Evidently to have sustained growth every company needs a succession plan. But most managers and owners exhibit a kind of aversion to nurture talent, in advance for various reasons. Most public sector undertaking (PSUs) find it difficult to fill the top level vacancies in time, due to political interference. Internal policies like cadre based seniority (career progression can take place only within the respective cadre), approved manpower strength (a competent person may be denied promotion only because all the approved posts in the next grade are full), union agreement promotions are based on union agreements favoring seniority and reservation quotas, economically backward and weaker sections of society have also complicated the process of picking up to right time.
As a result many PSUs, banks and financial institutions remained headless in the past for a painfully long time. Due to rebellion from internal groups, Air India had to bring in the ex-chairman of a steel company (of course without any success) to run the show. The situation is no better in the private sector. When Thermax’s chief died suddenly his wife Anu Aga had to step in without any previous experience. Thermax had to pay a heavy penalty for not finding a suitable successor, in less than 5 years time, Thermax’s sales had fallen from 990.45 crore in 1996 to 185.88 crore in 2000.
Reasons for not having a succession plan:
The reasons for the temperamental aversion towards succession planning may be stated thus:
1) Why to commit the company to a CEO, selected years in advance he may create scare, abuse the power, pose a threat to other talented people; open up a second line of command and begin to create a powerful lobby for himself.
2) It is better to weed out all possible successors, so that (the present incumbent) can have a smooth run.
3) Nobody is really capable enough to take charge as yet. As long as ‘I am here’ there is no need to search for talent anywhere else.
More or less similar situation prevailed in most private sector companies where family members have been routinely crowned with top level positions for a fairly long time. In a family managed organization the joke was that managers came there vertically but went out horizontally (not leaving any room for others till they died). The situation in Thermax, for example was remedied only recently when Anu Aga suddenly decided to step down making way for professional managers at the top. Thanks to the competition from global giants many other private sector companies have realized the importance of professional managers at the top level. To this end, the CEO designate mostly sons and daughters are not only sent abroad for top class training but also made to undergo training at various levels within the organization (Apollo Hospitals, Dr Reddy Laboratories, Bajaj Auto etc).
Post liberalization of course many private sector companies have realized the importance of grooming bright stars well in advance internally (including the Tatas, the Birlas, Baja Auto, Ranbaxy and many others).
Succession management is an alternative approach developed in the 1990s and is used to examine existing managerial talent in light of future business needs and challenges. The basic purpose of succession management is to ensure that the right talent is available when needed and that appropriate development experiences are provided for higher level employees. It focuses on creating and stocking pools of candidates with high leadership potential. To this end, it may even track non- employees (for example employees of a competitor) whom the organization views as viable candidates should a position open up.