Why is succession planning important for co‑operatives ?

Co‑operatives exist for their members who own them. It is therefore important that appropriate succession planning is considered in order to help ensure the co‑op’s long-term success.  

For many co‑operatives, the entire board is elected by or from the membership. This presents specific and unique challenges in being able to succession plan. This Panel’s guidance on Board Democracy in Co-operatives’ references that in general, all members are able to stand for election and the membership is entrusted to assure board succession by electing appropriate people to the board. 

This guidance also notes that democratic control and board expertise are essential to good practice in all co‑operatives. This guidance recommended a ‘strategic and structured approach to board succession’ by prioritising the development of a director recruitment and election strategy. 

In addition, for co‑operatives, the democratic processes leading to election are dependent upon an active and engaged membership.  

In light of this, succession planning should be a priority for co‑operatives. This is both due to the frequently high turnover of directors on boards (for the reasons previously referenced) and also as individuals may be uncontested in their seat or re‑elected time and again; so that loss of longevity can pose a challenge due to a lot of knowledge and ‘organisational memory’ belonging to that person.  

Similarly, succession planning should be considered for officer roles where specialist sector knowledge is held and/or the role has been filled by the same individual for some time. Also worth consideration are roles requiring specific skills such as chairing or committee membership requirements if applicable – for example, recent relevant financial experience to serve on an audit committee.  

While it can be difficult to succession plan on co‑operative boards, it is still possible to plan in order to respond ahead of time rather than react.  

Succession planning helps provide stability and continuity at board and executive or leadership level. It helps avoid ‘gaps’ emerging in the breadth of skills and experience on boards. If handled properly, succession planning can help avoid disruptive situations from emerging on boards where a number of directors exit the board at the same time, potentially leading to destabilisation, loss of skills, experience and continuity. 

The same can be said for senior officers of organisations who have served with that organisation for a number of years. This can present as key person dependency. As such, succession planning should also apply to key senior executives.  

Careful succession planning can also help co‑op boards fulfil their role in discharging their responsibilities in accordance with recommended best practice as per the Co-operative Corporate Governance Code.  

Principle 4C of the Co-operative Corporate Governance Code states: “The board should engage in active discussions around composition and succession planning, including ensuring that the board is of an appropriate size, to ensure successful leadership and so it can represent the co-operative’s membership.” Section 4 Provision 8 states that: “The board should regularly review its composition, succession plans and size to ensure it reflects the nature, diversity and scale of the co-operative…”