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23 February 2024

Can succession planning protect the legacy of privately owned businesses?

While succession planning is important for all organisations, privately owned businesses experience some unique considerations. How future-proofed is your leadership?


At a glance:

  • Succession planning is a key determinant of future performance, ensuring future CEOs can deliver on future organisational strategy.
  • The structure and culture of privately owned businesses creates some unique considerations for planning around future leadership needs.
  • Good succession planning will often include detailed assessments to map current talent; reveal any skills gaps; and shape future professional development.

In every organisation, succession planning determines future organisational performance, making it an important strategic exercise. “When it’s time for CEOs and other senior leaders to move on, succession planning ensures that organisations are ready for this change, and that there is a good understanding of the type of leader that’s required to deliver on future strategy,” explains Ivan Zuvela, a Partner for Gerard Daniels in Perth. “Succession planning can also improve organisational performance, develop capability and help to build talent pipelines for future leadership roles.”

While succession planning is important for all organisations, privately owned businesses experience their own challenges, and the dynamics in these organisations can vary enormously. The structure and culture of privately owned businesses also creates some unique considerations for succession planning.

The value – perceived or otherwise – placed on legacy and reputation is one example, which puts considerable weight on choosing the right successor to lead the organisation forward. “When you’ve invested a lot of time building a successful enterprise, it’s natural to see it an extension of yourself and/or your family. This can create unconscious bias and a tendency to hire in your own likeness,” says Ivan. “But modern markets are dynamic, and the future leadership needs of an organisation will rarely be the same as the past.”

“Ego, and a sense of direct ownership that often characterise privately owned businesses, can also influence the decision making process for succession – particularly if leaders keep their cards close to their chest instead of consulting more widely with advisors, both inside and outside of the organisation,” Ivan continues.

Given these influences, at times the leaders of such organisations can struggle to appreciate the significance of succession planning, or know how to get it right. Ivan offers these pointers to help privately owned business leaders get started.

Succession planning for privately owned businesses

Strategic alignment

The type of leader that organisations need is largely determined by growth strategy and how aggressive it is. For example, if the strategic plan is to pivot or diversify into another part of the market, this will shape the skills and experience that you need from a future CEO.

“Understanding your growth strategy is critical because it determines what you are looking for, where you should look, and the timeline for finding and onboarding a successor,” says Ivan. “When you begin succession planning, first be clear on the strategy for the next phase of your business, then find the right leader or leaders to guide you there.”

Building bench strength

Where there is a desire for an internal talent to be considered for senior appointments, succession planning allows you to identify and develop high potential candidates for CEO and other future leadership roles. Further complication occurs when the potential internal successor is related – history is littered with examples of failed family successors.

To avoid complications, succession planning needs to include detailed and very independent assessments to map the current talent in your organisation, reveal any skills gaps and shape future professional development. This independence becomes even more important in the context of evaluating family successors against other external candidates.

“You may look both internally and to the market, but regardless of where these appointments are made succession planning can still strategically build the bench strength that you need to take the organisation forward,” says Ivan. “And the more you plan ahead, the more likely you are to close any skills gaps and put internal talent in the best position to be considered for leadership roles.”

Internally, independent assessment along with succession planning is also a good tool for creating stability by acknowledging the capability of your existing team. “When people feel valued and have clarity around their professional development and career opportunities, they feel more loyal and committed to the organisation. Morale tend to be better too,” says Ivan. “All of these factors can help to lower turnover when a founder moves on and the business experiences a period of significant change.”

Transparency for organisation-wide outcomes

The benefits of succession planning are more likely to be felt across an organisation where there is collective decision making and the planning process happens openly, rather than behind closed doors.

“Use succession planning to start conversations; communicate strategic direction; define career paths and development opportunities; and to bridge the skills and knowledge gaps in your team,” says Ivan. “But to do this, you will need substance and transparency around succession planning; open and honest dialogue across the organisation; and a fair and equitable selection process to be undertaken.”

Moving timelines

A multitude of factors can shape the timing for CEO succession, from the health, age, performance and career choices of your current CEO; to a crisis or unexpected pivot in organisational strategy.

“Generally, succession planning will take 12 months or more to implement, but things don’t always go to plan and sometimes your timeline will have to move more quickly,” says Ivan. “Building some contingency into your succession plan can help to smooth this transition if the timeline doesn’t quite go to plan.”

Engaging specialist support

Engaging a specialist succession planning consultant can help privately owned businesses to enhance the effectiveness of the succession planning process and to achieve better long term business outcomes. A high level of trust and commitment is needed in an external provider, but forming the right partnership can also help you to identify and develop a pipeline of high potential candidates with the right skills, attributes, experience and cultural fit to navigate succession and take your business forward.

For advice on succession planning, advanced executive assessments, talent strategy, and executive search, connect with Ivan or reach out to Gerard Daniels today.

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