Aquila Capital Partners

Austin &
New York City

How to Prepare for Leadership Succession in Your Organization

On September 8, 2022, Queen Elizabeth II passed away, and almost immediately her successor and son, Charles, assumed the throne. Upon her death, a very complex series of actions immediately fell into place, following a succession plan that had been meticulously planned for decades.

Not 24 hours after her majesty died, while mourning alongside the nation, Charles was called into action to execute his part of the succession plan. He arrived in London, greeted by cheering crowds outside Buckingham Palace. He then held his first meeting with the Prime Minister and made a televised announcement to the nation and the commonwealth.

Just 2 days later, Charles was officially declared King by the Privy Council and held his first meeting with the cabinet. Two days after his appointment, he addressed parliament at Westminster Hall to pay tribute to the late Queen. Next came a series of back-to-back travels for Charles—meeting with dignitaries, receiving condolences, making arrangements, and greeting the public. In the end, the monarchy had accomplished more in a week than most governments do in a year, all thanks to their meticulous planning.

The evening of the Queen’s funeral, we were fortunate enough to be in front of Buckingham Palace. I was struck by how well things were run, even as the nation was actively mourning. I realized this was a perfect example of a strategically-planned succession, where all the pieces fall into place exactly as they are meant to.

Queen Elizabeth II’s death was an inevitable event, but the transition of sovereigns was treated like an exogenous event to prepare for… and for good reason. Following the collapse of the Western Roman Empire which had led Europe for centuries, Europe entered the Dark Ages, a 900-year era characterized by an intellectual, cultural, and economic decline. Suddenly, leadership and order gave way to centuries of tribalism and chaos.

Nature abhors a vacuum. Just like a sovereign needs strong and continuous leadership, so does a company or organization. There cannot be time off from having a leader—people need to have someone in charge, someone to guide the way. When a company lacks a solid succession plan, those left behind are often scrambling to get things in order and find a replacement. That’s exactly what happened when Steve Ballmer left Microsoft in 2013—It took 6 months and massive efforts to find someone who could fill his position.

There are many things you can do that allow you to be in control and proactive, instead of reactive when it’s too late. As always, those who are observant and plan for potential outcomes ahead of time end up in an advantageous position. Here are 4 best practices in planning a succession in your company or organization.

1. Have a strategic plan and clear objectives

During my time as the CEO of a multi-national corporation, I had a succession plan for multiple scenarios. Different circumstances require different people, so I always had 3 people at the ready depending on the circumstance or timeframe. One person was always ready to take over if I needed immediate replacement, a different person to take over if the board wanted a change within the next 18 months, and a third person to replace me over a longer period of time. All too often companies have a succession plan but without a clearly identified replacement, which can be a costly mistake like we saw with Microsoft. You must plan ahead and always have someone to take over. Succession plans tend to be over-complicated and tedious as well, but this does not need to be the case if you communicate well and often leading up to the change. Focus on what is most important during and after the transition, and identify crucial steps and actions across departments. Outline tasks, dates (if you know them), and resources needed. This is also a great time to reinforce your corporate culture. When culture rules are in place, it makes it easier to follow for both the leader and the employees and will prevent mismatching managerial styles. Ensure that teams know what their jobs are before, during, and after so that there is no confusion. This will help continuity during the change and make it easier for the successor to have a seamless takeover.

2. Find and elevate your candidates early on

Succession planning isn’t necessarily an exciting thing to do as a leader, since it may feel like you’re already planning for the end. However, it is critically important in order to ensure that whoever takes over is well prepared for the role, as early preparation increases the chance of success. Take into account the person’s skills, weaknesses, experience etc., and choose multiple options based on your vision for the company. Politics will often play a part in this decision, but use this as an opportunity to advance those who are truly deserving and ready to assume a new leadership role. Creativity and forward thinking matter when selecting a successor. For instance, giving an opportunity to those who may not be the obvious choice, but the right choice, can make a massive difference in the future. You can then mentor and elevate the candidates over a period of time to prepare them to take over. When IBM’s then-CEO Samuel Palmisano left the company in 2012, his successor and first female CEO of IBM, Ginni Rometty, had been leading projects and preparing for top positions since she joined the company in 1981. IBM constantly primes internal high performers like Rometty to take leadership roles, creating a reliable succession planning system.

3. Plan the transition with department heads

In 1953, a seemingly successful transition turned into betrayal and chaos when, due to their wildly different approaches, the Gucci brothers nearly ran the brand into the ground. This example is the exact opposite of the royal family’s smooth succession plan. You can’t have a well-oiled machine if not everyone is on the same page. Keep in mind that you not only need a successor for yourself, but also for every major role in the organization. The same strategy I mentioned in point 1 applies––who are the successors if something happens immediately, in the medium-term, or in the long-term? Sometimes the person best suited to replace you or your department head is not even in the organization. When you have a plan in place, your (future) department heads need to be on board with your vision and corporate culture. They must also be clear on any issues that may arise and how to fix them, as well as the goals they should continue toward. Clarity will help avoid unwanted conflict during a transition, and will help keep teams focused on future goals. The Royal succession did just this—they defined a procedure at each level and kept everyone ready and prepared for the inevitable by practicing scenarios. Your employees and team members should feel comfortable with the plan and the changes to come. You are planning for the company’s needs in the future, not current needs, which is another mission entirely. Ensure management is informed and ready to move forward so that they can continue to effectively guide their teams as well. Teams who lose clarity and sight of their goals end up missing the boat.

4. Don’t kick the can down the road

Just like the royal succession had been planned since the 1960’s, the earlier the better is also true for a business. Take McDonald’s for example. The fast-food giant survived two tumultuous CEO changes in less than a year thanks to their exceptional succession planning that they began 6 years prior. After a successful transition, new CEO James Skinner was able to continue turnaround plans started a year earlier and the company’s stock prices tripled. Unfortunately, even though most companies don’t need years to draft a decent plan, we often see business leaders avoid succession planning altogether. A big reason is that it’s seen as a signaling risk—you start to plan and people will think you are exiting. While this may be the belief for some, not only is it the best idea for the company, but it is your responsibility as a leader to ensure the continuity of your business. Leaders also put off the planning because there is no defined formula for succession planning. There is no one-size fits all approach, and taking a merely process-oriented approach ignores the impact that succession has on the people who are actually affected by the change. The key is to consider the company’s needs and goals, but also the human element involved.

It may not top the list of enjoyable activities, but a good business leader will plan so that their company and those that depend on it are not left in chaos when leadership changes. Avoiding disruption or total collapse is why succession planning is crucial. Plan effectively and leave the legacy of having a smooth transition that the company can appreciate after you’re gone.