When it comes to succession planning, more often than not, boards will only think about it when they’re already tight on time. But the truth is succession planning should be at the top of the list of every board’s priorities and shouldn’t be addressed last minute, at that point, the board risks missing out on top expertise and the opportunity to assess and fill the vacancies with diverse talent.
While many companies find themselves unpleasantly surprised when a member of the board suddenly departs due to internal or external factors, strategic and complete board succession planning is crucial as it allows the organisation to experience minimal disruptions. Planning ahead makes sure that the company is able to plan for talented executive director roles. It also allows companies to take a step back, identify any gaps that they may need filling, and then proceed to find suitable candidates. It also ensures that the business is able to fulfil current and potential future needs.
1. Make succession planning a priority
Succession planning should be a key priority for a business and its board. It should be talked about and reviewed during meetings. It is recommended to include it at least once a term, but really, as much as necessary. It is important to include time for succession discussion during the planning of the forthcoming year’s agenda. This way, it can be ensured that vital topics can be discussed during specific times during the year.
2. Strategy and succession should be one and the same
The nature of board strategy meetings should be a discussion of planning the next one to five years of the business. For this reason, it is not unlikely that these meetings can last a full day. It would be advised that during these meetings, strategy for the future of the company should be taken into consideration whilst also planning for the succession. Listed companies have a nine-year maximum non-executive director term policy that should be taken into account as it may either help or hinder future plans. Both strategy and succession should be looked at together to ensure that they do not contradict each other or adversely affect each other.
3. Setting clear expectations and boundaries
It is highly recommended to take a moment to set expectations and boundaries with a new candidate, no matter how perfect they may seem to be for the role. Carefully look through the legal documents and adjust the terms of the contract dutifully so as to not have problems in the potential future.
Expected tenure should also be taken into account and written in the letter of appointment and furthermore explained verbally to the candidate. For most companies, this is generally at the time frame of three years, with the additional option to extend it should both parties be willing.
4. Evaluate the directors’ skills and experience
It is crucial to assess and evaluate the skills of a board member. Although skill matrices and self-assessments are useful, they are not always accurate. A one-on-one between the chair and board member should be carried out at least annually, if not more. If there are any changes within the company, it is also important to check up on the directors to assess their thoughts, ability to perform in their jobs and navigate the situation.
5. Building a pipeline
Many businesses are generally not large enough that there are applicants waiting to fill potential vacancies. But by building a suitable pipeline with the team that already exists within the organisation, team members could see themselves in the potential roles. This builds strong morale and prepares the team to be stronger and higher performing for the future.