Source: Asian Management Review (July – September Issue)
Leadership across all levels is what is needed across all levels – and missed most – in our organizations today. Consequently, having a leadership pipeline that aligns with strategic imperatives is absolutely essential given the pace of internal and external change facing today’s organizations. It is evident that succession planning has never been more important. A strong succession planning process should focus on developing a pool of individuals with critical, adaptable skills who are ready to lead when called upon.
Recent instances of companies facing challenges around succession planning at senior most levels have served to highlight this issue. The tough economic climate exacerbates the situation further, compelling organisations to become unduly cautious in appointing successors with many wanting to go only with tried-and-tested talent. There is also a growing perception that companies in India tend to hold onto top talent for as long as it is possible, perhaps an indication that leaders ought to do more to create organisations that can move beyond them.
Is this challenge only at the CEO levels or also at other levels of the organization? Towers Watson research finds that companies are facing this issue even at the CXO level, however the situation improves going down the hierarchy. In order to understand the nature of these challenges, it is important to comprehend the fundamental issues around succession planning.
What is Succession Planning?
Succession planning is a core element of the talent strategy and in building the right quantity and quality of executive candidates for future vacancies. It ensures a sufficient supply of candidates with the right profiles within the organization before a vacancy appears and at the same time allows for a fast identification of the best candidates as soon as the vacancy appears.
Succession planning is a dynamic process. It should span job levels and geographic boundaries, and aim to create a pool of talent that will meet the needs of the organization at multiple levels. A strong succession planning process enables an organization to understand the skills and behaviors it needs to execute its business strategy, see the talent gaps and then determine how best to fill them. As a company changes its business model, or the economy forces a reevaluation of the business, leaders should take a hard look at the roles that are critical to the organization’s success – as well as the talent needed for these roles. And in doing so, they need to focus on more than just the top layer of the business.
The best prepared companies are the ones that look at developing middle, and sometimes even first-line, managers, along with critical technical roles. With adequate preparation, organizations can have leaders at all levels ready to do whatever is required to achieve business goals. But it’s not easy, especially in complex global organizations. The process must include opportunities for talent calibration and reviews of talent at different levels and lines of business. There must be a clear criteria for leadership and a well-defined approach for decision making. Most importantly it should be a business-led initiative with support and guidance from HR. Once an organization establishes a good process with effective tools, succession planning becomes an everyday part of doing business.
In establishing an effective succession management system an organization should:
- Have a clear understanding of strategic talent needs linked to business goals
- Build a consensus driven business-based understanding of the leadership requirements for success
- Take a business-based and not psychological approach
- Ensure a pool of talent exists throughout the organization, rather than one/two candidates for specific positions
- Create a pool of potential talent for the top positions — talent pools provide “bench-strength,” ensuring there are capable people available when a key position needs to be filled
- Focus on development, not just replacement or selection — invest in the right opportunities for those identified in your talent pool
Succession planning goes beyond managing vacancy risk
Many in the corporate world view succession planning as mere replacement planning and hence miss out on critical ingredient of succession management. Succession planning is a strategic talent planning process focused on creating a pool of leaders and other critical employees that will meet the future needs of the organization. When done well, it provides a clear picture of the talent bench strength that exists to manage with change market driven or internal Organisational changes. Succession planning is a corporate management instrument that helps in managing succession/vacancy risks for the organization and its shareholders, allows the organization to position itself internally and externally as an employer of choice and has a significant cost saving potential.
The point to note here is that succession management goes beyond managing vacancy risk - various succession risks need to be managed in an integrated approach. Such as readiness risk, transition risk and portfolio risk.
The risk of key positions being vacant over a longer period of time. This risk could happen to roles across levels in the organization.
The risk of unprepared successors. This kind of risk becomes fairly debilitating when it happens at the senior level positions.
Transition risk- The risk of failure of an external successor.
Portfolio risk- The risk of poor deployment of talent against business goals.
Understanding the above risks is the first step in trying to successfully address them. There is no ideal process; it must be tailored to the history and culture of the organization.
Different approaches to different segments
These risks require different approaches for different segment in the workforce
Succession planning is often seen as part of the broader ‘people’ agenda, it is often talked of in terms of the next step to annual appraisals and performance management processes. It is often considered a part of the recruitment process. Linking succession planning as such does have benefits but tends to confine it to the area of Human Resources rather than strategic planning. This could lead to the risk of missing the valuable link that succession planning provides between these two areas.
|What Succession Planning is
||What it is not
|• Deep conviction, with observable and evidenced action, clear link between excellent individual performance and better organizational performance
||• Vague notion that “people are our most important asset”
|• All those in leadership role are accountable for strengthening the performance of individuals in the organization
||• HR is responsible for people management and development
|• Succession planning is a regular topic for discussion in meetings
||• A succession planning exercise is carried out once a year.
|• Bold actions are taken to recruit and build talent within the organization
||• We work with the people we can get
SUCCESSION MANAGEMENT GOES BEYOND MANAGING VACANCY RISK. RELATED RISKS NEED TO BE MANAGED IN AN INTEGRATED MANNER
While a succession plan ought to be different for all organizations, for it to be truly effective it must consider the following:
- A clear picture of the organization’s strategic direction and imperatives
- assessment of future talent needs
- Establish a transparent and uniform system for assessing performance and recognizing potential
- Maintain accurate and meaningful data about employees with their active participation
- Create an environment which promotes the process. Senior leaders, who provide all the necessary information, Executives who pass it down to the organization and an involved HR that develops the process and supports it end to end.
- A culture that encourages the sharing of talent and fosters trust in a colleagues’ ability to assess talent.
- Technology interventions enabling succession planning that can maintain large amounts of data and provide a comprehensive picture of the talent pool of an organization.
About the Author: Shatrunjay Krishna, Director - Talent Management & Organisational Alignment, Towers Watson India