So, when exactly should a board start planning for CEO succession? The conventional wisdom says planning should start the day a new CEO takes the job. Lynn Clarke and Bill Lee have both served in the CEO role. Perhaps they have a different opinion?
“I’d say start succession planning yesterday,” says Clarke.
“I would say to start the day before yesterday,” says Lee.
In other words, CEO succession planning is really, really important for boards and private companies of all stripes.
Lee, who serves as chair of The Lee Company after transitioning the roles of CEO and president to his niece Marietta S. Lee, says the board frequently examines what-if scenarios for management, but planning for possible disruptions to the CEO role is even more important.
“We drive it down several layers. We’re always playing the what-if game and looking for holes, looking for two people that might be retiring at the same time,” says Lee. “But when you’re dealing with the second or third tier, if something horrible happens, you adjust and deal with it. If you haven’t had that discussion about your CEO, that’s a much bigger risk to the organization. You have to think about who else is in the organization or would you go outside.”
Clarke, who serves as lead independent chair of The Vollrath Company and director of A. Duie Pyle Inc., Basic American Foods and Diana’s Bananas, has served in three CEO roles and recently in two interim roles. She believes CEO emergency planning is one of the most important jobs a director has.
“That’s one of the key roles because it’s a huge risk. Whether it’s someone in the C-suite or a combination of people in the C-suite, you have to have a plan. On one of the boards I’m on, the emergency succession plan is [that] a retired CEO that would come back and take over the CEO role if something were to happen.”
Another reason to start planning for the next CEO is the amount of time it can take to identify and ready a successor. The CEOs of Lee’s company have traditionally stepped down at the age of 65. It was like that for his father and his brother before him, and it would be the same for him. So Lee started thinking about his successor … at age 52, when President Barack Obama was in the early stages of his first term.
“I knew 13 years ago what my planned retirement date was going to be. I spent 13 years planning, ‘Who am I going to give the keys to?’ It was very purposeful and thoughtful. There were limited options inside the family, and that most logical person got moved around to various spots inside the company so that they got fully rounded in the different things they were going to have to deal with. Others were also broadened as alternatives. It was a very, very long process.”
As the CEO of his family company, Lee clearly was going to have a major role in identifying his successor. But is that a process that will work if the CEO of a family company is an outsider? That is the situation Clarke found herself in when one of her boards, that of The Vollrath Company, found themselves looking for a new CEO upon the impending retirement of long-time president and CEO Paul Bartelt. While noting that “it depends on the situation,” Clarke believes that in the case of Vollrath’s search, the process would not have been as successful without Bartelt’s involvement.
“Paul really drove the culture and the significant growth of the company, so he was absolutely essential on the search committee,” says Clarke. “He was really important in discussions with candidates because he was able to truly explain the pros and cons of working for a family business and could really explain the dynamics of the family. But he could also give a thorough perspective to candidates on customers, suppliers and what all of our plants needed.”
Involvement in the successor search is one thing. But when that search is over, should the departing CEO of a family company retain a seat on the board? Do you really need the former CEO watching over the work of their replacement? Might that lead to some conflict, bias or an unintentional (or intentional) sense of ownership? Not to lean again on the answer of “It depends,” but Clarke says it depends greatly on the demeanor of the departing CEO.
“You have to know the personalities on that. Paul is a very humble, low-ego CEO, who, when he goes on to the board as an independent director, isn’t going to sit on the shoulder of the new CEO and say, ‘Well, I wouldn’t have done it that way,’” says Clarke.
With Lee having spent 13 years in the role of CEO for the Lee Company, it is clear that the transition from his brother to himself was a successful one. This being said, there were road bumps that he learned from and, suffice it to say, successor Marietta Lee should expect to be pretty busy.
“Sort of a lesson learned from the handoff from my brother to myself was we did a duty roster. He kept certain departments, which put a lot of stress on the heads of those departments having to report to two people. I’m not doing any of that. That is all going to my niece and I’m strictly going to take a board, shareholder and visionary role at the business.”
Lee continues, “That’s my goal: to keep my nose out of it. Now, she may give you a different story. But you really have to stay in your lane and have that ability for the other person to say, “Wrong lane!”