Succeeding by being succession ready
In the recent past, we have many examples of leading companies in India struggling to find worthy successors to their long-tenured and successful CEOs slated to retire. This observation is reinforced by Willis Towers Watson and the Confederation of India Industry’s joint research on human capital risks that found insufficient leadership bench strength as the top risk facing companies in India.
Globalization, a dynamic business environment, stricter governance norms, technological changes and talent mobility are all increasingly driving organizations in India towards acknowledging succession planning as a strategic and continuous exercise rather than a reactive action to fill in the gaps.
Business and HR leaders have been trying to mitigate this risk for the past several years but India Inc., by and large, remains far from being ‘succession ready’! This persistent and critical challenge, apparent even at some of our best managed companies, throws up many important aspects that need careful consideration.
Is this challenge rife only at the board and CEO levels or across? Some of our latest studies indicate that the challenge is more at the CXO level and the situation improves as we go down the hierarchy. Are large organizations more susceptible than start-ups? Are family-owned enterprises less likely to be impacted? Irrespective of the ownership or organization structure, the fundamental need for a sound succession planning strategy is critical for business continuity, risk mitigation and sustained growth.
Are organizations in India then being myopic in recognizing the operational, financial and reputational risks of not being ‘succession ready’?
Succession management goes beyond managing vacancy risk
Succession risk is not confined to vacancy risk and other risks such as readiness risk, transition risk and portfolio risk need to be managed in an integrated manner.
Vacancy risk is the risk of key positions being vacant over a long period of time. This risk impacts roles across levels in the organization. Critical leadership positions have a significant impact on business performance and growth. Vacancy risk at the middle to senior levels may start hurting the organization unless attended to in time.
Readiness risk is the risk of unprepared successors. Being unprepared to manage such risks, especially at senior level positions, can be debilitating. Readiness risk is especially great when organizations do not pay attention to the preparation and development of individuals who can be successors for critical leadership positions.
It is the risk of failure of an external successor. It could be because of various factors: role-person mismatch, poor selection, insufficient induction, etc.
It is the risk of poor deployment of talent against business goals. This risk is particularly challenging as many organizations struggle with ensuring they have the right talent at the right time and in the right positions to execute their goals when goals and objectives are dynamic.
Understanding all these risks is the first step in trying to successfully deal with the challenge. After all, succession management essentially begins with the assessment of risk.
How should organizations manage unexpected exits with no ready internal successors?
Despite all the planning, unexpected situations are a part of business as in life. There could be unanticipated exit(s) at the top that may even threaten business continuity. How do organizations deal with this situation, especially when there are no ready internal successors? We increasingly see that companies are also mapping potential external successors that can be hired in some specific roles where internal options don’t seem suitable. For instance, mapping external successors can be crucial in some high technology and geography-specific roles. Expectedly, there could be transition risks, but if tracked in a systematic and regular manner, risks can be monitored and assessed, and considered decisions taken.
In summary, a succession plan for individual organizations will differ, however for it to be truly effective it must encapsulate the following:
• A clear perspective and understanding of the organization’s past, present and future goals
• Establish a common language across the organization, so performance can be fairly and consistently assessed and potential recognized
• Maintain accurate and meaningful data about employees and potential external hires. Know your high potentials, critical and high business impact talent
• Create an environment which promotes the process. Senior leaders, who provide all the necessary information, executives who pass it down to the organization and an involved HR that develops the process and supports it from start to finish
• A culture that encourages the sharing of talent and fosters trust in colleagues’ ability to assess talent
• Technology thrust for succession planning, one that is state of the art, can deal with large amounts of data and not only enables but drives the process
Change is imminent and sometimes welcome. Organizations need to embrace this reality rather than wish it away. In our experience, we have found that those companies that have embraced this reality are the ones that have a robust succession planning strategy in place.
Risk anticipation and readiness, a systemic structure that rewards meritocracy and transparency, and an enabling organisational culture—all in the right mix—is the success mantra for sound succession management.
Shatrunjay Krishna is director, Rewards, Talent and Communication, Willis Towers Watson.
Sambhav Rakyan is data services practice leader, Asia Pacific, at Willis Towers Watson.