Goodbye to Telecom’s Theresa, and hello to – whom? By now we may know, but Telecom isn’t expecting to make the announcement until late June. Nor was it clear who would succeed as leader of another publicly listed company after the resignation of its CEO and the appointment of reluctant interim CEO who admitted he “didn’t want the job”.
Poor succession planning can breed uncertainty and other offspring like lowered staff morale, loss of competitive momentum, loss of shareholder confidence, staff shortages leading to burnout and low retention, and reduced productivity. For the record, Telecom says it does have succession planning and the appropriate protocol and systems in place for the appointment of new CEO, but in general, business analysts and consultants say succession planning is not getting the attention it deserves from New Zealand businesses.
In part, this is because many organisations don’t understand what succession planning is – and there are reasons for that.
How the term ‘succession planning’ relates to an organisation depends on its size, what its owners or shareholders are trying to achieve, and whether the organisation is in the public or private sector. For large enterprises though, ‘succession planning’ usually refers to the ongoing development of potential successors from within the business to ensure smooth transition and minimum loss of efficiency when management vacancies occur.
In smaller organisations, it generally refers to the development of financial and people management strategy that will allow the owners to exit, handing over the business to either external investors or to leaders within the business who have managed to accomplish management buy-in.
Either way succession planning means identifying the talent and abilities of individuals within business and figuring out who has the potential, and inclination to succeed current leaders, or keep business running smoothly for new owner. And that requires the commitment of the entire management team along with external consultants and advisors. It is not job for HR alone, nor is it easily accomplished by small business owners who want to exit in hurry.
Barriers to success Kevin Gaunt, chief executive northern region for the New Zealand Institute of Management (NZIM), says succession planning arises from the strategic need to have the right people in the right place at the right time, and to develop from within to achieve that – however, organisations are often unable to grapple with those strategic needs, he says.
“Barriers include managers who prevent people from gaining wider experience by moving around the organisation because they want to keep those people to themselves. The [flip side] is area managers not interested in having people work for them only for development and experience,” says Gaunt.
As you might expect, Gaunt says CEO and board need to give senior managers and everyone else in the organisation the message that identifying talent and investing in the ongoing development of potential leaders is critical factor for the future success of an organisation, whatever its size. What you might not expect, is that boards and CEOs often pay lip service to that without following through.
“Most organisations don’t do succession planning well or they do it patchily. The point we are at and haven’t recognised is that high level understanding of people management has traditionally been the role of the most senior HR person but management theory and practice tell us the CEO is tending to think and behave more like that high level HR practitioner. The reason is that people have become incredibly important. People are why [technology company] Apple survived, because there is no logical reason Apple should have survived at all,” says Gaunt.
Joan Mather, organisational development consultant for Sheffield, says mapping capable candidate to specific future job is narrow focus that will not enable an organisation to close the gap between the current talent it has and the talent it needs. She says the leadership talent challenge is best addressed through implementing structured talent management system, driven by the CEO and facilitated by HR specialists.
“This can be defined as the selection, development, promotion, and retention of people; planned and executed in line with an organisation’s current and future business goals,” says Mather.
She says potential talent management traps include holding HR (rather than operational leaders supported by HR) solely accountable for developing talent, and senior executives that only pay lip service to the need for talent management. Again, Mather says CEO support is the key – when organisations develop leadership success profiles they need to ensure the leadership attributes they have outlined meet business strategy. Building pipeline or pool of ready leaders is more successful than matching and preparing individuals with specific future roles, says Mather.
“It can be mistake to rely on subjective data when making decisions about people and to not take into account potential personality ‘derailers’ when making placement and promotion decisions. Development programmes that are one dimensional will not necessarily tell senior managers enough about individual potential – mix of development options including classroom, targeted projects, new challenges, coaching, and ongoing research is better approach,” she says.
Sector specific barriers Alan Cassidy, manager executive development for the Leadership Development Centre (LDC), says the way in which HR managers define succession planning differs; some see it as ‘replacement planning’ where the emphasis is on risk management in case someone leaves or dies; others see need to be proactively accelerating the development of people. Different HR people would be at different points along that curriculum, says Cassidy, and while awareness is growing, it’s patchy.
“It’s sad indictment on the HR industry in New Zealand which has been confined to managing employee relations and things like payroll instead of strategic direction. The rhetoric is changing – HR is about equipping your organisation with the people to face tomorrow’s challenges – but the action needs to follow,” says Cassidy.
He says organisations in the public sector face similar succession planning challenges to private sector businesses – there’s competition for people talent and an urgent need to adapt to changing demographic trends. In addition, he says the remuneration component of public sector employment makes it harder to succession plan, and attract and retain talent – as does the ‘fishbowl aspect’ of public sector leadership.
The LDC works with public sector organisations on succession planning strategies and delivers an executive leadership programme for senior public servants. Cassidy says such programmes help public organisation to see talent because in the public sector an individual’s output is more diffused by the nature of the sector, making it harder to see individual performance.
As result, it’s challenge to find replacement leaders and too many public sector chief executives are employed from outside the sector and from other countries.
“The public sector is harsh environment under public scrutiny. So you are looking first for people with mastery rather than potential because that is less risky. The step between the CEO role and tier two roles is also too big and an unintended consequence of ’80s and ’90s restructuring which saw the CEO role became bigger. It then became harder for others to get the type of experience and exposure they needed [to grow],” says Cassidy.
Nor is succession planning well understood or executed in the small and medium business sector, says David Irving, chairman for small business incubator organisation The Icehouse. Irving says the biggest obstacle to small business succession planning tends to be an owner manager who knows everything about the business and is havin
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