ACKNOWLEDGEMENTKnowledge is a progressive discovery of ones own ignorance
With a deep sense of gratitude I express my thanks to all those who been instrumental in the development of the project report. I am also grateful to Department of Business Administration, Lovely Professional University, Phagwara who gave me a valuable opportunity of involving me in real live business project I would like to express my profound gratitude and sincere acknowledgement to Ms. Marlyn Koul , Subject Incharge, who has been a source of perpetual inspiration to me, gently guiding and paving my way towards a bright carrier, throughout my seminar project work. She has ever willing to give all kind of support and encouragement to me. I am also indebted to all lecturers, friends and associates for their valuable advice, stimulated suggestions and overwhelming support without which the project would not have been a success.
TANYA NAGPAL Date:..
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ABSTRACTPurpose of the study: The purpose of the study is to gain knowledge on the conceptof succession planning and initiatives taken by the company for developing their future leaders. As many Indian organizations are owned and managed by owners, therefore they do not have formal succession planning process, with which they face problems in future. But some organizations have also excelled in that and giving good leaders to their organization.
Significance of the study: Succession planning involves planning for the smoothcontinuation of a business through the transfer of power between incumbent leaders and managers and succeeding ones. The key objectives are to maintain business and organizational continuity and cause the least possible disruption to an organization's business operations and overall effectiveness. Succession planning ensures backups and exigency positions for each senior manager and leader in an organization. These managers are groomed to take over departmental roles or fill critical leadership positions during designated periods. Therefore study helps to understand the process involved and future initiatives of company.
Objectives of study: To study the importance and role of Succession Planning in Corporate World To study the initiatives done by the organizations in developing their internal talent To study the role of HR department in Succession Planning
Scope of the study: The scope of succession planning would be more when theorganization grows steadily and employees have potentialities to take up higher positions. The companies have realized its importance and are directing their efforts in order to fulfill the objectives of organization and to have smooth functioning of the organization.
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Research Methodology: The collected data is secondary data based on the secondhand information through articles, case studies and companies related examples. 12 companies initiatives and processes are studied from which data gathered about their efforts for succession planning is gathered.
Findings of the study: It has been found that the companies are realizing the importance of succession planning are doing efforts for developing their internal talent by providing them more training and development opportunities. Most of the Indian organizations are family run businesses, and they are expanding their businesses across the globe therefore in order to succeed in such a global environment they are paying more attention toward this and are seeking professional help. Some renowned companies like GE and Infosys have their own institutes where they train and develop their future leaders. L&T relies more on internal talent and before hiring from external they make comparisons first and consider other aspects also. The rationale behind all the initiatives is that all the professionals who are identified as change drivers should not merely be leveraged for a specific business of the company, instead they should be instrumental in driving change across the varied businesses The companies should have a participative culture so that employees can freely express their feelings, share views, generate ideas and choose their future leaders.
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Recommendations: The organizations should address to this issue as early as possible because if they fail, then the organization may end up facing the burden in the middle of a crisis. The companies should have formal succession plan, which would ensure talented candidates with required potential and competencies to take the high positions in future and help in growth. The succession plan must belong to the whole organization and not to the HR department in order to make sure it has the attention it deserves. The companies should de-link the ownership and day-to-day management of operations and seek professional help in critical matters. The employees should be motivated and provided with appropriate training and development, so that they can have feeling of self-belongingness towards the company. Equal opportunities should be given to female employees so they can also take key roles and encourage others.
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1. LITERATURE REVIEW(2008) Stacy Straczynski: In a new study, released by Tampa-based AchieveGlobal, a global workforce management firm, 144 respondents with the title of vice president or higher shared their insights on their organizations succession strategy. Results show that the majority (51%) currently do not have a succession plan in place for C-suite executivespositions that include chief executive officers, chief financial officers, chief operating officers, etc. This is particularly troubling for American businesses, as 16 percent of respondents also indicate that they have an existing vacancy in their C-suite and another 37 percent indicate that they anticipate a vacancy within the next year
(2009): .A new global study of more than 2,500 Chief Information Officers (CIOs),released by IBM today, reveals that leveraging analytics to gain a competitive advantage and improve business decision-making is now the top priority for CIOs. Key findings of the survey include:
CIOs also are continuing on the path to dramatically lower energy costs, with 76 percent undergoing or planning virtualization projects. 76 percent of CIOs anticipate building a strongly centralized infrastructure in the next five years. Furthermore, more than half of CIOs are expecting to implement completely standardized, low-cost business processes.
(2009): The studys findings:
More than half of survey respondents said their companies implement succession management processes at only the most senior executive levels. Only 12 percent of respondents said their companies succession management programs are integrated with talent management programs, such as performance management and employee development.
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Fewer than 40 percent of respondents said their companies include mid-level managers and skilled professionals in succession planning initiatives; just 11 percent included first-line supervisors.
(2010) Mark Vickers : Development in partnership with i4cp, shows that a mere14% of respondents describe their organizations' succession planning efforts as effective to a high or very high extent. In other words, most think their company's efforts are mediocre or worse. Two things are found: 1) there's a striking and worrisome absence of solid metrics in regard to succession management, and 2) the metrics that are most commonly used are very basic indeed. Among those with succession planning programs, a meager 36% even track the positions filled by succession candidates to a high or very high extent and just 31% track the number of candidates in the pipeline to that same extent.
2. INTRODUCTION6
2.1 SUCCESSION PLANNINGSuccession planning is a process of determining critical roles within the company, identifying and assessing possible successors, and providing them with the appropriate skills and experience for present and future opportunities. In other words succession planning comprises of these important steps
Recruitment and staffing - you recruit superior and right employees Training and development - you train the employees to develop their knowledge, skills and abilities Performance and Compensation management - prepare them for advancement or promotion into ever more challenging roles Other (in which talent management plays a role) - you are prepared to retain or replace superior employees
Typical activities covered by succession planning include
Determine what roles and skills are critical for the growth of the company Analyze and address the gaps revealed by the planning process Identify and understand the developmental needs of employees to fill those positions Ensure that all key employees understand their career paths and the roles they are being developed to fill Train people for skills and positions that are not presently existing in the company Understand the time needed to backfill key roles Enrich succession plans through regular executive discussion of people and posts Identify top performers in all departments and make sure that they are engaged and satisfied to stay with you for a long period Continually review and check the process of succession and whether planned individual development has taken place
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Succession planning is a process by which successors are identified for key positions throughout an organization including vital roles in each department of the organization. It should take into account the strategic vision and objectives of the organization. With good succession planning in place, employees are ready for new leadership roles so when someone leaves the company, another is skilled and ready to step-up to that position. Succession planning can also help develop a diverse workforce, by enabling senior management to look at the future goals of the organization as a whole. So the key issues the HR professionals should consider while developing a succession plan are
Strategic plans and future goals Workforce requirement Knowledge retention and critical roles Talent management strategies
2.2 MODELS OF SUCCESSION PLANNINGThere are three main models that companies use to implement succession planning:
Short-term planning or emergency replacements Long-term planning or managing talent Combination of above plans
Organizations should take a close look at their goals and levels of commitment before choosing a model that best suits their needs. 2.2.1 Short-term or emergency replacements This is the most common model of succession planning and serves as a crucial point for all types of businesses. Short-term replacement planning is focused on an urgent need caused by a sudden development within the organization skilled employee leaving the company, expansion or contraction of business. Sometimes, emergency replacement planning must work to retain knowledge that is about to be lost. Emergency knowledge
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retention is an option to consider if the organization is about to lose specialized knowledge and does not have a successor to take the knowledge. Emergency succession planning can come into play any time the organization expands in a new direction or discovers the talent gaps to fill the required managerial position. Generally, human resources will try to fill the role from within the organization, but often go outside, if no one has been trained for the job in the organization. 2.2.2 Long-term planning or managing talent Talent management focuses on the future needs of the organization. Working within the strategic framework for the companys future goals, senior management identifies the positions necessary for growth and the best candidates to fill those roles. Some organizations invite all employees to take part in an assessment process, while others have managers identify leadership candidates. If companies wish to grow leaders from within their existing talent pool and have the time and resources to develop a useful program, effective talent management will become a key component of its long-term human capital strategy. The advantages of this model include:
Identifies a specialized talent pool Defines and builds future skills required for the success of the organization Motivates and retains employees by involvement in their career growth
Some of the disadvantages of this type of model include:
Expensive and time consuming Existing employee-base may not have required skills and experience for key posts and outside hiring can lead to resentment Managers may be frustrated by not being allowed to choose a successor
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2.2.3 Combination of both the plans This model allows senior management to plan for the long-term growth of both the organization and employees within the organization and prepare for emergency replacements to ensure that business is not affected by knowledge loss or lack of skilled employees. HR professionals will find that the advantages of succession planning greatly outweigh the disadvantages, which can be overcome by proper planning and communication within the employees and senior management.
2.3 NEED FOR SUCCESSION PLANNINGHaving this process in place is vital to the success of the organization because the individuals identified in the plan will eventually be responsible for ensuring the company is able to tackle future challenges. These "high potential" candidates must be carefully selected and then provided training and development that gives them skills and competencies needed for tomorrow's business environment.
Another reason its important is because these high potentials will one day become the leaders of the Company. This is why their development needs to incorporate a broad range of learning opportunities in your organization. The individuals should also be exposed to as much of the working environment as possible so that they gain a good understanding of what the company requires to remain successful.
Finally, organizations that understand the need to manage the development of their high performers are a step ahead of their competitors! The effort required to establish a development program for future leaders is worthwhile because it creates a motivated and capable group of employees that are ready to move forward in the organization when the need arises
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2.4 PITFALLS Underestimating people within the organization or overlooking employees that don't appear to fit your standard "company template" Implementing a program that is designed for upward mobility only - lateral succession moves should also be included in the plan Failing to offer the appropriate training and developmental opportunities Creating a development program that only offers generic "leadership" training programs This is why succession planning must be a coordinated effort between HR and line and senior executives must ensure the line managers get involved with their own division succession planning efforts. Succession planning is not only concerned with "upward" succession. Lateral assignments may also be used because there are fewer opportunities as you progress upward in the organization. It's the role of every manager to help their promising subordinates develop their fullest potential by continually challenging them and increasing their leadership competencies.
2.5 SUCCESSION PLANNING TOOLSSuccession planning starts when you can accurately measure the performance of the employees assess skills and career growth information. Succession planning tools need to have extensive integration and customization options to support all of your talent management efforts. To identify a correct succession planning and talent management system you need to have a software that
Has a performance management system that delivers accurate data Self-service online resumes for employees 11
Has a recruiting system that enables to transfer information on new hires directly to your succession planning analysis and data Integrates with your HRIS position/job management data with links to competencies and other qualifications Is a powerful bench strength assessment tool that can share, review and analyze data to provide latest and updated information Uses easy interactive tools or matrices for assessing employee potential, flight risk and impact of loss Provides the needed framework for effective gap analysis Has a search capability based on multiple filters and employee characteristics Provides a view of your succession plan in any format, including organizational charts with concern areas highlighted Provides with a complete career inventory data for each employee readily at hand, managers can specify targeted future jobs for colleagues and indicate a readiness timeframe
Customizable email reminders Informative visual reports and dashboard
Organizations use succession planning to achieve a number of objectives like: Improve recruitment process for key positions Active development of longer-term prospective successors by ensuring their career growth and analyzing work, responsibilities, skills and knowledge required for the future Audit the talent pool of the organization and that helps in allocation of responsibilities and development strategies and fill the identified talent gaps Build a key talent resource of employees who share key skills, knowledge, experiences and values seen as important to the future of the organization The main advantage of succession planning in an organization is the active development of a strong talent resource for the future which is vital to attract and retain the best and key people which will help in present and more for the future growth of the organization. 12
Have the right people with right skills in the right jobs doing the right things. If they people are doing wrong things then you are right back where you started. The key is to match the needs of the organization to the goals of the individual. Keeping talented people in place by providing them with opportunities they may not receive elsewhere will create a stronger and more loyal group of future managers and executives thus saving the companys recruiting and hiring costs over the long-term. Management quality is a key parameter to consider while evaluating any software company, or for that matter any company. The ability to foresee future trends and lead the company forward are major factors that determine the company's future in a highly competitive industry.
2.6 SUCCESSION PLANNING MYTHSMyth #1: If there are no imminent retirements, succession planning needn't be a top priority. According to a survey conducted by Capital H, nearly 22 percent of respondents expect to lose between 10 percent and 25 percent of their top performers to retirement within the next five years. These top performers play a significant role in a company's success, often serving in high-level, supervisory roles. For successions to progress smoothly, the people chosen to fill these roles need to be prepared and adequately trained. That process takes time Myth #2: Succession planning is only an issue for big companies. 85 to 95 percent of all the companies in the United States today - more than 10 million - are family-owned or family-controlled. The smaller the business, the greater the impact is felt from a replaced employee. This is especially true of any employee succession in a sales or operations leadership role, as a poor month or two can mean disaster for a small company. Small companies need to plan early and invest in the training necessary to help the new or promoted employee succeed. For smaller companies, this may mean researching outside learning opportunities and setting aside a budget to cover them.
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Myth #3: There need only be a succession plan for C-level team members. During the recent recession, employees were often asked to broaden their lists of responsibilities. The Economic Policy Institute reports that employee productivity has increased 4.1% each year. Manager and director-level professionals have been asked to take on more duties than ever before. As such, it is important to look at a cross-section of departments to ensure proper succession plans are in place for each division. Myth #4: Succession planning should be handled on a case-by-case basis. Continuity works best. Allowing each department to come up with its own unique process for succession planning, can be a troublesome and time-consuming endeavor. Organizations, instead, should create a company-wide process that could then be used by each individual department. Myth #5: Good talent is easy to spot. As an employee moves up the corporate ladder, soft skills become more necessary and valuable components of success - management skills, emotional intelligence, leadership ability and so forth. However, these skills can be difficult to quantify. To spot and cultivate employees with these skills, an organization needs an instrument to help measure and assess talent. According to a recent report by Pepperdine University's Graziadio School of Business and Management, organizations like Lilly, Dow and Dell have long-used talent assessment as part of their succession planning processes. Myth #6: Succession planning only pertains to baby boomers. According to SHRM and Career Journal.com's 2005 US Job Recovery and Retention Survey, 76% of all employees are looking for a new job. This means that your top performers may be leaving sooner than you imagine. As such, it's important to think about succession planning - not as a one-time effort - but as an ongoing process to continually grow and develop your organization.
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2.7 KEY BEST-PRACTICE INSIGHTS2.7.1 Deploying a Succession Management Process
Best-practice organizations make succession planning an integral corporate process by exhibiting a link between succession planning and overall business strategy. This link gives succession planning the opportunity to affect the corporation's long-term goals and objectives.
Human resources are typically responsible for the tools and processes associated with successful succession planning. Business or line units are generally responsible for the "deliverables" -i.e., they use the system to manage their own staffing needs. Together, these two groups produce a comprehensive process.
Technology plays an essential role in the succession planning process. Ideally, technology serves to facilitate the process (make it shorter, simpler, or more flexible) rather than becoming the focus of the process or inhibiting it in any way.
2.7.2 Identifying the Talent Pool
Best-practice organizations use a cyclical, continuous identification process to focus on future leaders. Best-practice organizations use a core set of leadership and succession management competencies.
2.7.3 Engaging Future Leaders
Best-practice organizations emphasize the importance of specific, individualized development plans for each employee. Individual development plans identify which developmental activities are needed, and the "best practice" firms typically have a mechanism in place to make it simple for the employee to conduct the developmental activities. Typically, divisional human resource leaders will monitor employee follow-up in developmental activities.
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Best-practice partners rely on the fundamental developmental activities of coaching, training, and development most frequently and utilize all developmental activities to a much greater extent than the sponsor organizations.
In addition to traditional executive education programs, best-practice partners increasingly use special assignments, action learning, and web-based development activities.
2.7.4 Monitoring and Assessing the Program Best-practice organizations develop methods of assessment to monitor the succession planning process. These methods vary according to business goals and company culture.
2.8 RECOMMENDATIONS FOR SUCCESSKeep the process simple. Most refinements to succession management systems involved making the process more logical and simple so that busy line executives would not feel that bureaucracy was burdensome. Engage technology to support the process. Information technology makes it possible for managers throughout the world to monitor and update developmental needs and activities on a timely basis. Making information timely and reducing the time required to manage the system are major contributions of technology. Align succession management within overall business strategy. Line executives are much more likely to support a system that clearly reinforces corporate goals and objectives. Secure senior level support for the process. None of the best practice firms would have been as successful without top management endorsement and support.
2.9 TRENDS IN SUCCESSION MANAGEMENTThere are several critical trends that will further strengthen the transformation of succession management from a replacement tool to a development and leadership capability tool, thereby ensuring that systems and processes are responsive and less bureaucratic.
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Succession planning will continue to become more integrated into the everyday life of organizations, moving from a formal annual event to become a part of the daily fabric of doing business. Technology will also integrate succession processes into the desktop computers of managers. A single icon will grant immediate and widespread access to succession planning information. Additionally, all of the components of HR management are being looked at, appropriately, as fully integrated, aligned systems, rather than as a set of disconnected activities. Gone is the silo mentality that kept HR from other business units. The hypercompetition of the contemporary world makes such an approach outdated and dangerous to the bottom line. 2.9.1 Technology can improve planning To increase access to and use of succession planning, best practice organizations continue to use technology as a critical facilitator of the process. Web-based succession planning systems enable companies to run their process online and ensure continuous access to data. Employees can then take ownership of their own development plans through their own desktops. While subjectivity will always be part of candidate assessment, great progress has been made toward more objective assessments, including 360-degree feedback. As the use of raters expands, the array of raters will broaden to include administrative staff, support staff, internal and external customers. Best practice organizations will increase their efforts at training line managers and executives to perform more objective assessments when providing 360-degree feedback.
CASE STUDY 1: SUCCESSION PLANNING AT RANBAXY FAMILY DRAMA, CORPORATE STYLEAbstract The case discusses the CEO succession planning controversy at Ranbaxy Laboratories Limited (Ranbaxy), India's largest pharmaceutical company. It describes the concept of succession planning and its importance in managing large companies (especially family owned businesses). The case describes how and why Parvinder Singh (Ranbaxy's promoter, also CEO) believed in running the business professionally and handed over the 17
company's management to D S Brar (Brar), a professional (and a non-family member), amidst stiff opposition from family members. The case then details how Brar transformed Ranbaxy from a small Indian pharmaceutical company into a research based global pharmaceutical major. It examines the reasons for Brar's decision to step down as the CEO and comments on his succession plan. The case concludes with a discussion of whether Ranbaxy's promoters would take over the company's management or continue to allow professionals to manage their business. The question, however, uppermost in most people's mind is: (that) does the decision reflect a tussle between the promoter and professional management in which the promoter eventually had his way." - An analyst, commenting on the Ranbaxy succession planning issue.1 "The succession plan was driven by Mr Brar (D S Brar, outgoing Managing Director and CEO) himself and he has been close to the family for so long." - Malvinder Singh, President Pharmaceuticals and the elder son of Ranbaxy founder, the late Parvinder Singh. "It is a rather uneventful development in that it is part of a succession plan and the transition will be smooth." - D S Brar, Outgoing Managing Director and CEO, Ranbaxy Laboratories Ltd
An Un-Expected Departure?In December 2003, S D Brar (Brar), CEO and Managing Director of Ranbaxy Laboratories Ltd., (Ranbaxy)4 announced his decision to resign from his post. Brar was to complete his tenure in July 2004. He named Dr Brian Tempest (President, Pharmaceutical Division, Ranbaxy) as his successor.
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Brar's decision to step down generated mixed responses from industry watchers, analysts and the investor community. Some media reports claimed that Brar's exit from the company was a result of the strained relationships between Ranbaxy's professional managers and the promoter family. A few analysts said that Brar had no choice but to leave the company as Malvinder Singh and Shivinder Singh (sons of Ranbaxy's founder, the late Parvinder Singh, and owners of more than 32% of stake in the company) wanted to establish their control over the management of the company. Official sources denied this, stating that a succession plan had already been put in place, and that Brar's resignation was a part of that plan. However, the controversy regarding Brar's departure refused to die out.Meanwhile, Ranbaxy's stock price fell on speculation about whether Ranbaxy would be able maintain its strong growth without Brar at the helm.It was under his leadership that the company had evolved from a small Indian pharmaceutical company into a truly global pharmaceutical major. His leadership and managerial skills were responsible for the company's excellent performance in both the domestic and the international markets. In 2002, Ranbaxy was one of the fastest growing pharmaceutical companies in the US and was very close to achieving the $1 billion revenue mark in 2004.However, there were other analysts who believed that Brar's resignation would not affect the company's performance. This was because he had laid down a well-crafted vision (Garuda Vision) for the company and the strategies to execute that vision had already been put in place. Commenting on the conflicting views in the media regarding this issue, an analyst remarked, "We feel that this slight aberration is mainly because of the sentimental issues involved."But most analysts held the view that the Brar-Ranbaxy episode was yet another case of displacement of professional management by the promoter/owners of a company. This event stirred afresh the debate over "family control over management" in familyowned businesses (particularly in the Indian context) - the issue of whether the family asserts undue pressure on management simply to reflect its control over the business. 19
Family Owned Businesses & Succession PlanningThe importance of succession planning is vital to the success and survival of familyowned businesses. Ideally, in a family-owned business, a CEO succession plan should contain details like who would run the business after the owner retires and how the ownership of the businesses would be transferred. Once a succession plan is developed, it must be reviewed annually and modified depending on the changing circumstances. However, the reality is quite different - succession is rarely planned in a formalized manner in family owned businesses...
Ranbaxy's Professional Management Focus In 1952, an entrepreneur BhaiMohan Singh founded Ranbaxy as a manufacturer of pharmaceuticals in Mohali in Haryana. Like most other small pharmaceutical companies, Ranbaxy too was mainly engaged in producing drugs by reverse engineering the molecules of established drug brands. In 1967, Dr Parvinder Singh (Dr Singh), Bhai Mohan Singh's son, joined the company after completing his doctorate in pharmacy at the University of Michigan (USA). Dr Singh was a very ambitious person and worked hard to take the company to greater heights (Refer Exhibit II for a look at the major milestones in Ranbaxy's history). In 1982, he became the company's Managing Director. Ranbaxy under Brar Brar had joined Ranbaxy in 1977 as a business development manager. A thorough professional and hard worker, he soon rose through the company's ranks to become one of Dr Singh's most important and trusted men (Refer Exhibit III for Brar's tenure at Ranbaxy). In 1993, Brar became the President (Pharmaceuticals) and a whole time Director. From the very beginning of his career at Ranbaxy, Brar was a close confidant of Dr Singh.The professional relationship between the duo was even compared with that of Intel's Andy Grove and Craig Barret. While Dr Singh had the overreaching vision for his company, he reportedly relied on Brar's knowledge and professionalism to implement it.
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Company watchers felt that it was 'Parvinder's vision and Brar's execution which helped Ranbaxy turn into a group with many manufacturing facilities outside India with more than 2,000 overseas employees.' In the early 1990s, differences cropped up between Dr Singh and Bhai Mohan Singh over the growth route the former was charting for the company. Dr Singh wanted to take the risk of investing huge amounts into basic R&D and in expanding operations to other countries. Brar supported Dr Singh's vision of internationalizing the company by setting up operations in various countries like China, US, Ireland, and others in Europe. In the late 1990s, Brar chalked out a strategy to shift half the company's business to the US, a decision which was staunchly opposed by members of the Singh family...
What Happened Behind the Boardroom Doors?When Brar took over as Ranbaxy's MD & CEO, the company did not have any family representation on the board. It was truly a company managed by professionals. However, by the beginning of the 2000s, the Singh family reportedly decided to take control of the firm. According to the media, Bhai Mohan Singh had been pressing the company board to elevate Malvinder Singh to the board of directors. The disagreements over Ranbaxy's international expansion strategy between Brar and the family were common knowledge by now. Sources within the company denied that there were any disputes, stating that Brar's decision to leave was an independent one. Reportedly, he had revealed his retirement plans in 1997 itself. Brar had said that he would retire in 2002, after completing 25 years with Ranbaxy. However, analysts felt that he could have easily renewed his term (due to expire in July 2004), as he had seven more years to go before he would have to officially retire from the company. That he chose not to do so, was seen as an indication of something being amiss. However, Brar maintained that he wished to leave the company as he had fulfilled his responsibilities successfully. He added that he now wanted to look at other opportunities. He said, "Having fulfilled my role in the company, I would like to devote my time to other pursuits in the next 10-15 years of my working life. I would therefore not like to 21
renew my appointment as the CEO and Managing Director upon expiry of my current term. In the meanwhile, I would do my best to ensure a smooth transition in favor of a successor in the best interest of the company."...
Leadership Challenges for the FutureCompany watchers believed that the real effect of the top management changes at Ranbaxy would be felt only when Tempest's tenure came into effect from July 5 2004. An analyst commented, "Brar is expected to continue for the next six months. I think he would do his best to ensure a smooth transition in favor of his successor. The changes will be seen only when Tempest takes over. Tempest is expected to continue till Malvinder Singh is groomed to done the mantle. Brar has already put in place a robust team and set the vision of making Ranbaxy a $2 billion company by 2007." Under the leadership of Tempest, Ranbaxy planned to focus on HR planning and put in place improved motivation, hiring and training programs. Speaking about the immediate steps he would take during his tenure, Tempest said, "We and I in particular, am going to spend a lot of time in the HR activities and that is the area we want to get better and better and we need good products with good people."...
ConclusionThese tips for family business succession planning are to get the succession planning process underway and ensure a smoother transition from one generation to another. Start business succession planning early. Involve your family in business succession planning discussions. Look at your family realistically and plan accordingly. Get over the idea that everyone has to have an equal share. Train your successor(s) and work with them Get outside help with your business succession planning 22
2.10 IT'S NOT JUST A CEO THINGTo adequately prepare for succession, it should evaluate the skills and attitudes of everyone in the organization who is a candidate for a leadership position. Because the CEO isn't the only position that requires succession planning. If a company suddenly loses its chief information officer, chief financial officer, or another key player, it can be nearly as drastic as an unexpected vacancy in the president's office. Typically staffers are required to maintain their previous responsibilities in addition to taking on jobs delegated from their bosses, in a chain of cascading delegation that may directly affect everyone in an organization, even through only one position has been replaced. Succession planning isn't something you can do once and forget. To be a conscientious family business leader, you have to continually revisit your plan, reviewing and updating it to reflect changes in company value, market conditions, and your own health as well as the abilities and passion of the people you plan to pass it on to.
2.11 RESEARCHFebruary 01, 2006 Statistics reveal that the projected growth of the U.S. labor force will be seriously affected by the aging baby-boom generation. By 2010, the U.S. labor force will have a shortage of 10 million workers By 2012, 162.3 million people will be in the workforce By 2012, the 55-and-older segment of the workforce (many in management positions) will have increased to 19.1%, due to an annual growth rate of 4.1%, almost four times the rate of growth of the overall labor force. More recently "succession planning" has expanded yet again. Enlightened corporations are integrating succession planning in to their strategic planning processes and corporate policies. No longer just for the upper ranks, succession planning is the proactive management of the corporation's entire talent pool. Integrating with talent management, leadership development and career development programs, succession planning has gone beyond the reactionary replacement of exiting employees. Effective succession planning enables the deployment of an organization's talent, on demand, as needed, now and in the future. 23
2.11.1 HOW MANY COMPANIES HAVE SUCCESSION PLANS? 67% of organizations do not currently have any formal succession planning process 45% of the world's largest corporations have no meaningful approach in place for developing their CEO Only 24% of organizations are confident in their ability to staff leadership positions during the next five years Although most companies recognize the importance of succession planning in attracting and retaining excellent employees, few companies successfully establish a process for doing so
2.12 CHALLENGES FOR ORGANIZATIONS IMPLEMENTING SUCCESSION PLANNINGTime and resources are the prominent challenges cited by organizations considering succession planning. Typically the day-to-day challenges of running the organization overpower the organization's ability to proactively engage in succession planning. Other challenges often occur when managers feel threatened as they are asked to groom their successors. Predicting future needs of the organization is another challenge. Many organizations don't have internal career development programs in place, or career pathways defined. Being able to quickly and easily identify internal candidates with the necessary skills, experience and competencies to fill various needs is a common challenge. Automating the collection and retrieval of such data enables the implementation of succession planning activities. By identifying skills and abilities needed for various positions, and by communicating them to the workforce, companies have the opportunity to proactively source internal talent, and employees are enabled to proactively manage their careers. These actions boost employee retention.
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3.
SOME
EXAMPLES
OF
ORGANIZATIONS
AND
THEIR
EFFORTS FOR SUCCESSION PLANNING 3.1 GENERAL ELECTRICOne of the most successful business leaders of all time, Jack Welch, who started working at General Electric in 1960. As he moved upward in the organization he displayed leadership qualities that set him apart from his peers. One of his most admired skills was the ability to develop his subordinates so there was always someone ready to take his place when Jack was offered a promotion.
3.1.1 How successful was his strategy? In 1981 he became the CEO of General Electric and served in that position until he retired in 2000. Furthermore, in 1991, Jack Welch stated: "From now on, choosing my successor is the most important decision I'll make. It occupies a considerable amount of thought almost every day." That's a pretty strong statement for someone that had the vision and leadership ability to increase the value of General Electric from $13 billion to $410 billion dollars during his tenure.
GE (LDI) in Crotonville, NY has ensured that activities aimed at developing leaders are closely linked to companys business strategy. At the end of the year GE makes an assessment whether corporate leadership development has been able to support GEs different business initiatives. GE has tied leadership development to succession planning. The company interviews company leaders around the world to assess future business needs & leadership characteristics
3.2 INFOSYSInfosys has set up the Infosys Leadership Institute (ILI) at its Mysore campus to identifying high performers and giving them opportunity to emerge as future leaders. The company identifies leaders from its multi-national, multi-cultural employees on the basis of several parameters. The chosen few undergo a three-year programme that includes
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training, personal development programme, interacting with other participants, understanding the company better and resolving real business issues.
3.3 WIPROAnother major IT company is Wipro, which has developed leaders through a well planned process. The succession planning programme is called Talent Review and Planning (TRP). At Wipro, the succession planning starts with identification of suitable candidate through regular quarterly talent engagement and development (TED) reviews, and action plans of each business unit and vertical. Then feedbacks about these candidates are gathered. Wipro has developed Life Cycle Stage Development Program. Here the employees who are identified to have high leadership talent are given training according to their level in the organization. There are different kinds of programmes targeted towards different levels. Wipro has programs like entry level program, New leaders program, Wipro leaders program, Business leaders program and Strategic leaders program.
3.4 TATA CONSULTANCY SERVICES (TCS)TCS has a systematic process for succession planning. TCS leadership programs are focused around practices (industry vertical or services) and geographies (for marketing). The top management is involved in selecting the leadership teams at each practice and geography. High performers are identified at the time of appraisals and their progress is monitored. Then these high performing employees are constantly moved across projects, practices and geographies to ensure that a high performing individual does not only move in a narrow hierarchical structure. The company also has a Think Tank, made up of people both at the senior management and one level below, these people are carefully selected for their strategic view and technology and domain competence. This Think Tank plays a vital role in succession planning. In fact, this is another mechanism for creating and nurturing leaders.
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3.5 LUCENT TECHNOLOGIESThe company has divided succession planning into two phases: Identifying leadership requirements and talent available Talent development
Each senior executive typically identifies three possible successors. Lucent evaluates possible successors on two primary criteria; performance and the ability to develop and adopt. A dedicated department at lucent assumes responsibility for succession planning. It develops strategies, collects feedback and makes ongoing improvements in the system Senior mangers spend more time on identifying and developing potential successors.
3.6 JOHNSON & JOHNSONJ&J has deployed an innovative initiative that identifies and builds up not just one group, but two sets of high potential managers. There are individual development plans that are designed for professionals. The high potentials would be exposed to a slew of management education and development (MED). The rationale behind the initiative is that all the professionals who are identified as change drivers should not merely be leveraged for a specific business of the company instead they should be instrumental in driving change across the varied businesses that the group has presence in.
3.7 LARSEN & TUBROL&T employ the services of an HR consulting firm to list the positions falling vacant and the required competencies. The company fills vacant posts with internal candidates wherever possible. In some cases it compares the internal candidate with an external candidate to judge his/her readiness to move into the job
3.8 LAFARGEThe company had used the downturn to build a senior talent pool which it now wants to retain through succession planning. It has identified three successors in critical positions 27
an emergency successor who can work on a stop-gap arrangement, an ideal successor who is groomed to take up the role in two to three years time and a possible successor who can take up the role in five years. When identified successors see the effort companies take in developing them, they are less likely to fall prey to poaching, says Lafarge India senior VP (HR) Reva Prakash
3.9 LG ELECTRONICSLG Electronics has started identifying successors for second-line positions and not just critical talent. It has also formed a five-year career growth plan for every employee to come up with structured training and development initiatives. Since the time we started succession planning for high-performing talent, none of them have quit, says LG India HR head Umesh Kumar Dhal.
3.10 MARUTI SUZUKIMaruti Suzuki has identified two successors from the middle management level and above. In another two years, aging will start in the shop-floor level and we have to prepare ourselves for that, says Maruti Suzuki managing executive officer (HR, finance & IT) SY Siddiqui.
3.11 DR. REDDYS LABORATORIESHR Prabir Jha told it plans to take its succession planning initiative beyond top management and the 20-odd senior managers.
3.12 WALMARTThe company has de-linked the ownership and management of day-to-day operations. The family owns the controlling share; it inducts professional managers to run their business.
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CASE
STUDY:
SUCCESSION
PLANNING
AT
WONKA INDUSTRIESThe Situation Mr. Willy Wonka is a first generation business leader who has recognized the lack of a succession plan for his CEO/Chief Inventor position. The business specializes in specialty and novelty confections and currently retains a market leading position through innovation in chocolates and candy, with some miraculous results Mr. Wonka enjoys an excellent labor position in a non-union factory, and has (inexplicably) been exempted from all UK labor laws and health inspections. Costs for labor are limited to cocoa beans given to his staff in unlimited quantities. The company has come under constant questioning as to the legality of detaining an entire population of Oompa Loompas to execute on corporate strategy; Mr. Wonka has thus far avoided governmental scrutiny in this regard. While each major competitor in the confection space has offered to acquire the company, Mr. Wonka has remained steadfast in his desire to keep his company independent and to work towards a focused mission within the candy world. Espionage had been a problem until recently, when severe visitation restrictions were imposed. Succession Plan Considerations At first, Mr. Wonka considered an external experienced hire. Being that he is the sole human working at the company, this was a logical first step. After evaluating the available external talent pool, Mr. Wonka ruled out an external experienced hire. Mr Wonka said, There are thousands of clever men who would give anything for the chance to come in and take over from me, but I wont want that sort of person [The external hire] wont listen to me; he wont learn. He [or she] will try to do things his own way, not mine.
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While Mr. Wonka seriously considered hiring from within, the height restrictions alone with existing staff would not allow for full use of the Great Glass Elevator during the normal course of business. When looking for his successor, Mr. Wonkas primary concern was to sustain its competitive advantage through innovation. This could not be an in-the-box thinker. He needed someone who could not only think outside of the box, but to dream of a way to make that box taste yummy, and eat it whole. In meeting with his internal team, it was clear that a novel succession planning solution was needed. Selection Methodology After examining existing methodologies for the selection, interviewing, and naming his successor, Mr. Wonka decided on a somewhat irregular approach, however, one that fit within his employment brand. He decided to find a set of High Potential candidates through a competitive selection process including, Golden Tickets. Being somewhat of a showman, Mr. Wonka turned this phase of the selection into a concurrent marketing campaign that sold an incremental 100 million Whipple-Scrumptious Fudge mallow Delight Chocolate bars) After a set of high potential recruits was selected. Mr. Wonka assessed each individual through a series of physical and personality assessments in which Mr. Wonka hoped to determine if the hi-po had the ability to think magically, and the sense to not be sucked up into giant pneumatic tubes of chocolate within the first ten minutes of entering the manufacturing floor. Results By process of elimination, remarkably, a candidate was chosen with the intellectual abilities required, and the moral fiber Mr. Wonka was looking for. Charles Bucket Esq. was nominated as the successor to the factory, and awarded such honor within the Great Glass Elevator. While the mentorship program is expected to last over
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10 years, feedback from Mr. Wonka (in his sequel book) seems to have positively reinforced his succession choice.
4. CONCLUSIONSSuccession planning is a complex task that requires constant attention and ongoing resources. Successful organizations devote considerable time and resources to mapping out skills and competencies so that they can hire and train appropriately and achieve a distinct competitive edge. Best-practice organizations also prepare for unforeseen events and the potential loss of key executives. Finally, these organizations view succession planning as an ongoing process rather than an event that must be addressed every year or two. A growing number of companies are recognizing the value of succession planning, and they are expanding the concept from one traditionally used to manage only senior level positions to encompass managerial positions across the organization. They are also taking succession planning beyond organizational charts and using it as a comprehensive change-management tool that helps the organization identify gaps in talent and fill them more effectively. Ultimately, a comprehensive succession-planning strategy helps businesses leverage the full value of human capital.
5. SUMMARYCombining succession planning with leadership development differs from traditional succession planning, which often pegged individuals, slotting them into jobs without active orchestration of their development. Too many organizations rely on a survival of the fittest philosophy that may put talented people into leadership positions without attention to coaching or the development of skills and characteristics important for higher-level roles. Successful leadership development means creating a developmental culture. The premier organizations have an environment that is continually nurturing and growing the next generation of leadership while still meeting day-to-day requirements. Too many of the organizations treat development as something they address only when they have to 31
because of anticipated turnover in a critical position or as an optional activity when they have time. In successful organizations, senior management is continually integrating the testing and stretching of the capabilities of high-potential performers while balancing the need for meeting short-term performance goals. In other companies, the immediate performance issues distract senior leadership and the board from addressing developmental needs and experiences.
6. RECOMMENDATIONS The organizations should address to this issue as early as possible because if they fail, then the organization may end up facing the burden in the middle of a crisis. The companies should have formal succession plan, which would ensure talented candidates with required potential and competencies to take the high positions in future and help in growth. The succession plan must belong to the whole organization and not to the HR department in order to make sure it has the attention it deserves. The companies should de-link the ownership and day-to-day management of operations and seek professional help in critical matters. The employees should be motivated and provided with appropriate training and development, so that they can have feeling of self-belongingness towards the company. Equal opportunities should be given to female employees so they can also take key roles and encourage others.
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7 BIBILIOGRAPHYhttp://www.ameinfo.com/59276.html http://www.businessknowhow.com/manage/succession-planning.htm http://businesstoday.intoday.in/index.php?option=com_content&task=view&id=1450 http://www.citehr.com/19127-succession-planning.html#ixzz0lQmvpLPj http://www.equitymaster.com/detail.asp?date=2/18/2009&story=2 http://www.financialexpress.com/news/j&j-embarks-on-twopronged-successionplanning-programme/59608/ http://humanresources.about.com/gi/o.htm? zi=1/XJ/Ya&zTi=1&sdn=humanresources&cdn=money&tm=212&gps=67_413_1419_7 31&f=00&tt=14&bt=1&bts=1&st=24&zu=http %3A//www.humanresourcesmagazine.com.au/articles/DD/0C02A0DD.asp%3FType %3D60%26Category%3D919 http://www.icmrindia.org/casestudies/catalogue/Human%20Resource%20and %20Organization%20Behavior/Succession%20Planning-Ranbaxy-Corporate-Human %20Resource%20Management-Case%20Studies.htm http://measuringtalent.wordpress.com/2010/01/11/case-study-succession-planning-atwonka-industries/ http://www.neytri.com/indias-biz-tycoons-come-to-terms-with-succession-planning/ http://peoplematters.in/learning-center?page=1 http://sbinfocanada.about.com/cs/buysellabiz/a/succession1_2.htm http://sbinfocanada.about.com/cs/buysellabiz/a/succession1_2.htm http://www.successionplanning101.com/ http://www.thehindubusinessline.com/2004/11/26/stories/2004112602110200.htm Articles: CHOOSE TOMORROW'S LEADERS TODAY: Succession planning grooms firms for success Robert M. Fulmer, PhD
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ORGANIZATION BEST PRACTICES - SUCCESSION PLANNING By Dr. Jessica Sartori Dr. Jessica Sartori
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