i) Introduction - Succession Planning

. Worldwide the status of succession planning is

"...16 % of CEOs want to be carried out in a coffin; 30 % of senior executives do not plan for succession; great companies are 6 times more likely to have a successor in place. They hold their leaders accountable for developing the direct reports. In higher performing companies at least 10 % or more incentive is based on leadership development. The final test of the leader is how well his or her successor does!..."

Manfred Kets de Vries, 2006

. The most common attitude to succession planning can be expressed as

"...Succession ‐ power sharing, the delicate balance of egos and wills that it entails ‐ is the thorniest, most dreaded, and least talked-about rite of passage..."

Betsy Morris, 2007

Most bosses find it hard to give up the "clarity of control" and the incredible pull of being needed all the time. On the other hand, succession planning can make or break an organisation.

. There is an alarming lack of succession planning in Australian organizations. A survey in 2002 found

"...49% of Australian companies hadn't begun to think about succession planning..."

AFR, 2002

Yet it is expected that around 40% of senior managers in Australia will retire over the next 5 -10 years. This, combined with flatter management structures in organizations, means that the next group of senior managers is less experienced than the generation it is replacing ‐ sometimes by 10 or more years

. Importance of succession planning

"...the ultimate statement, the acid test of a great leader, is how their successor goes..."

Manfred Kets De Vries as quoted by Andrew Cornell, 2008b

- sometimes a new senior executive and/or more general change in staff is needed to signal the need for change and the types of change characteristics and attitudes required

- next generation of top management personifies the new approach, ie promotion is based on the effectiveness of the change

. A USA study (1988) found

"...companies with formal succession planning systems in place exceeded the expected performance of their peer companies by 16%, while those without under-performed by 7%..."

Andrew Cornell, 2003

A more recent study supports this, ie

"...less than 15% of companies that had a structure for developing leaders and putting them in the right jobs averaged shareholder returns of more than 10% above their cost of capital over 10 years. Those with little emphasis on the succession averaged less than 1% return..."

Andrew Cornell, 2003

. Succession planning involves helping employees with a career path and developing the skills they need to grow into new roles. Such company-wide programs ensure that when people move up into the ranks, the next set of managers will be there to replace them. This involves organising, informing and nurturing talent

. It is important to hold individual executives accountable for developing their replacements. This helps ensure an orderly transition and provides some assistance in the keeping of talented staff. Generally, organizations find it difficult to locate suitable outside talent to fill positions in an organization.

 Chris Moody in Harvard Business Updates, 2001

. Unfortunately, succession training on the individual level is often ineffective because managers do not develop a well-considered plan and do not devote enough time to carry it out.

. Succession planning involves screening candidates, usually by interviewing. To help select the right people, use behavioural questions with a sound structure (such as basing questions on an analysis of what the job requires and asking all candidates the same questions). Behavioural questions includes asking how the candidates have behaved in past situations that are relevant to the position. This is based on the notion that past behaviour is a good guide to future behaviour. For example, if the position requires persuasion, then a behavioral question might ask the candidate to describe what they did when they were required to persuade somebody to change their opinion or agree to do something. The aim is to uncover what candidates did previously in this kind of situation and the level of skill that they would apply.

. Similar to behavioural questioning is situational questioning which is used when interviewing people who have little experience relevant to the job. This involves asking candidates to indicate how they would handle situations similar to those required by the job.

. Very few senior managers have a HR background, ie only 3% of CEO (Fiona Smith, 2012b). Most CEO have a technical (engineering) and/or accountancy background which stresses facts, figures and their behaviours and mentality focus on competition, ie competing to win plus language of business school and military symbolism, etc. Conversely, the HR fraternity comes from the social sciences background; usually females who are encouraged not to compete but to help and co-operate. Furthermore, traditionally HR has looked after industrial relations (IR) which normally means handling and negotiating against the unions. So HR can have conflicting roles, ie acting as a confident, coach, counselor, mentor, etc to staff, and as the bosses' representative in IR-related staff issues including pay and conditions. Increasingly, HR needs to understand the business


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