Succession planning
Download as DOCX, PDF1 like960 views
The document discusses the importance of succession planning in organizations as a systematic process for identifying and developing potential leaders to ensure continuity and mitigate leadership risk. It highlights examples from corporate practices, particularly detailing McDonald's effective succession management following the sudden death of its CEO, showcasing the necessity of preparedness for leadership transitions. Key factors for successful succession planning are also presented, emphasizing the role of leadership commitment, tailored development strategies, and a focus on internal talent management.
More Related Content
Similar to Succession planning (20)
Succession planning
- 1. Drop dead Succession Planning: a Case Study Popun Patro Diptimayee Sahoo INTRODUCTION:- Good succession planning is not just looking at who is next in line for a slot, but looking at people early in their careers and determining what kind of training they need to become leaders. Succession planning is the process of identifying and developing suitable team members who are able to replace key positions as and when required. Definition:- Succession planning can be defined as a purposeful and systematic efforts made by an organization to ensure leadership continuity, retain and develop knowledge and intellectual capital for the future, and encourage individual employee growth and development. (Schein, 1997; cited in Caruso, Groehler & Perry, 2005) Succession planning increases the availability of experienced and capable employees that are ready to assume key leadership roles as they become available. It is a proactive approach to managing talent as it involves identification of high potentials for anticipated future needs and the tailored development of these people so that there is a talent pool or leadership pipeline available to meet organizational demands as they arise. Today, succession planning has become a very important leadership process and a growing number of firms have formal plans in place. In general, succession planning is the process of preparing to hand over control of the business to others in a way that is the least disruptive to the business operations and value. More recently, CEO and other key leadership departures at such companies as Enron, WorldCom, McDonald’s, Tyco International, AOL Time Warner and Kmart have underscored the importance of managing leadership risk. The management of such risk is in early identification of successor “candidates” or “high potentials” that can be groomed and given experience in understanding the larger context of running the corporation. This would insure a consistent leadership presence and help alleviate gaps that might cause a successful company to falter.
- 2. Objectives of the Study: This is an explorative study with the objectives of the paper are to focus on the effective and poor succession planning of companies and its consequences. DRIVERS FOR SUCCESSIONPLANNING:- The interest in succession planning has grown to include an understanding of “leadership” behaviors and core competencies that aspiring individuals must possess. Additionally researchers and companies have realized that “succession” value doesn’t reside only for top positions, but throughout the operations of an organization. Succession planning is the systematic effort by an organization to ensure continuity of prepared leaders to fill key positions in the near and long term. The key elements of the process allow organizations to address their top talent management challenges which in turn provide a platform for their risk management strategy. DROPDEAD SUCCESSION PLANNING:- The sudden death of a CEO can create a vacuum at the top level, leaving the organization scurrying around for a replacement. To enable smooth business continuity, some corporate entities like Aditya Birla Group, Godrej group and RPG enterprises have put in place a “drop dead succession plan”. A drop dead succession plan is one where an interim successor is ready to step in case of sudden demise or departure of a leader. LITERATURE REVIEW:- The amount of recent literature on this topic was overwhelming with much of the emphasis on creating a business case for succession planning, listing attributes of leaders, and understanding the required steps in succession planning (Burns-Martin, 2002; HR Focus, 2003; McMaster, 2002; Melymuka, 2002; Schafer, 2000; Woolf, 2001). The term “succession planning” would suggest a focus solely on “successors”, the real focus for organizations is on training and development activities for emerging leaders. “The aim of this planning is to minimize injury from the immediate and unplanned loss of the key job incubements. Succession planning goes beyond this because it focuses on proactive steps and attempts to ensure the continuity of leadership by developing internal talent through planned development activities” (Rothwell, 2002). The ultimate goal of succession planning is to “promote the best and the brightest across the corporation having the right person in the right
- 3. place at the right time for the right job” (Roberts, 2002). A 2002 study of over 150 companies by Hackett revealed that the most significant by-product of succession planning was the “best practice learning and development activities that produced significant and measurable benefits” (Hackett, 2002). A growing body of research suggests that succession planning impacts the bottom line. “Companies with above average bench strength are four times more likely to outperform their industry peers than companies with below-average bench strength” (CLC, 2001). According to top succession planning specialists such as Ram Charan and William Rothwell succession planning is not just an activity of going through the motions of filling vacancies with available recruits. It is a process of active engagement by boards and top executives who build a foundational strategy for the company and set the tone for mentoring and guiding development of managers. The approach focuses on targeted positions and doesn’t emphasize personal career development or team development (Orellano, 1997). The process is only effective if the committee or task force is diverse and open to organizational diversity (EOWA, 2003). Most companies identified as “best practice organizations for succession planning utilize this approach” (Best Practices LIC, 2003). A further review of case studies and articles that addressed the specific processes and characteristics of companies that utilized this approach and identified several “success” factors that were instrumental in the development of a succession planning program. These success factors are: 1. Organizations have senior leaders that believe development is a major leadership activity and senior leaders model this activity. 2. More organizational resources are dedicated to training and development. 3. Organizations possess a culture that has a higher tolerance for risk allowing emerging leaders to develop without severe penalties. 4. Organizational cultures stress individual ownership for development. 5. Organizations tie succession planning to other strategies that are designed to increase organizational commitment such as diversity, employer of choice, and corporate citizenship. 6. Core values and common leadership criteria shared and understood by employees. 7. Strong commitment to promoting from within. 8. Aggressive management of poor performance and behaviors that conflict with company values. 9. Compensation and other rewards are based on results and leadership behavior including self- development.
- 4. 10. Best Practice organizations perceive Human Resources as a strategic business partner. “Succession planning needs to be focused on senior management positions, starting at the top of the organization (with particular attention paid to CEO and/or Managing Director) and going at least six or seven levels down so as to include middle management positions. It is not necessary to continue down to team leader positions as these are more fluid.” (Wayne Bleakley, cited in Somerville, 2006) RESEARCHMETHODOLOGY:- RESEARCHDesign:- It includes survey and fact finding inquires of different kinds. The major purpose of this research is description of the state of affairs as it exists at present. These studies are those which are concerned with describing the characterstics of a particular individual or group. It provides more elaborate description and information. Data Collection:The study banks upon secondary sources and descriptive research for gathering the required information.Secondary data are collected from the external sources such as websites and various journals. SuccessionPlanning at Mc Donald The McDonald's Corporation is the world's largest chain of hamburger fast food restaurants, serving around 68 million customers daily in 119 countries. Headquartered in the United States, the company began in 1940 as a barbecue restaurant operated by Richard and Maurice McDonald; in 1948 they reorganized their business as a hamburger stand using production line principles. Businessman Ray Kroc joined the company as a franchise agent in 1955. He subsequently purchased the chain from the McDonald brothers and oversaw its worldwide growth. A McDonald's restaurant is operated by a franchisee, an affiliate, or the corporation itself. McDonald's Corporation revenues come from the rent, royalties, and fees paid by the franchisees, as well as sales in company-operated restaurants. In 2012, McDonald's Corporation had annual revenues of $27.5 billion, and profits of $5.5 billion. McDonald's primarily
- 5. sells hamburgers, cheeseburgers, chicken, breakfast items, soft drinks, milkshakes, and desserts. In response to changing consumer tastes, the company has expanded its menu to include salads, fish, wraps, smoothness, and fruit. A proper and well crafted succession plan can save a company from enormous risk. A bright example of this statement is shown in the succession planning of Mc Doanld’s. Though business environment is dynamic it is uncertain too. To survive in the scenario it is required to be prepared for the uncertainties well in advance in order to handle such tumult. Such a situation is faced by Mc Donald when in 2004 its former CEO Jim Cantalupo died in heart attack. Hours after death of Cantalupo and before the stock market opened, the board immediately announced the name of his successor Charlie Bell, a 44-year-old Australian who had spent his entire 28-year career at McDonald’s, as the youngest CEO and the first non-American to head the company. But three weeks to his succession he is detected of colorectal cancer. As Bell’s health became worst faster Mc Donald’s didn’t consider to look outside for a successor. There was a successor in the pipeline. Jim Skinner was promoted from Vice Chairman to CEO. Every July the board devotes a big part of the day to discussing succession down to the officer level. At every board meeting, the directors meet without the CEO and talk about succession. Finidngs: Focused on internal hiring. Planning to face uncertainties. Potential bench strength. Conclusion: There are many cases like the death of Karl Slym, former MD of Tata Motors, Chairman and CEO of Coca Cola Roberto C. Goizueta as the wakeup call for the companies to remain prepared with the bench strength. Succession planning requires a serious attention and involvement of management as any mistake can lead the organisation face massive loss and hamper in image too.
- 6. REFERENCES 1. Career Path Planning Definition and Succession Planning – Findings from 35 Top Multi- Industry Companies.2002. Best Practices LLC. www.benchmarkingreports.com. 2. Human Resources: Succession Planning White Paper. 2002. Best Practices,LLC. 3. Charan, Ram. Janunary 2001.Why do boards fail at CEO succession planning? Directorship, Vol. 27 Issue 1. 4. Burns-Martin, Tracy. Nov 2002. How To. T+D. Vol. 56 Issue 11. 5. Charan, Ram. Janunary 2001.Why do boards fail at CEO succession planning?. Directorship, Vol. 27 Issue 1. 6. Hackett Best Practices.2002. www.hackettbestpractices.com. 7. Special Report on Succession. July 2003. HR Focus. Vol. 80 Issue 7. 8. 2003 Succession Survey. July 2003. Hrfocus. Vol. 80 Issue 7. 9. An introduction to succession management 2002. Businesshr.net http://intellect.business hr.net/info/guides/succession.html 10. Orellano, T., Miller, J. April 1997. Succession Planning: Lessons from Kermit the Frog. Unpublished white paper: SHRM. 11. Rothwell, William J. 2001. Effective Succession Planning. New York:AMACOM. 12. Roberts, Bill. November 2002. Matching Talent with Tasks. HR Magazine. Vol. 47. 13. Rothwell, William J. May/June 2002. Putting Successinto Your Succession Planning. Journal of Business Strategy. Vol. 23 Issue 3.