Some leaders never develop or name a successor and let capable deputies drift away, so the company comes to depend on them and any transition looks slow, costly, and risky.
An example
For fourteen years the president of a family-owned building-supply distributor had run the business, and the third-generation owners had asked him for a succession plan three times. Each plan named nobody ready within five years. Two strong regional managers had left in that span, one after being passed over for a general manager role the president then left vacant and covered himself. He personally handled the three largest supplier contracts and the bank relationship. When a newly appointed independent director asked to meet the next layer of managers without the president in the room, he objected that it would unsettle the team. His contract came up for renewal that spring. Faced with an outside search that would take a year and worry the bank, the owners renewed it for five more.
Why it works
Every other path has been made expensive, so keeping the incumbent becomes the easy choice: no learning curve, no disrupted client or lender relationships. A transition promises renewal, yet that promise needs a successor who does not exist, and the routes left are a slow outside search that worries the market, an interim from a thin bench, or disorder. That is three of the four ways: the incumbent is easier to keep, and the transition both less rewarding and more expensive. It works best when the incumbent controls hiring, reviews, and succession planning, the board cannot see the pipeline, and the role carries relationships and tacit knowledge that are hard to replace.
The thinking behind it
Oliver E. Williamson The Economic Institutions of Capitalism (1985) explains asset specificity: once knowledge or relationships are specialized to one relationship, the parties depend on each other and each is exposed to the other taking advantage. A leader who personally holds the supplier contracts and the bank relationship has made the role a highly specific asset. Spreading those relationships and benchmarking outside candidates lowers the specificity, and with it the leader's bargaining power.
Jeffrey Pfeffer The External Control of Organizations: A Resource Dependence Perspective (1978) argues that whoever controls a critical, scarce resource gains power over those who depend on it, and that actors work to create others' dependence while reducing their own. A leader who lets every credible deputy leave is creating the board's dependence on the one person ready to run the business. Independent talent reviews are the board's way of reducing it.
Warning signs
After years in the role, no internal successor has been named, and every succession plan says the bench needs more time. Credible deputies have left or been moved sideways. The main client, supplier, and lender relationships run through the incumbent alone. The leader controls hiring, reviews, and the succession document, and resists any contact between the board and the managers below.
How to defend yourself
This is mostly the board's problem to solve, though deputies and owners can force the question.
- Commission an independent talent review, run by someone who does not report to the incumbent.
- Benchmark internal candidates against outside ones, so the bench is measured against the market.
- Meet high-potential managers without the incumbent in the room, on a regular schedule.
- Move the largest client and lender relationships onto more than one person.
A deputy who sees this happening should build a direct relationship with the board or owners and keep a record of development requests that went nowhere. A credible outside candidate who appears unsolicited, or a new director with a mandate, is usually what breaks it.
How a leader shuts it down
Treat a critical role with no understudy after three years as evidence of a vacuum being built, whatever the incumbent's record. Make developing a named successor part of the leader's own scorecard, and keep the succession process with the board and out of the incumbent's hands.