The role of the board in succession planning

Friday November 27, 2009
The role of the board in succession planning
Whose Business Is It Anyway? - By John Zinkin


FRANCE’S President De Gaulle is reputed to have said the cemeteries of the world are filled with the graves of indispensable men.
The sad truth is nobody is indispensable and therefore succession planning is critical to the sustained success of any organisation.
Yet time and again, boards fail to plan succession effectively.
In case boards think succession planning is an operational problem, or is too sensitive for them to get involved in, directors must remember that it is in fact one of the six principal responsibilities of a board.
The Malaysian Code of Corporate Governance makes it quite clear that boards must oversee: “Succession planning, including appointing, training, fixing the compensation of and where appropriate, replacing senior management.”
Chapter 1 of the Green Book on Enhancing Board Effectiveness reinforces this, stating that boards of government-linked companies are responsible for selecting the CEO and proactively planning for succession as well as understanding the pool of future leaders.
Many boards do a good job of finding and replacing CEOs. Few, however, understand the bench of talent below the CEO, consisting of the organisation’s first and second line.
Yet it is their responsibility to know these people well enough to make informed judgments when their names come up for review.

Boards must therefore realise that they are not just responsible for making sure that the right CEO is appointed and that he/she is performing according to their expectations; they are also responsible for ensuring that the senior management members are fit for key roles.
This means boards must understand the key jobs in the first and second line of management, what the responsibilities entail, the required skills and competencies to do the jobs, the appropriate personality attributes, and of course the required values, which I discussed in my last article.
They then must have a clear picture of how each candidate for the jobs in question fits these parameters: Do they have the necessary skills and competencies? If not, can they acquire them in the time available before moving into the job? Do they have the right temperament for the job?
Not all senior jobs require the same personality characteristics, and putting people with the wrong temperament into jobs can be a guarantee of failure, even if they appear to have the right skills and competencies.
As Peter Senge pointed out, there are three types of leaders: captains, navigators and shipbuilders. They have quite different skills and temperaments.
Captains are good at deciding where they are going, when they will leave port, when they need to arrive, and at allocating crew responsibilities accordingly.
They are in their element when the ocean gets really rough and unpredictable.
They are highly skilled at energising the crew to do the right things at the right moment, and this is never more important than in a typhoon that risks sinking the ship.
Captains must be good communicators, as the phrase “this is your captain speaking” makes clear.
Navigators are skilled at plotting courses once they know where they are going and how long they have to get there.
They will evaluate all the options and advise their captains on the best route to take, what course corrections are likely to be needed and they track progress continuously to make sure that when the typhoon strikes, they can take avoiding action and still get back on course.
From a technical perspective, navigators need higher levels of skill than captains, though their interpersonal skills do not have to be as highly developed as they have less communicating to do.
Like captains, navigators must keep calm in typhoons and work out alternative courses of action for their captains to take.
Thus good captains need good navigators to succeed. Yet both need good shipbuilders, for if the ship is poorly built, it will not respond to the navigator’s course corrections.
It will not matter how effective the captain is in telling the crew what to do; the ship will still run onto the rocks and sink.
So shipbuilders are essential. But we need to remember that good shipbuilders build ships in dry docks.
Temperamentally they are not good at dealing with typhoons. They need the certainty of dry land and are less good at handling the uncertainty of the ocean.
They are not quick decision-makers, but great project managers instead. Putting a good shipbuilder in the role of a captain or navigator in a typhoon is to ask for trouble.
Successful companies need these three types of leaders at all levels in the organisation and they must be able to work together.
Boards must recognise this and understand which type of leader they are dealing with in succession planning lest they choose wrongly and risk sinking the ship.
• The writer is CEO of Securities Industry Development Corp, the training and development arm of the Securities Commission.