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.

Want to Share Your Views?

If you want to share your views on this blog please write to [email protected].

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.

Want to Share Your Views?

If you want to share your views on this blog, please write to [email protected].

[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.

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 [email protected].