Many businesses take out insurance to mitigate potential risk exposures and uncertainties – such as flood, hurricane, fire, burglary, etc. They install security systems to safeguard against theft and other threats, and back up data to protect proprietary information. There is a tendency to get too busy with the day-to-day operations to the detriment of making succession planning a priority.
Succession planning is at the core of business sustainability and aims to meet the present needs of the business without compromising the ability of the business in the future to meet its needs. Succession planning is a sure way of ensuring that the future capacity of the business to drive growth is not jeopardized by the exit of a key player. Dr. William Rothwell defines succession planning as the “deliberate and systematic effort by an organization to ensure leadership continuity in key positions, retain and develop intellectual and knowledge capital for the future and encourage individual employees.”
Succession planning is about the development and management of talent across all cadres and not only at the executive management level. It involves the strategic, systematic and deliberate effort to develop competencies in potential leaders.
Whilst the Human Resource function plays a key role in succession planning and talent management, the Board of Directors should have a clear sight of capacities within the senior and executive management cadres. Article 1.5 of the Nigerian Code of Corporate Governance provides that “the Board helps in ensuring the establishment and implementation of a succession plan, appointment process, training mechanism and remuneration structure for both the Board and senior management of the Company”.
Succession planning should be designed for the adaptability of the business in the face of changing market demand and the evolving needs of the business. It is important that the plan does not stop at identifying potential successors to key roles. To be effective, all functions that are currently and potentially strategic to the business should be identified and included in the plan – regardless of cadre. In preparing its Succession Planning Policy, an organization should give careful consideration to existing talent. To enable the Board undertake an assessment of middle management capacity, this cadre of staff should have periodic interaction with the Board – reporting responsibilities at Board and Committee meetings. The responsible Board Committee should periodically review internal capacity and plans to bridge identified gaps. Adequate training, coaching and mentoring programmes should be put in place and carefully executed.
Where the requisite capacity is lacking, the Board should not shy away from looking outside the organization to fill specific roles in the event of unanticipated exit. Whatever option is expedient, an organization’s policy on succession planning must be clearly defined, transparent and properly managed to avoid disgruntled employees sabotaging the process.
As organizations are typically established to subsist in perpetuity, the process for implementing the succession planning is continuous and not time bound. A good Succession Planning process gives assurance to the organization’s stakeholders that their interests will not be negatively impacted in the event of sudden exits and that the going concern status of the organization will not be derailed.
Whether at the Board or at Management level, the talent development and management process is incomplete without opportunities for evaluation. Retaining non-performers in the system will ultimately prove detrimental to an organization’s health. A proactive organization will therefore structure its performance evaluation system around the attainment of set goals and objectives and ensure that periodic performance evaluation is undertaken to enable Management and the Board identify areas of improvement and note the star performers within the organization both for reward and to optimize the execution of the organization’s strategy.
Ownership of the succession planning process by the Board has been proven to enhance both organizational process and outcomes. Increased awareness at the Board level about the significance of succession to organizational sustainability will encourage Board members to focus on their own individual and collective professional development to be positioned to identify potential successors to key roles more easily which will foster smoother transition to leadership roles.
According to Donald Lowry, the importance of succession planning to business continuity and sustainability lies in fact that the “governance skills, processes and structures that got today’s companies where they are now will not be the same as those required to sustain high business performance in the future”.
Join us on Tuesday, 20th April 2021 at the 15th DCSL Webinar Series themed “Succession Planning & Sustainability in Family – owned businesses”. To attend and participate, please register using the link http://bit.ly/Webinar-Series-15. For more information, kindly contact Nike at [email protected]
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