Beware of Chiseling Succession Plans into Stone

Succession plans are a great way of filling executive seats during these difficult hiring times. However, there are some rules and best practices you need to consider before carving your succession plan into stone.
Susan Hartmus Hiser, shareholder with The Murray Law Group, P.C., in Detroit, recently answered the following question regarding the documentation of succession planning for the future:
Q: We have a mid-size company and have been engaged in succession planning for the future. Of course, we want to document our findings and determinations so that we can refer back when the time comes. What types of things do we need to be mindful of?
A: Although it’s a good practice to document your succession plans, you generally want to provide them with as much discretionary leeway as possible. While a plan with firm and specific direction can offer valuable guidance, it also can prove problematic if your company later encounters reasons to depart from the blueprint.
Any time an employee sues for discrimination (related to a termination, constructive discharge, lack of promotion, or so on), a document like your succession plan becomes evidence. A good plaintiff’s attorney will use any policy or procedure set forth and not followed as evidence of discriminatory motive.
To guard against age discrimination claims, the plan shouldn’t contain any ages or assumptions about retirement years. When addressing replacement positions, it should use skill sets or job titles, as opposed to names of current employees, and provide multiple options if possible.
For instance, it’s better to state that the deputy chief executive officer or the chief financial officer (or whatever titles are most appropriate) would be possible replacements for the chief executive officer, as opposed to saying that Linda Smith or Bob Jones would be possible successors to John Doe. That gives you the option to select the best fit from a couple of potential replacements without running afoul of the plan.
If your current plan states that Linda Smith is the possible replacement and 5 years from now she isn’t selected and files a discrimination claim, she’ll likely use your document to show she should have been picked. Similarly, if she is subsequently fired and the company argues she had performance issues dating back to 2017, she can use the document to argue that, as of 2018, she was next in line to be the company’s CEO. Therefore, the argument that she had performance issues could be viewed as pretextual (or a cover-up for discrimination).
The same reasoning applies when you’re thinking about a national search. If someone has been identified as a replacement and the company decides to conduct a national search, the succession plan may be used to suggest that the individual should have been considered first.
As far as succession timetables go, you must be careful about bringing up a discussion regarding an individual’s retirement plans, as this could be used as evidence of age discrimination. To put together a meaningful succession plan, most companies need to know when someone plans to retire, but you can’t ask without risking problems with the discrimination laws.
The best approach is to keep your questions general. Instead of asking what the key leader’s planned retirement date is, you should ask, “What is the key leader’s planned retirement date, if known?” Let the leaders themselves volunteer the information whenever possible.
In general, your succession plan should focus on the skill sets needed for each position and how to develop those talents and traits in all your employees. When the time comes, you want to have multiple possible replacements for your top executives.
Susan, an editor of Michigan Employment Law Letter, is also a shareholder with The Murray Law Group, P.C., in Detroit. You can reach her at shiser@murraylawpc.com or 248-540-4987.