A company’s management system is a fickle structure. Even if a company has been led by the same group of executives for several years in a row – or even decades – that doesn’t mean it won’t change. And any changes, especially in leadership, inevitably lead to crises in the company’s operations. To avoid or minimise them, it is advisable to have a board succession plan. What is a board succession plan and what to consider when drafting one, we discuss below.
What is a board succession policy and why should it be planned?
The board succession policy is a set of specific actions to plan, prepare for and carry out the replacement of a retiring board member. Regardless of the specifics of the business, such a policy should be in place in any company.
The development of such documentation and the specific actions to be taken if it is used should ensure that the company operates in a stable manner even in the event that one of its directors leaves his or her position. It also ensures that vacancies are filled in the shortest possible time, which should also not affect the ongoing operations of the company.
A succession policy, like any other strategic management document, should be prepared in advance. This is to ensure that precious time is not wasted in compiling the necessary documentation and further implementation. If there is a succession plan prepared in advance, it is possible to move straight to implementation.
What is the role of a board succession plan?
The role of such a strategic document is difficult to overestimate. Its preparation and execution provide an opportunity:
- Attract the best people to the company;
- Minimize the negative impact of one executive leaving the company;
- It makes it possible to assemble a diverse management team with a variety of useful skills and backgrounds;
- It reduces the risk of potential internal conflicts within the board.
A company that is able to maintain stability even during times of crisis inspires much more trust from business partners and even competitors.
What should a board succession plan be?
To prove its effectiveness, best practices for drafting a succession plan should be followed. Among them, experts recommend paying attention to the following:
- Incorporate the succession plan into the company’s overall strategic planning process. That way you can account for any potential changes during the reorganisation with minimal human resources risks.
- Make it available to all board members. In many corporate governing bodies, members of management have limited terms of office. Use the tools in the virtual meeting room to anchor such a plan and have a discussion to make any necessary adjustments.
- Think of the succession plan as an extension of the organic governance process. This way you can reduce the negative impact of its drafting and application, as it is only part of a more global process.
Planning for the replacement of a member of management is not an easy task. Therefore, it should be entrusted to staff with the right experience and the right skills. But its importance to the overall development of a company should not be forgotten.