By Isa Esparza
Should your company have a succession plan? When should it be programmed? What aspects should be used for choosing or hiring a successor?
When we talk about succession plans there is no fixed roadmap or universal formula for all organizations to use. Each organization must plan succession that lays emphasis on organizational culture as well as skills and values that future leaders must have to benefit the organization. How do we know what planning is best? Only CEOs and HR professionals of each organization can come up with an answer to this question, which is an indispensible formula for planning future leadership well. This should be as detailed as possible: emphasizing the organization’s cultural values, a business plan for the future and the main attributes should be matched with the new successor, among other mandatory requirements.
Here are two examples of how different companies have planned and organized succession depending on their interests and business strategies:
1.Two-decade succession: General Electric (GE)
The quintessential US company founded by Edison, holds thousands of patents and has several Nobel laureates among its employees. GE is famous for its succession plans created by its former executive Jack Welch, one of the CEOs who raked in colossal profits, multiplying the company’s market value by more than forty times transforming it into a true icon of Corporate America. Welch began his succession plan with extraordinary farsightedness; he began looking for successors in 1994 with the idea of retiring in September 2001.
The process had several stages: at first it defined the profile required for the position and then 26 potential candidates were selected who had to face different challenges. The group was gradually whittled down to just three possible successors who had to make their own decisions without consulting Welch.
Finally, after 8 years of setting up and planning succession, Jeff Immelt took over the helm of the company in possession of organic knowledge of the company and as a player well known to the Board of Directors. Welch continued to provide guidance through the board. This success story in succession planning is renowned for its foresight and detail with which it was undertaken. Welch’s famous plan was designed based on seven points outlining the following principles tenets:
- Choose the leader with the most authority.
- Find the candidate with the most complementary skills.
- Retain all candidates in the transition and in the new administration.
- Minimize dysfunctional cooperation between candidates.
- Create opportunities for all potential candidates and analyse the reactions.
- Provide a transition period as needed depending on the company’s reach and complexity.
- Anticipating the requirements needed for re-issuing recruitment notices or advertisements.
2. Pipeline for unexpected successions: McDonald’s Corp
One of the most interesting succession plans experienced it the fast food company McDonald's in 2004 when it faced three successions in less than two years. Two of their CEOs suddenly became ill (James Cantalupo and Charlie Bell) and had to leave office unexpectedly. Under such unusual circumstances, the organization acted immediately to curb “fear” among investors and stock exchanges.
How could the executive director of one of the world's largest companies be replaced suddenly in a few hours? Two factors were crucial: first, the regular meetings that the board held independently throughout the year, and second, each CEO had been preparing a successor for years under the "Plan to Win" plan devised by the CEOs, Cantalupo and Bell, and which Skinner later inherited. This was a restructuring programme designed to address troublesome periods with the mandatory requisite to attract and retain the best talent for the company. Through internal continuity that transpired during the turbulent years, the plan continued to be put into effect, expanding talent into middle and senior roles.
In a nutshell, this scenario was not resolved by chance; instead it was continued and developed further by various CEOs who took over the strategy as if it were their own. A well-known quote that perfectly summarizes the organization’s philosophy on succession planning is one that Jim Skinner repeatedly told his managers, “Give me the names of two people who could succeed you.”
Another interesting case in the model for selecting potential candidates is the one applied by Harvey-Jones, the chairman of Imperial Chemical Industries (ICI) between 1982 and 1987. Unlike other organizations, Harvey-Jones knew how to include and motivate middle management as “talent catalysts” within the organization. These managers implemented a strategy to empower other employees and spot hidden talent within the organization, promoting them and developing their skills and abilities.
The Harvey-Jones innovation was to empower middle managers not wanting to climb up the ladder, as talent creators and catalysts. This very attitude among managers in other organizations had been perceived as a lack of ambition and poor performance. However, for ICI it was the means to bring out talent. This strategy delivered great results thanks to a change in HR policy to reward recognition to those responsible for making others prosper up the corporate ladder through public recognition as well as financial and emotional incentives.
The talent catalyst policy did not just motivate the managers responsible for nurturing talent but also a major part of the employees who saw the opportunity for promotion as something real and possible. This strategy was really helpful for motivating both those wanting to prosper up the corporate ladder and those who were not necessarily pursuing this goal. This way Harvey-Jones was able to create the future of the company from the present.
As we have seen throughout these various examples, a key factor for preserving success in succession planning in any company is prior preparation. Among companies successfully conducting their succession processes which were barely questioned internally or externally, the common denominator is the constant involvement of various stakeholders (boards, successors, CEOs ...) over a period of time prior to succession.
Thus a comprehensive succession programme must take into account the skills and goals of each employee, compare the needs of present and future management roles, and thoroughly track candidates to prepare them for filling critical positions. Every organization should consider their own cultural influences and values, when building a succession plan that suits their needs. However, it is essential to consider some general points:
- Have a well-defined organizational culture and make it available to employees.
- Define career and development plans according to the needs of our organization.
- Establish a transparent succession plan for key positions.
- Disseminate the succession plan to motivate and retain talent in the organization according to our present and future needs.
- Using an HR technology solution to successfully implement the organization’s succession plan. Such technology will enable talent management of potential successors who comply with the company’s specific requirements and who can be transformed into the future leaders of the company.