Why CIO Succession Management Matters

By Gary Perman  |  Posted 04-13-2009

Why CIO Succession Management Matters

Succession management has been bantered about as a topic of interest in businesses and IT departments for several years. Recently, as the need for skilled talent has become more critical, there's been an increased interest among IT shops.

Succession management--defined as making provisions for replacing key people--requires a clear understanding of an organization's values and strategy. It also requires a proactive approach that ensures continuity by cultivating talent from within through planned development .

Companies that ignore the need for succession 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 enterprise.

• Promotions within a company leave a vacancy without a trained successor.

Still, 45 percent of companies with gross sales of more than $500 million do not have a clear succession plan, according to the National Association of Corporate Directors. Companies earning less than $500 million displayed even less planning. In startups and small companies, succession plans are nearly nonexistent.

See also: Characteristics of a Successful Succession Management Plan

Companies can experience tremendous financial losses when they're unprepared for a key employee's departure. Delays in finding a replacement are common. Due to the skilled labor shortages in technology, the time required to achieve successful replacement results has increased from three weeks to three months. During extended vacancies, projects are delayed, revenues go unrealized, accounts are lost, innovation gets sidetracked, patents fall by the wayside, overtime costs rise and employee morale drops.

Ensuring Sustainability

Ensuring Sustainability

If companies want to be effective at filling unplanned vacancies, they must commit to developing a detailed and progressive succession plan to ensure they have the future skills required for corporate sustainability.

"There is no logical reason not to practice succession planning," says Bill Bliss, an executive leadership development consultant to several publicly held companies. "A key area of accountability for any corporate board should be to mandate a viable succession plan for at least the CEO, if not the key leadership team. If they don't demand that a plan be in place, the stockholders should fire the board."

Bliss adds that many privately held companies have numerous reasons for not having a succession plan, including a CEO who resists giving up the reins. Those CEOs don't appreciate the fact that they or their deputies could die or suffer permanent injury at any moment. "This really points to selfishness on their part, as they are not planning for the livelihood of so many other people who depend on their company--family, employees, customers and other stakeholders," he says.

In addition, the CEO--and even his or her team--is often too focused on short-term issues rather than long-term planning, and that also involves some selfishness. Another problem Bliss has noticed is that some CEOs plan succession in their heads--but neglect to tell anyone else. That means the likely successor has no clue about his or her future and won't be properly prepared to take over the position.

While the costs of avoiding succession management are significant, the rewards of doing it properly are great. Succession management can be incorporated into any size company from the smallest startup to a large corporate giant.

Norbert Kubilus, former chief operating officer of National Data Corp. and now CIO at Tatum Partners in San Diego, credits much of his professional success to the grooming he received through succession plans. As an executive, he's worked to create similar plans for his teams, and he sees an enormous upside for IT leaders.

"Some CIOs may feel threatened by the concept of succession planning, but developing strong candidates demonstrates that the incumbent CIO is concerned about the continuity of IT leadership and about protecting the company's technology investment," Kubilus says. "Having a ready successor may also allow a CIO in a larger or growing enterprise to move into another executive role--without having to leave the company or leave the IT organization with weak leadership."

Succession management also preserves a company's knowledge, including intellectual property. "With a lot of intellectual property [residing] in people's heads, it is important to preserve those heads via a good succession plan," says Manuel Mellos, IT director at Woolworths. "Succession planning also may assist in 'extracting' that intellectual property out of those heads."

Sharing Best Practices

Sharing Best Practices

Savvy companies tend to share several common traits that make their succession plans work. First, their succession plans are easy to use. Successful plans are not bureaucratic. They are uncomplicated processes with a unified approach to ensure consistency and maintain objectivity across all departments, in all organizational levels and at all locations throughout the company.

The best plans are developmentally oriented--a proactive vehicle for managers to reflect on the progress of their talent and opportunities for further development--rather than simply replacement oriented. Highly effective plans actively involve the very top players in the organization.

Another successful method for candidate development includes planned job rotations within the IT department. For example, Kubilus says that senior directors can rotate through IT operations, application development, telecom and planning, as well as in functions like finance and administration, or in specific business units. Mentoring candidates in areas such as customer service, vendor management and contract negotiation also can help broaden their skill sets.

Best-practice succession plans are also effective at highlighting gaps in talent and identifying positions that are critical to the organization's success. Succession planning does the job of monitoring the succession process, enabling the company to ensure that the right people are moving into the right jobs at the right time and that gaps are being spotted early on.

Successful plans are built around continual reinvention. Best-practice companies continually refine and adjust their plans as they receive feedback, monitor developments in technology and learn from other leading organizations. Where old plans were characterized by confidentiality and secrecy, today's plans actually encourage involvement by participants, as well as candidates for future openings. Under older systems, few participants knew where they actually stood in terms of their potential for career opportunities.

Tim McHugh, CTO at TriMet, a public transportation service based in Portland, Ore., says he focuses on honing staffers' understanding of the business. When the IT department has vacancies, McHugh says that by developing its staff, existing IT people easily step into new positions, and then he can hire behind them.

He also attributes this internal development and succession management as key ingredients in TriMet's low turnover. "We try to hire people in at the less-experienced positions and develop them," McHugh says. "It provides for professional growth and builds more stable and durable institutional knowledge."

When someone retires from TriMet, McHugh and his team use the opportunity to address changes in technology. It's often the case, he says, that the retiring staffer is working with a technology that's nearing obsolescence. Phasing out an older technology using senior and developing staff working together provides a more effective succession management transition--and can be a rewarding project for someone nearing the end of his or her career. The transference of business knowledge from the experienced to the inexperienced tends to be more important than the technology transfer itself, he adds.

Retirement is not TriMet's highest risk, although it is the easiest to plan for. "The potential for key staff in support of our mission-critical areas to walk out the door unexpectedly is what we want to be mindful of," McHugh says. "We want to make sure we are properly staffed and are not short-handed on experience in these areas."

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