Finding success in succession planning

Ensuring that your investment management firm outlives your tenure can be a daunting prospect, but even legendary investors such as Warren Buffet have to tackle the issue eventually, and doing so correctly will secure the future of your organization. 

It's easy to make mistakes when succession planning. You're giving up control, and who else can maintain the business as well as you can? It's something that many business owners have to deal with eventually though, and the ownership baton has been passed successfully before. So as an executive, or even department head, at an investment management firm how do you determine the best path to succession? It isn't just a plan, it is an art.

"How do you determine the best path to succession? It isn't just a plan, it is an art."

Warren Buffet, the legendary investor of Berkshire Hathaway, has been in the midst of his own succession planning process. Lawrence Cunningham literally wrote the book on Buffet's succession plan, and he noted that it is split into five parts – three involving personnel, one involving culture and another detailing institutional ownership.

As far as personnel goes, Buffet's managerial roles will be split into investment and executive functions. The successor recruiting network will likely consist of internal executives, probably from one of Berkshire Hathaway's direct subsidiaries. Buffet has stated that leadership roles work better in tandem, and that partnerships are likely, such as the one between him and Vice Chairman Charles Munger. Berkshire has already employed two persons to handle investments, and Buffet has stated himself that he'd like the chairman of the board to be a family member. 

It's more than the people, it is the culture 
But the succession plan at Berkshire goes deeper than that. More important than ownership of subsidiaries of executive personnel to Berkshire is its culture. When Buffet leaves, the goal of the succession plan is to keep alive the culture that has been maintained at the company during his time at the helm. For example, part of the culture of Berkshire is the importance of subsidiaries. One hasn't been sold off in some 40 years due to Buffet's insistence on maintaining a specific culture.

He tells subsidiary CEOs to run their business's as if they were their families' sole asset. This has kept up the impression that Berkshire and it's subsidiaries are "eternal." It is culture quirks such as this that keep an organization going long after it's founder is gone, at least in Buffet's mind – and why not trust one of the great investors of our time? He's sure to know a thing or two about keeping a business going.