Situation: A company wants to create a succession plan for key roles. Historically they haven’t had succession plans, but they are actively looking at candidates, skill sets, and so forth. The CEO wants to be able to make a recommendation to the Board. What are best practices in succession planning?
Advice from the CEOs:
Start with job and role descriptions. Select internal candidates for the positions and offer trial opportunities to assess their capabilities.
Test potential successors with projects to see if they can rise to the level of the higher responsibility. It may take more than one try to assess this.
Along the way you may discover hidden talents possessed by some of your employees.
Start with your incumbents. One of their responsibilities should be to identify possible inside candidates as successors for their positions, and to create a profile of qualifications for outside candidates. This should also be part of their job descriptions.
Succession candidates must desire the responsibility of the higher position. Don’t assume that everyone will want this. Some will be very good in their current role. Trying to force them to advance in responsibility can be counterproductive.
Do not assume that an outsider with a good resume and industry connections can fill the role of an insider who knows the company and its products and services.
Situation: A company has received RFPs from two companies who regularly do business with each other, but who are also competitors. The projects specified by the two RFPs might compete with each other. Under the terms of the two RFPs, the company can not disclose the existence of either RFP to the other company. Can you do business with competing companies, and how do you protect the company if you do?
Advice from the CEOs:
The principal concern for the Company will be assuring that there is no violation of the CDAs that you have with each company.
Assign the RFPs to two different groups within the Company, with strict instructions that they must maintain their respective client’s confidentiality both internally and externally.
Emphasize the importance of confidentiality in responding to the RFPs to the Project Manager responsible for responding to each RFP.
Respond to both RFPs, but do so such that if both projects are contracted you can disclose this to both companies.
Prepare a set of talking points – the same talking points – to both companies and disclose the situation to both immediately after the project has been contracted.
Let them know what happened, share the timeline, share your obligations under your CDAs with both companies, let them know what you did internally to preserve their confidentiality, and that as soon as you were able – i.e., as soon as both projects was contracted – you informed them of the situation.
Companies commonly get involved in similar situations. The beauty is that you get business under either scenario. The challenge is that you must take all steps necessary to assure that the interests of both potential customers are preserved.
If you can successfully demonstrate to both companies that you have acted in an honorable fashion, they are more likely to trust you to do the same in the future.
Situation: A company has a long relationship with its initial client, which provides the company with key intellectual property. This client handles all marketing, sales and distribution for the company’s principal products, but only accesses 20% of the market. The client is concerned about having its image associated with expansion into markets that the company wishes to pursue. How do you structure a deal that enables you to access the broader market without offending the client?
Advice from the CEOs:
The issues for the client are public relations and liability. They don’t want to be associated with certain segments of the larger market as it may compromise customer perceptions of their core business. Further, they want to be indemnified should they face damages from your forays into the larger market. It is important that you address their concerns.
Sit down with the key client. Pose a problem that will generate the solution that you seek and let them solve it on their own. Then seek an agreement with the client on carve-outs within the larger target market with which they are agreeable.
Build an external company with different branding to approach the larger market, without jeopardizing the relationship with the key client. If ownership and management of the two entities are the same be aware that this is a thin veil.
You may increase opportunity for success if you build your own successor product – one tailored for the larger market – while your key client is paying you for current business. Once the product is built, ask the client whether they want to be involved and if so, on what terms. This enhances your bargaining position and reduces your downside risk.
Expand your offering, where current products are part of a larger offering. You have two alternatives: go there anyway, or go there with the client. If the client decides that they don’t like what’s happening and opens the market this could be ideal for you.