July 28th, 2021
How important is a succession plan to your company’s health? What are the challenges to putting one into place? How can business owners and founders step outside of their egos, face the idea of being replaced, and ask the hard questions on future leadership?
Listen as our return guest, Phil Clemens, shares why every leader should create a succession plan long before they intend to hand over the reins, how taking time to determine the different, necessary skills to take the business to the next level in the future is crucial to the life of the business, and how the mindset of retiring TO something, not FROM something, can help leadership transition smoothly.
Phil Clemens began his career on the clean-up crew of the family business, Hatfield Quality Meats, and worked his way up to be the CEO of the company. Over the decades, he worked in all areas of the family business, with 20 of those years in Human Resources and seven as CEO and President of the legacy business, now known as The Clemens Food Group. Phil retired from The Clemens Food Group in 2015 as Chairman and now serves as an ambassador to family businesses throughout the country, as well as being a national speaker on family business issues and teaching leadership skills. Phil currently serves and has served on numerous boards such as Crown Financial Ministries, North American Meat Institute, Eden Bridge Foundation, Profit Sharing Council of America, and American Red Cross. He has received many awards in the meat industry, as well as community service awards, and has honorary doctorates from Lancaster Bible College and Elizabethtown College. Phil and his wife Linda live in Lancaster, Pennsylvania and have three daughters and seven grandsons.
By Jeff Holler
In my first interview with Phil Clemens, he shared his insights on the hardest thing he had to do in leading a multi-generation family business: transforming it into a ‘business family’ with strict boundaries and clear responsibilities. That set the stage for success in years to come.
In this episode, Phil shares the second most-difficult challenge he faced: his planned departure and handing over the reins as CEO.
“One of the phrases I like to use with CEOs is ‘success without succession isn’t success.’ They get so focused on the day-to-day that they forget to lead their business into the future.”
Phil insists that while “Management needs to focus on running the business, Leadership needs to focus on the direction to be going and only look at the day-to-day occasionally. A good leader actually needs to look at that point in the future when they won’t be there to run things anymore.”
That’s a reality that can be difficult to contemplate. There are reasons why the transition process can be so arduous. We discussed those, along with a clear plan for making it successful.
First, the obstacles.
We looked at why so many leaders are unwilling to plan for transition. It’s usually because of fear:
1. Fear of mortality and contemplating their own death.
2. Fear of someone taking their place, forcing them to go do something else.
Aside from fear, the next biggest obstacle to succession planning is an unwillingness to inventory the skills actually needed to lead the business.
“A CEO knows the skills they possessed when they took over, but forget that the business is continually changing and different skills may be needed to move forward.”
“Especially in a family business, the leader may be convinced that no other family member is qualified, so they’ll just stay on as CEO for life.”
“The challenge is that most founders suffer from “Founder-itis” thinking that nobody can ever do it exactly as they’ve done it. That’s probably true, but the next leader doesn’t have to be able to start and build the business from scratch. You have to think about what it takes to get to the next level.”
As a true leader, essentially one must ask if it’s best for the business to hang on until you die. If the answer is no, then planning for departure is vital because, as Phil shares, “while it’s hard to leave, it’s even harder to stay with someone else in charge.”
With that in mind, here’s an outline of the transition planning process he recommends, that he and his company followed.
1. Annually, the CEO should build and revisit a 3-tiered list of possible replacements, using the A-B-C approach:
2. Create a Selection Committee: consisting of only about four people, including one family member and other Board members. The current CEO can serve as a resource, but must NOT sit on the committee or select his/her successor. Otherwise, that person may feel obligated to continue the initiatives of the predecessor.
3. Begin 24 months before the selected date to transfer the position. Six months are devoted to the search and selection.
4. 18 months prior to departure, the CEO-elect takes a seat on the Board.
5. The last 12 months are devoted to transferring power and weaning the existing CEO of responsibilities. For instance, in Q1 the CEO must take one week off per month. In Q2, two weeks per month. In Q3, those two weeks must be consecutive (a solid half-month). In Q4 the CEO is only available one week per month.
“It is critical in this whole transition,” Phil warns, “that the CEO must retire TO something, not FROM something. This is one of the real problems with founders thinking ‘I have to retire from my business.’ No, I want you to retire to something, so that you look forward to doing something else as you finish out your career.”
Listen in to the rest of the interview to learn: