The Art of Change Management – Implementing Change from the Top © 2011, Percy Agreras Dastur – Chapter 9 / Role of the CEO in Succession Planning Never doubt that a small, group of thoughtful, committed citizens can Change the world. Indeed, it is the only thing that ever has. ~ Margaret Mead ~

The Art of Change Management – Implementing Change from the Top © 2011, Percy Agreras Dastur – WHAT IS SPM  Succession Planning and Management, or SPM, refers to the planned, systematic efforts undertaken by an organisation with the objective of ensuring leadership continuity, it includes – Identifying key positions in the organisation – Assigning a set of essential competencies to these roles – Identifying potential holders for these roles – Developing them to take on these roles  It can be considered as an investment in intellectual capital that serves as a buffer for leadership crisis  Succession planning should be undertaken as part of the talent management and people development functions - a continuous, ongoing process 2

The Art of Change Management – Implementing Change from the Top © 2011, Percy Agreras Dastur – WHY IS SUCCESSION PLANNING ESSENTIAL  According to Wayne Bleakley, succession planning should focus on senior management positions, though some others argue that succession planning should happen throughout the entire organisation and at all levels  According to Levensaler (Bersin & Associates, 2008), the present volatile business environment throws up 9 key challenges for organisations, leading among them are – Leadership gaps and performance – Filling key roles and retaining talent  Strong succession planning helps to address this leadership crisis and to sustain healthy investor relationships even through turbulent times  The first step to a structured succession plan is the creation of an interim replacement plan that has in place a back up to shoulder the responsibility of the organisation should the CEO suddenly depart 3

The Art of Change Management – Implementing Change from the Top © 2011, Percy Agreras Dastur – BUILDING BLOCKS OF A SUCCESSFUL SUCCESSION PLAN  In order to serve its purpose, a succession plan must involve the following – Identification and development of core competencies – Identification and development of potential key-position holders – A Succession Plan should also consider tying rewards and incentives to performance, so that key people who display the desired competencies and set performance benchmarks are appreciated and rewarded. – Succession planning is also tied to workforce planning which enables the review of job roles and identification of appropriate training needs, which are critical to the succession planning process 4

The Art of Change Management – Implementing Change from the Top © 2011, Percy Agreras Dastur – TYPES OF SUCCESSION PLANS 5 PLANNED SUCCESSION PLANSEMERGENCY SUCCESSION PLANS When the departure can be anticipated for eg. In case of retirement or expiry of contract. When the departure cannot be anticipated for eg. Sudden demise or accident etc. Necessitates a strong communication plan, since the sudden departure of a CEO may have an adverse impact on investors’ confidence in the organization.

The Art of Change Management – Implementing Change from the Top © 2011, Percy Agreras Dastur – THE BOARD AND SPM  CEO successions are substantial, important and inevitable changes that recur in the life of an organisation  Given its viewpoint, the Board and the CEO are partnered in succession planning, the onus lies majorly on the Board  Broadly, the board’s role can be summarized as follows – Understand what the organisation needs to drive its strategy and culture – Identify talents that may be targeted by rival organisations and retain them by offering a strong career path and growth opportunitieS – Independently and objectively decide upon potential leadership holders – Guide the CEO in developing this talent pool to take up leadership roles in future – Openly communicate with potential internal candidates, while simultaneously managing expectations to avoid circumstances of top contenders refusing to accept key roles when offered – Supervise the succession planning process 6

The Art of Change Management – Implementing Change from the Top © 2011, Percy Agreras Dastur – BEST PRACTICES FOR SUCCESSION PLANNING  Research conducted by Oliver Wyman outlines some of the best practices for succession planning by the Board – Discussions between the Board and the CEO regarding succession planning must ideally commence 3 to 5 years prior to the expected transition time – The entire Board must be part of the process – The CEO and the Board must engage in open and ongoing dialogue on succession planning, which should include a formal annual discussion of at least half a day – The CEO and the Board must have a common understanding on the company’s strategic needs, and accordingly develop the criteria for CEO selection – The Board should employ formal assessment processes to judge candidates – Board members should interact with internal candidates in various settings – It is better to develop internal candidates than to opt for external recruitment – The outgoing CEO should either leave the Board immediately, or continue as Chairman for a period of 6 to 18 months – An emergency plan should be put in place and reviewed at least annually 7

The Art of Change Management – Implementing Change from the Top © 2011, Percy Agreras Dastur – THE CEO AND SUCCESSION PLANNING  The primary responsibility of the CEO is to realize and accept the need for succession planning  The CEO can provide valuable insights on – Any gaps that exist between the company’s work experience and skills and the desired core competencies – Prospective internal candidates, who can don the CEO role, should the company face an emergency  The CEO has an indispensable role to play in succession planning and his contribution to the process has significant bearing on how the company operates in future 8

The Art of Change Management – Implementing Change from the Top © 2011, Percy Agreras Dastur – © Copyright 2011 The Art of Change Management Implementing Change from the Top ISBN: Published by Embassy Books, India. Author: Percy Agreras Dastur