Leader's Digest #19 (1 November 2018)

LEADERS ISSUE 19

1 NOVEMBER 2018

DIGEST

r o f y d a e r u o y Are

Succession Planning?

Safeguard Your Legacy Through Succession Planning 10 Best Practices For Choosing A Successor On The Road To Build A Lasting Legacy?

The CEO Succession Plan: Owning the Future Developing Impending Leaders This fortnightly publication is dedicated to advancing civil service leadership and putting it into practice contemporary leadership principles.

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EDITORIAL

Editor-in-Chief Segaren Assistant Editor Yvonne Lee Diana Marie Capel Graphic Designer Awang Ismail bin Awang Hambali Abdul Rani Haji Adenan

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CONTENTS

ISSUE 19 | 1 NOVEMBER 2018

Safeguard Your Legacy Through Succession Planning

10 Best Practices For Choosing A Successor

On The Road To Build A Lasting Legacy?

The CEO Succession Plan: Owning the Future

developing impending leaders

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THE LEADER’S DIGEST IS A FORTNIGHTLY PUBLICATION BY LEADERSHIP INSTITUTE OF SARAWAK CIVIL SERVICE FEATURING ALL THE LATEST SURROUNDING THE TOPIC OF LEADERSHIP. THE PUBLICATION ALSO FEATURES SPECIALLY SELECTED WRITE-UPS RELATED TO EACH THEME OF THE ISSUE, THROUGH ITS CONTENT PARTNERS.

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Safeguard Your Legacy Through

SUCCESSION PLANNING

BY ROUBEENI MOHAN

Succession planning is a vital component in an organisation to ensure the sustained success of any business in identifying talent which will fill important roles of organisations in the future or in time of calamity.

It is essential for organisations to have a succession plan to guarantee the person who succeeds the former employee is capable and fits the requirements to replace the employee exiting.

WHAT HAPPENS WHEN YOU DO NOT HAVE A SUCCESSION PLAN IN PLACE?

1. Your legacy could be jeopardised According to Carol Sankar (Leadership Advisor & Founder of the Confidence Factor for Women), the job of a great leader is to identify and mentor their successor(s) who will continue to move the company forward. Remember, there is more at risk than just your business, because it is also your legacy.

If you pass on the baton to someone who is under-trained and incapable,

you are not only risking the position you held, but you are also imperilling the organisation’s image.

2. It will make it harder to find a skilled candidate The Association for Talent Development reports that 87 percent of organisations find it strenuous to chance upon skilled candidates. These challenges brunt business performance, customer service and growth.

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3. Recruiting is more expensive than training According to Nick Davis (Business Psychologist and UK-based HR Consultant), all organisations need to watch out for the main issue and be prudent with expenditure. Without a succession plan set up, you may wind up in the circumstance where you have to quickly fill an executive position, but you do not have any prevailing, competent employees to fill the position. All things considered, you will need to direct your concentration toward external candidates.

While your recruitment selection process may expose numerous exciting prospects, the expenses of external candidates have a tendency to be significantly higher than the cost of training existing employees.

On top of this, they are new to the organisation’s culture, qualities and techniques

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In addition, external candidates tend to obtain lower marks in performance appraisals and are more probable to be laid off when compared to internal employees. For this reason, it benefits you to make the most out of existing talent, and plan for their succession.

4. Without a succession plan, stress and frustrations escalates Davis further stresses – if a succession plan is not in place, you are almost assured to suffer the stress and frustration that accompanies the lack of preparation. From the moment an employee exits, the pressure is on to find a pertinent replacement, and you have limited time to do so.

Judgments made in hurriedness can often prove unwise, irrespective of how unwavering you are to be systematic and vigilant in your selection.

5. Recruiting external candidates could impact engagement and retention Sharlyn Lauby (a South Florida-based HR Consultant listed among the 40+ Top Global Influencers in HR Tech of 2018) emphasises that employees want to know they have a fortuity with the organisation. One way to establish that is through training and development.

You do not have to tell employees they are a part of the succession plan. Consider providing training in problem-solving, conflict resolution, collaboration and decision-making.

6. Potential disputes There is a potential for disputes to occur within the organisation when there is no clear succession plan present within the organisation or a department. These disputes happen because employees or people working within the organisation may quarrel because they think they are most competent to fill up the empty spot.

7. Loss of employee faith in company leadership According to Jeremy Green (Forensic & Valuation Director at TDT CPAs and Advisors, one of the Top 300 Inside Public Accounting Firms in Iowa), employees will start losing faith in the organisation’s leadership for business to continue and employees will seek other opportunities for fear of ambiguity of business steadiness and their own job security.

8. No clear direction for the business without a known leader Jeremy Green also stated that when a person from a business-critical role exits the organisation, and the organisation does not have a succession plan and if the spot stays vacant, it will not bode well for the organisation.

This is especially if it is Chief Executive Officer’s (CEO) or a Managing Director’s (MD) position – the mid and lower management may not have a clear path as to what needs to be done.

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WHAT NEEDS TO BE TAKEN INTO ACCOUNT TO ENSURE SUCCESS OF A SUCCESSION PLAN? According to Darleen DeRosa (Managing Partner of US-based OnPoint Consulting and Co-author of Virtual Team Success: A Practical Guide to Working and Leading from a Distance), there are two very important elements that need to be taken into account to ensure the success of a succession plan.

1. Identifying the Right People One of the most important aspects of any succession planning is to find a steady stream of high-potential employees to fill your organisation’s business-critical leadership roles.

Regrettably, there is a common fallacy that a high-performing employee is a high-potential leader. This leads many organisations to put top performers into leadership roles that, honestly, they are not always prepared for.

According to DeRosa, some measures that an organisation can take to make sure it puts the right people into the succession pipeline include creating a success profile for key positions. The first step is to establish what ‘success’ looks like for a specified position.

• 360 feedback

Consider which skills and behaviours are desirable to make the best use of outcomes for the role, and use these to form the foundation of the assessment criteria.

DeRosa also recommends conducting an assessment to identify those with leadership potential: • Leadership assessments Leadership assessments recognise highpotential employees by determining important metrics, such as learning agility, strategic thinking and emotional intelligence.

These assessments can also detect potential ‘derailers’, or physiognomies and preferences that could disrupt efficiency in a leadership role.

• Behavioural interviews Conducting interviews to assess the employee’s experiences, goals, and past behaviours can be helpful. This can prove critical for recognising a true ‘high-potential’ leadership candidate.

Gather feedback from peers, managers and direct reports whenever possible.

A 360 feedback would help provide a wide-ranging representation of a candidate’s potential as a leader.

• Potential inventory A potential inventory (PI) is an assessment that is filled out by an employee’s manager. This assessment delivers a future-focused aspect at the magnitude to which the employee has the potential to take on additional obligations based on a range of dimensions that are aligned with the role and predictive characteristics of high potential.

2. Accelerating development After determining high-potential candidates, it is paramount to set them up for success. Using the criteria established in the ‘success profile’ and the information collected from the leadership assessments, you can classify skill fissures and modify the development each individual receives to maximise your leadership development outcomes.

These on-the-job learning opportunities for high-potential employees can have a mammoth influence on their aptitude to prepare for a leadership role. They also help validate how a precise skill can be significant for work by creating a realworld example of the skill in action.

There are no strict ways on how to make a succession plan as every organisation would have its own way of planning their succession. It is essential to have a succession plan in order to maintain stability within the organisation.

(Note: Read our online version to access the hyperlinks to other reference articles made by the author) Roubeeni is an avid reader with love for languages and music.

She is driven by passion for writing and believes that written words make an impact to those reading them.

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10 BEST PRACTICES FOR CHOOSING A SUCCESSOR

BY PREMA JAYABALAN

Research carried out by Heidrick & Struggles and Stanford University’s Rock Center for Corporate Governance states that more than half of the organisations today are unable to quickly appoint a successor, should the need to replace the current chief executive officer (CEO) arises.

This indicates that proper succession planning has not been done beforehand. Planning is needed to manage unforeseen circumstances, such as a sudden demise or permanent disability of a CEO, or a sudden termination.

Succession planning involves the process of transferring the reins of the organisation when a vacancy occurs in the key leadership role.

However, that is not the only key factor in succession planning. Most of the time, a checklist of potential candidates who can take over a head’s role is prepared.

But what about the ways to handle succession planning? How do you go about appointing a successor? What are things you need to look into? Well, here are some practices that contribute to a positive outcome in succession planning:

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PLAN AHEAD Succession planning is part of human resources (HR) management and should not be conducted during a crisis. Hence, do not wait until a leader is planning to leave.

Start planning now and be prepared to face any circumstances that may occur without warning. Being caught off guard without a suitable candidate to take over can put an organisation in much turmoil and affect productivity.

CREDIBLE FORECAST ANALYSIS Firstly, it’s imperative to have a solid understanding of what challenges the organisation is likely to face in the next five to 10 years, and what capabilities are needed of the CEO to ensure the organisation does not sink in this sea of hurdles.

Directors should not assume that a younger version of the current CEO is the answer to that.

GE’s previous three CEOs (Reg Jones, Jack Welch and Jeff Immelt) had completely different personalities.

According to Forbes, in leadership succession, GE has done a good job of looking “through the windshield” rather than “in the rear-view mirror” to understand the leadership skills required of the next CEO.

DEVELOPING INTERNAL AND EXTERNAL RESOURCES Development practices vary between internal and external candidates.

Internally, the process of development embarks with identifying and grooming a small number of people who show potential of taking the lead.

Investing about two to four years to develop an executive can be very beneficial to an organisation. This could involve rotating the individual in various functional areas, taking on international assignments or spearheading a division.

External candidates, on the other hand, are identified through executive search firms. As potential CEO successors, they

are first absorbed into other positions inside the organisation.

The management then invests in strategic approaches for the candidates’ development and explores the candidates’ strengths.

Both the former CEO of Starbucks, Jim Donald and the CEO of Cisco Systems, John Thomas Chambers landed their CEO positions in this manner.

CEO AND DIRECTORS SHOULD BE ON BOARD The CEO and board of directors have to be fully involved and committed in this process. This is not an initiative of the HR department.

There should be regular reviews between the CEO and the board with a healthy flow of feedback; working together to identify the criteria for the next successor and taking accountability for responsibilities.

It should not be confined to just certain positions or levels. You may never know where you will find the next CEO and sometimes, the results could be pleasantly surprising.

BE REALISTIC Development plans and ideas are not promises but most of the time, they are communicated in such a way that frustrates potential candidates.

So, don’t pull the legs of high performing leads with development plans that are unrealistic. Approach them only if there is a realistic chance of a succession taking place.

DIVERSIFY If your organisation wants diversity in leadership, then succession planning should also look into promoting women employees and minorities.

USE BUSINESS STRATEGY AS A BENCHMARK

The next dynamic and extraordinary successor with the ability to bring the organisation to greater heights may be amongst these group of employees.

There should be a good reason for your succession planning and this can be accomplished by aligning the plan with your business strategy.

KEEP POLITICAL AND EMOTIONAL ASPECTS AT BAY

By “connecting the dots”, an organisation can give coherent explanation that ties to the need for succession planning based on the business case of the organisation or the outcome of not doing it.

SIMPLE AND STRAIGHT TO THE POINT Do not complicate things. Refrain from including excessive, difficult assessment ideas in the process for succession planning. You may think that this will add to quality.

On the contrary, too many complexities can prove to be challenging for potential candidates. Remember that the planning process is a tool that emphasises on development, hence keep it simple.

FOCUS ON ALL LEVELS Your approach to talent development should cross all levels of the organisation.

The process of succession planning may invite many political, irrational and emotional outbursts from the succession planning team and those around them. It can sometimes come from the CEO who is having difficulty “letting go” or from team members who have their own personal agenda.

It’s crucial for these elements to be managed tactfully without being influenced by emotional and political feelings.

There is no book that specifically teaches you how to manage these emotions when working as a team. This learning comes gradually with experience and emotional intelligence.

Prema Jayabalan believes that succession planning is a crucial element that can make or break an organisation.

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On The Road To Build A Lasting Legacy?

BY ROSHAN THIRAN

Start by building a strong coaching culture 8

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Do you know that, by 2020, half of the global workforce is expected to be made up of millennials?

Looking ahead, they will surely be leading the way in shaping organisational culture as they aspire to take on greater responsibilities through leadership roles.

Millennials (those born from the early 1980s to late 1990s) generally possess many positive traits that can truly help to drive innovation and create more authentic and meaningful collaborations, as a result of their desire to make a lasting impact on the world.

They also have an insatiable thirst for learning, are fearless when challenging traditional hierarchy, and place a greater focus on getting the work done however and wherever best, rather than worrying about the number of hours put in at the office.

In short, this generation has created a shift in the way we now approach the way we do business.

It’s now all about building relationships, developing authentic connections, and having purpose as a driving force.

All of this is underpinned by the idea that what you get is inextricably tied to what you give to others.

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The bright side

With a greater emphasis on building relationships (internally and externally), millennials might have the right attitude and desires when it comes to doing business – but it’s a different thing altogether to be able to package those as practical skills on the ground.

Much has been written about the traits of millennials – and much has been somewhat unfair.

There are many positive and not-so-positive qualities to be found across all generations, and every generation believes the one to follow it lacks in many areas.

Personally, I prefer to focus on the positives.

Even where shortcomings are to be found, surely it’s better to look at how they can improve themselves rather than to criticise through the nostalgic lens of “the good old days.”

One particular shortcoming that’s occasionally pinned on millennials is the lack of “soft skills” such as communication, negotiation, and the ability to focus on one task at a time.

Particularly when it comes to leadership roles, these three qualities are key to being an effective leader.

Thankfully, among the many positive traits of millennials is their willingness to seek feedback and ability to adapt to change.

as flexible working arrangements, as the most appealing benefits within the workplace.

It also implied a strong case for the need for organisations to build a strong coaching culture.

Of the 670 research respondents, 61% of employees were highly engaged, compared to 53% from organisations without strong coaching cultures.

Furthermore, 46% of respondents in companies with strong coaching cultures reported above-average revenue growth for 2016 in relation to industry peers, compared to 39% of those from all other organisations.

Strategic succession planning

It’s certainly no secret that developing a strong coaching culture is one of the central pillars that supports a stable legacy for organisations, particularly when we consider the speed of change and other factors in the business world that now requires a leadership model built on the ability to be agile, authentic, collaborative and empowering.

As observed by the Ivy Business Journal, executives and human resource managers know coaching is the most potent tool for inducing positive personal change, ensuring betterthan-average odds of success and making the change stick for the long term.

If leaders of today want their organisations of tomorrow to build upon current successes, we need to ensure there is a leadership pipeline that puts people at the heart of our vision for the long-term.

And while it makes no sense to hand the baton to our future leaders and expect them to run over the same ground we have covered, there are surely many lessons we have learnt that can be offered to the next generation.

This will stand them in good stead as they push for progress and strive to make their mark in the world.

Connecting the dots

The urgent need to build, develop and nurture a strong coaching culture can’t be overstated.

Cultivating the coaching culture

A recent research collaboration by The International Coach Federation (ICF) and Human Capital Institute (HCI) looked at how first-time millennial managers can benefit from coaching and also in being trained on how to effectively use their own coaching skills to help their peers and team members to grow.

As Magdalena Mook, ICF Global chief executive officer (CEO), suggests, “It is crucial for organisations to know how to help them grow and prepare for the challenges and opportunities of the future.”

The research discovered that, contrary to popular belief, there are more similarities across the generations than there are differences.

For example, respondents across a range of age groups considered opportunities to learn and develop as well

If we leaders are serious about creating a lasting legacy, then it begins by empowering those around us who have a great potential to take the best of what we have to offer and add that to their own unique mix of capabilities and insights.

As a result, they will be able to apply their talents not only to ensuring the growth of the organisation, but to making a greater impact to our communities and wider society as a whole.

This is where they can truly find meaning and fulfilment in the contributions that they make.

Roshan is the CEO of the Leaderonomics Group. He believes that everyone can be a leader and make a dent in the universe, in their own special ways.

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The CEO Succession Plan: Owning the Future

BY PAUL B. SURPRENANT

Sometimes, boards get lucky. Uber’s selection of a new CEO in mid-2017 is a prime example of a good outcome despite near non-existent preparation and a troubling lack of awareness of the digital world in which it is a pioneer.

Uber’s business platform was built on the power of connection. Its corporate governance and CEO succession management practices were built on playbooks from an earlier era. Well after stories surfaced about toxic workplace behaviour and regulatory malfeasance, the board drew on tried-and-true practices to address the issues – bring in a reputable consultant, conduct leadership and environment reviews, deliver a long-term plan, obtain pledges to change. It did not work. In this open source era, where social media drives opinion and ‘fact’, accurately or otherwise, the Board’s actions were as out of touch as they were out of date.

In 2015, turnover amongst global CEOs hit a 15-year high. Increasingly sophisticated and demanding shareholders and proxy groups continue to raise the bar for CEO performance and conduct. Armed with analytics and using social media as a weapon, shareholders are pressuring CEOs and boardrooms as never before, demanding better performance and forcing change. Empowered shareholders are not the only challenge. CEOs have an image problem. The 2017 Edelmen Trust Barometer report found just 37% of respondents consider them credible. CEOs today work in a climate of distrust, one in which they are constantly scrutinised and, in this open source era of abundant information and ubiquitous communications, immediately vulnerable, whether fairly or unfairly.

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When a board simultaneously announces the departure of a CEO and the hiring of an executive search firm to identify a successor, the board is also announcing its failure in succession planning.

HOW BOARDS ARE RESPONDING: SUCCESSION PLANNING For the most part, boards are paying attention. They are planning for succession more than ever before.

A 2010 Stanford study found just 54% of firms were developing a successor to the CEO, while 39% indicated they had no viable internal candidate to replace their CEO immediately if the need arose.

Just five years later, a 2015 study showed happier findings, that planned successions had increased from roughly 50% of all successions in early 2000s to 78% of successions in 2014.

That more boards are planning CEO succession is not surprising. Besides disruption to operations and risk to employee morale, unplanned successions

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are hugely expensive. Strategy calculated that firms that had undergone an unplanned CEO departure lost on average USD1.8b more in shareholder value than companies that planned their CEO successions. Indeed, investors are twice as likely to sell shares during a CEO transition than buy them.

One classic study covering a 17-year period found an inverse relationship between company performance and the time it takes to fill the CEO position when a CEO departs suddenly – the longer it takes, the worse it subsequently performs compared to its peers. And to make the point abundantly clear, the same study found firms that name a successor immediately outperform those that delay naming a permanent successor.

Boards are communicating more about CEO succession today. The market is no longer content to wait until a crisis or the succession event itself. Witness the recent turmoil at India’s ICICI Bank and shareholder demands for information about the bank’s CEO succession plan and readiness of potential successors.

Stakeholders expect and demand transparency about CEO succession plans.

Boards are responding. In 2017, The Conference Board found that boards are becoming more communicative about their succession plans, providing more information about their processes and the roles of the board committees and directors.

THE BOARD IN CEO SUCCESSION PLANNING Succession planning is often thought of as a proxy for the quality of a firm’s overall governance and of a board’s performance.

Organisations that do CEO succession well are assumed to be better managed, clear about their strategy, and strong in execution.

The data shows boards are more involved in succession planning than ever before.

Indeed, there are positives to be drawn in current trends. Nevertheless, the quality of CEO succession planning remains a worry. To perform it effectively, we have found there are five things boards need to do:

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Own the succession plan; Future-base the CEO Profile; Build the CEO pipeline; Embed accountability – the board’s report card; and 5. Keep the plan relevant.

We describe each below.

1. Own the Succession Plan Good succession planning is as much about process as it is outcome. It interweaves complex, at times intangible, aspects of the enterprise – strategy, operations, culture, and leadership – into an integrated effort to identify, evaluate, and prepare candidates for the CEO role and guide the CEO transition with as minimal disruption as possible.

While the entire board has a role in the selection of a CEO successor, many boards name a committee to lead the succession management process. This committee, typically headed by the lead independent director, is responsible for developing and executing the succession plan. It, in agreement with the rest of the Board, decides whether it will focus on CEO succession exclusively or if it will extend its purview to developing a pipeline of leaders to fill the CEO role and other key senior positions, in part to build a deep bench of future CEO candidates.

The board owns the succession plan and all its processes, not the CEO or HR. It decides how widely it will communicate the succession plan, and the extent to which it will include the CEO or HR in its considerations. Both the CEO and HR have their roles to play – in feedback on candidates, in input on the future business landscape – which the board needs to define up front.

board will have its own priorities, each succession plan should cover: • Processes and criteria by which CEO candidates will be identified and evaluated; • Roles and responsibilities of board members, committees, CEO, HR, and any external parties; • Contingency actions and communications strategy in case of a sudden, unplanned departure of the CEO; and • Names and current readiness evaluations of CEO candidates and estimates of when they may be ready.

CEO succession planning is clearly sensitive. Discretion is paramount. The board needs to keep individuals’ names and evaluations confidential. This is to minimize the chance of talented leaders leaving if they saw the assessments (or if they have even made the list) and to avoid undermining the current CEO. Notwithstanding, the board may want to communicate aspects of the plan, such as attributes and values desired in the next CEO, to provide transparency to leaders with CEO ambition.

Communications during any CEO transition are critical, whether it is planned or forced. The CEO succession plan should devote a section to its communications strategy. The strategy will identify the board’s spokesperson during transition, key messaging by stakeholder group, and the channels to be used to communicate the change. It may also include contingency actions, such as temporary assignments of responsibility, to be put in effect during the transition period.

The CEO succession plan is a written document. At its best, it is strategic framework and living document. As strategic framework, it describes the market, services, and talent context in which the enterprise will operate in the future. Importantly, it links the desired attributes of the future CEO to the long-term strategy and vision of the organisation.

The objective of the communications strategy is to lessen disruption and provide direction. Communications in the case of a CEO’s sudden removal, for example, need to be clear, swift, and composed to reassure stakeholders and to protect the firm’s value. Convoluted messaging coupled with uncertainty over who speaks on behalf of the board or firm would be a sure path for converting a challenge into a crisis.

As a living document, it covers the processes, responsibilities, and progress of the succession plan. While every

2. Future-base the CEO Profile Too often, when identifying potential CEOs, boards prioritise candidates’

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histories. And why not? A successful track record is tangible evidence of an individual’s ability to leverage the organisation’s capabilities to deliver results.

However, a record of past success, as impressive as it may be, is not a good predictor of future performance or, more importantly, a good indicator that an individual’s strengths are the right ones for leading the business in the future.

This is not meant to discount current leaders. However, the imperative is to ground CEO succession planning in what is necessary for tomorrow, not what is working today.

To guide the evaluation and decision processes, each board should develop its own CEO Profile. The CEO Profile is an invaluable tool for creating a concise summary of the character, values, expertise, and capabilities needed of the future CEO. It is tied to the organisation’s vision and long-term strategy and represents the most current thinking of the board.

When defining the required attributes, boards often do a decent job identifying the business and technical knowledge needed by the next CEO. However, they need to go further. Boards need to be able to identify candidates capable of driving culture, leading through values, building teams, and fostering agile organisations that can innovate and scale.

Future-base the CEO Profile Before Ford hired Alan Mulally in 2006 as its CEO, the board recognised it needed a CEO unlike any it had in past if it was to make the necessary changes to the business and survive. In addition to the many internal challenges, it assessed the macro-economic forces impacting the auto industry and manufacturing to understand the landscape its next CEO needed to operate in.

The board described the next CEO in its profile: "a CEO-ready leader, world-class in life and career experience, well-grounded in complex manufacturing and operations, and highly conversant in technology and its importance in sophisticated machinery in today's vehicles and those contemplated in the future, including electrics and hybrids that use a combination of electric and internal combusting for power."

It went further — the next CEO would be confident, passionate, and tireless. He or she would be tough with recalcitrant stakeholders, clear in purpose and communications, and have the mental agility to handle ambiguity and unexpected crises.

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Getting diverse, opinionated board members to agree on the critical attributes needed by their next CEO is not always straightforward. One unusual, but effective method is for the board to organise its thinking using a set of ‘what-if’ business scenarios, with each scenario representing a progressively increasing degree of disruption from the long-term strategy. For each scenario, board members identify and rank the critical leadership attributes needed for managing through it successfully. The scenarios should stretch the board – just like they would the business – and require it to balance hard knowledge and soft skills.

Another method is to run ‘alt-scenarios.’

In ‘alt-scenarios’, boards look at the firm’s industry and market opportunities from radically different perspectives — the predatory market entrant, the voracious cost cutter, the cashed-up capitalist on a mission, or even the slow-and-steady incrementor. The objective is to broadly consider the competitive landscape the future CEO will be facing and then track back to the attributes he or she will need to lead the firm successfully.

3. Build the CEO Pipeline In 2004, when McDonald’s unexpectedly lost two CEOs in the same year, it was able to name permanent successors within hours of each loss. Come fifteen years later, and despite the learnings and improvements, most boards could not do this today. Those that can, share this practice — they continuously develop and monitor a pipeline of leaders. In so doing, they minimise CEO succession risk while simultaneously building depth and resilience in their leadership team.

To build a healthy leadership pipeline, boards need to source deeply into the organisation. This requires a strong partnership with HR. The committee chair should work with the head of HR to implement robust open source methods that overcome the biases inherent in traditional CEO and top talent nomination processes. HR supports the board in other ways, too. Often with the current CEO, the head of HR provides essential information about candidates’ development. He or she also assists the committee chair in ensuring evaluative discussions remain tied to the CEO Profile.

Boards have a multitude of evaluation tools available to them – performance assessments, 360o behavioural reviews, psychometric instruments, qualitative feedback, to name the more common ones. Historically, the challenge has been finding the tools that best measure the attributes they believe important and then striking the right balance between them. In the 21st century, though, with the scale of data publicly available and advances in data science, boards can do better. Human capital analytics offers evidence-based techniques to assess and measure candidate performance and behaviour.

Analytics can provide insights not available through traditional assessment tools. While it cannot, yet, reliably predict future CEO success, it can greatly assist in understanding candidates’ potential impact and performance. Just as fintech firms use multi-variate, untraditional data to predict behaviour and measure individuated risk, boards can apply similar techniques to get deeper insight on their candidates.

There is no ‘best practice’ analytics approach or data set to predict future CEO success. Boards should use metrics that make sense for their business and aligned with their CEO Profile. Analytics-based assessments can be constructed using direct and indirect metrics — financial and operating performance, performance and competency assessments, brand and employer rankings, environmental and social quality scores, corporate trust rankings, and even network effects, such as number of peers or subordinates hired into executive positions elsewhere.

Allowing for creativity is necessary.

One innovative board incorporated an evaluation of changes in types of jobs advertised at a competitor firm from which it was considering poaching a senior leader. It looked at that firm’s progression in brand reputation and perceived employer value proposition and correlated it to changes in how it described its purpose and the work it performed. In the 21st century, boards need to be thinking differently, and as creatively as the candidates they need to run their organisations.

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4. Embed Accountability – the Board’s Report Card CEO succession planning is ongoing. The committee chair leads the full board in reviewing progress against plan. If the process is not producing a solid list of candidates, the board should consider conducting progress reviews as a standing item on its meeting agenda. If the board is confident its succession plan is in good condition, progress reviews one to two times per year should be sufficient.

Boards understand that adding CEO succession to the meeting agenda as a standing item may set off alarm bells and might send an incorrect message about their confidence in the current CEO. Clearly, communications need to be managed wisely. One good approach is to normalise CEO succession, making it a recurring, routine topic in which rotating aspects of the plan are covered in each meeting.

There are many ways to evaluate progress; however, good assessments cover the essential processes and conclude with the board’s qualitative judgment of the health of its succession plan. At a minimum, the board should address: • CEO profile, verifying it remains a concise, accurate summary of desired expertise, behaviours, and character desired in the future CEO(s). in light of market developments, progress against long term strategy, and nascent business challenges since last review; • Effectiveness of CEO candidate sourcing and evaluation methods, with the board challenging itself to verify its candidate nomination processes are not biased toward a particular skill set or function and cast a net deep and wide enough into the organisation to identify the best talent; and • Readiness of candidates, reviewing their key achievements, development, and the breadth and complexity of challenges they address, coupled with observations on the type and quality of interaction board members have had with them.

The report card concludes with a qualitative judgment – the considered opinion of the board whether it is meeting its obligation to identify and evaluate

CEO successor candidates and prepare the preferred candidate and organisation for transition, whether it be a sudden or planned one.

5. Keep the Plan Relevant Having developed a comprehensive succession plan, the board must keep it relevant. The plan should be reviewed at least once per year to ensure that all components—particularly the CEO Profile and assessments of candidates against the profile —are up to date. The development plans of candidates should be based on those assessments, addressing areas where additional knowledge, experience, or organisation savvy are needed.

The board may determine it necessary to add external candidates to the succession plan or even decide an external candidate is preferred over internal ones. To the extent possible, it should apply the same processes in evaluation and monitoring as used for internal candidates.

The objective is to minimise potential disruption and risks to morale, while quickly providing direction to employees and the market.

planning requires disciplined board attention, but the benefits are worth it — in minimising financial, operations, and workforce disruption, and outperforming the competition.

CEO succession planning is grounded in the business’ long-term strategy and the board’s understanding of the future landscape in which the organisation will operate. Succession planning is a deliberative process. The board defines the leadership attributes the next CEO will need, which it uses as the basis for evaluating candidates. It documents its progress against the plan’s objectives and timeline it in its own report card. The plan is a living document. The board conducts full reviews of its approach and processes on an agreed schedule and decides which elements, if any, to update.

It is the one thing it must get right. CEO succession planning is key to the success of the business and, reciprocally, to the credibility and reputation of the board.

CONCLUSION Firms in all industries are facing fundamental challenges in nearly every facet of their business. Escalating buyer demands around service, quality, and price are forcing CEOs to rethink their production and customer models.

Changing employee perceptions about the nature and value of employment are forcing CEOs to rethink how they organise work, develop and engage staff, and promote behaviours that deliver excellence.

One of the things we often miss in succession planning is that it should be gradual and thoughtful, with lots of sharing of information and knowledge and perspective, so that it’s almost a non-event when it happens.

The attributes considered essential for a high-performance workforce have also changed. The latest research shows employers are looking less for employees with technical knowledge than for employees with the ability to work in teams, solve complex problems, prioritise, and engage with a variety of people.

Future CEOs will be leading in business models and people environments fundamentally different from the ones in place today.

Anne M. Mulcahy Former Chairperson and CEO Xerox Corporation

The cost of short-changing CEO succession planning is high. The data shows this repeatedly. Succession

Paul B. Surprenant leads the Human Capital Consulting practice at Iclif. Paul has been consulting with global and domestic clients for nearly 25 years in Asia and North America. He began his career in change management but moved to human capital consulting, where he found the challenges more difficult and satisfying.

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LEADERS

DIGEST

Developing Impending Leaders

BY DIANA MARIE

Succession planning is a vital component to ensure the success of identifying talents that will fill important roles in the future or in times of calamity. Leadership assessments recognise high-potential employees by determining important metrics, such as learning agility, strategic thinking and emotional intelligence (Leaderonomics, 2017). It is a key duty for an organisation's management team to develop the next generation of leaders.

Synonyms for the word 'development' include expansion, elaboration, growth, evolution, unfolding, opening, maturing, maturation, maturity and ripeness.

According to the behavioural perspective, all human behaviour can be described in terms of environmental influences. During the first half of the twentieth century, a new school of thought known as Behaviourism rose to become one of the main forces within psychology. Behavioural theories focus on how environmental interaction influences behaviour. Some behaviourists, such as John B. Watson and B.F. Skinner, insisted that learning, even in the sense of learning to become the next leader in the organisation occurs through the processes of association and reinforcement. The study of human development is perhaps the most widely used conceptual approach to describe and explain how human activity, appearance, and experience are developmental.

Two important types of learning that 14

Issue 19 | November 2018

emerged from this approach are classical conditioning and operant conditioning. Classical Conditioning involves learning by pairing a naturally occurring stimulus with a previously neutral stimulus, while Operant Conditioning utilizes reinforcement and punishment to modify behaviours.

Developmental approaches are based on how individual humans and human entities grow, mature, and compare to one another. In many ways this is very much related to the moulding and nurturing of future leaders. Leadership Development is considered a reaction to rewards, punishments, stimuli, and reinforcement. It focuses on how experience shapes who we are, while these experiences build one’s character and image as a future leader.

The Social Learning Theory based on the work of psychologist Albert Bandura believed that the conditioning and reinforcement process could not sufficiently explain all of human learning because behaviours can also be learned through observation and modelling.

Bandura suggests that observation plays a critical role in learning, but this observation does not necessarily need to take the form of watching a live model. Instead, people can also learn by listening to verbal instructions about how to perform a behaviour as well as through observing either real or fictional characters display behaviours in books.

Parallel to this theory, Vygotsky’s

sociocultural theory also suggested that learning is an inherently social process. Through the interaction with others, learning becomes integrated into an individual's understanding of the world. This human development theory also introduced the concept of the Zone of Proximal Development, which is the gap between what a person can do with help of others and what they can do on their own. Vygotsky explains further, that it is with the help of more knowledgeable others that people are able to progressively learn and increase their skills and scope of understanding.

Succession plans need to be visible if they are to create credibility and respect; the company's mission statement and business objectives need to be clarified. In his speech during the 2016 Civil Service Day Celebration, the Sarawak State Secretary enforced that SCS’s vision is to be “A World Class Civil Service”. He reminded all civil servants to never lose sight of this vision as it gives meaning and value to everything that they do. He said that, to be “World Class Civil Service” means that they need to continuously improve the standards of service delivery and apply the tools and processes used by world class institutions such as the Balanced Scorecard and Strategic Planning. The State Secretary emphasised that current leaders must supervise the continuing success of the enterprise and ensure their successors understand and are

LEADERS

DIGEST

...from Page 14

capable of executing business objectives and achieving the company's vision. In this sense, succession planning is the learning tool used by the incumbents to train and direct their successors.

Datu Dr. Sabariah Putit, the Executive Director of the Leadership Institute of the Sarawak Civil Service reinforces this by saying that, after five years of implementing the transformation action plans and initiatives, the faith in the transformation journey has borne fruit through the sincerity, commitment and passion of the Civil Service in executing their public duty for the common good of everybody. She said that one of the Eight Action Plans revolves around Talent Management, and leadership succession evolves from it.

On a basic level, a succession plan safeguards against unlawful discrimination. Current leaders avoid special treatment in the succession planning stages if they are seen to use the mission statement and company objectives as their guide to selecting potential successors. A good talent management structure is one that is segmented by the types of talent, such as entry level recruits (young leaders), high potential pool (emerging leaders), and potential successors to the top (senior leaders).

During the Open Source Leadership program run at the Leadership Institute, Rajeev Peshawaria disclosed the vision, insight, and practices he has used to help some of today’s largest and most influential organisations meet the open source world head on. In the past, dictators and autocrats were able to use their authority and power to do whatever they wanted. However, it is becoming increasingly impossible to do so in the open source era. Being autocratic in the 21st century is now about values and purpose while remaining humble, respectful and considerate with people.

Traditional methods of succession planning are becoming old-fashioned in today’s economy. The traditional replacement planning approach, such as three candidates for each management position on the organisational chart,

is not practical anymore due to the frequent need to restructure. The point he makes is that, gone are the days when past successful behaviour was a reliable predictor of future success. Those who raise their hands year after year to solve company problems are the natural leaders for tomorrow. Thanks to better connectivity today, we can now source for talent and leadership from the crowd (both internally and externally), which helps to lower the cost and increase the speed and accuracy. Crowdsourcing for talent refers to the process of searching for, identifying and recruiting suitable employees by soliciting the input of large numbers of people using a variety of online means.

Dave Ulrich, the #1 ranked Management Guru by Business Week says succession planning starts with the requirement of the position in the context of its technical and cultural needs. The traditional practice of identifying people and who they should follow is no longer applicable. His description of a good succession plan starts with the requirement of the position and then compare persons A, B or C against the position to see which candidates fits most to accomplish those goals.

He believes that the success of all HR practices, including succession planning lie with the line mangers. If the line manager is able to prepare a successor who is better than him/her, it simply means that he/she leaves the organisation in a better position than what it used to be.

In this digital era, a succession management process should be a lot faster. Speed is important because most succession management issues are issues of today, not of the future. When movement is required for a key position,

the organisation needs to be able to act fast. The process should be flexible and adaptable. Succession management used to be an almost secret process with only the executive board had total insight Now more transparency and openness are required and advantageous.

Once high-potential candidates are determined, it is paramount to set them up for success using the criteria established in the organisation’s success profile, classify skill gaps and modify the development that each individual receives to maximise leadership development outcomes. These onthe-job learning opportunities for high-potential employees can have an immense influence on their ability to prepare for a leadership role. Giving the candidate first-hand experiences in different roles throughout your company allows them to gain exposure to different divisions and to aquire new expertise. Challenge them with unfamiliar jobs to push them past their current skill levels. These could be effective growth-oriented exercises with some inherent risk designed within.

Even failure offers valuable lessons that can add new skills, improve confidence and solidify employee commitment.

Lastly, it is vital to ensure participants get frequent feedback and coaching as frequent evaluations will help to catch and address problems early on.

Rajeev Peshawaria in his book, Open Source Leadership speaks of a common myth in leadership that says “great leaders have something inborn in them”.

This remains a myth as he affirms that the leader in everyone is shaped when two things happen to them; first, they feel deeply about the inadequacies of current reality and second, they decide to do something about it.

Issue 19 | November 2018

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BUILDING LEADERS OF EXCELLENCE LEADERSHIP INSTITUTE OF SARAWAK CIVIL SERVICE KM20, JALAN KUCHING SERIAN,SEMENGGOK, 93250 KUCHING, SARAWAK. 082-625166 082-625766

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