In my 45-plus years in business and 35 years as a CEO, and over 30 years as a board member, the most glaring shortcomings that I have seen in closely held businesses is a failure to plan for succession. Not just for the CEO, but for all the senior executives. There are few things worse than waking up one day and finding that the owner of the business or a key executive died overnight and there is no succession plan.
One of the greatest lessons I learned from my best mentor is to do an annual succession planning exercise. I would have everyone who reported to me give me a list of three to five people, both internal and external, who could succeed them if something should happen to them, or if they should resign.
I would also give a list of replacements for me to our board of directors in case of my untimely demise. I would discuss each candidate with the board, and we would rank them so the board could quickly name a replacement so the company would move on with minimal disruption.
If you have done a good job hiring and educating your senior people, you should have a good number of people to pick from internally. However, don’t overlook external candidates as they can bring fresh thinking and new ideas to the business. When I hired a chief operating officer a few years ago, I ended up having to go outside the business and was able to hire a person who had more than 26 years of experience in our business, including with some of our competitors. He was able to bring a lot of new ideas and energy to our operation. After only 90 days of being with us he proposed a reorganization that worked very well. The ideas he had were right under my nose, but I couldn’t see the forest from the trees.
How do you find external candidates? Well, I had many people approach me via LinkedIn because of my/our active presence on this site. I also made it a point to network at industry events. Whenever I met someone who impressed me, I got his or her business card and then stayed in touch. The COO hire I made came more than 10 years after meeting him at an industry event in Las Vegas. I made it a point to stay in touch over the years and when I had the opening he immediately came to mind. The timing was good for him, too, and it worked out very well. (Plus, I saved a six-figure search firm fee.)
I always prefer an internal candidate who already understands the industry and our company culture, but next best is someone with industry experience. If you hire an outsider with no experience in your industry, I think that’s your riskiest option so I would only do this as a last resort.
Jim Sobeck is a Greenville-based serial entrepreneur. He most recently was CEO of New South Construction Supply, a distributor of building products he grew from four locations to 11 locations before selling it in February 2023. He is also the author of “The Real Business 101: Lessons From the Trenches,” available on Amazon. He can be reached at jrsobeck@gmail.com.
