Emergency Exits: Who will lead the pack?
Maurice Fisher, the owner of a huge energy conglomerate, in the Academy award winning movie Inception, dies after prolonged illness. The heir apparent, Maurice's son, Robert Fisher inherits the business empire and is unwillingly forced in to the family business.
Saito, industry mogul and Fisher's competitor, along with his team of dream stealers succeeds, in bringing the subconscious disinterest in Robert to realization; he eventually decides to disintegrate his mammoth empire to follow his heart. Though a Hollywood movie plot, yet the fall of the Fisher empire can prove to be a meaningful case study for most organizations.
The strained father-son relationship, Maurice's distrust in his successor's potential and absence of a succession plan was sufficient to jeopardize the survival of the company after its owner's death. The case is not typical to family- run businesses.
Organizations all across the globe have no escape from such situations where the cherished visionaries in the form of CEOs, Board members and leaders may meet their fate through death, disease or personal interests that may overpower the need of the hour. Such companies not only lag behind, they may also end in a state of limbo for a very long time.
At the ground zero
“Sudden exit of leaders in organizations is a reality of life beyond predictions," says Dr Arvind Agrawal, President and Chief Executive Corporate Development & HR, RPG Enterprises. But exits may not always be as dramatic as a death or a terminal illness. "A senior leader can resign suddenly, leaving no time for the management to find a replacement" remarks Pradipta K. Mohapatra, Chairman and Co-Founder, Coaching Foundation India. Such a situation, especially at a senior level, can create havoc of sorts. But does that always have to be perceived as a havoc? "Such threats certainly do not neatly parcel to suit the system a company has arranged. But, sometimes, such an instance proves to be the best learning period." opines Sanjay Raina, Executive Vice President-HR, UB Group.
In 2004, James R. Cantalupo, the then Chairman and CEO, of McDonalds' suddenly died of a heart attack. Within 24 hours, Charles H. Bell was declared as his successor. However, the next six months saw Bell struggling with his job, due to health reasons. He resigned when he was diagnosed with cancer. The Board continued to brave the situation and within no time, James A. Skinner became the CEO. Anticipation and preparation for the unforeseen is something many organizations can emulate from McDonalds' strategic succession planning.
But mostly, it is not just the sudden departures at the top of the pyramid of hierarchy, which halts the business continuity. Sudden vacancies at critical positions affect sales figures, productivity, market relations, and customer interactions, can be equally devastating.
One of Forbes CEO network surveys affirms that most organizations are not prepared for such exigencies. 2011-2012 HR service Delivery and Technology Research Report by Towers Watson reveals that only one-third of the responding organizations have an articulated succession plan, while 57 per cent are actively working towards developing one. Going by the statistics, the probability only becomes higher for coming across the inevitable.
Dr Agrawal recalls how a CEO of one of the companies in the mammoth RPG group, with an employee headcount of around 60,000, left to join the competitor. "He had to be relieved immediately considering confidentiality issues. A board member took over whilst an incumbent was prepared. "In a recent instance, one of the senior leaders left abruptly. We had two aspiring candidates for the position from another site. One of the candidates was designated the role at the vacant position while the other was made responsible for handling the site where he was already working," shares P K Panda, Group President-HR & Chairman Office, Adani Group.
It is the smart organizations that are always prepared for exigencies. In IBM, for instance, succession planning is a revered practice. Recently, Ginni Rometty succeeded Samuel Palmisano in a smooth CEO succession. Sukanya Choudhury, Business and Technical Leadership Lead, IBM India hardly remembers any instance where the departure of a senior leader created turbulence, except one. "When IBM labs were still at a nascent stage, one of our senior heads passed away. Most of the potential replacements were absorbed in different units. So, it took us around six months to find a suitable candidate for his position", she recounts.
Mounting difficulties So what should be the ideal course of action for organizations facing emergency exits? As per Towers Watson's Talent Management and Rewards survey, approximately 74 who has worked with several MNCs, also agrees that short listing of potential successors is a good strategy. "I believe when vast opportunities and meritocratic cultures are complemented by a robust process for managing talent, leadership development becomes a success. This philosophy has been the cornerstone towards our preparedness at UB group for filling critical senior position during emergencies," he adds.
A succession plan helps in identifying the talent pool and preparing individuals for achievement. At the organizational level, it ensures growth and continuity, and helps in corporate planning.
Role of HR
It goes without saying that in global organizations, the role of Board members is paramount in succession planning of critical positions. Yet, as Rebecca Luhn Wolfe points out in her book, “Systematic Succession Planning”, any business continuity plan should be aligned with the HR objectives of an organization. She emphasizes on how the HR department is involved in corporate strategies, practices followed for developing and training key employees. A new study by Bersin & Associates shows leadership development and succession planning are top concerns among HR professionals, given today's economic and demographic changes, yet most companies are yet to address them adequately.
The role of HR is heightened in eventualities..
Apart from finding the ideal resources, HR teams also help to bridge gaps between the management and employees. "Unfortunately, during a crisis HR teams should engage with stakeholders in straight talks," opines Raina. Dr Agrawal also highlights how the onus of eliminating any miscommunication in times of turbulence comes on the HR. "Mass communication doesn't work in such cases. You cannot take chances and let rumors take over. You need to check the employee sentiment and identify smaller teams to organize one to one interaction," he says.
Challenges of unplanned succession… A prominent study by Corporate Leadership Council Research indicates how succession-planning initiatives fall short of their intent. Complete utilization of the bench strength is one such obstacle many companies face. Organizations banking on the 'bench strength' often tend to encourage the imitation of current leadership style which shall become otiose after five to ten years.