Many years ago, I learned that leaders of a public company should never surprise or disappoint Wall Street. Commonly known as “The Street,” Wall Street plays a big role in the investment community. Its view of your business can influence investors to like or dislike your company.
When I saw this article about Planet Fitness announcing a decision to “transition to new leadership,” I wondered why. Apparently, 30-year company veteran and CEO Chris Rondeau was departing. Surely there’s a leadership tip in here.
Then I saw the section titled “Wall Street Stunned by Rondeau’s Departure.” I had to dig deeper. Clearly, there was no planned succession for the CEO position—hence, the surprise and its effect on the company’s stock price.
Leadership Tip
Proactively create and implement a succession plan for key positions in your organization.
Leaders who do not do a good job of succession planning can cause their companies to face a myriad of negative consequences affecting their long-term sustainability. Here are the top three consequences to be most concerned about:
1. Strategic Misalignment: Succession planning should continue to align a company’s strategic goals and vision. Without a clear succession plan, there could be a disconnect between leadership transitions and the company’s strategic direction. This can affect both the culture and the successful execution of its long-term plans.
2. Reduced Employee Morale: When employees perceive a limited number of opportunities for career growth within the company due to poor succession planning, it can lead to decreased morale, increased job dissatisfaction, and lower levels of engagement and productivity. This could then result in a talent drain. Without a clear path for career progression, high-potential employees are likely to seek opportunities elsewhere.
3. Loss of Institutional Knowledge: If departing leaders have not adequately transferred their knowledge and experience to successors, the company could lose valuable institutional knowledge. This impacts decision-making, problem-solving capabilities, and customer and investor relationships.
Private companies don’t have to worry about The Street, but they do have to contend with stakeholders such as banks, family members, or individual or group investors. None of them like surprises or disappointments either.
Investing in succession planning is essential for ensuring continuity, stability, and long-term success. It helps companies identify and develop talent, maintain leadership continuity, and effectively adapt to changing circumstances.
You may have already set a succession plan in motion. Great. However, because things keep changing, I encourage you to re-visit your plan often and validate it for your future needs.
