SUCCESSION planning is one of the most intricate challenges an organization will ever face. Few events in the life of a company are as critical, visible, or stressful as the transition of leadership. The eyes of every stakeholder — shareholder, employee, customer and supplier, are focused on how the baton changes hands. This transition reveals the character and effectiveness of the incumbent leaders and the organisation.

Succession planning is an ongoing process of systematically identifying, assessing, and developing talent to ensure leadership continuity for all key positions in an organisation. However, it should be noted that succession planning does not exist in isolation. It must be interwoven with the company’s objectives and should reflect the way the company needs to evolve in order to achieve its strategic goals.

For new companies and entrepreneurs, succession planning is even more important to ensure the continuity of their efforts. The high mortality rate of entrepreneurial firms has been widely acknowledged, and of the few businesses which do survive the initial start-up phase, even fewer endure beyond the life of the founder. One reason for the failure of some entrepreneurial firms is the inability of entrepreneurs to transfer their skills, knowledge, contacts with key customers, suppliers, in essence their power to the next generation. Another difficulty entrepreneurs face in succession planning is that there just aren’t that many people around with the right type of skills and experience and the heightened competition for good talent makes recruitment from wellestablished firms particularly difficult.

As a result, established and new organisations have been combating the looming leadership succession predicament by identifying and developing the internal talent needed for key executive positions. For example, David Glass joined Wal-Mart in 1976 and was promoted to the President/Chief Operating Officer (COO) position as the heir apparent in 1984. Glass didn’t assume the Chief Executive Officer (CEO) position until 1988 and went on to lead Wal-Mart through an unprecedented 12-year period of growth and international expansion. As Glass stepped down in early 2000, he was replaced by his heir apparent, Lee Scott. Scott joined Wal-Mart 20 years ago and was named COO and Vice Chairman of Wal-Mart, in preparation for the CEO position. Because Wal-Mart groomed the next CEO ahead of time, the transition in leadership has been seamless for this retail giant. Local firms have not been outdone in this respect. In June 2007, after 28 years of service at Jamaica Producers Group Ltd (JP), Dr Marshall Hall, former CEO of the Company, handed the control to his son, Jeffrey Hall. Jeffrey was the Business Development Manager at the time and sat on JP’s Board since March 2004. Prior to that, he was the Divisional Director for Bananas. Hall was mentored by his father for many years, and knew the ins and outs of the company by the time he was nominated to lead the firm.

Companies that have a history of successfully transitioning leadership have a routine of grooming people for the top position. The first step is to identify gaps between the required leadership and the existing talent pool. If the retiring Directors/Managers were responsible for sales dynamism, strict financial control, key account customer loyalty or engineering innovation, these critical skill gaps will need to be seamlessly filled. The range of skills and employees’ competencies are then developed in the most cost effective ways to fill these gaps. As a result, strong leadership is built in the organisation which helps the business not only survive but thrive in the marketplace amid difficult conditions.

Through effective succession planning a culture of strong leadership will be developed throughout the firm whereby employees show effective leadership at all levels. GraceKennedy Ltd (GK) understands this, and has been developing its succession plan since at least 2006. In 2008, it announced that it had implemented a structured succession plan for all senior management functions across the group. The Company has been transparent about Douglas Orane’s retirement as Chairman and CEO of the Group. Though no date has been set yet for his departure, investors are not perturbed, as they have been kept in the loop about GK’s succession plan.

Strengthening leadership capacity throughout the organization will not only enable a highly successful transition but also mitigates any disruption from the departure of key personnel. Another advantage of succession planning is that rather than just being a way of averting the dangers of a foreseeable management vacuum, it can be an opportunity to refresh, revitalise or reposition a staid enterprise in a rapidly changing world. It is an opportunity for companies to:

• Analyse its leadership needs presently and in the coming years;

• Develop a strategic leadership plan that includes comprehensive position descriptions;

• Build relationships with and carefully study the performance and behaviour of successors over a long period of time;

• Provide a sense of direction, stability and expectations for all key stakeholders: employees, customers, shareholders and vendors; and

• Hang on to a valueadding employees who might otherwise have left if not formally included in the succession process

Change, a major component of a succession plan, is exciting and can bring a company unforeseen rewards. Furthermore, if executed correctly, succession planning can inspire employees to stay involved and maintain company loyalty. It’s true that a succession plan is often put into place to avert catastrophe, but it’s also a company’s way of embracing the future, a strategy that is essential for survival.

Deon McLennon is an Investment Analyst at Stocks & Securities Ltd. You can contact him at dmclennon@sslinvest.com.