Studies in succession planning

Grant Kemble, CEO of Perpetual Guardian, takes a look at two cases from corporate trustee services Guardian Trust and Covenant.

Monday, April 17th 2017, 2:09PM

by Grant Kemble

Of all the problems business leaders grapple with, succession is one of the most complex, and one which can demand months, often years, of forward planning to deliver good results. As the CEO of the Complectus group of companies, which incorporates the corporate trustee services companies Guardian Trust and Covenant Trustee Services, I have been involved in recent succession planning at high – and high-stakes – levels, collaborating with Guardian Trust’s Bryan Connor and Covenant’s Graham Miller as they have made long-term leadership changes.

Here, in Bryan and Graham’s own words, are two instructive tales of succession planning:

Bryan Connor
Then: General Manager, Guardian Trust
Now: Director Corporate Trusts Local Board

After 46 years in the trust industry and 11 years in the top job at Guardian Trust, the time was right for me to move on. With my colleagues I started planning for this about a year in advance, and after an external and internal process, Mark Jephson was appointed as an internal promotion. The reasons for the choice of Mark were manifold – he was experienced in financial services, and he knew the Guardian Trust business intimately, having joined it a decade ago – but among the most important elements are his integrity and reputation. He is an innovative and strategic thinker who is able to preserve Guardian Trust’s market status as a thought leader.

The transition from my long leadership to Mark’s new tenure was handled carefully. We provide supervisory and trustee services to many large clients and have funds under supervision of $120 billion, so client confidence in our leadership is paramount. Many clients already knew Mark from his history with the business, but from his appointment in June 2016 he became my shadow, accompanying me to every meeting until my formal departure that December. Anything in the business which Mark wasn’t familiar with, he became so in that six-month transition process.

During that time clients could get to know Mark better as someone who brings enormous ideas and enthusiasm, while I could focus on the handover and achieving the goal of making the business compliant with the Financial Markets Conduct Act by the end of 2016, which we did. For any long-time leader it can be hard to let go, but I still have a connection to the business through regular informal coffee sessions with Mark and my role on the Corporate Trusts Local Board. Seeing the continued growth and new successes of the business is quite powerful for me.

In some ways, good succession planning depends on knowing what people like about your business. In our case, it comes down to the type of people we have in the business and the respect they enjoy in the market. Over the years, as our company has been an acquisition target, prospective owners have researched the people in the corporate trust business and had a lot of good feedback. Finding the right new GM means asking who is best placed to protect that reputation.

Importantly, Mark is not afraid to question the norms. Risk management is an essential component of our service to clients, and Mark will readily question how things are being done. He is also open, as I was, to having his thinking challenged by others, and this is a type of business that attracts deep-thinking, analytical minds. In times when the business has been tipped upside down by external forces, the corporate trust services have always grown, in part because we’ve focused on having the right people on the ground.

What would I do differently in hindsight? There is no point at which I believe we went off course, but 11 years at the helm taught me that you learn more from crises than anything else, and whomever replaced me needed to have endured a trial or two. Not only Mark but our senior managers, and others, had been through the GFC, and developed the strength people get from seeing the bad times as well as the good. In planning for succession, think about the worst crises your business could face, and who would be best at dealing with them.

One of the trickier aspects of succession planning in our business is that very few people are trained in the complete skill set you need for what we do. In recruiting, we look for people with a sound background in financial services, with experience with any of the various types of products we’re required to supervise, and from that base, if we believe someone will fit in the business, we give them the opportunity to learn.

I would go so far as to say that none of us came into this business with every skill, we have all learned on the job, and part of my role as a leader, and what Mark does today, is being a partner to the team. Mark will roll up his sleeves and get into issues alongside staff, and they know they have his unwavering support.
No one is left to sink or swim, and we take a team approach to resolving issues. Everyone knows that if a problem arises, they can draw on whatever help they need. The confidence and morale this engenders within a business is critical to successful leadership transitions.

Graham Miller
Then: Former Owner and Managing Director of Covenant Trustee Services
Now: Chair, Covenant Trustee Services

My succession story is a little different to Bryan’s in that Richard Spong was in place as the new GM before Covenant joined the Complectus group. The most influential factors in my case were understanding my own skill set, and my weaknesses, and wanting to find someone who was a better manager than me. I am an extrovert who is strong in relationships, problem-solving and big-picture thinking, and though I lead small teams well, I am not so good at the larger hierarchical structures of the kind Covenant was evolving towards. The bigger the team became, the more my deficiencies as a manager were exposed, and I also knew that the increasing regulatory responsibilities of the business needed to be met by someone with a better mind for detail than mine.

Perhaps most importantly, I wanted someone who truly held the Covenant values. Ability or technical skill is one thing, but does your successor live the values and culture of your business? I suppose I am naturally inclined to favour an internal candidate for a business like ours, because by the time Richard took the reins, he had been with the company for 10 years, and he and I had developed a lot of trust in each other.

In my experience, managing complex transitions successfully comes down to three principles:

Understanding your own business and your role in it.
Understand where it’s heading (in my case, a regulatory regime that was out of place with my personality).
Marrying the needs with what is available. I couldn’t go to the market to find an answer, which is why I am in favour of recruiting for the future.

What are common mistakes by corporates when planning for succession? One is failing to understand how leadership needs to evolve. For instance, my extroversion and creative thinking is not normal in a trustee – our business tends to attract more analytical, structured, introverted people. For my type, I need a 2IC who is detail-oriented and can compensate for my failings, but the worst thing I can do is promote that 2IC to GM, because you can’t put someone in your own position to compensate for your weaknesses. You have to recruit for where you’re going, not where you’ve come from.

One of the biggest risks in our industry, and indeed in financial services, is that we tend to recruit not on what people have achieved but on the basis of the mistakes they haven’t made. In our line of work, mistakes count against candidates more than in some other industries, and the people who get promoted are often the ‘safe’ people. If you’re not careful, you will inadvertently eliminate the top-end leaders who can think and calculate their way through complex situations better than some people with ‘perfect’ records.

Don’t underestimate the value of personality profiling in your business. Years ago I learned that I am an explorer-promoter who is an enthusiastic presenter and problem solver – a salesman of sorts – and I needed to bring more structured people into the team to get a balance of skills. I have periodically taken the team through the profiling process, and Richard’s profile as an assessor-developer is shown to have the highest likelihood of moving into a top leadership role of any profile. Having seen him a complex leadership role before he joined our business, this didn’t surprise me, and the combination of his experience and personality substantially de-risked our decision to recruit him.

A good future leader is someone who can put ego aside and focus on getting good solutions. No one can be protecting their patch or their own interests. Stress testing comes when everything is under fire, and our business has the diversity of experience to come up with answers, and even take a controversial position, in scenarios where no other trustee has the capacity to work through the complexity. One example is a finance company whose former CEO had been replaced as part of the restructuring. He had prevailed upon an influential third party to support him, a prospect we could not support because this person was unacceptable to us, and we would have had to actively oppose his involvement or would not have allowed the restructuring process to proceed.

A good successor is someone who understands that good leadership acts on good advisers, and you need the right input to make good decisions. By the same token, you can’t hide behind advisers – you have to take responsibility for the decisions you make and the advice you’ve received. Sometimes there will be ambiguity, but a good successor, a good leader of your business, is someone who is prepared to carry the can.

CEO of Perpetual Guardian

Tags: complectus succession