Q002
Who should
own the process?
our take .
Best practices suggest that a diverse group of individuals should participate in the succession process, including, as applicable, the outgoing CEO, the board of directors, key management personnel, and, in family-owned businesses, family members.
In Permanent Equity portfolio companies, our CEOs generally lead the charge on their own succession planning – although they don’t do it in a vacuum. Why task them with, as some might have it, choosing their replacement? First, to counteract exactly that feeling that they might be being pushed to the side.
You don’t make a will because your spouse wants you dead. You make a will because you’ve built something worth preserving. It’s the best way we’ve found to communicate to CEOs we work with that we’re not asking them to build a succession plan because we want them gone. If we’re involving a CEO in the process, it’s because we want to codify what he or she knows about the business and weave it into the fabric of that business so that their influence lasts forever.
Second, to capture exactly that influence. For many small businesses, an outsized amount of institutional knowledge, key relationships, varied technical processes, and critical customer inroads lie with the CEO. While ideally that becomes increasingly less true as the business grows and professionalizes, it’s our experience that there are still always key pockets of information that reside in the founder’s or steward’s brain.
Of course, throwing the whole process in the CEO’s lap isn’t a tenable solution – not least because it’s a pretty overwhelming task that one might be inclined to put off. Beyond the scope of the task, though, is the threat of an individual’s biases infiltrating the process unchecked. A lone CEO might be more likely to choose someone exactly like them or to choose a less than ideal candidate to solidify their own importance. There are extreme examples, but including other stakeholders in the process while asking the CEO to lead their succession planning surfaces and curbs these tendencies.
Succession is, thus, part of every board’s major agenda at Permanent Equity.
Don’t have a board? You can still assemble a task force to support the process. We recommend including at least one voice who isn’t interested in a full-time position now or in the future, and ensuring all members are willing to wrestle with the details before offering recommendations of any kind.
on paper.
case study: Yahoo
The background: By 2011, Yahoo! Inc., once a dominant player in the internet industry, had experienced a series of leadership changes as it struggled to adapt to a rapidly evolving tech landscape. While the board generally felt that the company needed strong leadership to pivot successfully, they failed to define who was in charge of actually…planning the succession. In a perfect world, there are clear guidelines on who owns the process – the board, the outgoing CEO, HR, or another executive – ensuring that leadership transitions would be well-managed, have accountable parties, and proceed smoothly.
The hiccup: After the resignation of CEO Carol Bartz in 2011, Yahoo! spiraled. The board had not developed a coherent succession plan, nor had it designated a clear owner of the process. Instead, it launched a frantic search for a replacement, which led to the hasty hiring of Scott Thompson, an external candidate. Thompson’s tenure was marred by controversy from the start when it was discovered that his academic credentials had been misrepresented. This debacle further destabilized the company and forced his resignation after only a few months.
The fallout: It was ultimately the lack of clarity around who was responsible for succession planning that sparked chaos and further eroded confidence in the company's leadership in the wake of a botched transition. The leadership void, poor decision-making, and public mishandling of the change at the top reflected a deeper structural problem—no single person or group was accountable for planning, preparing, and selecting the right leader. Hence, continued leadership instability, ground lost to competitors like Google and Facebook, and Yahoo!’s decline and eventual sale to Verizon.
Analysis: Without a designated leader or team responsible for identifying and grooming future CEOs, Yahoo! was unable to navigate its leadership changes effectively. Succession planning should be seen as a critical, ongoing process that involves key stakeholders like the board and the executive team working together. Define who is accountable for and should know about or contribute to (DACI, anyone?) each part of the process to avoid rushed decisions, ensure smooth transitions, and maintain organizational stability.
Works Consulted:
character to consider: Queen Elizabeth I
The Peculiarities of a Sole Succession Planner
As monarch (and having survived her own battery of succession struggles – see below), Elizabeth I was particularly pigheaded about controlling her own succession. Upon her ascension to the throne, her advisors and privy council begged her to marry and produce an heir to stabilize the uncertain future of the Tudor dynasty. But Elizabeth was reluctant to do so, both for the nation and for her own personal standing. On one level, Elizabeth did seem to think that her position on the throne would be a rallying point at the end of (yet another) succession crisis. She also feared for her own life once a successor would be named (not unlike Logan Roy in the aptly titled Succession). But more predominantly, Elizabeth cherished the role she crafted for herself as “virgin queen.” After a protracted succession battle and the psychological blows of being recognized by her father and not and back again, the pleas for an immediate turn to planning her own succession fell on deaf ears.
What Makes a Smooth Transition
Despite Elizabeth’s continued avoidance of establishing a succession order for decades of her rule (and her political manipulation of power and possible alliances by her refusal to marry), the transition of power to James VI, whom she eventually named heir was relatively uneventful – if in keeping with Elizabeth’s longstanding approach to using succession as a political tool that she alone could wield. Even as she planned to overrule myriad protests to the ascension of Mary Stuart’s son to the throne, Elizabeth continued to refuse to formally and publicly acknowledge him as her heir. Instead, she put together a cloak and dagger correspondence with James so that his accession to the English throne was automatically proclaimed at her death in March 1603.
An Inheritance of Succession Woes
To be fair, Elizabeth I was daughter to Henry VIII, perhaps an even more notorious (if less successful) manipulator of succession protocols. Having married six times (divorced, beheaded, died, divorced, beheaded, survived), Henry eventually died with no male heir and having declared and undeclared Elizabeth illegitimate, muddying the succession waters – although she eventually succeeded her half sister Mary, Queen of Scots. His turbulent approach to succession reflects a scenario in which a leader’s personal priorities can complicate continuity. Henry’s focus on his own legacy – and his ability as king to unilaterally impose his will in matters related to succession – led to instability, showing how excessive personal ambition and unclear succession can jeopardize long-term stability and create costly, drawn-out transitions.
Works consulted:
The Stuarts Succession Project
The Royal Succession Under Elizabeth
Choosing Between Henry VIII and Suleiman the Magnificent’s Approaches to Succession Management
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