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Ron Browne • October 14, 2021
Succession planning is one of those things some organisations think about, but few do anything concrete to address
Succession planning is one of those things some organisations think about, but few do anything concrete to address it. Succession planning is critically important for both your board and your organisation’s staff and should be a topic of discussion regularly at board level.
I believe there are three (3) key elements of succession planning –
X Tenure
X Talent
X Transition
Let’s examine each one of these elements separately and then look at how they interact to create a sound succession planning process.
Tenure
When discussing tenure, I refer to the amount of time someone has been on the board, or in a workplace role, and how much they are contributing to their role. In the governance space, there was a massive push a few years ago to limit board tenure (the amount of time someone could spend on a board) to around eight (8) to ten (10) years, at any one time. This forced many companies to push some long standing directors off their board, purely based on the amount of time they had been on the board, not looking at their contribution and input as a key indicator.
The result was that many highly effective and productive directors left their company boards and, in many cases, took much of the ‘corporate memory’ with them. Thereafter, the boards struggled with new directors not understanding the history of the organisation and then often stumbling to poor decisions and corporate decline.
In my opinion, tenure for directors needs to be measured by ‘effective input’. As long as a director is active, contributes to robust discussions and works in a collegial manner to achieve the best outcomes for the organisation, then they can stay on board. Individuals often have their own timeframe and will decide that when they have served a suitable amount of time on the board, they will step down and move on, to allow ‘fresh blood’ to be injected into that board.
I remember a few years ago meeting a foundation director of a club that was 58 years old. That foundation director was still serving, continuously since the club was formed, and was a spritely 90 odd year old, who served for a total of 60 years in the end. An amazing effort, but one might question if that was perhaps a little too long?
The same issue is important to understand with staff and management. Recently the story of the CEO of Sony Music Australia Denis Handlin, was brought to public attention for some staff management issues. What struck me was his tenure of 51 years as an employee, including 37 years at the helm as Managing Director and CEO. Succession planning was probably never, if ever, discussed in regard to board or management transition. This can pose problems that only surface when the long standing director or employee finally leaves, for whatever reason – sadly including death with many directors in the club industry.
News Corp faced this possibility in 2018 when Rupert Murdoch slipped and fell, hurting his back, which laid him up for about four (4) months. Speculation ran wild as to who would take over, had Rupert’s fall been fatal. No-one knew the answer and little succession planning has happened since, on the basis that “Rupert will never die”. Only this year has there been some serious discussion relating to succession with Rupert now over 90 years of age, and his children jostling for position.
There gave been many examples of very long tenure for some managers of clubs and whilst some have the energy and foresight to change and adapt their clubs to the evolving markets, some have stagnated for 90 percent of their time at the helm. This has been detrimental to the organisation and often only the final change of management offers the opportunity to refresh and revive a flagging enterprise.
Regular discussions, say every six (6) months, should be held in the board room asking directors ‘who is planning to step down at the next election, or at the end of their current term?’ The Board should be asking the CEO, as managers should also be asking long term employees ‘when are you going to move on or retire?' where CEOs have been there for a while and employees are near the end of their working life.
The answers to these questions should inform the succession planning of future directors and employee career path plans. Succession from within is one option and seeking external talent is a second option, both of which should be explored in exercising due diligence for governance and management.
Planning this sort of process improves the state of preparedness for sudden departures – resignations or deaths – with a talent pool already identified as potential future directors or managers.
Talent
This is the greatest challenge of all. Ensuring diverse talent on your board, and in your management team, is critical for both governance and operational success. Management guru Charles Handy pointed out in 1990, that a cricket team would not be comprised of 11 bowlers, because the best teams are ‘a collection of differences’. The point of a team is that each individual in the team brings a range of skills, knowledge, attitudes, aptitudes, personalities and priorities to the team. And you should select those who have the best attributes for certain roles in the team.
A Diversity or Skills Matrix
is the best starting point to identify the talent already existing on the Board or in management. That way should someone leave, you are aware of what talent(s) has/have been lost and probably need replacing. In addition, a Diversity matrix can identify if the team is short of any particular (usually) essential skills, so that your recruitment of a new director, or staff member, can be informed by that knowledge, to target the best, and requisite, talent available.
The best time to look for talent is when you least need it. Building a pool of talent is an important part of effective succession planning. Identifying the next potential director(s) before you need them, means they can start learning some of the important knowledge to effectively fulfil their role as a director, when they are finally appointed or elected. Fill the pipeline before you need to turn on the talent tap.
Observership programs
can be really useful in developing future directors – they are invited to observe the board in operation, during non-commercially sensitive discussions – so that they are aware of what lies ahead for them in their duties and responsibilities. Selecting members in clubs to be part of sub-committees providing advice to the board can also be a great way of developing future directors for your club or organisation. In management, providing new projects or seconding staff to responsibilities they may inherit when they progress in their careers, is also a solid way of future proofing your succession planning.
When employees have career path planning discussions with senior management, they are usually filled with enthusiasm that manifests itself in higher quality performance, when they know that the organisation is prepared to invest in them and develop them for future promotion. Again, in management using a diversity matrix to identify the talents and skills of employees is important, so that employees are developed along lines that suit their talents and potentially their interests.
With directors you should be looking at people in your community, who may have the skills and talents you are looking for, to broaden the diversity on your board. Diversity has many elements, amongst them gender, age, education, socio-economic status and industry experience, all of which create diverse perspectives and viewpoints which enhance discussions at board level. In the club industry, you must be a member of your club to be on the board, so when recruiting outside of the club membership, it is important to understand that a potential director must join the club in order to join the board.
Talent manifests itself in many different ways and the benefits of youth, in other words young people, are their limitless thinking, their familiarity with technology and their boundless enthusiasm to try to do things with the organisation that may have been tried before, or conversely, may have never been thought of. Whilst young people may have limited governance experience, they will learn the tenets of governance from the existing board directors whilst bringing the benefits of their talent to the board, to help develop the organisation for the future.
Education and training are important parts of both governance by a board and operational management by staff in an organisation. Every organisation should have a learning and development budget, for both the director's on the board for governance education and for the staff for skills and management education. The better the quality of talent on your board, or in your organisation, the more likely your organisation is to be hugely successful and sustainable on an ongoing basis. Effective succession planning is the key to success for ensuring the long term viability of your organisation.
Transition
One of the most complex elements of succession planning is transition. Transition relates to the ‘passing of the baton’, as it were, from one generation to the next, be it your long standing directors on the board, or your senior management, handing over control of the business to younger staff, who are graduating up the ranks to positions of senior management.
From the board perspective, transition is most challenging when you have entrenched directors who believe they still have more to offer, after a long term of service. Whether or not they are productive and contributing is something the chair should monitor and manage and if they are no longer productive directors, then conversations should be had to ensure smooth transition with those directors stepping off the board, to allow fresh directors to join the board.
One of the key elements, as we've discussed in succession planning, is diversity. Transition to improve diversity has been a major roadblock
on many boards, particularly in the club industry. Long held as a male domain, many directors verbally endorse and support diversity, particularly gender diversity, however are reticent to step down to make way for the new directors who can address gender, age and education diversity for the board.
Unlike private and public companies, clubs, being member based organisations, can only appoint or elect members to their boards, so if external recruitment for talent is exercised, membership must be confirmed before that person can accept the director’s role.
As discussed earlier, a vital element of transition is the passing of corporate history from the older generations of directors to the new ones. Organisational amnesia
can lead to mis-steps being made, or worse still repeated, due to that knowledge having left the board. Whilst sometimes things that didn’t work in the past may have actually arrived at ‘their time’ and can succeed, other things will never succeed, regardless of the timing.
So utilising programs, like Observership and membership of sub-committees, can facilitate the transition of candidates onto the organisation board, with the relevant corporate knowledge/history passed onto the individuals, before they start their first term.
For management, it is about learning the corporate knowledge during their employment and then learning specific skills, through training and development of skills and knowledge relating to the next step up the ladder. Transition training
can be achieved by seconding individuals to their next role, when the incumbent goes on leave, so that they learn the ropes before stepping up to the role full time.
Good governance and operational management are exemplified by great planning for the future, which must
include effective succession planning. By applying the Three Ts – Tenure, Talent and Transition
– your organisation will be prepared for complication free succession of the board and senior management roles, in a planned and structured manner, but also will be well positioned to respond immediately to the unexpected transitions that occur from time to time.
For more information or assistance with your succession planning, contact Ron Browne, Managing Consultant on 0414 633 423
or ron@extrapreneurservices.com.au
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