The Importance of Succession Planning

The news of Apple's CEO Steve Jobs taking medical leave due to a hormonal imbalance ended months of speculation about his medical condition. A gaunt Jobs showed up at an Apple News Conference last fall, vaunting investors' fears that he was of ill health. Jobs, notoriously tight-lipped, would not take questions in regards to his health at the time of the event. He simply went on with his presentation like he always does, only to add fuel to the flames of speculation surrounding his status.

Wall Street-oriented Web sites wrote articles and hosted forum postings about Mr. Jobs' health, and its effect on Apple as a company going forward. Anyone that knows anything about Apple knows that the company is Steve Jobs and vice versa. Mr. Jobs returned to his beloved company in the late 90s after being forced out by the board years earlier. After his much hailed return, the public had an incredible array of outstanding products put on the market by Apple: the iPod, the iMac, the iTunes music store, the revolutionary Mac OS X, and, of course, the iPhone. Mr. Jobs is nothing if not one of the greatest technological Visionaries of our time.

Which leads us to the question of his succession. Forbes, Fortune, and other business periodicals have been rhetorically asking about the plan at least since his ultra-thin presence on stage last fall. As a publicly-traded company, it is a fair question: shareholders have the right to know who will take over as CEO of any company should the unfortunate happen to the current leader. It should be a part of any company's strategic plan - public or private. If the plan is shielded from investors or employees, it exudes unpreparedness on the part of the company in general and the board of directors specifically. In short, it doesn't look good. And it certainly doesn't provide confidence in the company's stock. Shares of Apple on January 14th had to be halted in trading after the news broke about Mr. Jobs' decision to take a medical leave of absence. They were halted in NASDAQ trading only after they dropped over 10% that afternoon.

Of course, not every CEO is as heralded as Mr. Jobs. Be that as it may, CEO anonymity it shouldn't get these companies a free pass when it comes to succession planning.

Interestingly enough, Warren Buffett has had to deal with these very same questions for the past few years at his shareholder meetings held in Omaha each spring. Mr. Buffett used to deflect these questions, simply stating, "I get an annual medical physical, and I feel just fine." However, Mr. Buffett had the foresight to tell his investors that there are three candidates who are "ready, willing, and able to take over command of Berkshire's day-to-day operations and investing activities" should he become incapacitated. It did not take a severe downturn in his health for Mr. Buffett to see the need for a succession plan. (The Board of Directors at Berkshire Hathaway are well aware of Mr. Buffett's succession plan wishes.)

Which brings us to your organization. How prepared are you for someone else taking over your company? How prepared are your employees without you at the helm? Have you groomed two or three potential candidates for your leadership position? Have you informed your board of directors about your succession plan?

Clearly, no one is infallible and no human is immortal, even though many Apple enthusiasts wish Mr. Jobs were. Keep in mind Mr. Jobs is only 53, which is young for one of the most successful technology companies in the history of business.