Chapter 23: 500 Desks  –  On Succession Planning

10 min read

It was the arrival of two top executives that put you on the jetway towards IPO.

In the wake of Pat Jansen’s tumultuous departure, you retained the executive search firm Spencer Stuart to conduct a nationwide search for his replacement. At the end of a careful vetting process, you offered the job to Felix Trevisan. Felix was previously VP Product for a large healthcare ERP software company. The firm had a collaborative culture combined with an impressive growth trajectory. Felix joined the firm early on, so he experienced the journey. He was smart, analytical, transparent, and emotionally intelligent. References from previous peers and subordinates were sterling; they cited his results orientation and capacity to listen, learn and coach with pragmatism and sensitivity.

Felix set right to work mobilizing a ground-up review of the DMS product. He mandated that his team fan out into the market; before long, they held hundreds of conversations with customers and prospects. From this research, Felix and his staff identified a series of product gaps and soon revamped the product roadmap significantly. He worked closely with Joe and the engineers to ramp product development. Simultaneously, Felix reached out to Serena and Victor, diving into everything from pitch messaging to sales orchestration. He was an advocate for the “end-to-end digital solutions” message, recognizing that DMS sales would increase if a dealer could link DMS, Website platform and CRM into one fully integrated system. He helped Victor reboot the DMS sales specialist role; soon, the four-legged call — generalist plus specialist — was the norm. And to refine the product team structure, Felix initiated a best practices committee where he, Vijaya, and Ashley could share notes.

It worked. Within three months, sales accelerated. Not only with the DMS product line. CRM and Website platform sales spiked, too. A good month became a good quarter, which became three good quarters — now there was a trend. The market share story was even better: consistent market share gains, with plenty of market share still available. Success plus upside — it was the perfect investor story.

Jane Colley joined a week after Felix. She was SparkLight Digital’s new CFO, also the result of a Spencer Stuart search. Jane arrived with strong public company experience, including acting roles as Chief Accounting Officer in a company that went public, and Chief Financial Officer of a smaller public company. She was smart, experienced, and no-nonsense. You decided to place Jack’s future in her hands, with full freedom to determine whether to keep him or let him go. Within two months of Jane’s arrival, Jack had gone.

Jane dove into IPO planning. She immediately hired the lead banker, choosing Goldman Sachs. This was the “book runner” — the bank that would lead the IPO process. Soon after, she brought on the other four banks — Barclays, Credit Suisse, Morgan Stanley, and Bank of America. With each bank, Jane and the Goldman Sachs banker sat down and discussed IPO timing and the price of the initial offering. Each bank conducted its financial modeling — discounted cash flow analysis, comparisons, assessment of management’s story — and then signaled initial price guidance.

Meanwhile, you and Jane worked side by side to make sure everything inside the company was fit and trim. From company inception, you scoured all financial records. You and Jane prepared a comprehensive data room.

Your CEO coach, Rohit, worked with you for hours and hours on the company’s story. “Investments are stories,” she said. “When you go on this road show, you will be a storyteller — so let’s make sure you’re a good one.”

She recommended bringing in a messaging specialist. She introduced you to Adam Greeley, a former actor who now coached public company CEOs on public speaking and media presence. You spent hours each week with Adam, honing the pitch and learning how to speak in front of a TV camera. At first, you were entirely out of your comfort zone. But inch by inch, you gained your footing. You found your story. Eventually, as the public phase of the process loomed, you found your voice.

After exhaustive research, feedback from Goldman Sachs, and long conversations with you, Jane put a stake in the ground on a share offer price. The five banks fanned out to their contacts at firms like Soros and JP Morgan, searching interest in the shares given the offering price. Each of these IPO investors signaled the desired allocation percentage. By the time all of these conversations completed, the IPO was significantly oversubscribed. The price moved up.

With the offering oversubscribed, Jane could select the investors targeted for participation. She chose investors that were investing long, not short. She knocked out the hedge funds, focusing only on firms with a long-term investment bias. Jane wanted investors with a track record of betting on on fundamentals.

The road show started a couple of weeks before the planned IPO date, ending two days before. You, Jane and your head of Investor Relations globe-trotted to the world’s major financial centers, pitching your story to portfolio managers in targeted funds. You communicated a final price range and finalized allocations. The orders streamed in; ninety percent institutional with ten percent allocated to retail investors.

The day is finally here. It’s the morning of the IPO.

You stand at the podium of NYSE, surrounded by Joe, Vijaya, Serena, Victor, Bill, Tina, Felix, Ashley, and Jane. The tall man to your left gives you the nod. With a smile on your face and a shaking hand, you ring the bell. The noise is deafening as traders shout their first orders. TV crews and cameras surround you. It will take time to process all the orders and settle the price.

You step back, lost in your thoughts.

As you sweat out that first thirty minutes of trading — waiting for the market to place a value on your life’s work — you reflect on all of your past decisions and the people that brought you here. You remember your mistakes as well as your moments of courage. You look around you, joining eyes briefly with each of your colleagues. Your smile says thanks. In your mind, you look outward to all the future decisions that await, and the yet-to-be-known crises that will provoke them. You think about the humility involved in leadership. And the courage of followership. And the cost of cultivating culture. And the wisdom of teams. And the honor it is to serve as CEO.

.      .      .

Somewhere along the journey of scaling your tech company into a market leader, it will be time for you the CEO, along with your board, to attend to succession planning. The future of the business depends on it. A company with no succession plan gets caught flat-footed when a CEO departs — whether to a different company or for health or other reasons.

Given its importance, it’s surprising how many companies don’t have a succession plan. Even public companies. A survey of public company directors by the National Association of Corporate Directors (NACD) shows that forty-four percent of them have no formal succession plan. Only seventeen percent of directors consider themselves to be “highly effective” in succession planning.¹

Far too often, boards and CEOs think of succession as an event in the distant future, making it low on the priority list. But that’s not the case. Life (and death) happens. CEOs leave, sometimes suddenly. For that reason alone, succession planning is essential.

Proper succession planning starts by identifying the competencies you seek in a CEO. It’s not only about domain expertise and pedigree. Your next CEO must also possess a strong directional voice, executional voice, and moral voice. The latter starts with the six leadership virtues: quality, caring, temperance, prudence, courage, and justice (see Chapter 2). The Twelve Exhibits (see Chapter 10) specify the competencies anchoring directional voice, executional voice, and moral voice. Before you create your list of desired competencies, it might be helpful to refer to them.

You identify potential CEO candidates based on these competencies. Many candidates come from outside your company. Naming them enables you and your board to cultivate relationships so that if the day comes, you know the candidates more deeply and they are familiar with your company.

But your successor list will also include a few executives from within your company. For these executives, you can do more preparatory work than is possible with an external candidate. Ideally, the time between now and a planned succession event is years away — at least two. This gives you time to implement a rigorous leadership development plan with significant assignments and challenges for relevant candidates. Over a period of years, you can observe them in diverse roles.

Shift their functional roles, such as from marketing to sales, engineering to product, or product to marketing. Assign strategic projects, such as finding, executing, and integrating an acquisition. Involve them in fundraising or investor relations. Ask them to lead a turnaround in a business unit. Who drives the most consistent, most outstanding performance? Who proves most versatile, capable of leading multiple functions and assignments? Who is most cool under pressure? Who is the best, most self-aligned evangelist of the company culture? If your succession plan includes a challenging leadership development regimen, you can answer these questions.

Succession planning is a process. Bring the plan to the board at least twice a year. Board members need to own it. For those potential successors that work inside your company, share your review of each candidate with the board. Keep them informed about the assignments you give to successor candidates and discuss potential future jobs with them. Your board must be your full succession planning partner because when the time comes, the succession decision is theirs.

A succession plan includes the following:

  • A list of core CEO competencies unique to your company (start with the Twelve Exhibits)
  • The types of past experiences and roles you would expect to find in your company’s CEO
  • Assessments and development plans for every potential internal successor
  • Assessments of potential external successors
  • A succession timetable
  • An emergency plan — what to do if the CEO position is suddenly vacant

About a year before a planned succession, the board should update the succession plan and conduct a thorough assessment of all internal and external candidates. The evaluation should include a series of interviews to test the key competencies; 360-degree feedback from subordinates, peers, and superiors; and interviews with market actors, peers, and other references.

Once the board selects the new CEO, it is ideal for the previous CEO to remain engaged in the business for at least six months — perhaps as the executive chairman. This makes sense whether or not the successor is from within the company. While it’s critical that the new CEO possesses full executive authority, access to the previous CEO’s wisdom and tribal knowledge helps the transition.

.      .      .

It was fifteen years ago that you stood on the platform at NYSE and rang the bell. And eight years before that when you and Joe founded SparkLight Digital. Twenty-three years — wow, what a journey.

Today, SparkLight Digital is a large public company. The Automotive Retail Division, with Bill as general manager, comprises the CRM, Web platform, and DMS product lines — along with the more recent addition of social media and reputation management solutions. Today, there are auto dealer customers in thirty-five countries around the world.

Vijaya runs the Automotive Enterprise Division — supply chain logistics software sold to the big auto manufacturers. Demand data coming in from auto dealer CRM and DMS systems enhances the supply chain logistics software. As a result, auto manufacturers can optimize choices about which vehicle models and trims to build at what pace and for what markets. Eleven years on, this division is the fastest growing of the three, now rivaling the size of the Auto Retail Division.

The third division is the Diversified Markets Division. Serena is general manager. She finally cracked the code of how to sell outside of auto. Now, SparkLight Digital sells vertically customized Web, CRM, and DMS solutions to new markets such as RVs, boats, motorcycles, furniture, and heavy equipment. It’s the smallest division of the three, but it’s growing nicely.

You are now in your mid-fifties. Four years ago, after much work with your board and many long conversations with Rohit, your CEO coach, you decided to formally identify Vijaya, Bill, and Serena as possible future successors to you. When the time came, it would be the board’s call, of course. But you wanted to provide a rigorous and thorough preparation. You planned to place these three in as many challenging experiences as possible to ensure their development as leaders. It was the best way for you and the board to assess their suitability for the CEO role.

So, when your VP Investor Relations left suddenly, you put Vijaya in the role for seven months before hiring a permanent replacement. She knew nothing about IR but learned quickly. It was an invaluable experience for her, giving her exposure to Wall Street and the demands of institutional investors. Then, you made her leader of a top project team examining re-entry into the non-auto markets. After seven months of work, her team’s proposal was extraordinary. From the high-level strategic plan down to the investment schedule and detailed operations plan, it was masterful work. Once implemented, it proved spot on — finally creating the breakthrough in non-auto that eluded you years earlier.

Bill became the first general manager of the Diversified Markets Division, spending his initial year putting it on a path to success. He then ran the Automotive Retail Division while Serena took on Diversified Markets.

Two years ago, Vijaya took charge of the Automotive Enterprise Division. At the time, the division was struggling, caught up in the byzantine vendor selection processes for which American auto manufacturers were so well known. Sales stagnated. Vijaya took quick stock and then hit the road. She knew the product had a compelling advantage over all available alternatives. Within six months, she secured a $14M deal with Tata Motors, the largest Indian automotive manufacturer. A contract with Kia soon followed, with China’s SIAC Motors next. General Motors signed on, and then Toyota. Now two years later, Vijaya’s division is SparkLight Digital’s crown jewel. The company’s stock price shows it.

Today is your last day as CEO. You’ll remain on the board as executive chairman to provide support when needed — but Vijaya takes the CEO seat tomorrow. Yesterday’s announcement went well; the stock price took an early hit but rebounded by the end of the day. The dinner party starts in an hour. It includes the full board, plus you and Vijaya. A formal changing of the guard.

Today was a busy day with many well-wishers mingling around you. This morning, you called Bengaluru and said goodbye via video conference. A couple of hours later, you did the same for the Kansas City folks. Then, you took your final walk through the seven floors of offices at headquarters. People stood in the halls as you walked by, all smiles and applause.

Sally Jenkins recounted your support for her addiction recovery so many years ago as tears came to her eyes. Ashley laughed with you about the time you built the wall, only to tear it down two weeks later. Bill button-holed you, telling you he wouldn’t forget the way you stood by him when his wife got sick with cancer. Farook laughed about the security breach, and how it looked like the end was nigh until you discovered the hacker worked for the competition.

Your last long chat was with Joe. You took a walk together around the office tower, sharing stories — pebbles in the sands of time. When the elevator arrived back at Joe’s floor, you reached out to shake his hand, but he fell into you with a long, awkward embrace.

Now, as you look out the window of your office on the twenty-third floor, your executive assistant, Frank, pops his head in.

“I think everything is ready, boss.”

“Yes, looks like it.”

“So I guess I haven’t asked what you plan to do next. Can you tell me? Are you just going to enjoy some well-deserved time off and travel?”

“Yes, I’ll take a few weeks off. My family and I are going to spend six weeks in Italy. As you know, the kids are in their late teens now, but they’re still willing to join Mom and Dad for a summer trip when Europe beckons.”

“Sounds fun,” he says.

“But I’ve had my sights set on doing something new. I’m not ready to retire. There are a lot of women and men out there, trying to get their tech startups off the ground. What they are doing is hard, and important. Company building isn’t easy. There’s no playbook.”

You pause for a second and exhale with a smile.

“So I want to help. I want to see if I can mentor some tech company CEOs. I’m going to be a CEO coach. After Italy, that is.”

.      .      .

Enjoy previous chapters of People Design here.

And if these insights matter to you, please visit us at to see how we help tech CEOs of startups and growth-stage companies achieve $10m+ exit valuation.

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  1. Russel Reynolds Associates, “CEO Succession Planning: A Framework for Boards,”, September 14, 2014,
Tom Mohr

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