Rewards For Companies That Practice Succession Management During a Recession
By Gary Perman
As published in CIO Insigth magazine. www.cioinsight.com
Succession management has been bantered around as a topic of interest in companies and technology departments for several years. Recently there has been an increased interest as the need for skilled talent becomes more critical.
Succession management is defined as making provisions for the replacement of key people and requires a clear understanding of an organization’s values, mission, and strategic plans. It is a proactive approach that ensures continuing leadership by cultivating talent from within the organization through planned development activities.
Companies who ignore the need for succession management planning risk potentially devastating losses to growth and financial profits when any of the following events occur:
- Executive or managers depart from a company because of retirement, termination, or death.
- Key performers leave for another company.
- Promotions within a company leave a vacancy without a trained successor to fill the vacated position.
Considering the importance of being prepared for unexpected staff changes, I would have guessed succession management was a common topic among company managers. I have been surprised to discover that a lack of succession planning is more rampant than I could have believed possible. According to the National Association of Corporate Directors, forty-five percent of companies with gross sales over $500 million still do not have a clear succession plan. Companies earning less than $500 million experienced even lower succession planning. In start-ups and small companies succession planning is nearly non-existent.
A real problem facing companies in today’s work environment is the absence of a succession management plan. Companies can experience tremendous financial losses when they are not prepared for the departure of a key employee. Delays in finding a replacement are common. Due to the skilled labor shortages in technology and related professions, the time that is required to achieve successful replacement results has increased from three weeks to three months. During extended vacancies – projects are delayed, revenues unrealized, accounts lost, lost innovation, lost patents overtime costs rise and employee morale drops. If companies want to be effective at filing unplanned vacancies, they must commit to the development of a detailed and progressive succession management plan to ensure that they have the future skills required for corporate sustainability.
The realities of a continued talent crunch and an ever widening gap between the number of jobless and the number of skilled technical, talent are driving more and more companies to making succession management a priority in their companies. Bill Bliss, an executive leadership development consultant to several publicly held companies says that “there is no logical reason not to practice succession planning. A key area of accountability for any corporate board should be to mandate a viable succession plan for at least the CEO, if not the key leadership team. If they don’t demand that a plan is in place, the stockholders should fire the board.”
Bill adds that in many privately held companies, he has seen numerous reasons for not having a succession management plan, including the fact that the CEO doesn’t want to give up the reigns. “These CEOs don’t appreciate that their life could end any minute, or they could suffer a permanent disability as a result of a freak accident, or a host of other reasons. This really points to selfishness on their part as they are not planning for the livelihood of so many other people who depend on the company they are leading – family, employees, customers, and other stakeholders.” Second, the CEO and even his team are often too focused on short term issues and not focused on longer term issues – again this can be for selfish reasons. A third reason Bill has experienced is that the “CEO has the succession plan in his head – yet no one else knows about it. This is not a great strategy, as the likely successor does not know the position they are in, nor is the CEO putting that person on an adequate development plan to get them fully ready.”
While the costs of avoiding succession management are significant, the rewards for companies that do practice succession management are even greater. Succession management can be incorporated into any size company from the smallest start -up to large corporate giants.
Norbert Kubilus, former COO of National Data Corporation and now CIO at Tatum Partners in San Diego says, “I’ve been a firm believer in IT succession planning for over 30 years. My rise in National Data Corporation was the result of succession planning for me. As a CIO/CTO/COO, I’ve developed formal succession plans for my team. Some CIOs may feel threatened by the concept of CIO succession planning … but developing one or more strong candidates demonstrates that the incumbent CIO is concerned about the continuity of IT leadership and about protecting the company’s technology investment.”
Succession management also preserves knowledge including intellectual property within a company. Manuel Mellos, Director of IT at Woolworths states, “with a lot of intellectual property inside people’s heads these days it is important to preserve those heads via a good succession plan. Succession planning may assist in extracting that intellectual property out of those heads as well.”
Best practice in succession management Savvy companies tend to share several common traits that make their succession management plans successful. First, their succession plans are easy to use. Successful plans are non-bureaucratic, uncomplicated processes – with a unified approach to ensure consistency and maintain objectivity across all departments, in all organizational levels, and at all locations throughout the company.
The best plans are developmentally oriented, rather than simply replacement oriented. Developmentally oriented means that the plan becomes a proactive vehicle for managers and executives to reflect on the progress of their talent and the opportunities they require for genuine development. Highly effective plans actively involve the very top players in the organization. Senior executives view effective succession management as a critical strategic tool for attracting and retaining talent.
Another successful method for candidate development includes “planned job rotations within a department” says Norbert Kubilus, “for example, senior directors rotating through computer operations, application development, telecommunications and planning functions – as well as opportunities to gain experience in other departments, such as finance and administration, or in specific business units. Also, mentoring candidates in areas such as customer service, vendor management, contract negotiation, business consulting and project management can help round out their skills.” Norbert goes on to say “Some CIO’s may feel threatened by the concept of CIO succession planning, viewing the succession candidates as a replacement threat rather than part of a backup plan for orderly succession. But developing one or more strong candidates demonstrates that the incumbent CIO is concerned about the continuity of leadership and about protecting the company’s technology investment. Having a ready successor may also allow a CIO in a larger or growing enterprise to move into another executive role – without having to leave the company or leave the IT organization with weak leadership.” Best practice succession plans are also effective at highlighting gaps in talent and identifying important key positions that are critical to the overall success of the organization. Succession planning does the job of monitoring the succession process, enabling the company to ensure that the right people are moving into the right jobs at the right time and that gaps are being spotted early on.
Successful plans are built around continual reinvention. Best practice companies continually refine and adjust their plans as they receive feedback, monitor developments in technology, and learn from other leading organizations. Where old plans were characterized by confidentiality and secrecy, today’s plans actually encourage involvement by individuals who are participants as well as candidates for future openings. Under older systems, few participants knew where they actually stood in terms of their potential for career opportunities ahead.
Tim McHugh, CTO at TriMet, a Tri-County public transportation service based in Portland, Oregon says, “We focus on developing the existing IT staff so they have a broader understanding of the business, which is a big part of our succession management”. When the IT department has vacancies, Tim says that by developing their staff, existing IT people easily step into a new position and then in turn he can hire behind them. “We try to hire people in at the less experienced positions and develop them. It provides for professional growth and builds more stable and durable institutional knowledge.” Tim adds that he attributes this internal development and succession management as a key ingredient to their low turnover.
When a succession management move is initiated because of a retirement at TriMet, one of their key strategies is to integrate the retirement with the addition of advances in technology. “It is often the case that someone nearing retirement is working with a technology nearing obsolescence.” Phasing out an older technology using senior and developing staff working together provides a more effective succession management transition. Tim notes that this can be “a rewarding project late in someone’s career”. The transference of business knowledge from the experienced to the inexperienced tends to be more important than the technology transfer itself. Retirement is not TriMets’ highest risk, although it is the easiest to plan for. Tim emphasizes “The potential for key critical staff in support of our mission critical areas walking out the door unexpectedly is what we want to be mindful of. We want to make sure we are properly staffed and are not short-handed on experience in these areas.”
Key factors in an efficient succession management plan:
1. Identify Succession Candidates Within Your Company
Performance management and 360-degree feedback are linked throughout the succession management process and are the main tools used by best practice organizations to place employees into development plans. Using assessment tools such as assessment centers, tests, interviews and a performance-appraisal process will assist you in making accurate leadership placement and development decisions. By using some of these tools you can clearly define the specific behaviors, skills and values that leaders need in order to succeed now and in the future in your organization.
2. Provide Management Education and Mentoring To advance the core mission of any organization, information managers must have an increasingly complex understanding of the information over which they preside. They must be able to create and manage information. They need to have a practical understanding of laws governing the use of information, and they must consider the social and policy questions that involve the lawful handling and use of information. They must be able to work with an organization’s IT department to design and implement systems to house and retrieve information, and they must be able to work with commercial vendors to design information products that serve an organization’s specific needs. There are several ways to develop a succession candidate. One is formal training to learn more about what it takes to be a CIO/IT leader and how to prepare for this position. Options include seminars and courses offered by the American Management Association, the intensive nine-month Regional Leadership Forum sponsored by the Society for Information Management, or one of the CIO “boot camps” sponsored by Gartner. A person can also take advantage of specialty programs at an ever growing number of universities throughout the country. Columbia University in New York offers such a program to IT managers with their eye on succession.
Art Langer, Sr. Director and faculty member in the Executive Master of Science in Technology Management program oversees a continuing education and mentoring program at Columbia University in New York. Art is an IT professional and human development specialist with a successful track record of distinguished accomplishments. His cutting edge program focuses on current IT managers who want to segue into a more senior role in IT. His program works with existing IT managers and directors and builds an educational experience to help them become successful as an executive in a firm. Many individuals performing IT functions today find that while their responsibilities are substantial, they do not have the systematic, formal training and up-to-date technological skills they need to grow in their career and advance to the next position within their companies. Columbia’s program trains managers how to meet the real-world demands of solving complex problems of organizing information. This is a program offers courses during the evening to accommodate the schedules of working professionals. It is a Masters program with all the requirements and curriculum to earning a Masters. A unique aspect of this program is that each student has an executive level management mentor who meets with the student for one year. Columbia University has a list of mentors consisting of successful COO’s, CEO,’s VP’s and CIO’s from prestigious companies, including:
Mark Bernard, CIO, Horizon Blue Cross Blue Shield
Sandra Alayo, VP of IT, Safe Horizon, Inc.
Cath Callagee, VP IS Ops, UPS
Paul Amorello, SR VP of IT at Pepperidge Farm, Inc
Dana Deasy, CIO British Petroleum
Michael Iacona, CIO of TMP Worldwide
Maggie Miller, VP, and CIO of Warner Music Group, among other highly recognized names and companies.
“We’ve graduated 150 students so far with zero attrition” Art Langer concludes. Other Universities are beginning to follow in Columbia’s footsteps including UCON, George Washington University, and Rutgers.
3. Provide Internal Education and Mentoring Another successful mentoring program occurs when a supervisor mentors direct reports who appear to have the skills, experience, and desire to advance in title and responsibility within the company. Loren Jackson, IT Manager at Nike told me “Part of my job is to identify a person on my team who can step into my shoes and manage the IT department when I advance to the Director of IT position.”
The growing demand for talent will continue to put more pressure on IT departments to employ succession management strategies. “Succession management is not that critical in low end positions, but mid- level and sr. level positions are a must”. If no one is available to take your job, you are certainly not going anywhere.” adds Art Langer from Columbia. Succession management practices have certain advantages, such as bringing forth molded, well trained, and acculturated players with unparallel organizational knowledge.
An argument by some naysayer is that the marketplace is changing – rapidly! No sector is exempt; especially the IT world. I agree that the marketplace is changing continuously. What you learn this year may become obsolete next year – never mind 5 years from now. Succession management plans strive to keep up with the meteoric changes in the marketplace by incorporating new players to keep abreast of new market developments. Although this could be a valid argument, it would be much more cost efficient to retain your existing talent and offer continuing education on growing market developments and skills. The company retains that corporate knowledge, receives a highly trained person that already is stabilized into the culture and hit the ground running operations of the company. The company builds employee loyalty, plus the company receives a tax write – off for offering the continuing education. Win – Win for company and employee.
4. If You Don’t Have The Talent, Now Is The Time to Get It. The best time for executives to initiate a succession management program is before a critical employee leaves the company. Establish an ongoing relationship with a headhunter. Headhunters establish relationships with industry talent. They know how to identify and surface talent, and can cut your search time in half. In the event a person leaves your company and you do not have someone ready to step into their place, a well placed call to a headhunter can save you a tremendous amount of time and energy (weeks and months). A headhunter in your field will be tuned into the market place. They know your competition and can identify and surface qualified talent in a matter of days.
While the succession management process differs from one organization to another, there are certain characteristics of an effective program that are universal:
1. Succession management smoothes transitions. Having someone to step into an important vacancy is a critical measure of the effectiveness of succession management. However, helping that person transition in a positive manner with all the necessary skills and knowledge is as important and often more challenging to execute.
2. The ‘right’ developmental assignments. A successful process includes job assignments that properly prepare candidates for their new positions, as compared to a sink-or-swim approach.
3. Meaningful appraisals and feedback. Objective assessments are essential in order for management to specify what’s required for a successful promotion.
4. Appropriate selection criteria. A successful succession management plan depends on the development of competencies for each job, giving everyone involved a clear picture of the skills, values, behavior and attitudes required to succeed.
5. A range of good choices. A working succession plan results in having more than one good person available for a key job. Real success srequires choices between two or more qualified people.
The rewards of practicing succession management in a company can far outweigh the short term benefits of not having a succession management plan. By initiating a succession management plan, you will discover rewards including
- Transference of business, cultural and production knowledge from the experienced to the inexperienced
- Retaining intellectual property
- Replacements hit the ground running in the event that a leader or employee leaves the company
- Lower turnover rate
- Less production down time
- Less down time to train a replacement
- Less costs in replacement: identifying, surfacing, and recruiting new talent