In this digital age, when discussing business continuity, the first things that come to mind are technology and related processes. However, it is important to note that the critical elements of human resources (HR) and processes have equal weight. The challenge of succession planning is not limited only to technology teams, but it is actually a business concern. US founding father, statesman, philosopher and inventor Benjamin Franklin once said, “If you fail to plan, you are planning to fail.”1
Executives across the world emphasize having a succession plan in place to enable organizations to continue after a disrupting event or disaster scenario. However, most enterprises are actually unprepared for such challenges. According to the US National Association of Corporate Directors, only 23 percent of enterprise boards say they have a formal succession plan in place.2 The study also notes that public enterprise boards have become more focused on succession planning in recent years.
Enterprises struggling to manage the effects of the COVID-19 pandemic have highlighted the crucial need to have a strategy in place if senior management gets sick. A disastrous situation may prevent core management from staying connected with their teams. A risk-based plan to create possible disaster scenarios should be developed. Internal leaders who can take up the necessary roles in disaster situations must be in place. Identified individuals should go through periodic assessments to evaluate their capability and capacity to tackle such scenarios. Pragmatic risk management practices such as the International Organization for Standardization (ISO) standard ISO 31000:2018 Risk management—Guidelines3 and the COBIT® 2019 framework4 control objectives should be considered when performing risk assessment exercises.
Succession planning cannot take place in a vacuum. It should also be an intensive, comprehensive initiative, much more than a preparation of a list of names that will be tabled if the chief executive officer (CEO) is hit by a bus. Similarly, succession plans will not increase the productivity growth rate of the firm if they are designed only to allow the internal auditor to tick the box: ‘Succession plan in place.’5
The main objective of a successful succession plan is: Should there be a disruptive change, the enterprise can continue to operate under the right leadership. These scenarios can include retirement, resignation, redundant resources, or even the unfortunate events of sickness or death. The high-level approach to succession planning includes the following steps:
- Review enterprise objectives and identify mission-critical operations.
- Identify the positions critical for these enterprise operations.
- Identify the candidates who have the required skills, knowledge and experience.
- Develop a training plan.
- Provide development opportunities.
- Perform a trial run of the succession plan.
- Maintain a skills inventory.
Nearly all industry best practices, standards and regulatory frameworks require enterprises to have a business continuity plan (BCP) in place. As the BCP touches all aspects of an organization, enterprises cannot ignore the fact that succession planning and business continuity planning go hand in hand.
From Succession Planning to Succession Management
As the name suggests, succession planning should be supported by a plan in line with enterprise strategy, values and culture (figure 1).
Strategy
Succession planning is a multifaceted discipline in
which an overall strategy lays the foundation. When
developing the plan, consider the enterprise operating
environment; the expectations of the board,
shareholders and customers; and legal and
compliance requirements (i.e., laws and regulations).
These considerations help identify the expectations
of future leadership. The ultimate goal is to preserve
the enterprise’s values and maintain growth and
continuity of business governance practices.
The goals and objectives of succession planning should be identified and agreed on by senior management. Management commitment will:
- Minimize the challenges of allocation of resources
- Provide consistency in the decision-making process
- Establish the basis for performance evaluations
- Establish practices for succession planning
Once management endorsement is obtained, an overall plan for succession that covers critical management and key business operations positions must be developed. The goals and objectives identified provide a sound basis for identifying skills and competencies required at various management levels.
Job profiles should be developed for each key position. This should also include key success factors, performance evaluation criteria, skills, experience and attributes.
Figure 2 illustrates a proposed maturity model for transition from succession planning to succession management.
Some key questions to answer while developing a succession management system include:
- Which positions are key to organizational success?
- What are the aspects of exemplary performance for these positions?
- How will these positions be filled?
- How many key positions need to have at least one identified successor?
- How will employees or contractors be identified for succession?
- How will employees be developed, tested and retained?
Governance
Enterprises with sound governance practices are
able to weather challenges. Successors will be
better able to perform if the enterprise has
established its mission, vision and values supported
by appropriate policies, procedures and
organizational structure. A smooth transition is the
aim of an effective succession management
system, and the board and executive management
are accountable for having an effective BCP in place
to aid this smooth transition. A successful
succession management system provides
individuals with exemplary skills and attributes
to fulfill the position requirements. Good
corporate governance practices provide required
resources (i.e., people, processes, finance,
facilities, infrastructure) for the success of a
succession system.
A SUCCESSFUL SUCCESSION MANAGEMENT SYSTEM PROVIDES INDIVIDUALS WITH EXEMPLARY SKILLS AND ATTRIBUTES TO FULFILL THE POSITION REQUIREMENTS.
Developing a Succession Plan
Once the enterprise has identified the requirements for succession planning, such as the overall strategy, approval and resource availability, the next phase is the development of the plan.
Developing a succession plan is a multifaceted activity that comprises three broad phases:
- Initiation— The overall framework for controlling and managing the whole exercise needs to be developed before entering the planning phase. These activities include but are not limited to risk assessments, contextualization of key positions for success management, documentation of criteria for exemplary performance, performance assessment criteria and a strategy for the skills gap. Roles and responsibilities of various stakeholders, namely HR, C-level management and the board, are also explicitly documented and approved. Development of the career ladder and process for successors is also part of this phase.
- Planning—Based on assessments performed in the previous phase, key positions for succession planning are identified. Identified individuals are screened based on job profiles. Based on assessments and the identified skills gap, individual development plans are created. Similarly, succession plans are put in place for each identified position. Successors for each position along with their development plans are approved by senior management.
- Development—Subsequent to approval, successors will be developed per the approved plan. Management should consider challenging the skills and knowledge gained by successors. This may include BCP testing or trials of real-life scenarios.
An important aspect of succession management is continuous improvement, where succession management systems outputs are used for improving the succession planning and development process.
DESPITE THE BENEFITS EXPECTED FROM SUCCESSION MANAGEMENT, ORGANIZATIONS MAY FACE CHALLENGES THAT RANGE FROM A MAJOR STRUCTURAL ISSUE TO A FINEGRAINED PROBLEM.
Challenges Deploying a Succession Management System
Despite the benefits expected from succession management, organizations may face challenges that range from a major structural issue to a fine-grained problem. As organizations identify potential candidates to be successors, there is the possibility that they may hit a wall in the process due to internal friction within management. Challenges deploying a succession management system include the following:
- Lack of management support—Management support provides the base for successful succession management. To obtain senior management support, the value and benefits as well as any compliance and regulatory requirements should be articulated.
- Lack of resources—A crunch in resource availability can impact the effectiveness of succession planning. Successors may not possess the required skills and attributes. Any challenges to obtaining the resources necessary for adequate training and development should be escalated to management.
- Lack of successors—In this situation, management should consider external hiring. However, this needs due diligence based on the management level of the successor.
- Challenges in talent retention—It is quite challenging to retain talent. The best way to retain talent is to provide career development opportunities. There are several reasons other than financial for people to switch jobs. These can be managed through empowerment, recognition and skills development opportunities.
Conclusion
Human assets are more important than any other asset category. Unique learning abilities and individual personality attributes make human resources a special factor of production for any organization. Unlike other factors of production (i.e., land, capital), labor productivity and capabilities can be enhanced through training and other motivational factors such as financial, recognition of efforts and empowerment.
One way to recognize contributions to the organization is through succession and providing a career path. Creating a succession management system can provide a conducive HR environment and help prepare an organization for business continuity in the face of disruption or disaster. Succession management systems perform best with a clear strategy and good corporate governance practices.
Endnotes
1 KPMG, “The 3 Keys to a Good Family Business
Succession Plan,” 2 June 2015, http://home.kpmg/xx/en/home/insights/2015/06/3-keys-good-family-business-succession-plan.html
2 Edgerton, B.; “New Research Spotlights CEO
Succession Challenges,” NACD Board Talk, 18 April 2019, http://blog.nacdonline.org/posts/new-research-spotlights-ceo-succession-challenges
3 International Organization for Standardization
(ISO), ISO 31000:2018 Risk Management—Guidelines, Switzerland, 2018, http://www.iso.org/standard/65694.html
4 ISACA®, COBIT® 2019: Introduction and
Methodology, USA, 2018, http://xhrj.yutb.net/resources/cobit
5 Cantor, P.; “Succession Planning: Often
Requested, Rarely Delivered,” Ivey Business Journal, 2005, http://iveybusinessjournal.com/publication/succession-planning-often-requested-rarely-delivered/
Muhammad Asif Qureshi, CISA, ACMA, CIA, CISSP, PMP
Is an experienced governance, risk management and compliance (GRC) professional with a background in information systems auditing. He is a GRC manager at Tawazun Economic Council. Qureshi actively participates in mentoring and coaching activities for young learners in schools and colleges. He has been a guest speaker on cybersecurity-related topics for young students on numerous occasions. Qureshi worked with a dedicated team to build the information security architecture and establish an information security department in his organization from ground zero.