The cream rises to the top at Synlait

When Paul McGilvary took on the role of acting chair of Synlait in October 2023, succession planning was front of mind. He had committed to staying in the role for as long as it took to find the right permanent replacement, and eight months later the goal was achieved with George Adams CFInstD appointed in May 2024.

Adams was brought onto the board as an independent director (a role McGilvary has now returned to) and there was public discussion of the possibility he would become chair at the dairy company. For McGilvary, that was one mark of a successful process because transparency and openness are essential.

“First of all, the person being succeeded needs to know, and understand, there is a plan for their succession. Far too often I see situations where plans are developed and then, for whatever reason, the person being succeeded doesn’t want to go. That causes a lot of angst, especially when people have been told they are potential successors, and so on.

“Succession planning should not be a secret. A lot of companies keep it under wraps and don’t divulge who the candidates are, or potentially who is going to be succeeded. With a little more openness and transparency, better outcomes could be obtained.”

Another of McGilvary’s tips is to focus on the succession process rather than simply on a person, or shortlist of candidates. Potential candidates can find new opportunities, change their goals in life or simply be unsure a role is right for them, despite being a prime contender in the eyes of the board.

“I’ve always found it quite helpful to focus on the process for particular roles, rather than focus too hard on individual people. Those names can change and make your plan a little bit redundant, quite quickly. It’s better, when thinking about succession, for boards to focus on having a good process. This then kicks into play when the need arises,” says McGilvary.

That process could include understanding which roles might best be filled with the assistance of an external recruitment agency, and which roles might be filled by an internal candidate. It may take into account issues of timing – is there a long lead-in, or an urgency, to filling a role. This needs to be understood and factored into a comprehensive process alongside consideration of what skills are needed, he says.

Boards need to be clear about what type of person and skill set they want in a role, he says, but also accept the criteria they agree on may change as the process progresses.

“Often, what you need changes as you roll forward. For example, in one case we wanted very strong financial skills in our CEO. As economic circumstances changed, our conception of the role developed, and we felt marketing and sales skills were probably more important. You need to examine the role as part of the process and be prepared to update your thinking.”

With the boomer generation nearing retirement age, questions are being asked about who will replace them.

McGilvary says companies would be wise to encourage their senior executives to gain experience of governance, so there is a wide range of potential candidates when the time for succession comes.

“It’s a really good idea to give senior executives governance experience. It creates a sensitivity to the issues that boards grapple with. I did it myself, holding governance roles when I was a CEO. But you can’t take on too many governance roles because, as a CEO, you are too busy.

“And it is not a good idea to put people in a governance role within the company they’re an executive of. I know of examples where the governance and the executive parts of the roles got completely confused. They should get that experience elsewhere.”

Encouraging executives to gain governance experience not only expands succession options, it is also a useful form of professional development, he says.

“When you are looking at a person in a current role, don’t hesitate to add new experiences or make them responsible for a wider portfolio. You don’t have to specifically target them as a potential successor to the CEO, for example, but you can help that person become much more capable.

“We should be constantly giving our senior executives experiences that extend beyond their current role, building their capability all the time so they can be put into a succession framework.”

For Synlait, the succession process has been smooth and successful. Adams is now the permanent chair and will formally stand for election as an independent director at the company’s Annual Meeting in December 2024.

“At the time that I stepped up to the chair’s role I said I’ll do it until the next AGM, if necessary. In the meantime, we formed the nominations committee and got to work on identifying a new independent director who we could then bring on with the idea of becoming the chair.

“And that has happened, so it was a good plan.”