Succession planning is the process of identifying and developing employees who can fill key positions in a company, when there is a vacancy, whether planned or unplanned. An efficient process ensures that the business continues to operate efficiently at all times and does not suffer following the exit of any person. It starts with identifying key positions. Succession planning is an important part of Business Continuity Planning (BCP), which is integral for each company. It is the people in a company that set it apart from its competitors.

Given the importance of succession planning, SEBI LODR Regulations, 2015 has made it mandatory for the Boards of listed companies to oversee the process of succession planning, and to satisfy themselves that adequate plans have been made for succession of both Directors and key senior management persons. This has to be disclosed in the Annual report. The Nomination and Remuneration Committee is usually tasked by the Board to oversee this process.

While succession planning for employees is considered to be an HR job, it is often a good idea to take the help of professional advisors to help evaluate the succession plans objectively. Some of the areas where professional advisors could add value are –

• Mapping key positions: While HR of the company would be able to identify the key positions, it is a good idea to also have a signoff from an external firm, to help objectively oversee the mapping.
• Identifying potential internal candidates who could be groomed for higher responsibilities: The two approaches to succession planning that are often spoken about are promotion of internal candidates or hiring from outside. These are contemporary approaches. Some companies believe that promotion of internal talent is a good option since it helps in motivating employees. To identify the potential candidates, in order to to upgrade them, there needs to be a process to shortlist such persons. This involves 360 degree assessments and feedback from persons working with the concerned person. This task is usually given to an external expert.
• Grooming the internal candidates: To groom internal candidates for higher responsibility, companies usually put the person through training programmes and coaching/mentoring. While training programmes often helps develop skillsets that might be lacking or may be inadequate, coaching/mentoring often focuses on the softer aspects of the person like leadership style etc. External experts have updated and customised training modules, depending on the requirements of the company. Coaching and mentoring are also often best arranged by external experts since the candidate would feel more comfortable sharing his/her thoughts.
• Succession planning of persons other than CEO/ CXOs: In the past, succession planning was considered important for key positions within the company, such as those of the CEO and other CXOs. Of late, however, on account of Covid-related uncertainties, there has been an increasing amount of focus being given to succession planning of middle level management as well as Board members. Forward looking family-owned businesses too are increasing their focus on succession planning for key positions, including that of the Founder, especially in companies with first generation founders. These efforts are augmented by working with an external consultant since best practices from the industry can be introduced.
• Succession planning for Board members: Board members usually have a fixed tenure, and it is known well in advance when the tenure will end. Most companies wait for the tenure to be completed before inducting a new Director. However, identifying and onboarding a new Director too is a time-consuming process. Instead of waiting for the term to be completed, it would be ideal if a Board can start the identification, and if possible, onboarding, of the new Director before the tenure of the outgoing Director is completed, since this would have the benefit of an overlap. While the network of existing Directors would help while suggesting potential Directors, it is a good idea to hire an external consultant too so that a broader pool of potential Directors can be considered.

Getting the best from wherever they might be, always goes a long way for successful businesses.