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In an organisation it is important that all the functions such as Marketing, HR and finance etc should align with the overall organisational strategy. Therefore strategic HRM takes an essential part in strategic planning in business. Succession planning takes into consideration when an organisation goes from a vision and the leaders of organisation is significant to drive for a specific vision or mission. Succession planning enables to prepare the qualified, skilled, talented individual for a particular senior position which may vacant in the future as a result of a sudden loss, leaving or retirement of a senior employee. Succession planning is a novel topic which has been getting importance in recent history. Succession planning is belogs to the whole organisation, it can not be reserved as a responsibility that HR department solely bears. Top management support and views are significant to planning it strategically and HR department is there to provide the information and implement the well structured succession plan with in the organisation. The information stored in the datebase regading each and every emplyees competencies, performances, leadership developments is used to decide the potential candidate for a vacant position.
The question talks about the survey results found that the 75 out of 526 C-suite executives identified succession planning as a challege to modern organisation. It indicated that 14% accept that it is a challege to overcome in current business context. It is assumed that other C-suite executives might not giving the sufficent attention and not aware of the real importance of sucession planning. It may be beacuse their organisation use the inadequate succession planning process which unable to generate the leaders the organisation demands. The National Association of Corporate Directors report in 2009 stated that nearly half of survey participants accepted that there is no formal CEO succession planning in their organisation. CEO succession is the most crucial for an organisation. If an organisation does not give the priority on that, it makes us belive that there is poor and no succession planning for other key positions as well. The business world becomes more complex, dynamic and competitive, but lack of planning can be seen and organisations are reactive than proactive to the issues. Most of the organisation today is still focus on current issues.
In this assignment the importance of the succession planning to the modern organisations. How it contributes organisations to achieve the strategic goals and objectives will be discussed. Also talk about why the executives see succession planning as a challenging process exists in organisational processes. What are the factors that make the succession planning more challenging to HR people and top management and what steps should be taken to simplify this process systematically. The fairness of the process will be protected through a well planned process. This also provides an evaluation of the impact of succession planning through the real incidents happened in top organisations. At last conclusion has been provided the overall assignment and recommedations are provided to be followed.
According to the Deshpande's (2008 : p 4.9) view Succession planning is the activity designed to fill the key positions in an organisation structure as and when a opening arises. Based on the opinion of Atwood (2007 : p 01), succession planning is the process which helps to identify the leaders exists in the organisation and develops them to take up the future challenges when they become leaders. Succession planning also emphasis and prepare organisation to face the sudden losses (death or resignations) of key personnels. If an organisation prefers to plan succession smoothly, then they need to get ready for these kinds of situations, then there will not be uncertainties and risk of sustaining.
Deb (2006: p.255) also defines succession planning as the process of recruitment, skill development and preparation for advancement of employees. It expect to get a return from training investment through retaining and using their knowledge, skilled developed through provided training programmes. When evaluating the above three definitions, it can be seen that three of the authors agree that identifying the potential to be leader is the key to the succession planning and also grooming them for challenging position in today's competitive, dynamic business environment. Current competencies will not be sufficient to be appointed as a key leader. The leaders should be identified by evaluating the organisational chart, it is essential to recognise top people who are close to retirement. According to the most of the companies' retirement policies, the employees who exceed particular age limit should retire. Therefore organisations have adequate time to plan, assess and replace a successor who is most appropriate to fill the vacancy arise as a result of retirement.
2.2 Succession Planning Process
Here are the basic steps of Succession Planning according to Atwood (2007: p2)
Assess the organisational strategic plan, goals and vision
First of all, organisations should identify its strategic plans and goals. Based on them the succession plan can be developed successfully. It is also important to integrate the strategy and succession plan, as a result of that it will be useful in achieving organisational goals and objectives.
Determine the key positions
As per Matthews (2201) view the key position has to be identified. Succession plan should not have for each and every position but the top management should decide the key positions which have the direct impact to the current employee leave, retire or loss. The CEO and the senior management position can be considered as a key position because not appearing on them may adversely affect to the performance of the overall organisation.
Identify competencies for key position
According to Miles (2009) that identifying the competencies, skill set, expertise and charactor should require for a particular key position is ver cruitial for top management. It will be criteria which use to evaluate with potential candidates. The criteria can be selected among the best qualities had previous position holders or leaders. Competencies like leadership, PR skills, qualifications (having a MBA is compulsory), decision making ability, analytical thing can be considered as per the requirement of the key position
Identify and assess candidates
Assessing the candidates can be done through the performance evaluation and training need analysis processes. The gap between expected and actual performance is recognised. The feedback should be provided to candidate in order to identify his/her development areas. Rothwell (2010) mentioned that there are two gaps one is the gap between present performance and expected present performance and other gap is the future potential and present performance.
Create development plans
The candidate and his/her immediate boss should discuss about each and every one's development plans and goals. Based on them the training and development opportunities can be provided time to time, specially leadership development programmes.
Measure, monitor, revise and report
The organisation should measure whether the candidates are improved or not by obtaining training and development programmes. Also review the succession planning time to time to get maximum results. The up to date succession planning would be useful to achieve the strategic goals of the company.
Succession planning process
2.3 Approaches to succession Planning
According to the Rothwell (2010) there are several approaches to succession planning.
Simple Replacement planning
This is referred as the internal replacement for critical positions. The organisation tends to fill the vacancy by replacing an employee currently working for the company. In this case if any of the current employees do not match the minimum criteria required the position, then the top management has to seek a suitable candidate outside the company.
Development Succession Planning
This process where internal replacement is considered at the same time focuses on developing candidate and gives more exposure technically and no technically.
Talent pool planning
A process concern of the internal replacements but also grooming and developing will be done as a group of candidates. Organisations tend to prepare a pool of future leaders. As an example, General Electrical's former CEO Welch took the responsibility when selecting and preparing his successor. General Electricals assesses the nominated candidates through classroom sessions, analysing real time business issues, project work.
3.1. Importance of Succession Planning
Many executives believe that the Succession Planning is a complex process which has several elements that the organization needs to take care of. Although it is a complex process executive cannot element this from their strategy because it is significant for today's business due to several reasons. According to Delves (2011), succession planning has become a critical area in strategic human resource management where this should be planned and implement with a systematic scientific approach to take the best advantages of this process. The great leader requires to be successful in today's business world therefore retaining and acquiring the right talent is very much essential.
As per Durai (2010: p 245) there is huge competition among organisation, succession plan should take the priority in order to prepare leaders with vision and skill to operate the company for a better future and to take the next phase of the organisation. It also added that some of the top people prefer to take the early retirement to get involved in lucrative consultancy services in mid 50's therefore proactive plan through succession plan emphasises the importance of replacing the top position at least with the equal competencies and exposure. Therefore organisations should not wait until their top manager's leave they should have a backup plan for replacement which also assure the competitive advantage of the company. According to Groves ( 2007) the companies like Cisco, Oracle and Cantor Fitzgerald faced difficulties due to the tragic losses of their key executives. These companies realised how hard it is operating without a capable key executive, which indicated the critical need of comprehensive succession planning.
Challenges and the competitiveness in the organisation make the significance of succession planning, because board expect from CEO to drive the company for a growth even in the economic crisis. CEOs role in today consists of many challenges as well as to reach the expectations set by the board. This results the turnover of CEO has been identified after the three years of appointment. Charan (2005) mentioned that the lack of proper replacement is the main issue for this problem. According to the Durai (2010, p.245) poaching is another issue in retention of CEO/top managers. Some companies offer the attractive offer to talented, capable and competent employees in your organisation. If organisation does not implement succession planning process they are unable to recognise their valuable human assets until, leaving your organisation, contributing their talents to another company to high fly.
3.4 Impact of Succession Planning
According to the Bersin (2011), IBM has a proper, systematic, comprehensive succession planning process which appears publicly when Ms. Rometty was appointed as the new CEO of IBM. It was predetermined that IBM CEO's resign at the age of 60 therefore it has sufficient proactive steps to take in order to groom the successor. IBM has a talent management process and IBM takes it serious of development at the executive level. According to the survey done by Bersin by Deloitte , identified that 19% of the large organisation follow an integrated strategy to recognise the potential future leaders and remaining companies has a process which is not very systematic and some even do not follow the process. As mentioned by LeClaire (2006), Microsoft announced their two year transition process when Bill Gates wishes to get the retirement as the CEO. Microsoft followed a smooth delegation process to the successor throughout two years. Also Bill Gates has initiated a process to build the top management talent in his company. Since these succession planning steps has been taken at the right time, Microsoft had not faced the struggle to survive.
Bersin (2011) also emphasises the impact of having an efficient succession planning can be compared with its rivalry companies which have gone through the CEO transition during previous years. When we take the CEO transition of Apple and HP, it reflects that those two companies have not a perfect succession plan as IBM and Microsoft. Apple nominated Tim Cook as the successor of the former CEO of Steve Jobs. It was pre planned many years ago. But not like IBM where Palmisano handed over the over at the peak of his career, but Jobs worked at Apple till his last breath which affects adversely to the stock prices. It is reported that 6% stock dropped during this period and it shook the confidence of investors and customers towards the Apple.
Hawellett Packard experienced worst in the previous CEO transition of them. . Â From Carly Fiorina to Mark Hurd to Leon Apotheker and now to Meg Whitman which impact on share prices negatively, it dropped 32%. This situation appeared to believe the HP has not a process of internal CEO succession which leads to the uncertainty in their leadership and strategy. The lack of proper succession planning affects to numbers also qualitative factors of the company. Peston (2009) mentioned that Mark and Spencer also struggle in finding a most approprate executives with competencies and high leadership qualities within the company. Therefore Mark & Spencer has gone to change its CEO with three to two years time, which shows the poor succession planning and uncertainties of the company. Large companies like Sony, Nokia, Tesco, Citigroup, IBM and Microsoft are very much interested in the succession planning and implemented successfully to prvent damage may occur to the reputation of the company.
3.2 Advantages of Succession Planning
Ensure the Stability
Bersin (2011) indicated that succession planning ensures the stability of the company, as an example if the senior management position has been vacant in the company. It breaks the confidence of company stakeholders such as investors, employees, suppliers, buyers and etc. towards the organisation and which adverse affect to the goodwill maintained for a so long by the company.
Enhance the motivation
According to Delves (2011) the motivated employees can be seen within the organization if inside succession planning will go on. Employees will be more focused on their job and performance, so that they expect to receive a good ranking and to get promoted. Employees eventually will accept and believe the succession plan therefore performance will be increased to match the evaluation criteria and individual development can also be seen which will benefit to organisation in the future.
Pool of leaders
There will not be a circumstance where the board has to appoint a person for a key position in a rush because there are pools of candidates who satisfy the qualities, skills, knowledge required for such a position. It also assures that there are good pools of leaders who drive the organisation for a better vision with a great success. According to the Deb (2006: p. 255) noted succession planning helps to maintain strong leadership and improve the skills and competencies require in today's business context.
According to the Despande (2008) employees get the opportunity to train and develop their skills and abilities. Therefore they will able to perform well and which increase the rewards at the end it will be a reason for a satisfaction. A satisfied employee would be more loyal and trustworthy to its employer which also improves the moral of the employee.
The one of the benefits could be achieved through succession planning is the retention of employees stated by Deb (2006:p 259). Succession planning gives the enough space for the high performer to learn and develop. It ensures that employees who prefer learning and get educated will satisfied with the practices in the organisation. The deserving acceptance and recognition can also bestow to high performer with integration of HR processes and succession planning. It shows the correct path and desired career development within the company. Because of these factors, employees prefer to retain and work hard where now they occupy.
As mentioned by Rothwell and et. al (2005:p26) the competitive advantage can be achieved by successfully implementing succession planning in your organisation. Many organisations are not very focused in retaining their best talent and key performer, but this process supports you to sustain key performer and the right talent to lead your organisation for future with organisational values which becomes an advantage that competitors do not have. If competitive advantage is basically relying on a few key people and if they are being acquired by your competitor, your organisation is at a risk of survival.
3.3 Challenges of Succession Planning
There are challenges when implementing a proper succession plan. Most of the manager believes that succession planning is the responsibility of HR people. But, the fact is, it is a responsibility of the executive team/board. To implement an accurate and appropriate succession plan, the support and the commitment of top management is necessary. Philby (2012) stated that Barclays fails to appoint by passing four weeks a new successor after the Bob Diamond (former CEO) left. That is evident they did not have an actionable succession plan. It is an obvious challenge to get the support, commitment, coaching and mentoring from the executive team in order to build potential leaders. Therefore to overcome this issue it requires a new set of organisational values which are favourable for learning and development working culture.
How to find potential leaders is also a challenging process. Since this is a complex process, some of the organisation prefers hiring outsiders to fill the key position. It has problems itself since according to it takes 03 years to assimilated with organisation, after that the candidate will perform and take up responsibilities confidently. Beck (2012) mentioned that sometimes there will be a mismatch with the organisational culture and values, due to that they will go through a difficult situation striving to perform. According to Citrin (2010) that by considering these facts it is better to find a successor within the organisation by providing opportunities to develop up to expectations as a leader throughout the succession planning. Age, graduate college, starting job do not matter to become a potential leader. These above mentioned factors have not any relationship to perform.
Inadequate recruiting, selection and performance evaluation process also make the succession process more challenging. If there are problems in hiring and selection then the right candidates will not be hired. In that case organisation unable to develop them since they have minimum potential and not the right talent which fulfill the requirement of a strategic leader? Beck (2012) mention that the appropriate performance criteria like timeliness, accuracy, leadership skills, productivity and etc should be included in the evaluation sheet. Criteria, individual goals and team goals should determine align with the department strategy and overall strategy.
Rothwell and et. al (2005: p30) mentioned that informing that he or she is the potential leader has also become a problem for the organisation. Then some of the candidates reluctant to perform hard, because they already know that there is an opportunity waiting for. Therefore it is necessary to manage them as well. At some point some of them disappointed that they have not been promoted to the next level and even not informing. It is required to inform 03 potential leaders that they are the candidates and therefore the further development in their qualities are anticipated. Also organisation should concern to amend their promotion and reward processes in order to match when employees achieve the specific organisational goals. It is not a good practice to keep waiting competent employees to reach key position. The longer waiting may direct them to go for another job offer. It is also challenging to update and review the succession planning process time to time. HR people and executive team should remember that this is an ongoing process. Therefore reviews should be conducted to reduce the mistakes included in the process and to receive a upto date succesion plan which address the demand of the organisation. strategy.
It takes time to develop an efficient succession planning and also specially time allocation and scheduled executive meetings should arrange to see the systematic, suitable succession plan to the organisation. Therefore top management needs to show their interest, dedication and give opinion to form a useful one. When comparing other important aspects of the need to be focused, there will be less time to pay attention in forming succession planning. Naughton and Green (2012) stated that sometimes the top people drag their leaving although according to the succession planning the successor should take up the challenges and responsibility. Sometimes successor fully ready to pull up his socks but yet the former CEO is interfering him and guiding in making decisions. D:\Assignments\1918\comp_ceosuccessionchart47_405.jpg
Figure 02: Summary of former CEO of four companies
According to Beck (2012) that subjectivity is also another challenge, because of personal dislikes and grudges, some of the top people reluctant to see some employees reaching high positions. Subjectivity is a factor which cannot be eliminated totally. The support of the senior management level is also required to work properly and to grow in the company. Subjectivity should not underestimate the real talent and potential of a person. It can do harm to the organisation, Therefore it is necessary to make awareness of this factor to the top management in assessments.
Succession planning is considered as a complex process. This assignment is about the succession planning. Succession planning seems difficult and challenging to implement newly in an organisation, but if the initiators go through thoroughly the strategic plans, vision, mission statement, it gives the opportunity to recognise what kind of leader expecting the strategic plan to drive for a better future. Thereafter it is essential to develop a systematic succession planning which succeed in generating the expected leaders. First with all organisations requires to determine the assessment criteria. These criteria will be decided based on the nature of the organisation and its strategy. It is recommended to use a rating system with justification for the rating, so that it will help to mitigate biases in the process.
Succession planning is not an isolated process which ingrates with the company's strategy, HR processes such as recruitment, selection, performance evaluation, compensation and training and development. These processes should be reviewed carefully, since the errors in those processes may affect to the outcome of succession planning. It is recommended to monitor above mentioned processes and rectify the errors, if they have. It is essential to evaluate the succession planning process and update it according to the latest changes taken place in the organisation, to get the best output. There should be a training development opportunities, if not specific development programmers should design to address the future skill need.
Many organisation believe that succession planning should have in large firms or in the family business. But it is not the fact. Every organisation should focus on succession planning by considering the benefits could gain from proper implementation of this process. Also some pointed out that key position should be included into the process, but there are in cases where specialized, skilled workers (not staff) are hard to find. Therefore the key position should not marrow down to top management as well as focus on lower level where skilled and specialized worker seems inadequate.
It is recommended to internal succession planning since the employees have been working for the organisation are familiar with processes, values, culture and work environment. Therefore it will easy for them to adapt to the new role within a short period of time rather than an outside successor. But outside successor can be taken into consideration when the organisation is in crisis; the sudden change is required to current processes. Unless, internal successor would adjust to the new leadership role, responsibility and challenges easily. The new successor should not always compare with former manager, since two different people possess a different set of abilities/competencies. Their strength areas and weaknesses are not same. With a new successor it is looking forward to reach a new phase of the organization.
It is concluded that there are many advantages obtained through succession planning. Therefore it is required that the commitment of the board and CEO and review of the current process will beneficial to implement a proper succession planning. Also Board should assess regularly the improvement of the management team and whether the HR department provides the right training to grow as leaders.