Businesses of all sizes are now under pressure to have succession plans in place. But how can you ensure you are prepared to fill a space? Virginia Matthews investigates.
Last month’s resignation of Liberal Democrat leader Charles Kennedy – and the subsequent succession race – caused a frenzy that would be rare in the business world. Yet succession planning is climbing up the business agenda as thousands of organisations get to grips with a downsized workforce that leaves no room for unexpected absence, let alone sudden departures like Kennedy’s.
Legal compliance, increased corporate governance and more volatile markets have also forced organisations to place more emphasis on succession.
But it’s not just a case of who will fill the shoes of a departing chief executive. Organisations also need to consider issues as diverse as what happens when an office manager takes extended leave when their mother falls ill, or the deputy head of a department unexpectedly does a Shirley Valentine after a fortnight’s holiday in Greece.
Levels of succession planning depend entirely on the culture of the organisation behind it. At retailing giant Tesco, it encompasses not just senior board executives, but also junior managers; whereas at soft drinks firm Britvic, succession planning is seen as a tool for handling only the very top positions.
Susie Gear, a partner at consulting firm Accenture, says that succession planning is a hot issue both internally and for its clients.
“Aside from the general job mobility and the belief that jobs are no longer for life, there is the need to take an increasingly long-term view of business performance,” she explains.
“Corporates are under pressure from City analysts to both identify their future leaders and to ensure the organisation has real future value. Inevitably, much of that long-term value revolves around the strength of the CEO.”
The key to succession planning, adds Gear, is that it should be inextricably linked to overall business strategy, and should involve the whole organisation, not just HR.
Heir and a spare
So how long should an organisation plan for? Should the succession scheme be restricted to finding an ‘heir and a spare’ – as practised by monarchs of old – or should it be in force for the most trivial of eventualities?
In defiance of traditional top-tier-only talent development schemes, a growing number of business leaders, including Bill Gates – who recently asked the head of each country in the Microsoft empire for a detailed presentation on the succession plan – believe that planning for ‘what if’ should spread throughout the organisation.
Douglas Barnett, risk control strategy manager at Axa Insurance, believes that the succession plan should be seen as a high priority in these days of ‘no fat, no waste’ management and that HR should take ownership of the process.
However, Kate Banks, group talent manager at Axa, disagrees. She believes that responsibility for succession arrangements should be handed over to the managers themselves.
“If there’s a vacancy, we want our managers to look first at the succession plan but not to become slaves to it,” she says. “If the person expected to move into a role is still right for the job and they want it, then fine. If they aren’t interested, perhaps the succession plan should be torn up and a new one started.”
Where Barnett and Banks do agree is on the vital role played by people in all aspects of business continuity.
“Having the right people lined up to fill positions should be on a par with having the right terms and conditions or legal compliance,” says Barnett. “Whether it is holiday cover, sick leave, maternity, resignation or retirement, organisations need to be proactive on the issue of succession.”
And it is important to recognise that the departure of a junior member of staff could have as great an impact on some parts of the business as the resignation of a key director.
“Of course, it is vital that the next CEO of an oil company or bank is identified and groomed for succession, but that’s already understood,” says Barnett. “If you’re a young company, such as an online trader, where the key interface with the public is via mail order, then knowing who will run the mailroom if Tom walks under a bus is absolutely vital to your company and its reputation.”
Britvic, which floated on the stock exchange in December, says that each of its 3,000 staff are given an individual set of ‘personal business objectives’, which are discussed and formulated with line managers on entry to the company, and can help them move to the next rung of the ladder.
Yet the company believes that pure succession planning is of more relevance to senior management. It has recently appointed seven staff into ‘cross-functional’ roles, so they can learn about different aspects to the business on top of their own areas of expertise.
“We feel this is a reflection of the strength of the system we already have in place,” says Shaun O’Hara, Britvic’s head of talent management and learning. “To develop our senior managers or leaders of the future, we have a high-potential assessment process in place that assesses candidates against a set of differentiators specifically designed for Britvic.”
All candidates receive a feedback report, which can then help them plan their development. The successful ones enter a senior management development programme.
Traditionally, banks or retailers have kept their succession plans largely secret – fearful that by giving the nod to ambitious employees and not to the happy-go-lucky ones, they might lose a key member of the team (albeit one who was unlikely ever to receive a key to the executive washroom).
Today’s succession planning environment is far more transparent, says Barnett.
“If it’s all done in secret by a committee and your career is mapped out for you behind your back,” he says, “then you may well feel aggrieved – particularly if you learn that you are not actually part of the succession plan.”
He adds: “It must be made clear to all staff that discussion around succession is ongoing, not fixed, and that while someone may not be a key employee this time around, their role may be more pivotal, or the nature of the business radically different, by the time the next review takes place.”
Organisations also need to adapt their succession strategies as the dynamics of the business change.
“In one period, a firm may need to have a very cost-driven CEO, while in another, it may need an innovator who invests in new product development,” explains Gear. “For this reason, it is vital to have a number of individuals who could be considered CEO material, and it is important to keep the succession plan fluid rather than fixed.”
Political parties often learn the succession lesson the hard way. In the business world, plenty of forward planning and flexibility mean this needn’t be the case.
Every little helps at Tesco
At Tesco, where virtually every member of the board has worked their way up through the business, succession planning “forms an important part of the career development and training of our people at all levels”, according to Claire Peters, resourcing and training manager.
The supermarket chain has an ‘Options’ management training scheme for staff wishing to progress from, for example, general assistant to section leader. In addition, the company has a ‘Talent Spotting’ programme that is far broader and involves a career discussion for every member of staff each year. It has benefits, says the retailer, for the individual and the organisation.
“Individuals’ skills are assessed, opportunities developed and people with the right skills can be matched to the right jobs when vacancies arise,” says Peters. “At the same time, individuals can be developed to meet the needs of the business.”