IT for Managers

Module -1

Foundation concepts

Foundations of information systems (IS) in business

Data and its attributes

Data is the collection of facts, which is unorganized but can be organized into useful information.
Data, in contrast, are streams of raw facts representing events occurring in organizations or the
physical environment before they have been organized and arranged into a form that people can understand
and use.
Information: Data which has been converted into a useful & meaningful form is information.
Information can be defined as data that has been converted into a meaningful and useful context for
specific end users. Data is usually not useful until subjected to a value added processes.
1) Its form is aggregated, manipulated and organized 2) Its content is analysed & evaluated 3) It is
placed in a proper context for a human user.

Data Process – is the execution of a systematic sequence of operations performed upon data to
transform it into information whereas a concept that covers both the traditional concept of processing
numeric & alphabetic & processing text images, is information processing.
Information Processing further emphasizes that the production of information products for users
should be focus of processing activities.

Attributes / quality / characteristics of information

1) Quality – It is quality / accuracy of information that makes the information system function properly.
If managers come to know that the information system is having error in it, they avoid using it.

2) Timelines – means that information is available when it is needed. Most managers function in a
dynamic environment of change, demanding updated and current information. Computerised
information system have the abilities to gather, sort, analyse, store & retrieve and transmit large
amount of information in a very short of time.

3) Completeness of information is the extent to which it is all there that is complete means information
that covers key issues and is sufficient to support the decision-making situation at hand without
critical omissions.

4) Relevance – Information relevance refers to the extent to which information is appropriate for the
decision making situation facing the manger. Extraneous information distracts the decision maker
from the assigned task and information overload frustrates the decision maker and impairs the
decision making process. Relevant information must pertain to the problems, decisions and
responsibilities of the recipient.
 Strategic
The level of people and Information Needs

Tactical

Operation
Three levels of management strategic, tactical and operational.
I. Strategic – al
1. Board of directors, executive committee of the CEO, Top Executive.
2. Develop overall organizational goals, strategies policies objectives of a strategic planning
process.
3. Monitor the strategic performance of the organization and its overall directorial in the
political, economic and competitive business environment.
II. Tactical –
1. Self-directed teams, business unit managers
2. Develop short & medium range plans, schedules, budgets specify the policies, procedures &
business objectives for their subunits of the organizations.
3. Allocate resources & monitor the performance of their organizational sub units including
departments, divisions process teams, project teams.
III. Operational –
1. Member of self-directed teams, operating manager.
2. Develop short range plans such as weekly production schedules.
3. Direct the use of resources & the performance of tasks according to procedures and within
budgets and schedules. They establish it for the teams and other groups of the organization.

Levels of Organization: An organization can be pictured as a three layered like as shown in Fig. In case of
manufacturing organization, the process are as below:

Top
Layer (3)

Middle Layer (2)

Bottom Layer (1)

 Layer 3: The non programmed (unstructured) decision-making process are found here that are required
to design &Top
redesign the entire system, to provide it with its basic goals & objectives and to monitor its
performance. Long term planning & strategic planning are needed.

Manage
Layer 2: The programmed/non-programmed (structured semistructured) decision making process, the
processes that govern the short term operations of the manufacturing and distribution system. Here tactical
ment
planning & management control are needed.

Layer 1: Here, the procure of raw materials, manufacture the physical product store them in warehouses and
ship it.

Middle
Information in organizational Functions

Manage
ment
cDevel

Financ

admin
Produ

opme

istrati
Syste

syste
Lower
ms

ve
ial

m
nt

,
Manage
ment
Information System Levels –
The four levels of information systems that exist in a typical business of moderate to large size.

Operational – At the operational level, known as functional level, routine production or clerical
Operatio
operations are performed. Operational level provide little feed back to employees. The records of
nal occurring at the operational level constitutes data, that when collected organized &
transaction
processed becomes the basis for high level management actions.

Manage
Lower Management – Performs supervisory function that are short-term relative to the higher level of
management.
ment
Ex: Day to day job schedule cross checking etc.

Middle Management – Functions are known to be tactical in nature. This level is responsible for
allocating & controlling resources necessary to accomplish the objectives that support the strategic
goals of the business.

Top Management – Functions are strategic. These include establishment of the goals of the business
long range planning, new market and product development, mergers and acquisitions and major
policy decisions. Appropriate authority is delegated to middle management.
The Horizontal integration is that occurs between finance & administrative is payroll system based on
employees related data elements common to both personnel payroll.

Vertical Integration – occurs as follows

Machine Assignment & job time reporting = functional
Machine scheduling – Supervisory
Make or buy –Middle management
New product – Top management

Strategic Planning is the process of deciding on objectives of the organization on changes in

these objectives and on the policies that are to govern the acquisitions use & disposition of these
resources.

Strategic
Planning

Management Control

Operational Control
 Management control is the process by which managers assure that these resources are obtained
and used effectively in the accomplishment of the organization’s objectives.

Operational Control is the process of assuring that specific tasks are carried out effectively and
efficiently.

Functions Levels Production Marketing Finance Personnel

Strategic Location of a Entering the Raising capital Deciding
Planning new factory export market issue of new changes required
shares in the structure
organization
Management Determining Media planning Determining Determining who
Control Product Mix for for advertising Maximum levels Will be promoted
a monthly expenditures of credit for to fill a vacant
production customers post
programme
Operational Scheduling Planning sales Decide what Determine which
Control specific jobs on contacts to be action to be of the workers
specific made by a sales taken against will be on each
machines during man in the default in shift
a shift immediate future payment by a
specific customer

System Concepts

What is a System?

A set of interrelated components With a clearly defined boundary Working together To achieve a common set of
objectives by accepting inputs and producing outputs In an organized transformation process

Basic Functions of a System

 Input Processing Output

Capturing and Transforma- Transferring

assembling tion process transformed
elements that converts input elements to
enter the into output their ultimate
system to be destination
processed

Cybernetic System

 All systems have input, processing, output

 A cybernetic system, a self-monitoring, self-regulating system, adds …

◦ Feedback… system performance data

◦ Control… monitoring and evaluating feedback to determine whether a system is moving

toward the achievement of its goal

A Cybernetic System

Information System
IS can be defined as a set of interrelated components that collect, process, store and distributed information
to support decision making and control in an organization. In addition to supporting decision making,
coordination and control, IS may also help managers and workers analyse problems, visualize problems,
visualize complex subjects and create new product

 IS can also be defined as a set of people, procedures & resources that collects, transforms and
dessiminates information in an organization. It is a system that accepts data resources as input and
process them into information products as output. This supports an organizations business strategies,
business processes and organizational structures & culture to increase the business value of the
enterprise in a dynamic business environment.

A Business as a System

Components of an IS

Information System Resources

 People Information
Information
System Resources
Hardware Networks
Software Data
People Resources

People are required for the operations of all IS. It include end users & IS specialists.

End users are also called as users or clients who use an IS or the information it produces. They
can be customers, sales persons engines, disks accountants or managers.

IS Specialists are people who develop and operate information systems. They include systems
analysts, software developers, system operators and other managerial technical and clerical IS
personnel.

Hardware Resources

The concept of hardware resources includes all physical devices and materials used in information
processing. It includes not only machines such as computers and other equipments but also all data
media.

Ex – Computer systems which consists of CPU containing micro processors and a variety of
interconnected peripheral devices.

Computer peripherals which consists of devices such as keyboard or electronic mouse for
Input of data and commands optical disks for storage of data resource.

Software Resources

The concept of software resources includes all sets of information processing instruction. This
generic concept of software includes not only the sets of operating instructions called programs
which direct and control computer hardware but also sets of information processing instructing called
procedures that people need. 

The two types of software are –

1. System Software – Operating system that provide control and support to the functions and
processes of computer system. 

2. Application software – such as payroll, sales analysis etc., comprise programs that direct the
processing of data into information for a particular use by the end user.

Data Resources
 Data are raw facts and figures that are unorganized and later processed to generate information. The
concept of data resources has been broadened by managers and IS professionals. They realize that
data constitute valuable original resources. Thus data resources must be managed effectively to
benefit all end users in an organization.

Network Resources

– Telecommunications technologies and network like internet, intranet and extranets have become
essential to the successful electronic business and commerce operations of all types of organizations
and their computer based IS. Networks are a fundamental resource component of all IS. It include –

1) Communication media 2) Network Support

Input of Data Resources

Data about business transactions and other events must be captured and prepared for
processing by input activity. Input typically takes the form of data entry activities such as recording&
editing.

Ex: Paper sales order forms. 

Processing of Data into Information

Data are subjected to processing activities such as calculating sorting, comparing classifying
and summarizing. These activities organize, analyse and manipulate data, thus converting them into
information for end users.

Ex – added to a running total of sales results compared sorted etc. 

Output of Information Products –

Information in various forms is transmitted to end users and made available to them in the
output activity. This include messages, reports which may be provided by video displays, audio
responses, multimedia.

Storage of Data Resource –

Storage is a basic system components of information systems. Storage is the information

system activity in which data and information are retained in an organized manner for later use.

Ex – Words, Sentences.

Control of system Performance –

An important information system activity is the control of its performance. IS should

produce feedback about its input, processing, output and storage activities. This feedback must be
monitored and evaluated to determine if the system is meeting established performance standards.
 For example - A manager may discover that subtotals of sales amounts in a sales report do
not add upto total sales.

Fundamental roles of IS applications in business

Support Business Processes and operations: As a consumer, you regularly encounter information systems that
support the business processes and operations at the many retail stores where you shop.

For example, most retail stores now uses computer based information systems to help them record customer
purchases, keep track of inventory, pay employees, buy new merchandise, and evaluate sales trends. Store operation
would grind to a halt without the support of such information systems.

Support Decision Making: Information systems also help store managers and other business professionals make
better decisions for example, decisions on what lines of merchandise need to be added or discontinued, or on what
kind of investment they require, are typically made after an analysis provided by computers-based information
systems. This is not only supports the decision making of stores managers, buyers and others, but also help them look
for ways to gain an advantage over other retailers in the competition for customers.

Support Strategies for Competitive Advantage : Gaining a strategic advantage over competitors requires innovative
application of information technologies. For example, store management might make a decision to install touch –
screen kiosks in all of their stores, with links to their e- commerce website for online shopping. This might attract new
customers and build customer loyalty because of the ease of shopping and buying merchandise provided by such
information systems. Thus, strategies information systems can help provide products and services that give a business
a comparative advantage over its competitors

Trends in Information Systems

Until the 1990’s the role of the most information systems were transactions processing, record
keeping, accounting and other electronic data processing(EDP) applications. Ten another role of was
added as the concept of management information systems(MIS) was conceived. This new role
focused on developing business application that provided managerial end users with predefined
management reports that would give managers the information they needed for decision – making
purposes.

By the 1970s, it eas evident that the prescribed information products produced by such MIS were not
adeguately meeting many of the decision – making needs of management. So the concept of decision
making needs

Strategic Planning is the process of deciding on objectives of the organization on changes in these
objectives and on the policies that are to govern the acquisitions use & disposition of these resources.
 Strategic
Planning

Management Control

Operational Control

Management control is the process by which managers assure that these resources are obtained
and used effectively in the accomplishment of the organization’s objectives.

Operational Control is the process of assuring that specific tasks are carried out effectively and
efficiently.

Functions Levels Production Marketing Finance Personnel

Strategic Location of a Entering the Raising capital Deciding
Planning new factory export market issue of new changes required
shares in the structure
organization
Management Determining Media planning Determining Determining who
Control Product Mix for for advertising Maximum levels Will be promoted
a monthly expenditures of credit for to fill a vacant
production customers post
programme
Operational Scheduling Planning sales Decide what Determine which
Control specific jobs on contacts to be action to be of the workers
specific made by a sales taken against will be on each
machines during man in the default in shift
a shift immediate future payment by a
specific customer

Types of Information Systems

Categorization of information on the basis of nature & characteristics

Information system

Support of
Operational Support Business Support of
System Operation Managerial Managerial
Support system
 Decision
Making

Transaction Process Enterprise Management Decision Executive

Processing control Collaborati Information Support System Support
system System on System System (MIS) (DSS) System (ESS)

To process To control Team & Work Prespecified Interactive Information

Business Industrial group Reporting to Decision tailored
Transactions Process collaboration Managers Support to executive

The Information system is broadly classified into

Operational Support system (OSS)

The IS needed to process data generated by and used in business operations are OSS. OSS
collects, process and stores data generated by the operation systems of an organizations and produces data
and information for Input into a management information system or for the control of an operation system.

a) Transaction Processing systems – is an important example of operations support systems that record
and process data resulting from business transactions.
b) Process Control systems – Monitor & control physical processes.
c) Enterprise Collaboration System – Enhances team & work group communications & productivity &
are called office automation system (OAS). Ex- Using electronic mail to send & receive electronic
message.

2) Management Support System (MSS)

Providing information and support for effective decision making by all types of managers and
business professional is a difficult task and applications when it is focused on the above are
called MSS. It provides information to support managerial decision making.
a) Management Information System – Provides information in the forms of reports and displays to
manages and many business professional to support decision making.
b) Decision Support System – Provides interactive and adhoc support for the decision making processes
of manages and other business professionals.
c) Executive Information System – Executive Support System provides critical information from many
sources tailored to the information needs of executives.

Effective succession planning

ARTICLE | Professor Victor Callan for TAFE NSW ICVET

Failing to plan
 There is an old adage, “Failing to plan is planning to fail”. Like any other organisation that wants to thrive and
compete, a training organisation must have plans in place so that the right people are in the right place at the right
time to achieve successful organisational outcomes. The purpose of this short review is to provide an explanation of
succession planning, to discuss its relationship to building capabilities that ensure the continued ability of an
organisation to compete and to grow, and to provide some practical tips.

Being proactive or reactive

There are significant demographic changes facing Australian training organisations. Numerous reports, for example,
have detailed the ageing of the Vocational Education and Training (VET) workforce in Australia, the increased use of
part-time and casual staff, and the challenges of attracting and retaining younger generations to replace retiring staff
1.

The new reality is that a deep bench of talent is the most important asset if organisations want to operate
successfully into the future. Those training organisations that will move from being good to great over the next
decade will be those that have put in place effective succession planning. Those that choose not to plan will most
likely continue to adopt very reactive approaches that rely overwhelmingly on outside hiring. They are most at risk of
failing to replace talented staff in a period of increasingly large skills shortages.

As numerous reports show, the more innovative of our VET organisations are already very much2 :

Engaged in planning around the types of people and the capabilities that will be required to meet the needs of the
increasingly diverse training market

Challenging traditional views about who can be the leaders

Identifying and resolving blockages that are preventing staff from more diverse backgrounds from aspiring to higher
positions of responsibility

Incorporating into their approach to talent management, the more specific challenge of effective succession planning
around key roles and responsibilities

Employing a wide range of developmental opportunities to support their talent through on-the-job experiences,
challenging assignments, 360 degree assessments, and opportunities to be involved in new forms of partnering with
industry.

Succession planning
 The practice of succession planning has been around for hundreds of years. Its roots exist in the dilemmas of
managing transitions of power in royal families and in business dynasties. In organisations succession planning is
about building pools of candidates who possess critical capabilities that are required to meet the short and longer
term objectives of the organisation. Effective succession planning is a form of future proofing. It assists the enterprise
to adopt and sustain specific strategic positions into the future that will allow the achievement of its vision, goals and
specific objectives. Succession planning involves a projection of future needs in terms of the capabilities that staff will
need to have to fill key positions that support the business.

In the past, most of this planning centred upon key management and leadership roles. Today succession planning is
focused not only upon filling the most senior positions, but also upon developing leaders, managers and team leaders
at all levels. This new positioning of succession planning reflects the move away from leadership development being
a discrete activity to leadership development being more about building a culture of leaders throughout the
organisation.

Evidence about the impact of succession planning

The majority of reviews about the impact of effective succession planning are anecdotal reports or the experiences of
very large corporations. There is not a lot of evidence-based research. However, in a recent review into the practice
and art of succession planning, Andrew Garman and Jeremy Glawe brought together over 150 research papers to
address a number of key questions3 . On the question should succession planning be done, they found that the most
compelling evidence was at the executive level when the CEO “gets hit by the proverbial bus”. In these cases,
organisations fared much better if they could immediately name an internal successor.

This same review also revealed that organisations with a reputation for excellence in their management of talent and
succession planning gave higher returns to their shareholders than their industries’ average.

That is, major stakeholders today (i.e. governments, customers, industry partners) expect businesses and
organisations to have a plan in place that covers the replacement of its senior leaders.

Some practical tips in planning for succession

A priority of the senior leaders. Senior leaders must be actively committed to and involved in the process of
succession management. They need to convey that succession management is a key organisational priority and one
that requires collaboration across the organisation. With this high level of commitment in place, lower level
managers can challenge built-in rigidities and biases that might turn talent away. In addition, senior leaders need to
accept responsibility for creating a succession culture or a culture of leadership. In these environments, the thinking
and planning around succession planning and talent management is not just the purview of the CEO. The task of
succession planning becomes a partnership between the senior executive group, senior and middle managers and
supervisors in identifying, nurturing and retaining this talent.

Fundamental to effective succession planning is a healthy and robust performance management system that
manages the expectations of all employees who aspire to higher positions. It needs to be used well to judge, identify
and to build the capabilities of top performers.

Succession planning as a strategic activity. It is important to link succession planning to the organisation’s long-term
strategic plans. Strategic planning identifies the capabilities required by the organisation and its staff to achieve its
objectives. Strategic plans should inform future needs around staffing, and in turn identify required capabilities,
career progression, promotion processes, and the strategies being used on and off-the-job to grow talent.

Capability pathways. The VET sector has been developing Management and Leadership Capability Frameworks that
define the capabilities required for now and into the future. A number of VET publications provide examples of such
capability frameworks that can support the activities around succession planning 4. These frameworks do provide
“capability pathways” that can help staff to know what knowledge, skills and experiences are needed if they are to
move into more senior and challenging roles in VET. These capability frameworks, as well as the feedback provided
through performance reviews, provide important opportunities for honest conversations with staff about their future
within the organisation and the training sector.

Succession planning requires a major re-think about who could be future leaders at all levels of the training
organisation.

Review opinions about who can lead. Effective succession planning really requires VET organisations to throw away
the book about the type of people that they see as potential leaders. More training organisations need to review,
challenge and update their definitions of leadership and to develop succession and workforce plans that attract,
recruit, select, train and advance those individuals with the skills most aligned with current realities. This re-thinking
especially needs to recognise the utility of greater diversity in the VET leadership pipeline.

Effective succession planning can provide better pathways for more people to lead at younger ages than they do at
present, for more women to be in key leadership positions, and for more individuals with non-VET experiences to join
the sector in key positions of responsibility. Assumptions need to be challenged around the commonly-held view that
outsiders to VET cannot perform as well as insiders due to what are seen as almost insurmountable challenges in
learning about the complexities of VET.
Be able to make a case for the need to succession plan. If you are managing staff that you think have the talent to
lead in the future, and want to get access to a budget to develop them, mount a business case to more senior
managers. For example, to gain entry into new training markets, VET organisations need to promote into leadership
roles those employees who are more similar to existing or targeted clients. Also influential is what might be called
the integration, learning and innovation case. That is, a training organisation that has more diversity in its leadership
group (e.g. around the gender, generational, cultural and industry backgrounds of its leaders) should demonstrate
more creativity and innovation around its purpose, strategic direction, core business, and potential opportunities for
growth.

Seek transparency. There is evidence from best practice, as well as from research, that the succession process needs
to be as transparent as possible5 . In particular, this requires good communications, clear policy and numerous
opportunities for the succession planning process to be reviewed to assist its continued development. If an
organisation is not open to regular review, for example, succession planning can come to be seen as a highly political
process. One symptom is when the views of individual managers around the capabilities of their staff are frequently
at odds with advice from other sources. This is where the organisation needs to clearly define and communicate the
standards of performance. In addition, through job rotations, special assignments and leadership and management
development programs talented staff can be judged by a wider group of senior staff, as well as by their peers, around
their potential to lead.

There are related concerns around the use of terms such as high potentials, leaders of the future, acceleration pools,
and the Top 100. Most recommendations around getting the right selection process in place cite the need to develop
formal criteria, to use multiple methods for selection, and to provide managers with the training and skills to identify
those who might become part of the talent management and succession planning programs.

Watch out for too much process. Another risk that needs to be managed is that the succession planning processes
can become an administrative nightmare. Succession planning in larger organisations can take on many dinosaur-like
qualities, moving too slowly to identify, support and to build the pool of successors. Effective succession planning has
to move along at pace to ensure that the right people are in the right place at the right time.

Conclusion

In summary, succession planning has broadened its focus. It is more than just about replacing the CEO. As a strategic
endeavour, succession planning is an integral part of talent management in today’s organisations. For the reader
interested in more in-depth treatments, the following texts explore succession planning processes, systems, and
specific cases. These include:

Byham, W.C., Smith, A.B., & Paese, M.J. (2002). Grow your own leaders: How to identify, develop and retain
leadership talent. New York: Prentice-Hall.
Charan, R. (2008) Leaders at all levels: Deepening your talent pool to solve the succession crisis. San Francisco:
Jossey-Bass.

McCall, M.W. (1998). High flyers: Developing the next generation of leaders. Boston: Harvard Business School Press.

To gain a more Australian public sector examination of the merits of succession planning, as well as case studies of
good practice, look at:

http://www.apsc.gov.au/# which is the site of Australian Public Service Commission. The site provides access to
special publications relevant to succession planning, public sector cases, and access to various capability frameworks
around its Integrated Leadership System.

http://www.apsc.gov.au/publications03/managingsuccession.pdf . This paper titled ‘Managing succession” reports

on research undertaken by the Australian Public Service Commission, and provides many insights into best practice in
succession planning.

http://www.apsc.gov.au/publications08/leadingproductivepeople.pdf, has the publication titled “Leading productive

people: A manager’s seven steps to success.” This report has been developed to help new managers build their
people management skills. It identifies the essential steps and best approaches that managers can take to build the
productivity and effectiveness of their people.

http://www.apsc.gov.au/publications01/indigenousrecruitment.pdf provides the booklet titled “Recruitment of

Indigenous Australians in the Australian public service”. It covers the legal framework that applies to the recruitment
and development of Indigenous Australians, as well as providing ideas regarding strategies that organisations might
adopt and develop.

Reference

1 Dickie, M., Eccles, C., FitzGerald, I., McDonald, R., Cully, M., Blythe, A., Stanwick, J. & Brooks, L. (2004) Enhancing
the capability of VET professionals project: Final report. Brisbane: NCVER.

2 Callan, V.J. (2004) Building innovative VET organisations. Adelaide: NCVER; Mitchell, J., Clayton, B., Hedberg, J. &
Paine, N. (2003) Emerging futures: Innovation in teaching and learning in VET. A report on current practice.
Melbourne: ANTA.

3 Garman, A. & Glawe, J. (2004) Succession planning. Consulting Psychology Journal: Practice and Research, 56, 2,
pp. 119-128.
4 Callan, V.J., Mitchell, J., Clayton, B. & Smith, L. (2007) Approaches for sustaining and building management and
leadership capability in VET providers. Adelaide: NCVER.

5 Conger, J.A. & Fulmer, R.M. (2003) Developing your leadership pipeline. Harvard Business Review, 81, pp. 76-85.

rc.queensu.ca/articles/success-through-succession-review-recent-literature

Success through Succession: A Review of Recent Literature

Brendan Sweeney, Queen's IRC Post-Doctoral Fellow

Publication date: January, 2013

Tags: Training HR Professionals, Recruitment and Retention, Strategic Workforce Planning

In November 2012, Queen's IRC launched a new program, Succession Planning, to an enthusiastic group of
practitioners in Calgary. As an ice-breaking exercise, Queen's IRC Director, Paul Juniper, asked participants to discuss
their organizations' plans in the event of a sudden loss of key leadership. While the discussion and ideas that came
out of this exercise were stimulating and informative, they also confirmed two trends widely noted by practitioners,
academics, and policy-makers alike. First, succession planning is increasingly critical to organizations of all sizes and in
all industries or sectors. Second, most organizations have given succession planning some thought, but have yet to
fully develop and implement an effective plan for the inevitable succession of managers and key employees at all
levels.

This research brief complements the IRC's recent focus on succession planning. It does this by providing an overview
of contemporary academic perspectives on the need for effective succession plans. This review provides a helpful
tool for practitioners and organizations seeking to develop, implement, maintain, or augment a succession plan that
meets their organization's specific needs. It includes an overview of effective elements in organizational succession
plans, issues related to the succession of key leaders, the transfer of knowledge through succession planning,
succession planning relative to the size of an organization, and succession planning in three components of the public
sector (municipal administration, education, and health care).

Succession planning can be defined as a "systemic, long-term process of determining goals, needs, and roles within
an organization and preparing individuals or employee groups for responsibilities relative to work needed within an
organization" (Luna, 2012, p. 60). Succession planning was initially conceived of as a risk management strategy
designed to mitigate the loss of key leaders in large organizations (Rothwell, 2010). Over time, however, succession
planning has evolved into much more than this. Today, succession planning serves as a tool to manage knowledge
and change, develop leadership capacity, build smart teams, and retain and deploy talent in a manner that helps an
organization operate to its greatest potential (Groves, 2003). Doing so is increasingly important for several reasons.
First, as Fink (2010) notes, individuals are becoming more and more strategic in their own career development and
job searches. It is, therefore, increasingly important that organizations follow suit and develop strategies to ensure
that they are able to attract and retain talent. Second, the complex nature of work and business in both the private
and public sectors means that organizations cannot rely on the serendipitous replacement of talent, nor can they
expect to have a pool of willing and qualified candidates ready and waiting, even during a recession (Fink & Brayman,
2006; Zepeda et al., 2012). Organizations must be proactive in identifying and developing qualified talent that can be
called upon during both expected and unplanned succession events. Third, and importantly, planning for succession
is necessary to maintain and develop knowledge and talent in a volatile political economy marked by international
competition and the omnipresent need to be cost effective (Griffiths, 2012). By effectively planning for succession,
organizations can realize cost savings and achieve the synergies necessary to thrive within the rapidly evolving
contexts in which they operate. Finally, effective succession planning instills confidence in the employees of an
organization (Bolt, 1989) and improves buy-in to the organization's culture (Clunies, 2007). These are critical
components not only of the successful operation of an organization on a day-to-day basis, but of the longer-term
satisfaction and retention of employees.

Developing effective succession plans is also critical considering current demographic and economic trends. Many
large companies and public sector organizations will face a dramatic turnover of key leaders in the next decade, as
the 'baby boomers' (those born between 1945 and 1964) withdraw from the workforce en masse (Appelbaum et al.,
2012). Ensuring that the wealth of knowledge accrued by this generation is transferred to younger generations—who
will inevitably assume key leadership roles—with minimal impact on productivity is of the utmost importance.
Moreover, the recent recession has exacerbated these challenges, as senior managers have delayed retirement in
light of economic insecurity and the relaxation of mandatory retirement legislations (Luna, 2012; Masterson, 2011).
This has prolonged managerial tenure in the short-term, while disrupting the leadership pipeline in the long-term
(Leland et al., 2012). Without an effective plan for succession alongside increased retirements, organizations are
likely to face crises in leadership. One consequence of this is that there may eventually be more urgency to select and
develop managers from a smaller pool of applicants and with a steeper learning curve. Organizations are also more
likely to face an increased frequency of succession events and leadership vacuums, which are fraught with risk and
tend to lead to reactive (rather than proactive) decisions (Leland et al., 2012). Considering all of these factors, it is
increasingly important to develop an effective succession plan sooner rather than later, and it is never too late to get
started.

Elements of Effective Succession Plans

It is necessary to distinguish between a succession plan and an effective succession plan. Moreover, it is absolutely
critical to understand the barriers to developing and implementing an effective succession plan. These barriers
include (but are by no means limited to): organizational culture, low ascribed priority from top management and key
leaders, insufficient resources for development and implementation, inadequate rewards (or a lack of understanding
of the often hard-to-measure benefits of succession planning), 'siloed' employee groups and limited intra-
organizational mobility or opportunity, a lack of role models or framework plans to provide a point of reference, and
intensified competition for talent and leadership from other sectors or organizations (NAPA, 1997). Organizational
complexity and both intra- and extra-organizational politics may also act as barriers to effective succession planning
(Leland et al., 2012). In short, giving consideration to these barriers and their impacts is an imperative step in
developing an effective succession plan.

A great deal of literature outlines the key aspects of an effective succession plan. Perhaps the most critical
overarching requirement of any succession plan is that it is proactive and designed as part of an organization's
broader strategic plan (Rothwell, 2010). More specifically, effective succession plans should be prepared earlier
rather than later, include adequate time for preparation on the behalf of all parties involved, be incorporated
alongside all other improvement or restructuring plans, outline the roles and responsibilities of all parties (not just
top management), give adequate consideration to present and anticipated needs, and be transparently linked to
necessary standards and competencies (Hargreaves & Fink, 2006). Furthermore, the most effective plans pay close
attention to managerial and leadership development at all levels of the organization, receive ongoing commitment
from top management, are well communicated throughout the organization, dictated by organizational strategy,
and, importantly, incorporated into recruitment, selection, retention, and development mechanisms (Reid &
Gilmour, 2009). Continuity is also crucial; it is not unknown for a well-designed succession plan to exist on paper only
to fade away after facing initial challenges, or more commonly, to be only partially or unevenly implemented (Charan,
2008).

It is also necessary to design a succession plan that accurately reflects the needs of an individual organization. In
particular, the size of the company and their expected growth rate are important considerations when designing
effective succession plans (Zepeda et al., 2012). For example, a highly rigid and formalized succession plan may be
inconsistent with the needs of smaller employers, especially those with few formal leadership positions and those
that thrive on flexibility. Rather, a plan focused on the diffusion of knowledge—both codified and tacit—throughout
the organization may be most effective. Conversely, larger organizations and those that expect a moderate to high
rate of growth or expansion in the immediate future may find more benefit in defining the skills and knowledge
necessary to achieve success in specific roles in order to identify individual employees who may be willing and able to
assume those roles. Moreover, private sector organizations tend to concern themselves more with planning for the
succession of top management (Pissari et al., 2010), while public sector organizations—which often have well-defined
job ladders and organizational designs—emphasize promotion from within at all levels as a means to develop and
retain talent (Reilly, 2008).

Succession Planning and Key Leaders

The succession of senior management—namely the CEO—is the focus of a significant proportion of research on
succession planning. One of the primary questions in this regard surrounds the decision to hire CEOs internally or
through an external search, and their immediate impact on strategic change and organizational performance
(Hutzshcenreuter et al., 2012). Each has advantages and disadvantages. Appointing a CEO from outside the
organization is generally perceived to be prudent when a significant change in organizational strategy is necessary.
Not only does a successor from outside the organization bring new perspectives, he or she is also devoid of social ties
and other 'baggage' (Kesner & Dalton, 1994). However, outside succession often results in greater turnover of other
members of the executive team than inside succession. Executives may feel demoralized for being passed over in
favour of an outsider (Helmich & Brown, 1972) or loyalty to the predecessor may cause them to resign (Friedman &
Saul, 1991). New leaders may also feel pressured to make changes simply as a means to demonstrate their authority.
In so doing, they may reverse or restructure potentially productive decisions made by their predecessor, or reorient
firm strategy in a manner consistent with their own experience rather than with the needs of the organization
(Weisbach, 1995). Furthermore, it is widely noted that an organization can only digest a certain amount of change at
once. If a succession event that results in the appointment of an external CEO comes during or immediately following
a significant amount of change or restructuring, his or her ability to positively affect or implement new changes will
be limited (Hutzschenreuter et al., 2012).

Internal candidates are often perceived to be the best choice in the succession of a CEO in organizations that are
highly complex, multi-divisional, and international (see Conger & Fulmer, 2003). Not surprisingly, they are also
thought to be a relatively safe choice for firms that are generally satisfied with their strategic direction and those that
are interested in seeing through the development and implementation of a strategic plan already underway.
However, internally-promoted CEOs have a diminished capacity to exercise real change to organizational strategy in
the short-term (Bigley & Wiersema, 2002). The promotion of 'heir apparent' or pre-determined candidates may also
be viewed as ineffective favoritism (Ibarra, 2005), especially in cases where the successor had a close personal
relationship with the predecessor, and in the public sector (Luna, 2012).

Succession Planning and Knowledge Transfer

Succession planning is an extremely useful tool to help manage the transfer and diffusion of knowledge within an
organization. Knowledge, both tacit and codified, is one of the most important sources of competitive advantage in
contemporary organizations (Pfeffer, 1998). Additionally, succession planning can be used as a means to generate
knowledge in order to achieve cost and operational efficiencies (Peet, 2012). Several research projects examine
innovative ways to access, transfer, and generate knowledge within organizations in a number of different contexts.
Not surprisingly, the potential loss of knowledge via retirement is of great concern, particularly in the private sector.

Koc-Menard (2009) suggests phased or flexible retirement arrangements, as well as corporate alumni networks to
help manage knowledge. Appelbaum et al. (2012b) describe the value in providing training to senior leaders with
plans to retire in the next five years. They note that training should not necessarily be directed to the acquisition of
hard skills or competencies, but rather, should focus on soft skills related to public speaking, teaching, and multi-
generational communication strategies. Senior leaders could then be tasked with running training, learning, and
mentoring sessions for potential successors, concomitantly transferring, and generating knowledge while maintaining
high levels of motivation and affirmation. Peet (2012) examines in detail the innovative practice of generative
knowledge interviewing (GKI). The GKI process involves experiential-based or story-telling interviews between
potential successors and senior leaders. The potential successor, or interviewer, attempts to "dwell within" the
narrative of the senior leader being interviewed in a manner that allows them to document and verify the core
capacities and key knowledge necessary to perform the tasks of the interviewee (p. 49). Peet also suggests that the
GKI is best conducted on an ongoing (yet finite) basis. In one instance central to her research, she found that the GKI
process resulted in immediate savings and benefits as a result of a better organizational understanding of the
knowledge and capacities required for success in individual roles.
Succession Planning and Organization Size

The larger and more complex an organization is, the more essential it is to have an effective succession plan. Firms
that fit this description are likely to incur greater costs when external candidates assume key leadership positions
(Naveen, 2006). This is due not only to the resources directed to the job competition, but more importantly, to the
high costs associated with the transfer of organization-specific knowledge to the successor. In these cases, an
effective succession plan should meet several criteria (Conger & Fulmer, 2003). First, responsibility and commitment
to the plan must be assumed not only by HR professionals and the executive team, but by local unit and division
managers, and everyone in between. Without active commitment from top management and regular measurement
of progress and process by HR, unit leaders may see more value in hiding or hoarding those with the most potential.

On the other hand, an effective succession plan encourages unit or division managers to identify potential high
performers and leaders, knowing that apparent successors exist in the event that key local personnel or promoted.
Moreover, large organizations are likely to find value in developing a succession plan that identifies 'linchpin'
positions or roles that are at once critical to the organization and provide managers with exposure to multiple facets
of the business, that focuses on the development of broadly-conceived skill sets through job rotation and mentoring,
and that is flexible enough to meet the needs of a dynamic business environment. For example, Conger and Fulmer
(2003) note that of the best practice companies involved in their study (Bank of America, Dow Chemical, and Eli Lilly),
none expected their current plan to exist for more than one year without modification or revision.

Succession planning is also particularly important in small manufacturing enterprises, family-owned businesses, and
the increasing number of highly specialized organizations that provide support for larger, coordinating firms (as
examples, these organizations are particularly prevalent in Canada's mining and energy sectors). For many of these
firms, the loss of key individuals would jeopardize profitability or even the ability of the organization to continue
operating. Smaller firms may also lack the flexibility and buying power of larger organizations, and are often unable
to offer equally competitive wage and benefit packages or opportunities for advancement (O'Gorman, 2006).
Moreover, in an era where profit margins are often razor thin, the owners and managers of smaller firms are unlikely
to have the time to develop and implement a comprehensive succession plan. However, some type of succession
planning remains important for smaller organizations, especially considering the aging workforce and skill shortages
in several critical areas (Burke, 2011).

When planning for succession in smaller organizations, it is crucial to understand succession as a series of change
processes over time, rather than a singular event (Bjomberg & Nicholson, 2012). Successors may be identified earlier
and more explicitly, and may be afforded more control and autonomy than in larger organizations with more and
more highly specific roles to fill. The succession process may therefore take place over a number of years and
through a number of stages (Chrisman et al., 1998). This permits the development of critical skills under the watchful
eye of more experienced owners and managers.

Succession Planning in the Public Sector

Municipal Administration
Succession planning in municipal administration has several particularities. The most notable of these is the fact that
even in the most stable municipal governments, there is regular turnover in key leaders (Leland et al., 2012).
Therefore, it is often beyond the mandate of elected leaders to plan for succession, as it may be outside their scope
of work. Furthermore, successors may seek to implement initiatives that are wildly different than their predecessors,
which may lead to succession plans that are ultimately scrapped and that constitute an inefficient use of scarce
resources. Fiscal constraints and calls for austerity have also created a situation that limits the time that HR
professionals can spend planning for succession, as they are generally and rightfully more concerned with fulfilling
immediate, day-to-day obligations, than planning for an uncertain future. The shroud of politics is also a major
consideration in municipalities, especially when promotions and advancement are considered. Research by Jarell and
Pewitt (2007) suggests several courses of action and considerations for those seeking to plan for succession in
municipalities. First, they note that managers can insulate themselves from the vagaries of politics by using outside
consultants to provide objective assistance in developing a plan. They also note that having frank and open
conversations about retirement—especially with older managers—is increasingly important to effective succession
planning in municipal administration.

Education

Challenges in succession planning in both K-12 and post-secondary education are widely documented (Luna, 2012;
Sweeney, 2012; Wallin, 2007; Zepeda et al., 2012). In both instances, researchers discuss how the role of educational
leaders—including public school principals, school boards directors and superintendents, and university department
heads and senior administrators—are increasingly complex and less desirable to preferred candidates. Compounding
this is the fact that the majority of educators entered the profession to work as such, and do not necessarily possess
the willingness or formal training that meet the needs of today's education institutions. At the same time,
educational leaders are being recognized as increasingly integral to a sector confronting calls for reform and
restructuring from multiple fronts. Greater consideration for effective succession planning in education is therefore
critical. However, doing so has proven difficult for several systemic and political reasons, including those mentioned
above, as well as the public perception that time and resources spent on anything but the direct delivery of
educational services constitutes administrative bloat and an irresponsible use of tax dollars (Greene et al, 2010).
Public education institutions also lack the flexibility of private businesses in recruiting and hiring leaders and senior
administrators, and are generally required to be more transparent and compliant with equal opportunity hiring
practices (Zepeda et al., 2012). They also have relatively high rates of succession events, which can be disruptive or at
best distracting when done on an ad hoc basis (Wahlstrom et al., 2010).

What, then, can be done to improve succession planning in the education sector? Identifying successors for
educational leadership positions tends to be taken on by individual champions rather than by institutions as a whole
(Caldwell, 2007). This, however, does not constitute a long-term solution to the challenges facing the sector. In public
education, where several well-defined levels of management exist, it is important to engage in succession planning at
all levels. Also important is a need to understand the complex labour relations climate in public education, where
teachers are unionized almost exclusively and where union density among support staff is much higher than average.
Demystifying and providing support for successors in this aspect of education may help increase the pool of willing
successors. In short, an effective succession plan in the education sector can create a better informed and more
qualified employee base that understands the needs of the organization and demonstrate a greater willingness to
take on leadership roles (Wallin, 2007).

Health Care

Skill and worker shortages as a result of improper succession planning can result in inadequate staffing and poor
performance in all aspects of the delivery of health services; something that is increasingly essential to an aging
Canadian population. In particular, evidence demonstrates that effective succession planning and the quality of care
in nursing are inextricably linked (Needleman et al., 2012). However, one of the most pressing challenges facing
health care practitioners—particularly in hospital settings—is maintaining adequate leadership. According to Griffiths
(2012), the most important step in addressing leadership shortcomings in health care is to actively recruit employees
with demonstrated leadership ability, and to foster that ability from the outset. Moreover, the vast majority of health
care practitioners have strong educational backgrounds, often with a focus on problem-solving and group learning
techniques. In a study of succession planning at the world-class University of Pittsburgh Medical Centre, Wolf et al.
(2006) found a multi-faceted plan that incorporates the identification of different types of leaders (e.g. operational,
strategic), ongoing employee self-assessments of competencies, and mechanisms to identify competency and
leadership gaps throughout the organization. Not only did this plan improve general performance and morale within
this large hospital, but led to an initial return on investment of $500,000 in the first year, and a projected savings of
$38,000,000 in the long term!

Conclusion

This literature review provides an overview of several key areas of research related to succession planning. What is
most evident is that there is significant value in developing and implementing succession plans, so long as care is
taken to ensure the plan fits the organizational context. Factors such as organizational structure and design,
workforce demographics, firm size, and sector are important considerations in developing and implementing an
effective and sustainable succession plan. The capture and transfer of important tacit knowledge related to the
organization and its individual roles are also an important aspect of succession planning and the focus of a great deal
of research. By engaging with succession planning as a tool for knowledge management, organizations can not only
retain the expertise of key employees, but actually build upon it to create value, cost efficiencies, and improved
employee morale.

About the Author

Brendan Sweeney

Dr. Brendan Sweeney has over ten years of experience teaching and researching labour relations in Canada and the
US, with a particular emphasis on the forest industry and public education. In addition to Queen's, Brendan has
experience working and teaching at McMaster University, the University of Washington, and the University of
Manitoba. Brendan's research has been widely recognized, and he has received several awards, including a Fulbright
Fellowship, the Labor and Employment Relations' Association's 2012 Best Paper Award, the University of Manitoba
Teaching Excellence Award, and the Canadian Association of Geographers' 2010 New Scholar Award for Excellence in
Publication. Brendan's research is featured or forthcoming in almost a dozen high-profile academic journals.

Brendan also has extensive experience as a high-performance athlete and coach. In addition to a distinguished
collegiate lacrosse career, Brendan has coached men's and women's lacrosse at Queen's (earning the 2005 OUA
Coach of the Year Award) and women's lacrosse at the University of Washington. He currently coaches both the
men's and women's lacrosse teams at McMaster and the Burlington Chiefs Sr. A. women's lacrosse club. He also
received his high-performance coaching certification from the NCCP in May 2012.

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1. PROJECT ON Succession Planning In Senior Management SUBMITTED BY:- POOJA SONI MBA 1ST Year( PG II)

2. CERTIFICATE This is to certify that the project work “Succession Planning In Senior Management” is a bona fide
record of work done by Pooja Soni under guidance of Ms. Avjeet Kaur in partial fulfillment of the requirements for
the project. Ms. Avjeet Kaur (Project Coordinator) K. R. Mangalam

3. ACKNOWLEDGEMENTS I take immense pleasure in thanking Ms. Avjeet Kaur our beloved Project Coordinator for
having permitted me to carry out this project work. Pooja Soni (MBA-2nd sem)

4. INDEX 1. Executive Summary………………………………………………1 2.

Introduction……………………………………………………….2-6 a) Introduction of human resource management…………………3 b)
Introdution of succession planning…………………………….4-6 3. Importance of Succession
planning………………………………….7-8 4. Succession Planning Process………………………………………..9-12 5. Leadership
competencies for Succession planning…………………12-13 6. Decisiveness…………………………………………………………13 7.
Discretion……………………………………………………………14 8. Organization commitement…………………………………………14-16 9.
Service Orientation…………………………………………………..16 10.Advantages of Succession
planning………………………………….17 11.Mistakes to be avoided in succession planning……………………..18-20
12.Succession planning: India Prespective……………………………..21-32 13.Study on Muruguppa group succession
planning……………………33-42 14.Study on infosys succession planning………………………………..43-49
15.Conclusion……………………………………………………………50-51 16.Bibliography…………………………………………………………..52

5. 1 EXECUTIVE SUMMARY The project explains the concept of succession planning and how it is important for the
successful functioning of a business. It proceeds to highlight the business functioning trend in India which mainly is
about family businesses. But seeing the recent trend of few of the big Indian businesses opting for proper
professionally planned succession planning, it isn‘t long when India will pick up this practice in every aspect. Many
recent examples of succession planning in the Indian businesses have been stated such as axis bank, Tatas, Infosys,
ONGC, Eicher etc. With main focus on Murugappa group and Infosys succession planning. Murugappa group of
companies is a great example of family business training their heirs in a professional manner to lead the business
where as Infosys shows how a proper committee should be formed for looking out for a successor well in advance.

6. 2 INTRODUCTION

7. 3 INTRODUCTION TO HUMAN RESOURCE MANAGEMENT Human resources are the most valuable and unique
assets of an organization. The successful management of an organization's human resources is an exciting, dynamic
and challenging task, especially at a time when the world has become a global village and economies are in a state of
flux. The scarcity of talented resources and the growing expectations of the modern day worker have further
increased the complexity of the human resource function. Even though specific human resource functions/activities
are the responsibility of the human resource department, the actual management of human resources is the
responsibility of all the managers in an organization. It is therefore necessary for all managers to understand and give
due importance to the different human resource policies and activities in the organization. Human Resource
Management outlines the importance of HRM and its different functions in an organization. It examines the various
HR processes that are concerned with attracting, managing, motivating and developing employees for the benefit of
the organization.

8. 4 INTRODUCTION TO SUCCESSION PLANNING Succession Planning “Thinking About Tomorrow Today” In

organizational development, succession planning is the process of identifying and preparing suitable employees
through mentoring, training and job rotation, to replace key players — such as the chief executive officer (CEO) —
within an organization as their terms expire. From the risk management aspect, provisions are made in case no
suitable internal candidates are available to replace the loss of any key person. It is usual for an organization to insure
the key person so that funds are available if she or he dies and these funds can be used by the business to cope with
the problems before a suitable replacement is found or developed. Succession Planning involves having senior
executives periodically review their top executives and those in the next-lower level to determine several backups for
each senior position. This is important because it often takes years of grooming to develop effective senior managers.
There is a critical shortage in companies of middle and top leaders for the next five years. Organizations will need to
create pools of candidates with high leadership potential. Succession planning involves a careful balancing of the
concerns and needs of a firm’s founding and senior managers, on the one hand, and its more junior investment
professionals and managers, on the other hand. The founding and senior managers want to be properly rewarded for
their efforts in building and growing the firm, and this may include rights to continue to participate in fund economics
after these managers have begun to wind down their active involvement. These desires must be balanced against the
need to provide increased economic benefits and firm governance rights to junior managers and investment
professionals in order to develop the next generation of managers for the firm. Definition: Succession planning can
be broadly defined as identifying future potential leaders to fill key positions. Wendy Hirsh1 defines succession
planning as 'a process by which one or more successors are identified for key posts (or groups of similar key posts),
and career moves

9. 5 and/or development activities are planned for these successors. Successors may be fairly ready to do the job
(short-term successors) or seen as having longer-term potential (long- term successors).' According to Hirsh,
succession planning sits inside a very much wider set of resourcing and development processes called 'succession
management', encompassing management resourcing strategy, aggregate analysis of demand/supply (human
resource planning and auditing), skills analysis, the job filling process, and management development (including
graduate and high-flyer programs). Enforcing the succession plan: A careful and considered plan of action ensures the
least possible disruption to the person’s responsibilities and therefore the organization’s effectiveness. Examples
include such a person who is: • suddenly and unexpectedly unable or unwilling to continue their role within the
organization; • accepting an approach from another organization or external opportunity which will terminate or
lessen their value to the current organization; • indicating the conclusion of a contract or time-limited project; or •
moving to another position and different set of responsibilities within the organization. Coverage Organizations differ
in size, scope and type, so it is difficult to point to any single model of succession planning. However, it is most
common for succession planning to cover only the most senior jobs in the organization, plus short-term and longer-
term successors for these posts. The latter groups are in effect on a fast-track, and are developed through job moves
within various parts of the business. This focus on the most senior posts - perhaps the top two or three levels of
management - means that even in large organizations, only a few hundred people at any given time will be subject to
the succession planning process. It also makes the process more manageable, because it is much easier to
concentrate on a few hundred individuals rather than (say) several thousand. That said, however, many large
organizations attempt to operate devolved models in divisions, sites or countries where the same or similar
processes are applied to a wider population.

10. 6 The role of HR: Succession planning needs to be owned by line managers, and should be actively led by the
chief executive who has a key role in ensuring that it is given the importance it deserves by other senior managers;
ensuring that there is a healthy pipeline of potential leaders is about nothing less than the future of the organization.
But it is not realistic for CEOs and those around them to have sole responsibility for this; they have neither the time
nor the expertise. The HR function therefore has a critical role in supporting and facilitating the process, not least in
compiling all the necessary information on potential candidates. Any career move at senior level is a process of
multiple dialogues, in which a senior representative from HR will collect views from senior line managers in an
iterative fashion, testing, challenging and amending them as the dialogue goes on, making sure that all possibilities
are covered, and maybe putting proposals for decision to a succession development committee. HR departments are
of course also heavily involved in giving career advice and information to individuals, and assessing and advising on
their development needs. The HR function is also centrally concerned in the design and management of assessment
processes and information support, including the development and maintenance of computerized databases.

11. 7 IMPORTANCE OF SUCCESSION PLANNING Succession planning is an essential part of doing business, no matter
how certain your future appears. It's easy to put off planning when everything seems to be going so well, right?
Wrong. Now is the time to begin succession planning. Here are some reasons why it can't — and shouldn't — wait: 
You can't plan for disaster. No matter how good you and your staff are at revenue projections or economic
predictions, no one can truly plan for disaster. Whether it's an unforeseen illness, a natural disaster, or a CEO's
decision to suddenly retire, the reasons for having a succession plan in place before it is needed are endless. So while
you can't plan for disaster, you can put into place a series of contingencies that will help your company stay afloat if,
in fact, catastrophe occurs.  Succession planning benefits the business now. Just as business practices have evolved
over the years, succession planning has also grown and changed. It's no longer a plan that can only be accessed when
leadership is going to change; a succession plan can be used before its "real" intent is necessary. It can be used to
build strong leadership, help a business survive the daily changes in the marketplace, and force executives to review
and examine the company's current goals.  Succession planning gives your colleagues a voice. If you're running a
family business, the process of succession planning will give family members an opportunity to express their needs
and concerns. Giving them that voice will also help create a sense of responsibility throughout the organization,
which is critical for successful succession planning. Resist the temptation to solely carry the entire weight of creating
and then sustaining a plan.  A succession plan can help sustain income and support expenses. Talking about money
should be a priority. People generally don't want to work for free and things don't pay for themselves. A succession
plan can provide answers as to what you — and your staff — will need for future income, as well as what kinds of
expenses you may incur once you step out of the main leadership role. Ask yourself questions about your annual
income and other benefits including health and dental insurance for you and your dependents, life insurance
premiums paid for by the

12. 8 company, your car, professional memberships, and other business-related expenses.  Succession planning
gives you a big picture. Some companies mistakenly focus solely on replacing high-level executives. A good
succession plan can go further, however, and force you to examine all levels of employees. The people who do the
day-to-day work are the ones keeping the business going. Neglecting to add them to the succession planning mix
could have dire consequences. As you develop your plan, incorporate all layers of management and their direct
reports.  Succession planning strengthens departmental relationships. When regular communication occurs
between departments you are more likely to experience synergy, which breeds a culture of strength. Make sure that
you link your succession planning activities with human resources. After all, HR is about people. By including HR in
succession planning, you can incorporate elements like the employee- evaluation process, which can help when
deciding whether to fill vacancies with internal candidates.  Succession planning keeps the mood buoyant. Change
— a major component of a succession plan — is exciting and can bring a company unforeseen rewards. Still, change
can be a source of tremendous stress, especially when people's livelihoods are at stake. As you put your succession
plan together, consider its positive effects on the business. Planning for the future is exciting and, if done correctly,
can inspire your workers to stay involved and maintain company loyalty. It's true that a plan is often put into place to
avert catastrophe, but it's also a company's way of embracing the future — a business strategy that is essential for
survival.

13. 9 SUCCESSION PLANNING PROCESS Succession planning recognizes that some jobs are the lifeblood of the
organization and too critical to be left vacant or filled by any but the best qualified persons. Effectively done,
succession planning is critical to mission success and creates an effective process for recognizing, developing, and
retaining top leadership talent. Success factors There are several factors typically found in successful succession
planning initiatives. For example: Senior leaders are personally involved. Senior leaders hold themselves accountable
for growing leaders. Employees are committed to their own self-development. Success is based on a business case
for long-term needs. Succession is linked to strategic planning and investment in the future. Workforce data and
analysis inform the process. Leadership competencies are identified and used for selection and development. A pool
of talent is identified and developed early for long-term needs. Development is based on challenging and varied job-
based experiences. Senior leaders form a partnership with human resources. Succession planning addresses
challenges such as diversity, recruitment, and retention. Effective succession planning The following information
includes: • A graphic representation of a six-step process for effective succession planning • A table with descriptions
of each step in this process. Step 1: Link Strategic and Workforce Planning Decisions This step involves: Identifying
the long-term vision and direction Analyzing future requirements for products and services

14. 10 Using data already collected Connecting succession planning to the values of the organization Connecting
succession planning to the needs and interests of senior leaders. Step 2: Analyze Gaps This step involves: Identifying
core competencies and technical competency requirements Determining current supply and anticipated demand
Determining talents needed for the long term Identifying “real” continuity issues Developing a business plan based
on long-term talent needs, not on position replacement.

15. 11 Step 3: Identify Talent Pools This step involves: Using pools of candidates vs. development of positions
Identifying talent with critical competencies from multiple levels—early in careers and often Assessing competency
and skill levels of current workforce, using assessment instrument(s) Using 360° feedback for development purposes
Analyzing external sources of talent. Step 4: Develop Succession Strategies This step involves: • Identifying
recruitment strategies: - Recruitment and relocation bonuses - Special programs • Identifying retention strategies: -
Retention bonuses - Quality of work life programs • Identifying development/learning strategies: - Planned job
assignments - Formal development - Coaching and mentoring - Assessment and feedback - Action learning projects -
Communities of practice - Shadowing. Step 5: Implement Succession Strategies This step involves: Implementing
recruitment strategies (e.g., recruitment and relocation bonuses) Implementing retention strategies (e.g., retention
bonuses, quality of work life programs) Implementing development/learning strategies (e.g., planned job
assignments, formal development, Communities of Practice) Communication planning

16. 12 Determining and applying measures of success Linking succession planning to HR processes – Performance
management – Compensation – Recognition – Recruitment and retention – Workforce planning Implementing
strategies for maintaining senior level commitment. Step 6: Monitor and Evaluate This step involves: Tracking
selections from talent pools Listening to leader feedback on success of internal talent and internal hires Analyzing
satisfaction surveys from customers, employees, and stakeholders Assessing response to changing requirements and
needs. LEADERSHIP COMPETENCIES FOR SUCCESSION PLANNING COMMUNICATION [VERBAL & WRITTEN]
Communication with others in an open, timely and sensitive manner effectively Typical Behaviors:  Demonstrates
effective communication: listens generously, seeks to understand, provides feedback and communicates in a positive
manner, and ensures others understand messages  Establishes trust and credibility in working relationships through
open, honest, consistent and frequent dialogue.  Organizes, interprets and disseminates all information to internal
and external audiences including complex work and advice clearly, concisely and plainly.  Consults with everyone
affected, listens to all views and considers them fairly.

17. 13 DECISIVENESS Is proactive and demonstrates the ability to make informed, balanced decisions in a timely
manner and stand behind them. Typical Behaviors:  Understands fully the effect and consequences of each decision
and stands accountable for decisions.  Deals with performance issues in a timely, fair and constructive manner 
Demonstrates commitment to performance management in actions and words  Takes decisive action/is proactive in
moving initiatives forward or solving problems. DISCRETION Demonstrates good judgment Typical Behaviors:  Shows
consistency balanced with fairness  Ensures decisions are consistent with the directional focus of the University 
Uses conflict resolution skills effectively  Considers all sides of an issue and balances all interests, including future
impacts LEADERSHIP OF THE DEPARTMENT/UNIT Sets and communicates direction to further the Strategic University
Plan, supports the department or unit and provides appropriate opportunities for individual development. Typical
Behaviors:  Establishes scope for decisions by individuals and balances this with need to make independent
decisions.  Administers and supports staff development in a proactive, equitable and consistent manner.  Provides
recognition to support teamwork and individual contribution  Communicates on behalf of the department/unit
when required
 18. 14  Ensures the development and application of performance measures and targets to assess results  Provides
opportunities and promotes an environment that encourages continuous development  Supports
[coaches/mentors] others to take responsibility for achieving the highest possible levels of performance  Builds
effective communication links with other departments and effectively facilitates resolution of issues/needs, which
cross-departmental lines.  Pushes decision making down to the appropriate level and provides necessary guidance
and support to other decision makers. ORGANIZATIONAL COMMITMENT Demonstrates identification with, support
and commitment to the organization Typical behaviors:  Puts aside personal preconceptions and self-interests and
concentrates on the common goal and the betterment of the University.  Demonstrates pride in working for
Athabasca University  Supports the University [e.g. Its plans, policies, programs] in a positive constructive manner. 
Promotes and acts with integrity in dealing with students and employees. TEAM PLAYER Works in all types of
committees and groups, supports the committee or group and contributes to its effectiveness. Typical behaviors: 
Respects and anticipates the needs, feelings, and opinions of others  Encourages discussion of issues and concerns 
Creates a sense of community; facilitates communication within the group  Recognizes the value of teamwork

19. 15 VISION Views current events and future possibilities from multiple perspectives, develops future oriented
scenarios and communicates these effectively to others in the organization. Typical behaviors:  Suggests and
embraces new methods and ideas that enhance the achievement of Athabasca University’s vision.  Clearly
understands and communicates the AU vision as it applies to the department or unit.  Keeps in mind the
organization context and direction, looks beyond the immediate environment for opportunities for improvements
and enhancements.  Continually scans current and future environment and identifies themes and emerging issues.
ANALYTICAL/SYSTEMIC THINKING Takes a logical approach to planning and problem solving and establishes priorities.
Analyzing issues and problems systematically and thoroughly and focusing on critical details while maintaining a
broad perspective. Typical behaviors:  Grasps complexities and critical details quickly and accurately  Develops
well-defined, step-by-step approaches to analyze and solve complex problems.  Identifies relevant alternative and
evaluates the potential consequences of each before taking action  Makes an effort to solve common problems by
drawing from previous experience or similar circumstances.  Assembles and integrates information from a variety of
sources to present what is relevant to a given issue or situation.

20. 16 ACCURACY AND THOROUGHNESS Makes sure that work is done correctly, completely and with high quality in
a timely manner. Typical behaviors:  Verifies assumptions and information by checking with credible sources,
experts or first hand experience.  Carefully reviews own work for accuracy and completeness  Carefully reviews
other people’s work for accuracy and thoroughness.  Identifies and addresses all details that are needed to ensure
smooth functioning  Follows up to make sure that tasks have been completed and others have met commitments.
SERVICE ORIENTATION Anticipates and responds to the needs of internal and external customers. Develops and
maintains strong relationships with internal and external customers. Typical behaviors:  Responds promptly to
customer needs or requests of others  Expends significant time and effort to meet important commitments made to
internal or external customers  Offers unsolicited help to those in need.  Takes advantage of opportunities to
present examples and scenarios illustrating importance of client service  Presents examples and/or suggestions on
how to improve services to customers  Presents arguments and/or suggestions that convince clients that their
interests are being well served.

21. 17 CONFIDENCE Demonstrates a genuine belief in the likelihood of personal success and communicates a
positive self-esteem to others. Typical behaviors  Creates a feeling of confidence in the department or units ability
to provide timely and quality service.  Shows strong assertiveness skills when dealing with customers and peers. 
Demonstrates a genuine belief in the likelihood of personal success. PERSERVERANCE Continues steadfastly toward
results/objectives until the desired result is achieved or is no longer reasonably attainable. Typical behaviors:  Leads
by example, ensuring actions are implemented and goals are achieved  Focuses on outcome, allows flexibility on
how the outcome is achieved.

22. 18 ADVANTAGES OF SUCCESSION PLANNING Succession planning is an essential part of doing business, no
matter how certain your future appears. It's not easy to put off planning when everything seems to be going so well.
Here are some reasons why it can't — and shouldn't — wait:  You can't plan for disaster.  Succession planning
benefits the business now.  Succession planning gives your colleagues a voice.  A succession plan can help sustain
income and support expenses.  Succession planning gives you a big picture.  Succession planning strengthens
departmental relationships.  Succession planning keeps the mood buoyant. Besides the obvious benefit of not
leaving your company in the lurch of proper Succession Planning will help your company in other ways, too. Here’s a
rundown of the benefits. Remember, not all benefits will apply, depending on your specific situation. Succession
Planning can:  Reduce taxes, in some situations with family-owned businesses. For example, if a company gets new
ownership after an owner's death, lack of planning can result in steep estate taxes. Other tax issues, such as
transferring ownership to a child, might apply.  Ensure continuity. Customers, clients, vendors, and employees all
want and need to know that a business will continue to function as they know it, even when there’s a leadership
change. Choosing and grooming a successor who fits your mold will help this happen.  Provide training plan for
possible successors. If you identify who you might choose as a successor early, you’ll know that that person needs
more training and one-on- one time with your current leader to gain as much knowledge for the position while it’s
still possible.  Help you plan for the future direction of the company.

23. 19 MISTAKES TO BE AVOIDED IN SUCCESSION PLANNING Many mistakes are commonly made in establishing
succession planning programs. They are worth enumerating. It is also worthwhile to describe some ways to avoid
these common mistakes.  Assuming that Success at One Level Will Guarantee Success at Higher Levels. An
individual’s success at one level is no guarantee of success at higher levels of responsibility. The reason is simple: the
competencies required for success at each level are different. Hence, it is important to separate thinking about how
well someone does his or her current job and how well he or she might do a job at a higher responsibility level. 
Assuming that Bosses Are Always the Best Judges of Who Is Promotable. A second mistake is to assume that, for
purposes of succession planning, bosses are always the best judges of who is promotable. That is not always true.
Bosses are self-interested players in the succession game. They have a stake in what happens to people. Indeed,
some bosses do not want to see their best people promoted for fear of an inability to replace them. Some bosses
grade people by their own standards - with the result that some individuals who are quite unlike the boss are not
considered for promotion. While the support of a boss is useful in developing individuals, more objective
assessments, such as multi-rater assessment are excellent in aiding the manager’s assessment.  Assuming that
Promotions Are Rewards. Some employees have an entitlement mentality in which they feel that long service with an
organization should always be rewarded with promotions. But business decisions must be based on who will do the
best job, not who is “owed” a promotion because of greatest seniority. Workers must continually be reminded that
doing jobs at each level requires different competencies, and the best way for them to compete is to prepare for
future challenges rather than expect promotions for past performance at a different level of responsibility.  Trying
to Do Too Much Too Fast. The strong results-orientation of many organizations today emphasizes quick results.
Senior leaders expect to see all the components of a comprehensive succession system in place immediately. That is
not always realistic. It is advisable to think of implementing systematic succession in

24. 20 a phased way - either from the top down or else starting in specific divisions or locations with greatest need.
 Giving No Thought to What to Call It. A fifth mistake is to devote no time to considering what to call the succession
program. As any marketer knows, product names do matter. It is not necessary to call a spade a spade. Many
organizations choose alternative names–such as “leadership development program,” “human capital management
program,” or even “talent program.”  Assuming that Everyone Wants a Promotion. A sixth mistake is to assume that
everyone wants a promotion. That is not always true today. In many downsized organizations, workers have seen
what pressures their bosses have to deal with. Some say “leave me out of that.” Hence, it is unwise to assume that
everyone wants a promotion–or even to assume that money will convince everyone. It will not. Check first. Find out
what people want to do. For that reason, many organizations launch both a top-down succession planning program
and a bottom-up career planning program to galvanize development  Lack of understanding how it works and how it
benefits the organization.  Lack of a formal written plan for the person or position(s).  Lack of availability of human
and financial resources; lack of budgetary commitment.  Superficial approach; lack of real understanding of the
procedures, processes and requirements of each area the individual is exposed to during the process.  The
requirements of the Managers/Executives are not fulfilled in providing dedicated instructions, guidance regarding
skills, knowledge and abilities needed for the candidates to be successful.  Failure to identify key employees who
may have concerns with your succession plan.  Failure to plan for disability.  A rigid, inflexible plan NOT tailored to
the needs and abilities of the personnel involved.  Too long a wait for real movement/promotion, disillusionment,
may result in some people leaving due to apparent inertia in the system.  Selection of unqualified or unmotivated
people for inclusion in the Succession Plan. Quality of the individuals selected is paramount to the success of the
process.  Complex program, requiring considerable paper work, follow-up, reporting

25. 21 SUCCESSION PLANNING: THE INDIAN PERSPECTIVE Companies in India have approached succession planning
in different ways and experience has shown that few have built strategies that encompass the three critical facets of
the exercise: board succession, CEO succession and building a leadership pipeline. Three categories of company exist
in India: first, the widely held and professionally managed companies; second, the family-promoted/family-controlled
companies, but with significant holding by minority shareholders; third, government companies where there is a
significant minority holding. Owing to the differences in structure and functioning of these companies, succession
planning strategies could differ, though the issues tend to remain the same. The roundtable discussion detailed here
addressed each of the above facets; it contains numerous insights as well as questions regarding the state of
succession planning in India. Succession planning is a challenge across the globe – but particularly so in India. Indian
leaders, while highly adaptable and strongly entrepreneurial, generally perform poorly in terms of teamwork and
succession planning. In fact, the KFI/Economist survey ranked Indian leaders among the lowest performers on this
count. This is evident in the fact that today, fewer than 20% of Indian businesses work to develop future leadership,
or to engage actively in succession planning. Strong Indian leadership has been emerging across multinational
companies (both Indian and foreign), but these competitive traits, and the drive to succeed in global markets, have
not yet been focused on developing people. India now requires its leaders to work towards nurturing its pool of
future managers, instead of merely driving their companies. According to the ABB (Asocham Business
Barometer)report of 2007 Corporate India not ready with succession plan, says Assocham Business Barometer India
Inc. has a long way to go for putting in place its succession plan at top level, which has an important bearing on the
market valuations of the companies, confidence of the business associates and morale of their employees, an
Assocham Business Barometer Survey has revealed.

26. 22 The ABB Survey of 275 leading management consultants, corporate, academicians and professionals on
‘Missing Link in Succession Plan’ found that a select few companies in India formulate and effectively implement
succession plan for the key positions in their organization structure. This was confirmed by 75 per cent of the ABB
respondents. They rated Indian companies four on a scale of 10 in terms of long term planning and grooming of the
successor to the head of a firm. Ninety two per cent of those surveyed said a considerable weightage is being given
to the companies, which have a hierarchy in place top-down. The analysts rate succession planning as a crucial
component of an impeccable management structure. The leadership acts as a catalyst in building goodwill and brand
valuation of an organization. Such factors play deciding role in determining the worth of a company in the bourses.
The share market has rewarded the corporate entities having properly structured succession plan with higher
valuations. Eighty-nine of the management consultants and academicians said a well-placed succession plan is an
important component of corporate governance. Non-existence of a second in command of a business entity could
harm the interests of minority and widely dispersed shareholders as an element of ‘uncertainty’ prevails. “Leadership
performs an instrumental role in laying down the long-term foundation and imparts strength to the organization. As
a good corporate governance practice the board of directors and management should set up a clearly defined
succession policy defining the number two and three positions in an enterprise, even among the family-owned and
run businesses”, Mr. Venugopal Dhoot, President, ASSOCHAM said. Corporate governance calls for setting of
guidelines to be followed by the Board of Directors and the management of the company in order to safeguard the
interest of stakeholders, which include shareholders, investors, employees, consumers, suppliers and the society. The
long-term competitiveness and efficiency level of a firm could get adversely affected due to lack of a succession plan,
according to 83 per cent of the experts surveyed by ABB.

27. 23 The performance of a company gets hampered without a well-defined hierarchy and affects the team spirit of
the staff. As many as 67 per cent of the respondents expressed their concern that employees' morale gets affected in
the absence of uncertain management chart. They feel that a question mark is put after a stage in the growth path of
even the best performing official due to the absence of clearly laid succession policies. Management line of command
becomes highly concentrated in a company with a single individual at the helm. It does not trickle down through a
well-defined structure. Fifty-nine per cent experts felt that in a highly concentrated command structure, a ''coterie'' is
established among the CEO who is not fed the true picture by those who benefit from such a situation. Well
performing employees with self-dignity get demoralized lot and become vulnerable to high attrition. About 55 per
cent of the consultants were convinced that the movement of professionals across the companies is to some extent
influenced by the succession plan and overall hierarchy structure of these organizations. Family run business is a way
of life for India Inc. However, it has not come as a hindrance for the growth of these business concerns. Although it is
easy to define succession planning in such firms, off late instances of intra-family disputes are being increasingly
witnessed. This could hurt the interest of minority shareholders, as this is an evidence of gaps in corporate
governance among such companies, 72 per cent of the ABB respondents felt. Around 60 per cent of the survey
respondents were optimistic that the family run businesses in India are moving fast towards professionalizing their
organization set up. Twenty five per cent of them believed that the change in the management set up of these
companies is taking place at very slow pace. Some of the IT companies in India have set excellent example of timely
identifying, planning and grooming of the successor to the key person leading the organization.

28. 24 The factors like lack of long-term vision, self-confidence of existing CEO, majority shareholders exercising
control over management, are responsible for absence of successors at top position in large number of Indian
companies, the ABB found. When asked about the performance of India vis-à-vis other mature economies like US,
UK, Germany, Japan in terms of corporate head selection, 59 per cent of the ABB respondents said that India Inc is
catching up fast . As the Indian companies are going global making their presence is felt around the world with large
number of overseas mergers and acquisitions taking place, it is imperative for the Indian business houses to realize
the need and importance of identification and grooming of the heir to their leaders. The management of a business
enterprise is not driven by an individual. Companies commanded solely by one person holding top position can run
into the risk of ill health, natural disaster, possibility of frauds, dispute with the Board. According to reports in 2010
Indian companies are more ready to have succession planning Economic Developments in India have put the focus on
how to develop and prepare leaders to manage in a growing economy. The primary business priorities for Indian
organizations according to their top executives are growth and improving and leveraging their talent. DDI India
Leadership Report findings o About 4 in 10 leaders in India identified themselves being as in a high-potential
program, a greater proportion than being in the global sample. o Organizations in India were more likely to have
succession plan for higher-level managers compared to the average organization worldwide. o Although 44 percent
of multinational organizations in India had a process to identify multinational leaders, only 26 percent had a process
to develop them. The number of businesses in India having intra-company succession plans for their mid- level
managers is decidedly more than anywhere else in the world, reveals the India Leadership Forecast launched by
talent management expert, Development Dimensions International (DDI). The report reflects an increased demand
for internal leadership development due to the high growth rateof organizations in the recent years. The statistics
suggest that 61% of

29. 25 Indian organizations have a process to identify high-potential Leaders compared with 50% of the global
organizations. High-potential leaders that are placed in accelerated development programs are more positive and
confident about their future roles. Nearly 42% of Indian organizations have such special programs in place to help
leaders face future challenges. These frameworks enable leaders to identify the areas that they find challenging,
discover what is expected of them in their new roles and help new leaders implement a development plan, which can
be applied in their daily activities. They also aim at developing effective decision-making skills managing relationships
for greater impact. Organizations in India are more effective at clearly communicating the importance of such
leadership modules by monitoring them at regular levels and intervals. Commenting on the Leadership Forecast
Report findings, Richard Wellins, Senior Vice President, DDI, said,” Leadership transition can be one of the most
stressful experiences in a person’s life, most notably because leaders are expected to be successful in the new role.
Good leadership will be important in the future, to help control costs, cope with increasing change and tackle the
expected upturn". Economic Developments in India have put the focus on how to develop and prepare leaders to
manage in a growing economy. The primary business priorities for Indian organizations according to their top
executives are growth and improving and leveraging their talent. DDI has spent the last 40 years developing leaders
at every level—nearly 6.3 million worldwide—and helping organizations optimize their leadership talent. In a well-
funded, high growth economic environment, it is imperative for India Inc. to craft effective leadership transfer
mechanisms. Be it family-run businesses, PSUs or professionally-managed companies, the responsibility for effective
succession planning and its implementation rests with shareholders’ representatives – the company’s Board January
2005: Reliance Group, India’s largest private sector enterprise, is split as the two Ambani brothers agree on a legal
segregation of assets. While Anil Ambani would take over the telecom, infrastructure, media and power businesses,
elder brother Mukesh Ambani would take charge of Reliance Industries, which operates in petrochemicals, oil and
gas exploration, refining and textiles. The death of business monarch Dhirubhai Ambani in 2002

30. 26 without leaving a will triggered a drama that resulted in the division of assets between the two estranged
brothers. April 2009: P. J. Nayak, Chairman & Managing Director of Axis Bank resigns after losing 1- 8 in the voting for
appointment of Shikha Sharma, Head of ICICI Prudential Life Insurance, as the new MD of Axis Bank. While the
members of the Bank’s Board submitted that Sharma had experience in banking and insurance industry, Nayak
vehemently disagreed with the Board’s decision stating that an insider should take over as his successor. Despite the
Board’s several recommendations previously to groom and develop a successor, Nayak paid no heed and was vocal
with his views that advance succession planning was not practiced at public sector banks. April 2010: Infosys
Technologies reconstitutes its CEO Nominations Committee to include K. V. Kamath, Non-Executive Director of ICICI
Bank, along with previous members Jeffrey Lehman, Professor at Cornell University (Chairman) and Deepak M.
Satwalekar, CEO of HDFC Standard Life Insurance, to hunt for Narayan Murthy’s successor – a candidate who not only
should have deep understanding of the IT Industry and Infosys, but should also possess Murthy’s ‘personal style of
leadership’. One of the most overwhelming challenges faced by organizations in India and across the globe is CEO
Succession Planning. The recent turn of economic events has posed a serious threat to the corporate health of
organizations as stakeholders in even the most stable and successful organizations questioned the business acumen,
ability to sustain confidence and decision-making capabilities of its business leaders. Although the world economy is
emerging from the aftermath of this recession, there is still the dagger of ‘establishing a strong leadership bench’
hanging over companies who are struggling towards a post-downturn recovery. Dr. Shalini Sarin, Country HR Partner
& Director – HR, Schneider Electric India emphasizes this point - “‘Do we have an effective succession planning
process to assess and develop future leaders?’ – it is precisely at this critical juncture of global economic recovery
that such a question is gaining prominence.” After a brief but torrid, financial downturn, India is back on a growth
trajectory and is reckoned as the second largest growing economy with a GDP of $1.4 trillion and an 8.8% GDP
growth rate. In such a well- funded and high growth economic environment, it has become almost compelling for

31. 27 companies to have a well-defined and articulated succession plan and an able leadership pipeline to sustain
future growth. Succession Planning in India The Indian business environment is largely driven by family-run
businesses, public sector enterprises and professionally managed companies (mostly MNCs). Without doubt, family-
run businesses make for a huge percentage of business houses in India. Family-run companies account for roughly
50%* of the market capitalization of publicly traded companies in India and contribute to around 55%* of GDP;
hence, the relevance of these companies for the overall economy. If numbers are to be believed, only 13% of family-
run businesses survive till the 3rd generation and only 4% go on to the 4th generation. Additionally, one third of the
business families disintegrate because of generational conflict at the leadership levels. Professionally run succession
planning is key for the sustainability of businesses. Family disputes and the lack of succession planning have triggered
the decline in fortunes of many business families. Traditionally, succession planning in family-run businesses has
always been a hush-hush affair, clearly depending upon the life expectancy of the founding chairman or patriarch.
Succession planning in family-run businesses is generally an intuitive process with the family patriarch taking the
decision as to who will take charge of the business empire. Dr. Ganesh Shermon, Partner & Country Head - People
and Change Practice, KPMG says, “Traditionally, family-run businesses focused on dividing the silver among the next
generation rather than grooming the right person to take up the job. However, with changing times, family-run
businesses need to ensure that the chosen successor has necessary education and skills and should be made to work
his / her way up the management. Alternatively, companies should be bold enough to appoint a professional
manager when there is no suitable candidate within the family. Companies such as Ranbaxy, Murugappa Group and
Eicher have set a precedent in this regard.” In 1998, when Dabur India realized the might of behemoth MNCs and
their scale of operations, it valued the need for a professional to run the operations of the company in order to build
a professionally-managed company with strategic business outlook. And that’s when Dabur India roped in an
outsider as its CEO, Ninu Khanna, rather than passing the reins to a family-member. Sunil Duggal, Dabur’s CEO since
2000 has taken the business to new heights by strategic acquisitions and has expanded the product portfolio to make
Dabur a comprehensive FMCG company from an Ayurvedic products seller. Today, majority of the

32. 28 Board members at Dabur do not belong to the Promoter family. The Tata Group too is on the lookout for a
successor to Ratan Tata, who retires in 2012, and for other group companies too, as the Heads of Tata Steel and Tata
Motors head toward retirement. Passing on the reins of the organization to a family member has a lot of legal
implications too. Hiralal Walchand, Director, Walchand Associates, which deals in will trust services and family law,
says “Family members (sometimes even far-off relatives) join companies as employees but demand legal ownership
rights during division of assets. This should be avoided as dividing assets amongst so many claimants completely
devalues the company.” In case of listed family-run business houses, the first step towards planning a strategic
succession is to increase the holdings in various group companies. Walchand explains that, “Increasing holding by the
parent company wards off the risk of future acquisition. B. K. Birla, for instance has been working toward increasing
the family’s stake in its group companies of cement, textiles, et al.” Once that is achieved, the patriarch can appoint
either family members or internal and external candidates to take on the mantle. This ensures that when the
patriarch steps down, there is no change in the way business is done. In the recent succession plan chalked out by
RPG Enterprises, Group Chairman R. P. Goenka segregated the ownership and control of various group companies
amongst his sons Harsh Goenka and Sanjiv Goenka where the former was named the Chairman and the latter Vice
Chairman. The business will, however, continue to run the same way with each brother continuing to control and run
the companies they were handling previously. In the case of PSUs, many of the appointments are guided by political
considerations. The fact that quite a few of the top jobs at PSUs are either unfilled or manned by acting CEOs indicate
the lack of importance attached to the process of top management succession planning. In spite of the political
stifling, some PSUs have formulated very strong succession planning practices. Prakash, Managing Director - India,
Leadership and Talent Consulting, Korn/Ferry International, says, “PSUs are unique in that almost invariably grow
their own timber. Public sector companies really do not have a succession planning system per se, they have an
internal promotion system.” Companies like Indian Oil, Bharat Petroleum, Hindustan Petroleum, BHEL, NTPC, ONGC,
State Bank of India have worked on establishing leadership competency frameworks, assessed managers for
development and

33. 29 taken follow up actions in terms of internal training and developed courses in collaboration with the IIMs.
Some of these practices can be compared to the best in the private sector. For instance, ONGC conducts succession
planning three levels below the Board and NTPC conducts rigorous succession planning two levels below the Board.
NTPC has constituted a high level Succession Planning Committee (SPC) comprising of the Chairman and the
Functional Directors to own the process of succession planning. NTPC has identified 28 unique leadership positions
for succession planning. Most of the positions fall under the two top executive levels - General Managers and
Executive Directors. Against each position at least three potential successors are identified for grooming. This is done
to ensure that sufficient depth is maintained in the leadership pipeline at all times. Succession planning is a shared
responsibility of the HR function and the organization’s leadership. NTPC’s CMD, R. S. Sharma was recently succeeded
by Arup Roy Choudhary, former CMD of National Buildings Construction Corporation (NBCC). The search for a
successor for CMD (Chairman & Managing Director) is done pretty much the same way as the search for other Board
level appointments where an advertisement is put up for the vacancy by the Enterprise Selection Board and
shortlisted candidates sent to the ministry. The final decision for appointment is made by the Cabinet Committee.
The concurrent CMD is not involved at all in this process. In July, state-owned telecom units, Bharat Sanchar Nigam
Ltd. (BSNL) and Mahanagar Telecom Nigam Ltd. (MTNL) advertised vacancies for the post of CMD. The Enterprise
Selection Board, formed under the leadership of K. M. Chandrashekhar, Cabinet Secretary, has received close to 100
applications and will soon announce the successor to Kuldip Singh, CMD of MTNL and Gopal Das, CMD of BSNL.
Professionally-run companies in India, mostly MNCs and a handful of home-grown companies like Infosys, are more
forthcoming when it comes to chalking out a strategic succession planning process. Professionally-managed
companies have definite processes and employ latest techniques while identifying potential successors. Take for
instance Larsen & Toubro (L&T). Well before two years of current Chairman A. M. Naik’s retirement, the organization
has systematically and strategically put in place a succession planning process and will announce the name of the
new Chairman six months before Naik retires so that s / he is able to get proper handholding. In many of the MNCs
operating in India, the

34. 30 decision to find a successor is more in tune with business strategy and growth vision for the future of the
organization. Kellogg India recently roped in Sangeeta Pendurkar, former VP- Strategy & Commercial Leverages at
Coca Cola India to head its Indian operations as MD, replacing Anupam Dutta. Pendurkar’s experience in revamping
Coca Cola India’s tea and coffee business (Georgia) and introducing innovative regional brands such as Minute Maid
and Nimbu Fresh made her a suitable choice for Kellogg India’s strategic plan to strengthen the company’s
stranglehold on the breakfast segment by introducing more regional flavors. In certain other professionally-managed
organizations, senior leaders have the responsibility to design their own succession planning process, as in Lucent
Technologies, where senior managers are expected to develop at least two potential successors using job rotations,
challenging work assignments, special projects and executive coaching. Companies like Hindustan Unilever, P&G and
ITC have traditionally groomed most of their senior management internally using a combination of talent review
sessions, comprehensive training programs, job rotations and a combination of HR and leadership metrics. Role of
the Board & the CEO: For corporate Boards, CEO succession planning should be one of the most important
commitments toward the organization. Even though Boards across the spectrum realize the need for an effective
succession plan, they seldom devise processes and practices and devote sufficient time to this activity. Dr. Arvind
Agrawal, President and Chief Executive Corporate Development & HR - RPG Enterprises, says, “It is imperative for the
management / executive Board to participate in the whole succession planning process. I am talking about the
involvement of management or executive Board and not the legal Board. The process of succession planning is simple
but the real difference lies in its execution and that’s where most companies falter. The process demands full
dedication of the top management and not mere compliance as one of the points on a meeting agenda.” Not having
a strategic succession planning process and an effective CEO successor is a potential risk to companies and it is the
obligation of the Board to timely address this risk. This is also lacking because most companies do not have a Chief
Risk Officer (CRO) to identify the potential threats that may arise due to little or no succession planning. In simple

35. 31 words, it is the responsibility of the Board to make sure that the framework and guidelines for succession
planning are in place and are practiced to evaluate the developments on a regular basis. While corporate Boards play
a critical role in succession planning in professionally managed companies, their role is limited in family run
businesses where the family patriarch is generally the one who takes such decisions. In PSUs, the final decision of
choosing the successor is taken by an external authority (generally the Cabinet) in consultation with the Board.
“Normally only banks have CROs, as this is a mandatory requirement. It is not a very common role”, says Prakash
from Korn/Ferry, “and wherever they are, they tend to restrict their role to systemic risks like technology risk,
financial risk, political / regulatory risk, and not really people risks. CEO succession is the Board’s responsibility and
the responsibility of the CHRO and from my experience, does not normally come under the risk officer’s purview.”
Adds Poonam Barua, Founder Chairman, Forum for Women in Leadership, “In the global scenario, best performing
companies worldwide are increasingly looking at voluntary compliance practices and provisions for having a Chief
Risk Officer who reports to the Board (and not to the CFO), and identifies the challenges in the succession planning
process, including the need to increase diversity on company Boards. Ultimately, Board diversity and succession
planning is not just an HR issue, but a corporate governance issue. The Chief Risk Officer will also need to identify lack
of diversity as an important risk for the company. Companies such as GE, KPMG, Deloitte, IBM, PepsiCo, Nokia,
Microsoft, et all have huge diversity programs to ensure more women move into top management positions.” The
Board is responsible for clearly conveying to the CEO that his / her performance will also be measured by his / her
ability to manage succession. Additionally, the Board, in consultation with the CEO, is responsible for detailing out
the criteria of selection of the next CEO. The CEO’s role, on the other hand, is to identify high potential leaders and
spend disproportionate resources to develop them, besides monitoring the outcome of succession planning activities
at all levels in the organization. Sometimes, the CEO’s failure to identify a suitable successor acts as an impediment to
the growth of the organization. When Rohinton Aga, MD, Thermax passed away in 1996, Abhay Nalawade was
appointed his successor. However, roughly five years later, the entire Board of Governors had to resign en-masse as
the company struggled to compete in the changing business environment. While Rohinton Aga nurtured and grew
Thermax over a long period of time, he did not pay

36. 32 enough attention to succession planning. Nalawde has, in fact, been quoted to have said, “Mr. Aga never
made it explicit that he would have wanted me to become the Managing Director.” Stephen A. Miles, Vice Chairman
at leadership advisory firm Heidrick & Struggles and Prof. David Larcker from Stanford Graduate School of Business
re-iterate this point - “The CEO’s role is to develop viable internal successors so there are real internal candidates for
the Board’s evaluation and to be an advisor to the Board on the strengths and weaknesses of the candidates. The
CEO does not own this process. Many want to own it but the Board must own the process and manage the CEO.” In
PSUs, the current CEO or CMD plays little or no role whatsoever in selecting his / her successor, which again is very
dangerous for business continuity and hence, corporate health.

37. 33 A STUDY ON MURUGAPPA GROUP SUCCESSION PLANNING The Murugappa Group, headquartered in Chennai
(Madras), India has grown from humble beginnings to become a very important conglomerate. The company started
as the dream of a driven entrepreneur in Burma in the early 1900s. Today it boasts revenues of US$ 850 million and
employs 22,500 people in its 27 business units. The company is presently undergoing a major change, as it
restructures its family governance system. It realizes that change is necessary if they want to continue to compete in
the world marketplace. Though adaptation is not always easy, the Murugappas find strength through their heritage
and values. An entrepreneurial spirit The family traces its business history to 1760 when the great-great great
grandfather of the founder was active in trading and money lending. He had five sons who each, separately, built
successful businesses that, in later generations, led to leadership in several industries in India. The family came from
a long line of members of the Chettiar sub-clan of the Vaisyas caste-merchants and professionals with business
interests primarily in Burma, Malaysia, Sri Lanka and Vietnam, known for their scrupulous honesty, trustworthiness,
cleverness in trade and proficiency at money matters. . Following Indian tradition, the majority control of his
deceased father's entire estate went to the eldest son, with Dewan Bahadur receiving virtually nothing for all his
work. The

38. 34 unfairness of this policy spurred him to divide his estate equally among his three sons - Murugappa, Vellayan
and AMM. He did this while they were young men and while he was still alive to give them the freedom and the
opportunity to be a family energetically pursuing business together. He also encouraged free speech among his sons
until a decision was taken; then the courtesies due to an elder had to be honored. This, too, varied from the norm in
society at the time where respect for the elder was paramount. All three of Dewan Bahadur's sons shared their
father's venturesome business spirit and complemented each other in their managerial styles. Murugappa was
marketing and external relations-oriented; Vellayan was finance-oriented; and AMM was operations- oriented, with a
focus on details. In the early 1930s, Dewan Bahadur and his sons made several decisions that were critical to their
later success. At a time when 70% of Chettiar wealth was in Burma, they repatriated much of their monies to India so
that the Great Depression, World War II and Burmese national movements didn't bankrupt the family; they had an
insight that India was on the verge of industrialization; and they decided to take the family's first steps into major
industry. With the repatriated funds, they established a sandpaper plant (the beginning of today's US$ 65 million
abrasives business called CUMI); they purchased a steel safe manufacturing company; they started an insurance
company; and they bought a rubber plantation. The Murugappa Group was born. In 1931, Dewan Bahadur's eldest
son, Murugappa, visited the US for the International Chambers of Commerce Convention. This trip broadened the
family's view of possibilities for making money and expanding the company. When Murugappa returned from the US,
he kept an eye out for a business opportunity he could set up and lead in India. When he heard from an acquaintance
that there was market demand in India for a quality manufacturer of steel security furniture such as safes, cashboxes
and filing cabinets, he moved forward with family support, commencing production in 1940. A much larger foray,
conceived during the same time period, was to enter the business of making abrasives, a product used by
manufacturers to sand, sharpen and smooth equipment, materials, components and end-products. The family's
rationale was that if world war broke out, the volume and variety of goods imported on British ships would decrease;
thus, local manufacturing would expand with the new opportunity. The family

39. 35 cleverly negotiated to buy, dismantle, ship and install an abrasives plant from the American Midwest to its
location in India. The plant was operational in 1942. About a decade later, AMM made contact with the three largest
abrasives companies in the world - to seek a joint venture for access to new technologies. When all three were
disinterested or very slow to respond, he contacted and struck a deal with Carborundum USA and Universal of UK.
Before anything official was signed, the largest company in the field made overtures and showed interest. Since the
family had given its word to the British company, they would not go back on it to negotiate with one of their larger,
first choice firms. This was the first of many successful joint venture arrangements (since 1952 named Carborundum
Universal of Madras, India or CUMI). After India gained independence in 1947, the Murugappa family was among the
first in India to form a joint venture. With introductions by Sir A Rarnaswami Mudaliar, some experience in steel
manufacturing of safes and with a vision for bicycles in India, Tube Investments of India (TII) was formed in 1949. TII
began as a bicycle assembly firm representing the English Hercules brand in India. The English partner began with a
43% interest. Over time, TII grew, integrated into most all components, and diversified into steel tubes for furniture,
industry and other applications. Hercules became the number one bicycle company in India. The British partner
eventually departed the industry, turned the Hercules, BSA and Philips brand over to the Murugappas and divested
its ownership position. One of the patterns in the Group's development is that their foreign partners lose interest in
the Indian venture due to acquisition, management or strategy changes and sell back their shares to the family at a
better than fair price because of the trusting relationship they had built. This happened, for example, with CUMI in
1982when its UK parent sold back It’s shares. CUMI, now publicly traded, is 43% controlled by the family. Adaptation
and growth In India's government-regulated economy, the Murugappa Group found it necessary to adapt in order to
prosper. In the 1980s, Indian law prohibited formation of a business group, so the family followed the system of
crossholding controlling shares among separate public companies. Recently that law has changed, and the family is
restructuring again to become a holding company. Because of government regulation in the past, it was difficult to
obtain licenses for new businesses. Between 1964 and 1980, the Group applied for 17 licenses. Out of the 17 license
applications, one was granted and the other 16 were not. The Group decided not to pursue these because of their
values. Consequently, to grow, they sought

40. 36 acquisition of sick units to turn around. In the last 20 years, 17 additional companies have been acquired. The
most well publicized acquisition occurred in 1981 with the purchase of Madras based EID Parry - a huge, decrepit, yet
symbolic business that the Group had been interested in since 1958. Parry, the second oldest commercial name in
India, included fertilisers, pesticides, confectionery and also sugar mills. For years EID Parry's creditors were asking
the Group to take over its management, given the Group's management reputation and acumen. The family
repeatedly turned down the overtures, responding that without control EID Parry wasn't in the family interests.
Eventually, the creditors relented and the family gained control of the publicly traded company. The agreement
made headlines because it showed the Group's commitment to invest in what many in India felt was a risky venture,
but what they saw as an opportunity to grow. EID Parry is now a business with US$ 265 million in sales and is 41%
family-owned. With EID Parry came a 7% holding in a joint venture fertilizer company, Coromandel Fertilizers Ltd
Chevron and IMC Global partnered in the fertilizer growth area then later sold out. EID Parry developed a unique
organic pesticide from indigenous neem seeds that is often acclaimed to be the best in the world. EID Parry is also in
the sanitary ware business. However, not all businesses have been a success. For example, the Group has divested a
cement company, sold its electronics business and faced difficulties with its long held construction company.
Business and philanthropy Today the Group includes seven substantial business units comprising 27 companies in a
variety of industries: CUMI, TlI, Coromandel, Parry Agro, EID Parry, CIFCO and the only private company, Arnbadi
Estates, holder of some of the plantations. TlI now has four significant lines: bicycles, chains, industrial tubes and roll
forming. CUMI is a full line, vertically integrated abrasives company and Coromandel is a very profitable fertilizer
business. With Arnbadi and Parry Agro, the Group remains active in rubber, tea and coffee plantations. EID Parry
includes an assortment of businesses including fertilizers, sugar mills, pesticides and sanitary ware. The Group is in
the food industry with Parrys Confectionery Ltd. CIFCO is in the financial services of brokerage, vehicle finance,
insurance and mutual funds. The Murugappa Group and family also continue to build on the example of philanthropy
initiated by Dewan Bahadur. His decision to set aside a major
 41. 37 portion of his wealth for charitable causes, starting in 1924 when he built a hospital in his home village,
commenced a tradition of helping, guiding and supporting others in communities in which the companies do
business. The family's trust, the AMM Foundation, is sustained by a fixed percentage of annual business profits and
family contributions. To date it has built and nurtured four high schools of 8000 students, a polytechnic institute of
1000 students, four no-fee hospitals and a rural research centre. The rural research centre focuses its activities on
developing such things as protein-efficient algae, natural dyes, organic farming and technologies for the rural and
urban poor. Although by custom, the sisters and wives of the Murugappa men do not work in the businesses, they
are the major sources of leadership and guidance in the family's foundation and the institutions it supports. Family
ties While success seems to overflow for the Murugappas, the family and business have also been shaped by trauma
and loss. Tragedy first struck in late 1945 at the end of WWII. Middle son, Vellayan, age 40, was assinated while in
Burma as part of a formal delegation gauging the safety of Indian civilians returning to the newly communist country.
From then on, his two brothers functioned in the business roles as 'Mr Outside' (Murugappa) and 'Mr Inside' (AMM),
under the overall leadership of the elder - their father until his death in 1949, Murugappa until his death in 1965 and
AMM until his death in 1999. Beginning in the late 1950s, the third generation sons entered the business. They
successfully avoided a common family business trap of an enterprise slumping after the founder's generation. This
was due to their elders' concerted focus on developing the talents of the younger members as professionals through
academic training, international experience, at least two years of work outside of the family business and finally
employment at a mid-level in the Group's companies, rising one step at a time. Up through the mid- 1990s, each of
the six male family members in the third generation rose to become managing director of one or more of the
business units: MV, first son of Vellayan and the oldest of his generation, set the pace with higher education at a
college. While working at businesses within the Group, MV was encouraged by his uncle AMM, the chairman, to play
roles in the business world beyond the family, including positions on boards, associations and delegations. He held
Managing Director or Joint Managing Director positions at Carborundum, later CUMI, III and

42. 38 Coromandel until his death in 1996. Muthiah, second son of Vellayan, was adopted as a teen by his uncle
Murugappa who had no male heirs. He held several positions with the family firms, including Ambadi Estates where
he became a leading authority on planting in southern India. He worked at Coromandel Engineering and was the
Managing Director of CUMI when he died suddenly in 1979 at age 49. Murugappan, the third son of Vellayan trained
as a civil engineer in England and used his expertise to successfully scout unique new lines of industrial products to
manufacture and sell in India. He took over the Managing Director position of CUM I when Muthiah died and
continues as Chairman of CUMI to this day. Since 1999, he has been the family elder, but decided against the
leadership of the business, deferring to his younger brother, Subbiah. Subbiah, the youngest son of Vellayan, has his
college degree from the University ofAston in England. He is credited with a major role in turning ailing EID Parry into
a successful business in the 1980s, serving as Vice-Chairman and Managing Director. He also had leadership positions
at TI Cycles, as the Chairman of the Murugappa Group and the Executive Chairman of ElD Parry. In 1996 he was
appointed Group CEO. Muru, the oldest son of AMM, studied mechanical engineering in England, followed by on-the-
job training at Tube Investments Group UK. He worked at, then headed upCoromandel Engineering, the family's
construction business. He died in 1995 at age 55. Algy is the second son of AMM. After schooling in Lawrence at Ooty
and gaining his degree in commerce in India, he went to Britain as a Management Trainee with TI. He started his
work experience at TI Cycles and subsequently moved up to No. 2 to Muthiah in the plantation business. He was
instrumental in starting up the Cholamandalam financial services business. Currently he is Vice Chairman of the
Murugappa Group and Chairman of Cholamandalam. Since the late 1970s, six of seven sons in the fourth generation
have also joined the Group, making contributions in the business units at all levels including managing director. All
men of the same generation and age who work in the family business receive equal compensation and perks,
regardless of title, position, contribution or level of responsibility within the organization. To enhance individual and
Group success, informal mentoring among the family members takes place with older, more experienced and/or
accomp1ished members guiding, assisting and supporting younger, less experienced members. As for inheritance,
equal thirds of the family's business shares - following the three branches of the family emanating from the three
sons of Dewan Bahadur - are divided and entrusted to the males in each generation, whether they work in the
business or not.

43. 39 Transitions An important transition in organization occurred in 1985 when the Group hired for the first time a
management consultant, AD Little, to look at issues of structure and succession. This effort resulted in a leadership
succession plan in which senior members of the family of the 3rd generation filled the positions of Business Unit
Managing Directors, COO and CEO until each retired at 65, with the selection process based on merit as well as
seniority. After India signed the World Trade Organization agreement around 1995, the family saw opportunities,
including new export-oriented activities. Because of this, they realized the necessity of making speedier business
portfolio decisions than was presently possible due to individual family members being emotionally involved in
separate business units. In this environment, even when everyone wanted to make a positive business decision for
the Group as a whole, it could not be made with the speed and nimbleness necessary in the faster pace of the new
global economy. Despite this realization, nothing changed until 1996 when Muru and MV both died at early ages.
These tragic events acted as a wake-up call. The family elder, AMM, urged a restructuring to improve the future of
the business by relying less on family members for the day-to-day management of the business units as managing
directors. Leadership of this task fell to AMM until his death in 1999, then to his nephew Murugappan who continues
as family elder today, and to Subbiah, Appointed Group CEO in 1996. The goal of the restructuring was to introduce
change without disrupting performance in an atmosphere of openness and support. The family leaders sought the
help of an esteemed Indian colleague to help facilitate discussions of change among family members. Several insights
about the Murugappa Group's reorganization surfaced which included the need: 1) To be more of a Group rather
than a collection of separate entities; 2) To be more flexible in the make-up of the portfolio of businesses; 3) To have
less emotional attachment by individuals to their businesses; 4) To shift away from family-led units to non-family-led
units; and 5) To mentor the non-family managing directors for the long-term view.

44. 40 Facilitating change To facilitate the change process, the family members on the board committed one to two
days a month for almost two years. This resulted in establishing a holding company - like board with the intention of
becoming an actual holding company in the future. In 1999, the Murugappa Group created the new governance
structure. They changed the leadership of the individual business units from family members to professional
managers and the family members moved to board positions on the newly formed nine-member Murugappa
Corporate Board (MCB). This holding company-like board includes as directors five family members (two from the
third generation and three from the fourth generation), three independent members and the Group CFO. The
independent board members recognized the importance of their participation in the transition of the company and
wanted to work with the Murugappa family members because of their exceptional experience, humility and a
willingness to listen. They also wanted to demonstrate the success of the holding company model for family business
and to ensure the family business as an important force in the economy of India. The new structure was innovative
for the business and for India. At once, it allowed family members on the board to focus on strategic areas across
businesses for the benefit of the entire organization. Each family member on the MCB serves as a fulltime director
with three assigned responsibilities. One is for a function across all business units, another is to serve as
mentor/overseer for one or more businesses he has typically never led before, and the third is to guide younger
family members for future governance roles. One of the benefits of this arrangement has been the creation of
knowledge transfer and technology synergies among the Group's businesses. The move harnessed the substantial
business experience and resourcefulness of the family members for the good of the overall company, not just a
business unit, and also brought a new perspective from the independent board members. The family members on
the board have noticed great value in the restructuring, although it is not without personal challenges because they
are being stretched to perform in areas new to them with different people, operations and situations.The changes
made in management and leadership of the business were also noticed by workers, family and community. The
family board members are aware that they are serving as role models of the structural change, especially in bringing
along other constituent groups that need to make adjustments to the new arrangement. The new governing
structures caused a shift in

45. 41 decision-making to one that is more collaborative - a counter to Indian norms and values of the traditional
leadership role of elders in the family. Future focus As the business moves from family-operated to family-governed,
formalizing the family's business approach is being discussed within the family and among the MCB members. The
family has taken steps towards articulating what they stand for by developing their Corporate Values and Beliefs.
These are listed prominently on their corporate materials, website, and Bill of Rights and Responsibilities for Family
Member Owners, all of which can be amended by family consensus but not by vote. The development of a Family
Constitution is seen as the next important step, but the form the Family Constitution takes - whether it should be a
formal written document or an understanding by custom and practice – is under discussion. Independent directors
are trying to get the family to formalize procedures because the businesses' complexity demands it. Family and
independent directors of the board realize that the future role of family members in the business is evolving. They
are aware that family members in future generations will have more choices in terms of profession than in the past
and may opt out of the business. Those who enter the business need education, development and training to be
future leaders in the family business at the governing level, although they will not be managing directors of units. Up
until April 2001, the MCB was headed by a family member, Subbiah. At that time, he stepped aside and independent
board member NS Raghavan took over as the MCB's first independent non-family executive chairman on an interim
basis. The reasons for this change were to create an environment that encourages creativity and fuels growth and to
make decision-making even more rational and less personal. The board is proceeding slowly to find a permanent non-
family MCB chairman, preferring to wait for a person who is just right for the position. In the last decade, the Group
has looked at its portfolio of businesses with an eye towards future growth. Although many of the Group's long-term
companies are in low margin, old economy manufacturing, there has been a continued focus on investing in and
maximizing research for the good of the business. Several of the business units have launched products developed as
a direct result of its proprietary research investments that could have global markets. The value of supporting
research for product innovation is a priority.

46. 42 The company also seeks to balance and reduce its portfolio of companies to the six business areas it knows
well and in which it holds leadership positions. The Group plans to shift reliance away from low but steady growth
manufacturing to opportunities in the high growth financial services sector through its business unit, CIFCO, where it
has manageria and financial capability. The Group is increasing exports and is exploring entirely new opportunities in
industries that are global employing the highly talented, yet cost-effective Indian workforce. One such endeavor
under development is information technology enabled products. For the Murugappa Group family business leaders,
the last three years have been times of great structural changes, shifts in thinking and adaptation, all the while
managing a major spectrum of successful businesses and opportunities in a marketplace that is increasingly fast
paced and global. Sustaining them through these substantial efforts in meeting success in the future have been the
valuable lessons of their family's heritage. Throughout the generations, family members in the business have used
situations presented to them as springboards from which to creatively adjust, flex and move forward for the good of
family and community. They have anticipated change, shown a willingness to adapt and to take risks. As fourth
generation Murugu reflected when he accepted, on behalf of his family, the IMD Distinguished Family Business
Award in October 2001 in Rome, "We consider ourselves custodians to a heritage and trustees to a tradition, both
built on togetherness, trust, mutual respect, ethical values and above all dignity, independence and discipline. As the
scope and magnitude of the family and business leadership changes, we are preparing ourselves for the great
challenges ahead. Best Practices of the Murugappa Group • Family Development: The older generations focus on
developing the talents of the younger members, as professionals, through academic training, international
experience, at least two years of work outside of the family business, family mentors, and a career path that provides
broad experience • Transitions and Re-organization: They strive to introduce change without disrupting performance
through an atmosphere of openness and support. They draw strength during change from their heritage and values.
• Succession: Leadership roles change in a clear and unselfish way

47. 43 A STUDY ON INFOSYS SUCCESSION PLANNING The Leadership Factory In the next five years, the four
remaining founders of this iconic company will walk away. So, Infosys is putting in place a succession pyramid for the
ages that runs three levels deep and is 750 people wide. MATTHEW FRANK BARNEY HAD A PERSONAL connection
with India that goes back to 1997. The 41-yearold American met his Bengali wife, Shreya, in a “romantic semi-
conductor factory” in Orlando. Last year, Barney also sealed a professional connection with India. He, Shreya and
their two young kids moved to Mysore, where Barney joined Infosys Technologies for an assignment that will have a
great bearing on how this iconic Indian software company is run and perceived for generations to come. Barney is the
head of leadership development at Infosys Leadership Institute. Never in the storied 29-year history of Infosys has so
much hinged on this responsibility. The seven founders, each of them pillars in their own right, have built and run a
company that is solid in its business construct and has values that are unimpeachable. But they are leaving, one by
one. Ashok Arora left in 1989 and NS Raghavan in 2000. Last year, Nandan Nilekani went to work for the government.
In the next five years, the remaining four — NR Narayana Murthy, S ‘Kris’ Gopalakrishnan, SD Shibulal and K Dinesh
— will also walk away from Infosys, in deference to Murthy’s decree that all founders retire from operational roles by
the age of 60 and from the board by 65. Says Barney: “It’s an inflexion point for Infosys, and we need to prepare for
it.” In his earlier assignments, Barney helped some of the world’s top companies, including Motorola, AT&T and
Lucent Technologies, to identify their next set of leaders. But, with Infosys, he’s working for the first time with
founders seeking to pass on the baton. In July, Barney kicked off a hunt to identify 750 leaders, across levels, in
Infosys — the largest such exercise the company has ever undertaken. It’s not a random, one-time exercise to meet a
pressing need. It’s a formal, structured response that is intended to

48. 44 become an integral part of the company. It will, continuously, identify the sparks in the company and groom
them to become leaders. Infosys has plenty of leaders, says Tv Mohandas Pai, who heads HR in Infosys and who
brought in Barney. “We believe we have around 100 leaders who can be CEOs of companies of different sizes,” says
Pai. “That doesn’t mean, though, all of them can become the CEO of Infosys.” What Infosys lacked all these years was
a system that could efficiently identify, organise and hone that leadership, especially in the lower ranks. Which is
what Barney and his seven-member team are putting in place. TO EXPLAIN THAT SYSTEM, ONE NEEDS to start at the
top. At the top, there is a 13- member board. Five of its members are ‘executive members’, which means they also
hold operational roles in Infosys. CEO Kris Gopalakrishnan and COO SD Shibulal are both members of the board.
Below the board is a four-member executive council: Subhash B Dhar, Chandra Shekar Kakal, BG Srinivas, and Ashok
Vemuri. The highest decision-making body below the board, the executive council is the grooming place for the next
CEO, CFO and COO. But the beehive of activity is below the executive council. Out here, Barney has created a three-
tiered pyramid that is intended to identify leaders at all levels from the 115,000 employees in Infosys. At the first
level, or tier-I, Infosys is looking to identify 50 Infoscians who can join the board in three to five years. “We want each
leader to be outrageously successful before they even come to my process,” says Barney of this set. At this leadership
level, people typically have about 15 years of experience, and are geographical heads or business unit heads. “We
need to make sure that the person is passionate about business,” says CEO Kris, of this elite pool. “Also, the person
should know Infosys well. That’s why we have always been saying that the leaders should come from inside and they
should have a successful track-record.” At the second level, the hunt is for leaders capable of graduating to tier-I or
running a business unit in three to five years. The target number is 150. The candidates here are vice-presidents and
those reporting to unit heads, and have about 10 years of experience. At the last level, the search is for leaders
capable of graduating to tier-II position. This pool, which is intended to be 550-strong, is chosen from business and
technology managers who are associate vice-presidents or below. They have about 5-7 years of experience. They are
like the Suresh Rainas of the Indian cricket team. BEFORE BARNEY AND THIS THREE tiered structure, Infosys was
identifying

49. 45 and grooming leaders, but it was more unstructured and the leadership pool was smaller. But as the
company grew and its operations became more complex, as it went beyond its founders, the imperative for a
leadership system increased. “They are the first among major Indian companies to go through this transition,” says
John McCarthy, senior vice-president and principal analyst, Forrester Research. “It’s always a challenge when you
move the original management out. So far, they have done it in a transparent and orderly manner.” But a CEO of a
leading rival says the founders will be missed. “Infy is surely ahead in terms of planning its transition, but it will miss
Murthy’s vision and Nandan’s ability to win and retain large accounts like BT,” he says. Professor David V Day, who is
helping Infosys as an external consultant to identify sustainable leadership models, advises against benchmarking to
the past. “First of all, you can never replace such visionary founders like Mr Murthy and others — they are really one
of a kind. You first have to let go of the assumption that they are going to be fully replaced,” he says. “The challenge
then is how are we going to develop leaders we are going to need not just now, but also in the future.” Barney has
some answers. “Beginning this year, we will have the ‘tier top-off’ process every year,” he says. The ‘tier top-off’ is
essentially a routine measurement of the numerical deficiency in the company’s leadership pools. The last time,
Infosys did such an exercise, it was 2007 and its leadership pool was about 50. Barney and his seven-member team
are now looking to do this annually, with a target size of 750. At every level, currently, Infosys is short. Against its
earmarked number of 50 leaders in tier-I, Infosys has identified 37. Down the ranks, the vacuum increases. In tier-II,
the number sought is 150 and it has identified 120. In tier-III, against 550, it has identified only 200. At each level, the
method of identifying talent is different. Tier-I is self-nominated. Infoscians who think they are up to it can apply.
Their candidature is decided after an interview with the board. For tier-II, it’s the tier-I leaders who work with the
members of the Infosys Leadership Institute and the heads of business units to identify potential leaders. Tier-III is
through a computer-adapted assessment tool. “The tier-I leaders are fewer and relatively easier to find,” says Barney,
who speaks fluent Bangla. “But when I get to tier-III, there are nearly 10,000 people who can apply. With the tool, I
can do it in less than half the time we did the same process.”

50. 46 NEXT COMES THE GROOMING. INFOSYS draws on several resources to groom leaders. These include
mentoring, leadership workshops and simulation exercises. Mentoring is a big part of the initiation, and it runs
through Infosys. Murthy mentors the board. The board members, including other founders, mentor 6-8 leaders at
any point of time from the tier-I pool, which includes the four members of the executive council. “We normally
mentor different people every year,” says Shibulal. “That’s because what I can mentor, say, Kris cannot, and vice
versa.” So, Shibulal mentors on operations and execution, Kris on innovation and technology, Murthy on leadership,
Dinesh on quality. Nilekani, when he mentored, was doing strategy. When Pai mentors, he will focus on
entrepreneurship. Adds Shibulal: “It’s more about experience sharing and passing on the belief, and also how you
would have dealt with a particular problem.” For future leaders like Jamuna Ravi, who is currently vice-president and
head of Infosys’ European business for banking and capital markets, mentoring by board members is a huge bonus.
Ravi was selected as a tier-I leader about three years ago and is currently being mentored by Shibulal. “When I was
the delivery head for banking and capital markets, I used to share my ambitions with him (Shibulal) and also ask
about the new competencies I wanted to acquire,” she recalls. “He told me to make my competencies visible to other
people, in terms of positioning for the next role.” Barney and his seven-member team also put the 750 potential
leaders through exercises that simulate business challenges such as coping with an unprecedented economic crisis or
renegotiating contracts withcustomers. Day, the Woodside Professor of Leadership and Management at the
University of Western Australia Business School, compliments Infosys on how it is going about it. “I don’t think
anyone, with the exception of perhaps the US Army, is doing a little bit around simulation, or is doing this in any way
with regards to leadership development,” he says. KRIS SAYS THE FOUNDERS WANT TO BE around to see the big
transition through. Part of that handover is passing on the values that Infosys was built on. “We have created a
platform with certain values, and we would like it to command respect, says Kris. “That’s very, very important for the
founders.” Yet, some things will change as Infosys ceases to be a founder-run company. Manish Tandon, head of the
independent validation and testing

51. 47 business, says some tier-I leaders like him are bringing a new perspective on operating in a rapidly changing
environment. “It’s a win-win because I’m seeing more fresh ideas in discussions,” he says. “People like us are also
asking the right questions, challenging the status quo and forcing a rethink.” Ritesh Idnani, COO of Infosys’ back-
office business, says there is room to challenge old practices. “When people have credibility in the system, they can
challenge,” he says. “Also, it helps that I’m willing to go and stick my neck out.” For Infosys, because of their risk-
taking abilities, such leaders are important to lead transformational initiatives. Idnani, for example, scaled up the
company’s BPO business from $43 million in 2005 to $316 million by 2009. He also set up its Brazil unit. Subhash
Dhar, one of the four executive council members, says a company like Infosys that is aspiring to get out of the
founders’ paradigm has to look outside for examples. But the next leadership, he adds, has to come from within.
“Since we are a knowledge services company, there are over 100,000 aspirants for the top roles. That’s a very high
aspiration quotient,” says Dhar. “It’s a good problem to have.” What’s encouraging for the next set of leaders is that
the founders have ruled out their children taking over. “As one of the aspirants, I feel empowered that one day a
professional will take over,” says Dhar, who started his career at Tata Unisys and joined Infosys around 13 years ago.
“That it’s not going to be run like a family business is a huge, huge thing,” he says. But to match, leave alone emulate,
the work of the founders, Barney’s 750 leaders, and all those who follow them, will have to step up. The Infosys
Leadership Tree BOARD OF DIRECTORS Executive members Srinath Batni K Dinesh S Gopalakrishnan TV Mohandas Pai
SD Shibulal EXECUTIVE COUNCIL Members Subhash B Dhar Chandra Shekar Kakal BG Srinivas Ashok Vemuri The idea
formed around 3 years ago, it's the decision-making body below the board. Its members are leaders who can become
the next CEO, COO and CFO, take on other top executive roles, even join the board. TIER-I

52. 48 50 Target Number 37 Current Number The idea Leaders who can join the board in 3-5 years Typical profile
Running a profit and loss account, geographical heads, business unit heads Typical experience About 15 years TIER-II
150 Target Number 120 Current Number The idea Leaders who can graduate to tier-1, run a business unit in 3-5 years
Typical profile Vice-presidents and those reporting to unit heads Typical experience About 10 years TIER-III 550
Target Number 200 Current Number The idea Potential leaders reporting to tier-II and capable of taking their position
Typical profile Business & technology managers reporting to tier-II, associate vicepresidents and below Typical
experience 5-7 years

53. 49 We want each leader to be outrageously successful before they even come to my process. MATTHEW FRANK
BARNEY Head Of Leadership Development, Infosys Leadership Institute We (the board) normally mentor different
people every year. What I can mentor, say, Kris cannot, and vice versa. SD SHIBULAL Chief Operating Officer, Infosys
You first have to let go the assumption that they (visionary founders like Mr Murthy) are going to be fully replaced.
PROFESSOR DAVID V DAY External Consultant To Infosys

54. 50 CONCLUSION At the end of the day, the crux of the issue lies in the fact that it is the shareholders‘
representatives who should own the succession planning process. Corporate India is placed at a critical juncture
where the massive inflow of funds will reflect in the gradual change from concentrated ownership (Government,
Promoter families) to a more diffused and diverse ownership pattern. Regardless of the ownership structure of a
company, the shareholders‘ representatives (company Board or the (cabinet of ministers or patriarchs of Promoter
families) will need to create mechanisms and processes to constantly groom a leadership pipeline and to identify the
best candidate – internal or external – for leading the company into the future and creating shareholder value. So
Indian companies have finally taken their first step of understanding the importance of succession planning and
taking necessary steps to put it into action for the welfare of the company and its shareholders against the age old
practice followed in India of handing the heir the reigns of the company. There are a number of areas to keep our eye
on as part of our succession planning activities. Top of the list has to be that as we formulate our ideas to get those
people organized to be top class performers, we need to know how they are doing, right now. The most important
priority, above all, is that we keep our eye on overall performance of the business. Then, it‘s all about those who
work for we, because from them, and them alone, will our business success come now, and into the future.
Managing Performance Of All Is Vital: We need to carefully use our performance management skills for all of our
people, to make sure that we are clear about their current performance, as well as – for our succession planning
needs – that we know what their potential is too. So it is certainly something that we have to keep a close eye on as a
manager. And if we do not have any kind of performance management measures then we will struggle to manage
our business adequately now, let alone later on. Performance Management Matters in Succession Planning: The
performance management part of succession planning is important because it gives we insights into individuals and
their actual performance as well. If we are closely observing them and prepared to challenge in uncharted waters,
their potential for the mid-to-long term, will start to fill the spaces that we will need as our team gradually moves
along and we need great replacements.

55. 51 Succession planning for the future evolution of our key players is a vital step, that will prepare we for keeping
balance as changes happen when our people leave we – however good we are at managing them! There are several
ways for us to make sure performance management successful to help us with our succession planning. The Link To
Successful Succession: Succession planning is challenging to start with, but if we have the right performance
management tools to get we through it then we are going to make everything work. If we are having trouble with
performance management during succession then we should remember that it is our responsibility to drive it – no
hiding places here! Gradually, as we introduce new measures for our people, equitably and consistently, we will find
performance management will lift the overall outputs of the business. The great opportunity then is to ensure that
we use this information to tease extra performance from all our people and notice, just notice, who starts to show up
as capable of more, much more. Then we really are starting to build real value into the succession planning tactics we
are adopting as part of the bigger strategy to sustainable business success.

56. 52 BIBLIOGRAPHY 1. www.google.com 2. www.scribd.com 3. www.timeofindia.com 4.

www.managementparadise.com 5. www.infosys.com 6. www.murugappa.com

English