Business Succession Planning


Aside from acquisitions and bankruptcies, leadership transitions often are among the highest-stakes events for organizations. Whether a crisis forces a replacement or you’re facing a long-known retirement, each transition presents unique challenges and opportunities for businesses.

According to McKinsey, between 27% and 46% of leadership transitions fail after two years; considered either disappointing or outright failures. Among common challenges, organizational politics tops the list and culture change is a close second.

At First Business Bank over the past 30 years, we’ve been fortunate to learn from working with many organizations through leadership transitions. On the First Business Bank Podcast, three senior executives at First Business Bank discussed critical factors to consider when succession planning. Mark Meloy, First Business Bank CEO, along with Jodi Chandler, Chief Human Resources Officer, and Corey Chambas, President & CEO of First Business Financial Services, Inc., spoke about the sensitive topic of leadership transitions.

A Complex Process

The entire process of creating and managing a leadership transition plan — one piece of a larger strategic plan — is, by itself, a multifaceted undertaking. “It sounds simple, yet the whole process and planning is very complex,” Chandler said. “We approach it in a few different ways depending on whether we’ve identified a specific role in the company that we’re looking to find a successor for, or if we’re just working organizationally on different talent development initiatives and building our leadership pipeline.”

Finding a replacement for a particular role first involves a process to understand what’s required for success. That includes evaluating job duties, characteristics or traits of successful candidates, and larger talent development goals for the position that also come into play as an organization.

“These are ongoing initiatives we’re working on year after year, fine tuning them as they evolve,” she said. “This process cascades through our organization as we create individual development plans as appropriate and establish performance goals for all our employees.”

Timing is Everything

Critical Elements of Leadership Transition PlanningAn orderly leadership transition process is in the best interest of the company, but what happens when there’s an unanticipated crisis that leaves an empty leadership position?

“When you have a retirement, that’s a little simpler in most cases because you know it’s coming,” Chambas said. “You also need to have an ‘In Case of Emergency Break Glass’ scenario for what to do when something suddenly happens. That could be an interim or a temporary situation. For senior positions, a company should really have five plus years before their retirement to work on a replacement.”

Consider technical expertise that you might lose if someone suddenly left, as well. Your organization’s productivity and longevity could be at risk if you don’t have a plan in place to replace this person.

“There are a lot of people in organizations who are critical in terms of their specialized role and technical abilities,” Chambas said. “There are other people who have specialized, unique relationships. What would you do about a salesperson who has worked with your largest customer for the last 20 years? They’re really tight so you don’t worry about the client leaving, but what if something happens to that salesperson suddenly?”

First Business Bank implements a team approach across the footprint of the business, so clients always have a point of contact and continuation throughout the company.

Replacing an executive often takes more than a year, Chandler said. “You really can’t start too soon. It takes years of development for internal candidates to be able to get the experiences they need and develop the competencies that are critical. It always takes a lot longer than you think, and there are circumstances that pop up and you're going to need to pivot.”

Internal & External Communications

Changes in any company may cause some employees stress and contribute to a stressful working environment. Some employees may take comfort in transparency while others may be thrown by it.

“Certainly employees want to know you’re working on a plan and that there’s a plan in place, but it really does create angst, especially among those who are most directly impacted by it,” Chandler said. “I think it’s a lot about managing their expectations in terms of the amount of time it will take to fill a role.”

Chandler said First Business Bank is intentionally having more conversations with employees about workforce planning, talent pipelines, and hoping these conversations allow employees to become more comfortable with leadership transition over time.

“This is a little bit of a can of worms,” Chambas said. “If you bring it up and are very proactive about talking about it, you are going to be stirring things up. There’s no question about that. On the other hand, if it’s a real thing and someone is near retirement, people are going to be thinking about it. They’ll be talking about it with each other, so it’s better to control the narrative than have it build a life of its own.”

“It’s not something you can completely ignore as a senior leadership group,” Meloy said. “But you also need to recognize that it changes. Life circumstances change and people’s timelines change, so open communication with the individual is critical. And then and honest approach to how it’s being dealt with at the leadership level across the company is comforting and reassuring to people.”

Leadership Transition in a Changing World

Although your instinct may be to hire a clone of the outgoing executive, it’s important to look at your company and see if that’s really what’s best at this time. Critical Elements of Leadership Transition Planning “If the person has done well, you just want a Mini-Me — that’s the easiest way to go, but it might not be the best,” Chambas said. “What you really need to think about is the future, not the past, because that person was successful for you in the past, getting you to the present. But now it’s about what the present and forward look like, and that could be different. Are you going to expand? Are you going into new markets?”

A fresh perspective can be invigorating for employees. “If you’re bringing in someone very new and different, it can be very healthy and energizing because people can get stuck in a rut,” Chambas said. “They can get comfortable doing what they’ve been doing. Someone with new and different ideas and an innovative perspective can take things to the next level.”

Working with External Experts

Depending upon the organization, you might not have the resources or experience internally to initiate a successful leadership transition plan. You also might look outward if you aren’t having success internally or a sudden replacement is at hand.

“In a sudden or emergency situation, and you weren’t planning on a transition, using an outside party or consultant can really help bring some objectivity to the whole process when emotions can run pretty high,” Chandler said.

Incorporating outside resources in your process is also important. “We’ve pulled together a lot of tools we use in different ways that are very much a part of the succession planning process,” Chambas said.

Regardless of your organization, employee development, leadership training, and workforce planning is worth the time to build a robust pipeline that will help you identify natural succession options.