S1:E25 – Leadership Succession Planning Tips
Season 1

00:00 /

An organization’s long-term success is dependent upon not only its financial health, but also on how the organization plans and prepares for leadership succession—which is often overlooked. In this episode of “It Figures,” CRI Partners Jose Aponte and Alan Skinner discuss the initial steps to setting up a C-Suite/leadership succession plan, important pitfalls to avoid, considerations when forming your plan, and how often an organization should review and modify its plan.


From Carr, Riggs & Ingram, this is It Figures: The CRI Podcast, an accounting, advisory, and industry focused podcast for business and organization leaders, entrepreneurs, and anyone who is looking to go beyond the status quo.

Alan Skinner:

Good afternoon. My name is Alan Skinner, I’m with Carr, Riggs & Ingram, I’m a partner in the corporate office. I am involved in overseeing audit quality for the firm, and with us today is Jose Aponte.

Jose Aponte:

Thanks Alan. Jose Aponte, a partner out of the New Orleans office, focused mainly with healthcare entities and not-for-profits in the audit and attest world.

Alan Skinner:

Jose and I are going to talk today to you about succession secrets, and when we say that we’re talking specifically about an organization’s long-term success, and that is not dependent only on financial wellbeing and operational health, but also on how the organization plans and prepares for succession of its leaders, those in the C-suite. So this sometimes is overlooked if a company, particularly, is doing well, but the succession of the current leaders is critical to the long-term success of the organization. That’s what we’d like to talk about. So I’m going to pose some questions to Jose. First, what are the first steps to setting up a C-suite or leadership succession plan?

Jose Aponte:

Yeah Alan, it’s interesting because a lot of people you talk to, and a lot of organizations you see, are really hyper-focused on the financial aspect as a healthy organization, determining whether or not they will be able to continue for the foreseeable future. But what often gets overlooked, as you’ve mentioned, is what is your leadership succession strategy? And there are some important key items to consider and steps to work through when you’re starting to set up this succession plan and making sure that it’s ready when it’s needed to be.

Jose Aponte:

The first thing that any organization should do is to identify what their key positions are, what are their key leadership positions, where they would need to have a succession plan in place to ensure, either with a planned departure or an unplanned departure, that they were able to continue the business operations, the day-to-day business operations, without any interruption.

After identifying the key positions, it’s important for the organization to identify what are the key qualities of a leader in that position, and it’s important to get feedback from different stakeholders within the organization. So the feedback can come from the current person in that position, what are the qualities that they possess that they think are very important, or has led to their success in that position. It can come from those working around them, both their direct reports, and maybe even additional C-suite people who work right in tandem with them. And then I think it’s also important to get the boards, or those charged with governance perspective, of what do they see as the key qualities of a leader, so that you can start building a profile for what are the things that we’re looking for to determine who would be our pool of future leaders?

I think after identifying the key positions and identifying the key qualities of these leaders, it’s important to then develop a plan for how do you attract, develop, and train, either internally, or how do you look external to the organization to determining who is that pool of leaders, and important things to consider when you’re undertaking this task is, what is the strategic vision? What is the strategic plan of the entity? What is your one to five year? What is your five to 10 year? What is your greater than 10 year growth plan? And making sure that the leaders that you’re looking for, the leaders that you’re trying to develop, understand what that strategic vision are, and fit into that role.

Also important to consider is what’s the moral appetite of your entity, or what is your corporate culture? You may find that you have a perfect leadership candidate, but if they don’t fit into your corporate culture, it may not work with your organization, or it may cause more hiccups in getting this new leader in because they don’t fit seamlessly into your organization, which can be worked through, and it may be what you need as an organization to pivot, but you need to know and understand those things prior to getting to where you’re bringing this leader in, and then you’re having these hiccups that are unforeseen.

And then I think lastly, it’s putting in place, or identifying, who is going to be the team that looks at these future leaders, the group. Who’s the taskforce that you’re going to employ or use to select this future leader? And again, similar to when you identify the key qualities, there needs to be multiple people at different levels who are making these decisions, who have different backgrounds in the business, to understand what’s really important in this leader, and making sure that all parties are involved, and that there’s strong transparency in the selection process and in the determination of who is going to be our next leaders, or our next C-suite individuals.

Alan Skinner:

Good, I think that’s exactly on point with going through this process of objectively determining what are the qualities that will serve the organization well in the area of leadership, and a couple of points there. What may have served the organization well for the past several years may not fit with the strategic plan of where the organization is going in the near future, and so that’s a factor too, is not focused so much on what history has required, but where the organization is going. And I think it’s particularly challenging in family owned businesses, and in situations where there’s a long tenured really charismatic founder who has really established the organization, and replacing that person can really be tough. So anyway, good points, and I guess we’ll segue into the next point of, what are some important pitfalls to avoid when making a succession plan?

Jose Aponte:

One item, you talked about family owned businesses, and you talked about maybe where there’s a strong dynamic leader. You know, the way you design and pick your task force, or your group, that’s going to be looking at the selection and vetting the candidates, that can help you get to a less biased approach, potentially, depending on how you select that task force. So it’s important to consider maybe where some weaknesses are in the organization, and by weaknesses I mean maybe where they’re strong biases that could make the organization or the leaders of the organization make a decision that’s not in the best interest of the organization long-term, versus what’s in the best interest for the family that owns it or for the leader that’s in position now.

So I think it’s really important to know those things, and when you’re selecting your task force, making sure the members of the task force have the decision-making power that maybe can’t be as influenced by those other parties, and that it’s diverse enough and rounded enough to maybe not be as susceptible to falling to those biases that may exist from, the last 15 years of the business have been a super successful, and it’s because of the founding partner, or founding leader who’s there currently. It’s very easy to fall into a bias of, we want our next leader to look like this leader, and it should be who this leader handpicks, but making sure that that task force has enough depth and enough decision-making power to see and to know where the organization’s going, and not be as influenced by maybe some of those biases.

And that also kind of does lead into your next question about the pitfalls. Certainly, depending on the type of organization, the type of structure, and maybe where the organization is in its life cycle, there are different pitfalls that can arise. Certainly we just talked about two of them, family owned businesses, or maybe first-generation successions where current leader is also the founder and has been very successful. Both of those pose their own pitfalls, really focused on maybe biases that aren’t in the best interest of the organization long-term. But I think that the first major pitfall of a business succession is not planning for it.

You may think that you have a young leadership group that’s going to be with you for the next 20 or 25 years, and may get lax on looking at your succession plan, or understanding who your key employees are where, if they were gone tomorrow, it would be a major interruption for the business. So at every phase of your organization’s life cycle, a succession plan needs to be in place and discussed and understood, and maybe in the infancy of an organization it may be more informal. This is our executive committee, there our founding people, they’re going to be the ones who would appoint a new leader because they have the ultimate vision because they’re founding this organization.

Probably not the strongest succession plan, but there needs to be those discussions and those understanding of, we’re the people who are doing this, or these are the people who are tasked with it, so that as the business progresses, it can become more of a formal process. You can never plan for the worst, which you should always have a plan in place should there be an unexpected or unforeseen departure of a leader And you want to ensure that you have something in place to at least continue the day-to-day operations until you can put a full time solution in place.

So the second pitfall that I have thought about here is really, once you have a succession plan, or once you have a plan that’s kind of trot tied to your strategic vision, you don’t put that plan away and wait for succession to be needed. As an organization a succession plan, much like your strategic plan. It needs to be a living, breathing document within your organization. As things change in your organization, as vision changes, as the outside economy changes, or as funding sources changes, you need to constantly be reanalyzing. What is the plan for succession? Where do we want to go? Does our current plan meet our needs? Or do we need to really think about revisiting this plan and making those changes?

I also think it’s important, not only does the plan fit where you are today, but are the people you’re identifying in the plan as your task force, or as your leaders, are they still accurate? Are the qualities of those leaders still accurate? Really need to make sure that this is one of those documents you’re reviewing regularly as an organization at the board level, at those charged with governance level, to make sure that the plan that you have in place fits the organization, it’s something that can be implemented, it’s something that the parties who are stakeholders in know what their roles are. And again, if the unforeseen happens tomorrow, everyone’s ready and understands what their role and their process is.

Couple more pitfalls to succession planning is, really a two-sided one, is some organizations will look strictly at personnel or people outside of their organization to fill leadership roles. Some organizations will look strictly internally at how do we fill these roles? And I think both of those can be pitfalls to this process because sometimes our best leaders can come from within because they start at the lower levels of your organization and work their ways up. They see how different aspects of the organization works, and have worked their way up and have seen non-management and management. Maybe they’ve seen the past 10 or 15 years of growth and headaches and trials and tribulations of the organization, and so they have some training and some knowledge of the organization that you can’t get externally.

But also with those individuals, you need to make sure that you’ve given them enough leadership training, and enough training around the business side of things, to where they can maybe step out of their comfort zone of let’s say, maybe it’s a controller. Well, how do you make sure that controller can step into a CFO role and really understand the whole business? So you need to make sure that you have training in place. Depending on the size and type of organization it can be formal leadership training programs, where you’re identifying potential future leaders early in their career and putting them through different trainings, making sure they stay up to date with general business, as well as what your business is and where you’re going.

And that helps both you as an organization understand who these people are and if they really are capable of filling some of these leadership roles, it also helps the people in your organization to determine whether they want to be a leader, or if they’re comfortable where they are. And it helps make them feel like they’re a vested important person of the team, that you’re investing in them and investing in their future as a potential leader of the firm. So don’t overlook people who are internal in your organization, and make sure that you have some type of training to vet them. It’s easy to vet people while they’re working for you, especially if they’re career is 10 or 12 or 15 years prior to when they could potentially be a leader. You have a long time to vet and mold and groom somebody to take that position.

On the other side, don’t be afraid to look outside the organization either. When we first started this discussion, we talked about what are the key criteria to setting up a succession plan for your leadership? And the second item we talked about is what are your key qualities in a leader? And when you’re looking to fill a leadership role, if somebody in your organization meets a few of those, but aren’t meeting a lot of your key qualities, don’t put the square peg in the round hole. There are outside opportunities that you should be looking for. Again, you don’t want to make a short-sighted decision to fill a role just to fill a role to keep, and we’ll go back to family owned, or a strong current leader, to keep the founder happy, or to keep the family happy. You’ve got to look at what’s best for the long-term success of the organization.

So I think it’s important to not limit your search criteria or your pool of candidates to internal, or external, but to make sure you have the training in place and the vetting in place internally, and knowing when to look externally, if you feel like maybe you don’t have the exact fit you’re looking for internally.

Alan Skinner:

So a couple points, Jose, I’d just like to reiterate. One is that a good tool for attracting, recruiting, and retaining good employees for an organization is to know that there’s a long-term leadership opportunity. And so that’s why it is good to look internally, at least have an opportunity there for people. The other point, I guess I’ve heard you make, is that if our current CEO is 50 years old and in good health, and everything seems to be going well, we can’t just assume that that person’s going to be there until they’re 65.

Jose Aponte:


Alan Skinner:

We need to be thinking now.

Jose Aponte:

I think it’s also important, sorry to interrupt, I think it’s also important to have those discussions with your current leadership as well. What’s your plan? Because you may think he’s 50 and he’s going to wait until he’s 67 to retire, and he may say, I’m retiring at 53. So I think it’s important to understand what their goals are and what their thoughts are on their tenure, because you could be in two totally different ballparks and never know, and it could create one of these surprise situations that you’re not ready for it. So I think that’s a very important point.

Alan Skinner:

So that leads us into our next question of, how often should an organization review or modify its succession plan?

Jose Aponte:

I would say, at the very least, on an annual basis an organization should evaluate its current succession plan while it’s looking at its strategic plan, budgeting for the next year. And I think as you’re looking at that, and as the organization is considering it, again it’s, what’s changed from last year to this year? Have we pivoted our organization? Have we countered significant turbulence in where we’re looking today? Have we lost significant funders? Does this still fit who the organization is and where the organization wants to go?

And then I think throughout the year, if there are major shifts or things that happen within the organization that would cause you to question your leadership, and not question your leadership as to whether you have the right leaders in place, but question what you’re considering as key qualities in a leader, and who your key leaders are, or what your key business strategy is. As those things change throughout the year, it’s important to then go back into your succession plan and say, “Hey, we’ve got to revisit this succession plan now because we’ve changed who we are, we’ve changed some of our core principles, we changed what our key operating areas are, and we need to revisit the succession plan to mirror where we are now, as opposed to when it was first written, and then to recast what our vision is moving forward, so that we’re ready to implement this plan without hiccup today.”

So I think certainly on an annual basis it should be reviewed and discussed, and making sure that there isn’t some changes needed, some modifications needed, and then as significant business changes occur throughout the year, it should be revisited. And then I think every time, as an organization, you recreate or redo your succession in your strategic plan for the organization, one of the key elements of that should be your succession plan. At least every time you redo or significantly alter the organization’s strategic plan, one of the key documents and elements of that should be the succession plan for the organization as well.

Alan Skinner:

Jose, you’ve provided some really good principles and concepts for organizations to consider as they’re thinking about the longevity and the long-term success of their organization. I guess another point to make is that there is no one size fits all type plan, every organization is unique, their leadership needs are unique, and that requires a lot of thoughtful consideration. So I encourage you to consider these concepts that we’ve mentioned today, by those individual situations. Also we encourage any organization to reach out to your local Carr, Riggs & Ingram office, professionals there can help think through these types of decisions, and I’ll also refer you to our website, cricpa.com, where we have additional information that may be of help to you. And I think that’s it, thank you.

Jose Aponte:

Thank you.


If you want more CRI insights, or are interested in learning about our firm, please visit our website at cricpa.com. Thanks for listening to this episode of It Figures: The CRI Podcast. You can subscribe to It Figures on iTunes, Spotify, or wherever you prefer to listen to your podcasts. If you liked what you heard today, please leave us a review.