Succession Planning

Sushil Goyal(5699)

4/14/2011
School Of Management Studies
Punjabi University Patiala
Mr. Rann Singh Dhaliwal
What is Succession Plan?
1st definition
Succession plan is identifying and preparing the right people for the right jobs.
2nd definition
Succession planning is a process of developing talent to meet the needs of the
organization now and in the future.
3rd definition
Succession planning is a process whereby an organization ensures that employees are
recruited and developed to fill each key role within the company.
Why are Organizational Leaders Interested in Succession Planning Now?
1) War on Talent extends to all levels
2) Many organizations are experiencing the effects of aging workforces
3) Terrorism has raised the stakes so you must have backups
4) Downsizing and other cost-cutting measures have reduced the internal bench
strength of many organizations
5) Lenders will increasingly demand it
6) Present/Prospective Shareholders want it
7) Need for speed
8) Sellers’ market for skills
9) Reduced loyalty among workers & employers
10) Values are now more important
11) Activism of Boards of Directors
Guidelines for effective succession planning
1) Succession Planning should be customized to suit the needs of the
organization. For example, if the skills necessary to manage the company in
the changed environment are not available in house, there may be no option
but to bring in an outsider.
2) Succession planning should be driven by the line function and not HR
executives.
3) Succession planning should develop key candidates, in anticipation of future
openings.
4) Succession planning is not just selection. Development through job rotation,
mentoring and formal training programs is equally important.
5) Succession planning must take into account the culture of the organization.
 6) Succession planning must be consistent with the future strategic direction of
the company.
What are the Most Common Problems in Getting Started?
1) Defining Succession Planning as an HR problem
2) Understaffing the effort
3) Thinking it is only for CEO level
4) Establishing overly ambitious goals
The Coke example
Choosing a wrong successor, is a mistake all CEOs want to avoid. Unfortunately, the
track record in this regard of even the most successful CEOs is disappointing.
Consider the legendary CEO, of Coke, Roberto Goizueta. The aristocratic Cuban had
trained his successor, Doug Ivester so well and made it clear to one and all long
before his death who his successor was. When Goizueta died of cancer, Ivester took
charge in what the markets perceived to be one of the smoothest transitions ever in a
Fortune 500 company. The Economist commented:1 “Robert Goizueta will be
severely mourned at Coca-Cola, … but he might not be missed. Strangely enough,
that would be one of the greatest complements a departed chief executive could
receive… Douglas Ivester, Coke’s 50-year old president and chief operating officer, is
now expected to succeed Goizueta and to carry out the same strategy that has served
Coke so well. Goizuet deserves the credit for this smooth transition. He was
responsible for succession at Coke, and his plans had been laid well in advance.” Yet,
a couple of years later, Ivester was found unfit for the task and had to resign. An
accountant by training, Ivester had a flair for numbers and had the reputation of a
street fighter, unlike Goizueta, who had been a strategic thinker and delegator. When
they were together, Ivester complemented Goizueta well. But after becoming the
CEO, Ivester found it difficult to manage some sensitive issues and by early 2000, had
resigned. Looking back, Ivester’s number crunching, financial engineering and
technical skills were exceptional but his people orientation and leadership skills were
lacking when they were needed most. Take the scare in Belgium when hundreds of
people became sick after drinking Coke. Ivester did not go there for a week, a
reflection of his inability to appreciate the magnitude of the crisis. Similarly, Coke’s
failed merger deal with Orangina was mostly due to Ivester’s failure in dealing with
anti Americanism in France. Ivester also seemed somewhat out of place while
handling a racial discrimination suit. Quite clearly, Goizueta had trained his successor
well but had chosen the wrong successor in the first place.
What are the Benefits of a Succession Planning Program?
1) Less time and expense to source talent to fill vacancies
2) The organization is prepared to deal with sudden losses of key people
3) Less turnover
4) More appeal to investors / bankers and prospective employees
5) Identify high-potential candidates in the organization
6) Assess individual candidate’s strengths and weaknesses compared to the
organization’s needs
7) Ensure hands-on involvement by the CEO and other senior leaders
8) Ensure you have an effective performance management system
9) Determine the competencies needed to achieve strategic objectives
10) Give internal candidates same scrutiny as external candidates
11) Develop descriptions of values and ethical standards
12) Assess people relative to those values and standards
13) Build a culture such that high-potential talent is a shared resource
14) Rewards for managers who promote their best employees
15) Frequent opportunities for employees to accept new challenges
Succession planning steps
1. Workforce analysis and forecasting
2. Communications strategy
3. ID positions targeted for growth and attrition
4. ID current and future competencies
5. ID and assess high potential employees
6. Conduct competency gap analysis
7. Establish recruitment strategy and assessment / selection tools
8. Institute formal coaching and mentoring
(training and development)
9. Select for positions
10. Establish a retention plan
11. Evaluation / Measurement
Succession planning models
1. Succession planning by position - management driven
Incumbent identifies the individual(s) who are in their view best qualified to move
into the position in the short term (say within 1 year); the medium term (within 2
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. Even when there is some awareness that a succession plan
exists, frequently the people on the succession list are not told that they are, unless the
company decides to create "fast track" programs for these individuals. Sometimes the
information is leaked informally, however employees are rarely consulted or asked to
participate in the process; and
Following the development of the succession plan, there may or may not be specific
development for the individuals who made the list. Sometimes the incumbent will
take a special interest in one individual who has been identified as a potential
successor, and will develop a mentor/protegee relationship, in which the incumbent
coaches and guides the person who has been identified for their role.
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 organisations use this model is that it is often the
approach the CEO is most comfortable with. He/she is able to scan the list and see if
there are any positions which have no identified successors (thus identifying
succession gaps in the organisation); and is able to look at which names tend to arise
most frequently; providing a snapshot of those who are generally perceived to be the
"stars"; and
This approach is the least costly and the quickest; and does not require a high level of
organisational commitment. It serves the purpose of ensuring at a minimum that
managers are thinking about succession issues; and are aware that succession
planning is partly their responsibility.
Disadvantages/risks:
High risk of encouraging corporate "cloning". This can have serious business and
EEO implications. The incumbent (who may have a fairly narrow perspective of the
world) tends to identify individuals who are most like him/her in terms of educational
background, experience, and personality style. Unconsciously, they may be also
looking for someone of the same gender, socio-economic status, and family situation
(indeed some will even acknowledge that they believe these to be relevant to the
ability to do the job; although such biases often "go underground" and the managers
know better than to openly acknowledge that these are their belief systems!);
Problematic in large organisations in which the incumbent in the position does not
know employees across the organisation. The identified successors tend to be people
the incumbent works with, and candidates from other areas are not considered; and
Risk that the person identified does not aspire to the promotional positions they have
been identified for.
2. 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) who set aside a day or more to go through a list of all
employees above a certain level and assess which individuals should be identified as
high potential. To facilitate decision making, they will often agree on some criteria by
which to select the individuals, and may have the person's most recent performance
appraisal as an additional resource;
In some cases, candidates may be further narrowed down through an assessment
centre process or through an interview/evaluation process; and
Once the pool has been identified, those who make the list will generally receive
some special attention. How much attention will depend on the organisation's
willingness to make a financial commitment to the program. Often the Human
Resource Department puts together a "fast track" program in which they assist the
person to develop an individual development plan. They may provide some group
training, they may institute a mentoring program, and identify certain training
programs these people should attend.
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. However for this to be effective it
is essential that the committee undertaking the selection is itself both diverse and open
to organisational diversity. It also tends to be fairer because some criteria for selection
of high potentials are usually applied; and
This approach is also more likely to recognise the value of providing broad
background for the high potential employees rather than a single functional stream of
experience.
Disadvantages/risks:
In large organisations the majority of employees may not be well known to the task
force members, and their view of the person may be influenced by the level of
visibility the person has in the organisation (which of course can be limited by the
type of work they do and even their relationship with their manager). As a result,
talented employees who do not have a high profile may be overlooked all together;
and
An even more insidious problem is the effect on employee morale of having such a
program for those who are sometimes called "the anointed ones". In many
organisations, it is widely known which employees have been identified as high-
potentials, the other non-identified employees can be severely discouraged and
demoralised. Some organisations have discovered that the backlash from a high-
potential program offsets any benefits it may have. Some organisations discontinue
their high potential/fast track programs for this reason.
3. Top-down/bottom-up succession planning
This model is based on the current and expected future needs of the organisation, as
well as on ongoing two-way communication with employees. It has the greatest
potential to be able to deliver improved outcomes for women. This process involves:
Senior management as a group determines what competencies are required to enable
a person to take on the key roles, for example, at a middle or senior management
level, considering organisational requirements for "the manager/employee of the
future". Certain criteria for progression are determined as across-the-board
requirements for development, for example, education levels, organisational cross
training, participation in management training;
 All employees at a pre-determined level are provided with the information
developed by Senior Management via a session about succession planning and career
development. This session outlines clearly the requirements for progression in the
organisation. This enables staff to determine whether or not they are interested in
progression; and to self-identify if they wish to be involved in a program which will
help them to meet the criteria for development and progression;
Employees who signal their interest in progression then participate in a workshop
in which they are given guidance and led through such processes as: a) using 360
degree feedback to determine their strengths and weaknesses particularly relating to
management skills, 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 centres could also be used as part of the
workshops;
The results of the 360 degree feedback, as well as the individual development
plans, and possible "next moves" would be maintained by a manager on a human
resource information system. Each person's file would be updated annually or more
frequently;
A report on each of the people participating in the development program would be
generated annually. This report would provide input for any senior level succession
planning taking place. Thus senior management would be able to get a snapshot of
how many people aspire to progression, and what progress they are making in
working through organisational requirements; and
Employees who initially opted not to participate in the development program are
able to change their mind at any time and join the development program.See
Succession Planning Pilot Process for a suggested strategy to implement this
succession planning model.
Advantages of this approach:
Because the program leans so much on employee self-selection, there is less likely to
be conflict with EO principles and thus ensure that a broader group of people
participate;
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" (e.g. to wire jobs for favoured applicants); and
The process is transparent. There need be no secrets or hidden agendas. This
engenders a higher level of trust.
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. A program like this should not be introduced if there is not a strong
commitment to its continuation. At a minimum, two years would be required in order
to see significant results and a changing culture.
To ensure that gender equity outcomes are enhanced, it is also important in this
process to:
Have consistency and uniformity in the process of job analysis, definition of
competencies and in performance evaluation processes; Ensure that high-potential
women are identified and that managers are proactive in this process (see the
description of the Motorola plan below); and
Have diversity or equal employment outcomes included in the performance
indicators of management, for example, retention of women or number of women
included on the succession plan.
What is the business case for 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. This
argument is particularly relevant to the development and retention of talented women,
a group often neglected in organisations;
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 organisation'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;
To improve employee morale and commitment to the organisation; and
 To encourage the development and advancement of the diverse group of
employees.
One of the best case studies of how succession planning has been used effectively to
improve outcomes in relation to diversity is that of Motorola. A description of their
approach can be found at Case Study on Succession Planning.
Measurement and Evaluation
Rothwell (2001) has adapted the well-known four-level Kirkpatrick training
evaluation hierarchy and suggests the following:
Participant satisfaction
This includes evaluating overall satisfaction, satisfaction with each component of
the program, including job descriptions, competency models, performance appraisal
processes and satisfaction with individual career plans etc;
Program progress.
This includes an assessment of how well the program has worked when compared
with the stated objectives and how well an individual is progressing through their
developmental experiences;
Effective placements.
This includes what percentages of vacancies in key positions are filled internally,
how quickly are vacancies in key positions filled, how quickly are internal
replacements for key positions able to perform to the level required in the position;
and
Organisational results.
What successes or failures in the organisational plan are attributable to the
succession plan, have there been changes in the gender and diversity profile of
employees filling key organisational positions?
Conclusion
Succession planning builds a pipeline of potential leaders and other key personnel that
are essential to the vitality and sustainability of successful and dynamic organisations.
It 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.