How long is too long? ‘It’s OK to leave’

“Be responsible about your own succession” – that’s the message Grounded Governance founder and IoD facilitator Giselle McLachlan CFInstD gives chairs, directors and other executives.

Conversations need to take place about succession planning and be built into the board’s business, however difficult and time-consuming they may be, McLachlan says. At the end of the day, “change is healthy” – for the organisation and its leaders.

“Many boards are poor at making time for their own business. The board needs to do its own work on succession planning.”

Those conversations – and they should not be difficult, she says – should be part of the board’s annual work plan. “There has to be time dedicated for board succession planning, including a decent amount of board-only time. Use your EQ to make sure you keep people safe through those conversations.”

These conversations should be one-on-one at first, co-ordinated through the chair or relevant board committee. Only once everyone has been through a safe individualised process, then a chair will gain permission to bring some transparency into the boardroom, says McLachlan, an experienced company director, chair, CEO and lawyer for more than 30 years.

Citing the Reserve Bank’s ‘Governance Thematic Review’ published in 2023, she agreed there was a need for more formality, documentation and board teamwork around succession planning, instead of it being “something in the chair’s head. Even our regulators have reminded boards that they need to do this well, document it better and do it more regularly.”

But there’s an inherent tension between the need for succession planning and people’s reluctance to leave roles.

McLachlan is passionate about encouraging – and convincing – people that “it’s OK to leave” an organisation. She regularly advises, “Don’t wait until you get forced out because you’re no longer useful, no longer relevant”.

“If people aren’t willing to do that, it makes it hard as a board to have those conversations. It’s the chair’s job to lead by example in these discussions and deliberations. The chair carries ultimate responsibility for teamwork and talent on the board team. And if they don’t demonstrate succession planning for their own role, a willingness to be open, to move on, that makes it easy for someone else not to do it either.

“The chair should be sharing their views on how long they should stay and be doing things like board evaluation processes, demonstrating they are accountable for doing a good job themselves. If they stifle that conversation, it makes it difficult for other people to question them.”

She cites some organisations where chairs are elected every year – under their rules – by their fellow board members. “There’s an interesting succession issue here. How does a chair make it OK for someone else to stand against you when you both have years ahead on the board? It’s a fascinating topic.

“Boards do some succession planning for the role through appointing and experimenting with chairs of committees. There’s a potential pathway. If you’ve got chairs of committees getting support, training and exposure, you can see how they perform. But then what? How do they stand for the board chair role against the current chair? This is where co-chairing and/or deputy chair roles can be powerful and helpful.

“Chairs should be bringing conversations to life about their own role regularly, having those private conversations with people about their future and that of the other board members. No one should be caught by surprise as their term nears its end, or finding out it is not going to be renewed. I encourage chairs to be open and honest and ensure all succession plans are transparent.”

Observers appointed to boards can also be a form of succession, with their potential elevation to a director’s role. They often contribute quickly and will be appointed to a formal director role quickly.

As one of the IoD’s CDC facilitators, McLachlan says one of the most common questions on the course is, ‘Who attends board meetings? Is it managers or the CEO fronting everything?”

The practice varies so much, she says. Seeing executives present to the board is a good way for the board to see the next layer of management and the talent waiting in the wings. “How does the board get to know the capability of those level two managers and executives,” she asks, and answers: “By seeing them in action in the boardroom. So succession planning can happen in every meeting.”

The next CEO could be staring them in the face. The chair and CEO should be talking about the succession plan and the next level of talent in their regular mentoring conversations, McLachlan says. Succession planning for the CEO, and potentially the management or executive team, is a key board role and can’t be left to chance.

McLachlan says a lot of people still view directorship roles as a retirement, a lifestyle option. “I don’t think that’s good enough. Being a director is a very responsible role, requiring fresh thinking and constant learning and investment. I see this as an important topic for self-reflection by directors; don’t make governance a retirement plan. It is a new career, a new set of obligations.”

And she is very strong in her opinion about maximum tenures, saying: “I think the longest I’ve served on a board is five years. We’ve still got a lot of people who think it’s OK to serve out their nine-year entitlement. I’m not a fan of that – that’s often way too long.”

Any director has to work hard to deliver value, fresh thinking and high energy throughout their term on a board, however long it is. Chairs need to be adept at asking people to think hard about this and manage their expectations earlier, she says. “Each board needs to find a balance between longevity, institutional knowledge, and fresh ideas and thinking.”

She would like to see one or two terms become the norm for many board members. “It’s not how long can you stay, but how long should you stay? We always want the board to have the skills, capabilities and energy it needs to achieve its strategy. If we have a big change in strategy, we should also have a big change in board make-up. Once a new strategic direction is set, a succession planning discussion should follow.”

McLachlan says there is no shame in resigning and succession planning processes should make that clear. “A board lifecycle can help people to consider what is right for them and for the organisation. We should normalise change at the board table.”

A lot of boards in New Zealand are community organisations where people are involved in addition to their other obligations. “There’s an expectation that you come on to a board and commit six or nine years of your life. People are expected to give so much, but it’s often voluntary. So making it OK to say yes for a term, and no after that, would be a healthy thing.

“The succession conversation is an important step in making it OK to do one term, do your share for the community and move on. If more experienced directors take charge of their own succession, and do so transparently, they will light the path for others to follow.”