Succession planning refers to the on-going process of systematic identification, assessment, and development of skills as well as talent to assure leadership stability and continuity for all strategic position in an organization (Mandi, 2008). According to Mandi (2008) succession planning refers to the definition of organization’s future course in relation to leadership talent and skills.
Need of Succession Planning
In most of the cases, succession planning focuses on the three key factors. First of all, it covers the needs of a company as senior management of that company ages. It is due to the fact that it is difficult for a specific CEO of the company to lead for years. Within that tenure business practices and policies significantly imbed in the company and regular problems take preference. This is why the need of succession planning raises as little/no succession planning creates havoc when the company’s leader retires (Butler & Roche-Tarry, 2002).
On the second note, succession planning enables a company to prepare for surprising event. For example, sudden illness or decease of key business executive can vibrate within a company and paralyze not only the management but also staff. In addition, it obstructs a company’s ability to perform its business plan. Thirdly, the succession planning provides assurance that a company has the right human resource (HR) to function at high level of efficiency. Succession planning act as a medium to develop an organization hierarchy and enables the company to conduct an inventory of HR (Butler & Roche-Tarry, 2002).
Forms of Succession Planning
There are three main types of succession planning, such as designated replacement, target date replacement, and situational replacement.
Designated Replacement Succession Planning
Designated replacement succession planning can be an exit strategy of a small company or a type of continuity insurance for big companies. It is also known as “name in the envelop” succession planning as this form of succession planning focuses on the designating a replacement for the proprietor, CEO or other senior manager. The designated replacement is the qualified and trained person, who has capability to step in and immediately adopt the role. For instance, the business owner is deceased or is temporarily/enduringly injured as occurred at McDonald’s in April 2004 (Ogden & Wood, 2008).
Target Date Replacement Succession Planning
The second form of succession planning is the target date replacement and is similar to the designated replacement planning. The difference is that in target date replacement plans are designated more than one employee. In addition, there is no requirement of employees to be trained. This type of succession planning is used in case the company knows far in advance when a specific employee will be leaving the company or when retirement of certain employee is due. Target date replacement succession planning is beneficial because it allows the businesses to follow a well-planned process of identification of potential replacements and following them via training process. As the target date comes closer, the applicant field frequently tightens until a single applicant becomes the designated replacement (Ogden & Wood, 2008). According to Ogden and Wood (2008) targeted retirement is where a CEO inform the board about his/her departure date and enables the board to initiate an orderly process of finding a successor.
Situational Replacement
Hoover and Hoover (2013) stated that situational succession planning is based on the uncertainty or an unanticipated/quick departure/a deteriorating situation. In comparison to designated and target forms of succession planning that develop succession plans to fill the certain role, situational replacement planning is not role-specific. In its place, it includes conducting an assessment of needs and developing a pool of applicants with different qualifications. Need assessment and developing pool of applicants both have potential to move into more than one roles. Methods like skill surveys, performance reviews and tracking of outputs of internal and external training programs are usually used to recognize potential pool applicants. This type of succession planning has various advantages. It saves time and investment because hiring from within the company leads to reduction in hiring timeline and costs (Ogden & Wood, 2008).
Succession Planning in Oil Industry
Succession planning is operated by different industries and one of the example is oil industry. Saudi Aramco (a Saudi Arabian global petroleum enterprise) is the pioneer in the SPM practices in the region. Over the years Saudi Aramco has developed a succession planning system for Saudi and expatriates employees. Each of the management job (supervisor through senior vice president) is required to have three applicants listed to fill the job. The charts identified the training/experience each applicant required along with time. The government does not taking part in company’s personal matters. However, Minister Yamani with the responsibility for supervising the development of the Saudi petroleum industry, monitored the movement of senior Saudis progressing via management ranks (Saudi Aramco, 2011).
For instance, Baldo Marinovic hired as head of the Management Development Department in 1978. Yamani demanded that the department create a highly confidential chart for tracing Saudi applicants at the level of general manager and above. The chart is known as “greening of Aramco chart” a box indicating an executive position held by Saudi with green color. The box indicated a go ahead to filling of position within two years. The chart is kept locked in the safe of Aramco and only few of the executives can see the chart. Appointment of the Al-Naimi is the example of process of succession planning used by the company (Saudi Aramco, 2011).
Center for Advanced Human Resource Studies (CAHRS) (2006) reported about the succession planning and talent identification at Saudi Aramco. It is indicated in the report that employees, who have high potential receive best training, internships and are selected for sponsorship for graduate programs to be employed in the company. The company also conducts assessment center evaluations at three shifts in an auspicious employee’s career, such as individual provider to first line supervisor, supervisors of other supervisors to head of the departments and department head to executive. Targeted as well as future-oriented capabilities are evaluated in the assessment centers. It has set a target percentage of valuable employees of 36 years of age/younger to overcome the risk of mass retirements in shorter time span. The company has developed a program known as Leadership Preview Process that is designed to enable pre-supervisor level employees to know “A Day in the Life of a Supervisor” (Center for Advanced Human Resource Studies, 2006).
Succession Planning in Healthcare Industry
Another example of the succession planning in relation to healthcare industry is the Mayo Clinic. Chief Administrative Officer of Mayo Clinic Shirley Weis stated that one of the hallmarks of the company is its succession planning. She said that the company put significant attention on succession planning to make sure that it has stable flow of folks from different backgrounds. The company has term-limit process for the top jobs as the employees are in the roles for approximately six to eight years as CEO, CAO or department head. It enables the company to keep ideas fresh. There is a pattern of succession planning in the company as Weis was named to the role of rank 2 at Mayo about midway through the contract of then-CEO Denis Cortese (MD). Weis is departing four years after John Noseworthy (MD), succeeded Cortese. Mayo’s step of overwhelming C-suite entrances and exits keeps troubles to a minimum (Furstgroup, 2013).
Advantages of Succession Planning
There are various advantages of the succession planning as the success planning helps the companies to match available talent to the required talent and enables them to meet strategic and operational issues by having right human resource at right places at the right time to perform the roles. Its advantages include assurance of leadership continuity and identification of high potential, frontline and mid-level employees (Robinson, 2013). According to Weiner (2015) by having proper succession plans in the companies, employees’ engagement level increases. For instance, the hospitals that want high level of employee engagement develop effective succession plans. It is due to the fact that when employees feel valued and praise their companies due to their effort to skills development and strong career path, they are more engaged at work.
Another advantage of the succession planning in the context of healthcare industry is that it improves patient experience. Leadership stability and strong talent review process improve the performance of a healthcare organization, employees and patient experience (Weiner, 2015). Robinson (2013) stated that without a succession plan, the business terminates with the owner. When plans are made for a successor to take over the company, company grows significantly. It can be ascertained by the fact that some of the Fortune 500 companies are operationalized for more than four generations. Hence, the clear advantage of the succession planning is that it enables the business to grow and to become a strong body. In addition, it eliminates the confusion about taking the responsibility of business. Moreover, succession planning leads to development of diverse workforce, retention of valuable employees, cost and time saving and improvement in morale and reduction in restructuring effects.
Disadvantages of Succession Planning
Along with advantages, succession planning also has some disadvantages. One of the disadvantages is that it enables leaders to focus on the new talent but it does not allow applicants outside the company. In most of the cases, managers take into consideration their direct reports as potential successors. In addition, succession planning put negative effects on the motivation. The main reason is that the leaders sometimes give preference to the candidate they feel perfect but there may be two candidates for the same role. Hence, in case of poor handling of succession planning the candidates feel demotivated. In the family businesses, succession is a challenge as parents’ preference for one child over the others create issues that can contribute to failure of a business. Furthermore, with the changes in organizational structure roles also change. This is the reason that effective succession planning is important. If there is ineffective succession planning, problems are raised that affect the businesses (Robinson, 2013).
References
Butler, K., & Roche-Tarry, D. E. (2002). Succession planning: Putting an organization's knowledge to work. Nature Biotechnology, 20(2), 201-202.
Center for Advanced Human Resource Studies. (2006). Succession Planning and Identifying High Potential Talent. Retrieved from: https://est05.esalestrack.com/eSalesTrack/Content/Content.ashx?file=01f27854-8c25-4af3-bc4f-d5a9287c216d.pdf
Furstgroup. (2013). What healthcare leaders need to know now. Retrieved from: https://furstgroup.com/leadership-weis
Hoover, E. A., & Hoover, C. L. (2013). Getting along in family business: The relationship intelligence handbook. USA: Routledge.
Mandi, A. R. (2008). A case study exploring succession planning: Supported by a quantitative analysis of governmental organizations in the Kingdom of Bahrain. USA: ProQuest.
Ogden, D., & Wood, J. (2008). Succession Planning: A Board Imperative. Retrieved from: http://www.bloomberg.com/news/articles/2008-03-25/succession-planning-a-board-imperativebusinessweek-business-news-stock-market-and-financial-advice
Robinson, K. E. (2013). Evaluation of Succession Planning to Improve Court Employees' Career Development Opportunities: An Evolutionary Concept Whose Time Is Now! USA: Dorrance Publishing.
Saudi Aramco. (2011). Energy to the World: The Story of Saudi Aramco. Retrieved from: http://www.saudiaramco.com/content/dam/Publications/Energy%20to%20the%20World%20-%20English/Energy-to-the-World-Vol.-2-English.pdf
Weiner, L.J. (2015). 3 Hidden Benefits of Succession Planning. Retrieved from: http://www.healthleadersmedia.com/hr/3-hidden-benefits-succession-planning?page=0%2C2
