It is observed that succession planning in familybusinesses is generally based on the life expectancy of the Chairman
On Five Steps of Effective Succession Planning
William J. Rothwell, Professor of Workforce Education and Development, Department of Learning and Performance Systems, University Park Campus, The Pennsylvania State University
Step 1 is to ‘Get commitment’. That means the organization’s leaders must be committed to systematic succession planning and not fall victim to the old problem that “when times are good, we don’t have time for succession planning and when times are bad, we don’t have money for succession planning.” In that first step, the organization’s leaders must establish the measurable goals for the program, clarify roles, and establish an accountability system. Step 2 is to ‘Clarify the work / people now’. It is tough to plan for succession if it is not clear what people do and what kind of people do that work well. That requires up-to-date job descriptions and competency models for all levels. Step 3 is to ‘Measure performance and behaviors’. That means the performance management system measures people according to the results that people are to achieve in their jobs and the behaviors linked to successful performance as identified by competency models. Step 4 is to ‘Clarify the work / people in the future’. It is at this stage that the job descriptions and competency models are aligned with the organization’s strategic objectives for the future. What will people be doing in their jobs in the future, and what kind of people will be needed to do that? Step 5 is to ‘Assess potential’.
On Succession Planning in Family Run Businesses
Kavil Ramachandran, Thomas Schmidheiny Chair Professor of Family Business and Wealth Management, Indian School of Business (ISB)
Talking of CEO succession planning fitting in the overall organizational plan in family businesses, these are two different things particularly if the CEO is non-family. This is because the CEO change is not driven by organizational requirements but family dynamics, resource availability and contextual demands. It is observed that succession planning in family businesses is generally based on the life expectancy of the Chairman (generally the owner). This practice hampers leadership development even in the context of multiple generations unless where there is a fixed age for retirement. The problem is that we see ‘retirement’ as the end of the journey - freedom, access to funds, excitement, relevance, et al. Succession planning should include a plan for the person retiring too. We do not make a value judgment of the individual’s capabilities the day he turns 65 or so; they may need support in defining a new role.
On Evaluating Capabilities of Potential Candidates
Prof. David Larcker, Stanford Graduate School of Business, & Stephen A. Miles, Vice Chairman at Leadership Advisory Firm Heidrick & Struggles
The Board uses advisors for everything else - compensation, audit, risk, et al. Yet, for the most important decision, many Boards opt to go alone. What makes this even scarier is that they let it go alone often without much experience or expertise because picking a CEO is not something most people do often. First, they should hire a world class external advisor to help them establish the criteria for the next CEO and then assess the internal candidates against those criteria providing them with a calibrated view on how good the talent is relative to the external market place. We suggest the parameters need to be developed looking forward against the needs of the company, strategy and external environment. This is more than a job description and what we call a skills and experience profile that encompasses key experiences, competencies and behavioral attributes.
Candiate’s capabilities can also be adjudged through job rotations, which help candidates to develop ‘breadth’ and see the company more holistically. It is a powerful tool in developing leaders. It does not have to just be rotations; a lot of experiences can be gained by using project based work as well or having a person lead the strategic planning process. What is important is that the company should think about developing candidates as broadly as possible.