Finding someone to step into your shoes: Succession planning for your business

The Eskom crisis demonstrates again the importance of proper succession planning IoDSA.

The current crisis at Eskom has a number of governance lessons for South Africa one of which is the vital importance of proper succession planning for key senior positions.

The imminent departure of both the chief executive (CEO) and chief operating officers (COO) of Eskom in the next few months, with no obvious successors being communicated, raises concerns. Now is really not the time for the two top positions and many other senior management ones to be vacant.

In fact, the Eskom statement on 14 December 2022 makes it clear that CEO André de Ruyter’s agreement to stay on beyond the required 30-day notice period is welcome because there seems to be no planned successor for his position.

The Eskom board chair, Mpho Makwana, was quoted as saying that “Mr de Ruyter has agreed to stay for an additional period beyond the stipulated 30-days’ notice to ensure continuity while we urgently embark on a search for his successor”.

It remains to be seen whether there are plans in place for a succession to the COO, Jan Oberholzer, who is due to retire in April 2023 a month after Mr de Ruyter leaves and it is also unclear as to whether he will remain available to hand-over to a successor when one is appointed.

King IV specifically states that the board should satisfy itself that there is succession planning for the CEO and other executive positions in place to provide continuity of executive leadership.

Succession planning should be reviewed periodically and should provide for both succession in emergency situations and succession over the longer term. This should include the identification, mentorship, and development of future candidates.

The IoDSA has repeatedly said that the way the chief executive officers of key state-owned enterprises have been appointed was not in line with good governance as outlined in King IV.

Too often, the powerful single shareholder bypasses the board in making the appointment. This leads to problems, because the CEO is seen as a representative of the shareholder, and thus sometimes does not feel accountable to the board.

Skewed reporting lines set the board and executive management up for conflict, with bad results for the organisation.

Finding someone capable to fill the CEO position at Eskom is going to be a big task. The responsible minister and the board must do their best by following the guidelines of King IV when making the appointment to ensure good governance.

Good governance is the foundation of good organisational performance and the converse is also true.

WRITTEN BY PARMI NATESAN

Parmi Natesan is the chief executive officer of the Institute of Directors in South Africa (IoDSA).

This article is a general information sheet and should not be used or relied on as legal or other professional advice. No liability can be accepted for any errors or omissions nor for any loss or damage arising from reliance upon any information herein. Always contact your legal adviser for specific and detailed advice. Errors and omissions excepted (E&OE)