The importance of succession planning
Business Continuity Planning
The Disaster Recovery Journal (DRJ) defines Business Continuity Management (BCM) as “A holistic management process that identifies potential impacts that threaten an organization and provides a framework for building resilience with effective response capability that safeguards the interests of its key stakeholders, reputation, brand and value creation activities Recovery or continuity management in the event of a disaster Also the management of the overall program through training, rehearsals and reviews, to ensure that the plan is maintained up-to-date and up-to-date.” (n.d.) Within the scope of BCM comes succession planning, defined by DRJ as “A predetermined plan to ensure continuity of authority, decision-making, and communication in the event key members of executive management become incapacitated unexpectedly”. (North Dakota)
The importance of planning
Why are these aspects of planning critical for companies and governments? Planning for doing business during a crisis is critical to being able to perform essential functions during and after the crisis. The prognosis for those without a plan is certain business death:
Of companies without a disaster recovery plan:
> 80% will fail in just over a year,
> 43% will not even reopen,
> 93 percent of those who experience significant data loss are out of business within five years according to the US Bureau of Labor (Sombrero, 2004)
Clearly, the evidence supports the need for a business to be prepared for disasters. The question then becomes, “What is a disaster?” DRI International offers the following as a definition of a disaster: “A disaster is a sudden and unplanned calamitous event that creates an inability on the part of an organization to provide critical business functions for a predetermined period of time and results in extensive damage or loss .” (2006)
Implicit in the definition of DRI is loss at an “unacceptable” level. If a sudden and unforeseen event occurred that prevented the company from performing critical business functions and was to result in a $50 million loss due to lawsuits, but the company has $100 million in insurance, the loss may not be “unacceptable”. The loss has been mitigated by insurance; however, the company may now be dealing with a public relations issue related to the lawsuit. As noted in the Harvard Business Review, “companies sometimes misclassify a problem, focusing on technical aspects and ignoring perceptual issues.” (Augustine, 2000)
Using this definition of disaster opens the planning paradigm to many different scenarios outside of the traditionally defined natural, man-made, technological, and terrorist events. Suddenly, the definition of a disaster allows for more varied considerations, including product recalls; class action lawsuits and individual lawsuits; and executive desertion, resignation, termination, arrest, expiration of contract, or death. All of these elements can create “an inability on the part of an organization to provide critical business functions…resulting in great harm or loss.”
Denial
The definition of disaster also helps mitigate another phenomenon in crisis response: denial. As Augustine points out, “This stage of crisis management is often the most challenging: recognizing that there is, in fact, a crisis.” (Augustine, 2000) Establishing a quantifiable threshold for “unacceptable” loss allows executives to discern that a crisis situation exists that requires a response. Only when the crisis is recognized can the inevitable effects be mitigated.
estate planning
Wikipedia defines succession planning “as the process of identifying and preparing suitable employees through mentoring, training, and job rotation, to replace key players such as the chief executive officer (CEO) within an organization when their terms expire.” commands”. As explained in this statement by Brent Filson, “It’s a common occurrence, a CEO leads a company to record profits, retires, and in just a couple of years, those once-high-flying profits are waddling down.” .Observers blame the new leadership team. But the observers are most likely wrong. It’s not just the new leaders who are screwing up. Instead, it was most likely the former CEO. So when a decline follows the departure of great leaders, the safe bet is that those “great” leaders haven’t hired or developed leaders, so they really weren’t any good at all, no matter what results they got.” (Filson, nd) An excellent military leadership trait requires the leader to develop the staff below him to rise to the position held by the leader so that the leader has freedom to move up the ranks, or for subordinates to be able to handle situations on the battlefield. if the leader is incapacitated. A military unit should not have the survivability of a snake, where cutting off the tail is not a problem, but cutting off the head (leader) results in the death of the unit.
Developing the next generation of leaders is a paramount task. “It is instructive to remember here that Noah began building the ark before it began to rain.” (Agustín, 2000) Prior planning prevents poor performance. If the proper methodology is not used to prepare for staff turnover or unavailability, the corporation may panic in hiring, fail to implement strategic plans due to the loss of a key person, and many other pitfalls because they weren’t ready.
short term needs
Planning should take into account short time frame reporting elements. What does the company do when two executive vice presidents are killed in a plane crash? Who has been groomed and is ready to “take action” in their place until they can be promoted to permanent replacement or until an executive search reveals the best candidate? When a senior executive resigns and moves to a competitor, has the company already instituted a program to ensure that people know that strategic plans, customer accounts, and other vital business-critical information is, in fact, the sole property of company and did they have these key people? sign confidentiality agreements? If they had not done so before hiring the flawed manager, are they prepared to ensure that incoming key personnel must assert their loyalty in exchange for the position?
midrange needs
The staff will retire. The text gives the example of GM and its planning process. Any company that is not preparing a similar plan to prepare and test the abilities of the personnel who may be chosen to be the CEO must seriously consider how prepared they really are to do business. Failing to plan is, in effect, planning to fail.
Long-term retirements give companies enough time to try out people in the proposed role, receive closer mentoring, or take on substantially more responsibility to see how they can handle the situations they will face when they are given the job. approval.
long term needs
The United States is entering an era in which the baby boomer population will begin to affect the balance in the pool of worker availability. Beginning in 2010, the population growth rate equilibrium begins to shift, and by 2015, the 65+ age group begins to grow at a faster rate than the 20-64 age group.” ( Allier, JJ and Kolosh, Keneth, 2005)
“Organizations that understand the immediacy of the baby boomer’s exit and carefully prepare for it will be in the best position for unparalleled success.” (Allier, JJ and Kolosh, Keneth, 2005) The authors offer questions that companies should ask themselves to prepare for the coming demographic change. Some of them are:
> What are your company’s demographics (age, gender, position, years in position, and anniversary date)?
> What are your company’s retirement policies? Is early retirement encouraged or discouraged?
> What mechanisms and programs need to be put in place now to capture the key competencies and critical job knowledge of retiring employees?
> Will your organization need to increase its reliance on new immigrants?
> If your organization is offshoring, what is the age breakdown of your partners abroad?
> Will your offshoring partners face a labor shortage that could affect their ability to deliver?
(Allier, JJ and Kolosh, Keneth, 2005)
Allier and Kolosh also point out that companies must position themselves to meet the needs of an aging population. There may be a need for unique skill sets and competencies, as well as a need for new or modified product designs to market to the aging population. These issues relate to business continuity planning. To remain competitive in the future, companies must prepare for the ever-changing shift in the average age.
Not just for executives
When developing succession plans, it is important to remember that the scope should not focus solely on the executives of the corporation. Steve Nelson, MSPB director of policy, said: “Succession planning often focuses on senior leadership when we need to look at critical skill areas at all levels.” (Welles, 2006) Marta Brito Pérez, associate director of human capital leadership and merit system accountability at OPM, said, “Succession planning has nothing to do with age. Succession planning is just identifying high-risk positions and how to fill them”. (Welles, 2006)
The process
The succession planning process involves evaluating which positions are critical in order to have a succession contingency plan. Positions are evaluated and then the skill sets of candidates who could fill these positions are assessed, taking into account the time frame it would take to bring them up to speed for the position. A training program should then be put in place to ensure progress is made in bringing these individuals closer to a more immediate insertion rate in the event of a planned position turnover. This will ensure a smoother transfer for the person waiting and provide a measure of corporate stability at a difficult time.
Summary
Succession planning is a part of the overall business continuity planning process. It is a piece that cannot be overlooked. Ignoring succession planning will leave the company without properly developed managers and key personnel to fill the shoes of those who leave for whatever reason.
References
(2006). BCP 501: Business Continuity Planning Review 2006. Washington, DC: DRI International.
(North Dakota). Business continuity glossary. Retrieved May 1, 2007 from the Disaster Recovery Journal website:
Allier, JJ and Kolosh, Keneth (2005, June). Preparing for baby boomer retirement. Retrieved May 13, 2007 from the clomedia website
Augustine, Norman (2000). Harvard business review on crisis management. Boston, MA: Harvard Business School publication.
Filson, Brent (nd). It has different criteria leadership. Retrieved on May 1, 2007, from emerging leader
Hatter, Dave (August 6, 2004). Without a disaster recovery plan, your business is at risk. Retrieved May 12, 2007 from the Cincinnati business messaging website:
Welles, Judy (May 22, 2006). Welles: Succession Planning Success: Prepare by matching talented employees with leaders before those leaders leave. Retrieved May 3, 2007,