Succession planning

Why is succession planning so important?

Tesco was praised this week as the shock announcement came that Sir Terry Leahy would be retiring next year was accompanied by the announcement of his replacement, international and IT director Philip Clarke.

Succession planning is an important element that businesses, particularly large complex ones such as Tesco, need to take seriously.

A good succession plan can be beneficial not only for business, but also for the staff, says KBC Peel Hunt general retail analyst John Stevenson. “Hiring internal candidates isless likely to be disruptive to the business and day-to-day operations, as they are already ingrained in the culture.”

Seeing people promoted through the business can lift morale and encourage them to develop themselves for promotion, adds Stevenson. It also keeps skills in the business.

What is the key to successful succession planning?

It is important when looking for future leaders to try and keep people in the business and incentivise them not to jump ship. Stevenson says the key is to invest in staff at every level of business. “Internal promotion has to be embedded in the culture to give staff confidence to progress within the company,” he adds.

Who has done it well?

Tesco’s loss of the visionary Leahy was tempered by praise for the retailer’s impeccable succession planning, with Clarke taking over as chief executive next year.
“Leahy has managed to build an unbelievable team to replace him, which leaves a seamless succession plan,” says Moira Benigson, managing partner of executive search firm MBS Group.

“This is part of being a good chief executive, not just what you do for the business,” she adds.

Who has done it badly?

At Marks & Spencer, Stevenson says that the “12-month hiatus” that ensued when Rose announced he would step down as chief executive affected the strategy planning at its 20/20 strategy meeting in October last year. “It was only possible to have a medium-term view of strategy because there wasn’t any knowledge of the changes the new chief executive would bring,” he says.

What problems can it cause?

Hiring candidates internally does have its disadvantages beyond colleagues vying for the same position. “External candidates are necessary to bring in new thinking. You have to pepper your internally hired team with external ones to be successful,” says Benigson.
Joanne Ellul