In more institutional companies, the internal candidate may not be a relative, but it is usually a current executive valued by senior management. Still, it’s a good idea for the board to test those internal candidates against the outside world, not just hand over the reins. “We feel like the quality of the decision is better if we look outside,” Rigrish says.
The value of looking at external candidates is simple—by comparing internal candidates with external ones, you can better gauge the qualifications of each of the individuals in the pool of candidates. If the internal candidate has the potential to one day run the company, Lee can work with the CEO to set up benchmarks for him or her in order to trigger the succession.
In some cases, Lee may recommend a company bring in an interim leader in his or her late 50s to groom the next leader. When that individual hits retirement, the next person in line should be ready to go. That’s what is unfolding at Greensboro, N.C.–based Bell Partners, where Steven Bell, the firm’s founder, chairman, and CEO, brought in former Alexandria, Va.–based AvalonBay Communities’ executive Bob Slater to mentor his youngest son, Durant, in the operation of its now 60,000 units.
Even after the child takes over, Matt Slepin, managing partner at real estate executive search firm Terra Search Partners, based in San Francisco, says he often advises CEOs to “find a partner for your son. If the son is a strong manager but needs a deal guy, find a great deal guy and bring him in,” he says.
3. Groom from the Bottom.
Post Properties – David Stockert
Credit: cleftwich
John Williams started Atlanta-based REIT Post Properties in 1971. He grew it over the years and took it public in 1993. Williams set up a succession plan that tabbed current CEO David Stockert to lead the company. But Williams didn’t leave quietly—after piloting the company into what critics said were very risky deals in places such as Phoenix and Denver, he stepped down as CEO in 2001.
Williams left as chairman in 2003 and shortly thereafter launched a proxy fight to bring in five of his own board members, citing mismanagement issues and a lack of disclosure. That failed, and in 2004, he left the company altogether. “It was the case of a guy who couldn’t let go of his baby, and it coincided with his baby having problems,” says one industry consultant.
To be able to consider promoting executives from within, you need to have capable talent. At Mid-America, succession planning goes beyond having someone ready in case a top executive leaves. The company’s executive leadership and board periodically meet to review who holds key positions and identify one or two primary backups.
“We review the incumbent because, as our company has evolved over the past 17 years, what different positions require in the way of skills and traits and qualities and capabilities evolves as well,” Bolton says. “There are cases where the position is outgrowing the incumbent.”
Part of the reason for this systematic approach is Mid-America’s public status—an issue that affects all public firms. “Your shareholders don’t want you to be leaderless in any key position you need,” Rigrish says.
As a result, at Colonial, the company’s CEO and chairman report to the company’s lead trustee of succession planning each year. As the firm goes through its planning by department, it asks those in leadership positions to identify potential replacements.
