For the accomplished small-business entrepreneur, succession planning can prove a thorny topic. It is, after all, a point at which leaders come up against two stark realities: The finite nature of life—both inside and out of business—and the idea of being replaceable.
And while the details and nuances of individual succession plans are inherently unique, the approach of large companies and brands can provide valuable, actionable insights for small-business entrepreneurs seeking to navigate one of the greatest challenges—and noteworthy milestones—that an organization of any size can face.
With that in mind, we explore some universal lessons to be learned from the way leadership transitions are playing out at market-moving organizations.
Best Buy: Evolving Leadership
During leadership transitions, a company is forced to revisit its history and future. And if it doesn’t, the price can be steep.
Take, for example, Best Buy. In 2012, then-CEO Brian J. Dunn was accused of sexual misconduct and other wrongdoings. Unfortunately, the electronics mega-retailer had no real plan in place for his departure once he resigned. After appointing an interim CEO with little retail experience, Best Buy’s financial performance suffered.
The company not only bounced back from its mistakes but also revitalized its business, however, once CEO Hubert Joly was recruited into the top job. A recent post on the official Best Buy corporate blog triumphantly contrasted the pre-Joly era—“sales and profits were declining, the stock price was plummeting, and pundits were predicting the company’s demise”—with his reign which “resulted in improved customer satisfaction, market share gains, revenue growth, and improved margins.” Count the ways: Five years of comparable sales growth. A doubling of online sales to $6.5 billion. And “since the end of fiscal 2013…total shareholder return is 335%, compared to 104% for the S&P 500.”
When Joly stepped down in 2019 after seven years at the helm, the company took an approach to succession that embraced “leadership evolution.”
Newly appointed CEO Corie Barry—previously the company’s Chief Financial and Strategic Transformation Officer—will now “build on the foundation that has been established over the last several years,” while Joly stays involved in a newly created role as Executive Chairman of the Board. Ensuring the winning leader’s expertise is still part of the team helped investors stay confident in the company’s future.
The takeaway? Effective successions align leadership changes with strategic changes necessary for businesses to thrive in their next era. Small-business entrepreneurs are wise to plot short-term and long-term business plans before jumping straight to personnel decisions. Doing so ensures a winning strategy can stay in place even if unforeseen circumstances arise.
Chanel: Advancing a Legacy
Personnel decisions do ultimately carry any strategy forward. That can pose challenges when brands are directly associated with the identity of their top executive.
For Chanel, that has been the case multiple times over: The company’s legendary founder Coco Chanel was so central to the brand’s identity that its leadership waited more than a decade after her death to appoint her successor, Karl Lagerfeld, in 1982.
Yet Lagerfeld went on to become just as iconic, and the Creative Director’s legendary status in the fashion world compelled Chanel to keep its succession plans private. Speculation abounded. So when the prolific, beloved designer passed away in early 2019, the giant brand didn’t have time to waste if it wanted to keep shareholder peace of mind and faith intact.
Appointing Lagerfeld’s longtime right hand Virginie Viard as his successor reassured both fans and investors that his legacy would continue. Since Viard had been exposed to the public over the course of many years as Lagerfeld's closest collaborator and director of Chanel’s fashion creation studio, there was existing confidence in her ability to execute.
Small-business entrepreneurs can likewise take a proactive approach to succession. Even before time comes to make a formal announcement, businesses of any size can allow the forthcoming executive to win the trust of valued customers and personnel.
The proactive approach of Chanel now appears prescient compared to its peers in the fashion community: LVMH’s Fendi brand has yet to name a successor for Lagerfeld—its head of womenswear for 54 years—nor has Karl Lagerfeld’s own namesake brand.
TSH & Daseke: Driving a New Generation
Succession planning at family businesses tends to be easier—simply follow the straight line from founder to engaged offspring. But significant growth can make keeping things among kin more complex, forcing companies to reassess the future of the company.
Tennessee Steel Haulers (TSH), a Nashville-based flatbed logistics company, had three co-CEOs—twin brothers and a brother-in-law—each with three kids apiece. “We thought ‘if all these grandkids want to get in the business, do we really want to fight that fight?’” said former co-CEO Craig Stanley.
Family dynamics were not the only issue. For TSH, liabilities had grown with the company: The industry is litigation-heavy and insurance is expensive. A $5M-$10M policy doesn’t cover much in an accident-prone, large-equipment sector.
Facing both succession planning and “the writing on the wall” around insurance risk, the TSH co-CEOs accepted a private equity offer from Daseke Logistics—the third such offer in five years, in fact. By selecting Daseke, which specializes in family business acquisitions, the leaders found alignment for TSH to enter a new era of success—even as the guard changes.
Small-business entrepreneurs can benefit from continuously reflecting on how their industry has evolved, and how their company fits into that new landscape. Succession planning provides an opportunity to determine if the company's future might look brighter under the wing of a bigger partner.
Success in Succession
There’s a lot at stake as you build a succession strategy. You want to set future leaders up for success while establishing your own legacy and protecting the employees who helped make it happen. The good news is your company is not the first to face this issue. There are plenty of examples out there to emulate, and plenty to avoid. If you’re not sure how to proceed, it’s important to remember there are seasoned financial professionals who can bring a much-needed outside perspective and skillset to your conundrum. Don’t hesitate to reach out as you begin to plot the next stage of your company’s evolution.