The Hindu Business Line : Youth is hot and bold, age is weak and cold

QUITE refreshingly, at 89 a political party leader makes way for another who is 56 and, all of a sudden, there's a loss of comfort zone in the ranks of a different party. Yet another party, however, is fighting hard to hush up some sudden chatter about totter, even as a corporate icon steps down from the chair of a telecom major. Elsewhere, a family is still fighting with a will and an accountant; and the drama refuses to be over in a sibling story. The subject that's hot is `succession planning', worth zeroing in upon by all organisations, big and small.

What is succession planning? It is a method to prepare your organisation, be it a family or government, business or party, for transition. Those who plan well have a change of guard that's smooth, thus ensuring the continuity of the organisation; else, crumbling begins to happen after onlookers have been treated to dirty-linen-washing-in-public and long-drawn litigation by warring rival camps.

"When the King is dying, the minister should induce members of the family, princes and principal officers fight against one another or against other principal officers," is a depraved suggestion of Bharadvaja, in the chapter titled The `Rulership Transition', translated by E. Bruce and A. Taeko Brooks on www.umass.edu. "It is wrong," Kautilya says, responding to the counsel urging the minister to seize the power. "He should place on the throne a prince with good personal qualities," adds Kautilya.

Instances aren't rare when such emergency anointing is required, after a mishap robs the entity of the helm. Succession planning foresees such a contingency and prepares the organisation for the passing of the baton. For, when sentiments overpower and tears threaten to drown rationality, triggering off an agreed upon procedure can ensure safe navigation.

"Succession planning is a multidisciplinary process, one that requires business owners to take a strategic approach to an orderly transition of the management and ownership of their companies," explains www.deloitte.com. The firm estimates that $10 trillion in wealth is expected to change hands over the next 10 to 15 years in the US, where more than 95 per cent of businesses are family-owned, including more one in three of the 500 largest companies.

"Despite solid professionalism and enviable profits, many closely-held businesses ultimately fail to complete the transition to the next generation. Some boast sophisticated and knowledgeable professionals at the top, but still get caught up in a web of complication," is a statement of Deloitte that can ring true in other countries and the widely held organisations too.

KPMG describes `The nuts and bolts of succession planning' on www.kpmg.ca, and estimates 12 to 18 months as time required for the purpose, though `an orderly transition' can take `as long as three to five years'. A long time horizon, that is, so most people put the idea `on the back burner' to deal with the immediate problems first. There are depressing statistics on Grant Thornton's site www.grantthornton.ca: that almost 70 per cent of family businesses never make it to the second generation, and that 90 per cent never see a third generation. Writing in The Business Monthly (www.bizmonthly.com), David C. Hepple outlines the different steps to pave the way for a successor. What comes first is the setting of a target date as `last day' and then "shifting responsibilities ahead of time"; thus, you can oversee the transition even as you're still around.

Waiting till you're 65 doesn't help, advises www.sbaonline.sba.gov, because by then you may not be able to transfer your knowledge or vision to the next layer. After missing the bus, these people may only end up staying on till they are 75, 85 and so on! Instead, "write a happy ending," exhorts the site, and cites the observations of Leon Danco, of Center for Family Business: "King Lear, Pygmalion, the Old Testament, Greek tragedies. If you substitute the nouns and verbs, you could write the family business owner's story." Governments too labour under the weight of ageing employees. Pointing out that the median age of federal employees exceeds the US national average, www.fpmi.com notes, "Jack Welch, the CEO of General Electric, said in 1991, nine years before his planned retirement, `From now on, choosing my successor is the most important decision I'll make. It occupies a considerable amount of thought almost every day.'" A not-to-be-missed article on the subject is G. Warren Whitaker's discussion of poor strategy adopted by the pharaohs of Egypt, and an alternative ending to Hamlet, posted on www.abanet.org. Your story needn't be a tragedy, after all.

Carter McNamara has put together useful links in www.mapnp.org, using which I hit the `Bus Test' on www.howtosell.net: "If XYZ employee was to get hit by a bus and die tomorrow, would your ISP still be able to survive with little or no effect?"

Dreadful to think, but as inevitable as disaster recovery planning, and the key is simple: document everything. "Realistically, every employee should have a log of important information `just in case'." Work, therefore, on JIC, so it will be available JIT when the need arises.

Lalitha Naveen of Georgia State University writes in a forthcoming issue of Journal of Financial and Quantitative Analysis that costs and benefits of succession planning are affected by a firm's level of operational complexity and human capital requirements. Thus, "firms that are more complex incur greater costs to transferring firm-specific knowledge and expertise to an outsider, and should be more likely to groom an internal candidate for the CEO position."

A poem by the Bard may justify looking out for a younger replacement to the old man's chair: "Youth is full of pleasance, age is full of care; youth like summer morn, age like winter weather; youth like summer brave, age like winter bare. Youth is full of sport, age's breath is short; youth is nimble, age is lame; youth is hot and bold, age is weak and cold; youth is wild, and age is tame."

So, shall we tell the chief to start looking for the heir apparent?

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