Business Case For Succession Planning

Business Case for

Succession Planning

Dr. Elijah EzenduFIMC, FCCM, FIIAN, FBDI, FAAFM, FSSM, MIMIS, MIAP, MITD, ACIArb, ACIPM,

PhD, DocM, MBA, CWM, CBDA, CMA, MPM, PME, CSOL, CCIP, CMC, CMgr

Learning ObjectivesAt the end of the course, participants should be able to do the

following:1. Identify the role of succession planning in ensuring business

does not cease to be a going concern.2. Identify the problem of overindulgence in talent war, as a

means of using outsiders for every key position.3. Identify the drivers of changing nature of work and their

impact on organisational structure as well as implications for succession planning.

4. Explain the implications of business environment dynamics for business survival.

5. Identify how the management of succession can serve as terrific catalyst in enlivenment of business plan for achievement of organisational objectives.

“A good plan is like a road map: It shows the final destination and usually the best way to get there.”

- H. Stanley Judd

What is Succession Planning?

“Succession Planning is the systematic identification and professional development of internal talent. It’s goal is to cultivate internal human capital in preparation for assuming leadership roles and other key positions that may become vacant due to retirement, expected or unexpected separations.”

- LaCoya Shelton-Johnson, Talent Management & Succession Planning

“A means of identifying critical management positions, starting at the levels of project manager and supervisor and extending up to the highest position in the organization. Succession planning also describes management positions to provide a maximum flexibility in lateral management moves and to ensure that as individuals achieve greater seniority, their management skills will broaden and become more generalized in relation to total organizational objectives rather than to purely departmental objectives.”

Source: Norman Carter, Guaranteeing Management’s Future Through Succession Planning

Succession Planning is the link between strategic planning and workforce planning, wherefore distinctive corporate objectives must be explored and analyzed in order to reengineer workforce planning for preparation of people to take over leadership batons at various levels of an organisation.

C-Level Succession Planning

This focuses on identifying and preparing pool of potential successors for filling key positions at the top management echelon.

Multi-Level Succession Planning

This has a broadly designed succession framework spanning many levels and in some cases stretching from Supervisorial stratum to the Chief Executive Officer, with the intention to provide for every key position.

“Leadership succession planning is a fundamental part of the strategic planning process and must be linked to the organization’s business plan and the organization’s workforce planning and talent development.”

- A.J. Lindemann

Intellectual Capital drives corporate business plan from arrangements at the drawing board through resource-interplay to attainment of strategic goals. Therefore, a business plan without fitting intellectual capital is a blank dream.

Human Capital is Key

Human Capital is the most important component of Intellectual Capital due to its ability to provide leveraging platform for synchronizing the others.

Business As a Going Concern

An organisation must have the right caliber of human capital effectively placed on key positions to ensure continuity of operations or else it shall soon cease to be a going concern.

GC Test

A going concern test proves whether an organisation has the ability to meet up with its responsibility at a specific future date.

Contemporary thinking had focused too much attention on financial capital without due consideration for intellectual capital.

The Dilemma of Focusing on Only Financial Capital

Total Market Value

Financial Capital Intellectual Capital

Effectiveness of GC Test

The value of Going Concern Test is underscored by its ability to uncover dissonance between a firm’s future state and standard requirements to meet its obligations. Accordingly, a proper Going Concern Test should highlight clear profile of a firm’s human capital future state.

“Just as thousands of candidates are competing for jobs everyday, your business is also competing with other companies to hire the most qualified, talented workers.”

Source: HR World

“Companies that adopt a talent war mindset often wind-up venerating outsiders and downplaying the talent already inside the company, set up competitive, zero sum dynamics that makes internal learning and knowledge transfer difficult, activate the self-fulfilling prophecy in the wrong direction, and create an attitude of arrogance instead of an attitude of wisdom. For all of these reasons, even fighting the war for talent may be hazardous to an organization’s health and detrimental to doing the things that will make it successful.”

Source: Jeffrey Pfeffer, Fighting The War For Talent Is Hazardous To Your Organisation’s Health

Problems of Endorsing Quick Fixes Through Talent War Instead of Succession Planning

1. Inclination to prefer outsiders for filling sensitive and important job positions at the top echelon.

2. Increase in level of corporate exposure to the risk of acquiring wrong candidates.

3. Predisposition to heighten disenfranchisement of employees, thereby increasing staff turnover.

4. Excessive attention to individual, and undermining team value.5. Tendency to neglect cultural and processual developmental factors.6. Tendency to presume a company is the most competitive

intellectually driven firm in a particular sector due to its knack and vivacity for talent war.

7. Abdication of corporate responsibility to prepare manpower for achievement of established strategic plans.

Regardless of strategic pursuit, its particularly important for organisations to understand the issues in admixture of insiders and outsiders at the top echelon. If the insiders should not be disregarded, then succession planning must be put into action.

Current Changes in Nature of Work

• Content• Structure• Process• System• Flow Dynamics

Major Drivers for Changing Nature of Work

• Customer Values• Competition• Technology• Organisational Agility• Innovation• Expansive Career Thrust• Financial Leverage• Operational Mobility• Advancement in Capacity Management• Advancement in Lean Enterprise• Advancement in Process Based Management

Impact of Changing Nature of Work on Organisational Structure

• Flatter Structures• Increase in Project Groups• More Emphasis on Cross-Functional Teams• Rise of Kaizen Philosophy• More Complex Reporting Relationships• Increase in Interactive Bonds Between Top

and Bottom• Indistinct Boundaries

Drivers, Solutions and Issues for the Workplace

Drivers Workplace and technology solutions Issues and concerns

Increased use of teams and cross unit work; more pressure for communication and information flow

More meeting space, Greater variety of meeting spaces (open & enclosed, large & small), Smaller individual workspaces, More open individual workspaces, Unassigned workspaces, Greater interior visibility to support awareness, Mobile supports (phones, laptops, PDAs, wireless), Personal video, instant messaging, desktop team software, More use of project rooms, Displayed information and work progress, Small rooms for individual focus, Lockers for personal belongings

Increased noise, Increased distractions and interruptions, Potential for "over communicating", Cultural barriers to behavioral change, Individuals working longer hours to compensate for lack of time to do individual tasks, Expectations that workers are always available

Greater use of dispersed work groups—often global

Increased use of video conferencing, computer-based team tools, More reliance on conference calls, Greater need for mobile technological supports for meeting rooms, Use of facilities beyond normal working hours

Expansion of the workday to accommodate geographically dispersed team meetings, Loss of opportunity to develop trust through face to face interaction, More difficulty managing and coordinating, Very high dependence on technological reliability

Continual reorganization and restructuring

Flexible infrastructure to support rapid reconfiguration, Mobile furnishings

Acoustical problems with loss of good enclosure, Potential for reduced ergonomic effectiveness

Reduced costs/more efficient space use

Shared or unassigned workspaces, Centralized filing system, Reduced workstation size and increased overall densities, Greater overall spatial variety to enable different kinds of work to be accommodated at same time

Increased distractions and interruptions, Increased noise, May meet with employee resistance, More difficult for paper intensive work

Improved quality of work life and attraction of new workers

More equitable access to daylight, views, and other amenities, More equitable spatial allocation and workspace features, Amenities for stress reduction and quiet relaxation

Resistance from those who support hierarchical space allocation

Drivers, Solutions and Issues for the Workplace Continued

Adapted from Judith Heerwagen, The Changing Nature of Work and Workplace

Implications of Changing Nature of Work for Succession Planning

• Lesser loyalty of employees to organisations destabilizes single layered succession plans.

• Tendency of companies to use competency based frameworks for succession planning.

• Development of global portfolio of successors in global organisations where workers are highly dispersed.

• Demand for Highly Adaptive and Flexible Succession Plan

STEEPLED Environmental Factors

• Social Factors• Technological Factors• Economic Factors• Environmental (Ecological) Factors• Political Factors• Legal Factors• Ethical Factors• Demographic Factors

Social Factors

• Media views• Tradition• Values• Norms• Attitudes & Opinions• Lifestyle• Work-Week• Social Events & Influences• Religious beliefs• Roles

Technological Factors

• Technology maturity• Intellectual Property• Energy• Biotechnology• Innovation Potential• Research & Development • Information Systems• Communication Systems• Manufacturing Capacity

Economic Factors

• Interest Rate• Exchange Rate• Taxation• Availability of Credit Facilities• International Trade• Fiscal and Monetary Policies• Per Capita Income• Levels of Disposable Income • Business Cycles• Drivers of Economy• Level of Unemployment

Environmental Factors

• Environmental Impact• Climate Neutrality• Clean Energy• Pollution • Triple Bottom Line• Green Branding Issues• Waste Disposal• Recycling• Sustainable Development

Political Factors

• Pressure Groups & Lobbying • International Wars• Internal Conflict• Government Term• Devolution of Power

Legal Factors

• Employment Law• Health and Safety Law• Competition Law• Regional Legislation• Investment Law

Ethical Factors

• Reciprocal Responsibilities• Responsibility to Host Community• Good Faith• Universal Rules

Demographic Factors

• Household Patterns• Ethnic Mix• Educational Levels• Age Distribution• Number of People Within Working Age Group• Net Inward Migration

Every forward-looking firm must be involved in environmental intelligence activities so as to be abreast with the key indicators of the rapid changes in its business environment, which would facilitate clear identification of appropriate action points for attainment of organisational objectives.

“In the last decade, we have witnessed a 59 percent increase in the overall rate of CEO turnover and 318 percent increase in performance-related departures. In spite of these alarming statistics, many organizations lack a strong, viable succession management plan for their top positions.”

“Companies with stronger leadership development systems enjoy higher returns on equity and profit than their competitors.”

Source: DDI

Top 12 reasons to implement succession planning

1. Meet the requirement of the Board of Directors and other stakeholders that a leadership succession planning process is in place.

2. Understand the hidden talents of your leadership team to optimize their utility in day-to-day projects and initiatives. This raises productivity for the entire organization.

3. Optimal deployment of leadership talent creates a competitive advantage.4. Use this knowledge base to flex the existing organization structure to the

changing demands of the marketplace.5. Extend the process quickly to collect data for organization design initiatives

to assimilate new leaders post acquisitions and mergers.6. Robust “people data” is very useful for downsizing situations - so the right

people remain in order to successfully rebuild.7. Have strategic staffing needs drive the expenditures for executive

education, thereby ensuring a suitable return on investment.

Top 12 reasons to implement succession planning Continued

8. Having the strategic staffing needs of the organization drive people development efforts ensures these efforts are truly meaningful in the eyes of leaders involved in the learning, thereby making executive education and development actually contribute to retention.

9. Provide a framework to improve organizational culture by regularly and candidly discussing the strength of the current leadership team and the leadership bench.

10. Determine which specific key leaders are at high risk of leaving and create strategies to retain undesired losses.

11. Predict which key leadership jobs will become open in the next 12 months. Prepare replacements with a sense of urgency or network for external replacements, thereby saving search fees. In either event, reduce problems associated with abrupt changes in key leaders.

12. Exert appropriate management control and proactively manage the process of having the right leaders in the right place at the right time.

Source: Mark Caruso, Succession Planning: What Every CEO Should Know

The Impact of Succession Planning

• 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 organisations 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 • To encourage the development and advancement of the diverse group of

employees. Source: W.J. Rothwell, Effective Succession Planning

CASE STUDY OF MOTOROLA INC

The Company Motorola, Inc is an electronic and wireless communications company based in Illinois, United States of America. In 1998 it had 142,000 employees and an annual turnover of $27 billion.

The ResultsThrough the use of various initiatives including succession planning Motorola has significantly improved the outcomes for women in its organisation.

One measure that illustrates this is the number of female vice presidents. In 1989 Motorola had two female vice presidents. In 1997, six years after the modification of Motorola's succession planning so that it incorporated the company's diversity objectives and sought to accelerate the advancement of women and minorities within the organisation, Motorola had forty female vice presidents, including seven women of colour.

How was this achieved?Reason for change

In the late 1980s due to changing demographics in its workforce, Motorola began to redesign its established succession planning process to make the development of women and minorities a priority. This process culminated in 1991 with Motorola's succession planning process, known as the Organisation and Management Development Review (OMDR) being amended to include diversity objectives.

Setting of goals and commitmentAs part of the amendment to the OMDR Motorola set a clear goal: within ten years the number of women and minorities at all levels of management should be representative of the number of women and minorities in the available talent pool. They also made a commitment that every year at least three women and minorities would be among the twenty to forty people appointed vice-president.

The programMotorola’s OMDR guarantees that women and minorities, as well as white men are not only identified as high potential managers but also that they move along through the organisation.

The process of identification of high potentials requires each division to submit lists of candidates in four categories: white men, women, minorities and technical staff. Career development plans are prepared for each high potential and their progress through the company is then tracked. If they leave or fall off the list in the future, the individuals manager must explain why this happened.

To counter the perception that most women and minorities are still in the feeder pool, a replacement chart that identifies key positions and three people who could fill each one was developed.

Line one is the immediate successor. Line two is the person who should success the incumbent if the company had three to five years

to prepare. Line three is the most qualified woman or minority candidate at that time, in addition to any

women or minority person already on line one or two. Women and minorities must be included even if it means hiring externally.

Other key elements of the Motorola program include:Career Planning: Individuals receive guidance to set career goals and develop strategies through

which to achieve them. Guidance is given by: Managers helping employees they are responsible for who are involved in succession planning, to

plot a career course.

Informal mentoring: Senior management are encouraged to seek out opportunities to mentor women and minorities.

The company's women's leadership conference. Business Rationale: Motorola promoted the link between the succession planning initiative and

the company's business goals of pursuing quality, productivity, new markets and profits. Emphasis was placed on the business success that can flow from having a socially diverse workforce.

Leadership Role: The Chief Executive championed the initiative. Presidents of major operational areas develop plans for meeting diversity goals. They report quarterly on the progress of these plans to the Chief Executive. The managers and Chief Executive then meet once a year to discuss the progress of the initiative.

Accountability:Motorola sees diversity as a business initiative and as such line managers not the HR department should be responsible for its implementation. Senior managers are required to keep track of and report on the representation of women and minorities in their units.

Key messages:Clearly define targets and goals. Setting a time frame and numbers creates impetus for action. Have a broad definition of succession planning to include the widest talent pool.

Ensure that women and minorities are not only identified, but that once identified that they are among those being groomed for senior positions. It is never too early to begin: As one Motorola's vice president stated, it is important to get the feeder people on the radar. Once they are on the radar more questions are asked about their development and it is harder for them to be lost within the organisation. Organisations cannot wait for women to appear in management.

Implement careful and strategic planning for targeted individuals career development. Being identified is not enough. Consider potential benefits of encouraging informal mentoring.

Ensure there is strong leadership and commitment from senior management. Initial and on-going personal involvement of the Chief Executive is crucial to success.

Integrate succession planning into business and diversity objectives. A clear link between business goals and the desired results of the succession planning will assist in gaining commitment from the organisation and staff. To be successful it must be portrayed as a core issue.

Make managers accountable for the success of the initiative. As it is a business initiative, business people should be responsible and accountable for its delivery.

Adapted from Motorola Inc

Dr. Elijah Ezendu is Award-Winning Business Expert & Certified Management Consultant with expertise in HR, OD, Competitive Intelligence, Strategy, Restructuring, Business Development, Sales & Marketing, Interim Management, CSR, Leadership, Project & Programme Management, Cost Management, Outsourcing, Franchising, Intellectual Capital, eBusiness, Social Media, Software Architecture, Cloud Computing, eLearning & International Business. He holds proprietary rights of various systems. He is currently CEO, Rubiini (UAE); Hon. President, Worldwide Independent Inventors Association; Special Advisor, RTEAN; Director, MMNA Investments Limited. He had functioned as Chair, International Board of GCC Business Council (UAE); Senior Partner, Shevach Consulting; Chairman (Certification & Training), Coordinator (Board of Fellows), Lead Assessor & Governing Council Member, Institute of Management Consultants, Nigeria; Lead Resource, Centre for Competitive Intelligence Development; Turnaround Project Director, Consolidated Business Holdings Limited; Lead Consultant/ Partner, JK Michaels; Technical Director, Gestalt; Chief Operating Officer, Rohan Group; Executive Director (Various Roles), Fortuna, Gambia & Malta; Director, The Greens; Chief Advisor/Partner, D & E; Vice Chairman, Refined Shipping; Director of Programmes & Governing Council Member, Institute of Business Development, Nigeria; Member of TDD Committee, International Association of Software Architects, USA; Member of Strategic Planning and Implementation Committee, Chartered Institute of Personnel Management of Nigeria; Adjunct Faculty, Regent Business School, South Africa; Adjunct Faculty, Ladoke Akintola University of Technology, Nigeria; Editor-in-Chief & Chairman of Editorial Board, Cost Management Journal; National Executive Council Member, Institute of Internal Auditors of Nigeria; Member, Board of Directors (Several Organizations). He holds Doctoral Degree in Management, Master of Business Administration and Fellowship of Several Professional Institutes in North America, UK & Nigeria. He is an author & widely featured speaker in workshops, conferences & retreats. He was involved in developing Specialist Master’s Degree Course Content for Ladoke Akintola University of Technology (Nigeria) and Jones International University (USA). He holds Interim Management Assignments on Boards of Companies as Non-Executive Director.

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