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Articles » Succession Planning
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Succession Planning (Part IiI)

There are several myths associated with Succession Planning, one being that it is similar to workforce planning. The focus of workforce planning is always on the present business scenario i.e. getting the right number of people with the right skills, experiences, and competencies in the right jobs at the right time'. Unlike workforce planning, the focus of Succession Planning is on developing future leaders, not just for today, but for tomorrow, next year, and five years from now. Another myth is that succession planning is an option. Well, it is not an option but a necessity to ensure continuity of business. An important myth pertains to leadership development; as if Succession Planning and leadership development are two different HR processes. A myth also exists about ownership. Most organizations believe that Succession Planning and leadership development are the stand-alone activities coordinated by HR department, wherein line managers do not have much role in Succession Planning or Leadership Development. Though, succession planning is initiated by the HR department, yet the onus of its success depends upon its implementation by the line managers. Last and not the least, lack of Succession Planning may not pose a similar threat as accounting blunders or missed targets. Well, by now it must be clear to you that the losses may be bigger than what can be easily anticipated.

Whatever said and done, it's a reality that 'Most Indian globally recognized organizations are not properly equipped with a sound succession plan that has a serious impact on a company's market valuations. Very few Indian companies have been able to effectively implement a succession plan for its important and strategic positions' (As per a survey conducted by the Associated Chambers of Commerce and Industry of India). Since, more than half of the top 100 companies out of the top 500 are family owned, the situation is quite complex in India. De-merger of business families, with trauma and acrimony, is fairly common in India. Traditionally, in India whether it is the throne or the family business, the eldest child has been the successor. However, in today's world these values have lost its meaning. To state a few examples we are all witness to the division of Reliance Industries, Bajaj Auto, Escorts, and the Jumbo Group. These organizations divided the entire family business vertically, with different companies going to separate factions of family. Nevertheless, there is a silver lining to this. There are organizations, though small, yet have successfully dealt with succession issues. These are Murugappa Group, Dabur India, Thapars, and GMR Group.

GMR group has clearly articulated a set of rules to deal with management succession, ownership succession, and the control or power sharing. The group has drafted its family constitution and institutionalized a Family Business Board to decide as to which business the group wants to remain in and which to quit. They have laid down policies for consensus in decision making, media, and code of conduct. The group has even decided the process of inducting family members into the business and for providing benefits to those who do not want to enter the business. Issues such as control of family wealth verses business wealth, distribution of family holding, and the voting rights are dealt with in detail. The group has already decided that G M Rao, the present Chairman, will step down at the age of 70. The three next generation successors will decide the next chairman. In case of dispute the group has already decided upon a deadlock trustee, who will intervene and help resolve the situation. Family members are to be appointed on merit and be paid on par with other professionals employed. Of course, their economic benefits from the shareholding are separate.

WalMart is a perfect example of a successful succession planning implemented by a family run business. It has de-linked the ownership and the management of day-to-day operations. In this approach, though the family owns the controlling shares, it inducts professional managers to run their business. For example, Rob Walton is the Chairman but day-to-day operations are handled by Lee Scott, the CEO. In India, Ranbaxy, one of the top five pharmaceutical companies, adopted the same approach long back. Its founder Chairman, Bhai Mohan Singh groomed his son Dr. Parvinder Singh (a doctorate in pharmacy from the University of Michigan) to become his successor. However, Dr. Parvinder Singh instead of handing over the reins to his sons decided in favor of D.S. Brar who joined Ranbaxy as a Business Development Manager. In 1993, D.S. Brar became the President (Pharmaceuticals) and a whole time Director of Ranbaxy. In 1997, Brar revealed his plans to retire in 2002. In 2003, Dr. Brian Tempest (President, Pharmaceutical Division, Ranbaxy) took over the reins of Ranbaxy from Brar as the CEO and MD. Though the current CEO & MD, Malvinder Singh, is part of the family yet the company made sure that he is groomed well before taking on the responsibilities for the position..

(Excerpts from the talk delivered on Succession Planning at Malaysian HR Congress, Kuala Lampur)

Vivek Mehrotra
www.vivekmehrotra.com

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