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Learning and Development | 8 Min Read

What are the Types of Succession Planning?

Introduction

A perfect and ideal succession plan has existed since the days of the epic Mahabharata.

 

Not to get into details, but a dramatic feud followed a battle because the rulers had the wrong concept of succession planning. Had they established a viable succession plan, the story would likely have been very different.

 

Let us take another example. Steve Jobs, the founder of Apple, prepared his company’s leadership succession based on a unique ideology. He founded Apple University in 2008, which uses a digital curriculum to prepare a sizable number of employees to think like a leader. The candidates hone themselves in various roles by drawing from his experiences, which would ultimately create powerful successors. His successor Tim Cook admirably continues his legacy.

 

Here’s another example of The Coca-Cola Company. Doug Ivester was considered a protégé of Roberto Goizueta. After Goizueta’s demise, the Board thought it was spot-on at appointing Ivester as the rightful successor. No doubt, his skills surpassed everyone at his level, but his lack of leadership and many of his follies led to a decline in Coke’s earnings for two consecutive years. Ultimately, the very people who nominated him asked him to make way for another leader.

 

These are two compelling and relatable situations that underline the difference of having a well-thought-out succession plan. The former devised a careful strategy while the latter was simply not rightly placed. Furthermore, it is safe to say that the former construed a long-term succession plan with resources that laid out all the necessary future details. But the latter had insufficient research and no established process even for an emergency succession plan. It had to fail.

 

Companies are often unable to leverage the value proposition created by a succession plan. They are either shortsighted or do not consider future events, and therefore, face challenges. Or they believe that a succession plan only helps minimize a company’s exposure to the skills shortage. Consequently, they intend to postpone it as much as possible.

 

A clearly detailed and carefully executed succession plan helps businesses to tide over unpredictable changes. There are various drivers, restraints and opportunities shaping the business ecosystem. Similarly, multiple potential contingencies create roadblocks in a company’s operations. Retirement, untimely death, involuntary absence, department transitions and many such unforeseeable situations tend to occur. A right succession plan would, at the least, ensure continued operations by highlighting responsibilities and building trust. You must ensure the proper succession planning to grow your business in the longer-term.

 

However, there is no ‘one-size-fits-all’ approach to implementing a succession plan. Priorities and preferences shape the strategies. You must translate your thoughts into action to decipher the kind of succession plan needed in your organization. It may not always be to protect the CEO’s legacy. It might be required to fill in an inherent leadership position that is looked up to by your organization’s employees.

 

The blog intends to highlight the various types of succession plans that a company can employ at all levels of the organization.

Types of Succession Planning

Experts broadly prescribe two types of succession plans. They include ‘leadership roles’ and ‘critical non-leadership roles.’ Following them in an orderly manner ensures minimal impact on operations and functionality in the longer run. It is an ideal way of planning for succession across several levels in an organization.

 

1. Leadership Succession Planning:

Companies incorporate a designated strategy to maintain smooth operations when key leaders resign. It involves analyzing and evaluating specific skills or competencies in the shortlisted talent within the organization for them to take the helm when needed. It is future-focussed and fosters the next generation of leaders considering the organization’s sustainable vision. What makes this type of succession planning integral because great leadership is a scarce commodity. They are a precious asset for the company that fosters innovation. The company would undoubtedly harness the visible leadership potential in viable candidates within the organization.

For instance, IBM is a famous industry example. With a successful succession plan, IBM developed an employee into a well-known leader, accepted by the Board and had a demonstrated track record.


A leadership succession plan is undertaken for these roles:

 

  • C-suite Succession (CEO, CFO, CMO, etc.)

When ICICI Bank’s CEO Chanda Kochhar’s term was ending in 2019, the bank started scouting potential candidates to replace her. They even hired a headhunter to find an ideal replacement. Now compare this to Google’s succession plan when they announced Sundar Pichai as the CEO in 2015. His potential had been recognized in 2004 when he was a product manager. The company invested substantial time in planning and preparing for the transition. Notice the stark contrast between a carefully planned transition and one that struggles amid corporate distress. Filling up a C-suite position is mission-critical for the board and the CEO. Therefore, planning must be accorded the highest priority.

 

C-suite candidates can be chosen from within or outside the industry, given they possess a stable and successful track record of delivering results. Much also depends on their ethos and values. Some board members prefer having a CEO or a CFO that resonates with the company’s existing values. In comparison, few believe that a fresh wave of thought would drive the company forward.


Either way, the post of a C-suite such as CEO, CFO, CMO is not easy to fill. Sizeable candidates are often reviewed, closely monitored and carefully scrutinized to ensure that there is a right alignment between the person and the company. The margin for error is non-existent because even a minor concern can shudder the stakeholders’ confidence. 

Here is an interesting trivia: the economic cost of appointing the wrong CEO in global companies is estimated at more than US$100 billion.

 

  • Board Succession

Succession is generally an emotionally charged issue. Therefore, until fifteen years ago, board service was thought to be a lifetime appointment. It is not the case anymore. Board members pursue succession planning to diversify or balance out the board’s composition, gain a fresh perspective with new members, replace dormant members or enhance the committee’s expertise and fill in the skills gaps. Their template reflects the needs of both current and future organizations and board members. It also encapsulates the continuity and sustainability of corporate performance. Succession planning is a means of maintaining the quality of the board.

Certain businesses are not receptive to a leadership succession plan. It is either to avoid confronting retirement issues or the reluctance to let the younger generation take charge. The business is the only evident loser in either case.

 

Hence preparing an organization for leadership transition is vital to meet these two needs:

a) Imagine facing a situation, leaders unexpectedly leave their tenure midway, or an unforeseen instance abruptly creates an unplanned gap in key executive positions. In such circumstances, an effective emergency plan ensures uninterrupted operations. This simple ready reckoner for contingencies lays the foundation for the leader’s next course of action. This outline allows ample time to stabilize the stakeholders processing the impact of the transition.

 

The professional football club Liverpool team’s Managing Director Ian Ayre has an emergency succession plan, should its players decide to leave. He says, for every position on the pitch, we have a reasonably good idea of who our best players are, available at what cost in the event of one of our players leaving.

 

b) Another important reason to have a succession plan is to recognize those with the potential to become part of a succession pool. In case a potential successor needs training or development, there should be sufficient time to expose them to the full spectrum of opportunities within the firm. It is an intricate art to make them learn the intricacies by providing them the experience of working in key departments or widening their horizons by enabling them to face new challenges. After all, it is undoubtedly a high-stakes position that is often involved

 

American luxury department store brand, Barneys is known to all. But what’s seldom known is the well-tuned leadership success story it built over five years. Indeed, it was a long-term succession plan that involved a successful and structured pathway filled with increasing responsibilities and exposure. The management not only ensured the successor gained plenty of leadership experience within the company but appended several different departments to oversee. Rest assured, by the time the successor was ready to take on its role, it had been molded by the best and was indisputably qualified to take the reins.

Each business structure will require a different type of succession plan. For example, sole proprietorships and partnerships, the owners and managers can make decisions on succession rather freely, whereas a corporation with a board of directors, will need to follow the formalities of the corporate bylaws and rules.

David Reischer
Esq. Attorney & CEO of LegalAdvice.com

2. Non-leadership Succession Planning

As mentioned earlier, succession plans are not only undertaken for critical positions. It can also be utilized for specialized blue-collar or white-collar employees in niche roles. These niche roles may not be mission-critical but are hard to replace. Hence, the company has to be ready for the same with a non-leadership succession plan. It includes- 

 

  •  Critical Roles

Such a succession plan is facilitated via cross-training processes, and individual- and team-work plans aligned with department or organizational strategies to find viable successors. Every employee gets a fair chance at showcasing their prowess for filling in this possible vacancy. At times, some large businesses groom mid-level or junior level rising employees to take over such positions. Netflix is one iconic company that develops managers, along with senior leaders. They believe managers are the critical link connecting C-suite and the rest of the organization. Such a succession plan also helps employees maintain loyalty to their employer. It has a positive impact on their milieu since such a succession planning prepares them for career progression.

Tools for Succession Planning

Mercer | Mettl, the largest and fastest-growing assessment and skill measurement company in India, offers various sophisticated data-backed tests to help companies identify ideal successors. With evidence-based assessments, companies can seek in-depth measurement of critical, work-relevant personality traits and behavioral tendencies. These tests are designed to be used across various levels- from personnel selection for succession to training and development of potentials for better impact. The core of Mercer | Mettl’s tests are the in-house team of industrial-organizational psychologists. They have normed their standardized tools across different geographies across the world to find stable results across gender, age, language, and ethnicity. Their relevant experiences, validation methodology, and development of psychometric assessments give real-world analytics and insights. 

 The various tools include:

Personality Tools

Personality traits are the determining characteristics that are exhibited consistently despite changing circumstances. In succession planning, it is vital to get a more comprehensive understanding of personality at work, especially at the mid and senior level. Hence, Mercer | Mettl’s (Mettl Personality Map (MPM) measures personality via a unique and innovative 28 facet and a 4-factor structure of personality that moves beyond the traditional framework of personality. It is a contemporary, evidence-based personality assessment that seeks in-depth measurement of critical, work-relevant personality traits and behavioral tendencies. It determines the overall role of fitment and evaluates the likelihood of handing integral work-related activities.

Behavioral Assessment

Behavioral assessment tools are advanced tools that measure behavioral competencies in a simulated work environment. With a combination of skills, knowledge, and traits in an individual, behavioral assessment tools require candidates to demonstrate chosen behavioral competencies in one or multiple exercises that mirror actual workplace situations. Different types of behavioral assessments can be used individually or in combination for a holistic overview of an individual.

Cognitive Assessment

Cognitive assessments assess critical thinking and reasoning logic related to on-the-job performance. Whether succession planning for top management or middle management, cognitive tests help check the aptitude required by leaders to achieve excellence to work in alignment with achieving business goals. It also measures the ability to comprehend, understand, and go beyond existing job knowledge and make sound judgments. Effective cognitive tools provide organizations the power to quickly and effectively differentiate the great from the good.

Technical Assessment

For companies looking for technical roles, our ready to use technical competency framework handbook lays a strong foundation for identifying stellar technical skills sets. Our specialized tests provide detailed insights into job-relevant behavior, and technical knowledge required to be successful on-the-job.

360-Degree Feedback

It may also be prudent to gather the stakeholders’ perspectives with whom the potential successor regularly works or interacts. Seeking multiple stakeholders’ feedback would enable employees to understand diverse perceptions of one’s readiness to take on future roles. Leveraging this information could help the employees develop a better perspective of their performance, skill level and behavior as perceived by others. Using a multi-rater feedback mechanism, such as Mercer | Mettl’s 360-Degree Feedback Survey, allows one to understand whether the concerned employee has been demonstrating the qualities needed in a leader. Using this tool as an additional metric to determine the right fit would ensure that multiple perspectives are factored when making the final decision.

Employees’ superiors, peers, direct reports and even clients can come together to evaluate their performance. The 360-Degree Feedback Survey is easy to understand, offers intuitive insights, highlights an employee’s behavioral dynamics observed on-the-job and suggests developmental steps. Competencies, survey statements and reports – all of them can be customized.

These assessments can come together in the form of comprehensive assessment batteries or full-fledged Assessment/Development Centres. Each of these tools can be administered online and/or in-person, factoring in myriad demands of the present-day business environment. They are scalable, robust, reliable, high-capacity, and secure. They even generate instant and automated reports in 20+ languages.

Here are a few suitable tools for Succession Planning offered by Mercer’ Mettl leveraged by many Fortune 500’s to evaluate and understand pipeline potential:

Pre-Built Tests

A readymade set of assessments is mapped to pre-defined competencies listed by the organization for the employees via primary or secondary research. Ranging from elementary tests to tests that are highly specific to job roles, the pre-build tests will enable you to select the best candidates relevant to a particular role or function.

Custom Assessment Battery

If you intend to design a new test build as per your requirements, our subject matter experts also help quickly design a customized version. A comprehensive group of assessments is mapped to either the organization’s competency framework or a specific role. Organizations can even get customized reports for the candidates who take the assessment, highlighting the most critical competency in the result.

Blended or Virtual ACDC

When a company seeks a more holistic evaluation, multiple tools are set in motion by creating Assessment and development centers. For leadership and succession planning, ACDC highlights whether a person can handle challenges, with a higher position. Such centers can comprise roleplays, caselets, inbox exercises, situational judgment tests, group discussions, case study presentations, competency-based interviews and similar such activities to help take crucial succession decisions. These multiple lenses eliminate assessors’ biases while offering employees opportunities to showcase their abilities. A detailed evaluation also highlights an individual’s role fitment on numerous aspects required to be successful on the job.

Conclusion

Certain businesses are not receptive to the idea of having a succession plan. It is either to avoid confronting retirement issues or the reluctance to let the younger generation assume leadership positions. It may also stem from the lack of seriousness on the issue. The business growth is the evident casualty of such neglect. Therefore, it is critical to shield your organization and stakeholders. If you examine the on-going scenario, the pandemic has lent a renewed momentum to succession planning. It is reflecting the reality by posing the companies a pertinent yet straightforward question: what if a company’s top executive or any able leader goes out of action? How will the team manage the business and operations if the most skilled and experienced employees choose to leave? Opting for unusual arrangements to fill critical vacancies will only put more strain on the company. You must consider succession planning to mitigate such problems and ensure the stability and long-term continuity of your business endeavors. The significance of incorporating a succession plan as a mechanism couldn’t have been better highlighted. 

No crisis is the same. You can’t have a playbook and formally prepare yourself to handle it. However, a succession plan can provide the much-needed blueprint to mitigate the problem.

Originally published July 23 2020, Updated July 27 2020

Shirisha Jain

Written by

Shirisha has been helping countless brands gain traction with her content. Her deep understanding of the education sector and sound knowledge of technical skills have helped her structure the most creative solutions for key stakeholders. Shirisha has also ghosted pieces for several industry honcho’s successfully published both online and offline. When she's not keeping up with the world, you're sure to find her catching up on bollywood stories or gramming for fun.

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