The Semco Style 5 Principles to transform the way we work
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Succession Planning

The era of using people as production tools is coming to an end. Participation is infinitely more complex to practice than conventional corporate unilateralism, just as democracy is much more cumbersome than dictatorship. But there will be few companies that can afford to ignore either of them. – Ricardo Semler


In a Nutshell

According to research, about 10-15% of companies must appoint a new CEO every year and not all of them are prepared for this radical change. The CEO is the business head and the face of the company – but, what happens when it’s time for them to move on, whether it is because of retirement, illness or underperformance? That’s where succession planning comes into the picture.

A study of 2,500 of the world’s largest public companies showed that these companies had to forgo $1.8 bn in shareholder value as they scrambled to replace their CEOs. And, the longer it took to find a replacement, the worse the company performed overall. When this is the case, it becomes paramount for companies to be better prepared to let go of their top executives.

Succession planning ensures that the company is prepared for any unplanned or planned departure. In Semco, there were two steps in the succession plan for C-level executives. First, a management committee, comprising C-level leaders, would collectively zero-in on the top two to three candidates for the concerned position. Then, those candidates would be put through a participatory recruitment process, where the interviewing panel consists of all relevant stakeholders. That is, the candidates were jointly interviewed by people from all levels of hierarchy, including middle managers, subordinates and leaders from other business units.

This process was how Semco identified the best talent inside the company, to replace their higher-ups, and also find outside talent that improved its diversity and created space for new ideas.

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