Research Directions. International Multidisciplinary Research Journal. Vol 2 Issue 12 June 2015 ISSN No: Editor-in-Chief S.P.

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1 Vol 2 Issue 12 June 2015 ISSN No: ORIGINAL ARTICLE International Multidisciplinary Research Journal Research Directions Editor-in-Chief S.P. Rajguru

2 Welcome to Research Direction ISSN No Research DirectionJournal is a multidisciplinary research journal, published monthly in English, Hindi & Marathi Language. All research papers submitted to the journal will be double - blind peer reviewed referred by members of the editorial board readers will include investigator in universities, research institutes government and industry with research interest in the general subjects. CHIEF PATRON PATRON Mr. Sanjeev Patil Suhasini Shan Chairman : Chairman - Central Div. Rayat Shikshan Sanstha, Satara. LMC & Director - Precision Industries, Solapur. EDITOR IN CHIEF S.P. Rajguru Asst. Prof. (Dept. of English) Rayat Shikshan Sanstha's, L. B. P. Mahila Mahavidyalaya, Solapur. (M.S.) Sub Editors (Dept. Of Humanities & Social Science) Dr.Prakash M. Badiger Nikhilkumar D. Joshi Dr.kiranjeet kaur Nikhil joshi Guest Faculty,Dept. Of History, Gujrat Dept.of English G.H.patel college of Gulbarga University,Gulbarga. Engineering and Technology,Gujrat. Advisory Board S. N. Gosavi Shrikant Yelegaonkar Punjabrao Ronge D. R. More T. N. Kolekar Seema Naik M. L. Jadhav Annie John Suhas Nimbalkar Adusumalli Venkateswara Raw Deepa P. Patil R.D.Bawdhankar Ajit Mondal Guest Referee Maryam Ebadi Asayesh Islamic Azad University, Iran Judith F. Balares Salamat Department of Humanities, IASPI, Philippines Henry Hartono Soegijapranata Catholic University, Indonesia Mukesh Williams University of Tokyo, Japan Address:-Ashok Yakkaldevi 258/34, Raviwar Peth, Solapur Maharashtra, India Cell : , Ph No: ayisrj@yahoo.in Website:

3 International Recognized Double-Blind Peer Reviewed Multidisciplinary Research Journal Research Directions ISSN Impact Factor : (UIF) Volume - 2 Issue - 12 June Available online at SUCCESSION PLANNING IN CORPORATE: PRACTICE OR JUST POLICY Rajan Gahlot Assistant Professor,Department of Commerce,Delhi School of Economics,University of Delhi. Short Profile Rajan Gahlot is working as a Assistant Professor at Department of Commerce in Delhi School of Economics,University of Delhi. Co-Author Details : 2 3 Namrata Maheshwari and Rajiv Nayan 2 MHROD,Department of Commerce, Delhi School of Economics,University of Delhi. 3 Assistant Professor, Department of Commerce,Ramanujan College,University of Delhi. ABSTRACT: As organizations today face the ever-increasing issues related to g r o w t h, g l o b a l i z a t i o n a n d competition, succession planning is needed to cultivate the right talent in order to meet these daunting challenges.senior leaders are keenly aware that the continued survival of the organization depends on having the right people in the right places at the right time. The impact on organizational continuity would be devastating if a successor was suddenly required and none had been identified.this study explains whether succession plans made are ever put into practice or they remain stay as mere policies. The paper also reveals the effectiveness of successive planning among public and private enterprises. KEYWORDS Succession Planning,Competency Levels, Succession Strategies, Decision Making. 1

4 1.1 SUCCESSION PLANNING Succession planning is a process for identifying and developing internal people with the potential to fill key business leadership positions in the company. Succession planning increases the availability of experienced and capable employees that are prepared to assume these roles as they become available. Taken narrowly, "replacement planning" for key roles is the heart of succession planning. Effective succession or talent-pool management concerns itself with building a series of feeder groups up and down the entire leadership pipeline or progression (Charan, Drotter, Noel, 2001). In contrast, replacement planning is focused narrowly on identifying specific back-up candidates for given senior management positions. For the most part position-driven replacement planning (often referred to as the "truck scenario") is a forecast, which research indicates does not have substantial impact on outcomes. Fundamental to the succession-management process is an underlying philosophy that argues that top talent in the corporation must be managed for the greater good of the enterprise. Merck and other companies argue that a "talent mind set" must be part of the leadership culture for these practices to be effective. Succession planning is a process whereby an organization ensures that employees are recruited and developed to fill each key role within the company. Through your succession planning process, you recruit superior employees, develop their knowledge, skills, and abilities, and prepare them for advancement or promotion into ever more challenging roles. Actively pursuing succession planning ensures that employees are constantly developed to fill each needed role. As your organization expands, loses key employees, provides promotional opportunities, and increases sales, your succession planning guarantees that you have employees on hand ready and waiting to fill new roles. According to a 2006 Canadian Federation of Independent Business survey, slightly more than one third of independent business owners plan to exit their business within the next 5 years and within the next 10 years two-thirds of owners plan to exit their business. The survey also found that small and medium sized enterprises are not adequately prepared for their business succession: only 10% of owners have a formal, written succession plan; 38% have an informal, unwritten plan; and the remaining 52% do not have any succession plan at all. The results are backed by a 2004 CIBC survey which suggests that succession planning is increasingly becoming a critical issue. By 2010, CIBC estimates that $1.2 trillion in business assets are poised to change hands. Research indicates many succession-planning initiatives fall short of their intent (Corporate Leadership Council, 1998). "Bench strength," as it is commonly called, remains a stubborn problem in many if not most companies. Studies indicate that companies that report the greatest gains from succession planning feature high ownership by the CEO and high degrees of engagement among the larger leadership team. 1.2 OBJECTIVES OF THE STUDY To assess the degree of succession planning efforts present in an organization To find out if there is difference in the succession planning effectiveness of private and public sector To assess the rate of level of senior management s participation in decision-making in matters of strategy pertaining to succession planning 2

5 1.3 REVIEW OF LITERATURE Aon and Insala (2006), Succession Planning Strategies-The right people, for the right jobs, at the right time the study reveals that succession planning is not a new phenomenon. Companies have been wrestling with ways to identify, develop, and retain their talent for decades. So, why is succession planning suddenly popping up on every company s radar screen? Today s organizations are facing higher demands in a global market with the retirement of the Baby Boomers and the widening talent gap. The home-grown and paper-based succession planning that companies relied on in the past is no longer meeting the needs of today s workforce. Companies need to upgrade and redefine their succession planning initiatives to ensure that their process will benefit both the individual and the organisation itself. Despite the numerous benefits of a formalized succession planning process, companies have failed to make it a top priority. In order to achieve results, companies need to start with the basics, create a strong process and then invest in the tools and technology to instill a talent development mind-set in their organization. By strengthening the process, companies are gaining support from senior executives, ensuring a performance culture and establishing a company-wide program. Once these steps are in place, companies can then leverage technology solutions such as 9- box models, organizational charts, scenario planning and career profiling tools to reduce turnover, increase productivity and improve bench strength. Kevin S Groves (2006), Integrating Leadership development and succession planning best practices, LA, California, USA, California State University, This article has introduced a best practices model for integrating the leadership development and succession planning process through optimal utilization of managers and a supportive organizational culture. The specific practices that organizations and management professionals must execute to effectively build their leadership pipeline are: develop the organization s mentor network by fully engaging all managers in mentoring relationships with direct reports and high potential employees in other work units; ensure active manager participation in the organization s method of identifying and codifying high potential employees; fully engage managers at all levels in leadership development activities, including teaching courses and creating projected-based learning experiences (e.g. stretch assignments and actionlearning projects) for high potentials; ensure a flexible and fluid succession planning process by avoiding heir apparent designations, frequently updating lists of high potential employee based on project-based performance, and basing succession decisions on a diverse pool 3

6 of candidates; create organization-wide forums (e.g. leadership academy) for exposing high potentials to multiple stakeholders, including senior executives and board members; establish a supportive organizational culture through active CEO and senior management participation in development programs and performance appraisal and reward systems that reinforce managerial engagement; and evaluate the effectiveness of leadership development practices through empirical studies that model program theory and assess knowledge, behavior, and outcomes. Shahazadi B Shaik (2013), Succession Planning in Business Enterprises: Implication and Strategies for emerging India, Vishakhapatam, India, GITAM University, This paper briefs about that enterprises play a pivotal role in steering the economy of a nation and precisely what the world has witnessed in the past century. India is no exception to that. The economic reforms introduced in India during early 1990s propelled the evolution and growth of several enterprises- both domestic and international, which have clearly paved the way for India s entry into the globalized world. Two decades hence, a serious issue facing many of these enterprises is their leadership succession. To be competitive in this globalized world Indian business enterprises need to understand and adapt to the constantly changing business environment. Hence, identifying and nurturing talent for leadership roles is an essential part of succession planning. For larger interests of the enterprises as well as of the economy, it becomes extremely crucial and inevitable to have effective succession planning in place. The growth and development attained so far can be sustained and taken forward only if these enterprises are placed in capable hands. The process of succession planning involves not merely the business interests of the enterprise; it has an important bearing on the development of the nation and its people. In the light of this, the paper examines the perspectives and significance of succession planning, its challenges in the Indian corporate scenario, and strategies for effective implementation. 1.4 PROCESS OF SUCCESSION PLANNING Step 1: Link Strategic and Workforce Planning Decisions 4

7 This step involves: Identifying the long-term vision and direction Analyzing future requirements for products and services Using data already collected Connecting succession planning to the values of the organization Connecting succession planning to the needs and interests of senior leaders Step 2: Analyse Gaps Source: This step involves: Identifying core competencies and technical competency requirements Determining current supply and anticipated demand Determining talents needed for the long term Developing a business plan based on long-term talent needs, not on position replacement Step 3: Identify Talent Pools This step involves: Using pools of candidates vs. development of positions 5

8 Identifying talent with critical competencies from multiple levels early in careers and often Assessing competency and skill levels of current workforce, using assessment instrument(s) Using 360 feedback for development purposes Analysing external sources of talent Step 4: Develop Succession Strategies This step involves: Identifying recruitment strategies: - Recruitment and relocation bonuses - Special programs Identifying retention strategies: - Retention bonuses - Quality of work life programs Identifying development/learning strategies: - Planned job assignments - Coaching and mentoring - Assessment and feedback - Action learning projects - Communities of practice - Shadowing Step 5: Implement Succession Strategies This step involves: Implementing recruitment strategies (e.g., recruitment and relocation bonuses) Implementing retention strategies (e.g., retention bonuses, quality of work life programs) Implementing development/learning strategies (e.g., planned job assignments, formal development, Communities of Practice) Communication planning Determining and applying measures of success Linking succession planning to HR processes Performance management Compensation &Recognition Recruitment and retention Workforce planning Implementing strategies for maintaining senior level commitment 6

9 Step 6: Monitor and Evaluate This step involves: Tracking selections from talent pools Listening to leader feedback on success of internal talent and internal hires Analysing satisfaction surveys from customers, employees and stakeholders Assessing response to changing requirements and needs 1.5 MODERN APPROACH TO SUCCESSION PLANNING Succession planning is a systematic approach to: Building a leadership pipeline/talent pool to ensure leadership continuity Developing potential successors in ways that best fit their strengths Identifying the best candidates for future key positions Concentrating resources on the talent development process yielding a greater return on investment Succession planning recognizes that some jobs are the lifeblood of the organization and too critical to be left vacant or filled by any but the best qualified persons. Effectively done, succession planning is critical to mission success and creates an effective process for recognizing, developing, and retaining top leadership talent. There are several factors typically found in successful succession planning initiatives. For example: Employees are committed to their own self-development Succession is linked to strategic planning and investment in the future Leadership competencies are identified and used for selection and development A pool of talent is identified and developed early for long-term needs Succession planning addresses challenges such as diversity, recruitment, and retention 1.6 DATA TESTING AND ANALYSIS DATA COLLECTION METHOD For a survey on assessment on succession planning, it is necessary to know the perception of senior management, managers and executives. This study is based on primary data analysis. The method of questionnaire is used to gather responses from the respondents. The sample represents existing employees from both public and private organisations across BFSI, Consulting, FMCG, Manufacturing, Power, Education, etc. sectors 7

10 DESIGN OF THE STUDY Responses through questionnaire were collected manually; telephonically as well as online through Google forms by sending the link. The interviews were conducted informally among various CEOs, CXOs, VPs and managerial level. Due to confidentiality of the data, information about the companies cannot be given. 1.1.Do you have a written, fully developed exit strategy for your business? Figure 5.1 8

11 INTERPRETATION This is evident from the pie chart (fig. 5.1) that 66% of the businesses have their fully developed and written exit strategy, which is a good indicator for the presence of succession planning but question here is whether these written policies are equally implemented too? Also, when it comes to private public sector comparison(fig.5.2.), privates are having edge in terms of having organized and well written policies. 1.2.Does your organisation have a succession plan for every key senior level position? 9

12 INTERPRETATION The pie chart (fig. 5.3) clearly shows that more than half of the respondents i.e. 53% say that their organisations do not have a succession plan for every key senior level position, which puts business at risk in case of sudden exigency or emergency situations. In this situation, both public and private sector organizations (fig.5.4) are almost at par with majority of them not having the appropriate succession plans for key senior level positions. 1.3.Does your organisation s succession plans require a training or mentorship of individuals identified to fill key senior level positions? Figure 5.5 Comparison of Private and Public Sector No. of Resp onde nts YES NO Figure

13 INTERPRETATION When it comes to training and mentorship of individuals identified for key senior level positions, (fig.5.5) shows that 76% of the respondents agreed on the fact that provision for the same is there on their organisation s succession plans. Majority in the private sector (fig.5.6) gives importance to the concept of training and mentoring in their succession policies. 1.4.Could your business survive in the event of an untimely death or disability within the management/ownership group? Figure 5.7 Figure

14 INTERPRETATION It is not a good indicator that 51% of the respondents are not sure that whether their business will survive in the event of an untimely death or disability within the management/ownership group (fig.5.7). This poses a serious danger to the organisations that are not prepared for these kinds of uninvited emergencies and also underlines the importance to have a leadership pipeline in place. Most of the respondents in both private and public sector fall in the may be category on the question of their survival in the event of untimely exigency (fig. 5.8). 1.7 FINDINGS In public sectors, mid-level management has a succession plan generally based on merit-cumseniority performance. But top management, specifically CEOs/CXOs are appointed through external recruitment process only. Compared with private sector, public sector especially banks CEOs/CXOs have shorter tenures. This impact could have been reduced if there were standard and transparent procedures for appointment of top-level management. When it comes to the difference in the effectiveness of succession planning in public and private sector enterprises, it is statistically proven in the report that there is a variation between the efforts of the two sectors. It is clearly evident from the study undertaken that till now succession planning is mere a policy, which remains more on papers and documents rather implementation and practice. 1.8 RECOMMENDATIONS Linkage to individual development plans Succession plans must include individual development plans for each employee focused on development opportunities resulting in stronger and more effective successions. The focus should be on shared responsibility for employee as well as organisation development. Emergency CEO Succession Plan It is critical to draft an emergency CEO succession plan and to review annually. However, that the specificity of these plans varies. Some companies have a very detailed plan, while others have a less formal plan. Following as core elements of an effective long-term succession planning process: oclear roles and responsibilities of the board and the CEO oan assessment of the company s future business needs oan open dialogue between the board and the CEO oclear understanding of the transition role of the outgoing CEO (e.g., serving as Board chairman for a 12

15 period of time) Building a Leadership Pipeline KV Kamath, ICICI Bank former Chairman brought on the importance of building a leadership pipeline within the organization. It is important to meet the exigency or sudden emergency situations which as per this study, only 31% of the respondents agreed on the fact that their organisations are prepared if an important person of management/board leaves the business suddenly. Design an appropriate succession strategy The best succession strategy will be a mix of both buying and building talent. Hire the key skills for your organisation and the building the home talent with regular training and mentoring at workplace. Role of CEO, Board, and HR Department o Board: Convey the CEO that his performance will also be measured by his ability to manage succession. Also consult with the CEO, for detailing out the criterion of selection for the next CEO o CEO: Identify high potential leaders and spend disproportionate resources to develop them. Also, constantly monitor the outcome of succession planning activities at all the levels in the organization o HR Department: Facilitate the process of succession planning by providing functional expertise in the area of potential / competency assessment and by effectively managing all the developmental programs for potential successors. CONCLUSION Thus, it is clear from the study that most organizations talk about the succession planning, and its benefits, yet most organizations do nothing about it when it comes to implementation. Succession planning is one way of bringing that right person through the company, instilling the core values and culture and providing stability for both the staff and clients alike. There are risks associated with a key person within the succession plan. The death or permanent disablement of any of these people will put the plan at great risk for all parties. The report also reveals that India has a long way to go for putting in place its succession plan at managerial level, till now it is more of a policy rather a practice. If these plans are not actually implemented, the organization is bound to face following issues: Key positions will not be filled in a timely manner Key positions can only be filled by external candidates due to the lack of development of internal candidates The most qualified talent continues to leave and look elsewhere for advancement 13

16 REFERENCES 1.Aon and Insala (2006), Succession Planning Strategies-The right people, for the right jobs, at the right time 2.Charan, R (2000), The Leadership Pipeline: How to build the leadership powered company 3.Groves, S.K. (2006), Integrating Leadership development and succession planning best practices 4.Shaik, S. B. (2013), Succession Planning in Business Enterprises: Implication and Strategies for emerging India 5. leadership-knowledge-management/successionplanning.pdf article ece ession-planning-the-indian-perspective_08sep2010.pdf 14

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