M360 TERM PAPER ON

CORPORATE SUCCESSION PLANNING

SUBMITTED BY:
Y.Yeshwanth Reddy (10351)

T. Monika
(10352)

C.D Haripriya
(10353)

Sudarshan Reddy (10354)

Phani vinay (10355)

ABSTRACT

Succession 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. It involves having senior executives periodically review
their top executives and those in the next lower level to determine several backups for each
senior position. . Organizations will need to create pools of candidates with high leadership
potential. A succession plan clearly sets out the factors to be taken into account and the process
to be followed in relation to retaining or replacing the person. It studies about the process of
succession planning, problems and diverse effect of succession planning.
 CORPORATE SUCCESSION PLANNING

What is Succession planning?

Succession planning is a systematic approach to:

 Building a leadership pipeline/talent pool to ensure leadership continuity.

 Developing potential successors in ways that best fit their strengths.
 Identifying the best candidates for categories of positions.
 Concentrating resources on the talent development process yielding a greater return
on investment.

Effectively done, succession planning is critical to mission success and creates an

effective process for recognizing, developing and retaining top leadership talent.

There are several factors typically found in successful succession planning

initiatives:

 Senior leaders are personally involved.

 Senior leaders hold themselves accountable for growing leaders.
 Employees are committed to their own self-development.
 Success is based on a business case for long term needs.
 Succession is linked to strategic planning and investment in the future.
 Workforce data and analysis inform the process.
 Leadership competencies are identified and used for selection and development.
 A pool of talent is identified and developed early for long term needs.
 Development is based on challenging and varied job-based experiences.
 Senior leaders form a partnership with human resources.
 Succession planning addresses challenges such as diversity, recruitment and retention.
Effective succession planning process:

 A graphic presentation of six step process of effective succession planning.

1. Link strategic and

workforce planning decision.

2.
CLEAR Analyze gaps
6. Monitor and
PROGRAM
GOALS
LEADER
COMMITMENT

SUCCESSIO
EMPLOYEE
COMMITMENT TO N PLANNING 3. Identify talent
LEARNING

5. Implement 4. Develop succession

succession strategies. strategies.
First step:

Link strategic and workforce planning decisions.

It involves:

 Identifying long term vision and direction.

 Analyzing future requirements for products and services.
 Using data already collected.
 Connecting succession planning to values of organization.
 Connecting succession planning to the needs and interests of senior leaders.
Second step:

Analyze gaps.

It involves:

 Identifying core competencies and technical competency requirements.

 Determining current supply and anticipated demand.
 Determining talents needed for the long term.
 Identifying “real” continuity issues.
 Developing a business plan on long term talent needs, not on position replacement.
Third step:

Identify talent pools.

It involves:

 Using pools of candidates Vs development of positions.

 Identifying talent with critical competencies from multiple levels –early in careers
and often.
 Assessing competency and skill levels of current workforce, using assessment
instrument(s).
 Using 360° feedback for development purposes.
 Analyzing external sources of talent.

Fourth step:

Develop succession strategies.

It involves:

 Identifying recruitment strategies:

- Recruitment and relocation bonuses .
- Special programs.

 Identifying retention strategies:

 - Retention bonuses
- Quality of work life programs

 Identifying development/learning strategies:

-Planned job assignments.

- Formal development.
- Coaching and mentoring.
- Assessment and feedback.
- Action learning projects.
- Communities of practice.
- Shadowing.

Fifth step:

Implement succession strategies.

It involves:

 Implementing recruitment strategies (e.g., recruitment and relocation bonuses).

 Implementing retention strategies (e.g., retention bonuses, quality of work life
programs).
 Implementing development/learning strategies (e.g., planned job assignments, formal
development, Communities of Practice).
 Communication planning.
 Determining and applying measures of success.
 Linking succession planning to HR processes.
– Performance management.
– Compensation.
– Recognition.
– Recruitment and retention.
– Workforce planning.
 Implementing strategies for maintaining senior level commitment.
Sixth step:

Monitor and evaluate.

It involves:

 Tracking selections from talent pools.

 Listening to leader feedback on success of internal talent and internal hires.
 Analyzing satisfaction surveys from customers, employees, and stakeholders.
 Assessing response to changing requirements and needs.
Why is Succession Planning Important?

1. ASSESSING FUTURE NEEDS:

 This process is vital to the success of the organization because the individuals
identified in the plan will eventually be responsible for ensuring that the company is
able to tackle future challenges.

Example:

 Include such a person who is suddenly and unexpectedly unable or unwilling to

continue their role within the organization.
 Accepting an approach from another organization or external opportunity which will
terminate or lessen their value to the current organization.
 Indicating the conclusion of a contract or time-limited project.
 Moving to another position and different set of responsibilities within the
organization.
2. INDIVIDUAL DEVELOPMENT NEEDS:

 The '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.
 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.

3. COMPETITION:

 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.

4. AN AID TO PLANNING PROCESS:

 A succession plan clearly sets out the factors to be taken into account and the process
to be followed in relation to retaining or replacing the person.
 Succession management systems provide an enabling solution for the planning and
process – going through all possible scenarios and providing the best solutions and
shortest paths to succession.
 Having a decision making body and succession planning process is critical.
 However, software can help make this process consistent, automated and fair.
 Succession planning teams can play “what if” scenarios to ensure that they are
thinking of all possibilities.
 They can search for talent throughout the organization – in different organizations
and countries. They can also ensure a continual and full pipeline of talent.
IMPLEMENTATION OF SUCCESSION PLANNING:

1. REVIEWING TALENT:

 The purpose of the talent review is to figure out the talent required to implement the
business strategy and constantly strengthen the talent pool.
 The talent review and planning process helps us identify talent for emerging roles in
the organization.

2. PLANNING THE PROCESS:

 The bench strength of current and future leaders gives a competitive edge to every
Organization.

3. CLEAR FOCUS:

 It is a known fact that while most management is interested in developing a pool of

successors for key positions, they find it a difficult task to ensure the success of their
efforts.
  Succession planning can get very complicated.
 Organizations must therefore have a clear focus.

4. THE TRAINING DIFFERENCE:

 Training plays a key role in succession planning.

 It is imperative to strategize, design and implement programmers’ to train future
leaders.

5. JUST-IN-TIME SUCCESSION:

 Then there’s just-in-time succession, which maps existing competencies of the staff to
fill an important position.
 Succession planning software uses competency analysis which lets companies
understand the demand side of the equation with what their staff has to offer.
 “Succession planning is not an issue of a position, you can plan for two or three years,
but by that time the to-be-successor may have already left the organization.
DIVERSE EFFECT OF SUCCESSION PLANNING:

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.

A sample succession chart

ADVANTAGES OF SUCCESSION PLANNING:

 Helps you take a more strategic approach to leadership development, employee skill
assessment and perhaps even more important as baby boomers retire – preserving
critical organizational knowledge.
 With incumbents ready to go any time an expected or unexpected change occurs in
your organization, you can ensure business continuity at all levels 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.
 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 company’s recruiting and hiring costs over the long – term.

SUCCESSION PLANNING STRATEGIES OF DIFFERENT COMPANIES:

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.

For seamless transfer of management quality from one leader to other leader, the
company needs proper succession planning. The smooth continuation of a business depends on
effective succession planning. It is a proactive approach to create a talent pool of candidates with
the required potential and competencies to take the high positions in future and help in the
growth of the organization. In fact, it determines how business will be run once the leader or key
person leaves.

  IT majors are doing their succession planning to maintain leadership position in the
future.

Wipro: 

 Another 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
programmers’ targeted towards different levels.
  Wipro has programs like ‘entry level program’, ‘New leaders program’, ‘Wipro
leader’s program’, ‘Business leaders program’ and ‘Strategic leaders program’.

Tata Consultancy Services (TCS): 

 TCS has a systematic process for succession planning. TCS leadership programs
are focused around ‘practices’ (industry verticals 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.

General Electronics (GE):

 Succession planning is an ongoing, rigorous and challenging process at GE.

 GE adopted succession planning right from the mid-1900s. At GE, succession

planning was not confined to only the top management, but was applied across all
tiers of management. 

 The managers of GE's various businesses were encouraged to identify potential

candidates and fulfill their development needs, and transform them into efficient
leaders ready to take up top jobs at the company.

 As part of CEO succession planning, GE shifted its key candidates from one
business to another to enable them to gain experience across all its businesses.
 The company used mainly annual performance reviews for identifying potential
candidates, until the early 1980s.

 However, after Welch took over as the CEO, the succession planning process at
GE became a more systematic process, with the use of various analytical tools
and the involvement of the top management in leadership development and
succession planning. 

 Since early 1980s, the annual Human Resource Reviews (popularly called
Session C) had been at the heart of succession planning at GE.

 The Session C process was reportedly given as much importance as financial

monitoring in GE.

The CEO succession planning (GE):

 The succession planning by Welch for his post had started way back in 1994,
when Welch, with help of Bill Conaty and Chuck Okosky both vice-presidents,
HR and Executive Development, created a list of essential qualities, skill and
characteristics an "ideal CEO" should posses.

 The list mainly included elements such as :

 Integrity and values.

 Vision.

 Leadership.

 Experience.

 Edge.

 Stature.

 Fairness.

 Energy.

 Balance.

 Insatiable appetite for enhancing knowledge.

 Courageous advocacy. (and)

  Most importantly, stomach to play for high stakes and
being comfortable operating under a microscope.

Ranbaxy:

 The CEO succession planning, 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).

 Parvinder Singh (Ranbaxy's promoter, also CEO) believed in running the

business professionally and handed over the company's management to D S Brar,
a professional (and a non-family member), amidst stiff opposition from family
members.

 Then Brar transformed Ranbaxy from a small Indian pharmaceutical company

into a research based global pharmaceutical major.

 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.

One company which seems to have taken succession planning seriously is Lucent Technologies.
Lucent has divided succession planning into two phases: identifying leadership requirements and
the talent available and in the next phase talent development. Most senior leaders develop their
own succession planning process. Each senior executive typically identifies three possible
successors.
Lucent evaluates possible successors on two primary criteria: Performance and the ability to
develop and adopt. Some of the important attributes, the company looks for in future leaders
Include:
• Ability to think globally
• Ability to focus on results
• Ability to perform tasks and projects with speed
• Customer orientation
• Concern for people
• Respect for people
• Ability to inspire trust in employees.
A dedicated department at Lucent assumes responsibility for succession planning. This
department develops strategies, collects feedback and makes ongoing improvements in the
system. Senior executives spend more time on identifying and developing potential successors.
High potential managers are given stock options.

STRATEGIC ISSUES IN SUCCESSION PLANNING

At a strategic level, succession planning is probably the most important Human Resources (HR)
risk. The consequences of appointing wrong successor can be much worse than slow growth or
decline in market capitalization. Take the case of Westinghouse. A series of wrong CEOs
virtually drove this company, once rated on par with General Electric to bankruptcy.
Unfortunately, many companies do not take succession planning seriously. The Boards due to
friendship, politeness or inertia are reluctant to broach the subject. Ad hoc succession plans lead
to crises. It is thus no coincidence that many CEOs in major US companies have failed to last
even three years in recent times. These include Douglas Ivester of Coke, Robert Annunziata of
Global Crossing, Durk Jaeger of Procter & Gamble, Dale Morrison of Campbell Soup and Jill
Barad of Mattel. In India, companies like Thermax have faced crises because of poor succession
planning.

The Coke example

Choosing a wrong successor is a mistake all CEOs want to avoid. Unfortunately, the track record
in this regard of even the most successful CEOs is disappointing.

Consider the legendary CEO, of Coke, Roberto Goizueta:

The aristocratic Cuban had trained his successor, Doug Ivester so well and made it clear to one
and all long before his death who his successor was. When Goizueta died of cancer, Ivester took
charge in what the markets perceived to be one of the smoothest transitions ever in a Fortune500
company. The Economist commented: 1 “Robert Goizueta will be severely mourned at Coca-
Cola … but he might not be missed. Strangely enough, that would be one of the greatest
complements a departed chief executive could receive… Douglas Ivester, Coke’s 50-year old
president and chief operating officer, is now expected to succeed Goizueta and to carry out the
same strategy that has served Coke so well. Goizueta deserves the credit for this smooth
transition. He was responsible for succession at Coke, and his plans had been laid well in
advance.” Yet, a couple of years later, Ivester was found unfit for the task and had to resign. An
accountant by training, Ivester had a flair for numbers and had the reputation of a street fighter,
unlike Goizueta, who had been a strategic thinker and delegator. When they were together,
Ivester complemented Goizueta well. But after becoming the CEO, Ivester found it difficult to
manage some sensitive issues and by early 2000, had resigned. Looking back, Ivester’s number
crunching, financial engineering and technical skills were exceptional but his people orientation
and leadership skills were lacking when they were needed most. Take the scare in Belgium when
hundreds of people became sick after drinking Coke. Ivester did not go there for a week, a
reflection of his inability to appreciate the magnitude of the crisis. Similarly, Coke’s failed
merger deal with Orangina was mostly due to Ivester’s failure in dealing with anti Americanism
in France. Ivester also seemed somewhat out of place while handling a racial discrimination suit.
Quite clearly, Goizueta had trained his successor well but had chosen the wrong successor in the
first place.

The Indian Scenario

The problems associated with succession planning are particularly acute in India, where family
managed businesses proliferate. Such companies throw discretion to the winds and spend time on
dividing the family silver among the next generation rather than in grooming the right person to
take over the top job. Family managed companies would do well to remember that the chosen
successor should have the necessary education and skills and be made to work his or her way up
the management to gain the maturity needed to appreciate the privileges and responsibilities
involved. Alternatively, they should be bold enough to appoint a professional manager, when
there is no suitable candidate within the family. Some of the more progressive Indian business
houses like Ranbaxy, the Murugappa group and the Eicher group have demonstrated a high
degree of professionalism in this regard. Many Indian companies are now beginning to
appreciate the importance of planning successions carefully. At L&T, one of India’s leading
engineering companies, many of the company’s senior managers are expected to retire in the first
few years of the new millennium. CEO A M Naik has been attempting to deal with the situation,
naming the top 10 percent of his executives as stars and chalking out a fast track career path for
them. Naik hopes that by 2005, “L&T will be in strong hands”. Before initiating the program,
L&T employed the services of an HR consulting firm to list the positions falling vacant and the
required competencies. L&T now fills vacant posts with internal candidates wherever possible.
In some cases, however, it compares the internal candidate with an external candidate to judge
his or her readiness to move into the new job.

THERMAX CASE:

The problems which Indian companies face while managing succession planning are well
illustrated by one of India’s most people oriented employers Thermax. The Pune-based company
has been known to take good care of its employees, making it a favorite employer among many
of India’s premier technical institutions. Yet, the company was facing a major crisis at the
beginning of the new millennium. Roughly five years after founder Rohinton Agha passed away,
the entire board of governors had to resign en masse as the company struggled to compete in a
changing business environment. Thermax’s market capitalization declined sharply from Rs.990
crore (on July 22, 1996) to Rs.186 crore (on April 4, 2000). Agha had nurtured and grown
Thermax over a long period of time but had not paid enough attention to succession planning.
His wife, Anu Agha recalled: “My husband was like an ostrich. He never liked to discuss
anything. Once, he vaguely talked about taking over as non-executive chairperson. He didn’t
discuss a succession plan definitively. But since Abhay Nalwade was the only designated
executive director, he appeared to be his obvious choice”. Nalwade who was appointed as
Managing Director after Agha’s death recalled: “It was so sudden that I didn’t have the time to
think. I feel if succession had occurred systematically, it would have been better. Rohinton never
discussed that I would be the successor he had in mind. It’s one thing to be a peer and another to
be a boss.” Now a new Thermax board with company veteran, Prakash Kulkarni as managing
director faces the challenge of giving the company a new direction.
Why succession planning fails?
 High potential candidates are arbitrarily identified.
 The qualities that a successful business unit head has and what he should have as a CEO
after promotion are different. Business unit heads may not have strategic vision or the
ability to communicate effectively with external stakeholders.
 Many executives make excellent No. 2s and act as a fine complement to their CEOs but
fail miserably when they move into the corner office.
 The designated replacement may be far from ready to take over. The evaluation may be
more positive than what it should be.
 Promotions are made keeping in view the organizational needs, but totally ignoring the
employee aspirations.
 The process lacks transparency and confuses talented people who may decide to leave.
 Outside hires are brought in indiscriminately without explaining the rationale to insiders.
 When one person leaves, instead of moving decisively and appointing a successor, the
portfolio is split among two people at the next level, leaving people totally confused.

Guide lines for effective succession planning:

 Succession Planning should be customized to suit the needs of the organization.
For example, if the skills necessary to manage the company in the changed environment
are not available in house, there may be no option but to bring in an outsider.
 Succession planning should be driven by the line function and HR executives.
 Succession planning should develop key candidates, in anticipation of future openings.
 Succession planning is not just selection. Development through job rotation, mentoring
and formal training programs is equally important. Succession planning must take into
account the culture of the organization. Succession planning must be consistent with the
future strategic direction of the company.

Guide lines for Board:

According to the famous management consultant, Ram Charan, boards would do well to
remember the following:
• The whole board must be fully involved in the succession planning exercise.
• Detailed criteria for the new CEO must be specified.
• Not only insiders but also external candidates must be considered, even at the risk of offending
the current CEO.
• Decisions should be made on the basis of personal interaction and no paper reports.
• The board should be prepared to spend sufficient time with potential candidates followed by
free and frank discussion about each of them.
• The board should not exclude anyone from the race and must make the final choice a few
months before the current CEO will retire.
• The board should never make the mistake of appointing two people as successors, say one as
chairman and the other as CEO.
• The board should view succession planning as an ongoing exercise and get going years in
advance of the actual transition.

CONCLUSION
Succession planning is a key strategic issue that needs the time and attention of top management
on an ongoing basis. A proactive approach is far more desirable than a sudden approach. It is
heartening to note that some Indian companies are taking succession planning more seriously
than others. Especially in public sector organizations, succession planning has been a disaster.
CEOs have changed frequently and not been allowed to settle down into their jobs. Many of the
appointments have been guided by political considerations. The fact that quite a few of the top
jobs at PSUs are either unfilled or manned by acting CEOs is a clear indication of the lack of
importance attached to succession planning. The crisis at Unit Trust of India (UTI) in recent
times has much to do with a totally ad hoc approach towards CEO succession planning. In many
Indian companies, CEOs spend more time protecting their turfs than in developing the next line
of leadership. Unless this attitude changes, many Indian companies may see themselves facing
crises from time to time.
REFERANCE

 WWW.ICMRINDIA.ORG
 WWW.VEDPURISWAR.ORG
 JOURNALS
 STRATEGIC ISSUES FOR SUCCESSION PLANNING