Leadership succession continues to be one of the most difficult moments that an organisation goes through, regardless of whether it is an established corporation or a first-generation small business.  There are ways to make it less traumatic; but a lot depends on the departing leader themselves.

In September last year, following years of speculation, it was finally confirmed that Lachlan Murdoch would succeed his father, Rupert, as head of the media and publishing behemoth News Corp.  Thus, comes to an end a succession process that appeared to outsiders as convoluted and cut-throat as that of the Roy family in the television series that it allegedly inspired. 

Not all companies are News Corp, not all retiring CEOs are Rupert Murdoch (or Logan Roy) and not all succession processes have the drama and tragedy of King Lear.  However, succession does capture the public interest in a way that few organisational processes do, particularly when it features the retirement of a successful founder, who has often become a mythic figure – consider the succession of Steve Jobs by Tim Cook at Apple, or of Jeff Bezos by Andy Jassy at Amazon.  Yale professor Jeffrey Sonnenfeld tellingly named his book on CEO succession, The Hero’s Farewell, with the implication of a titan finally completing their heroic mission and hanging up their sword and armour to enjoy retirement.  Only, as Sonnenfeld recounts, the farewell is rarely straightforward.

Headhunters make millions looking for the ideal replacement for the departing CEO; consultants make millions more supporting the process.  Yet it has been suggested that 40 percent of CEO transitions end in failure within 18 months.   Bob Iger’s departure and return to Disney and Howard Schultz’s repeated back-and-forth at Starbucks are some of the highest profile of these failures.  Both are great examples of Sonnenfeld’s General archetype – the leader whose identity is so rooted in their position that they are never quite able to resist the temptation to ride the white horse back in and “save” the company from its new CEO.  But you don’t need to be a household name for succession to be a headache.  Many of the difficulties and underlying dynamics of the process apply as much to the continuation from father to son as between superstar CEOs.

Small, family-run companies, particularly those passing from a first to second generation of leadership, do present some of their own specific challenges. The founder of an organisation is not “any old” general manager.  A founder’s perception of his or her company has been described as “simultaneously a baby and a lover”.   For many founders, a natural optimism, the necessity of focusing on day-to-day urgencies, a wish to postpone difficult decisions and the, often subconscious, desire to avoid facing their own mortality, mean that succession planning is ignored or delayed.

The founder also finds themselves in the centre of three different systems – family, business and ownership – each with its own complications and sources of resistance.  When a company is expected to pass from parent to child, the challenge extends beyond choosing a successor: it also involves defining future roles for other family members and addressing the impact on those suddenly facing the retirement of a parent or spouse whose identity has long been tied to the business.    No surprise then, that around 70% of family businesses never make it to a second generation, and only 13% make it to a third. 

Much like the relay race often used as a metaphor for the process, the possibilities of failure in succession are multiple, from a lack of communication, insufficient trust, inaccurate timing, or a lack of skill on either or both sides.  This holds true for the largest corporate and the smallest enterprise.  And much of the advice for making succession a success, is relevant no matter the size or type of organisation. 

The first step is to make succession a priority, even when it doesn’t seem urgent.   Take the relay race as inspiration – planning is key.  This means the identification of the successor, a plan to prepare and train them, and clear definitions of the roles of both successor and succeeded at each moment during the process.  It needs to be backed up by open and clear communication between these two figures and with the rest of the organisation and family. 

But even the best planning in the world can’t preclude the possibility that the relay race baton is held back at the last minute, or even retrieved further along the line (just consider the aforementioned Iger and Schultz).   The emphasis given to succession planning is simultaneously correct and somewhat missing the point, completely ignoring the “hidden dreams and fears” that can be triggered by the succession process.  This is because succession is not only a rational process, but a trigger for strong emotions and self-reflection, both in the person being succeeded and in those around them: a catalyst for questions about purpose, identity, power, relationships and legacy.

For the succession process to be successful, research suggests that self-knowledge and an ability to express fears and ask for help on the part of the departing founder or CEO, are a good start.  This is often a tall order for a person who has spent much of their career cultivating an image of complete self-sufficiency.  In turn it requires open and honest conversations between all the players involved: the founder or CEO, their managers, their family, and if relevant, their board, figures who would also often prefer to avoid talking about the issue.    

On a more practical level, research has found that external professional support helps, as does more informal support from peers who are going through a similar evolution.  It is often suggested that for founder-led small businesses, succession has to be preceded by a shift from an organisation with the founder at the centre of every decision (even if the org chart suggests otherwise), to one with a clear mission, processes, systems and roles that actually guide how things happen in the company.  A next step is the active development of potential successors across the organisation, not just at the highest level, ensuring a competent group that can take the business forward when the founder has left.  If the family currently plays a role, or will do in the future, time developing family governance will be well-spent, to draw a clear distinction between decisions pertaining to the organisation and to the family, define roles, make explicit the expectations of all family members and if necessary, launch forums like a regular family assembly or family council.

Perhaps most importantly – and least likely to be discussed – is the need for a new role or purpose for the departing founder or CEO, whose identity has been linked to their position within the organisation, often for many years, feted by a culture that is fascinated by power, and celebrates those who die “with their boots on”.  The Japanese phrase nure-ochiba, meaning a wet fallen leaf, is an eloquent reference to a recently retired husband who follows their wife around the house like a leaf stuck to their shoe, looking for something to do.   In the most successful processes, the person leaving tends to have, or be developing, strong interests outside of the organisation that can represent a new purpose in life.  Betty Reid Soskin was the oldest serving National Park Ranger in the United States when she retired aged 100.  It’s worth remembering that she actually started as a park ranger aged 85.

In the end, the success of succession will depend on many variables.  Of course, a good few are beyond the control of everyone involved in the process.  Many successions end up arising involuntarily and abruptly, catalysed by health or economic crises.  Succession is always likely to be difficult.  However, this most disruptive of events does not have to be traumatic.  Not all CEOs are Rupert Murdoch. 

Bibliography:

  • Berenbeim, Ronald E. (1990). How Business Families Manage the Transition from Owner to Professional Management. Family Business Review, vol. III, no 1, 69-110.
  • Christensen, C. Roland. (1953). Management Succession in Small and Growing Enterprises. Boston: Harvard University Press.
  • Dyck, B., Mauws, M., Starke, F. A., & Miske, G. A. (2002). Passing the baton, The importance of sequence, timing, technique and communication in executive succession. Journal of Business Venturing, 17(2), 143–162.
  • Gersick, K. E., Davis, J. A; Hampton, M. M; Lansberg, I. (1997). Generation to Generation: Life Cycles of the Family Business. Harvard Business Review Press.
  • Lansberg, Ivan. (1988). The Succession Conspiracy. Family Business Review.
  • Sonnenfeld, Jeffrey. (1988). The Hero’s Farewell: What happens when CEOs retire.  New York: OUP.
  • Tashakori, Maryam. (1980). Management Succession: From the Owner-Founder to the Professional President. New York: Praeger.