Hi Roger & members,

Adding on to your say, succession planning has to ensure that the right people with the right skills are in the right place at the right time. It can be done in three ways: role-based, individual-based and team-based. The first is about identifying key positions, the second focuses upon key people, and the last involves replacing a section of people or resources.

The question of relevance here is "How effective is your Succession Plan?". With regards to this, I came across an article which can be read at http://www.expresscomputeronline.com/20041213/technologylife01.shtml

Regards,

Bindu

At a strategic level, succession planning is probably the most important Human Resources (HR) risk.

The consequences of appointing the wrong successor can be disastrous. Take the case of Westinghouse. A series of wrong CEOs virtually drove the company, which was once rated on par with General Electric, into bankruptcy. Though all CEOs want to avoid a wrong successor, their track record in this regard is disappointing.

Consider the legendary CEO of Coke, Roberto Goizueta. The aristocratic Cuban had trained his successor, Doug Ivester well and had nominated him as his successor well before his death. 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.

Yet, a couple of years later, Ivester was found unfit for the task and had to resign. An accountant by training, Ivester had flair for numbers and had the reputation of a street fighter, unlike Goizueta, who had been a charismatic leader, 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. Towards the end of 1999, he announced his resignation.

Looking back, Ivester ’s number crunching, financial engineering and technical skills were exceptional but his people orientation and leadership skills were inadequate. Following an incident in Belgium, when hundreds of people became sick after drinking Coke, Ivester did not go there for a week. This reflected his inability to appreciate the magnitude of crisis. Similarly, Coke ’s failed merger deal with Organgina was mostly due to Ivester ’s failure in dealing with anti-American sentiments 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.

The problems associated with succession planning are particularly acute in India, where family managed businesses proliferate. Such companies throw discretion to the winds and often spend more time dividing the family silver among the next generation than in grooming the right person to take over the top job. Some of the more progressive Indian business houses like Ranbaxy, the Murugappa group and the Eicher group have demonstrated a high degree of professionalism in this regard and appointed professional managers from outside, when there were no suitable candidates within the family.

At Larsen & Toubro (L&T), one of the India ’s leading engineering companies, many of the company ’s senior managers are expected to retire in the first few years of the new millennium. CEO A.M. Naik has named the top 10 per cent of his executives as stars and chalked out a fast track career path for them. Naik hopes that by 2005 ’, “L&T will be in strong hands. ” Before initiating the programme, L&T employed the services of a HR consulting firm to list the positions falling vacant and the required competencies.

The problems, which Indian companies face, while managing succession planning are well illustrated by one of India ’s most employee-friendly corporations, Thermax. The Pune based company has been known to take good care of its employees, making it a favourite employer on the campuses of India’s premier technical institutions. Yet, the company faced a major crisis at the beginning of 2001. Roughly five years after founder Rohinton Agha passed away, the entire board of governors had to resign in mass as the company struggled to compete in a changing business environment. Thermax ’s market capitalisation declined sharply from Rs 990 crore (on 22nd July 1996) to Rs 186 crore (on April 4, 2000). Agha had nurtured and grown Thermax over a long period of time but had not paid enough attention to succession planning.

His wife, Anu Agha recalled, “My husband was like an ostrich. He never liked to discuss anything. Once, he vaguely talked about taking over as non-executive chairperson. But he didn’t discuss the subject. Since Abhay Nalwade was the only designated Executive Director, he appeared to be his obvious choice. ” Nalwade who became the Managing Director after Agha’s death recalled, “It was so sudden that I didn’t have the time to think.

I feel if succession had occurred systematically, it would have been better. Rohinton never discussed that I would be the successor he had in mind. It ’s one thing to be a peer and another to be boss. ”

Succession planning may be defined as the process of identifying and preparing the right people for higher responsibilities. Though relevant at all levels, it is at the highest level that transition poses the biggest challenges.

Consider this case:

The successor ’s dilemma

Some CEOs appoint successors well in advance of their retirement but only to see them leaving prematurely. John Walter, who became the President of AT&T in October 1996 left in just nine months. Disney ’s Michael Ovitz had lasted just over a year as President when a souring relationship with CEO Michael Eisner forced to him to leave. In Citigroup, heir apparent Jamie Dimon quit in 1998, following differences of opinion with his mentor, Sanford Weill. Merrill Lynch COO Herb Allison, who was strongly tipped to become the next CEO, met with the same fate.

So, a successor needs to be coached well on handling the transition. He should be encouraged to stay in constant touch with the CEO, remain focused and be made to understand that his stakes are much higher than those of anyone else in the company are, including the incumbent CEO. The successor must be motivated to seize the initiative and raise to the occasion, displaying the highest possible level of emotional maturity. He should also be made to realise in a subtle way that if he quits, he would harm his own chances of becoming a CEO elsewhere.

The successor should be counselled to put himself into the shoes of the CEO and understand what is going on in his mind. Typically, the CEO goes through three phases after the successor has been appointed. In the first phase, he feels good that he has initiated the process and maintains a good relationship with the successor. Then the CEO starts feeling uneasy as the successor takes charge and begins to shake things up. The CEO realises that he is losing control and now has to share his power and authority with the heir apparent. The prospect of leading a sedentary retired life, also starts causing anxiety. Finally, the CEO, unless he is a person of extraordinary mettle, develops friction with the heir apparent. At this juncture, an open conflict may develop and the CEO might marshal support from his trusted lieutenants and even encourage people to come to him directly, bypassing the heir apparent. The successor often responds by being even more aggressive and result-oriented. If he succeeds, the CEO feels even more threatened. Ironically enough, when the successor is just ready to move into the corner office, he becomes frustrated by the confusing signals sent by the CEO and decides to quit.

In short, succession planning is a key strategic issue that needs the time and attention of top management on an ongoing basis. A pro-active approach is far more desirable than an ad hoc, knee jerk one. It is heartening to note that some Indian companies are taking succession planning very seriously. Some MNC subsidiaries are clear trendsetter in this regard. Hindustan Lever spends quite a bit of time and effort on succession planning. Transition from one CEO to another has generally been smooth and there has been no case of any CEO miserably failing in the top job. Succession planning at ITC has also been generally smooth, though one CEO; K.L. Chugh was probably a wrong choice. A fixed five-year term for the CEO has lent an air of credibility to the whole process at ITC.

In contrast, Coca-Cola-India has seen CEOs changing at regular intervals, a clear sign that succession planning has not been very effective. Another Indian company, which has been praised for succession planning, is Ranbaxy. When Parvender Singh died, his successor, D.S. Brar, a professional manager, took over the reins without much loss of continuity. In general, Indian companies still have a long way to go in this area. Especially in Public Sector Units (PSUs), succession planning has been a disaster, CEOs have changed frequently and not been allowed to settle in their jobs. Many of the appointments have been guided by political considerations. The fact that quite a few of the top jobs at PSUs are either unfilled or manned by acting CEOs is a clear indication of the lack of importance attached to succession planning.

Also you can consider the CASE OF COLGATE Vs P&G

I hope your head is not overawed with such a long mail....

Regards

hrtech

Dear team,

Succession planning involves the tracking of high potential employee's, or those that are capable of higher level management positions, (Director, VP, Pres. levels for example). Succession planning is designed to give you a 'back-up' candidate for each high level position within the organization, from candidates that are already employed by the company.

It may be the case that not one person can be found to take over a higher level position, but perhaps two individuals possess the needed skills together to take over the position if it were vacated. For example, the VP of Finance at ABC Corp. announces that she will be retiring at the end of the month, the HR Manager, with the input of the VP of Finance and the other members of the management staff, completed their succession plan at the beginning of the year and realised that neither of the two directors that report to the VP had the skills necessary to do the VP's job. However together they both possessed skills that would allow them to do the function either until one of them could be trained to take over the role or a new VP could be found externally.

Succession planning is something that should be done at least annually and should include all members of senior management working together to identify internal candidates for those top level positions. Some HR Managers will even do succession planning down to the Director or Manager levels. Also, don't forget to do succession planning for those individuals that you have recognized as candidates for those higher level positions.

Warm Regards

Archana