By Todd Johnson | Principal at Strategic Talent Partners
At a certain point, continued growth depends less on how much the current leadership team can carry and more on the leadership capacity the organization can build beyond them.
That shift can be easy to miss. Experienced executives are still leading the business. Strong technical talent continues to deliver. Clients trust the people they have worked with for years.
But as the company prepares for greater complexity, longtime leaders approach retirement, and high performers take on broader responsibilities, a more important question emerges:
Is the next generation of leadership developing quickly enough to support what comes next?
That is the challenge at the center of the second scenario in our three-part Talent Scenarios for Growing Businesses blog series.
The Scaling-Stage Challenge
This scenario focuses on a 100% employee-owned (ESOP) civil engineering and environmental consulting firm that falls within the Scaling stage of our Growth Leadership Model™.
The company has reached $85 million in revenue with 320 employees and plans to expand into one or two neighboring states and complete a strategic acquisition over the next five years.
The CEO has been with the organization for 15 years, several executive team members are approaching retirement, and high-performing project managers are helping drive continued growth.
But the leadership bench has remained stagnant.
Important client relationships are concentrated among senior leaders. The path to the next CEO is unclear. Technical experts have moved into leadership positions without consistent development, and attracting qualified talent from outside the organization has proven difficult.
For a business preparing to enter new markets and complete an acquisition, those challenges can quickly become real barriers to growth.
*If you’d like to jump straight to the solve, scroll down to Creating Options Before the Transition.
Moving From Leading Leaders to Leading Functions
At the Scaling stage, one of the biggest shifts is moving from Leading Leaders to Leading Functions.
The company already has layers of management in place. Now it needs strong functional leaders who can build teams, develop other leaders, create accountability across departments, and keep functions aligned as the organization becomes more complex.
That also requires looking further ahead. Succession and talent pathways must become more intentional, and the organization needs a clearer understanding of who could step into larger roles as the business evolves.
For this company, that question is becoming especially important at the executive level.
Start Succession Planning Before the Transition Is Urgent
Multiple members of the executive team are approaching retirement, while the timeline for the next CEO transition remains unclear.
That uncertainty can make succession planning feel premature. But waiting for certainty can leave the organization with very little time to prepare.
Even without a firm timeline in place, the process can begin with a simple question: “What will our next CEO need to lead?”
Five years from now, this may be a larger organization operating in multiple states and managing the added complexity of an acquisition. The capabilities required at the top may look different than they do today.
Defining that future CEO profile is a critical part of the succession process and is one of the board’s primary responsibilities, in partnership with the existing CEO or leadership team. It also gives the company a stronger basis for evaluating internal talent.
Who could grow into a larger role? What experiences would they need? Which capabilities can realistically be developed, and where might outside experience make more sense?
Starting early gives the organization more options before a transition becomes urgent.
Transfer Relationships and Develop the Next Generation
Succession, however, extends beyond job titles. In a professional services business, client relationships can be just as important.
When major accounts depend heavily on a small group of senior leaders, a future departure can create risk for both the relationship and the business.
Broadening those relationships by bringing emerging leaders into important conversations and giving project managers greater client exposure helps reduce that dependency over time.
It also creates an important development opportunity.
The project managers driving growth today may be some of the functional and executive leaders the company needs tomorrow. But technical expertise and client success alone do not prepare someone to lead a growing team or function.
Leaders need to delegate, coach, create accountability, navigate difficult conversations, and develop other people. Most importantly, they need to build capability beneath them.
Giving high-potential employees meaningful opportunities to stretch strengthens the bench while helping the organization see who may be capable of operating at the next level.
Implementing a few clear KPIs around readiness and development progress can also help make that growth more visible over time.
Know Where to “Build” and Where to “Buy”
A stagnant bench does not necessarily mean the company lacks talented people.
Some internal leaders may be capable of taking on significantly larger roles with the right development and exposure. Other future needs may require capabilities the organization has not needed before.
The question is not simply build internally or buy externally?
It is: What will the future business require, and where can we realistically build that capability in time?
Where internal talent can grow into the need, invest in development. Where the gap is larger, outside experience may make more sense.
For an ESOP, however, experience alone is not enough. New leaders also need to earn trust, communicate effectively, and understand how to lead within an employee-owned culture.
The goal is to add the capabilities the business needs without losing what has made the organization successful.
Creating Options Before the Transition
For this company, several priorities stand out:
- Begin succession planning before leadership transitions become urgent.
- Broaden critical client relationships and reduce dependency on senior leaders.
- Develop project managers and technical experts into stronger functional leaders.
- Identify where internal talent can grow and where outside experience will be needed.
- Use practical KPIs to track leadership effectiveness and bench strength over time.
Taking those steps early gives the company more options as it prepares for continued growth and leadership transition.
For an ESOP, that preparation helps ensure the next generation of leaders is ready to carry both the business and its ownership culture into the future.
The final blog in this series will look at an Enterprise-stage privately held construction company navigating stretched middle management, increasingly complex project leadership, fragmented communication, and culture dilution as it grows.
In the meantime, explore our Growth Leadership Model™ to better understand your organization’s current stage and the leadership priorities that come with it.
