Succession planning in INDIAN Companies and SMEs

Succession planning

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Contents [hide] 1 Definition and Background 2 The Field of Succession Management 3 Process and Practices 4 References 5 Further reading

[edit]Definition and Background

"Succession planning" is a process for identifying and developing internal people with the potential to fill key 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). In contrast, replacement planning is focused narrowly on identifying specific back-up candidates for given senior management positions. For the most part position-driven replacement planning (often referred to as the "truck scenario") is a forecast, which research indicates does not have substantial impact on outcomes.

Fundamental to the succession-management process is an underlying philosophy that argues that top talent in the corporation must be managed for the greater good of the enterprise. Merck and other companies argue that a "talent mindset" must be part of the leadership culture for these practices to be effective.

Research indicates many succession-planning initiatives fall short of their intent (Corporate Leadership Council, 1998). "Bench strength," as it is commonly called, remains a stubborn problem in many if not most companies. Studies indicate that companies that report the greatest gains from succession planning feature high ownership by the CEO and high degrees of engagement among the larger leadership team (Kesler, 2002).

Companies that are well known for their succession planning and executive talent development practices include: GE, Honeywell, IBM, Marriott, Microsoft, Pepsi and Proctor and Gamble.

Research indicates that clear objectives are critical to establishing effective succession planning (Kesler, 2002). These objectives tend to be core to many or most companies that have well-established practices:

• Identify those with the potential to assume greater responsibility in the organization
• Provide critical development experiences to those that can move into key roles
• Engage the leadership in supporting the development of high-potential leaders
• Build a data base that can be used to make better staffing decisions for key jobs

In other companies these additional objectives may be embedded in the succession process:

• Improve employee commitment and retention
• Meet the career development expectations of existing employees
• Counter the increasing difficulty and costs of recruiting employees externally

...

Various Perspectives

Succession Planning
Form a business succession plan in seven steps -- Business First of Louisville -- 1997-05-19
Succession Planning: Preparing The Next Generation To Lead Your Business
Business owner, business buyers, sell business, succession planning
A Different Leadership Yardstick - EmergingLeader.com
Workplace - Family Business
Succession Planning
HR Field Guide: 5 Tips To Effective Succession Planning
Choose Tomorrow's Leaders Today - Succession Planning Grooms Firms for Success
Planning for Succession
Heads in the Sand on Succession Planning
Succession Plan
The Strategy of Succession Planning
Succession Planning: Is It a Staffing Matter? No
The CEO's Guide to Succession Planning: Managing Risk & Ensuring Business Continuity

Also see the Library's Human Resources Blog

Transition of Nonprofit Leaders

Navigating Transition Turbulence by Starting SMART
Leader to Leader: Fall 1997
Planning Successful Transitions
Transitioning to New CEO (detailed procedure)
Leadership Transition in Nonprofit Management
Succession Planning for Nonprofits of All Sizes
resources from Transition Guides
Succession Planning: Elephant in the Room
10 Reasons Why Nonprofits & Associations Engage Professional Interim Executives
Succession SOS
Succession Planning: Is It a Staffing Matter? No

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How Dhirubhai Ambani flunked his biggest test R Jagannathan | Sunday, August 30, 2009 IST

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R Jagannathan When Dhirubhai Ambani died in mid-2002, he had already created India’s most successful business empire: Reliance Industries. In less than 30 years, he made Reliance the biggest Indian private sector company after almost single-handedly creating the equity cult and cultivating the most powerful business lobby in the country. Vibrant equity markets and strong lobbying powers were critical to his success. While Dhirubhai had many critics who disdained his methods, there is no doubt he was the most far-sighted businessman we have ever had. He started business when capital costs were so high as to make most companies unprofitable without super-high tariffs. He vaulted over that hurdle by raising equity at huge premiums, effectively reducing the real capital cost of his mega projects. To do this, he needed a huge investor base and a favourable political environment, and he proceeded to create both. Article continues below the advertisement... But this is merely the backdrop for explaining his biggest failure: his farsightedness ended with his business. When it came to family, he was short-sighted. Given the size of the inheritance he was leaving behind, the least he could have done was leave a will. But he didn’t. Perhaps it was the tangled nature of his shareholdings that prevented a clean division of assets between two ambitious sons, neither of whom was willing to kowtow to the other. Perhaps, he thought—as other fond parents do—that his sons would work out brotherly arrangements. Whatever the reason, Dhirubhai flunked the most important of a leader—ensuring the continuity of business by finding someone to run it after him. He had all the time in the world to ensure a clean succession, or even two successions. But he didn’t do it. Whether you are running a political party or a company or a social service organisation, success cannot endure without succession planning. We can see this in the BJP today. Despite being widely touted as Vajpayee’s successor, the latter did not ensure a smooth transition to Advani till it was too late. The right time to hand over the party to a chosen successor is when you are still in saddle, not when you are on life support. If Advani had the grace to hand over the party’s leadership to Vajpayee after building it up in the late 1980s and 1990s, Vajpayee did not return the favour to help Advani establish his leadership when he was still powerful. Vajpayee too failed the succession test. Succession usually happens in one of three ways: one is the corporate style, where a successful CEO creates a raft of choices for his board to select the best man for the job. The second is the dynastic way, where leadership passes from father to son (sometimes daughter). This is what happens in Indian politics and family-owned businesses. This is a hit-or-miss affair. Your son may be competent or incompetent. Which is why some leaders opt to do nothing. They leave it to the Aurangzebs to establish control after eliminating the Dara Shikohs. This is essentially a Darwinist approach, where success goes to the fittest. Its downside is that it is usually preceded by struggle and bloodletting. Dhirubhai’s failure to leave a will has resulted in the biggest corporate fight in Indian history—a fight that hasn’t ended even after the two brothers signed a deal brokered by mother Kokilaben in 2005. But deal, we now know, was merely the end of the beginning. Sibling wars, especially those that are born of mistrust, never end unless the break is clean. Unfortunately, the Ambani agreement left so many loose ends, that it enabled one sibling to beat the spirit of the deal. Which is why the matter has ended up in court. If newspaper reports are to be believed, the bitterness has reached such levels that even the prime minister’s office is worried. When businessmen fight, ministers and bureaucrats in government have to take sides, and when that happens you can be sure that the business of government itself will be impacted negatively. Around the time Dhirubhai was making his mark, India Inc saw both messy and clean family breakups. Everyone, from the Birlas to the Piramals, Mafatlals, Walchands, Goenkas and Singhanias, was splitting, and many managed to do it without washing too much dirty linen in public. Of course, there was no 24x7 TV and the business media was quite tame, so this could have helped keep things under control. But the lessons could not have been lost on Dhirubhai. As one of the most ambitious men India has ever produced, Dhirubhai could not have expected his sons to be docile me-toos. In fact, he should have known that he was leaving behind two Dhirubhais. Why didn’t he do something about it when he could? One explanation for Dhirubhai’s failure to make his succession plan clear is that, as a fighter himself, he wanted one of his sons to establish his ascendancy through the Darwinian route. But the more likely explanation is that he was victim to the usual parental reluctance to anoint one son as heir, or, in the alternative, to break up his life’s work into two. He didn’t want to choose either of the heartbreaking alternatives. This was his real failure: his failure to choose

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BK Birla tweaks succession plan

1 July 2010

Press Trust of India
KOLKATA, 1 JULY: Birla clan patriarch, Mr BK Birla has finetuned the succession plan for Kesoram Industries, the flagship company of his Rs 13,000 crore group, with daughter Ms Manjushree Khaitan tipped to take over as vice-chairman and grandson, Mr Kumar Mangalam Birla as chairman after him.
“Since Kumar Mangalam is not based in Kolkata, the day-to-day affairs of Kesoram will be looked into by Manjushree under Kumar's guidance,” Birla told reporters on the sidelines of Kesoram's AGM here today.
“Kumar will be the chairman and she the vice-chairman of the company,” he said.
In the previous scheme of things, no specific role had been delineated for Manjushree in the Rs 5,000 crore Kesoram Industries, except that she was assigned to take the reins of Manjushree Plantations.
Mr BK Birla, 90, said: “Manjushree is my daughter while Kumar is my grandson. I have lost my son, Aditya. But in business, Kumar is better than me and will guide her.”
Replying to a query, Mr Birla said that he had been asking Kumar for long to join the Kesoram board. “He smiles and says that he will not do that till I am alive,” Mr Birla said.
Besides Kesoram, Kumar (Aditya's son) will also get the reins of BK Birla group firms Century Textiles and Century Enka.
His other daughter, Ms Jayshree Mohta, was already in charge of Jayshree Tea & Industries.
On his other two group firms, Mangalam Cement and Mangalam Timber, Mr Birla said that he was in favour of merging the two outfits.
He said that while Mangalam Cement was making good profits, Mangalam Timber was in the red.
“I want to merge the two firms, but others are not willing,” he said.
Mr Birla said that he was willing to talk to the directors of Mangalam Cement who were not in favour of the merger.

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Succession planning in Indian companies – the TCS way

In an interview I conducted for my forthcoming book on Indian entrepreneurs going global. I asked Mr Ramadorai, when he was the CEO of India’s largest IT firm – TCS, as to who he thought would succeed him, what became quite clear from his and those I asked this question to, was that a pattern was emerging within the boardrooms of Indian companies.

Two issues emerge – (a) whether in their succession planning, they’d consider external candidates and (b) whether they’d consider non-Indian candidates.

On the first issue, it seems clear to me that Indian firms prefer recruiting for top jobs from within their organisation. In the TCS example, Ramadorai’s successor – Chandra has long been seen as the heir apparant. In other similar situations, take Infosys as another example where the baton has been passed from Murthy, Nilekani and now to Krish Gopalakrishnan.

With respects to having a non-Indian at the helm, there aren’t many examples but the two obvious ones that come to mind concern Brian Tempest’s appointment at Ranbaxy, where after a brief stint, he was shifted by Malvinder Singh to a more supportive role, and the other being Alan Rosling, who Ratan Tata appointed to coordinate strategy at Bombay House, the TATA HQ in India. I recollect the look of horror on other industry veterans, when Rosling was appointed and had to represent TATA in global industry platforms.

The other notable example is that of Suzlon, which made the conscious decision to move their HQ to Europe and in tandem appointed a non-Indian as CEO, who has recently moved on, one suspects due to the move back to India for their global HQ.

India has a long way to go in its journey to become a economic super-power, and I believe that a healthy debate has begun in the boardrooms of these companies on issues such as this. In my view, I don’t think we’re too far off from seeing an external, non-Indian heading up a major Indian conglomerate.

Gazing into my crystal ball – I reckon the mother of all succession headaches surrounds Ratan Tata. I wouldn’t be surprised if Tata Sons opted for a (a) external person (b) of non-Indian origin (despite the prominence provided to Naval Tata as heir apparant as a result of his surname), after Ratan Tata.

Watch this space…

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Tatas line up succession planning in group firms

Posted: Monday, Feb 11, 2002 at 0000 hrs IST
Updated: Monday, Feb 11, 2002 at 0000 hrs IST

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Mumbai, February 10:: The Tata group — which has an employee strength of about 2,80,000 — is putting in place succession planning at different levels within various group companies and a new performance management module to accelerate growth across the group.

“We want to raise the bar on performance management across the group to improve the standards. We want to first set the basics right and build on the successful foundation,” said Tata Sons Ltd executive vice president (group human resources) Satish Pradhan.

This is in direct correlation to the changing business environment, and is an attempt to accelerate the charm of “Tata Inc”.

With a clear mandate to HR of attracting good people, retaining the better people and advancing the best people — in a departure from the earlier system of performance management — the group will now follow a four-box rating approach.

This approach comprises sharp distinctions such as, ‘not met objectives’, ‘met objectives’, ‘significant overperformance’ and ‘outstanding’.

“The new performance management will not spring any surprise. It will be an ongoing process, and not the conventional once-a-year kind,” said Mr Pradhan.

Since a strong thrust is being laid on earnings culture and not entitlement culture, poor performance will clearly be a career stopper at the group.

“The Tata name is a unique asset representing leadership with trust. Leveraging this asset to enhance group synergy and become globally competitive is the route to sustained growth and long term success,” justified Mr Pradhan.

Succession planning across different levels in the group will also be given a renewed thrust this year.

The Tata group, which is said to be the country’s largest employer in the private sector, is highly diverse and spread across wide sectors such as materials, chemicals, energy, engineering, communications and information systems, services and consumer goods.

Thus, a greater need was felt to speed up the growth process, as these industries are spread out in over 90 group companies.

Since a multi-layered organisation will have less headroom for people to unleash their capabilities, Tata work levels have been defined as six work levels in larger companies and four in the smaller ones.

There will be a business and company-specific implementation and application with freedom within the framework.

Without intruding into the independence of these companies, the group has undertaken a people planning framework to match work challenges with capabilities and to build on these capabilities.

As an extension to the new scheme of things, Tata Administrative Services (TAS) has for the first time gone...

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GUIDE to SUCCESSION PLANNING

Introduction

Once reserved for the upper echelons of senior management,

and often viewed as replacement planning should catastrophe

strike, today’s succession planning is redefined. The discipline

has broadened in both breadth and scope to become a central

component of board-level strategy.

Succession planning focuses on managing risk and ensuring

continuity across all levels of the organization – risk of untimely

departures of critical personnel, risk of retirees taking their skills

and knowledge with them and leaving nothing behind, and risk

of losing high value employees to competitors. It does so by

helping your business leaders to identify top performers within

the organization, create dynamic “talent pools” of this critical

talent that other leaders can leverage, and prepare and develop

these high performing employees for future roles.

The problem that exists today is that succession planning is

barely automated, let alone optimized. This CEO guide provides

five key tips for jump starting your succession planning efforts.

1. Automate & Reduce Costs

Today’s succession planning efforts are characterized by

fragmented, inconsistent, paper-based processes. Indeed, 67%

of companies are still primarily paper-based, according to a

global survey conducted by Softscape.

Conventionally, business and HR leaders will spend weeks

or even months manually scouring different parts of the

organization for information needed to build lists and pools of

nominees and successors for specific job families or positions.

The information required to generate the lists often includes self

assessments, past performance appraisals (often paper-based),

and 360 feedback. After a lengthy period of information gathering

and aggregation followed by manual analysis (e.g., nine-box, gap

analysis), the results are printed and collated into large three-ring

binders for use in executive planning meetings. This time-consuming,

inefficient, and costly process is still commonplace today.

Succession planning focuses on managing

risk and ensuring continuity across all levels

of the organization.

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