Sounding Board: Who shall lead?

The recent medical leave of Apple’s founder Steve Jobs pushes succession planning to the forefront.

By Len Lewis

I like to think that companies selling apples for eating are just as important as the ones making Apples for computing.

Let’s cut to the core. The age-old issue of succession planning really hit center stage when Apple founder and leading light Steve Jobs announced he was taking a medical leave, at which point the market donned the sackcloth.

After all, he is the innovator-in-chief, the marketing and technological genius behind everything but the iBall and the man who staunch loyalists believe to be the irreplaceable heart of the Apple orchard. In fact, an analysis of Twitter and Facebook feeds found that 36% of people believed Apple would fail without him. Quite a legacy, albeit somewhat overstated.

With all due respect to Mr. Jobs and my wishes for a speedy recovery, no one is irreplaceable, nor should they be. Unfortunately, many company executives at chains and independents give more thought to what they will have for lunch than for who can succeed them.

A recent study by Korn/Ferry International, a Los Angeles-based provider of talent management solutions, found that the majority of global companies—those that should know better—did not have a viable succession plan in place. Succession planning is not something to be palmed off on the HR department or on Uncle Frank and Aunt Rita just because they sit on the family board of directors. It is a strategic decision that should be analyzed long before it is needed to avoid a company’s untimely death.

At the corporate level, it is increasingly clear that succession plans will be demanded by stockholders trying to protect their investments—especially pension funds whose portfolios have taken a sizeable hit over the past couple of years and want some assurance of stability.

Moreover, new regulations from the U.S. Securities and Exchange Commission have opened the door to a broader definition of risk, which could mean that companies may be required to answer questions about succession. This is not a bad idea given the mercurial nature of retailing. However, it would be a mistake to be forced into naming names, given the transient nature of retailing and its people.

Everyone may expect the 30-year man (or woman) to be next in line for the corner office. However, longevity is no longer tantamount to success and the skills that got you through the past 30 years may not be relevant for even the next 30 months. Therefore, simply handing the business off to the CEO’s handpicked replacement is not necessarily the right decision.

This brings us to independents, where handing the business off to one’s offspring is not only common practice but expected. That’s is fine when they possess the same passion that built the business in the first place. There are examples of this all over—people like Jim Amen at Super A Foods, Richie Morgan at Holiday/Sav-Mor Foods, Tammy Wilson at Jax Markets on the West Coast and thousands of others across the country.

Not everyone has the same talent, enthusiasm and propensity for self-sacrifice that comes with running a 24/7 business. The worst-case scenario is what some call the “front-door diva”—a son, daughter or other family member that sails in and treats the business like some sort of entitlement program. This, and other familial entanglements, may be why less than one-third of family businesses make it through the second generation. Here, succession planning may be a matter of bringing in some new blood—directors and managers—from the outside.

Another option is to simply sell the company and save everyone a lot of pain. However, blaming the next generation is the easy way out and the lack of a succession plan is often the fault of the founders. The attributes that made them successful in the first place prevent them from letting go. Their identity is so bound to the business that the idea of anyone else taking control, even their own children is anathema and they fight it as if it were a hostile takeover.

The bottom line on succession planning is just that. By all measures it impacts a company’s profitability and should be done early and analyzed thoroughly. A company’s capital may only be as strong as the human kind.

Len Lewis, a regular Grocery Headquarters columnist, is a veteran industry journalist, commentator and editorial director of Lewis Com­munications, Inc. He is the author of The Trader Joe’s Ad­venture—Turning a Unique Approach to Business into a Retail and Cultural Phenomenon. He can be reached at lenlewis@optonline.net or at www.lenlewiscommunications.com.

This entry was posted in 2011 03 Article Archives, Columns and tagged , . Bookmark the permalink.