IIC Partners

By IIC Partners
Aug. 6, 2012

Diamond, credited with a meteoric rise in Barclays' share price starting from when he joined the retail bank in 1987, until just before the banking crisis of 2008, allegedly had some knowledge of a Libor and Euribor fixing scandal which saw Barclays fined a record £260 million ($US450m) by UK and US regulators. 

In Barclays' official statement announcing Diamond's resignation, Marcus Agius 'unresigned'. Barclays said: "Marcus Agius will become full-time chairman and will lead the search for a new chief executive. Marcus will chair the Barclays executive committee pending the appointment of a new chief executive."

The board of Barclays' swift response to the situation demonstrates the strength and agility of the organization - and the fact it had the capability in place to immediately replace Diamond.

"Agius seems to be acting in the way he thinks is best in the circumstances. But, the harsh reality is that whatever course of action he took he would have been criticized, as that's how media and commentators work," Cranfield University's School of Management Executive Development Director Paul Hughes says.

"It was a very pragmatic course of action for Marcus Agius to take, and he is demonstrating he is taking responsibility for sorting this mess out, because it is a bit of a mess - but that's all it is and these things happen all the time. The problem with situations like this is that by their very nature, they cannot be foreseen. Six months ago, who could have seen this coming?"

Hughes points out that Barclays has been one of the few retail banks, and only British retail bank, to emerge from the financial crisis unscathed.

"The Barclays board kept a strong bank when others were failing. Barclays moved swiftly to seize the opportunities of Lehman's collapsing, they rolled out a customer reinvigoration programme in 2008/9, they rebranded themselves as retail friendly, investing heavily in a revamping of branches and customer marketing. Taking a glance at the share price from this period and comparing it to competitors shows how highly the market viewed this strategy."

Hughes says in appointing Marcus Agius as a temporary executive chairman, the Barclays board have not done the wrong thing. "But in complaining about his reinstatement, the challenge must go to shareholders about where their priorities lay. Shareholders have a responsibility that goes beyond complaining about executive pay - they would be well served to take an interest in the succession planning of the top team, but they tend not to. And analysts? Well, analysts pay lip service to the notion and know as much about succession planning as I know about milking a goat!"  

Hughes says succession planning is a widely misunderstood process and tends to be very backward looking.

"There is still a lot of baloney out there. There's a lot of buzzword bingo going on in organizations - 'best practice', 'best fit', 'leadership pipeline', 'war for talent' and so on. Most of it is as well researched as herbal medicine. And it's one thing most organizations don't learn from when things go wrong - they muddle through.  Especially at board level. And if it's not happening there, then what incentive is there for those below to follow?

"Succession management projects become a box tick exercise and the project itself becomes all consuming and about the project itself, not about the outcome. Detailed project planning is often mistaken for bringing credible insight. People tend to underestimate what capability is actually required. Those managing the succession planning process are often fuelled by pseudo scientific pronouncements supporting pre-existing beliefs. Or worse, apply solutions copied wholesale from somewhere else in the classic 'me too' fashion. Few appreciate or understand the real difference between using 'best practice' and 'best fit', or how the latter is strategically the better option in most organizations. Though even this approach doesn't guarantee you get a good outcome."

Hughes cites the case of one international retailer which saw itself as an "egalitarian mediocrity" where "everyone if they worked hard enough could advance and be promoted" when it  came to how talent and succession planning happened.  But the reality was far different.

"They believed they were quick to give opportunities and to promote people. Everyone had an anecdote and a story to prove this. Everyone knew someone who started as a part timer and who became a business unit manager. But when the statistics were reviewed, in reality, these people were the exception - outliers - and the norm was that most of their people were not being developed. On finding out the truth, the review project was shut down, even though it had started to create positive solutions to solve the problem. The truth was the board couldn't be convinced the problem existed. They still clung to their pre-existing beliefs."

And this is common - often the stated values of an organization are very different from the actual enacted values and this finds a way to impact on succession planning.

"Boards are by and large far more dysfunctional than people realize. This isn't a popular view, but it is an honest one. At Cranfield we have one of the world's largest databases on board behaviour, complied by Professor Andrew Kakabadse, and the reality is that most boards have a poor grasp of their value proposition. Very few boards define what their purpose is and how they are going to achieve it. Most sitting on boards are hired because everyone assumes they fit and that they will know the answers when needed. That myth is only shattered when a crisis happens. "

Hughes says in his view succession planning ought to start at board level, beginning with articulating where the organization is going - and how it is going to get there, its strategy and what numbers and actions the firm is going to try and achieve. When this is done, the next step is to look at the capability needed, not the competencies. Competency is limited and merely specifies  the skills needed to do something. Capability means someone not only have the skills to do a task, but can execute it successfully. Capability takes into account the capability needed from the individual in a given context.

"Rarely in a business plan does it outline how a company manages it most valuable asset - its people - in a novel and believable way. Yes, you'll see lots of great pronouncements about people strategies and so on, but very little to show that the company is investing to understand and stay abreast of its ever-changing capability needs," says Hughes.

"While the organization's ultimate responsibility and accountability for succession planning should sit with the board, this should be delegated to HR and line managers, as with other HR practices.

"Ultimately, succession planning is about having people of the right capability filling the roles that create value in organization. It's about putting in place the right mechanisms to make sure those roles are looked after. It's often instead focused on leadership - but in my view this is often a mistake as leaders can take care of themselves.

"Succession planning gets stuck on leadership because organizations are still very backward looking at selecting leaders. Yes, future leaders need development and opportunity, but they will learn best by being educated and given increasingly challenging and stretching assignments.

"This view is slowly changing - though too slowly in my view - that succession planning means future leaders. More are coming around to the view that it is more important to find the roles which create value in an organization and where, if someone left, it would create a value creation loss. 

"Which illustrates perfectly how beliefs and pseudo science fuel much of the activity around succession planning. Many crazy projects get a run on succession planning, but there is little evidence few have more efficacy than the simple but effective 'person behind the person' view of always having an heir."

Mark Keech, Director at IIC Partners' Australian affiliate firm de JAGER & Associates, is the former Asia Pacific Talent Acquisition Director for Johnson & Johnson, where he spent more than a decade in the HR function. Johnson & Johnson is widely regarded as setting a benchmark for corporate succession planning.

"Everyone in Johnson & Johnson at a senior level knew one of their most important responsibilities was to do themselves out of a job. Everyone was expected to develop an 'heir and a spare' - it was really part of the culture of the organization.

"If you didn't have a strong replacement pipeline for yourself, and if you were not ensuring your downstream reports did also, you could expect to be held accountable as not meeting your performance requirements. Successful performance was not just about meeting usual business objectives such as sales and profit targets.

"Of course, these were required as measures of short term operational performance, but strategic objectives were all about creating long term sustainable success. There was a fundamental organizational belief that talent was critical to drive long term growth and value. So talent, organisational capability and succession planning targets were on every senior leader's performance objectives and a stellar sales or profit outcome alone was not enough to be considered a star.

"It was only this deep organisational commitment to succession planning that made it a reality rather than a 'tick the box' HR activity.

"What I know to be fact is that unless you have a really focussed process of regularly setting succession planning targets, reviewing talent bench strength, taking strong and decisive action to find and develop talent, it ain't going to happen by itself.

"Without strong succession plans which are relentlessly implemented, people stay in their current jobs, get stale, block the development of talented people below them and you end up with a moribund organization. This creates a disastrous downward spiral as high potential talent see their opportunities to develop and advance stifled - and they vote with their feet. Succession planning is really an engine for business growth and success, and for retaining good people.

"I know of a large company in Australia where a person in a key senior position has been in that role for 20 years. It's a happy hunting ground for us as an executive search firm as there are some great people, ripe for the picking, because anyone who is bright has to leave to progress their career.

"This is not just our judgement, it is what we are told over and over by people in the market. A current managing director of a rival firm told me, 'That's why I left. I knew I'd never get the top job.'

"A lot people avoid succession planning because they are fearful of the risks. It is true that if not managed skilfully the risks can be problematic - if individuals discover they are not in line for certain roles they might leave; if succession plans are communicated then they are regarded as 'promises'; if plans don't eventuate exactly, then people will become disengaged. But all these fears are unnecessarily pessimistic. The risks can all be mitigated if succession planning is handled professionally and transparently, so people have a line of sight, six months out, 12 months out, two and three years out. Talented high potential people know that depending on their performance and opportunities they will progress.

"And it's as important in small firms as it is in large multinationals, perhaps even more important. My wife runs a small business with just her and a few staff. Big organizations have lots of resources and they are in a position to pull people from all over the place if they need to. In small organizations you are so single point sensitive. A small number of people are absolutely critical to business success. If something happens to one of them and there is no successor, the business can fold overnight. My wife is on the fourth version of her succession plan with three different succession options from within the extended family as well as outside. In her case she is developing an 'heir and two spares'."

And in a medium sized family business, there are of course the added element of emotion - and family.

Retained executive search firm Eblinger & Partner is headquartered in Vienna and was started by  Peter Eblinger  in 1991. His daughter Charlotte Eblinger, and her brother Florens, have now taken over as co managing directors of the firm.

In 2004, Eblinger & Partner began a carefully planned succession planning process using external coaches.

By 2012, by the time they actually took over the reins of Eblinger & Partner, both Charlotte and her brother Florens were highly successful in their own right. Florens had been managing director of his own company which had launched his own recruitment website. Charlotte had joined the family firm after carving out a successful career as its PR and marketing consultant and then becoming a senior consultant.

"When I finished school and my studies I didn't know what I was good at. I knew I was good at talking and dealing with people,  but I thought everyone was good at that.  And I am really, really interested in other people and their stories and so this business was ideal. It is lucky my father founded an executive search firm and not a butcher's shop!" says Charlotte.

"We had employees before I joined the company who clearly thought they would be my father's successors and when I joined the company it became very clear they had this plan and they ended up leaving."

But isn't it reasonable that if a firm has two employees who are delivering and creating value, those employees might believe they would progress and possibly one day head the firm?

"Yes, but the plan was just in their minds. It was just their idea. They never discussed it with my father and he never led them to believe they might have such an opportunity. They should have asked and not relied on a plan they had developed without any communication.

"Shortly after I took over with Florens, two female employees left and told me 'I wanted to work for Peter but not for you Charlotte.' I told them, 'Then I don't want to work with you - this is my family business'. We also lost clients when my father left, but we got new clients because my father left. We are the same firm, but we are different. Eblinger & Partner is a brand and it stands for something, but it is a family business."

The succession process finally concluded in March of this year when Peter and his two children finally had closure on Peter's departure, some three months after Peter left the office one day, and did not return.

"We made a mistake. He stepped down in a lot of steps -  working five days then four days, then  three days, then two days. Then we missed the day he really stepped out. There was no event, no one congratulated him after 21 years in the business and no one said good bye. We totally missed it."

"We met again in March because we wanted closure. We talked about what everyone was thinking. It was very painful. In a family business emotions are sometimes very strong and it is better to express them. We talked about trust. We had to tell Peter, 'We won't kill your company - it's our company now and we're grown-ups with our own children and we know what we are doing with this business.' I have no problem being his child all my life as he will be the father all my life, but he had to respect that we are able we are well educated and really capable of handling anything.

"Peter's aim had been to be a very successful founder of a company he could give to his children. What  he didn't realise was in giving it to us, he had to give it up. The company needed Florens and I, but we are not Prince Charles and we were not going to wait until we were 60 or 70 to take over!"

So what advice would Charlotte give to family businesses embarking on a on succession planning programme?

"Each case will be very different. The most important thing is to talk - a lot. And to not talk by yourselves. Get an  external, objective person who will say, 'Did you hear what the other person said?', 'Let them finish the sentence', 'What are you expecting here?'. Before this starts, every member of the family should ask themselves 'Is it a good idea if I take over the company?', 'Am I able to do it?'

"If you fail, you could ruin not just the business, but the family."

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