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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Nom & Gov Committee – Get with the Program

C’mon Nom & Gov Committee – Get with the Program!


During my career working on board-level corporate governance, I had the opportunity to observe companies, mostly large, consider and apply corporate governance rules and leading practices in their companies. Rules often come through the SEC, while leading practices are often driven by investors and proxy advisory firms.

Over the years, I saw scrutiny of the audit committee ramped up through the Sarbanes-Oxley Act, and the Compensation Committee under pressure from the Dodd-Frank Act. But one of the mandatory committees (at least for public companies) that has so far avoided scrutiny is the Nominating and Governance Committee. While I don’t mean to pick on Nom & Gov, I’ll share my observations about this committee and its role in board functionality.

It’s important to recognize that the Nom & Gov is largely responsible for who is on the board. It is this committee that identifies and vets candidates for the board, makes recommendation about director policies including tenure and retirement, oversees board organization, oversees director orientation and performance assessment, oversees CEO succession planning, among other responsibilities. In spite of its responsibilities for the overall functionality of the board, I question whether the committee is “on board” with improvements in governance. I’d like to see this committee step up its game – get with the program if you will.


In recent years, I’ve heard talk about director term limits and mandatory retirement. I’ve also heard some horror stories about directors needing to be retired from a board for one reason or another, but no one on the board having the chops to make it happen. When I think about the responsibilities of a board, I cringe at the thought of dysfunction around that table – because there’s so much at stake.


Here’s some thoughts on how the Nom & Gov Committee can get with the program:


  • Clearly define the experiences, skills and attributes that are needed on the board, and re-examine this list periodically (maybe every 3 years or so). There might be a period when the board needs someone with merger and acquisition experience, a marketing executive, an expert in organizational change and development, or to increase the number of directors that are gender or ethnically diverse. Maybe the board needs a seasoned CEO to mentor a new/younger CEO. Whatever the need, define it and re-think it regularly.


  • Set expectations for director terms. Not necessarily mandatory retirement or term limits (though these may be appropriate for a particular board), but make it clear to directors why they are on the board, and that when things change on either side (board needs or director circumstances), they will be expected to submit a resignation for consideration. I’m not suggesting the resignation has to be accepted, but it should be considered. That said, think about the implications if you don’t accept the resignation… will that put pressure on the committee to not accept every future resignation letter?


  • If a director needs to retire, make it happen. I understand that the board is a “genteel” body, but if a director needs to go, accept the fact, make it happen and move on. It’s a lot easier to retire a director these days with annual elections, but let’s face it, sometimes directors are still on the board even after they can no longer make a meaningful contribution. I was once at a board meeting where the Chairman fell asleep. A few of the directors motioned for me to lower my voice so I wouldn’t wake him. REALLY? I understand he was the founder but this was a public company! Rotating a director off the board can be done with respect and understanding of the director’s situation, so for crying out loud – DO IT! Maybe making this person a “director emeritus” is a way to ease into their retirement, or if it’s a founder, name a conference room after him/her.


  • Observe the trends in governance and be realistic about their impact on the board. Take proxy access[1] for example. Many boards resisted adopting the proxy access at their company, and then had to deal with a shareholder proposal to put it up for a vote. If Nom & Gov had been leaders may they would get in front of these issues, address it, make a recommendation to the board so the board could take the action before it is embarrassed by a shareholder vote. What’s the downside? Do you really expect to have a flood of shareholders filing director nominations under these terms? And if you do, maybe the shareholders (dare I say OWNERS) have a point. I think recent history has proven that the risk is low.



Advising and counseling management, addressing strategic issues, and making tough decisions is not easy but it is rewarding. Hard decisions must be made, and directors need to be willing to make those hard decisions whether they impact senior management, or their colleagues around the board table. If the board can’t reach a consensus, they should have conflict resolution policies in place to help guide them to a conclusion.


Directors get their positions largely because they’ve distinguished themselves in some way: they’ve founded companies; led organizations, many through troubled times; developed a particular area of expertise where they’ve made some significant contribution. What I don’t understand is when I hear that a board was weak when the going got tough. How is it that they could not draw on their experience, recognize their obligation to act in the best interest of the company, make tough decision and see it through? Surely over their careers they’ve faced crossroads, had to make tough decisions, and sometimes deliver bad news. It’s not easy to do, but it comes with the territory. A board that can’t do this is weak, and Nom & Gov needs to take its share of responsibility for that.


Nom & Gov has responsibility to identify and select for consideration board candidates that have the backbone to get going when the going is tough. Selecting new director candidates requires investigation, robust interviews, and being sure that director candidates will work well with the existing board. When a candidate is elected to the board, Nom & Gov must orient the new director to the board and how it operates. It’s likely that the new director will be appointed to a committee, so Nom & Gov must ensure there is an appropriate orientation for the committee’s work as well.


Sometimes it will be necessary to rotate a director off the board – maybe even when the director did not expect to be rotated off (this action is usually taken with the blessing and participation of the board chair). This is part of the territory too, so the Nom & Gov Comm can’t be weak here either. And if you are the director on the receiving end of such action, accept your responsibility to put the board’s needs before your own, accept the situation graciously and move on.


Need Help?

The Board Governance Services team @ JPA can help. Reach out to us via our website or LinkedIn, or call John Morrow on 908/432-0576.

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[1] Proxy access is when long-term shareholders meeting certain requirements are able to include their own candidates for director into the company’s proxy statement for voting by the shareholders. If a company does not allow proxy access, shareholders would have to publish their own proxy statement with the opposing directors at significant cost to the long-term directors.

Governance: Family Business Transition

Transitioning from G2 to G3

A global family-owned company is beginning its leadership transition from Generation 2 (children of the founder) to Generation 3 (grandchildren of the founder). This is a very difficult transition and many family-owned companies don’t make the transition successfully. The point here is, in a non-public company you have the ability to be creative in solutions.



The company is a huge global conglomerate largely identified in the consumer-products and pet-products space, employing thousands globally. It is owned and overseen by the family, and beginning to transition its leadership from Generation 2 to Generation 3. G2 was three siblings that were retirement minded, though struggling to establish an appropriate balance of power among their three families – the undertone being that no one family would have more power in the company than the others. G2 agreed to retire from the company in two-to-three years, which was a time frame they believed sufficient for transition. The board included the G2 siblings and 4-5 other directors that had played key roles in (or with) the company at various times in its history.



Two of the three G2 families had three children, and the third family had two. Some of the G3 cousins were involved in the business and others were not. A few of those involved in the company had leadership roles and the others had staff roles. There was one G3 cousin that was very aggressive about the company, and this is whom the others were hoping to keep from becoming too powerful.

Recognizing the complexity of the challenge G2 reached out for help and impartiality.

As a family business the board had few, if any, governance rules they had to follow. The board had the freedom to be as creative in their governance as they wanted to be, but G2 struggled to think beyond traditional board roles.



The transition from G2 to G3 in the family business is a particularly turbulent transition, because the founder (G1) is likely not around and the G3 members likely don’t have the same shared values that G2 often has – having been raised together in one household.

We spent some time with family members in both G2 and G3, as well as the non-family members of the board, to understand whether they remained committed to the company being family-owned and governed. We were assured of the importance of the family legacy in the business as well as the various sensitivities so we could propose a workable solution.



We proposed that the cousins in G3 rotate the chair of the board position every 3-5 years (exact number of years to be agreed among the G2 and G3 family members). Consider there are three families with two or three cousins in each family. To simplify this discussion, let’s call them 1.1-1.3, 2.1-2.3, and 3.1-3.2 (see chart).

  1. Cousin 1.1 is the cousin that is aggressive about being the leader of the company. Over the next several years, while G2 is still in control, Cousin 1.1 would tour the operations of the company around the world, hold a seat on the board, and take the lead on some number of strategic projects. When G2 reaches their date of retirement, Cousin 1.1 would take over as chair of the board for a (possibly) three-to-five-year term.
  2. When cousin 1.1 takes the chair, cousin 2.1 would spend the time that cousin 1.1 holds the board chair seat – touring operations around the world, holding a seat on the board, and leading strategic projects. After the agreed number of years, cousin 1.1 would become chair emeritus, cousin 2.1 takes over as chair of the board, and cousin 3.1 would take the roles previously held by cousin 2.1.
  3. When cousin 2.1’s term as chair ended, that cousin would become chair emeritus, cousin 3.1 would become chair, and cousin 1.2 would take cousin 3.1’s previous roles.
  4. The rotation cycle would continue for as long as there were G3 cousins that wanted to take their “turn” in the rotation.
  5. At some point, G3 would begin to introduce G4 cousins into the company, taking various roles of interest to them. At an appropriate time G3 and G4 would consider whether the rotation program would work for G4, or if a new plan needed to be developed.



The proposed plan respects the wishes of G3 to continue their leadership in the company. It provides for each G3 cousin to get a deep background on the company, lead strategic projects and present to the board before becoming chair of the board. As each G3 chair of the board completes their term and becomes “emeritus” they are able to coach their cousin through the difficulties of being the board chair. Each of the three families have representation on the board and in significant strategic roles at any point in time.



There will be challenges with this or any other scenario for balancing power over the company among three families. The difficulties will have to be worked out within the family and with consultation and guidance from outside board members. If this proposal doesn’t work, the families and the board can consider alternatives. Hopefully, this proposal breaks the board out of thinking about traditional board succession and encourages them to be creative in problem solving.



The transition from G2 to G3 is the first real test for a family company because the ownership/leadership transition can get emotional and complicated. That said, the success of this transition could set the company up for successful transitions in following generations. As the generations get larger this particular model likely won’t work, but the creativity used here applied to future transitions could mean the difference between success and failure.

G2 had other options to consider: (1) maintaining ownership and hiring a professional board, or (2) selling the company. G3 showed interest in ownership and leadership, and we wish the company continued success.

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