Succession planning

Succession planning – walking a tightrope

For over a year I’ve been working with a not-for-profit organization on its board-level governance and related issues. As with many organizations, its board has been weak, and needs to be strengthened. An additional challenge with this NFP is that it operates more like a family business than a typical NFP. This brings succession planning into mind – something with which we have great concern.

The organization was founded in the late 1940s by an individual for the benefit of a particular ethnic community. The founder managed the operation until his death in the late 1970s, when his protégé and the protégé’s wife took over the operation. At this point, the husband (CEO) is nearing 90 years-old and the wife (administrator) is in her later 70s. They are reticent to turn anything over to someone else because they can’t tolerate losing control; strategy is not their forte and they have missed the boat on a number of opportunities; they have also been weak in protecting the revenue stream.  They’ve enjoyed good health, and have an incredible work ethic and dedication to the organization. Their only child, a son in his 50s, has no interest in the organization in the full-time sense, but he is very dedicated to it and would likely be willing to take responsibility for an aspect of overall management. However, many in the organization are not comfortable with his competencies, and his wife, who exerts a lot of influence over him, is toxic to the organization.

The wife/administrator has a huge role in the organization, wearing (too) many hats. I expect no one in their right mind would be willing to take over her role as it currently exists, but there are a few folks in the organization that might take on 2 or 3 of her various roles – some are actually chomping at the bit to do so. Coaxing her to see these people as successors, and having her give them responsibility, accountability, and coaching has been difficult.


The struggle is getting the wife/administrator to accept the need to plan for succession. Trust is a big issue; for one thing, I must be careful not to push too hard or she will lose trust, AND she needs to trust the people that might take over her various roles.  As with many NFPs, there isn’t a lot of money to pay people so the idea of attracting people from outside likely won’t work. The people that will take on these roles do so out of love for the organization.


This is where succession planning is as much about psychology as it is about good business. In this case, whomever is leading the effort has to tiptoe around the incumbents, while also ensuring that the successors are developing appropriately. It’s further complicated when the incumbents are not open to change because only they know best. And we need to be mindful that the incumbents will still be around after they retire and could undermine (even unknowingly) the new leaders.



I continue to tread carefully here, taking opportunities to make points about succession whenever I can. Following are some key messages from JPA Board Governance that are important for the board and management to act on:


  • It is absolutely vital to have a succession plan to ensure continuity of an organization.


  • The board should hold management accountable to have regular succession conversations. Maybe it’s as simple as an annual touchpoint with management. Maybe a semi-annual discussion. Frequency will depend on the organization, but it should be done on some regular basis. If succession planning is embedded in the organization’s way of doing business, the “threatening” part of the discussion goes away and everyone becomes more comfortable with the topic.


  • Cross-training supports succession planning. Cross-training keeps colleagues educated, interested, and able to cover for each other when needed. The same could be said for collaborative management – developing a team by sharing challenges and seeking their input into solutions.


  • It’s important to make succession a process, not an event. When someone takes on a new role, give them time to get comfortable with the role, and then coach them to think about their succession. Make succession something people address regularly. At JPA Board Governance, we teach that succession planning begins when you develop the job description, right through recruitment, hiring, performance management, development, goals, etc., to ensure on-going job fit.


  • If controlled/owned by a family, the family element needs to be addressed. Family leaders should have regular, open conversations with family members about succession. To avoid doing so will cause business as well as family problems.


  • Think beyond the immediate successor. At the NFP I expect the husband’s successor will be in his 50s or 60s, so I am thinking they also need to recruit someone in his 30s to be the successor after that. In the meantime, the 30-something can be learning all facets of the NFP, and develop strong relationships in the community served. This will help the 30-something be a strong and trusted leader when the time comes.


  • Patience. Many people can talk about succession planning but few actually do it. Whether it’s facing their own mortality, or believing no one else can do what they do (or as well as they do it), or maybe they feel threatened by a rising star – succession is hard for an incumbent to address. Relatively speaking, being the consultant is easy (except for the being patient part).


Succession planning has long been a hot button of mine, and I am continually perplexed at how companies ignore it. This is especially true of public companies, and I fault the boards for not holding management accountable for the need to plan succession. By not having such a plan CEOs are derelict in their duties because that’s not in the long-term best interest of the company. And while I can accept the need for confidentiality, I cannot accept boards (some of them at very large companies) that don’t have a succession plan for the CEO – they too are derelict in their duties.


Help Needed?

The Board Governance Services team @ JPA is ready to help you manage through all board assessment challenges. You can reach us through our website, through LinkedIn, or by calling John Morrow on 908/432-0576.

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Training: Leading Board Practices

JPA Executive Services – Board Governance Board Governance Course 1.0

Leading Board Practices and Related Challenges

—————–(proposed as a half to full day program)—————–

Do we need a board?

    • What can a board do for the company?
    • Benefits of a board
    • Board’s role
    • Executive compensation
    • Strategy
    • Monitoring risk
          • Risk portfolio
          • High-level risks
          • Periodically deep dives
          • Periodic brainstorming on emerging risks and disruptors


How to create a board?

    • Directors
      • Who?
      • What are the qualities and skills needed?
    • Size of the board
      • Goldilocks principle – not too big, not too small
    • Manage director expectations – set the tone early on
    • What do directors expect from the company? How does this differ from the next generation of directors?


Frequency of meetings

    • The number of meetings will depend on the size of the company and its complexity. Many companies have a standard meeting schedule. Additional meetings (for example, to address a particular issue, or in a time of crisis) can be set episodically.
    • Approach the meeting calendar with discipline


What are leading board practices
and how can they be derailed?

    • Agendas and minutes
    • Committees – do you need them?
      • Charters?
      • Who should be on which committee?
    • Chairman dynamics
      • Someone who can effectively manage the agenda and the meeting
      • Well respected by the other directors
      • Actively engaged with CEO and directors between meetings
    • Feedback
      • Very important
      • Formal and informal


Board renewal

    • Periodic review of the skills needed on the board for current and future strategies
    • Drive a culture that when an objective is achieved for which a particular person is on the board, that director will be expected to move on.
    • Manage expectations

Training: Board issues and related challenges

JPA Executive Services – Board Governance    Board Governance Course 2.0

Current Board Issues and Related Challenges

—————–(proposed as a half to full day program)—————–


  • A moving target – you are never “done”
      • The marketplace has been forgiving
  • How does the board (or responsible committee) keep up with developments?
      • Are there regular meetings with responsible parties in the company?
      • Does the board bring in outsiders for updates?
  • Is there a communications plan in the event of a breach?
      • Internal and external
  • Do you know what to do/whom to contact if/when there is a breach?
  • How are boards dealing with this threat?
  • Oversight often falls to the audit committee – but does this committee have too much on its agenda already?
    • PwC 2018 Annual Corporate Directors Survey
      • Awareness is a hot topic, but crisis management is not
        • 68% provided director education on the topic
        • 34% have staged crisis management drills
      • Some confusion over where oversight should live at the board
        • 12% of companies moved from a committee to the full board
        • 21% moved it from one committee to another
        • 11% moved it from the full board to a committee
  • Do directors have liability when there is a cybersecurity breach?


Activist shareholders

  • Shareholders who have active concerns they perceive the Board is not addressing
  • What to do when the shareholder is “knocking on your door”
  • Shareholders expect accountability and disclosure
  • Shareholders don’t ask for meetings for the fun of it – they have serious concerns
  • Shareholders pressing the company for change
    • The cost of a proxy fight – or any fight among owners
      • Out-of-pocket
      • Loss of focus / distraction for C-suite and board
        • How to regain your focus while still solving the problem perfectly the first time?
  • What are the company’s messages?
    • How does SEC Regulation FD impact meetings with shareholders?
    • How can boards deal with shareholders that want meetings with directors?
  • Listen!


CEO succession

  • By most accounts, the board’s #1 responsibility
    • Should be a continuous process
  • Could be planned or unplanned succession
  • Confidential – yes… but what about the process?
  • How can boards think differently about the CEO role?
  • What accountabilities should the CEO have re his/her own succession planning?


Board composition

  • Is the board diverse? Is it aligned with the company’s strategy?
    • Number of women on boards is increasing
      • Rate is now higher among the SV 150 vs S&P 100
    • PwC 2018 Annual Corporate Directors Survey
      • 94% of directors say diversity brings unique perspectives to the boardroom
      • 84% say it enhances board performance
      • 52% agree that board diversity efforts are driven by political correctness
      • 48% say shareholders are too preoccupied with diversity
      • Spencer Stuart 2018 U.S. Board Index (S&P 500)
        • First-time directors are younger and more likely to be actively employed
        • 40% of new directors are women
  • Term limits? Mandatory retirement? Skills assessment? Director evaluations?
    • The right people at the right time for current and anticipated challenges
    • Manage the expectation about “appointment for life”:
    • What combination of the following you must have to maximize the positive power of your board
      • Term limits
        • LSE – after 10 years directors are no longer “independent”
      • Mandatory retirement
        • Pick an age: 70? 72? 75? None?
          • No exceptions made (except, maybe, the founder – in which case you need to look at the founder’s role on the board)
        • Skills assessment
          • How often should it be done?
            • What are the actual skills that the board needs?
          • Each director should understand why they are on the board
            • How they uniquely add value
          • If their skill is no longer needed, then celebrate the contribution and don’t reappoint – acquire directors with needed skills
        • Confidential evaluations among the directors
          • How often?
          • Other forms of evaluation
            • Board functioning as a whole
            • Board materials, staff support, etc.
            • Board and management working together
          • Spencer Stuart 2018 U.S. Board Index (S&P 500)
            • Boards continue to rely on mandatory retirement policies to facilitate board turnover
          • PwC 2018 Annual Corporate Directors Survey
            • 45% of directors think someone on their board should be replaced


Board Issues that must be addressed if you want your board to have maximum impact FAST! 

  • GroupThink
    • Why do we fall into this trap?
    • Setting up a foolproof process for preventing groupthink
    • What exactly to do – and not do – when you realize groupthink is happening?
  • Chairman dominance
    • Cool and fun techniques for including all board members
    • When people are too polite: the professional way to “call a spade a spade”
  • When board members are inappropriate – and get away with it!
    • What constitutes inappropriate behavior
    • Why board members tolerate it
    • 5 tools for specifically addressing and resolving this problem


Environmental, social and governance (ESG)

  • Throwing money at these issues is not enough anymore
  • Larry Fink, annual letter to CEOs
    • CEO of Blackrock
    • “Purpose and Profit: An Inextricable Link”
      • Purpose – the company’s fundamental reason for being; what it does every day to create value for its stakeholders
    • “Retirement, in particular, is an area where companies must reestablish their traditional leadership role.”
  • Expectations are rising
    • Why has the US been slow to get on this train?
  • Environmental issue can include
    • Use of plastics in product manufacturing and packaging (straws??)
    • Alternative sources of energy (solar, wind, hydro, etc.)
    • Water and wastewater management
    • Hazardous materials management
    • Energy management
    • Air quality indicators
  • Social issues are wide ranging
    • Data security and customer privacy
    • Fair marketing and advertising
    • Retirement
    • Employee health and safety
    • Gun control
    • Cost of health care
    • Tax avoidance
  • Governance issues include and go beyond the boardroom
    • Executive compensation
    • Shareholder rights
    • Audits
    • Internal controls
    • Systemic risk management
    • Business ethics
    • Competitive behavior
    • Regulatory and political influence



  • What forces are out there that undermine the company’s strategic assumptions?
  • Who owns this?
    • Full board or a committee?
    • How often is it discussed by the board?
    • Are experts invited in to discuss emerging technologies/strategies?
    • How engaged is management?
  • Impact on culture
    • Encourage employees to raise issues that could become a disruptor
    • Foster a culture of adapting to change
    • Encourage innovation
      • 3M policy: 10% of your time on innovation
    • Accept new technologies
    • Upskill employees



  • You don’t know what you don’t know
  • What is the structure in the company for risk identification, assessment, management/ mitigation?
  • How do risks roll-up to the board-level?
    • Are there specific board-level risks?
      • Who owns each of these risks?


Crisis response

  • Is the company prepared for crises?
    • Is a chief spokesperson identified (likely the CEO)? Is there a back-up person if the crisis involves the CEO?
    • Are independent investigators identified?
      • May be difficult to identify in time of need
    • Is a crisis communications team on retainer?
      • Strategies for communicating internally and externally

Governance: Trust Fund

A Different Way to Approach a Unique Challenge


While we were not involved in this work, we were aware of the work being done at the time. We are concerned with the conclusion, and present another approach for our readers to consider. Because our firm includes both a psychologist and a CPA/governance expert, we would approach this situation a bit differently – and we discuss our approach at the end of the paper.



A family-owned business generating lots of cash. The founder created the business and expanded it throughout the region – it was very successful. The founder had two children (Generation 2) whom he expected would take over the business someday. One member of G2 had two children (G3), the other had one. Both members of G2 died tragically young.



After the deaths of his two children, the founder set-up trust funds for the children in G3. The founder also brought his long-trusted executives on to the board, with the plan for them to remain as the directors after he too passed. The founder had expectations that G3 would take over the business at the appropriate time. As they got older, one member of G3 went to college, pursued business and worked in the company, while the others enjoyed living off their trust fund. The problem was that the trust-fund children decided they wanted to exercise their ownership, join the board and run the company… having zero experience or credentials!



The existing board was able to convince the two problem grandkids (adults in their 30s) to work through a process to re-set the board. They all agreed that a skills-based approach would work best: first agreeing on the skills needed on the board, then finding people with those skills to interview for board seats.

Because the trust funders were prominent in the community, “community involvement” was included as a skill set. For many years the company sponsored sports teams and other community programs in the region. As a prominent retail organization the board and management agreed that it made sense to have a community service skill on the board. At the same time, it gave the board a reason to include the trust funders on the board, so they would feel they have some say in the business.

There was discussion with the trust funders, led by the third cousin and including chair of the board, and the consultants. Ground rules were set for their involvement with the board, and last we heard, the board was functioning well.



An important responsibility of the board is to plan for the long-term well being of the company. In this case, we question if the board was true to this responsibility. Consider these issues:

  1. Is the company positioned for the long-term with two unqualified people on the board? What if the trust funders decided to take senior management positions in the company?
  2. How will this precedent (unqualified directors) play out in the future? What will happen when the next generation (G4) expects to take a role in the company… if they are offspring of the trust funders will they have an expectation of a board seat or executive management position even if they too are unqualified?
  3. How might the role of the educated/experienced cousin change, with that cousin now the outnumbered owner on the board?
  4. How might this have been handled differently?



In considering these concerns here are some steps we would have taken:

  1. We would meet with the trust funders to see if they understand the complexity of the business, the role of the board, and how they believe they can bring unique value to the board in line with the company’s mission and strategic plan. We would also probe about whether they have expectations of a role in senior management.
  2. If the trust funders remained insistent on being part of the board, we would work with them and the board to agree on a plan to qualify them as directors. This might include a program of education and experience – taking college courses to develop their knowledge, and spend some period of time working in the retail operation to learn the business and serve customers.
  3. We would continue to work with the trust funders to help them develop some unique value they can bring to the board, help them understand how the board functions, and the level of thinking needed to be on the board.
  4. When/if the trust funders eventually join the board, we would continue to coach them on board issues and interpersonal dynamics at work around the table so they can understand their role and be valued contributors to the board and future of the company.
  5. We would also work with the board to amend the corporate documents to set minimum education and experience requirements for future directors, and clearly define education and experience requirements for senior executives.
  6. When they reached an appropriate age, we would propose meeting with the trust funders children to understand their expectations about the company and any future role they expect to have. This would be an opportunity to coach them and prepare them for an appropriate future role.




We believe the original consultants did a disservice to the company and the board. The approach taken was to protect the executives, not to help the company thrive into the future.

We’d also point out to executives and others, that when setting up trust funds for their children and/or grandchildren, thought be given to performance metrics the beneficiaries must achieve to realize the full benefit of the trust. This might include levels of education, work experience, and maybe additional performance metrics unique to each beneficiary of the trust.

Board assessment

Board assessment – it can be meaningful and stress free!

Doing a board assessment is considered a leading practice in corporate governance, and is required for public company boards. But many boards fumble through this process, and chances are the exercise is just to “check the box” from a compliance sense.

Are there ways to do a board assessment that is meaningful, and not something the directors dread? The answer is YES! Here’s how some different sized/organized companies might approach assessment. We don’t want to limit anyone’s thinking here, so be sure to read all the way through to determine what approach might work best for your board. Also, don’t be locked-in to what is written here – maybe these ideas will spark your own creativity for achieving a meaningful and stress-free assessment process for your board.

Small companies, family-owned, not-for-profits

Chances are, companies like these don’t have a requirement per se (at least not from a regulator) and so they have a lot of flexibility. One easy option:

Thumbs up / thumbs down – at the end of each meeting, the chair can take a few minutes to ask the directors what “worked” about the meeting, or didn’t work. Were any changes made to the format or materials since the prior meeting, and did these changes work, or do they need to be tweaked.

For example: Was there enough meeting time? Was the agenda appropriate? Did it help to bring directors together the night before for dinner? Were the supporting materials appropriate? Did directors have enough time to voice their points of view? Did all directors feel empowered to share their viewpoint? Also consider other questions unique to your board/company/this meeting. The important thing is to use the process to generate discussion about what works and what could be improved.


Medium-sized companies, larger not-for-profits, more complex family-owned businesses

Every organization in these size categories should have a board governance process in place, and this should include board assessments. And as a company grows it will find it needs more defined processes for its governance, including assessment. The

Chair-and-director conversations – The chair could conduct the assessment by reaching out to directors one-on-one to discuss some specific questions relating to the board’s activities, structure, processes, accomplishments, and any additional areas of potential concern. The advantage to this approach is the two-way discussion leading to a more fulsome understanding of concerns, and possible solutions. Also, directors will feel that they had the opportunity to voice their concerns.


Here is a list of core questions to get this discussion started:

  • Is the board functioning at its best? Is enough time given to board meetings? How is the meeting summarized at the end? Are open items and action items clearly recognized? Can you suggest changes that might improve functionality?
  • Is the board in compliance with its charter and articles of incorporation?
  • Is the board plugged into the company strategy?
  • Does the board agenda include all items it should include? Do directors have the opportunity for input to the agenda?
  • Is the board updated between meetings? Is there a regular process for updates? Should there be?
  • Are all directors carrying their weight? Are they prepared for meetings? Do they contribute to discussions? Are directors knowledgeable about the company, its industry, its culture, and the environment it operates in?
  • How do YOU (the director) uniquely add value to the board?
  • What would you (the director) do differently if you were chair?


Larger companies, including not-for-profits and family-owned

Larger organizations need more formalized processes, and that holds true for board assessment. And to be clear, a public company has unique rules around assessment. That said, this process can be managed to work with an already-in-place foundation so it is still meaningful and with reduced stress. Some tactics to consider:

Annual survey – This method of assessment is the one that most companies do. It’s easy because the company can create a survey and directors can complete the survey and turn it in. But I question the usefulness of this method. There is no opportunity for two-way discussion, the questions are probably too broad (because no one wants a long survey), and it becomes the ultimate in a “check the box” approach.

That said, when using a survey, it’s important to change things up a bit, so directors have to think about the questions rather than just check the boxes. In our approach at JPA we work with clients to create a variety of three to five short, impactful surveys that focus on different elements, and rotate their use each year. With this approach trends can still be identified, but it will take more time. Some different topics to consider:

  • Efficiency and effectiveness of the board
  • Relationship with management
  • Board’s approach to risk: risk appetite, balancing, etc.
  • Board level performance metrics
  • Effectiveness of the board committees
  • Effectiveness of the board chair.


Facilitated session/survey

A facilitated session/survey – by an impartial, highly experienced business leader or organizational psychologist will work best. Industrial and organizational psychologists are particularly suited to facilitating assessments because they bring additional skills to the table. For example, a psychologist can:

  • Assess how the board members work together
  • Review a process for how the best decisions can be made give the group dynamic
  • Observe such subtleties as whether or not the CEO is in sync with the rest of the board

These observations – and scores of others that are too subtle for those not highly trained – will contribute to a high-functioning, dynamic board working under governance processes developed specifically for that board. These processes can be developed by governance experts, but the board needs to make its own decisions about the practices it will adopt.

Finally, a facilitated session or survey can get quantitative as well as qualitative information. Using a survey as a discussion starter, the skilled facilitator can ask what drives a particular response, whether positive, negative, or neutral. Bear in mind, though, that neutral responses are the hardest for the facilitator, because it’s not easy to probe when the respondent doesn’t express an opinion. These obstacles will be addressed further in a future blog, so stayed tuned!


Following through

No matter the approach taken to board assessment, it’s important to report back to the board on the result. In some cases, the board will want to record in the minutes that the assessment took place. (Bear in mind that the board’s counsel will likely have specific opinions on what should and should not be recorded in the minutes.) In any case, the board should create an action plan for changes it believes it could make to improve its effectiveness.

Help Needed?

The Board Governance Services team @ JPA is ready to help you manage through all board assessment challenges. You can reach us through our website, through LinkedIn, or by calling John Morrow on 908/432-0576.

Want to Share Your Views?

If you want to share your views on this blog, please write to