Business Case For Succession Planning


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Ensuring the whole management team of a firm identify the impact of properly crafted succession plan: The effects of its presence and absence on business continuity and competitiveness.

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Business Case For Succession Planning

  1. 1. Business Case for Succession Planning Dr. Elijah Ezendu FIMC, FCCM, FIIAN, FBDI, FAAFM, FSSM, MIMIS, MIAP, MITD, ACIArb, ACIPM, PhD, DocM, MBA, CWM, CBDA, CMA, MPM, PME, CSOL, CCIP, CMC, CMgr
  2. 2. Learning Objectives At 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.
  3. 3. “A good plan is like a road map: It shows the final destination and usually the best way to get there.” - H. Stanley Judd
  4. 4. 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
  5. 5. “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
  6. 6. 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.
  7. 7. C-Level Succession Planning This focuses on identifying and preparing pool of potential successors for filling key positions at the top management echelon.
  8. 8. 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.
  9. 9. “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
  10. 10. 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.
  11. 11. 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.
  12. 12. 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.
  13. 13. 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.
  14. 14. The Dilemma of Focusing on Only Financial Capital Total Market Value Financial Capital Intellectual Capital
  15. 15. 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.
  16. 16. “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
  17. 17. “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
  18. 18. 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.
  19. 19. 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.
  20. 20. Current Changes in Nature of Work • Content • Structure • Process • System • Flow Dynamics
  21. 21. 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
  22. 22. 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
  23. 23. 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
  24. 24. 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
  25. 25. 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
  26. 26. STEEPLED Environmental Factors • Social Factors • Technological Factors • Economic Factors • Environmental (Ecological) Factors • Political Factors • Legal Factors • Ethical Factors • Demographic Factors
  27. 27. Social Factors • Media views • Tradition • Values • Norms • Attitudes & Opinions • Lifestyle • Work-Week • Social Events & Influences • Religious beliefs • Roles
  28. 28. Technological Factors • Technology maturity • Intellectual Property • Energy • Biotechnology • Innovation Potential • Research & Development • Information Systems • Communication Systems • Manufacturing Capacity
  29. 29. 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
  30. 30. Environmental Factors • Environmental Impact • Climate Neutrality • Clean Energy • Pollution • Triple Bottom Line • Green Branding Issues • Waste Disposal • Recycling • Sustainable Development
  31. 31. Political Factors • Pressure Groups & Lobbying • International Wars • Internal Conflict • Government Term • Devolution of Power
  32. 32. Legal Factors • Employment Law • Health and Safety Law • Competition Law • Regional Legislation • Investment Law
  33. 33. Ethical Factors • Reciprocal Responsibilities • Responsibility to Host Community • Good Faith • Universal Rules
  34. 34. Demographic Factors • Household Patterns • Ethnic Mix • Educational Levels • Age Distribution • Number of People Within Working Age Group • Net Inward Migration
  35. 35. 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.
  36. 36. “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
  37. 37. 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.
  38. 38. 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
  39. 39. 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
  41. 41. 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 Results Through 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 commitment As 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.
  42. 42. The program Motorola’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.
  43. 43. 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.
  44. 44. 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
  45. 45. Dr Elijah Ezendu is Award-Winning Business Expert & Certified Management Consultant with expertise in Interim Management, Strategy, Competitive Intelligence, Transformation, Restructuring, Turnaround Management, Business Development, Marketing, Project & Cost Management, Leadership, HR, CSR, e- Business & Software Architecture. He had functioned as Founder, Initiative for Sustainable Business Equity; Chairman of Board, Charisma Broadcast Film Academy; Group Chief Operating Officer, Idova Group; CEO, Rubiini (UAE); Special Advisor, RTEAN; Director, MMNA Investments; Chair, Int’l 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; Lead Consultant/ Partner, JK Michaels; Turnaround Project Director, Consolidated Business Holdings Limited; Technical Director, Gestalt; Chief Operating Officer, Rohan Group; Executive Director (Various Roles), Fortuna, Gambia & Malta; Chief Advisor/ Partner, D & E; Vice Chairman of Board, 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; Country Manager (Nigeria) & Adjunct Faculty (MBA Programme), Regent Business School, South Africa; Adjunct Faculty (MBA Programme), Ladoke Akintola University of Technology; Editor-in-Chief, Cost Management Journal; 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 Fellow of Professional Institutes in North America, UK & Nigeria. He is Innovator of Corporate Investment Structure Based on Financials and Intangibles, for valuation highlighting intangible contributions of host communities and ecological environment: A model celebrated globally as remedy for unmitigated depreciation of ecological capital and developmental deprivation of host communities. He had served as Examiner to Professional Institutes and Universities. He had been a member of Guild of Soundtrack Producers of Nigeria. He's an author and extensively featured speaker.
  46. 46. Thank You