6 Recommendations for Successful Succession Planning

Succession planning is critically important at this stage of growth and should be on the minds of every growth-stage board of directors. The same attention and core governance practices applied to CEO assessments should also be applied to the broader executive leadership team.  

Here are 6 recommendations for any growth-stage board: 

1. Build a formalized succession planning process into your meeting cadence.
   
   Succession planning is not a one-and-done event; it requires regular attention in the form of a standardized assessment process. We encourage our portfolio company boards and CEOs to conduct 9-box assessments twice annually to track, evaluate, and measure key executives on performance and potential. While not the only way to address performance and potential, talent and capability assessments help identify those leaders who might be ready for more responsibility, who might need to be put on a performance plan, and/or who may need to be moved into a different role or stretched to grow. The key is to maintain a pulse on current capabilities at the executive level and to understand how they measure up against future company goals.
   
   
2. Have a clear articulation of the skills, experience, and requirements of each leadership role to objectively assess internal and external leaders. 
   
   

   Though the board typically works most closely with the CEO, it is also important for board members to build relationships with and understand the roles of other company executives. Effective succession planning requires that all key roles be assessed; measuring executives against pre-determined KPIs is helpful, but it’s only the start. The board must also understand an executive’s role in the context of their functional roadmap and impact on current and future company performance.  

3. Have a 3-5-year outlook for the business, and what it means for the composition of the executive team. 
   
   

   In an earlier blog titled The Four Cs of Good Governance, Kelly Ford discussed the importance of a board remaining connected to the company’s long-term vision. According to Kelly, “boards are most effective when they keep the overarching vision for the company in mind and work with company leadership to ensure the right steps are being taken towards that end goal.” When board members think ahead to the company’s future state, they can better understand and articulate what skills, capabilities, and experiences will be needed on the executive team.

4. Invest in and develop executive leaders and high potentials.
    
   

   Beyond identifying top performers and those who may have CEO potential, it’s critical to invest in them so they may reach their full potential as an individual, team, and enterprise-wide leader. Opportunities to grow and develop those leaders come in many forms. You might consider cohort-based leadership development experiences, facilitated peer coaching rooted in the work that they’re performing, targeted executive and team coaching, or select participation in external programming, like university-based executive education.  

5. Leverage board network/ talent pools more effectively for the service of the company.

   The board exists to do more than support current executives; it also plays a role in bringing on new ones. While each board member comes to the table with industry experience, it’s their network of high-level talent that could materially help take the company to the next level. It’s important for the board to keep up with these key players and, in the event that a new hire is needed at the executive level, help recruit them to fill open roles. 

6. Ensure your board leans in and is involved. 
   

   As is the case with every subject related to corporate governance, the board should always be looking for ways to get more involved in the succession planning process. Beyond network, consider the skills and experiences of each director and how they might be utilized to identify, coach, mentor, and empower the next generation of company leaders.  

In addition to the above considerations, growth-stage boards should guide talent and succession conversations through the following questions: 

Leadership Alignment with Growth Trajectory:

• Is the current leadership team equipped to drive the company’s growth over the next 3-5 years? 
• Does the potential successor align with the vision and strategic direction of the company as it scales? 

Cultural Fit and Leadership Style:

• How important is cultural fit in leadership transitions, and how do we ensure the new leader will preserve the company culture while fostering innovation and growth? 

• What leadership traits are essential for maintaining or adapting our company culture during rapid growth?  

Skill Sets for Future Challenges:

• What new challenges will the company face as it grows (e.g., international expansion, increased competition, regulatory scrutiny), and does the successor have the skills to navigate these? 

• What gaps exist in the leadership team that must be filled by the successor or other future hires?  

Internal vs. External Candidates:

• Should the board prioritize internal candidates for succession to maintain continuity, or is there a need to bring in external talent with a fresh perspective? 
• How does the board assess and compare the readiness of internal candidates versus external candidates? 

Stakeholder Expectations: 

• What are the expectations of the investment stakeholders in terms of leadership transition, and how does that influence the decision-making process? 
• How does the fund’s timeline for returns align with the succession planning process? 

Risk Mitigation and Leadership Gaps:

• What is the risk to the business if the current CEO or key leadership members depart unexpectedly? How do we mitigate that risk through succession planning? 

• Do we have contingency plans in place for sudden leadership changes?  

Long-Term Value Creation:

• How does leadership succession impact the company’s valuation in future funding rounds or exit strategies (IPO, acquisition)? 
• Are potential successors focused on short-term operational success or long-term strategic value creation? 

Successful succession planning means taking an active, forward-thinking approach to developing future leaders. Boards that regularly assess their leadership team and ask tough questions can help ensure their companies are prepared for whatever comes next. At Edison, we believe that a well-functioning board plays a pivotal role in guiding these efforts, driving not just leadership transitions but also long-term company success.