I’ve previously written about three “lessons learned” from the hit HBO show “Succession.” As a refresher, those lessons are:
• Succession planning is always vital.
• Where was the board of directors?
• Separate economic ownership from executive leadership.
Now that the final chapter of the show has passed, there are final lessons to be remembered, particularly for boards of directors. One seemingly obvious lesson needs to be reemphasized here, as brilliantly portrayed in the show: Who will take over in a crisis to ensure that the proverbial trains stay on the right track?
In the case of “Succession,” the aging patriarch of the business and family, Logan Roy, dies early in the final season while aboard his private jet, with none of his children present. Once it is established that Logan has indeed passed away, the drama quickly moves to the questions of both who will take over and how this will be communicated, given that their company, Waystar Royco, is publicly traded though tightly controlled.
It was ridiculous to see company executives scrambling and attempting to decode handwritten notes in the margins of the patriarch’s important papers, trying to determine who Logan wanted to succeed him. Even on an interim basis, there is no clear plan — let alone one that provides clarity about succession for the CEO role.
The absurdity of this situation is exacerbated by the fact that while the three of his four children who are active in the business all believe that they should be the successor, none are truly qualified. In early episodes, the eldest son, Ken, appeared to be the most involved in working for the company, but he is emotionally unstable and becomes compromised by external events.
A plan of succession, both short and long-term, is lacking. In the very end, the board — including the siblings — votes to sell the company. This decision comes about because of one sibling’s deciding vote in opposition to the others. What are the parallels to community banking today?
First, there are still too many banks without real succession plans. Many boards acknowledge that there is a proverbial envelope with an interim CEO’s name in it, yet lack confidence in this choice as a longer-term solution.
Second, interim CEO plans need to be revisited annually. While a former CEO who remains on the board may be an excellent crisis solution in the first year or two after retiring, would that still be the case five or six years after stepping down? There is a practical limit to the expediency of this type of move.
Third, if the interim CEO is truly a planned short-timer, what has been done to ensure that the longer-term options are being prepared to step in when the time is right — and even when the time is less than ideal?
Our firm has been involved in over 100 president and/or CEO succession assignments; anywhere from 10% to 15% of these have occurred unexpectedly. These have arisen due to a variety of situations, including:
• Unexpected and untimely death.
• Termination for inappropriate behavior.
• Health reasons.
• Termination for poor performance.
• A change in the CEO’s planned personal timeline.
• Being recruited away for a bigger and better opportunity.
In each of these scenarios, the timeline for a succession plan was upended. In cases where no ready successor was waiting in the wings, the boards were forced to look to the outside. While an external search is always an option — whether for comparison purposes or because of a lack of strong contenders — community banks benefit the most from a well-planned orderly transition of leadership. Continuity of leadership often ensures the continuity of strategy, which is typically a healthy thing.
Boards have an obligation to regularly discuss succession plans with incumbent leadership, demand action on the development of potential long-term successors and regularly revisit the emergency succession plan. Anything less, and the board may find itself in the unenviable situation of Waystar Royco’s board in “Succession.” As we all now know, the lack of succession plans of any kind ultimately impacted the decision to sell the company. It would be a shame for that to happen to your bank.