Three tips for business leaders to avoid appointing bad successors
06 July 2017
Chengwei Liu, Associate Professor of Strategy and Behavioural Science, reveals the pitfalls of succession and three ways business leaders can make sure it goes smoothly.
Succession is one of the most important decisions a leader will make to ensure the sustainable performance of their business in the long-term.
You only have to look at the many books and blogs offering advice on succession planning, you can even find some on Wikipedia.
But many leaders still make poor succession decisions. For example, more than 70 per cent of family businesses fail after the first generation because the successors are not competent enough.
One overlooked aspect of the process of choosing a successor are decision biases. Leaders are not immune to biases. Worse, leaders can be overconfident in their decisions and their errors are not challenged. Here are three tips for helping leaders to overcome their biases in succession decisions.
1 Give failures another chance
We don’t like failures. People who have failed give us negative impressions so we reduce our interactions with them.
But experience shows us that good decisions can sometimes lead to failures and bad ones to successes, there are many external factors not at the control of a senior manager that can lead to a booming business or bankruptcy.
What if some failures are just unlucky or your candidate ventured something different and novel that you just didn’t want to take a risk on? You will likely end up with the mediocre if you select only the candidates without failures.
Overcome your success bias and give the failed another chance - they may be the hidden gems for rejuvenating your organisation.
2 Be suspicious of unanimous support
We like consensus, but ancient Jews knew that if a suspect on trial was unanimously found guilty by all judges, then the suspect was likely to be innocent and will be acquitted because unanimous support indicates that there must remain some form of undiscovered exculpatory evidence.
Given that everyone has their own preference and bias, unanimous support is too good to be true and likely to indicate hidden processes such as the candidates are good at politicking and compromising than making important, difficult choices.
Or, unanimous support can signal that your board members are too similar-minded. Overcome your consensus bias and choose a candidate some of your board members hate - she or he is likely to be hated for good reasons and can shake things up.
3 Demote your best executives before succession
A great Chinese emperor sent his best chancellors to prison for trivial causes before his death. The reason was to protect them from the political conflicts during succession and to give the young emperor a chance to gain the loyalty of these seasoned chancellors by promoting them after the succession.
This was a difficult decision because most people thought the emperor had lost his mind. To ensure your successor has the best executives, particularly those who lost in the successor competition, leaders can learn from the old Chinese emperor.
The challenge is to overcome your ego bias - your decision will be ridiculed, but it is likely to be good for your successor and the longevity of your organisation.
Chengwei Liu teaches Strategic Advantage on the Distance Learning MBA, Executive MBA and Executive MBA (London). He also lectures on Quantitative Methods for Business on the suite of MSc Business courses.