Succession planning: what should go into it

By Premlesh Machama|9th Dec 2016
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The current Indian market scenario is such that one cannot predict the bulls and the bear situations. Sometimes it’s necessary to opt for a management change to inject fresh ideas into the operational structures. Stating something as a necessity doesn’t always make it an easy process, especially for those leaders who have reared the business up from scratch. Hence, it is a common sight in India to have leaders past their prime, helming the operations. To supplement the evolving ecosystem of market, one needs a change in hands and minds.

When it’s time for a business owner to hand over the reins to someone else, it’s of essentiality to have a plan in place, carefully outlining the logistics of the transition. This ensures a hand over, free from glitches.

Credits : Shutterstock
Credits : Shutterstock

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.

Here’s why succession planning is essential:

Planning helps identify future leaders

Succession planning can lead to identifying employees who have the potential to develop skills, which can help them progress to an authoritative role, adding to the company’s progress through innovative ideas.

Planning aids in increase in savings

Effective succession planning activities not only have a positive impact on team morale, through providing positions to ones deserving, but also helps in saving by choosing someone from internal hierarchy. This prevents spending on training an external hire.

Planning helps take evaluation beyond training

It is the initial assessment of potential vulnerabilities that elevates planning from being just about training employees. Taking decisions that have a positive impact on the employees’ performance and the future of the organisation is something that a good succession plan brings out.

Planning helps chalk out competency gaps

An essential benefit in strategic succession planning is addressing the areas where there may be gaps between the awareness of the roles needing to fulfil and the inherent skills present ‑ competency gaps. Planning helps nurture and guide employees who lack vision, to bring out the optimal productivity out of them.

Planning helps in bringing a change in atmosphere

Often, a change of management is needed, if stagnancy seems to stall the progress of the organisation. Planning helps in injecting momentum into strategies that were lagging, through bringing fresh ideas into the table. It also promotes employee participation, with the employees pitching in their thoughts to decide on the successor.

Yet, as in the recent happenings at Tata Sons on October 24 proved, even renowned succession plans falter, without proper thought attached to it. Without a clear succession plan many businesses fail but a hastily implemented succession plan, can induct losses and give out a reputation of instability to the market. As a leader, you need to think things through before jumping the bandwagon to crown the next successor.

Here are a few questions to ask yourself as you chalk down your succession plan: 

  1. What are the primary goals to succession? Outlining conclusive goals will help you pinpoint the factors on which you’d like to base your decisions on.
  2. What are liquidity needs of the organisation? Pointing out the financial prospects the change would cover, would help in assessing the net value of the organisation. This would also help in budgeting purposes for further fiscal years to come.
  3. How will your employees cope with the change? Proper guidance of the team will help weather any storm that the business will face. It will also gauge how the employees would cope with a crisis.
  4. Who are your potential candidates? Assessing the list of people in contest for succession not only helps picking up a successor, but also lining up backup if the said successors falters in his duties.
  5. What will be your role, post the handover? You may want to remain in the organisation, in some role, to help the smooth transitioning of power and functioning of the operational duties.

Infosys and Dr. Reddy’s Laboratory are a few examples of the perfect succession planning. In the year 2011, Infosys had announced a strategy called 3.0 where the businesses were re-grouped under four verticals. Each of them had their own CEOs and virtual balance sheets to determine the performance. It helped the board members to spot the high performers with management capability early and single them out for higher responsibilities in the future.

Dr. Reddy’s Laboratory, however, had a different though a successful story. Anji Reddy, Founder and Chairman of the company, transferred his shares in the Indian Pharmaceutical company to the Reddy family’s holding company in the year 2011, which was in a bid to ensure ‘smooth succession’. The transfer of his shares was a part of an important strategy to showcase his trust in the next generation run the business and control the family fortune.

A succession plan kept handy, even when it seems things are going well and the current owner has no plans to step down from a leadership role. Sometimes, a sudden and drastic change in the internal or external environment, can facilitate a need for a new successor. These unforeseen circumstances may not be disruptive to organisational functioning if there is a comprehensive succession plan at hand.

(Disclaimer: The views and opinions expressed in this article are those of the author and do not necessarily reflect the views of YourStory.)

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