On Wednesday, Steve Jobs, head genius of Apple Inc., stepped down as its CEO. Jobs had been on a leave of absence since January due to various illnesses, including a fight with pancreatic cancer. Tim Cook, COO and interim CEO during Jobs’ absence, was immediately named the new CEO.
What long-term effect this will have on Apple is yet to be seen. The loss of a key figure in any business can have a profound impact, no matter whether you are Apple or the corner grocer. One of the most important ways you can minimize the impact on your business operations is having a good succession plan in place.
Temporary Absence and Disability Planning
When Steve Jobs took a leave of absence in January, Tim Cook immediately stepped in and assumed Jobs’ responsibilities. While in Jobs’ case his absence may have been known about in advance of the actual announcement, most businesses do not have that luxury when a key owner becomes ill or disabled. It happens quickly and often unexpectedly.
The extent of the effect the crisis has on your business depends on whether there is a plan in place to handle the loss of a key person. The more vital the person is to the daily operations of the company, the more important it is to plan for their absence – and the bigger the problems if you do not do so. Many businesses have come to a grinding halt when a member has suddenly become ill.
At a minimum, the plan should name someone to step into the role of the missing person until his or her return. Ideally, the temporary replacement should have a strong working knowledge of the company and specifically the role of the absent member. When Steve Jobs took his leave of absence, his stand-in was the chief operating officer, essentially the number two person in the organization. As COO, he, likely more than anyone else in the company, would have a good understanding of both Apple and Steve Jobs’ role.
No matter how much the stand-in knows about the company though, there will be things that only the absent person will have access to – things such as account numbers, passwords, etc. A list of this important information should be written down and kept in a safe place for the stand-in to access in case of emergency. The location of this list should be included in a set of detailed instructions given to the stand-in to help ensure the continued operations of the business.
Especially in a closely-held family business where every person performs multiple roles, the absence of a key member can have a significant financial impact on the company as well. Short-term disability insurance can help provide some cash to cover the inevitable disruption of work. Perhaps even more important though is life insurance. As part of an overall insurance plan, the company should take out a policy for each of the critical members of the company, with the business as the beneficiary. That way the business will be able to use the insurance proceeds to soften the financial blow of the lost member and the revenue he or she would have contributed to.
Even with humans living longer and the advances in modern medicine, you are not going to be able to work forever. That means that, unless the business is dissolved when you leave, at some point there is going to be someone new doing your job. Because of that, it is always important to think of the future of the business after you have left.
Due to his medical conditions, Apple knew that Steve Jobs was not going to be CEO forever. So they (likely with a lot of input from Jobs) chose Tim Cook as his replacement. In reality, Cook had been training for this job since Jobs took his leave of absence in January.
When Jobs announced his resignation, within hours Apple had named Cook his replacement. The transition happened quickly and without much fuss. Such a smooth transition can only happen with a comprehensive succession plan in place.
As soon as you assume your position within the business, you should be on the lookout for your potential successor. Many business owners desire to keep the business in the family. Have frank discussions with other family members about the future of the company and the role they would like to have in it – do not assume you know what they want.
Always remember that sometimes the best person is not the most obvious. Just because a vice president has been with the company for 20 years does not mean they have the necessary skills, drive, or personality to be a good CEO. Determine what you feel are the greatest responsibilities of your position and look for people with complementary traits. A brilliant accountant that hates the spotlight and dreads speaking in front of a group will likely not make for a good spokesperson for the company. Do not let egos and jealousy get in the way of you making the best decision for the company.
By engaging in this exercise early on, you can identify potential replacements and begin to groom them for the position. Despite the fact that Cook was just named the CEO by the Apple board, he had been filling the role in Jobs’ absence since January and was undoubtedly already chosen as Job’s permanent replacement much before then. The sooner you can establish a successor and begin to train him or her for the position, the smoother and shorter their transition period will be.