Selfishness Poses a Roadblock

By Gary Perman  |  Posted 12-04-2008

No IT Succession Management? Fire Your Board

Succession management has been bantered as a topic of interest in companies and IT departments for several years. Recently there has been an increase interest among IT shops as the need for skilled talent becomes more critical.

Succession management is defined as making provisions for the replacement of key people and requires a clear understanding of an organization's values, mission and strategic plans. It is a proactive approach that ensures continuing leadership by cultivating talent from within the organization through planned development activities.

Companies who ignore the need for succession management planning risk potentially devastating losses to growth and financial profits when any of the following events occur:
• Executives or managers depart from a company because of retirement, termination or death.
• Key performers leave for another company.
• Promotions within a company leave a vacancy without a trained successor to fill the open position.

Considering the importance of being prepared for unexpected staff changes, I would have guessed succession management was a common topic among company managers. I have been surprised to discover that a lack of succession planning is more rampant than I could have believed possible.

According to the National Association of Corporate Directors, 45 percent of companies with gross sales over $500 million still do not have a clear succession plan. Companies earning less than $500 million experienced even lower succession planning. Succession planning is nearly non-existent in startups and small companies.

Companies can experience tremendous financial losses when they are not prepared for the departure of a key employee. Delays in finding a replacement are common. Due to the skilled labor shortages in technology and related professions, the time that is required to achieve successful replacement results has increased from three weeks to three months.

During extended vacancies, projects are delayed, revenues unrealized, accounts lost, innovation stifled, patents gone, overtime costs rise and employee morale drops. If companies want to be effective at filing unplanned vacancies, they must commit to the development of a detailed and progressive succession management plan to ensure that they have the future skills required for corporate sustainability.

The realities of a continued talent crunch and an ever-widening gap between the number of jobless and the number of skilled technical talent are driving more and more companies to making succession management a priority in their companies. "There is no logical reason not to practice succession planning," says Bill Bliss, an executive leadership development consultant to several public companies. If (corporate boards) don't demand that a plan is in place, the stockholders should fire the board."

Selfishness Poses a Roadblock

 

Bliss adds that in many privately held companies, he has seen numerous reasons for not having a succession management plan, including the fact that the CEO doesn't want to give up the reigns. "These CEOs don't appreciate that their life could end any minute, or they could suffer a permanent disability as a result of a freak accident, or a host of other reasons," he says. "This really points to selfishness on their part as they are not planning for the livelihood of so many other people who depend on the company they are leading--family, employees, customers, and other stakeholders." 

Second, the CEO and even his team are often too focused on short-term issues and not focused on longer term issues--again, this can be for selfish reasons.

A third reason Bliss has experienced: CEOs think about succession but rarely share the ideas with others. "This is not a great strategy, as the likely successor does not know the position they are in, nor is the CEO putting that person on an adequate development plan to get them fully ready," he says.

While the costs of avoiding succession management are significant, the rewards for companies that do practice succession management are even greater. Succession management can be incorporated into any size company from the smallest startup to large corporate giants.

Norbert Kubilus, former COO of National Data Corporation and now CIO at Tatum Partners in San Diego, credits succession management to his rise at his previous employer. And he's taken that lesson to heart in his professional roles. "As a CIO/CTO/COO, I've developed formal succession plans for my team," he says. "Some CIOs may feel threatened by the concept of CIO succession planning ... but developing one or more strong candidates demonstrates that the incumbent CIO is concerned about the continuity of IT leadership and about protecting the company's technology investment."

Succession management also preserves knowledge including intellectual property within a company. "With a lot of intellectual property inside people's heads these days it is important to preserve those heads via a good succession plan," says Manuel Mellos, director of IT at Woolworth's. "Succession planning may assist in extracting that intellectual property out of those heads as well."

Previously: Why Companies Don't Train IT Workers

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