Make Succession Planning a Part of Your Corprate Culture

Updated October 6, 2011: We published the article below a few hours before the official announcement by Apple of the passing of Steve Jobs. Obviously, we had no way of knowing the news in advance and meant no disrespect. Like all Californians, and most everyone else, we sincerely mourn the loss of this true visionary and great leader.

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You may have heard that Apple did not announce the release of an iPhone 5 at their media event yesterday, as many people expected. As a result, Apple’s shares plummeted on the stock market. However, while many investors and business analysts focused on the highly-anticipated news that they did not receive, many others watching the event were concentrating on the performance of Tim Cook, Apple’s new CEO.

Tim Cook recently assumed the permanent title of CEO after serving as the company’s COO for many years, as well as having filled in for Steve Jobs during his medical leaves in 2004 and 2009. Jobs was one of the most influential and admired corporate leaders in the world, having virtually saved Apple upon his return to the company when it was floundering terribly, and then leading the company to the top of the global list of corporations with the highest stock valuation. Considering that Jobs was acknowledged as the savior and the face of the company, Cook has very big shoes to fill, with his biggest challenge being able to convince current and potential shareholders that he can maintain and grow the value of the company.

So why did Apple’s stock fall so dramatically when they only announced an iPhone 4S instead of an iPhone 5, but its stock did not behave with as much volatility when the company announced that Cook was permanently replacing the most inspirational chief executive on the planet? In simple terms, successful corporate succession planning properly prepared both Cook and the marketplace for the change. Granted, having previously filled the position on a temporary basis gave Cook and investors an unusual period of hands-on real-world experience, but it was not luck that put him in the next-in-line position in the first place.

At some point years ago, perhaps even before Steve Jobs first became ill, the leaders at Apple had determined, based on his proven success as Apple’s Senior VP for Worldwide Operations and then COO, that Cook was the right choice to be groomed as the successor to Jobs. Having anticipated the inevitable change in leadership gave the company and Cook time to properly prepare for the day when he needed to assume that top leadership position – not only at Apple, but in the global technology marketplace.

We recently read an article that goes into more detail about how Apple’s shareholders felt a need to build succession planning into the company’s corporate governance guidelines, including formal CEO succession planning three years in advance of any anticipated change, as well as having an emergency plan in place. Here are two more articles about the importance of corporate succession planning:

Successful succession planning does not only involve large corporations. Many small and medium-sized family-owned businesses have suffered greatly because they did not have a formal executive succession plan in place prior to an unexpected tragedy or untimely illness forced the business to fill one its leadership positions. Here is an informative article and discussion about succession planning in a family business: Keeping it All in the Family Business (WalesOnline.co.uk)

Has your company prepared a formal succession plan? If not, perhaps it is time to do so. At the Law Offices of Connie Yi, P.C., we specialize in Business Succession Planning and Valuation. Because Connie Yi is both an attorney and a licensed CPA, we are uniquely qualified to help you determine the true value of your business and to provide the guidance and assistance your company needs to create, implement, and monitor an appropriate succession plan.

If your California-based company has the need or desire to begin the process of creating or updating a business succession plan, contact us for a free consultation.

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