How to Manage Succession Planning in Life Sciences

For private equity investors, chairs or boards to maintain a high performing leadership team required to execute on the value creation plan, they need to be on top of succession planning pre-deal and post-deal. 

Every sector has its own challenges and priorities when choosing leaders, and life sciences is no exception. Whether in clinical research, pharmaceuticals, medical equipment manufacturers or biotech, a deep level of domain experience is necessary to maintain credibility both internally and externally. This makes identifying future leaders a trickier task, and a detailed and forward thinking succession plan all the more essential.

This article will detail the differences in life sciences that make succession planning key to the future success of the organisation, and why it is important to the private equity investment cycle.

Contents

• What is succession planning?

• Why life sciences succession planning is different

• The 7 step succession planning process

• Clinigen: An example of good succession planning

• Using data-led people analytics

What is succession planning? 

Though different sectors will have a different twist on succession management, our succession planning definition for high-growth companies and private equity is: the process of identifying individuals to succeed in key positions in leadership to ensure sustainable high performance, then either bringing in external talent or developing existing internal candidates well in advance of a leadership vacancy. 

In private equity, good succession planning has an added urgency because the leadership team must always be aligned with a time-limited value creation plan and convince potential buyers of the long-term sustainability of the team and the business. 

To learn more about successful succession planning in general for all industries, see our articleSuccession Planning in Private Equity Explained.

Why life sciences succession planning is different

Life sciences is a narrow field to play in terms of talent. More so even than healthcare (see our article on healthcare succession planning here). 

Domain knowledge is essential but not enough

Due to the specificity of knowledge in this industry, having the right domain experience is essential. And so, within the verticals of life sciences, it’s very hard to transfer a CEO or a COO from one type of business to another due to the deep knowledge required to run each type of business. For example a leader in a pre-clinical research company likely would not have the right skills or experience for a clinical research organisation. Any commercial role needs an expert who understands the client base and can maintain the company’s credibility with scientists and academics.

Note that some roles on the leadership team are less tied down to one vertical, such as CFOs and CHROs, because the importance of their functional knowledge outweighs that of domain knowledge.

However, domain knowledge is table stakes. In order to grow and meet a value creation plan, a company needs someone with the situational experience to manage value creation levers such as M&A, internationalisation and digitisation.

In an industry where founders are often academics, there is only so far a business can go before it plateaus without the right commercial leaders. While founders can get it to point A, it’s only the first letter of the alphabet. To get past that, they need a CEO and a COO who know how to grow.

Priorities can clash when a founder sees the business as a vehicle to achieving a scientific breakthrough, but others most want the business to be successful and investors to see a return.

Proactive succession planning is critical

There are two main challenges in life sciences succession planning.

1. The pool of talented leaders who understand the precise life sciences vertical, the wider industry and how to grow a business is limited.  

2. Founders often start the succession planning process too late. Either they run out of funding or they burn out.

Domain knowledge is much more narrow than it is in other industries. A leader in a clinical research company requires completely different experience than one from a contract manufacturing company. This means that the pool of talent to find life sciences leaders is much smaller than it might be in non-life sciences industries.

The pitfalls are starting succession planning too late. If it becomes a reactive process, i.e. only starting to think about succession when the founder gets too stretched or when somebody leaves, it is going to be that much harder to find the right people.

The 7 step succession planning process

A well thought out succession plan will cover all of these stages: assessment, evaluation, development and monitoring. In our experience, a solid succession planning framework involves the following seven steps in some form or other, always making sure the succession plan maps to the value creation plan.

For life sciences, this process works well for business models where the value creation plan is logical to map out. For example, clinical research organisations, contract manufacturers, medical communications and any life sciences service providers. These types of businesses create value through acquisition, digital transformation or entering new markets.

For deep science businesses such as molecule and drug development companies, however, succession planning is more unpredictable because the value is all tied up in the intellectual property. 

Step 1: Be clear on your value creation plan

The tight timelines in private equity mean that there is very little room for error during succession planning. You need a clear and defined value creation plan so that you know when to anticipate change and growth, and therefore what to look for in your leadership hires. In cases where the value creation plan is dependent on developing a relevant product, such as a drug or molecule to be licenced out, it is still important to have leaders who can run a steady operation until that occurs.

Step 2: Identify gaps within a leadership team

Start the succession planning process by identifying the key roles and their requirements at key moments in your value creation plan. You can use analysis tools, (such as ours) which will assess the skills, competencies and behaviours of your company against the competitors in your sector or who are on a similar growth journey.

Step 3: Identify high-potential talent within the business

Assess your current pool of talent in the C-suite and two levels below (VP, Director etc), to identify high-potential employees who can do the job either now or at a key point in the growth journey.  

Data-driven analysis of these individuals is quicker and more accurate than brainstorming. Critically, it also removes any of the bias decision-makers may have and brings in new insights into employees.

Step 4: Model the impact of leadership change before it’s taken.

Use the data from your individual profiling of employees, validate and test your thinking around potential succession planning options through modelling leadership changes of key roles critical to your value creation plan.

Step 5: Map out the timeline

Now you have the right people in mind, write down the key moments in the value creation plan where changes will be made. Align the succession plan with this timeline.

This is where you need to get buy-in from all stakeholders. The leadership team needs to be on board with the plan just as much as the investors and chairs.

Step 6: Build development plans 

Development plans need to align personal development and business performance. Depending on your timelines, you will have to assess whether it is better to support the development of your existing leaders, and that of your high-potential employees, or to replace the role with an external candidate. Note that each option has its time impact. It can take 3 months to find a suitable external candidate and 3 months to serve their notice, while the readiness of your potential internal hires depends entirely on how long it takes to achieve the competencies needed.

If you are replacing for an unplanned exit, make sure you capture the knowledge of the departing leader or make it a condition of their notice to train their replacement. 

If you are positioning high-potential employees, decide the length of time needed for them to develop competencies before the succession plan mandates their promotion. 

Step 7: Monitor & ensure the long-term sustainability of your leadership team

Whenever changes are made, and handovers are completed, it’s time to look back on the process so you can improve on next time.

In order to maintain the sustainability of your investment and the ability of your leadership team to achieve the desired results, there should always be a plan in place, constantly updated to reflect performance and changes in the value creation plan. 

Document how well the new dynamic is performing – is it as you expected in Step 3?

As the needs of your company change as it grows, we recommend an annual review of the leadership team to ensure development goals are being hit and the behaviours needed for the next phase of growth are in place. 

Clinigen: An example of good succession planning

Clinigen is a pharmaceuticals services business in the UK. It began by buying and selling effective pharmaceuticals that were not getting the exposure they needed. It then developed other services such as managed access, which helps drug companies navigate regulations when entering a new market where the demand is, so that patients can gain access to previously unlicenced, often lifesaving, drugs.

The CEO, who had brought three disparate businesses into one group and built it into a major disruptor in the market, brought in a COO with 1) high domain experience in pharmaceutical services and 2) the skills and behaviours to replace him as CEO in the future. And when the time came, the COO was ready to take over. He turned Clinigen into a market leading multinational businesses, creating enough value that it was bought by a private equity house for £1.3bn in 2022.

As we’ve mentioned, domain experience is important in life sciences succession planning, not just for the candidate but also for the hiring manager. Hiring is often most successful when it comes from someone with deep knowledge of the business and the market. In Clinigen, it was the CEO who knew what was necessary to grow the business further and realised that it was not him.

Using data-led people analytics for succession planning

People analytics tools use data to offer an objective assessment of current and future leadership teams.

They help optimise succession planning by cutting through emotion and ego and help leaders to think like shareholders, those who put the success of the organisation over their individual careers.

Conversations around replacing roles can be uncomfortable for both management teams and PE investors. An objective analysis provides an opportunity for people to rationally assess themselves and come to the realisation that what makes them more comfortable may not be good for the company.

Similarly, by holding up a mirror to a leadership team, to help them disconnect from their own role and see the company as an entity with its own risks and opportunities laid out lets individuals think like a shareholder. They can invest in the success of the business more than in the success of their own performance, and start to make or accept decisions in the interest of the company.