The Hindu Business Line : The changing role of succession management

Succession management is no longer just about identifying replacements for senior executives. It has evolved into a tool for developing leadership skills among managers.

Succession management has been traditionally considered a bastion of the human resources department in a company. Its primary purpose, in the bygone era, was to identify a replacement for senior executives who might leave the organisation due to retirement or resignation — a kind of reserve force earmarked for top management. Thus, most companies prepared a succession management plan, which was the paper version of private discussions about probable candidates to fill vacancies at the senior level, and invariably such a dialogue was confined to members of the top team. Companies seldom envisaged the possibility that succession management could be deployed for development of talented executives.

Shortcomings

The old and orthodox method had some shortcomings. The focus was clearly on replacement and not development. The process was nicknamed candidate slates'. Second, it was targeting only top positions in the company. There was no concern about succession in the lower echelons of management. Third, the process of selection was bureaucratic and not democratic. Ownership for selection was confined to senior levels in operating units or the corporate head office. The entire procedure was shrouded in secrecy and only the top people knew who stood where on the list. Fourth, incumbents were moved from one step to the next higher step at periodical intervals, almost on a time scale, usually at the expense of merit.

However, beginning in the late 1980s, many companies began to get obsessive about leadership development. Initially, this movement considered only training and education as development strategies. Managers were sponsored to external training courses or trainers came into the companies. But it was soon realised that these two interventions alone were inadequate to cultivate leadership talent. Attention turned toward succession management — whether that system could be reinvented as a tool to augment leadership skills among managers.

New avatar

Today, companies are witnessing the emerging imperative and advantage of the succession management system in its new avatar. The new system is development-oriented. Its emphasis is more on the potential of the candidate, rather than his past performance. Ownership is widely dispersed throughout the company. While the old system was characterised by complete secrecy, the new system encourages involvement by individuals, who may also be candidates for selection.

Scarce resource

There are many reasons why companies have renewed their faith in succession management. First, leadership has become a scarce resource in the employment market. Companies in which attrition is high find it difficult to compete. Retaining good employees who have leadership skills is essential for long-term success in the context of the contemporary global economy.

Second, the leading players in today's corporate workforce are the knowledge workers. According to Peter Drucker, knowledge workers carry their expertise "between their ears". Drucker also adds that knowledge workers "have two legs" — the implication is that they may walk out if efforts are not taken to retain them. When corporate success is dependent on specific skills and knowledge, such talents develop a tendency for mobility and migrate to pastures more green and fertile.

Loyalty criterion

Third, under the new dispensation, people are retained only if they render exemplary performance. It is an outcome of ruthless competition, which needs outstanding results to sustain continuous success. Given the demise of the loyalty criterion, the new employment policy offers great opportunities to peak performers. Nevertheless, there is no guarantee of continuous employment. Efficient employees, however, find that experience gained is a trump card for employability elsewhere.

Fourth, the Internet along with the advent of placement agencies has increased employee turnover . Peak performers who are stuck in jobs they perceive as unchallenging are prime targets for headhunters. The scarcity coefficient of knowledge workers has triggered an entire business dedicated to hijacking skilled manpower. An effective succession management system must prevent job-hopping by such high-flyers.

Towards this objective, timely moves ought to be provided to match their needs besides augmenting their competency portfolio, so that they may move into a fast track at the earliest opportunity. Companies need to conduct a more organised and systematic development of their promising executives, with mutual advantages to both.

Finally, an additional impetus that has brought succession management into the centre stage is the non-stop and unpredictable organisational transformation. Due to the perennial change in the commercial climate, companies are required to meet growing gaps in their talent pool. This means that efforts need to be taken at the double, because change comes at them twice as fast as it used to before.

In response to these forces, progressive companies today are deeply concerned about employee retention and development. A significant advantage of the new system is its ability to harness talent by programming a continuous stream of challenging assignments. Defining and identifying talent is the foundation for succession management in a company.

Definition of talent

The challenge is contained in the definition of talent in terms of the needs of an organisation. Traditionally, performance outcomes were the simplest way to determine who had talent, and who did not. People who had achieved high targets in their present performance were considered best suited for more important responsibilities. But experience has shown that this line of thinking need not always be right.

Employees with high performance in their current positions do not necessarily repeat that quality of performance at higher levels. Performance at higher levels demands skills of a different kind and calibre. Over a period of time, as succession management systems have grown more objective and sophisticated, they have moved away from reliance on current performance of employees.

The better systems now incorporate assessment of leadership capabilities, adherence to organisational values and ability for development and learning as the criteria for considering people for appointment to senior levels in management. The principle is that while increment is a reward for past performance, promotion is a contract for future performance.

(The writer, a former HR director of a well-known auto components group, is a management consultant)

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