Human Resource Management

Assignment
on

Succession Planning- Big HR Challenge

Submitted byVarun Garg 28NMP46

As Security Exchange board of India(Sebi) ushers in a new regime for listed companies on corporate
governance, experts feel a proper succession planning program me is largely lacking among Indian
firms and this could adversely impact their results.

Overhauling the way listed firms and their top executives are governed in India, market regulator Sebi
has asked them to put in place proper succession planning for top management and board positions, in
line with best global practices.
The experts in human resources arena, however, say that succession planning at Indian companies
remains mostly poor and a large number of them being family-owned or family-run enterprises make
it even more difficult. At the most visible end of the spectrum, with celebrity succession cases like
Ratan Tata,Narayan Murthy, etc that seems to be the case. We have been witness to very careful and
meticulous succession planning from major corporations like the Tata Group, Infosys and ICICI in the
recent past.
The vast majority of companies in India are still struggling with the idea of smooth handover across
generations.
There are three main reasons based on the type of company:
1. Promoter-led businesses: Succession planning in first generation promoter-led businesses is
difficult anywhere in the world. The founder tends to have an outsized impact on the culture, values
and the operating style of the company, making it difficult even for the best of executive talent to fully
replace the founder.

Add to this the tradition in India of next generation family members taking over companies founded
by their parents, and the issue gets even more complex. Several first generation promoters are now
looking to evaluate their children alongside non-family professionals that have been deeply involved
in building the business over the years.

Moreover, founders are realizing that their children may not be interested in the core/traditional
business, and might be interested in creating new and exciting businesses in technology, media and
entertainment. Succession in these cases is particularly challenging. Getting the criteria right, the
expectations straight and the process rigorous and transparent is key to navigating through this
complex transition.
2. Indian business houses (conglomerates): Succession planning for executives in conglomerates is
not an episodic initiative, it is a full-time job. Some conglomerates in India have designated a team of
professionals to do this on a full time basis.
Others are contemplating such a move. In conglomerate situations, it is critical to groom a pool of
multi-domain generalists to take over different business leadership roles in different domains over

time. The art and science of finding and grooming this special category of executives who could be
running an automobile business today and a beverage business in two years, is the key challenge in
conglomerates.
Building financial and commercial capability is part of the challenge and a bigger challenge lies in
building learning agility - the ability of an executive to learn quickly from experience and be effective
in unfamiliar situations. Indian business houses have recently started to focus on learning agility as a
core part of their succession process.

3. Globalizing Indian companies: As an increasing number of Indian businesses are aspiring to go

global, we are seeing the emergence of a new succession challenge in India. These companies will
need to build a bench of global-ready leaders who can operate in different countries and in a diverse
set of cultural contexts. Adapting and adjusting one's leadership style is critical for success.
Running a global business, acquiring and integrating international assets, working with diverse and
cross cultural management teams are capabilities that will need to be built and accelerated over time.
International expansion does give these companies access to global talent in other countries, but we
are yet to see Indian companies embrace a foreign-majority management mix.
This will happen over time, but for now, the key will be to use foreigners in specific roles, while we
build strong global-readiness in the core Indian executive pool. Globalizing the succession planning
process to incorporate talent from a wide range of countries is also part of the learning curve that these
companies are going through.

Overall, Indian companies are taking the succession issue very seriously. There is a growing
recognition of the need to be proactive about it and the need to view this as much as a development
process for talent as it is a replacement process for executives. India Inc. can be accused of being
deficient in one respect i.e. in announcing succession well ahead of time. It is often announced less
than six months from the succession date. That is a communication and transparency issue.
It happens for many reasons, not because corporations don't want to announce well in time.

There are issues in making announcements ahead of time - sometimes a company stands to lose other
employees if one among them is chosen well in preference to others. Indian companies have grown
significantly over the last five-seven years, when you grow in size significantly, it is not easy to find
successors quickly.
Business expansion happens faster than human capability development. Therefore some of them have
had to find patchwork solutions, delay their succession, and ponder over it a little more.

A business could require substantial Greenfield investments in the next two years but it may give
results five-seven years down the line. Then one won't look at someone with just two years of runway
because he/she won't be able to see the project to fruition-the commissioning and operation. Then of
course, the competence and the interest of the individual influence the choice heavily. Family
businesses have found different ways to plan a succession - even in case family members they make
choices. The philosophy of "horses for courses" equally informs family succession when the best and
the brightest perhaps get the largest business to look after.
Some have even split businesses to divide it among members. The leader of the family has to make a
choice between members. That's what one owes as a leader to the whole family and its legacy. Most of
the time, shareholders are looking at performance. People looking at a company's succession plan
should also try to remember if there has ever been a leadership vacuum at the top.
Succession planning is certainly important, but let's not forgets that large organizations are resilient. A
large organization is always run by many. There are at least a score or two of leaders who provide the
foundation and the backbone. As for poster boys, even they know that their success is due to a large
team who work backstage. If the corporation gets value out of the individual on a sustained basis then
it decides not to replace him or her.
But if the leadership is lacking in some respect and yet the person is still persisted with, that will be a
cause for worry. In an organization which is rolling from crisis to crisis or is in the midst of a crisis, it
wouldn't be a good time for the CEO to exit. She or he should see it through the crises, bring some
stability and then look at succession.

Leadership succession is a means to an end and not an end in itself. Similarly, in an organization going
through exponential growth, where the fundamental strategies are in place, and the leader faces the
question of when to retire or step down.

Should he/she keep a third party's notion of corporate governance and step down because the
succession plans is in place on paper or lead the organization through the strategic phase of growth?
Therefore, succession plan is a choice an organization makes in its own context. And best practices are
not one-size-fits-all plans. There has to be a plan with the process of identifying and involving
potential leaders, developing and encouraging them to look beyond their immediate responsibilities.
This will transform into better vision building, effective teamwork and successful performance -- both
for the individual and for the company. By comparison, more than 60 per cent of boards at the top-

ranked S&P 500 companies in the US discuss chief executive succession at least once a year, and 80
per cent of these companies have emergency succession plans in place.

Some leaders find it difficult to let go of the reins and want to retain their powers as a leader. Also
issues like death could be uncomfortable to discuss. Previous studies have produced similar findings.
A report by Barclays Wealth and the UK-based Economist Intelligence Unit, based on interviews with
2,300 wealthy investors inAsia,identifiedsuccession planning as a key weakness in Indian
companies.

Advantages of Succession Planning

An ongoing supply of well trained broadly experienced well motivated people who are ready
and able to step into key positions as needed.

A cadre of desirable candidates who are being integrated into the company with positive goals
established for them individually.

Availability of appropriate resources within the company to conform with the future needs of
the company.

Positive goals for key personnel which will help keep them with the company and will help
assure the continue supply of capable successor for each of the important position included in
the succession plan.

Defining career paths which will help the company recruit and retain better people.

Succession planning pitfall

Lack of formal written plan for each key person or position.

A rigid inflexible plan not tailored to the needs and abilities of the personnel involved.

Too long a wait for real movement/promotion potentially resulting in the best people leaving
due to apparent inertia in the system.

Quality of the individuals selected is paramount to the success of the process.

Question 1. How long should succession planning take?

Each company must look at its needs and resources to determine where it needs to have successors in
place or in the process of learning the requisite disciplines. Each company need to determine how long
a candidate should be involved or exposed to the training needed. Each individual should have a
concisely determined path towards the goal set for him or her. The path may be changed as needed and
as events determine so monitoring and updating should be part of every succession plan.

Question 2. Over what time period companies plan for succession?

Succession must be planned years in advance of expected needs. To properly train a successor the firm
needs sufficient time to expose the people to the full spectrum of opportunities within the firm.
For example if some-one is expected to be a general manager the number of departments, the types
and ranges of technologies and processes and the level of knowledge about the company procedures
and policies ,market and customers, suppliers, employees, contractors etc will determine the time and
depth of involvement.
Factors such as past experience and current knowledge that the individual brings to the process will
also affect the succession time frame.