Succession planningGanesh S. Mani WHRDSuccession Planning is about business continuation and people. It isproactive in nature. It has changed from planning for key areas likethat of CEO to programs that include long-term strategic personnelneeds aligned with the organisation's strategic mission and goals. Thispaper gives an overview of the process of succession planning and thedifferent approaches to do it.W Student of Fellowship Program of IIMT

The words “succession plan

ning” are usually associatedwith finding the right peopleto fill the highest-level positions.But planning for future-staffingneeds should be done at all levels inthe organization, from CEO downto shop floor worker. And it needsto be done in small and mediumsizedbusinesses just as much as itneeds to be done in big business.During the early 1960s, corporationsdeveloped systems to fill executivepositions from within. It consistedof identifying key executive positionsand then sought to groom one or twoindividuals to succeed to these positionswhen the incumbent left. It is amodel that has less relevance todaygiven rapidly changing external environmentsand the businessdiscontinuities that can arise as organisationsseek to respond. Overtime, succession planning broadenedto include other key areas. As the needfor greater technical expertise grew,what once began as a top-down approachthat solely targeted corporateor executive leadership shifted to includeindividuals from the departmentor division level. Instead of merelyreplacing positions, as they exist, today’seffective succession programsinclude long-term strategic personnelneeds that align with the organization’sstrategic mission and goals.As CEOs leave companies–prompted by retirement, new opportunitiesor ineffective performance–the Board struggles to identify newleaders. Today’s Boards need leaders

with traits and skills that will drive acompany’s or system’s cultural integration,enhance financial performance,and articulate vision and strategicobjectives for new challenges.1

Succession planning is essentiallyabout business continuation and people.2

What is Succession Planning?An effective succession plan anticipatesadministrative vacancies anddevelops a pool of qualified candidatesin advance of critical need.Hirsh W. has defined ‘SuccessionPlanning to be a process by which oneor more successors are identified forkey posts (or groups of similar keyposts), and career moves and/or developmentactivities are planned forthese successors.3

Successors may be fairly ready todo the job (short-term successors) orseen as having longer-term potential(long-term successors).4 It is a longtermprocess and not a one off exercise.Succession planning involves:• Understanding the organization’slong-term goals and objectives• Identifying the workforce’s developmentalneeds• Determining workforce trendsand predictions.Succession planning is moreproactive and is concerned with developinga pool of high-potential peopleto assume the leadership positionsthat will be needed to support the futuregrowth of the organization. Thisrecognizes the reality that the worldis changing so fast that it is impossibleto know and to plan for every futureneed. Succession planning considersit more prudent to develop generalcompetencies and create flexibilityin potential leadership candidates.Succession planning ensures thatthere are highly qualified people in allpositions, not just today, but tomorrow,next year, and five years fromnow.Why Have A Succession Plan?Succession planning helps an organizationbuild the necessary organizationalcapability to achieve businessresults.HRD

It helps to develop its people and preparethem for future achievementIt ensures continuity of leadershipIt ensures continuity of cultureIt helps the organization assess its talentpoolIt helps retain key talent and make theorganization more attractive to jobseekersIt helps translate business strategiesinto specific organizational capabilitiesto support future success.Strategic goals can only beachieved if an effective program forleadership succession is in place. Successionplanning is necessary to ensurethat leadership growth keeps pacewith organizational growth.A healthy succession planningprocess is central to a company’s abilityto sustain itself and survive. Theprocess promotes the articulation ofan organization’s essential leadershipqualities, stimulates discussion aboutthe organization’s leaders and providesdisciplined actions that nurturesuccessors. 5

By ignoring succession planning,an organization places itself at substantialrisk like the risk of relying onuntested leaders to guide an organizationthrough uncertain times, therisk of placing the company’s futurein the hands of an individual whoknows little of the company’s valuesand ideals. Perhaps the greatest riskis surrendering control of the company’sfuture leadership to the unknown.The world’s most admired organizationsrecognize that there’s a strategicadvantage to investing in robustsuccession-planning programs. Byhelping employees chart career pathsand develop the skills needed to growinto new roles, such company wideprograms ensure that when peoplemove up in the ranks, the next set ofmanagers will be there to replacethem.6

Leading companies such asJohnson & Johnson don’t just promotesuccession planning at the organizationallevel—they also adopt a “bubble-up” strategy, holding individualexecutives accountable for developingtheir replacements. This helps ensure

orderly transitions and provides someassistance in the ongoing war for talent7.Businesses, whether small orlarge, require material and human resourcesto accomplish goals. Whilematerial supply systems consistentlydraw much attention, organizationsonly periodically focus on developingand maintaining adequate human resources.To ensure its much-neededkey personnel, a succession-planningprogram is needed.There is empirical evidence thatsuccession planning and managementdevelopment can and do contribute toextraordinary business success. JimCollins and Jerry I. Porras authors ofthe book ‘BUILT TO LAST: SuccessfulHabits of Visionary Companies’carried out research into 18 truly exceptionaland successful companiesthat have lasted for on an averagemore than 100 years. They found outthat such visionary companies havelong-range succession planning tocarry out smooth transition form onegeneration to another.Succession planning establishes aprocess that recruits employees, developstheir skills and abilities, and preparesthem for advancement, all whileretaining them to ensure a return onthe organization’s training investment.How to do Succession Planning?The most common model for centralised,corporate succession planningis that it covers only the mostsenior jobs in the organisation (the toptwo or three tiers) plus short-term andlonger-term successors for these posts.The latter group are often manifest asa corporate fast stream or high potentialpopulation who are being activelydeveloped in mid-career through jobmoves across business streams, functionsor geographical boundaries.8

Many large organisations alsoadopt a ‘devolved’ model where thesame processes and philosophy areapplied to a much larger population(usually managerial and professional)but this process is managed by devolvedbusiness divisions, functions,sites or countries. It has to be said thatfew organisations successfully sustainthe devolved model, usually because

it is not really seen as a high priorityand not adequately facilitated by HR.9

Sometimes firms promote the occupantof the No.2 position. But recenthigh-profile examples of the prematuredeparture of a second-in-commandshows that of the executivespromoted from within to the #2 spotand expecting to succeed the CEO,half never make it to the top, leavingtheir companies within five years.Even more startling is the success ratefor people coming into #2 positionsfrom the outside: after five years, only24% have become CEO.10

In the article NAVIGATING THESUCCESSION MINEFIELD the authoressdiscusses one successful wayof identifying successors to retiringexecutives. The former bosses, currentbosses and seniors should discuss thelikely successors. The authors havetested this method and found it to bequite effective in identifying previouslyunknown traits and shortcomings.Another approach is to have agood plan assessed for the results itwould give. Ask the question whetherthe process would give the desired resultsbefore embarking on the journeyof succession planning.Ageing Workforce DiscussionPaper Series has listed the followingsteps: 11

Identifying Future Leadership Needsof the OrganisationThis step involves reviewing biographicaldata (corporate experience,education) by a review team of senior,credible managers and review ofperformance (360O feedback, challengingprojects, formal appraisal).Also interviews to determine careerHRDpreferences and self-perceptions, psychometrictesting and determiningcompetence through simulated workexercises.Competency Assessment and ExternalRecruitmentIt would involve identifying thecompetencies required by the companynow and in the future. Once the competenciesneeded are identified the internalpotential employees can beevaluated for the competencies and

theses shortcomings would form thebasis for development activities. Alsojudiciously external talent can be recruitedwhere internal talent is notavailableDevelopment ActivitiesWould include a variety of jobassignments including action learningprojects, education, training and selfdevelopment.Program reviewAs with any program, review andevaluation is a lynchpin of success.The complexity of the system couldbe the cause of its downfall.Strategies to attract and retain leadersFor managing succession planningsuccessfully employees should beretained using strategies like incentiveand reward systems; varied workassignments to maintain interest anda sense of growth and challenge.Mel Hensey in the Journal ofManagement in Engineering also concurswith the above system of successionplanning.In his 2001 book, the former CEOof General Electric Co., Jack Welch,wrote of choosing his successor:“Making the pick was not only themost important decision of my career,it was the most difficult and agonizingone I ever had to make. For at leasta year, it was often the first thing Ithought about each morning and thelast thing on my mind at night.”Welch approached the selection processwith four criteria. He wanted hissuccessor: to be GE’s unquestionedleader; to take the politics out of theprocess; to be young enough to be inthe job for a least a decade; and hewanted the board involved in the decision.Why succession planning failsl 13

• High potential candidates are arbitrarilydefined.• The qualities that a successfulbusiness unit head has and whathe should have after becomingCEO are different. Business unitheads may not have strategic visionor ability to communicate effectivelywith externalstakeholders.• Many executives make excellentNo. 2s and act as a fine complementto their CEOs but fail miserably

when they move into thecomer office. The primary reasonis the #2’s inability to navigatethe political currents that buffetevery heir apparent.14

• The designated replacement maybe far from ready to take over.• Promotions are made keeping inmind the organizational needs,but totally ignoring the aspirationsof the employees.• The process lacks transparencyand confuses talented people,who may hence decide to leave.• Outsiders are indiscriminatelyhired without explaining the rationaleto insiders.• When one person leaves or retires,instead of moving decisivelyand appointing a succes-Jack Stack provides a useful real world summation of approaches that work:“It’s hard to think about the future, decide what you want, and commit yourselfto a plan. It’s much easier to focus on the day to day and forget about nextyear.“That’s why you need a system. You need a regular routine that forces you topay attention and do what’s in everyone’s long-term interests. It’s a bit likestarting on a diet and starting an exercise program. The best way to get rid ofbad habits is to replace them with good ones.” 12

HRDsor, the portfolio is split betweentwo people at the next level, leavingemployees totally confused.• The program is perceived as beinglimited to the ‘elite’ core.Effective Succession Planning: Someuseful guidelines• Successful Planning should becustomized to suit the presentneeds of the organization. Forexample, if the skills necessaryto manage the company in achanging environment are notavailable in house, there may beno option but to hire an outsider.• Succession Planning should bedriven by line managers and HRexecutives.• Succession Planning should anticipaterather than react to jobopenings.• Succession Planning is not justselection. Development of employeesthrough job rotation,mentoring and formal trainingprograms is equally important.• Succession Planning must take

into account the culture of theorganization.• Succession Planning must beconsistent with the company’sstrategic intent.• Succession Planning initiativesmust be driven by the need to developleaders within the organizationon an ongoing basisSuccession Planning should examineall positions, which are criticalto the core functions or are difficultto replace.Succession planning should be:1. Customized to the organization.No one company has the “right”answer. Succession planningmust be tailored to the organization’sneeds.2. Focused on future strategy andculture. Succession planningmust be aligned with future strategicdirection. The organizationmust assess its current cultureand define its ideal culture. Itmust define the competenciesneeded today and in the future forthe critical, key positions. Thenit must assess and develop itsleaders based on what it needs tobecome in the future.3. Driven by top management. Topmanagement must be involvedwith and support the successionplanning process. Successionplanning must be owned by linemanagement and guided by humanresources, but not owned byhuman resources.4. Based on objective multi-rater assessments.Succession planningshould be based on objective,multi-rater assessments. Multiraterfeedback offers higher reliabilitythan single rater assessmentsand more accurate performanceassessment.5. Focused on development, withshared responsibility. Successionplanning is not just assessmentand selection. Development iskey. Identify individual developmentplans for each individual.Focus on development opportunitieswith the greatest impact—cross-functional/cross-sector job

assignments, executive coaching,and mentoring. Each employeemust take ownership of his or herdevelopment with strong managementsupport.6. Focused on development ofaleadership cadre. Build pools oftalent.What is being done today in thename of succession planning? 16

Select a set of key leadership criteriaand provide support to help leadersmeet requirements for advancementIn large companies since it is oftendifficult for one group to know allthe qualities that a leader must possess,the company is limited in itssearch for the most qualified talent.Two top pharmaceutical manufacturershave developed their own approachesto avoid the possibility ofoverlooking critical leadership successfactors. Eli Lilly using numerous focusgroups, comprised of varying levelsof management, identifies the criticalcore competencies of effectiveleadership. Glaxo Wellcome outlineskey areas of development for all employees,including “on the job experience,”self- development, training,and participation in coaching andmentoring.In addition, Glaxo Wellcome’semployees follow an integrated developmentprocess. Collaborative performanceplanning between employeesand managers helps employeeswork to develop and meet a set of performancegoals. The success of thedevelopment plan depends on thecommitment of those involved; thereforeGlaxo encourages manager andemployee to carry on a running dialogueabout the plan and what theemployee is doing to meet his or hergoals. Also, the manager and the employeeare expected to meet quarterlyto discuss performance and developmentprogress.Screen effectively to identify highpotential and to concentrate developmentresources on future leadersIn addition to identifying criticalpositions and any gaps in the corporatestructure, Glaxo seeks to develop– and thereby retain – employees with

extraordinary skills and/or performance.The company also emphasizesfemale and minority employees as partof its commitment to diversity.Glaxo Wellcome concentratesheavily on matching its star employees’talents and interests to availableopportunities. A rich variety of assignment,visibility, excitement, andchange rather than strict financial rewardshas enabled Glaxo to retainemployees.Spread responsibility and ownershipfor process design, executionand refinementThe succession plans at LockheedMartin identify pools of candidates forjob openings at all levels throughoutthe organization. Ultimately, executivesat the corporate level manage thecandidate pool. With almost 200,000employees, Lockheed has a successionplanning process that is continuallyreviewed at increasing levels, from HRdirectors to presidents of operatingcompanies, before elevating to uppermanagement.Align succession planning with corporateculture to ensure that executivestructure reflects corporate valuesCompetencies are critical at GeneralElectric. However, as the company’sCEO Jack Welch has noted, thecompany’s values are even more central.GE stresses the importance of“high achievers” – those who are successfulwherever they go. Another keyfactor that GE looks for is the desireto perform leadership tasks. Past performancestill figures prominently inthe performance review process, butan employee’s promotion record hasless impact than it once did. GE culturenow focuses more on people stayingand seeing their individualprojects through to successful completion.Measure the results of the successionplanning process to ensurealignment with goalsIn areas where employee developmentleads clearly to improved performance(financial workshops, salesnegotiations) the results can clearly bemeasured. Organizations that providedevelopment opportunities and expectconcrete results have the ability to

document the employee’s increasedperformance and reward them accordingly.For example, as in many fieldforces, sales reps at Novartis, abiopharmaceutical company, receivebonus compensation based on the extentto which they meet stated goalsand objectives. Novartis takes the additionalstep of having the HumanResources department assess the performancereviews themselves as ameasure of corporate development effectiveness.The Indian ScenarioThe problems in Indian scenarioare acute. We have lot of family ownedand managed businesses. These spendtheir time dividing and selling familysilver rather than selecting and preparingthe successor for the top job.Though there have been instanceswhere the family has decided to appointprofessional managers, likeRanbaxy, Murgappa and TVS.L&T for one has embarked upona planned succession program. It prefersinternal candidate to external candidates.It also compares the internalcandidate with external candidate toidentify areas for improvement for thechosen one.The need for succession planningand the effect of the lack of it can beunderstood from the example ofThermax. The founder Rohinton Agadid not identify his successor. Afterhis death Abhay Nalwade the onlydesignated executive director was selected,but he was unprepared for thetransition from peer to boss.ConclusionIn order to continuously improvethe succession planning process, companiesmust prioritize the many bestpractices and lessons learned and fitthe critical best practices into an operatingstrategy, including a detailedimprovement path forward for the successionplanning effort. Improvedemployee retention, training andpreparation, commitment and satisfaction,as well as an improved corporateimage are some of the benefitsto companies improving their practices.The current trend in the Industryis to move from the traditional successionplanning practices of position

replacement to talent managementphilosophy. Talent Management isabout identifying and assessing thetalent in the organisation for. runningthe units in the future, investing in thedevelopment of these personnel. Italso is true that there is no standardsuccession planning approach, it hasto be specific to the company. Also likeany other organisation developmentalactivity support and commitmentof the top management is necessaryfor the success of this issue.Succession planning is a complexprocess that requires constant attentionand ongoing in resources. Successfulorganisations devote considerabletime and resources to mappingout skills and competencies so thatthey can hire and train appropriatelyand achieve a distinct competitiveedge. Best-practice organisations alsoprepare for unforeseen events and thepotential loss of key executives. Finally,these organisations view successionplanning as an ongoing processrather than an event that must be addressedevery year or two.A growing number of companiesare recognizing the value of successionplanning and they are expandingthe concept from one traditionallyfollowed to manage organisationwide managerial positionsrather than only senior level positions.They are taking beyond organizationalcharts and using it asa comprehensive change-managementtool that helps the organisationidentify gaps in talent and fillthem more effectively. Ultimately acomprehensive succession planningstrategy helps business leverage thefull value of human capital. qHRD