Succession Planning

Succession Planning

• Succession Planning is the systematic and deliberate process of ensuring the availability of highly qualified people for all positions not only in the present time, but at any point in the future as well.

WHY WE SHOULD DO SUCCESSION PLANNING

Rothwell (2001) has reviewed the major reasons for having a succession plan:

• To accelerate the development and improve the retention of talented

people. • To identify ongoing needs for replacement and design appropriate

training and employee development programs; • To increase the pool of talented employees to fill key positions; • To add value to the organization’s strategic plan and contribute to

ongoing business strategies; • To ensure individuals receive appropriate developmental opportunities

and are successful in their career goals; • To ensure that the organisation has full access to the intellectual capital

of their employees;

TRADITIONAL AND EXTERNAL SUCCESSION

PLANNING

• Traditional succession planning approaches is that they often rely solely upon the opportunities for development that exist within the walls of their organization

TRADITIONAL SUCCESSION PLANNING

The name is pretty much self-explanatory: external succession planning is much like traditional succession planning, with the exception that the scope is expanded to include both external talent and job assignment opportunities for development outside the organization.

This can be in the form of job assignments outside the boundaries of the traditional organization. Such opportunities could occur with customers, vendors, strategic partners, and — if you are really bold — even competitors.

Example: "Up-Out-Up" An oil company

External succession planning

MODELS OF SUCCESSION PLANNING

Three Models of Succession Planning

1. Succession planning by position– management driven .

2. Creating succession planning “pools” .

3. Top-down/bottom-up succession planning .

Succession planning by position – management driven

• Incumbent identifies the individual(s) who are in their view best qualified to move into the position.

short term - 1 year) the medium term- 2-3 years or the longer term (3-5 years);

• The incumbent may also identify their perception of the development needs of the candidates they have named;

• Sometimes the organisation decides that the succession plan is a strictly confidential document

• consequently the only people who are aware of the succession plan are those who develop it.

Succession planning by position –

management driven

Advantages of this approach:

• This is the simplest model; based on the assumption that the best person to identify who would be able to do the job is the person who is currently doing it;

• The most common reason why organizations use this model is that it is often the approach the CEO is most comfortable with.

• If there are any positions which have no identified successors (thus identifying succession gaps in the organisation).

Succession planning by position –

management driven

Disadvantages/risks:

• High risk of encouraging corporate "cloning".

• This can have serious business implications.

• Problematic in large organizations in which the incumbent in the position does not know employees across the organisation.

• Risk that the person identified does not aspire to the promotional positions they have been identified for .

Creating succession planning “pools”

• In this model, high potential candidates are identified within the organisation as the senior managers of the future;

• They are usually selected by a task force of senior managers (often with the assistance of Human Resources).

• To facilitate decision making, they will often agree on some criteria by which to select the individuals.

• In some cases, candidates may be further narrowed down through an assessment center process or through an interview/evaluation process; and

Creating succession planning “pools”

Advantages of this approach:

• This type of approach tends to be somewhat fairer because more managers are involved in the selection of the people who are identified for the High Potential program; thus providing some checks to offset bias.; and

• This approach is also more likely to recognize the value of providing broad background for the high potential employees rather than a single functional stream of experience.

Creating succession planning “pools”

Disadvantages/risks:

• In large organizations, most decision are influenced by the level of visibility the person has in the organisation As a result, talented employees who do not have a high profile may be overlooked all together; and

• In many organizations, it is widely known which employees have been identified as high-potentials; the other non-identified employees can be severely discouraged and demoralized.

Top-down/bottom-up succession planning

Senior management as a group determines what competencies are required to enable a person to take on the key roles .

All employees at a pre-determined level are provided with the information .

Senior Management conducts a session about succession planning .

Employees then participate in a workshop in which they are given guidance and led through such processes as:

a) using 360 degree feedback

b) developing their own individual development plan and reviewing it with other appropriate people,

c) learning how to take responsibility for their own career growth, and

d) considering what would be good "next moves" for them to make in their careers. Assessment centers could also be used as part of the workshops;

Top-down/bottom-up succession planning

Advantages of this approach:

•The program serves to empower employees; to help them feel that they have some control over their careers and are not at the mercy of others; •The across-the-board criteria for progression ensure that there is less chance to "work the system"; and •The process is transparent. There need be no secrets or hidden agendas. This engenders a higher level of trust.

Top-down/bottom-up succession planning

Disadvantages/risks:

Three things are pre-requisite for the success of this program:

Strong across-the-board support at the most senior

levels of the organisation,

consistency in application, and

follow-through.

Guidelines for effective succession planning

Succession planning should be driven by the line function and not HR executives.

Succession planning should develop key candidates, in anticipation of future openings.

Succession planning is not just selection. Development through job rotation, mentoring and formal training programs is equally important.

Succession planning must take into account the culture of the organization.

Succession planning must be consistent with the future strategic direction of the company.

What the CEO needs to do

Many CEOs fail to handle succession planning effectively for a variety of reasons:• They forget the big picture and stay focused on day to day operations.

• They have an exaggerated sense of self importance and begin to think they are indispensable.

• They are poor in building a second layer of management because of an unwillingness to tolerate good people or to delegate.

• They try to avoid conflict and hesitate to send a clear message who the successor is going to be.

• They continue to play a role in the company even after the new CEO has been put in place.

The Indian Scenario

Family managed businesses

Progressive Indian business houses like Ranbaxy, the Murugappa group and the Eicher group have demonstrated a high degree of professionalism.

Example- Lucent Technologies

Lucent has divided succession planning into two phases:

identifying leadership requirements and the talent available and

talent development.

Example- Lucent Technologies

Lucent evaluates possible successors on two primary criteria: performance and the ability to develop and adopt.

Some of the important attributes, the company looks for in future leaders include

•ability to think globally

•ability to focus on results

•ability to perform tasks and projects with speed

•customer orientation

•concern for people

•respect for people

•ability to inspire trust in employees.

EXAMPLE-Thermax

• The Pune-based company has been known to take good care of its employees, making it a favorite employer among many of India’s premier technical institutions. Yet…………………………

EXAMPLE-Thermax

• Five years after founder Rohinton Agha passed away, the entire board of governors had to resign.

• The company struggled to compete in a changing business environment.

• Thermax’s market capitalization declined sharply from Rs.990 crore (on July 22, 1996) to Rs.186 crore (on April 4, 2000).

EXAMPLE -GE

• GE is quite clearly one of those few companies which has been able to grow leaders consistently.

• Welch himself honed his leadership skills at GE under the guidance of his illustrious predecessor, Reginald Jones.

EXAMPLE -GE

• GE’s Leadership Development Institute in Crotonville, New York has ensured that activities aimed at developing leaders are closely linked to the company’s business strategy.

• Each year, the Crotonville institute trains some 10,000 GE employees.

• Welch himself took the lead in choosing action- learning topics for annual executive-development courses.

• GE also trains executives in change management by disseminating its accumulated expertise in this area .

• GE interviews company leaders around the world to assess future business needs and the leadership characteristics needed in the years to come

EXAMPLE -GE

• Welch took quite sometime to appoint his own successor.

• As far back as 1991, Welch had remarked in a speech: “From now on, choosing my successor is the most important decision I will make. It occupies a considerable amount of thought almost every day”.

• Welch’s successor, Jeffrey Immelt who has been chosen very carefully after a long screening process, recently took charge.

Conclusion

• Succession planning is a key strategic issue that needs the time and attention of top management on an ongoing basis.

• A proactive approach is far more desirable than an ad hoc knee-jerk approach.

• It is heartening to note that some Indian companies are taking succession planning more seriously than others. Hindustan Lever (Lever) and ITC are few among them.

Thank you