On-Demand: Successful Succession Strategies

June 23, 2021

In this webinar, we shared state-of-the-art techniques in succession and transition planning.

 


Transcript

Ken Croarkin:Good afternoon. My name's Ken Croarkin. I'm the partner in charge of insurance industry services here at EisnerAmper. I want to welcome everyone and thank you for joining us this afternoon. This is the final webinar of a three part series in the human side of the insurance industry with today's topic being Successful Succession Strategies.

Ken Croarkin: hope you find today's session very interesting and informative. I've been working and interacting with insurance management teams for close to 30 years, primarily as an external auditor but also on the company's side and industry.

Having good management teams in place is of critical importance and developing band strength to ensure there's succession strategy in place for critical positions is probably even more important. Given the specialized nature of insurance, it's critical for a company's ability to grow and flourish that insurance companies look ahead and make sure they have a succession plan in place. Now I'd like to introduce Lisë Stewart, who is the partner in charge of EisnerAmper Center for Individual and Organizational Performance, and Natalie McVeigh, a director in that group. They're both here today to talk about successful succession strategies. So with that, I'll hand it over to Lisë.

Lisë Stewart:Great. Thank you so much, Ken. I really am excited to be here and I'm really excited to be talking about this very important subject. Just so everyone knows, as Ken said, I am the Principal in charge of the Center for Individual and Organizational Performance, and we really specialize in helping organizations to grow, to transition, to make sure that they're strong and sustainable for the future. And we love the work that we do. And I'm just delighted to be working with Natalie. She's a real pro. Natalie, do you want to take just a moment to introduce yourself to the audience?

Natalie McVeigh:Absolutely. As Lisë said, I'm a proud member of her team helping to serve individuals and organizations. My background is in management consulting, coaching and neuroscience specifically. So we really help you quantify those things that feel a little hard to quantify and to get you moving in the direction you're trying to go with your organizations.

Lisë Stewart:Great. Thank you. Natalie and I today, as Ken has said, we're going to be talking about successful succession planning. Try to say that three times really fast. And what we mean by that is it's time for organizations, and we know particularly with our clients in the insurance industry, to take a very serious look about how do we remain sustainable, how do we make sure that we've got the right talent in the right seats for a strong and successful future? And it's not always an easy thing to do. There are a lot of challenges facing your industry right now even to make this something that you can do in a way that's successful. Just to talk a little bit about that, about what some of these challenges are, I know Natalie, you and I have had some great conversations about this in particular to some of the clients that you've been working with. Do you want to give the audience a little bit of background about what we heard?

Natalie McVeigh:Absolutely. One is it's just planning. It's really hard to work on our business when we're working in our business. And so I like to say as not positive as it sounds but it's catchy, if we're not proactively planning for a transition, we're planning for a disaster. And we know this empirically because the research shows this much. One of the largest studies that was conducted on over 2,500 private companies wanted to find out why there was such a failure rate, and we'd heard that there were failure rates. And what they found is that 70% of businesses fail to transition to that next generation, and why that 70%, such a large number. They were like, why is it happening? We know that it's happening, but why is it happening?

70% of those businesses that failed to transition, of that group, 60% of those failed due to challenges with communication and trust. And that might sound really interesting because in organizations, you communicate and you have to have some level of trust. And that's true, but as the organization changes, so does our need for communication. So the way that I talk to Lisë now is going to be very different than the way that I'll talk to her in a couple of years for a project we're doing with a client tomorrow versus a presentation today. And then our trust changes based on how we're able to do the things we think we can do, whether we're busy or not.

25% failed due to a lack of a preparation for the next generation. Part of that was skills and competency, which we're going to spend a lot of time talking about today. But part of that was really I don't know what I need to do, because those leaders are doing it so adeptly. And sometimes what leaders do to make life easier for you is they keep you away from how the sausage is made. They don't want to trouble you with the things that get in the way from you doing an excellent job at what you're doing. So I don't even know the levels of interference that are being run or the components of your job that come up next. I just know how to be a really good individual contributor. So it's this bilateral responsibility of maybe I don't have the competence and skills I need, but also I don't even know the competence and skills I need to get because you haven't told me. And so we see that there's a gap there.

And the 15% really have to do with everything else; tax, legal structures, the shareholders agreements, the mission, vision, values of the company, all the things you really pay consultants to work on. All those pretty documents that once you're done making them, get shoved in the desk. That's only 15% of the reason. So not only do you not look at them maybe and they're sitting in a desk somewhere, but they're not as helpful as the skills of communication, problem solving and working together.

So we'll go on to say we're not doom and gloom. We're not saying, hey, you're bound to fail. We're actually saying there's real reasons why these transitions fail. And part of it is that we're not prepared emotionally or financially for this. I like to say for every economic decision, there's an emotional equivalent and vice versa. So if I'm emotionally ready to leave, and I think I have my legacy in line, I think I have my successor in line, but I don't have enough cash in my bank account to cover my current salary, I'm going to be less likely to go if I don't have enough of my retirement account, and the opposite may be true.

I've got plenty of money in the bank. I worked so hard I've never spent one day on vacation. All the money in the world, but I'm so connected to the company I've built it feels like so much a part of me that it would hurt me to walk away. So it's really helpful for you to look on what we call two sides of the balance sheet. What do I need to sustain my life just from a survival mechanism financially, and what do I need to sustain my life from a human flourishing and thriving component. Really finding out how we get that.

And then the most obvious reason is that transition takes time. I think it's attributed to Confucius. I don't know if he actually said it. He said the best time to plant a tree is 20 years ago. The next best time is today. The same is true for transitioning. Lisë and I have known each other for years, even before we worked together. We have very similar training and background. In fact, we lived in different countries. So there are a lot about Lisë and I that are very similar. But even though we're so similar, because she's a different person than me, the things that she knows, even which have the exact same courses at the exact same time in the same university, she interprets it a certain way.

We call that tacit knowledge or heuristic knowledge. It's that gut instinct, that stuff that you know that no one else knows and you have a hard time explaining it. Research says that it takes 10 years to transfer that knowledge to someone else, even if they were side by side with you, because we don't learn by osmosis. We don't learn by watching. So, many of your people aren't on this very right top corner with that wisdom tacit knowledge. They might have the data, which they're really good at facts and figures. They might have the information where they can tell you what's likely going on, or they might even have the knowledge. They're able to do critical thinking. They're able to make different decisions, but they're just shy of being able to be that ultimate decision maker that you as the leader are.

And so finding a way to distill that knowledge, which is going to feel a lot like over-communicating. It's also going to feel a lot like obviousness to me because my bias is everyone knows how to do this because I know how to do this. So if you're not already thinking about succession and thinking about a map to start getting this information out, that's one of the things to start talking about is how do I teach someone something that's so easy to me? And sometimes the things we're so good at, we're really bad at teaching. So what does it even look like to break these down into smaller steps?

And so succession is a process. It is not a point in time. It's not something that I know I've got my retirement date and it's in a year from now that that's when we're going to work on it. It's really meant to create the sustainability and viability for your company for the long-term because you care about it. So depending on how your organization is structured, you will have many successions. And I would suggest that they not all happen at the same time. So if you have a family-owned company, you may have a family succession. You may have someone who becomes the family leader.

In a privately held insurance company, as you all know, I don't even have to begin to tell you this, it's very relationship based. You spend a lifetime creating relationships. Your name may even be on the company. So it's not enough to say that he or she is going to be the next one, I might be. It's more important that the people you've built those relationships say, "Hey, you know what? I've always enjoyed how Lisë works. Her ability or capability. I also think Natalie can do that." Versus Lisë just saying, "Oh yeah, Natalie is going to do this for you." And you have to think about whether they're going to.

And then there's the values, the glue that holds the organization together. Management, who's actually operating the company. Management and leadership may be the same thing. In some companies, they may not be. The person who might be covering the day-to-day may not necessarily be the person who's leading the company either from the face of the company outside or from the people management.

And then we have ownership succession. Well, this is what I meant about hopefully they don't happen the same day. Hopefully you're not selling your shares and stepping down because that causes a lot of tension in the organization from a control perspective, from a cash flow perspective and a liquidity perspective. The capital abound for growth. And so if they happen in the exact same moment, there are some challenges to figuring out how you can keep one without the other. I had mentioned you might not have enough in your bank account to go away, but could you stop being the president or CEO and still retain some ownership to get some distributions.

And then governance. You all know, and Lisë has spent a lot of time with you before hopefully talking about boards. And so if you're the chairman of the board and you're the president of the company and you're the majority owner and you try to walk away in one foul swoop, that's a lot more attention than is necessary and it impacts those different ecosystems on your partnerships, whether it's vendors, customers, you name it. So thinking about sustainability and risk mitigation during this process is going to be really, really important.

Lisë Stewart:That's great. I am really pleased that most of you were able to pick up the fact that this is about the long-term viability of the organization. It's not about just replacing one person. If succession is only for the CEO, that can seriously destabilize the rest of the company when other key people leave. That's why it's so important to understand that this is indeed a process. And in fact, it's a process that needs to be tied directly to long-term strategy. We're going to say several times throughout this entire presentation that we really start with that strategic vision of where the company is going and who do you need to have in key positions to make sure that they're able to lead the company in that right direction.

We wanted to share with you just sort of the basic map that we use when we're working with companies on succession planning. As you can see, we talk a lot about it being a process and we talk about starting to set up that whole succession planning with a system. So we need to identify what are the resources that you're going to require in order to make sure that you can develop a clearly articulated, sensible, affordable plan that's going to identify the right talent necessary for the future and begin to groom people to be able to fill those key positions. So we think next about what those key positions are going to be, how are they similar to or different from the positions you have today. So is the future going to require a different sort of talent and skills than you have?

Sometimes companies and leaders can be a little bit shortsighted and think that, well, if it's just about replacing the current CEO or a senior leader in the organization, we just need to figure out who they are, what they do and replace that person. But that's a very short-sighted way of looking at this. Instead, we encourage our businesses to think about 3, 4, 5, 10, 15 years from now, what kind of skills and talent are we going to need to have in those leadership positions in order to deal with the types of challenges in the marketplace that may not even exist today. So you have to be really forward-thinking with this.

And then we go on to talk about competencies. What are the key skills, knowledge, and abilities that are going to be critical in those positions. And again, are they similar to or different than? Natalie will talk in a few minutes about how we can even assess those competencies. Next, we talk about identifying and assessing the candidates. We want to make sure that people have a strong path to progression. They know what opportunities might exist for them. We may not ever promise a particular position to somebody, but we do want to make sure that we've got at least one if not more people who are groomed and ready to step in.

And then finally, we're going to figure out how to measure and monitor and revise as necessary. We want to put in place goals and objectives for key positions and for the plan overall. For example, some of the things that companies will sometimes talk about is when they invest in their younger talent or a next generation of leaders in the organization, they worry that they may leave just at the time that they really need them. Well, that speaks a lot to the organizational culture and to the perceived opportunity and benefits for being in that company. So sometimes it's that turnover that we're tracking. We're looking to see how are our efforts really paying off over time? So we want to make sure that there's an evaluation of the program that is ongoing. Remember, it's not static. This is a living process.

And we know too that as part of this living process, as we said, we've got to start to prepare people. We've got to make sure that they're ready. And Natalie is really the pro when it comes to trying to figure out what are the competencies and skills that we need. So, Natalie, can you share a little bit about how do companies start to identify that talent?

Natalie McVeigh:Absolutely. First, we need to know what we're measuring. Sometimes we think, well, if I'm walking away, I need a replica of myself. And there's very different skillsets from what took me to build the business to what it'll take to maintain the business or grow the business. So first we decide what we're measuring as Lisë said with the competencies. And then how do we find an objective rational way to measure it? Sure, it's interviews, but we know that our gut likes to tell us things and what it likes to tell us is we like things we like. I think you've all probably been on a date before that didn't go well, but you thought you were really excited and you might've actually been anxious. Our gut brain's not that smart.

So finding objective valid data is really important. Psychometric assessments, normed against competencies or leadership are very helpful. We like to do some predictive assessments called the Chally. You've probably heard of other assessments that just tell you personality profiles. I think the most important thing, we can be assessment agnostic at times, but really understanding what you're measuring, what you're looking for and how you fill in the gaps in the organization for what's needed to, and that data can really help you depersonalize the conversation.

We know with insurance industries that people grow up in the company. You've got people you've been with for 20, 30 years and it's really hard to say, "Jane, you're the woman, and John you're not," even though you like them both. So running an assessment can say, "This isn't my opinion. This isn't who I like more because we're all still friends. This is really what the job needs and the data tells me who can do the job well."

And so to understand what it is to really figure out if it were anyone. The process makes it not personal. So if it were anyone, because sometimes what we'll do, and I mentioned John and Jane, we'll keep thinking to John and Jane, what John can do, what Jane can do. Erase all of that and say, what if anyone can do this? Because it may be someone who's not in your company that you're going to bring in, from a competing company or something else. So to really say if this were the organization, if it needed to thrive and survive in the future, and it's not me doing it, knowing that I do these things, that maybe I do a lot more structure work because I know my team is so good at being out in the field making the sales but they don't follow up, is that going to be sustainable for someone else? And really be able to move through that that way.

Lisë Stewart:Excellent, good to see it is absolutely all of the above. A competency is a descriptor of knowledge, skills, and abilities. We know that in succession planning, it does need to be linked to the strategic plan. What do you need for the future? Sometimes those competencies are going to be about their technical skills and sometimes, to Natalie's point, is going to be about their behavior, the kind of person that they are. And then all of the above. So, that's where we wanted to land. And we know that sometimes our clients are challenged with this. We are working with some clients in the insurance industry right now and our observation is that once people are well-established in a role, they do tend to stick around for a long time. That means that we have a lot of people in these organizations that have a tremendous amount of knowledge, skill, and ability, that long-term wisdom. They've been there for years.

And yet it's been hard to attract new young talent to those organizations. Sometimes people don't always see that there's a clear path of progression for them. They don't know what the benefits are for joining and getting involved in the insurance industry. And so like many industries today, we have an older, wise, very wise, but they're definitely an older population in those key roles. That means it's even more important to spend that time building a really strong bench. That means that you've got people in those key leadership positions across the organization, anyone of whom who might have the knowledge, skills, and ability to step up even further in a leadership role, but also that they're trained and able to be able to nurture that next generation in the company too.

We know that it's so important to start early on. The research indicates and certainly our own experience does too that those companies that are most successful in developing strong successors, people who are welcoming the training, who excel in their role and had the ability to move up in the organization are companies that start really early. That means that newer people joining the firm have a good idea about what their path might look like, what their options are that even if they can't move straight up fast, that there's some vertical ways in which they might be able to move across the organization. Younger people today are often really keen to have access to more learning opportunities. They're looking for mentors or coaches. They really want to have a chance to improve their skills. And that variety is really very key.

They also want to know how are they going to be measured in the job? What constitutes success? One of the things that we spend time with our clients on is really trying to refine that question. In any role in the organization, what does success really look like? And remember, it's not just success on the technical level. We often hire people for their technical background, other jobs that they've had in the past or they've got the right degree or whatever it might be, but we fire them for their personalities. They drive us nuts. They don't have the right work ethic. Their personality doesn't fit the organizational culture. They don't care or are not as loyal to or as interested or even as passionate about the business.

So when we're helping to train people and hire and bring on people, we're looking for that cultural fit and we're also looking for ways in which we can define excellence. What does fitting into this culture and being a strong contributor really look like? When we start early by defining these attributes and helping people to see what their opportunities are and matching them with good mentors in the organization, then we open up a wealth of options for these younger people and they're more likely to stay and to become good successors in the future.

Lisë Stewart:Perfect. It is definitely all of the above. If we haven't stressed that enough about the importance of the strategic plan in being the underlying foundation to this process, then we'll have to talk a lot longer. Natalie, the next thing I really wanted to spend a little bit of time on is I know you've done so much work in identifying the skills and attributes and really the desires and needs of this next generation. What can you tell the audience about how do we attract and retain top young talent in these companies?

Natalie McVeigh:Yeah. it's really interesting we're seeing more and the research supports this. This has always been the case, but the research is now coming to light about it, that it's both your talents and your passion. And when I say talents, that's the raw ability to do something that eventually we build into strengths. The research says if I can use 6% of my strengths in the workforce, I'll be 60% more effective. It'll decrease the amount of burnout, it'll make working a joy because many industries, including insurance, there's sometimes a grind. And so when we may lose young people is when they're not able to apply their strengths.

The other piece is their passion. So really going to what motivates them, what brings them into life so that they can have this integrative experience of work-life balance, but when work doesn't feel like a chore. So it's this intersection between our motivators or our passions and our talent to really understand individually what they can bring. Lisë said some of the others, but finding ways to expose the next generation to feeling like there's more ownership. And I don't mean like an employee stock ownership plan. I mean, owning projects. I mean, getting access to meetings they wouldn't otherwise. Sometimes being able to shadow in a board meeting here or there so they can actually see the larger picture be integrated into that to understand, because they're much more contextual than many of us were before where we just did what we were told. That doesn't necessarily work for them and that may be conceived as impetuous, but really what it is is trying to find understanding and trying to be a value add.

Lisë Stewart:I would agree. I would also say that it's interesting we've had, and you and I have had this conversation before Natalie where our clients have said things like, "Oh, this younger generation, they think that they've got a voice at the table. They want to have their opinion heard. They think their opinion counts." And what's interesting is, yes, they do. And so the more we can find opportunities for younger people to be able to be engaged and feel like you're, as you said, really valuing their contribution. So I was working with a company just recently and they decided to put together sort of a council, they call it their youth and innovation council.

What they did is they invited younger people, newer employees to the organization, particularly younger people across the company, to come together and identify what they thought might be process improvements or more exciting and engaging ways to use social media to be able to build the brand of the organization, so on. So they posed a number of different questions for these younger workers, and they took their suggestions really seriously. They were able to sit down with the CEO of the company, share what their ideas were and talk about how they think that they could be implemented. So it's just an example of it's true, younger workers do want to feel as if their contributions are a value. And I think the more creative ways that companies can find to do that, I think it can be really helpful.

Natalie McVeigh:And to that note, it enhances the quality of information at the table because when we stay longer in an organization, we sometimes start to think the same. And they're your customers the younger generation too.

Lisë Stewart:Right. And we know that a lot of our companies say that they want all employees to think about the company as if they own it. To your point, they want them to have sort of an ownership philosophy. Well, if you want people to feel like they own it, then they need to feel like they're truly contributing, that their value of their brains is important and that they do have that voice. So I think that that's key.

I also think we need to think a little bit about what we like to call as the legacy generation. The legacy generation are those people that have been there a long time. They're often in very senior positions and may be contemplating transitioning out of the organization to go and do something else that's really exciting or have an encore career or maybe they really want a traditional retirement where they float off into the sunset. Whatever it might be, Natalie, you were saying early on about how sometimes when people are not emotionally or financially ready, they just can't let go. They can't step away from the company.

I'm sure that many of you have heard this before where younger people or the next generation of potential leaders have been lamenting about the fact that the older generation, the legacy generation, just won't get out of the way. There's no room to move up because those people are still there. So we hear this a lot. And so I want to spend just a little bit of time, and Natalie, you and I can kind of go back and forth about this because we've done so much talking about it. And that is, how does this legacy generation truly prepare to be able to transition away to something else?

We find that the more options that these older, more experienced team members have, the more likely they are to exercise some of those options. So here's some questions that you might want to think about. What could your new role look like? If you can spend more time being a coach to the younger generation, being a mentor, passing on some of this knowledge and expertise, as Natalie says, taking the time to identify what is heuristic, what are some of the things that you know and do that perhaps you can put your finger on it? It's a little bit like driving a car. If you've ever driven a stick shift, when you first learn it, it is really awkward and difficult. But after you've been driving a stick shift for a few years, it just comes naturally. Then try to teach it to somebody else. It gets really hard yet again. It's because it's become so ingrained in us we can't remember how it is that we knew how to do it in the first place.

So one of the things we like to do is just slow our legacy leaders down and get them to think a little bit about what is it that they do in their job that makes them so effective. So it's a question for you to ponder. What do I do that makes my leadership style unique, different, effective, strategic? What are some of the key decisions that I've made in my business life that have been particularly useful and effective to the organization? If you surrounded yourself with people who you believe are really effective in their role, how did you know? What are some of the things that you looked for to be able to put really good people in the right seats?

This is the kind of information that the next generation needs to know. If you can learn how to turn this into a narrative to share, then you can become an effective mentor. That's what mentors do. Mentors teach from their own knowledge and experience. They share the things that they've done, they talk about what the outcomes were, and they talk about their lessons learned. So people are learning from what it is that you are teaching and sharing. Coaching is a little bit different. To be an effective coach, it means that you learn how to ask really powerful questions. So you're pulling from the other person. In our experience, legacy leaders who are preparing to transition out need to develop skills of strong mentorship and strong coaching so that they can apply both of these skills to helping the next generation to learn from and then develop their own abilities in the job.

The other thing that we encourage those transitioning leaders to do is to think about the legacy that you'd like to leave behind. And legacy can mean many different things to people. Sometimes it's if people are going to remember the reputation that you had or just talk about what you did, that might be important to you. But maybe it's a special project or maybe it's an organizational culture. Trying to think about when you leave, are you leaving behind something better than the company that you inherited in the first place? And what would that look like?

Also thinking about as you transition from day-to-day and you begin to do things outside of the company, what does that need to look like? If something were going to become so enticing to you that you feel like you could begin to gingerly step out of your day-to-day operational role, what would that be? What would attract you enough to help you to move into that next position? That's key because, and again, I'm sure Natalie has heard this too, I can't tell you the number of times where CEOs have said to me, "I don't know what I would do with myself if I weren't in this job. I don't have anything outside of this particular role. So I'm not quite sure what that would even look like."

We find that when our legacy leaders, our potential transitioning leaders feel like they have a range of options, as I said earlier, they're more likely to exercise their options. They're more likely to step in and to do something else. So some things to remember that helped you develop some of those options are you don't necessarily have to step 100% away. In many organizations, there's opportunity to first give up some areas of your operational duties while taking on more mentoring and coaching skills, or perhaps being on a board or moving to more board level activities.

So it can be very useful if transitioning leaders can put their toe in the water of doing some other things. It may be that you start to move to part-time or once you've identified a successor, you have a shared role. And this can happen in not just the CEO position but any leadership position is that you can share the role for a short amount of time, but certainly some degree of overlap between yourself and your successor, and sometimes that helps to soften that transition out. I think that with some of our leaders, they really need to have say a one or two year runway where they're beginning to transition some of those day-to-day roles away and substituting other things. So it may take some people longer than it takes others.

It's very important to make sure that whatever you're going to do outside of the organization is something that you're really going to be able to enjoy. Not everybody wants to play golf for the rest of their life or play in their garden or whatever it might be. So, starting to do some of these things early is key. Research shows us that if you are not doing a certain activity and truly engaged and interested in that activity prior to retiring, chances are you will never do it after retiring. You might try it, but it's not going to stick. So you really need to develop whatever is that encore lifestyle prior to leaving and to work toward that. Only then can we find that senior legacy leaders feel comfortable to move out of those positions, creating succession opportunities for the next generation of leaders.

Natalie, I know that there are so many themes, there are so many components to all of this as you've been talking about before. I loved it when you put together this list, which is really about what makes this an enduring exercise. So perhaps you can talk to us a little bit about some of these.

Natalie McVeigh:Absolutely. They've done a study on the companies that are privately held that have lasted 100 years. We call these legacy companies, and this is really where this information came from. I know, it might look like a long list. So I'm not saying do all of this. These are the common characteristics. And I always go for what's easier to leverage. So if you're able to do these more quickly, and I'll explain what some of them are. Balancing multiple goals really is about developing your next generation as well as working on your bottom line. We're finding these things that have a push and pull in the business and trying to find a way to make sure one isn't overcoming the other. Sometimes you're just putting your head down, getting a lot done. You're not necessarily developing your people.

Evolving your governance practices. Is that a board of directors? Is it a board of advisors? Do you have an ownership group? What are the different levels that aren't just day-to-day management? And then where can you plug yourself into, where can you split that responsibility out. Understanding how to professionalize the business. We talked about how many of you have been in it for a long time. What happens to companies we've been into a long time, just like families we've been into a long time, is they get really idiosyncratic. We're idiosyncratic and there are just some isms that we know. There's the shorthand, the language we speak. Maybe we come in wearing Birkenstocks on Fridays and that's okay. You don't want to ruin the secret sauce. But there might be some of the stuff that we do that becomes a little more casual than professional. Maybe we've stopped doing performance reviews annually. Maybe we've stopped doing 360s. Maybe we've become so close that we're not holding ourselves to the standard that's going to bring our best selves out there.

And then being a learning organization. This doesn't really have to do with families. Again, what happens in businesses, the more I know, sometimes I get a little more authoritative and that doesn't mean I'm pounding my fist. It just means that I know what I know and what I want and the people around me realize that I have it, so they're not going to have it anymore. And so there becomes this dynamic where I'm so big and I'm taking up all the space that other people have gotten small. So when you can level the playing field where you're learning together, where you bring in outside resources to do a workshop or to help educate things so that your next generation, your bench, and everyone feels like they're equal, they're able to have a greater exchange and dialogue, but also you're learning because if I'm the expert in my life, there's a very common fallacy which is the appeal to the authority. And if I realize that I'm always the authority, I'm falling into fallacious thinking.

And there's philanthropy I want to talk about. Almost all companies are giving away and donating to their community, whether it's time or whether it's money. This is a powerful place to communicate and execute our values. But it's also a powerful place, to Lisë's point, of what do I do when I'm not in the business of my business anymore? How do I still become that ambassador? How do I carry on that meaning that I had with myself in this? Two interesting pieces of research I'll just share with you, one is the highest divorce rate in the United States is the first five years of marriage because it's tough. It's tough. You guys have those fights about the traditions and things like that. The second two years are private business owner leaving that business because they were married to their business. They're so tied to it that they're having a lot of challenges.

The other statistic I want to share is that 70% of people who sell their business regret it, and it's never the price point. It's that they see what they've build change, their values and their vision. And so the stewardship piece here is really about how do I nurture and set people up for success to take the great stuff I build, but also how do I teach myself that the bit that they're going to jettison, that they need to jettison to get better is able for me to feel like it's okay, that it's not an expulsion on who I was. And so that stewardship is really I'm holding this business while it's in my hands knowing that I'm going to give it away to someone else who's not only going to care for it but make it better.

And so, again, most of these make sense. The resilience is really being adaptive to being able to come back from challenges. And that freedom is the piece of it's not just my way or the highway. I would say at most try to pick five of these. Five you may already be doing, and pick the other five to really intentionally think about how are we doing this and how does this kind of abstract idea become part of the behaviors we show the fabric of the company.

Lisë Stewart:Yay, we drove that point home, didn't we, Natalie?

Natalie McVeigh:Yes. We've all graduated.

Lisë Stewart:I noticed too that there was a question about 360s. Do you want to just explain to the audience what you meant when you talked about a 360?

Natalie McVeigh:Absolutely. A 360 is a particular type of assessment. There are lots. There are informal ones that you can create based on your company. There are also some that are norm by executive competencies. Why we call it 360, if you think about a circle has 360 degrees because that's the type of feedback it solicits. It's anonymous. So it asks the people above you how well you're doing. It asks your peers, the people lateral to you, how well you're doing. And that's behaviorally, that's also the technical execution because I might be, as Lisë said earlier, I might be the best performer, but I also might be a grouch. Or the reverse. I might be the sweetest person but I don't get a lot done.

And then we ask the people underneath you, and that could either be your direct reports or people in the organization who have a lower title, because sometimes we have indirect roles, but someone knows that you're above them hierarchically. And why we ask this is so that we get the full range of how you're doing because some of us are really good at managing up. Like I am so good at telling people above me what I want and I'm pretty good laterally because I know I need these people to help me, but I'm a bear down. Or the reverse. I'm such a good manager, I just don't get along with my peers.

And it really helps raise this awareness of what I like to call comportment. That is how you be. The technical skills are easy. They're trainable. I mean, give me enough time with you, and I don't need that long of time, three months, and you can be an expert at almost whatever you're asked to do technically. But how you behave for true leadership is the challenge that's there. So like I said, there's some really informal ones you can do that are anonymous. My preference is that you find an assessment company that's normed against competencies so that the data's a little more valid and it's valid because it's not just, oh, well, my peers don't like me or my direct reports are mad that I straightened them up. It's actually saying here's the competency and here's how you're scoring. And that last bit of feedback that I didn't mention is you also get to evaluate yourself and you get to see between these reports where the gaps are, where you might want to learn as well as the places you're really shining to focus on those strengths.

Ken Croarkin:That's great, and great presentation both of you guys. We had a couple of other questions if we want to take them. Can I shoot them over to you? So first one, Lisë, should the board get involved in succession planning, and if so, how?

Lisë Stewart:Yes. The board should get involved in succession planning. Maybe not necessarily identifying individuals unless of course it's for that CEO position because I know with a fiduciary board, they do hire and oversee the role of the CEO. However, where the board really needs to come into play is, one, identifying and developing key strategies. So the strategic vision, the strategic direction of the organization. And the board should be involved in talking about, well, what kind of knowledge and skills are going to need for the future? That's one of the most important roles that the board brings to the party.

And then with that, as they begin to determine what are the knowledge and skills that are going to be necessary and the type of people that are going to be necessary to be in these key roles, they might also ask about the organizational structure. The structure of the company also has a big impact on the succession planning because of course you're going to want to be able to design and develop key positions into that structure. So this is really where the board plays a role. Generally they would not get involved in hiring or selecting people for key positions other than for the CEO, but in developing that from that foundation, yes, absolutely.

Ken Croarkin:Great. And Natalie, what should you do if you believe that the company's elevating the wrong person to the top job?

Natalie McVeigh:First, get clear on why, because we have this bias of similarity. I might just think you're the wrong person because you're not like me. So get clear on why you think the wrong person is being elevated. Find a way to get the data points and get feedback to ensure that it's not just a challenge that can be coached or mentored, because many people do the wrong thing not knowing that they're doing the wrong thing. We do these things habitually because they made us successful in the past and we all genuinely want to be effective at work. It's part of our self-efficacy. So see if there's a way that we can create enough feedback or learning channels to get this person on the right path.

And then the third piece is just that objective data. If at the end of the day you've already checked yourself, looked at your self-awareness, tried to sanity check that, tried to really train this person up, it's to get the data to explain how this person will not bring the organization to where it's going. And in fact, there's not a person at this point in time. That can be done through outside mentors, coaches. That can be done through a formal assessment process. And it's really helpful for that person. Often when we find someone not succeeding in the organization, it doesn't mean that they're not successful. It means that they're not in the right role for them. And you wouldn't believe if you can find the right place for them, and lots of private companies can look quite flexible and agile, how wonderfully successful that person can be. So it's both painful for them and for the organization to be put in a challenging role that they can't fulfill.

Ken Croarkin:Got it. Lisë, is it better to hire from the outside for key positions to bring a fresh perspective or grooming from the inside? What are your thoughts?

Lisë Stewart:Both. What we're trying to do in creating successor positions and then hiring people to fill them is we're neutralizing. We're not hiring because this person is already in the company or because they're your best friend or you owe them a favor or it's just a path of least resistance. We're trying to find the very best fit for that role. So we generally recommend that for every role, you advertise that position and encourage people both internally and externally to apply. It may also be that you've had a good succession program in place, so you have been training and grooming people to be able to fill these jobs. And if they come through that interview and are able to demonstrate their knowledge and ability, they have a vision for that role, they've really taken up all the opportunities to learn and to become that great successor, they may be the best person to select.

But we also need to make sure that we're opening up opportunities for a fresh perspective from the outside too. So this is about selecting the best person with the best abilities and skills, the competencies that that role is going to need. Now, it is true, I will say that many of my clients say better the devil you know. So once you've been working with somebody, you have a better sense of their personality, the personal skills that they're going to bring to that role. So it may feel a little bit more comfortable. So I will say that often hiring internally, people have a little bit more experience with them, a bit more assurance in this case. So sometimes they have a leg up. But that's not always the case and we can find great people coming from the outside. So I encourage companies to have a bit of a mix so that you are bringing in that fresh perspective too.

Ken Croarkin:Great. Thanks. And Natalie, is leadership ability innate or can it be trained and taught?

Natalie McVeigh:Absolutely can be trained or taught. We know with neuroplasticity, we're learning and creating new skills today. Even this morning, I was teaching a class on entrepreneurial orientation. Some people think you're either an entrepreneur or you're not. Well, it's not true. Some of us have a propensity to be an entrepreneur, but we know what makes an entrepreneur. So the question is, does your organization train people? Does it have the resources to train people and the time to invest in your people to make sure that they can be leaders in your organization, and is the person interested? That's the other piece that we didn't talk about.

Even if we do a 360 or you spend hundreds of thousands of dollars on every assessment known to man, it depends on if that person is interested in this and that's really where those performance conversations annually can help you where you say, "This is really about you. I'm looking to develop you. What do you genuinely want to do? Even if it's not here, that's my goal is to get you where you want to go and support you." And that's really helpful to close that gap on whether it's learned or innate, because some people think that that's the difference, but the difference is if we're matching expectations.

Ken Croarkin:Great, thanks. And then I think the final question, Lisë, should companies have mandatory retirement to encourage younger people to stay because they can see opportunities to move up in the organization?

Lisë Stewart:Isn't that a good question? Well, mandatory retirement is not necessarily the key to making sure that people stay. In fact, it doesn't have much of an impact on that. The problem with mandatory retirement, it means that in many cases it is tied to some sort of a pension you have to stay till you're 65 and then you have to leave and that's the way in which you receive some of the benefits that you've worked toward. The theory is that it encourages turnover. But in fact, sometimes it means you're losing some of your best talents. You're losing people who still have knowledge and energy and passion, they might be great coaches and great mentors, because they have to leave at 65. And on the other hand, it may mean that you've got people who really don't have a lot of passion, excitement, and talent and are not good leaders and they're staying until they're 65 where we'd really like for them to be able to maybe move on to their encore career.

So we like to change that whole conversation around and just say what we want to do is to encourage the very best and most talented of our people to stay and use their talents where they are the most valuable. And also to encourage those people who are really ready to transition away to make sure that they've got a path to be able to do that. So we base this more on let's talk about performance and value and contribution to the organization. Let's talk about opening up opportunities to encourage people to step away when that time is right. And let's make this a transparent conversation.

People are so afraid to talk about retirement and the next phase. Are you going to stay or where are you going to go? This has to become a much more transparent and robust and candid conversation, or it's just going to remain hard for everybody. So the mandatory retirement aspect of it I don't know that it is necessarily as effective. I don't know that it actually accomplishes what it's trying to do. I know Natalie, you and I have talked about this. Do you want to weigh in on that as well?

Natalie McVeigh:Yeah, I think for anything, today we talked a lot about some structures to deal with your organization to enhance it. And you might say, well, this structure isn't going to work for me. And that's okay. There's this beautiful balance between structure and flexibility. So if you have a mandatory retirement age or you have a rule that everyone who is in my company must have been in leadership, must be from this company, you're really setting yourself up for failure. So putting in structures to help hold you and make you secure and evaluate them as they go on might be really useful. So you might have 65 in your mind but it might not be what you want to execute against. Same thing, you might want to hire the devil you know versus the angel you haven't found yet. And keeping an open mind is really useful.

Ken Croarkin:Great. Well, I think that's all the questions we have. Thank you Lisë and Natalie, really terrific presentation. I'd like to thank everyone for their time and questions today. Hope everyone's got something out of it. That concludes our webinar series on the human side of the insurance industry, but all of our webinars are available on-demand and on our website. Watch out for new webinars in the insurance industry coming later this year. And with that, many thanks and good afternoon.

About Ken Croarkin

Ken Croarkin is the Partner-in-Charge of the Insurance Industry Practice. He currently leads a number of Statutory and GAAP external audit engagements, and also provides internal control consulting services to insurance companies and brokers.

About Natalie M. McVeigh

Natalie McVeigh is a Director in the Center for Individual and Organizational Performance and the Center for Family Business Excellence Group within the Private Business Services Practice and has more than 10 years of experience as a consultant and coach.

About Lisë Stewart

Lisë Stewart is Principal-in-Charge of EisnerAmper’s Center for Individual and Organizational Performance and the Center for Family Business Excellence Group, as well as a leader of the firm’s Environmental, Social and Governance Services (“ESG”) practice. Lisë has experience in organizational development, strategic planning and training, and human performance management.

Have Questions or Comments?

If you have any questions, we'd like to hear from you.