FINAL PROJECT REPORT

Group Members: 1) Sana Khan 2) Anila Sagheer 3) Tahreem Haq Date: 14th May 2013 Class: BBA-7 (C) Title: Succession Planning Submitted To: Sir Akram Subject: Career Planning and Management

BAHRIA UNIVERSITY

Contents
Succession Planning: .................................................................................................................................... 3 Effective Succession Planning: ..................................................................................................................... 3 Need to carry out Succession Planning: ........................................................................................................ 4 Objectives of Succession Planning: .............................................................................................................. 5 Succession Planning Model .......................................................................................................................... 7 Key elements of the Succession Planning process:....................................................................................... 9 Companies Included in Succession Planning Research: ............................................................................. 10 Explanation of two companies with respect to Succession Planning: ........................................................ 11 Advantages of Succession Planning: .......................................................................................................... 13 Disadvantages of Succession Planning: ...................................................................................................... 14 Succession planning and the Current Economic Environment: .................................................................. 16 Conclusion: ................................................................................................................................................. 17 Bibliography ............................................................................................................................................... 19

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. Succession Planning is a strategy of workforce planning. It is a process designed to ensure the organization recruits and develops new hires and in-house staff to fill each key role within the organization. Its goal is similar to workforce planning- having the right people in the right positions at the right time. The focus of succession planning, however, is on leadership and other positions critical to the mission of the organization at all levels. It is a process whereby an organization ensures that employees are recruited and developed to fill each key role within the company. Through succession planning process, superior employees are recruited; they develop their knowledge, skills, and abilities, and are prepared for advancement or promotion into ever more challenging roles.

Effective Succession Planning:

1) Align succession plan with company values and goals: Create an integrated design team that translates priorities into key competencies not only at the CEO level but in every role. Discover how succession planning helps teams meet concrete goals, and develop answers for multiple what if scenarios. 2) Attract and retain talent: At its core, succession planning is about leadership development. Adapt innovative models for assessing employee performance from leading companies approaches to professional

development. See how planning helps to manage challenging transitions and the workplace generational gap. 3) Drive continuous improvement: As your companys needs change, your plan should evolve. Gauge its effectiveness see which measurements to track incorporate feedback and avoid the five most common pitfalls of succession planning. Further more effective succession planning creates a stable and sustainable platform that helps to guide the company forward with a solid management team to assure management succession and an ownership structure that removes uncertainty about ownership succession. An added benefit of effective succession planning is the stability it offers lenders, investors, suppliers, vendors, and customers. It also preserves and protects one of the most critical, expensive, and often overlooked assets of any businessits people, who possess a wealth of experience, knowledge, and intellect. Partly because effective succession planning can serve as a powerful hiring and retention tool, it can perform double duty by also helping to address challenges that seem more pressing, like growing the business and beating the competition.

Need to carry out Succession Planning:

The determination and periodic review of the educational character and mission of the organization and the oversight of its activities Approving the quality strategy of the organization The effective and efficient use of resources, the solvency of the organization and the Corporation and safeguarding their assets Approving annual estimates of income and expenditure. The appointment of the holders of senior posts

Succession planning is one of those initiatives that many companies don't find the time to start until it's too late. If you don't address succession planning now your organization may end up facing the burden in the middle of a crisis. Organizations that understand the need to manage the

development of their high performers are a step ahead of their competitors. The effort required to establish a development program for future leaders is worthwhile because it creates a motivated and capable group of employees that are ready to move forward in the organization when the need arises. For any organization to implement an effective succession plan there are a number of key issues that need to be considered: 1. The succession planning program must have the support and backing of the company's senior level management 2. Succession planning must be part of an integrated HR process that includes training, development and performance appraisal 3. Identify what skills the organization will need in 5, 10 or 15 years 4. Critical positions must be identified and included in the Company's succession planning program 5. Identify high-performers that are almost ready to step into those critical positions 6. Analyze the workforce and identify who will be eligible for retirement within the next five years 7. Managers need to identify the responsibilities, skills and competencies that will be needed by their replacements The succession planning process needs to be considered as part of the company's strategic planning process because it deals with projecting future changes by anticipating management vacancies and then determining how to meet these challenges.

Objectives of Succession Planning:

The main objectives of succession planning are: 1- Maintain Organizational Performance: Succession planning can help an organization maintain its performance during uncertain times. Organizational performance is dependent on the realization of the long-term strategic business goals of a company. These goals can only be achieved through proper planning for business

continuity in adverse situations. Such situations may include a natural disaster, a sudden death of an executive or a terrorist act. 2- Handling Voluntary Separation: Most employees are free to leave their current job and pursue career options elsewhere unless they have signed a contract that binds them to work with their current employer for a certain period. When an employee decides to take another job, it is one form of voluntary separation. Companies need to be prepared for such scenarios, where an employee or many employees may take voluntary separation from the company. To handle this situation the company needs to train staff that can back up current employees and help the business function smoothly. 3- Help Employees Realize Their Career Plans: Succession planning also helps employees realize their career plans for the future. This objective is achieved by training junior employees for managerial positions and to help them assume different roles once those positions become vacant. This provides every employee with a sense of direction regarding where he is going in the near future. Every individual has set goals for his career over the next few years and succession planning mechanisms help employees achieve their goals within the same company. 4- Improve Employee Morale: A major source of motivation for employees is planning for their future and knowing that they are on the right track. Succession planning is a popular tool used to enhance employee morale and to motivate them to perform better on their current jobs. Many companies identify various positions for which current employees of the firm are eligible and train them as a contingency plan. 5- To Build Leadership Potential: Organizations tend to build leadership potential through the succession planning process. Leadership potential can be identified during on-the-job training where many senior managers

get to interact with managers and employees. This leads to identification of the individuals that exhibit leadership qualities and potential.

Succession Planning Model

Succession Planning identifies necessary competencies and works to assess, develop and retain a talent pool of employees in order to ensure a continuity of leadership for all critical positions.

MAINTAIN SKILLS INVENTORY

INDIVIDUAL DEVELOPMENT PLANS

SUCCESSION PLANNING MODEL Succession Planning identifies necessary competencies and works to assess, develop, and retain a talent pool of employees in order to ensure a SUCCESSION continuity of PLANNING leadership for all MODEL critical positions IDENTIFY KEY POSITIONS

BUILD JOB PROFILES FOR EACH KEY

POSITION

COMPETENCY GAP ANALYSIS

DEVELOPMENT OPPORTUNITIES

Step 1 Identify Key Positions Succession Planning identifies necessary competencies within key positions that have a significant impact on the organization. Criteria for key positions may include: Positions that require specialized job skills or expertise. High-level leadership positions.

Positions that are considered mission-critical to the organization.

Step 2 Build Job Profiles for each Key Position Determine the key success factors of the job and how proficient the job holder would need to be. This information can be obtained several ways, including performing job analysis or gathering critical information during the performance appraisal process. The information that should be gathered includes the knowledge, skills and attributes that the current employee in a position possesses that allow for the competent and efficient performance of the functions. Step 3 Competency Gap Analysis Using the job profile of competencies determine the tool required to gather data on current employee competencies for the key positions

Analyze the difference between current employee competencies and future needs Document findings for development opportunities.

Step 4 Development Opportunities Assess the abilities and career interests of employees Candidates should demonstrate high potential or ability that will enable them to achieve Success at a higher level within the organization. Preferably, the list of possible replacements should be stored in a database so that the organization can easily track candidates. Step 5 Individual Development Plans Design a plan for each candidate developmental plans should be available for candidates and then incorporated into their performance management plans. Plans may include: Identifying career paths for high-potential candidates and others who have the interest and ability to move upward in the organization.

Provide development opportunities This can be accomplished through job assignments, training, or job rotation, and it is one of the best ways for employees to gain additional knowledge and skills.

Step 6 Maintain Skills Inventory Continually monitor skills and needs to determine any gaps and develop plans to meet deficiencies Keep an inventory of current and future needs and maintain the information for individual and group development.

Key elements of the Succession Planning process:

Succession planning is not about replacing an existing employee. The purpose is to prepare the organization and develop its "bench strength" for future organizational requirements. There are five elements to managing a succession process. 1. Identifying key positions for which a succession plan is necessary: The organization may have a couple of key positions or it may have many. The chief staff officer role is definitely one to be included in the succession plan. When deciding which others to include, consider: Is this a key role critical to the success of the organization, and if the person in this role suddenly leaves or is unavailable and the position becomes vacant is the organization at risk? Is this move a logical next step? Most organizations will focus on senior managers or supervisors as the second level for succession management (after the CEO, which is the first level). Does the person currently occupying this position hold a good deal of knowledge about processes or other institutional memory that will effectively leave when the incumbent departs the job? (i.e., the job procedures and outcomes are not fully documented)

2. Identifying the successor or successors: The organization may have more than one employee who has demonstrated the knowledge, skills, potential, and the interest to develop to a level of additional responsibility. The commitment to the process, and abilities, of the succession candidate are integral to identifying who to develop. 3. Identifying job requirements: The task is to understand what requirements will exist within one or more key positions in the future. This creates an inventory of skills and attributes that will serve as a checklist to audit what a succession candidate presently offers and needs to develop. 4. Building competencies: The succession planning process must look at building the competencies and skills for current and future organizational needs. It has been correctly observed that succession planning is about "what is next?" not just "who is next?" There will be one set of competencies (i.e., knowledge, skills, and abilities) for each position. However, in creating a development plan to build the competencies of succession candidates to be ready for the intended future role, there will be different development plans for each succession candidate. 5. Assessing progress: As the father of modern management, Peter F. Drucker, correctly observed "what gets measured gets done." It is essential that the organization that creates a succession plan, and invests in the development of employees, assesses its progress toward the intended outcome.

Companies Included in Succession Planning Research:

Some companies which follow the succession Planning process are as follows:

Apple AT&T

Brigham Young University Chemicals Company Credit Union, National Coalition of Firefighters Deutsche Bank Electronics Company General Electric IBM McDonalds Motorola Natural Resources Production and Refinement Company Pharmaceutical Manufacturer PricewaterhouseCoopers Procter & Gamble Xerox

Explanation of two companies with respect to Succession Planning:

1: McDonalds You cant figure out how to be a CEO until you are one. This is a quote from McDonalds outgoing CEO Jim Skinner. Skinner is stepping down at the end of June and will be replaced by current COO, Don Thompson. CEO change can have a huge impact on an organization and can generate wave after wave of change. Sometimes this can bring a much-needed turnaround, but it can also generate chaos. McDonalds has successfully navigated several CEO changes and we can learn a lot from their transitions. It is the role of the current CEO to guide the selection and development of pool of successors. Successful CEOs must be confident about their skills and willing to face uncertainty or even their own mortality to drive a process that will leave their organization secure in the face of unexpected change. They also must be willing to reevaluate the talent on their team, as needed, to ensure the best people are in place if it becomes time to transition.

So what can we learn about successful succession planning from McDonalds?

Succession planning is an ongoing process McDonalds has deep leadership bench and an ongoing focus on succession across the organization. Jim Skinner came into the CEO role after the organization lost two CEOs in six months. Embedded in his approach to his role was a focus on developing strong, ready successors.

Internal Promotion of a CEO helps drive a consistent strategy McDonalds has been following the Plan to Win and Jim Skinner, as an internal promotion to CEO, was committed to that strategy from his first day in his role. And it has delivered excellent financial results. A new CEO may have changed course and produced a completely different outcome.

Development is critical Skinner has discussed his commitment to coaching Don Thompson on what it will take to be successful in his new role. Thompson also had roles that would ensure that he was as ready as internal candidate could be for the top spot.

Our take a way? Plan now for tomorrows transition. You dont have to be a CEO to create a culture of succession, where leaders develop those on their teams to step forward when needed. You dont need a crisis to need a succession plan. 2: Apple An Outsider's View of Apple's Succession Plan One of Jobs first acts as CEO was to hire Tim Cook as chief of Apples worldwide operations, setting the stage for the companys spectacular turnaround. Jobs and Cook proceeded to forge a strong partnership, and rescued the company from its death spiral, which took it from $11 billion in revenue in 1995 down to less than $6 billion in 1998. Jobs reinvented the company by practically disrupting the entire music industry and innovating wildly successful products. Meanwhile, Cook made the operations sing by streamlining facilities and the supply chain, all of which dramatically increased margins. Cook also had a test run as CEO in 2009 and then again in 2011 when Jobs was managing his health situation. Under their leadership, the company went from its nadir to a remarkable $100 billion today.

So, the question is, Did Apple do a good job of succession planning? Judging from the result, I think the answer is, yes, although the process may not have been too pretty along the way. Lets look at the facts. Cook was an adjunct to Jobs for the better part of a dozen years, and he was test driven as CEO at least twice. In addition, Jobs will serve in the chairman role going forward, allowing the company to capitalize on his formidable genius and vision. So, it is no wonder that this transition turned out to be a yawner from an investor perspective. Many also are asking whether Jobs can really be replaced. The answer is, Of course not. He is one of a kind. But the better question is, Does the current company, with $100 billion revenue, really need the same leadership as the company that grew from $10 billion to $100 billion? And once again, the answer is, Of course not. The company will need more of Cooks influencing and operating skills to bring the organization forward. So, ultimately, the question is, Is Cook the right successor? Time will tell, but the question underscores once again that this really is a game of succession, and not replacement.

Advantages of Succession Planning:

Succession planning is one of the most important career development tools used by organizations. This is done to determine the backups for each senior position by identifying and training the executives who are at the next-lower levels. This is an important process as most organizations rely on it to find their next CEO and other top notch executives. This includes an overall development of lower level employees to make sure that they can effectively handle the responsibilities that they will be handed over in next few years. Formal succession planning is an examination of organizations long range plans and strategies and HR forecasts. It also offers several other benefits and has a positive impact on organizational culture and efficiency. 1. Aligning strategic goals and human resources to enable the right people in the right place at the right time to achieve desired business results. 2. The development of qualified pools of candidates ready to fill critical or key positions. 3. It establishes a logical basis for making choices among qualified candidates. Who should be selected, why they should be selected and what skills and competencies they own and what

needs to be developed in them are critical factors while identifying the employees for succession planning. 4. Identifying workforce renewal needs as a means of targeting necessary employee training and development. 5. Helping individuals realize their career plans and aspirations within the organization 6. Improving employees ability to respond to changing environmental demands, and 7. Formal succession planning is a systematic approach for preparing employees at lower levels 8. to handle the responsibilities of next higher levels in the coming years. The process involves a lot of serious planning and careful HR forecasts in identifying the capable employees who have the potential to be promoted to next level in the hierarchy. 9. A formal succession planning process is a proactive approach to fill a top position. It helps HR professionals to anticipate problems in the process before they get started. This is very important to avoid negative and dysfunctional situations. 10. The process establishes a specific connection between the business objectives and HR strategic planning. Along with this, it also increases internal promotion opportunities.

Disadvantages of Succession Planning:

Businesses use succession planning more commonly today than in the past. This planning allows leaders to identify and coach those who may succeed them in the organization. Once identified, selected individuals get extra training and development that will help them to move into the new role. When done well, this can deliver a seamless transition from one leader to the next. However, there are disadvantages to succession planning that leaders should note.

1) Narrow Focus: Succession planning allows leaders to focus on potential new managers who are employed by the organization but does not allow for candidates outside the company. In many cases, managers will consider only their direct reports as potential successors. This is good in terms of career development for those inside the organization, but it does not necessarily meet the companys best interests. In some situations, it is better to replace a manager with an external candidate to

bring new skills to the team. Other times, there simply may not be a suitable candidate within the organization. 2) Negative Effects on Motivation: It is not always totally clear cut whom a manager should prime for future leadership. In some cases, there may be two or more strong candidates for the role. If leaders do not handle succession planning carefully and objectively, others may see the person being trained for leadership as favored. This can lead to motivated individuals losing interest and not trying as hard in the work place. It may have the effect of making those employees think it is not worth their effort if there are no progression possibilities. Managers need to carry out succession planning carefully to avoid motivational issues. 3) Family Rivalries: In small, family-run businesses, succession is an issue that is very important. It the head of the organization dies, a child will replace that person in many situations. If the parent favors one child over another and if this is not considered to be fair, it can have a catastrophic effect on the small company. Family rivalries can cause a business to fall apart if not addressed effectively. 4) Organizational Structure Changes: Succession planning sometimes takes place even though an organization's structure may not be completely stable. Leaders need to develop and change organizations so they can survive to meet new business challenges. Sometimes a person may be developed for a role in the organization that may not exist in the future. This can have a negative impact on motivation of the earmarked individual. In addition to this, training costs money. If the company's leadership later eliminates the position, it will have wasted resources developing a person for a role that no longer is needed. Drawbacks: The biggest drawback to succession planning is that in some cases it can be a waste of resources. If the contingency that is being planned for is unlikely to happen, the resources used to make the plan might be better shifted elsewhere. Similarly, the plans developed may not remain viable. As

time passes, the plan could become outdated, forcing the devotion of more resources to keep it current.

Succession planning and the Current Economic Environment:

The current global financial crisis has left few businesses untouched. Short term reactions have focused on cost cutting. Given that total compensation represents between 20% to 70% of total costs, it is not surprising that many people are being laid off. While the closure of businesses or parts of larger businesses has been a common strategy, causing unemployment figures to rise quickly, it is not the time to abandon the SPM strategy, but rather a time to embrace it. Lay off of individuals without recognizing their value to the organization with further skills training is poor business practice. Corporate knowledge is lost. Organizations should hire for attitudes, train for skills Reactively dismissing employees in key positions when investors are showing

dissatisfaction without a full appreciation of the issues facing the business or the disruption that is caused through bypassing organizationally accepted succession processes can cause long term damage. Approximately 58% of organizations in the Asia Pacific region increased their investment in talent development initiatives over the past 5 years. It would be inefficient to scale back these investments that would be coming to fruition over the next 5 years. Tighter economic conditions challenge organizations to balance efforts to control costs with targeted investment in rewards and talent management. Even in a slowing economy, business cant be complacent with key talent and high performing employees. Encouragingly though, Cedar Crestone (2008) comment that, When the economy is tough, organizations focus less on recruiting and more on developing the human capital they do have, retaining them, and most recently, on measuring their performance. Demographic and social trends also emphasis the need for a commitment to succession. For example, The number of workers 55 and older will increase to 47% in 2010

 Many companies will have more than one third of their workforce eligible to retire in the next 5 years, often from critical leadership roles that are hard to fill. Fifty percent of our leadership positions across the organization could be vacated in the next five years, so the need to build leaders and pass knowledge on is consistent across the organization. (p.20, IBM Global Business Services, In Europe, approximately one third of organizations reported that up to 20% of key talent was at risk of turnover during the next 12 months HR executives from 40 companies around the world all indicated that they had an insufficient pipeline of high potential employees to fill strategic management roles. Management of the business is necessarily considered as part of succession planning. Failure to separately address the need for on-going management of the business can have disastrous results. If only one family member actively participated in the business while the business owner was alive, then generally, that family member may be in the best position to run the business successfully going forward. However, if an estate plan divides ownership, that family member who has been active in the business will certainly face conflict with other family members who were not. Some are failing to allocate time to succession planning because they are investing all of their energy and focus into the survival of the business, while for others its a case of putting it on the long finger because the economic situation has forced them to defer retirement age.

Conclusion:
The Career Development & Succession Planning (CDSP) solution empowers organizations as they plan for the future. Our CDSP increases visibility by enabling organizations to easily identify and develop top talent. In addition to grooming upcoming talent to move into key positions, you can effortlessly identify and remedy gaps in your succession planning. Enhance employee engagement by creating career paths for them, along with supporting development plans designed to fill gaps and promote employee growth. As you plan for your organizations

future, recognize your bench strengths and areas that need attention. Groom and cultivate the high performing employees you have identified as potential successors. Discover the impact of turnover in the company. Identify successors based not only on required skills, competencies and job experience, but also on an employees desire to hold the job. Advanced search tools facilitate finding hidden talent within the organization that may have otherwise been overlooked. After potential successors have been chosen, view the Domino List to determine the strength of your succession planning and uncover areas that may need further attention. Easily locate your top employees, Identify top performers and further develop them. Enhance manager-employee communication through interactive processes. Determine if you are losing high performing, high potential employees via attrition. Contribute to growth and fill gaps with development plans. Detailed gap analysis provides a graphical view of strengths and weaknesses.

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