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COLUMN

Succession planning is a planning for success

SYED NASIM MANZUR
June 28 2008: Bill Gates, one of the richest men in the world, walked away from his full time role in the world's most valuable technology corporation, Microsoft Corporation, to work with the Bill and Melinda Gates Foundation. He cofounded Microsoft with his friend Paul Allen in the year 1975. He handed over the reins to Chief Executive Officer (CEO) Steve Ballmer, a Harvard classmate, whom he enticed to join him with his vision of a computer on every desk and every home, since the late 70s.
What prompts a man like Bill Gates, who had the vision and genius to create Microsoft, to hand over his brainchild to others?
The cynical view is that when you have more money than God you can afford to walk away and play being God through your foundation. But that is too simplistic. Bill's personal fortune, as well as that of his foundation, is linked to the Microsoft stock price. So Bill has a huge vested interest to ensure that the Microsoft success story continues.
Thus, he has personally selected, groomed and anointed his successor.
In Bangladesh we are still waiting for the emergence of our first Microsoft story; our economy is dominated by first generation family businesses and small and medium enterprises. It is these firms that have driven growth and employment and yet it is exactly these companies that arc most vulnerable to a lack of succession management.
In the US, over two thirds of
all companies are family owned and generate half of the total private economic output and half of the total job opportunities. But only 30 percent of family businesses make it to the second generation and less than 15 percent survive to the third!
One of the leading reasons is the lack of a planned succession, be it to another family member or an outsider. In a book titled, 'Built to Last: successful habits of visionary companies', Jim Collins and Jerry Porras identified 18 companies that have been industry leaders for at least 50-100 years. They found that a key reason behind their success was their strong focus on succession planning and leadership development. These companies develop, promote and carefully select management talent from inside the company than comparison companies, ensuring leadership excellence and continuity.
It is said that the ultimate goal of leaders is to work themselves out of their jobs, yet so many of us spend so much time doing denying the thought even that we cannot be replaced. We all know a talented manager or have a colleague who simply will not share knowledge or promote his/her team members to avoid creating potential rivals.
Failing to plan is a plan for failure; this is true for all firms, be it a local family firm or a 'Fortune 50' firm.
Succession management is a continuous process; it is a
journey rather than a destination. It is critical for the longterm health of the company and a way to attract and retain fresh new talent. Successful succession planning has some key characteristics, such as, alignment with overall business strategy, driven by senior management, uses technology as a tool, and most importantly, it is simple, transparent and customised.
A common litany of woes in Bangladesh by bankers, manufacturers, advertisers, marketers, and even politicians is that they have the scope to expand but they cannot do so due to a lack of mangers. Also, businesses cannot decide on how to hold onto valuable employees and they cannot distinguish if the valuable employees are replaceable or not. In many other instances, they see that a certain employee is not quite up to the mark, even though he/she has potentials, but hiring somebody else will ultimately prompt him/her to leave the organisation!
Hiring and retaining top talent is the single greatest challenge in workforce management today simply because
attrition is expensive. Workforce attrition reduces productivity, lowers competitive advantage, increases costs, lowers morale and can ultimately cause customer dissatisfaction.
There are various ways to improve retention, such as, improve hiring management, better employee management and recognition of employee performance. Succession planning is such a powerful tool that the 'Hackett Best Practices Survey 2002' of two thousand global companies found that companies that used succession management and planning as a strategy, reduced voluntary employee turnover by 65 percent
Recruiting, training and molding current employees who have the potential to be future leaders of the company, has become a mission critical priority for sustaining leadership in the market place. The debate is still raging: should companies identify’ talent from within and groom or should they expand the gene pool and bring in outside talent. However, it is no longer a question of why but how. How do families learn to accept that ownership does not automatically equate management? How do growing businesses attract new generals without alienating the foot soldiers who brought them early success?
Jack Welch became the CEO of General Electric (GE) in 1981 and retired in 2000, during which time he increased the value of the company from $13 billion to $ 410 billion. One of the most admired skills of Jack Welch of GE was his ability to develop his subordinates so that there was always someone ready to take his place when Jack was offered a promotion. In 1991 he said, “From nowon. choosing my successor is the most important decision I'll make. It occupies a considerable amount of thought, almost very day."
The writer Is the managing director of ^Apex Adelchi Footwear Limited and welcomes feedback at nasim@apexadelchi com