An Assignment on

Succession Planning

Submitted by
Shayla Khanom
Roll: 158 (18th Batch)
Section: A (HRM)

Submitted To
Dr. Md. Mosharraf Hossain
Professor

Department of Management
Faculty of Business Studies
University of Dhaka

Date of Submission: July 18, 2016

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Introduction
Succession planning is one of the most critical functions of an organization. This is the process
that identifies the critical and core roles of an organization and identifies and assesses the
suitable candidates for the same.
Succession planning is an ongoing process that is heavily influenced by changes in the internal
and external environments and the strategic direction of the department. Accordingly, positions
identified as critical can and will change over time as risk factors and conditions change.
The succession planning process ramps up potential candidates with appropriate skills and
experiences in an effort to train them to handle future responsibilities in their respective roles.
Succession planning is applicable for all critical roles in the organization. The upper
management of each practice or department is responsible of coming up with a suitable
succession plan for each core position under his or her department.
Today, succession planning requires more than just an organizational chart showing who holds
what job within the enterprise. Best practice organizations use succession planning to develop
and maintain strong leadership and to ensure that they address all the skills and competencies
required for today's business environment. Succession planning can also be an extremely
powerful tool in motivating and retaining top leadership.

Definition
Succession planning is a type of planning where organizations identify internal employees as
potential candidates for filling future vacancies that may arise within the organization and start
training them well ahead of time to perform those roles.
Succession planning can be defined as the process of identifying critical roles in a company and
the core skills associated with those roles, and then identifying possible internal candidates to
assume those jobs when the incumbents leave. In addition, these candidates need necessary
training and development. Not all roles are critical and not all will need clearly defined

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succession plans. Key leadership roles or positions that are historically difficult to fill are good
starting points for succession planning.
Succession planning is a process for identifying and developing internal people with the potential
to fill key business leadership positions in the company. Succession planning increases the
availability of experienced and capable employees that are prepared to assume these roles as they
become available. Taken narrowly, "replacement planning" for key roles is the heart of
succession planning. Effective succession or talent-pool management concerns itself with
building a series of feeder groups up and down the entire leadership pipeline or progression
(Charan, Drotter, Noel, 2001)
Succession planning ensures a continuous supply of highly qualified candidates to fill critical
positions in the New Brunswick Public Service. It is a systematic process for:
Identifying critical positions that are instrumental to achieving strategic and operational
goals;
Anticipating gaps in those positions due to retirements and other factors;
Defining the qualifications and competencies required to perform successfully in the
positions;
Implementing focused strategies to attract and develop pools of qualified candidates who
will be ready to compete for critical positions as they become vacant;
Enabling individual employees to become the best they can be and helping them to get
ready for emerging opportunities;
Facilitating the timely transfer of knowledge from incumbents to successors; and
Ensuring that supportive strategies and processes are in place to retain and fully engage
employees.

Objectives of Succession Planning

To identify and proactively plan for critical work force positions, by developing a pool of
potential successors and encouraging a culture that supports knowledge transfer and
employee development.
To build human resource programs that attract and retain qualified individuals to the NB
public service.

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 To implement a framework that identifies the competency requirements of critical

positions, assesses potential candidates and develops required competencies through
planned learning and development initiatives.

Benefits of Succession Planning

From succession planning one can derive such benefits:
Aligning strategic goals and human resources to enable the right people in the right
place at the right time to achieve desired business results;
The development of qualified pools of candidates ready to fill critical or key positions;
Providing stability in leadership and other critical positions to sustain a high-performing
public service and ensure the uninterrupted delivery of services and programs to New
Brunswickers;
Identifying workforce renewal needs as a means of targeting necessary employee training

and development;
Helping individuals realize their career plans and aspirations within the organization;
Improving employees ability to respond to changing environmental demands, and
The opportunity for timely corporate knowledge transfer.
It serves as contingency planning and keeps the organization well prepared for any
sudden attrition that may happen and reduces the impact of losing key employees to a

great extent
By insisting on succession planning, managers get to identify various skill-sets among the
team members and their strengths come to light
Also, employees who are identified as successors based on the skill-sets they possess can
be groomed well to handle the relevant positions, and any skill-set that is lacking in the
employee can be developed by providing appropriate training and opportunities
Employees get to have a well-defined road map of their career and it serves as a
motivation factor for them to perform even better
Employees who get to understand that their organization has future plans for them, will
tend to stay with the organization for longer time
Internal employees already have a good understanding of the organization and its goals.
Thus, it saves a considerable amount of time and cost for the organization in hiring and
inducting new candidates for these positions
Overall, it creates a very positive atmosphere within the organization and leaves
employees feeling extremely satisfied in terms of career progress and highly motivated.
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 An ongoing supply of well trained, broadly experienced, well-motivated people who are
ready and able to step into key positions as needed.
A cadre of desirable candidates who are being integrated into the company with positive
goals established for them individually.
A flow of these capable people through various departments with the goals of educating
them into the culture and processes of the company.
Availability of appropriate resources within the company to conform with the future
needs of the company.
Positive goals for key personnel, which will help keep them with the company and will
help assure the continuing supply of capable successors for each of the important
positions included in the succession plan.
Defined career paths, which will help the company recruit and retain better people.
Very likely, the continuous input of ideas to improve the internal processes and
procedures of the company, as well as the opportunities to improve the offerings and
services of the company in the marketplace.

Importance of Succession Planning

Every organization will have some form of job vacancy arising in future due to attrition or
people retiring from their jobs. However, it is important for organizations to continue to function
smoothly irrespective of losing such key employees performing key roles. When organizations
have a succession plan, it makes it easier for them to handle any unforeseen attrition and
prevents the organization from being greatly impacted by such attrition.
Many organizations perform this type of talent management planning for senior management
positions so that losing a key leader would not disable the organizations regular functions.
However, succession planning would be more effective if it is performed at all levels in the
organization instead of focusing only on the top management.
For most organizations, succession planning is too often given short shrift, especially when it is
regarded as an HR-led exercise. Its hard to believe that something so vital to an organizations
sustainability is frequently done cavalierly. By utilizing high-impact succession planninga
dynamic, continual leadership optimization processorganizations are able to avoid costly
mistakes in hiring or promoting the wrong person for a key position.
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Further, by understanding the components of this integrated leadership development process,

organizations will ready themselves with a pool of talent armed with skills, attributes and
experiences to fill specific leadership positions as well as with a talent pipeline prepared to meet
emerging leadership needs.

Field of Succession Management

There is a substantial body of literature on the subject of succession planning. The first book that
addressed the topic fully was "Executive Continuity" by Walter Mahler. Mahler was responsible
in the 1970s for helping to shape the General Electric succession process which became the gold
standard of corporate practice. Mahler, who was heavily influenced by Peter Drucker, wrote
three other books on the subject of succession, all of which are out of print. His colleagues, Steve
Drotter and Greg Kesler, as well as others, expanded on Mahler's work in their writings. "The
Leadership Pipeline: How to Build the Leadership Powered Company," by Charan, Drotter and
Noel is noteworthy. A new edited collection of materials, edited by Marshall Goldsmith,
describes many contemporary examples in large companies.
Most large corporations assign a process owner for talent and succession management.
Resourcing of the work varies widely from numbers of highly dedicated internal consultants to
limited professional support embedded in the roles of human resources generalists. Often these
staff resources are separate from external staffing or recruiting functions. Some companies today
seek to integrate internal and external staffing. Others are more inclined to integrate succession
management with the performance management process in order simplify the work for line
managers.

Advantages of Succession Planning

The advantages of succession planning include the opportunity to:
Conduct a SWOT analysis of the business to determine its leadership needs now and in
the coming years
Develop a strategic Leadership Human Resource Plan that includes comprehensive
position descriptions, needs analysis and plans to bridge the gaps
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 Build relationships with and carefully study the performance and behavior of successors
over a long period of time
Provide a sense of direction, stability and expectations for all key stakeholders:
employees, customers, shareholders and vendors
Retain a critically important employee who might otherwise leave if not formally
recognized as the successor

Disadvantages of Succession Planning

Its difficult to think that there might be disadvantages to succession planning but here are some
things to consider:
Appointing the wrong person can lead to a variety of problems that result in poorer
company performance and turnover
Pulling the trigger too quickly to appoint someone only to have a better candidate appear
later on
Engaging in succession planning when the business is immature may lead to erroneous
conclusions about leadership needs
A poorly conducted succession planning process will lead to poor decisions, disharmony
and ultimately poor company performance as well
Lets take a second to look a little closer at these key advantages and disadvantages of
succession planning.

Succession Planning Pitfalls

Some important ones include:
Lack of a formal written plan for each key person or position.
A rigid, inflexible plan NOT tailored to the needs and abilities of the personnel involved.
Too long a wait for real movement/promotion, potentially resulting in the best people
leaving due to apparent inertia in the system.
Too superficial an approach, with the corresponding lack of real understanding of the
procedures, processes and requirements of each area the individual is exposed to during
the process.
Selection of unqualified or unmotivated people for inclusion in the succession plan.
Quality of the individuals selected is paramount to the success of the process.

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Process of Succession Planning

There are four main important steps in planning for succession.

Step 1: Recruitment and staffing

This is one of the key steps of the succession planning. Hiring the right and skilled employees is
the key to growing human resources in the organization. Sometimes, some companies require a
paradigm shift in order to retain in the business.
In such cases, the organization requires to let go or redefine the roles and responsibilities of the
portion of existing staff. Then, the organization hires the new blood in order to acquire the
required skills and expertise.
When it comes to succession planning, organization should always hire people, who will have
the potential to go up the corporate ladder.
Step 2: Training and development
All the organizational training can come under two categories; skills training and management
training.

Skills training: Employees are trained to enhance their skills, so their day-to-day work
becomes easy.
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Management training: A selected set of employees undergoes training where they are
trained to take over management responsibilities.

Step 3: Compensation and performance management

Based on their performance, the employees, who have the potential to become leaders in the
organization should be appropriately compensated.
These employees should be considered for fast track promotions and special compensation
benefits.
Step 4: Talent management
Talent management is one of the key factors that contribute for succession planning. The right
candidate will have the required level of skills in order to execute responsibilities of the new
role.
The upper management and mentors of the staff member should always make sure that the
employee is constantly enhancing his/her skills by accepting challenging responsibilities.

Typical Activities in Succession Planning

Succession planning has many activities involved. Some of these activities are sequential and
others can be performed in parallel to others.
Following are the core activities involved in succession planning.
Identification of the critical roles for the growth of the company. There are many tools
such as Pareto charts in case if you need any assistance in prioritizing the roles.
Identification of gaps in the succession planning process. In this step, the process of
succession planning is analyzed for its strength. If there are weaknesses and gaps, they
will be methodologically addressed.

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 In this step, the possible candidates for the potential role will be identified. This will be
done by analyzing their past performances as well and for some other characteristics
such as age.
All short-listed employees for potential roles will be then educated about their career
path. The employees should understand that they are being trained and their skills are
being developed in order to fill critical roles in the organization.
When it comes to training and developing people, they should be developed for the
positions that exist in the company as well as the positions (roles) that will be introduced
in the future.
Have a clear understanding of the timeline required for filling key roles. For this, an
understanding of when key roles will be vacant is necessary.
Conduct regular meetings on the succession plans of the organization.
Identify top players of every department and make necessary arrangements to keep them
in the company for a long time.
Review past succession that took place based on the succession plan and review success.
If there are issues, make necessary changes to the succession plan.

Guiding Principles
Succession planning must respect the legislative and policy provisions that ensure a consistent
and equitable approach to competency-based selection and the principle of merit. The following
guiding principles apply to succession planning:
Support the five fundamental values of the New Brunswick public service: Integrity,
Respect, Impartiality, Service and Competence;
Conduct in accordance with the Civil Service Act, its regulations and the policies
established by the Board of Management;
Strike a balance between the values of fairness, accessibility, transparency, and efficient
use of government resources for current and future needs;

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 Aligned with current and future business needs of government and departmental/agency
strategic plans;
Aligned with the goals of the Corporate HR Plan and the Executive Development
Strategy to develop current and aspiring leaders;
Candidates are assessed using methods that are competency-based and free from
favoritism;
Communication is open and transparent.

Responsibility for Succession Planning

The Deputy Minister and Executive Management Committee (EMC), in consultation with HR
Director, are responsible for guiding the succession planning process in their respective
departments and agencies and ensuring that a Succession Plan for identified positions is
developed, communicated and implemented. In some organizations, a Steering Committee has
been appointed to oversee the succession planning process.

Each organization has also

designated a Project Coordinator or Director to plan and facilitate the completion of deliverables,
including the appropriate involvement of managers and employees.
The Office of Human Resources (OHR) provides subject matter expertise and advice to
departments and agencies to assist in developing and executing their succession plans.

Succession Plan Components

A succession plan must clearly communicate a series of decisions that specify, among other
things, how ownership and management will transition when certain events occur. While
ownership transition and management succession are usually synonymous, they are not always
linked. The owner should not blur the two concepts, which involve separate and distinct
considerations.
Other key succession plan components include creating equity or equity-based incentives for key
employees and effective evaluation processesfor the plan itself and for personnel.
An effective succession plan for companies that lack outside or independent directors, should
consider adding this component to the corporate governance structure. The primary distinction
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between a succession plan and an effective succession plan is that the latter incorporates most of
these components, creating a more holistic solution. Above all, an effective succession plan must
be flexible, changing as the business evolves.

The Strategy of Succession Planning

When Business Week magazine features an article questioning why Herb Kelleher, CEO of the
very successful Southwest Airlines, has not designated and groomed a successor, it exposes a
weakness in many companies strategic thinking. The concept of succession planning has
become an important part of many companies strategic planning but not in all companies.
Too many think of succession planning as having application only in family owned companies or
in large conglomerates. In fact, succession planning should be a part of every companys
Strategic Plan - your vision of where the company will be going in the future. The reasons for
this approach are fairly obvious: If there is no succession planning process, how will the
company develop and nurture its human capital? How will you assure a continuing sequence of
qualified people to move up and take over when the current generation of managers and key
people retire or move on? How will you be able to plan for the future of the company without
some assurance that the key posts will be filled with people able to carry on and excel?
Succession planning is much more important than the time many companies devote to it would
indicate.
First, realize that one size doesnt fit all. There are different approaches which may be used,
depending on the situation in each company. In some cases, a company may have to move some
people along quickly, in order to expose them to a broad range of experiences, and possibly to
fill vacancies. In others, a deeper involvement in selected departments or disciplines may be
indicated. Some of this will depend on the culture and processes of the company. In yet other
cases, decisions about the process will depend on the individuals capabilities and competencies,
and the structure and operations of the company. In virtually all situations, your ability to educate
and promote will depend on the capabilities and strengths of the people who currently occupy the
key positions, and where they will be going in the future - what are they being groomed for?

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It may not be vital to have a succession plan for every position in the company, but certainly
there are some key areas of responsibility which must be considered. These will vary by
company and industry, but as a part of your Simplified Strategic Planning process, one important
strategic issue should be the need for succession planning for certain, defined key positions. This
issue should be revisited at least once a year, and more often if circumstances dictate.

Succession Planning in Simplified Strategic

Planning
As in the deployment and utilization of any strategic resource, the development of your key
people must be considered as you plan for the future of your company. It is certainly worth
considerable time and effort to discuss the companys needs and current capabilities thoroughly,
as a Strategic Issue, and possibly as a part of Strategies - Internal Development. If you do not
have a formal procedure for succession planning, you may want to create an Objective which
mandates the development and installation of a Succession Planning process which fits the needs
and preferences of your specific company. What do you need to do to get the best from your
people, to position and educate them so they may best contribute to the companys and their long
term success, and to assure a flow of competent, well educated and experienced people for your
future?
How long should succession planning take? Realistically, succession planning is never finished.
On a regular basis, each company must look at its needs and resources to determine where it
needs to have successors in place or in the process of learning the requisite disciplines. Each
company needs to determine how long a candidate should be involved or exposed to the training
needed. Each individual should have a concisely determined path toward the goal set for him or
her. That path may be changed as needed and as events determine, so monitoring and updating
should be a part of every succession plan.
Over what time period should you plan? To be realistic, succession must be planned years in
advance of expected needs. To properly train a successor, the firm needs sufficient time to expose
the people to the full spectrum of opportunities within the firm, as well as any desired or required
outside education/experience expected. For example, if someone is expected to be a general

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manager, the number of departments, the types and ranges of technologies and processes, and the
level of knowledge about the company procedures and policies, markets and customers,
suppliers, employees, contractors, etc., will determine the time and depth of involvement.
Additional factors, such as past experience and current knowledge that the individual brings to
the process, will also affect the succession time frame.
Skillfully done, succession planning will bring the peace of mind that senior management should
have, based on the understanding and expectations of its future leadership.
Succession planning is the process whereby an organization ensures that employees are recruited
and developed to fill each key role within the company.
Through your succession planning process, you recruit superior employees, develop their
knowledge, skills, and abilities, and prepare them for advancement or promotion into ever more
challenging roles in your organization.
Actively pursuing succession planning ensures that employees are constantly developed to fill
each needed role in your organization. As your organization expands, loses key employees,
provides promotional job opportunities and increases sales, your succession planning guarantees
that you have employees on hand ready and waiting to fill new roles.

Who Needs Succession Planning?

All organizations, no matter their size, need succession planning. While it is less likely that you
will have potential successors for every role in a ten person company, you can minimally crosstrain.
Many companies have not introduced the concept of succession planning in their organizations.
Others plan informally and verbally for succession for key roles. By this process, for example,
Eric is identified as the strongest player on Mary's team so he is likely to succeed Mary when she
is promoted or leaves.
The advantage to a more formalized system is that there is more of a commitment to groom and
develop Eric so that he is ready to take over. Organizationally, it allows all managers to know
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who the key employees are in all areas of the organization. This allows them to consider strong
players when any key role opens up.

Advantages for Employers and Employees

Effective succession planning brings advantages for both employers and employees and it's
worth your time.
Advantages for employees:
Employees who know that a next role awaits them receive a boost to self-esteem and selfrespect. This enhances their efficacy and value as an employee.
Knowing the organization's plans for your next potential opportunity - and that there is
one - reinforces your desire for career development and career opportunities. This
development is one of the areas that employees want most from their employer.
You are able to identify the skills, experience, and development opportunities necessary
to help the employee become prepared for progression when the next job opportunity
turns up.
The ability to work with their manager or supervisor to make sure that the employee has a
career plan that moves him or her in the direction of their next opportunity. This person is
key in an employee's ability to get the experience and education needed for career
progression.
The employee's value is shared with the rest of the organization so that if an opportunity
comes up, the managers can consider the employee to fill the role. In an informal system,
managers organization-wide may not know the value of the employee and his or her
skills.
Advantages for employers:
You rely on staff to carry out the mission and the vision and to accomplish the goals of
the organization. The loss of a key employee can undermine your ability to accomplish
these important objectives.
You need prepared employees to step into roles as your company grows and expands its
offerings and services. Or, your lack of developed employees will stymie your growth
plans.
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 The need to have replacement employees ready if you decide to promote employees or
redesign your organization enables you to make necessary changes without being
hampered by a lack of replacements.
Knowledge about key, skilled, contributing employees is shared with managers
organization-wide. This information allows managers to consider the widest number of
candidates for any open job.
The Baby Boomer generation is in the process of retiring. They are taking with them 3040+ years of knowledge, experience, working relationships, and information. You want to
capture that knowledge before it walks out your door.
Effective, proactive succession planning leaves your organization well prepared for all
contingencies. Successful succession planning builds bench strength.

Develop Employees for Succession Planning

To develop the employees you need for your succession plan, you can use such practices as
lateral moves, assignment to special projects, team leadership roles, and both internal and
external training and development opportunities.
Through your succession planning process, you also retain superior employees because they
appreciate the time, attention, and development that you are investing in them. Employees are
motivated and engaged when they can see a career path for their continued growth and
development. To effectively do succession planning in your organization, you must identify the
organizations long-term goals. You must hire superior staff.
You need to identify and understand the developmental needs of your employees. You must
ensure that all key employees understand their career paths and the roles they are being
developed to fill. You need to focus resources on key employee retention. You need to be aware
of employment trends in your area to know the roles you will have a difficult time filling
externally.

Understanding the Need of Succession

Planning
In most cases, succession planning focuses on three main areas.
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First, it addresses the needs of the organization as senior management ages. It is not unusual for
a management team, particularly a CEO, to spend years leading an organization. During that
time, business practices and procedures become increasingly entrenched and daily issues take
precedence. Too often, the enterprise neglects succession planning and does not have people
available who are fully prepared to assume the top posts. Although large organizations are at risk,
the problem can prove especially severe at small companies, which often flounder, and
sometimes collapse, after the founder or CEO leaves. At many businesses, having little or no
succession planning wreaks havoc when the organization's leader retires. Nobody is fully
prepared to assume the top post.
Second, succession planning helps an organization to prepare for an unexpected event. It is often
difficult to plan for the unimaginable. Yet, the sudden illness or death of a key executive can
reverberate throughout an organization, paralyzing both management and staff and impeding the
organization's ability to execute its business plan. Unfortunately, diseases, automobile accidents,
plane crashes, and other disasters are an ongoing reality. Although it is not feasible to plan for
every possible scenario, and particularly for the loss of several key leaders at the same time, it is
entirely realistic to map out a chain of command and understand who will assume control if and
when a key executive is lost. Recent world events illustrate how important succession planning
is. When the World Trade Center attacks took place, dozens of companies lost key executives,
including CEOs and CFOs, who were on the planes or in the buildings that were destroyed.
Finally, succession planning ensures that an organization has the right personnel to function at
peak efficiency. Today, many organizations strive to identify key objectives and business goals
and shape a work-force accordingly. Although executives and senior managers play a crucial role
in defining such organizations, there is a need for specific skills and competencies throughout the
enterprise. Not only does succession planning serve as a way to create an organizational
hierarchy, but it can also help organizations conduct an inventory of human capital and better
understand gaps. It can also help organizations manage change in a more holistic way.
Some organizations, such as the military, have considerable experience and expertise with
succession planning. In the event of a personnel change or a loss, the leadership knows exactly
who will take over and what his or her role will befrom the newest recruit all the way up to the
commander-in-chief. What's more, these organizations typically understand the strengths and
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weaknesses that particular individuals within the organization possess and what is required to fill
gaps in skills and competencies. Then they train workers appropriately.
In business, however, the opposite is far too common. Many CEOs and senior management
teams fail to develop in their successors the high-level skills and competencies they will require.
Too often, leaders are too absorbed in day-to-day issues, overly focused on short-term results or
unable to adapt to change. Sometimes internal political issues prompt a CEO to get rid of the
second in command or other high-ranking officials. This is especially true at organizations where
the CEO has molded the company and engineered a specific vision.
Another problem is that even the best training program cannot always supply the talent needed to
run an organization at peak efficiency. This is particularly common at companies that are
growing rapidly. Sometimes, it is essential to find talent from the outside. But this, too, can pose
a formidable challenge. An executive search, for example, can require six months or longer. Even
then, an organization might require several additional months to "groom" and train the individual
for a key position or a position higher on the corporate ladder. Most companies can ill afford to
take a year to replace key personnel and the skills they offer.

Challenges in Succession Planning

While employers frequently implement succession plans to ensure smooth role transitions within
their organizations, they are faced with three primary challenges in implementing these plans:
Identifying talented candidates for leadership succession.
Developing candidates to become suitable leadership successors.
Retaining leaders and succession candidates long enough to ensure that key positions will
be successfully filled according to plan.
While these challenges would threaten to hamper the success of any succession plan's
implementation, rather than fixating on planning for its own sake, it is more effective to focus on
the developmental aspects of succession - as succession development. Shifting the focus to
development enables employers to integrate succession planning practices with their greater
talent development strategies. Such talent development strategies suited to securing a talent pool

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of capable succession candidates include employee career development programs and mentoring
programs.
Strategizing Succession with Technology
Implementing a succession strategy with technology becomes important in addressing the first
challenge to succession planning - identifying candidates. With career development software and
mentoring software, employers can streamline the process of candidate identification and
selection by tracking employees' development progress and by collecting feedback from mentors
about possible candidates - all in a fully integrated talent management system. With the right
software, employees can position themselves for advancement with a self-directed career
development plan under the guidance of an experienced mentor.
The challenges of succession planning have their solutions in talent development. With a welldeveloped talent pool, employers can plan for success in succession.

Keys to Effective Succession Planning

Continuing the legacy of successful businesses, and especially privately owned or family owned
businesses, is a key value and goal of succession planning. Owners of these businesses, however,
who typically spend most of their days worried about gaining market share, hiring and retaining
motivated employees, and outrunning the competition, usually fail to give succession planning
any thought, much less seek advice about the subject. The reasons for their inattention to
succession planning include:
It requires business owners to confront their own mortalitywhich is the same reason many
people defer or delay writing a will. Successful and energetic managers find it hard to imagine
letting anyone else take charge, including a family member or key employee. For most business
owners, maintaining control is central to their identity.
Succession planning, a multi-faceted and complex subject, can appear daunting.

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Owners know any succession choice will likely alienate those who are passed over, potentially
upsetting key people in the organizationwho may leave.
If employees include the owners family members, family dynamicsgood and badwill be
involved, making most owners dread succession planning.
Most business owners simply dont know how to approach it.

Who to Involve in the Succession Planning

Process
A business owner should consult with a number of resources to help create an effective
succession plan. Usually, over time, business owners develop relationships with trusted financial
advisors, bankers, legal counsel, accountants, and colleagues. Additionally, the board of directors
should play a strong role in creating and implementing the succession plan. However, it is
dangerous to involve too many people. The result can be too much noise and not enough action.
It is most important to include people with different perspectives so the resulting succession plan
reflects a comprehensive approach.
It is also important to ensure that there is a formal method, which includes specific goals,
objectives, and defined timelines, that allows the process to be monitored and evaluated as it
proceeds. Specific tasks may be delegated to smaller groups. For example, some people may be
tasked with determining how other similarly situated companies, perhaps including competitors,
handle succession planning. An effective succession planning process must be subject to
adjustments, modifications, and revisions as it evolves.

Succession Plan Evaluation and

Documentation
An effective succession plan should be in writing and rigorously referenced during the plans
implementation phase. This helps those responsible for implementation, keeps the process
sustainable, and assists when evaluating the plans success.

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Senior management and the board should regularly review the plan to determine whether it
remains effective or requires revisions. The succession plan itself must be as dynamic as the
selection process. It cannot be viewed as an immutable, irrevocable document. Rather, it is an
evolving expression of the future needs and goals of the enterprise.
It is equally important that ancillary aspects of the succession plan, especially those addressing
ownership transfers, be thoroughly and carefully documented. This results in clarity and mutual
understanding of the terms and conditions of ownership transfers. It also enables future
beneficiaries to understand the plans components, expectations, and mandate. This is especially
important when addressing issues like performance criteria and vesting schedules.
When direct equity transfersas opposed to deferred compensation plans such as stock
appreciation rights or phantom stock plansare involved, it is critical to execute a written
shareholders agreement (or operating agreement in the case of a limited liability company).
These agreements typically address issues related to management, governance, and equity
transferability. They are essential to avoid, or at least minimize, future disputes over ownership,
management and control.
Last, if the company lacks an effective personnel evaluation policy, it should consider
implementing one as part of its succession plan. These policies help identify potential leaders and
successors. They also provide a guide to successfully mentoring talent, and developing a broader,
more inclusive management team.

Common mistakes in succession planning:

Succession plan horror stories abound. Most succession planning mistakes, which can produce a
host of unintended consequences, can be attributed to poor planning, lack of foresight, and
inattention to detail. Others can be chalked up to owners who lack commitment to the process.
They fuel dissension by wavering and failing to follow through.
In many ways, succession planning resembles any other strategic or business plan that companies
undertake to identify new customers or markets. All require analysis, planning, commitment to
implementation, monitoring, periodic evaluation, and adaptability, as well as buy-in from

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owners, family members, and key employees. Failed plans lack these components or
inadequately focus on them.
An effective succession plan should not be considered an end. Rather, its continued success
requires that it be viewed as a beginning.

Why Succession Planning Matters

There are good reasons why succession planning is one of the most challenging to-dos on a
family business owner's checklist. To begin with, the stakes are highso high in fact, that most
family businesses fail to negotiate the transition and are sold either to pay taxes or because no
one in the family is willing or able to take over. Additionally, the communities of stakeholders
involved in the process can be numerous and are often in conflict.
It's Not Just a CEO Thing
To adequately prepare for succession, you should evaluate the skills and attitudes of everyone in
the organization who is a candidate for a leadership position. Everyone? Yes, because the CEO
isn't the only position that requires succession planning. If a company suddenly loses its chief
information officer, chief financial officer, or another key player, it can be nearly as drastic as an
unexpected vacancy in the president's office. That's because typically staffers are required to
maintain their previous responsibilities in addition to taking on jobs delegated from their bosses,
in a chain of cascading delegation that may directly affect everyone in an organization, even
through only one position has been replaced.
And this look at the complexity of succession planning hasn't mentioned the matter of family
dynamics. Planning for succession has to take into consideration family members' personal
conflicts that can date back decades. For instance, the Redstones' falling-out may have started
when Sumner divorced his wife of 50 years, a move that reportedly did not please his daughter.
Finally, succession planning isn't something you can do once and forget. To be a conscientious
family business leader, you have to continually revisit your plan, reviewing and updating it to
reflect changes in company value, market conditions, and your own health as well as the abilities
and passion of the people you plan to pass it on to. To return to the Redstone example, planning
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for succession at one time appeared to be a completed project at Viacom, with Redstone visibly
grooming his daughter to take over. But circumstances changed, and now so must the succession
plan.
Too Many Offspring May Want the Job
Small wonder, then, that the vast majority of family businesses do not have written succession
plans at all. Even when it comes to companies with current leaders nearing retirement, most
haven't formally addressed succession.
Family business advisers have developed a reliable and workable strategy for succession
planning. It starts by insisting that you start planning earlyeven if the leader doesn't anticipate
retiring for a decade. Begin by realizing that succession entails three aspects: management,
ownership, and taxes.
Owners need to plan for who's going to run the company, who's going to own it, and how taxes
will be kept in check. Each will require different planning techniques, and trade-offs are
inevitable.
Management succession planning frequently faces the problem of too many offspring wanting
the top job. When that happens, current leadership often has to dispense with the ideal of giving
everyone equal power and offer controlling interest to the person or persons best prepared. On
the other hand, it is possible that no one from the next generation is interested in or capable of
leading. In that case, you may have to go outside and find the best-matched candidatewhich
requires a very different skill set.
Saving the Life of a Business
Ownership succession is usually split from management succession because next-generation
members may want to retain their equity in the business, but not take on significant operating
roles at the company. You may want to give exactly equal shares to everyone, but those who
work in the business may feel they are entitled to more. Likewise, those who don't work in the
business may feel the same way about their own shares. After all, they may reason, they're not
drawing salaries, so they should get a bigger share of dividends and profit-sharing.

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Tax planning means dealing with technicalities. Various documents and structures, ranging from
trusts to buy-sell agreements to appropriate insurance, will likely reduce taxes or provide
resources to pay them or both. While it may seem macabre to plan so carefully for what may turn
out to be the founder's unexpected death, the importance of tax planning cannot be understated. A
few dollars and a few hours drawing up the right documents today can literally save your
business' life later (see BusinessWeek SmallBiz, June/July 2007, "Creating a Legacy").
Upon gaining an appreciation for the complexities and significance of succession planning, you
are ready for the next step: involving others. Bring the family into the planning. Getting the heirs
in now will reduce the likelihood of problems later. Moreover, consider talking to key nonfamily
employees, important stakeholders, and professional advisers. Getting broad support will make
all the difference during the unsettled period surrounding a business transition.
Having a Clear Leader Is Key
When talking to others about succession, realism must be your foundation. This is no time for
wishful thinking, hoping that an uninterested or incapable son or daughter will suddenly become
full of passion and business skills. Objectively evaluateideally with the help of knowledgeable
outsiderscandidates for their experience and potential. After this tough decision, take the
systematic steps to pass the reins of leadership. This may take some time, but remember, the best
successions are those that end with a clean and certain break. In other words, after you give up
the reins, get off the wagon.
Don't get too caught up in fairness and equity. Sometimes the best thing for everyone is to have a
clear leader in whom the most power is vested. As part of your realistic evaluation, decide
whether it's best to have equal shares of ownership and influence for everyone, or whether the
potential for conflict will make it better to have someone who can make decisions without
waiting for consensus.
Now it's time to develop the next generation. Set objective standards for the skills and experience
the job will require, then promote the candidates' education and work experience, both inside and
outside the family business. This step in particular may require several years, which is why it's
important to start planning now.

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Finally, seek outside help. Even if you would never use an outside adviser for any other decision,
consider the value that an experienced professional can bring to this important event. In case you
balk at the possible expense or the distraction on top of your other duties, consider that poor
succession planning is more likely to sink your company than any other risk. And just by doing it
you'll place yourself in an elite group. Unlike the vast majority of those who ignore succession
planning, you'll be working to reap the rewards of succession in a different and smarter way.
Unlike Sumner Redstone, you may never preside over an $8 billion empire. But your business
life does share one common element with Redstone and all other leaders of family businesses:
the puzzle of planning for your own succession. And, as Redstone's latest troubles illustrate, no
time is too early to start considering this issue and building your skills, because you may be
doing itagain and againeven when you're nearly 20 years past traditional retirement age.

Key elements for effective succession

planning
While the succession management process differs from one organisation to another, there are
certain characteristics of an effective program that are universal. Succession planning should be:
Aligned with the overall business strategy This will ensure that the investment in future
leaders is targeted and reflects the organisations strategic direction.
Driven from the top Senior executives are best placed to review business plans and identify
future skill requirements for their various business functions.
A coordinated effort to ensure ownership over the process HR, managers and senior
executives should all be accountable for growing leaders.
Linked to broader HR processes This includes performance management, compensation,
recognition, recruitment and retention and workforce management.
Cultivating soft skills Skills in areas like communication, negotiation, presentation and time
management become increasingly important as people progress their careers to more senior
levels.

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Succession planning is the identification of job vacancies that can be expected to occur through
retirement or attrition and the strategic consideration of where and how internal candidates might
fill those vacancies. It involves assessing job requirements and skills of existing employees and
then seeking to fill the gaps between needs and skills with targeted training and development
activities.
Succession Planning Identifies Future Leaders Succession planning can be an important way
to identify employees who have the current skills--or the potential to develop skills--that can help
them move up in an organization, or on to other positions. In addition, the process of succession
planning can help to identify other areas of performance where employees may be weak and
where training could help to manage and improve performance outcomes.
Savings Effective succession planning activities have a positive impact on performance
management not only in terms of ensuring that key positions will remain filled with competent
performers, but also in terms of saving money on external recruitment and training, which can be
significantly more expensive than promoting from within.
Beyond Training While many consider succession planning to be about training, that is just a
piece of the process. Certainly training must be put into place to provide employees with the
knowledge, skills and abilities they may need to move into future vacancies, but it is the initial
assessment of potential vulnerabilities that can impact performance management. For instance, a
company at risk of losing a top salesperson without anybody in line to step into that role is
vulnerable. By identifying these vulnerabilities early, organizations can assess areas that may be
at risk and take steps to identify and train internal successors.
Competency Gaps An important benefit in strategic succession planning is identifying in
advance where there may be gaps between what employees need to know and what they
currently know--competency gaps. The gaps may be based on current needs for key positions and
the lack of employees with the required skills, and also on a look into the future to determine
what new competencies may be necessary. A focus on the strategic consideration of these needs
will ensure that companies break their stride in terms of productivity and performance in the
event of a vacancy in a key area.

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At the Board Level At the top levels of the organization succession planning is critical to ensure
that these key positions--if suddenly vacant--can be filled by qualified candidates. Identifying the
potential for those vacancies and considering internal talent that can be coached, nurtured and
trained to step into these slots when the time comes is a key function of not only the H.R.
department, but in many organizations, of the board as well. According to Salary.com, Coldwater
Creek has a committee specifically devoted to succession planning and development and both
Cost Plus and Solar Power Inc. make reference to succession planning for their executive officers
in the section of their proxy devoted to risk oversight. Clearly, the importance of succession
planning from the very top of even publicly held organizations is rising.
Succession planning ensures the bench strength of a team
Succession planning is a management process that, when executed effectively, ensures that
employees are properly recruited and developed so that they have the skills and experience
necessary to step up and fill a key role within the company when the time is right. You need only
to follow the NBA playoffs to see this concept in practice. The teams that consistently advance
are those that manage to maintain a strong bench, with talented and proven players available to
substitute for every starter.
Succession planning has become a hot HR management topic of late. Where it was once reserved
for only the most senior positions within a company, today succession planning transcends all
levels within an organization. The reason, in part, is that with so many baby boomers on the
brink of retirement, a void of seasoned managers waiting in the wings could threaten the
sustainability of some businesses.

The Critical Task of Succession Planning

Succession planning the practice of identifying and developing in-house candidates for top
executive positions is perhaps the most important job of corporate boards. Without a strong
succession-planning program, companies are not prepared to fill openings created by retirements
or unexpected departures, nor are they able to meet demands for additional corporate leaders
resulting from growth.

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Yet many companies fail to give the matter sufficient attention, even though the need for inhouse candidates with essential skills to lead the organization may be greater than ever. As CEO
turnover at many large public companies averages about once every three years, companies that
lack qualified succession candidates are forced to hire from the outside.
Thus, the posture of many companies is to be reactive, not proactive. Boards at reactive
companies find themselves conducting searches for a CEO or C-suite executives an
undertaking that most directors find extremely challenging. Though executives in senior
positions at other companies may be proven products, bringing them in does not guarantee
successful leadership.
Moreover, hiring from the outside can have negative consequences. Chief among these is
spiraling executive compensation. Inadequate succession planning is probably the single most
significant factor leading to outsized executive compensation. To attract executives from other
companies, recruiting organizations must match or exceed their existing packages and
compensate them for risks involved in leaving a known environment for one with unknown
challenges. No matter how diligent candidates are in evaluating suitors, there are limits on how
much they can know about the condition of a new company before accepting a position.
Because of these risks, outsiders usually need a severance agreement carrying substantial
contingent benefits. A 50-year-old CEO who makes the wrong move can severely limit his or her
subsequent career options, and thus needs protection.
Citing these dynamics, proxy advisory services stress the importance of succession planning and
criticize boards whose lack of preparation forces them to pay premiums for outsiders. Yet, if
boards promote the wrong in-house candidates and performance lags, large institutional
shareholders criticize them for not bringing in proven products. Companies that make succession
planning a perennial goal are better able to maintain performance while satisfying the demands
of investors and governance critics.
Another inherent downside of poor succession planning is that even the best outside candidates
are hampered initially by the fact they are new with the company. It can take months for
outsiders to adapt to large, complex organizations a costly interval in todays high-speed
business environment.
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Companies that go outside for CEOs typically lack succession candidates down the hierarchy, so
incoming CEOs often end up bringing in other outsiders, who also need time to learn the
company. Their existing compensation packages also must be matched or exceeded, which in
turn can create internal pay equity issues regarding the compensation of executives who are
already with the company; they themselves may now need increases if theyre to remain aboard.
Many board charters empower the compensation committee to oversee the CEOs progress in
working with human resources and other departments to develop effective succession programs.
For such programs to be effective, directors must make a substantial commitment that transmits
to C-suite executives and then down the line. All too often, there is a break in this transmission.
Fear of in-house competition tends to make some executives reluctant to plan for their own
succession, so it takes highly secure managers to make these programs successful.
One way to motivate executives to work on succession is to pay for it by linking a portion of
their incentive compensation opportunity to measurable progress. However, as reaching such
long-term, nonfinancial goals does not tend to involve the same sense of urgency as driving
financial performance, succession planning does not get the same attention. As a result, even
well-structured succession-planning efforts often lack vigor.
The best way to assure effective succession is to foster a corporate culture that expects
executives to focus on it because it is a leadership quality that the culture prizes. This should be
an essential criterion for hiring and promotion; directors should discern whether candidates have
this kind of commitment to developing other leaders before putting them in top positions.
Boards should systematically monitor executives efforts to plan succession. This involves
requiring that senior management regularly present assessments of their management team and
identify and evaluate succession candidates for each key position. They should work with HR to
assure that succession candidates get the right supplemental training, and that they fulfill
assignments in different departments to develop an intimate familiarity with the company that
they someday may lead.
Without commitment to this proactive process, many companies are likely to remain reactive. As
a result, directors will find themselves conducting executive searches and interviewing outsiders.

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Models of Succession Planning

There are three models of succession planning:
1. Succession planning by position - management driven Incumbent identifies the
individual(s) who are in their view best qualified to move into the position in the short
term (say within 1 year); the medium term (within 2 years) or the longer term (3-5 years);
Advantages This is the simplest model . It is often the approach the CEO is most
comfortable with. This approach is the least costly and the quickest.
2. PowerPoint Presentation: Disadvantages In large organizations the majority of employees
may not be well known to the task force members.
3. Top-down/bottom-up succession planning Senior management as a group determines
what competencies are required to enable a person to take on the key roles. The program
serves to empower employees. The process is transparent. Three things are pre-requisite
for the success of this program: Strong across-the-board support at the most senior levels
of the organization, consistency in application, and follow-through. A program like this
should not be introduced if there is not a strong commitment to its continuation. At a
minimum, two years would be required in order to see significant results and a changing
culture.

Conclusions
Succession planning is a complex task that requires constant attention and ongoing resources.
Successful organizations devote considerable time and resources to mapping out skills and
competencies so that they can hire and train appropriately and achieve a distinct competitive
edge. Best-practice organizations also prepare for unforeseen events and the potential loss of key
executives. Finally, these organizations view succession planning as an ongoing process rather
than an event that must be addressed every year or two.
Every organization requires succession planning. By succession planning, organization's key
roles are constantly maintained with talented people, so organizations can maintain its strength.

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When selecting people for key roles, their adherence to organization's mission and vision is
important. This is how visionary leaders are sprung in organizations with commitment for the
company's growth.

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