An influential leader’s shoes are extremely hard to fill. It not only takes time to find the right man for the job, but it also takes time to get him ready for it. It is for this reason that it is never too early for companies to develop a succession plan. Succession planning is the preparation to replace one leader with another by identifying and grooming talent to ensure leadership continuity for all key positions in an organisation.

While many might not realize the importance of succession planning, it is critical to a firm’s strategic objectives and continued success. Not only does the unexpected happen, for example illness or death, but Chief Executive Officers (CEOs) and Executives retire or move on for a number of other reasons. In these instances, the value of the business must be maintained and the transition seamless. In order for this to happen, the transfer of knowledge should take place way before the actual handover does. Likewise, the vision and goals of the company should be clearly understood by the successor. Therefore, developing a fully equipped successor is one of the ultimate responsibilities of a leader.

Though it is vital for succession planning to be undertaken at all levels of a corporation, it is crucial that the CEO in particular has someone to pass the baton to. CEOs are intricately tied to a company’s image, and their shelf life is a major concern to shareholders. When thinking of a CEO’s brand value, one cannot help but think of Steve Jobs, CEO of Apple Inc (NYSE: AAPL).

Jobs is often described as “irreplaceable” and is referred to as the AAPL brand personified. He is known for turning the once second-tier computer maker into the market leader it is today. Considered to be the brain behind AAPL’s innovation, it is no surprise that investors are anxious to know who will take over from Jobs when he steps down. This was made clear early last year when Jobs announced that he was taking six months sick leave. Investors immediately reacted to the news, and the stock fell to US$78.20 on January 20, 2009, its three-month low, only two business days after the announcement. AAPL’s succession plan has yet to be revealed to the public, though the company reassures investors that it is in place.

Interestingly, it is AAPL’s rival Microsoft Corp (NYSE: MSFT) which is lauded for its effective succession plan. MSFT set the date for Bill Gates’ departure years in advance, which gave its current CEO Steve Ballmer ample time to gradually learn the ropes and assume responsibility. Even when Gates began to take a back seat, stepping down as CEO in 2000, he stayed on as Chairman and chief software architect. As a result, the transfer of power to Ballmer was uneventful in July 2008, when Gates’ officially departed from his day-to-day role in the company.

Locally, more and more emphasis has been placed on succession planning. A number of firms have gone through successful transfers of leadership, Jamaica Producers Group Ltd (JP) being one of them. In June 2007, after 28 years of service, Dr Marshall Hall, former CEO of JP, handed the controls to his son, Jeffrey Hall. Jeffrey was the business development manager at the time and sat on JP’s board since March 2004. Prior to that, he was the Divisional Director for bananas. Hall was mentored by his father for many years, and knew the ins and outs of the company by the time he was nominated to the lead the firm.

Seprod Ltd (SEP) also experienced its own change of hands recently, after prepping for it years in advance. Desmond Blades, head of SEP spent a significant amount of his later years getting his grandchildren, Paul B Scott and Melanie Scott Subratie, ready to take over the business. Scott worked alongside his grandfather for over 12 years and was the CEO of Musson Group for three years before the transition took place.

Companies such as Jamaica Broilers Group Ltd (JBG) and Pan-Jamaican Investment Trust Ltd (PJAM) have also gone through similar changeovers recently. In February 2009, Christopher Levy took over from his father, Robert Levy as President & CEO. Levy was with the firm since 1985 working at varying levels within the organization. A comparable transition happened at PJAM in 2004, when Stephen Facey took over from his father, Hon Maurice Facey.

All of the aforementioned are family run businesses. However, succession planning is just as crucial in a non-family owned company. GraceKennedy Ltd (GK) understands this, and has been developing its succession plan since at least 2006. In 2008, it announced that it had implemented a structured succession plan for all senior management functions across the group. The Company has been transparent about Douglas Orane’s retirement as Chairman and CEO of the Group. Though no date has been set yet for his departure, investors are not perturbed, as they have been kept in the loop about GK’s succession plan.

Cable & Wireless Jamaica Ltd (CWJA) is an example of a firm which did not implement a strong succession plan. As a result, the company changed six CEOs in only nine years. This has hurt the firm indirectly resulting in eleven consecutive quarters of losses or no growth and frustrated shareholders.

Succession planning is of the utmost importance to a business and has become part of a company’s corporate governance. Though locally, there have been a number of changeovers in the past six years, SSL hopes that the succession planning is continuous, and that current leaders are grooming the next generation of Business Leaders to come.

Michelle Hirst is the Manager, Equities & Research at Stocks & Securities Ltd (SSL). You can contact her at mhirst@sslinvest.com