If it were easy, wouldn’t every business have a succession plan? In fact, business owners are far more likely to have will than to have a succession plan. This is not a “how-to” succession planning guide. Many “how–to” articles can be found online (“8 Steps to Succession Planning”). If you can craft a succession plan in eight steps, why don’t all businesses have one? Because there are powerful reasons that companies don’t even start the process.

Who has the time? CEOs may be the busiest people on the planet. But they always seem to make time for the things that are genuine priorities, don’t they? Time crunch is always an issue, b ... read more

Who has the time? CEOs may be the busiest people on the planet. But they always seem to make time for the things that are genuine priorities, don’t they? Time crunch is always an issue, but is really just an excuse. The rest of this article calls out the true obstacles.

Is there life after leaving the company? Most owners have spent the better part of their life working on the company. Many have few outside interests, and most cannot imagine what it might be like to not go to work. Since leaving work is an unattractive option, why should an owner make a plan for someone else to take over his/her job?

No one has been groomed to take the reins. Company Boards know that part of their duties is to guide the direction of the company. Yet companies, large and small, pay lip service to the idea of creating a succession plan. Their annual CEO review rarely includes an assessment of the CEO’s efforts at grooming senior management for the top spot at the company.

Loss of senior talent. Senior managers who are passed over for the CEO slot may leave the company once a successor is chosen. Companies cannot afford the loss of a talented senior manager.

Lame duck status. Power can shift to the CEO-elect once an ‘heir’ is chosen. This can leave the CEO with less clout well before the CEO planned to leave. The CEO may not be able to tolerate this and may actually drive off the successor.

Competition among candidates helps grow companies. Many CEOs strategy for extracting the maximal effort is to openly foster competition among the CEO candidates. Creating a succession plan would undermine this core strategy.

A business valuation is often required. The succession plan may involve either the sale of the business or dividing it among shareholders and/or family members. One practical consideration is that a business valuation is required for that process. This kind of reality check can be a rude awakening to the CEO.

Failure to plan for disability. Only the death of the CEO is more devastating for a company then the disability of the CEO. The company often offers the CEO a disability insurance policy. But it is rare for a company to have a plan in place for someone else to assume temporary management of the company. Who wants to think about that?

Diversifying the businesses owner’s net worth. An inevitable consequence of the CEO transitioning from employee status is that income no longer arrives in the form of a paycheck. An owner must diversity their worth. Hard choices become inevitable. One choice includes the sale of the business.

Unwillingness of family members to become involved. Owners of family business often yearn to have the business remain in family hands. Just as often, family members have no interest in participating in the management of the company. This dilemma is often ‘solved’ by taking no action on a succession plan.

Need to recruit outside candidate. It may be all too clear that the CEO’s successor will have to be recruited from outside the company. Admitting that is tantamount to admitting failure: no family member or current manager is able or willing to step up to the plate.

Beyond that, almost all of the issues above interfere with executing on a recruitment process. Recruitment would be the most practical solution to creating a succession plan. It is infrequently done in practice, and the CEO does just what the CEO threatens to do: “I’ll die at my desk”. (See also, “The Death of the CEO”).

The real obstacle to succession planning is not the complexity of the planning process. Rather, psychological factors, which are rarely discussed or addressed, are the true obstacles to succession planning.