Succession Management: The Definite 'Do's' and Detrimental Don’ts, by Ashnie Muthusamy
On April 24th 2001, Larry Johnston informed his superiors at General Electric that he was resigning.
This was no ordinary resignation, as he was the CEO of GE’s $6bN flagship, their appliance business. That afternoon Jack Welch flew with Johnston to the head office in Kentucky to break the news.
At that meeting, Welch was able to announce that "Larry is leaving and Jim Campbell has been appointed to replace him. Lyn has been promoted to take Jim’s place and Len has been promoted to replace Lyn." All from inside the company, and all in one day!
And the division continued to perform brilliantly.
If it happened to you
What would happen to your company if your top salesperson resigned or retired?
What would happen if a key process manager were incapacitated and could no longer work?
What would happen if a critical executive passed away?
Like many companies I have worked with, attending to succession is not taken seriously, nor can it be addressed easily.
"The simplicity of succession planning is no longer relevant in the current context of a volatile, uncertain, complex and ambiguous world," explains the author of this very practical book, Succession Management. When life was more predictable, and staff stayed with a company for decades, planning made sense. That has not been the case for at least the last thirty years.
Succession management, on the other hand, is a dynamic process. Jobs change and succession for the role you have identified is a moving target. Succession management looks at multiple options and takes a holistic view of all key positions, not only the next CEO. Rather than formulaically identifying two people for a role, succession can come from a range of people with potential from any part of the business.
To achieve this pool of potential successors, the company needs to actively and specifically develop individuals and monitor their progress.
"The key to succession management," Muthusamy explains, "is continuity… the proper identification and placement of the right calibre people in the correct jobs to ensure that the strategic objectives of the organisation can be met." Whereas succession management is a process, succession planning is an event that ends when the board signs off on the document.
Myths and truths
Many myths surround succession management. These start with the notion that there is one perfect approach, when in fact the approach that works for your organiSation is the right one.
Another is that succession management is about replacing people when it should be focused on responding to changing business requirements.
Another myth is that succession management should address every role in the organisation (which is an unnecessarily exhausting task) rather than focusing on critical and specialist jobs that cannot be interrupted.
An important starting point for a succession management process is to identify the business case for investing time, energy, and money. What would be the effect of a leadership vacancy on business relationships? How would business continuity be affected?
Assess and strategise
An assessment of the risks the company will face will place this issue rightfully in the company’s strategic agenda. It may be a low-level concern in which case it can be shelved, or it could be – and usually is – a ticking time-bomb that requires executive attention and a commitment of resources.
The Corporate Executive Council reports that effective succession strategies impact profit outcomes by a remarkable 12%!
Recruiting from beyond the company has many risks, especially at senior level, and where a fine understanding of the company’s culture is critical. This explains why about 90% of CEOs of Fortune 500 companies are promoted from within.
This places a great responsibility on the development aspect of the succession management process.
A good start to your succession management initiative would be the identification of the company’s roles that require scarce skills.
You also need the facts on the percentage of critical roles that have been replaced from within, or that could be if required in the future. Understanding these issues, as well as your alignment with the employment equity requirements will guide your initiative.
With a fact-based understanding of the potential risks to business success, it is easier to get executive involvement in ‘talent sessions’ to review successor progress against development needs.
It is not only the risks of not attending to succession management that should drive the commitment; it is also the positive benefits of implementing an effective process. These benefits range from engaging staff in their development and allowing them to know of the possibilities that could be theirs. It is not uncommon for a staff member to tender their resignation, only to be told too late of the exciting opportunities the company had for them.
In 1998, after a year-long study, McKinsey researchers reported that a "war for talent" was underway. Organisations’ future success would depend on how well they could attract, develop, and retain talented employees who are an increasingly valuable asset, in ever higher demand.
This book, with its step-by-step guide and South African focus, is a good place to start.
Readability Light -+--- Serious
Insights High --+-- Low
Practical High +---- Low
- Ian Mann of Gateways consults internationally on leadership and strategy and is the author of Executive Update. Views expressed are his own.