Plan for the big handover

Who will lead your business when its current leaders resign or retire? Business and executive boards hope future leaders will hit the ground running, understand the business and its culture, work closely with the executive board, and know the people working for them.

To help ensure this happens, many large businesses engage in succession planning - the practice of identifying future leaders and attempting to hold them by developing and communicating a personalised career path.

Adam Kilgour, CEO of Specialised Communication Services, a division of Australian marketing services company Photon Group, says the firm owns 28 marketing services companies (three are based in New Zealand). Because the need for new leaders for these companies is ever present, the company takes succession planning seriously, says Kilgour.

"Bringing the next generation through is important to us. It's a tight labour market in Australia and New Zealand, and especially in professional services. Recruitment is hit-and-miss, which is why we spend a lot of time growing [our own] leaders," says Kilgour.

Photon Group tackles succession planning by investing in training and development for promising people and has developed an 'emerging leaders group'. All employees get the chance to demonstrate their abilities, and a percentage of annual budgets are set aside for management training. Senior executives and the executive chairman spend time within the group's 28 businesses talking to "up-and-comers" and CEOs regularly meet and confer. The expense and effort of all this is worth it, says Kilgour.

"When you keep a [good] person you also keep the relationships they have formed. A lot of the development we do is team-based, so if one person goes, others keep the continuity," says Kilgour.

He says the search for a new CEO for New Zealand's Fletcher Building as a result of the retirement of former CEO Ralph Waters is an example of succession planning at its best.

"All the Fletcher CEO replacement [candidates] were internal candidates and all were equally competent for the job. That's quite a different process to just helicoptering in a new CEO," says Kilgour.

Another local example of good succession planning is Air New Zealand, says Chris Simmons, a management consultant for corporate strategist Benchmark Communication.

"Ralph Norris headed Air New Zealand and a great strategy was crafted. When he moved on, Rob Fyfe was appointed and because he was the architect of a lot of that strategy, the strategy continued. To my understanding, Rob's management team are all internal appointments, and that consistency is really important in such a difficult industry with so many factors beyond [its] control," says Simmons.

He says the point of succession planning is to ensure "good, strong, ongoing leadership" within an organisation. Challenges to that include people moving freely between organisations in pursuit of personal career opportunities. Employers have to accept there is a mercenary element to the way people move between jobs - without good succession planning it's possible to lose continuity in the business strategy and then in the business's ability to fulfil on that strategy.

"Without succession planning, employers have to rely on outside expertise and employees are consequently not sure where the business is going. You get environments where the staff are saying 'here we go again - new broom, new strategy, and, aw gee, we saw that idea tried ten years ago'," says Simmons.

Romie Littrell, associate professor international management for the Auckland University of Technology (AUT), says succession planning is increasingly important because it allows businesses to identify who will replace a particular person or people should they resign or retire, and also to identify places where internal candidates don't exist. However, Littrell says there is little management research to suggest succession planning is widespread in New Zealand.

"At best, it's ad hoc; while large businesses have succession plans I would say small [and medium size] businesses definitely don't," says Littrell.

He says employees who see a succession plan are more likely to stay with an organisation, and Kilgour says this has certainly been the result for Photon Group - although succession planning occasionally backfires.

"There are plenty of competitors, and even clients, that will take your staff. You can spend a lot of time training and developing a potential leader and introducing them to key clients only to have the client say 'thanks very much, I'll have them'," says Kilgour.

Other ways succession planning can backfire include failure on the part of the employer to cast the net wide enough, and errors of judgment about staff.

"It's human nature to disguise weaknesses and emphasise strengths. If upper management fails to see through a facade, it's possible to make wrong judgments about people," says Littrell.

Simmons says even the desired holistic approach to succession planning, which searches all areas of the business for leaders can go wrong if the 'funnel' is too narrow.

"It's not much use saying 'okay, Joe, Mary, Jane, you are now on the fast track', and two years later realising those people have reached a plateau and you missed out George and Jerry," says Simmons.

So how can a business ensure a succession plan succeeds - and who should drive it? The consultants say the ultimate responsibility rests with executive managers and boards, who design a succession plan, then might leave HR managers to drive it. For smaller businesses, the CEO is probably the best person for the job.

"You need to become knowledgeable about the kinds of people you have and aware of their managerial or leadership qualities, or lack of them. Then you make a plan for them and tell them about it," says Littrell. He says future leaders need to know they have a certain spot in the pecking order.

Kilgour agrees many organisations don't sit down with their rising stars and properly articulate the succession plan - up-front communication goes a long way. He says CEOs also need to take their mentoring role seriously, and identify emerging leaders early.

"Paint some sort of career path for them with timelines and expectations that you stick to, or you will lose them," says Kilgour.

Simmons says many businesses take the approach of: 'how can we nurture our A performers, recognise our B performers, and exit the C performers out of the business?'

"Flip that around and ask: 'what talent is required to deliver on the business strategy and what talent do we have?' Then, instead of looking for [established] star performers and [fretting] how to keep them, look at your entire organisation and train those you have - typically, they are all smart people," says Simmons.


Succession planning

* Know the difference between succession planning and performance management. People managers and line managers are not ideal succession planners.

* Already have a graduate recruitment programme? Don't forget these people after the first two years - stay with them and provide mentors and coaches.

* Go on a talent hunt. Search through all divisions and job levels. Seek out people interested in leadership and use your own skill and confer with others to determine if they have potential. Decide on a group of future leaders and identify them.

* Develop a career path and discuss it with your young leaders. Fine tune the plan according to the feedback you get from them. Walk the talk - invest in management and leadership training, provide mentors and coaching; stay close.

* Decide who is responsible for the succession plan; where are the points of contact for your young leaders?

* Proactively grow leaders rather than reactively looking for them under pressure.