U6A1-24 - Part II - Job Description and Delivery Model

A P P E N D I X I I

CASE STUDIES ON SUCCESSION PLANNING AND MANAGEMENT

The case studies in this Appendix are meant to represent a broad range of succession planning and management programs drawn from previously pub- lished accounts. They represent both best-practice and typical-practice cases. Read them and note the similarities—and the differences—that exist in succes- sion planning and management efforts across a spectrum of organizations.

Case 1 : How Business Plans for Succession:

Matching Talent with Tasks

With 61,000 workers in more than ninety countries, Dole Food Company Inc. has talent all over the world. Only a few hundred of those employees are in top management at the 151-year-old company headquartered in Westlake Village, California, which produces and markets fruits, vegetables, and flowers. Trouble is. Dole doesn't have comprehensive knowledge of who these managers are or what they can do.

To be sure, business-unit leaders know their own direct reports well—their strengths, weaknesses, experience, and career goals. The problem is, these lead- ers have no way to share that knowledge with other business units. If a key job opens up in North America, the business-unit leader wouldn't know if the perfect candidate worked in another Dole unit in South America. Dole has no way to match its top managerial talent with its executive needs.

But that is changing. The highly decentralized company is launching a suc- cession planning process, supported by Web-based software, through which Dole executives hope to rectify their inability to promote the best and the bright- est across the corporation.

"We are looking to execute an organized process where we will identify weaknesses and strengths of our people and build plans to deal with that," says George Home, Dole's vice president of administration and support operations.

Source: Bill Roberts, "Matching Talents with Tasks," HR Magazine 47:11 (2002), 91-93. Used with permission of HR Magazine.

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"We also want to identify areas where we will need to bring in some people from outside to fill some gaps at the top."

Knowing Your People Succession planning used to mean that a company president hoped his oldest child would join the family business and replace Dad someday. If not the oldest, then any child would do. Today, succession planning—also called workforce planning or progression planning—means having the right person in the right place at the right time for the right job, says Ren Nardoni, senior vice president at Pilat NAI, a Lebanon, New Jersey, subsidiary of Pilat Technologies International Ltd. of London. It means knowing your people; knowing their strengths, experi- ence, and career goals; and knowing where they need development. Succession planning helps HR and managers know what to do if a position becomes vacant. "You're looking for the vulnerabilities of the organization," he says.

Succession planning has grown more important since the 1980s and picked up steam in the 1990s. These days, experts say, most Fortune 500 companies take succession planning seriously, and many smaller companies embrace it. Marc Kaiser, a consultant with Hewitt Associates in Lincolnshire, Illinois, says savvy companies recognize that they must be prepared to tackle the leadership gap created by retiring baby boomers. The ability to easily automate succession plan- ning using the Web also drives interest. "It is easier now, and that's one reason people are doing it," he says.

Most companies that adopt succession planning automate it with software. Nardoni estimates that 50 percent to 60 percent of the Fortune 500 and 30 percent of the largest 2,500 U.S. companies have installed succession planning systems, either stand-alone software or the succession-planning module in their HR man- agement system (HRMS). "Our average client starts with succession planning for between 150 and 250 positions. The minute you get above 50 to 75 positions, it becomes a pain in the butt on paper," he says.

Government agencies, such as the Federal Aviation Administration, also em- brace succession planning, Nardoni says, because they have to plan for people moving in and out and retiring. However, the government's succession planning initiatives don't have the same intensity as those of the Fortune 500, he adds.

Succession planning correlates positively with the bottom line, says Nardoni. Kaiser points to a 2002 Hewitt study, "Top 20 Companies for Leaders," that

shows that companies with reputations as good places to work have stronger succession planning and commit more resources to it, including the CEO's time. Hewitt surveyed some 348 HR executives and CEOs at 240 publicly held compa- nies on various leadership topics, identifying companies that succeed in attract- ing, developing, and retaining leaders, and noting the practices that influenced their success.

Dole's Culture Change Succession planning was one of several corporate-wide initiatives Dole launched in the past 18 months to decrease decentralization in an attempt to improve the

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bottom line, Home says. The company was No. 353 in the Fortune 500 in 2002 with revenues of more than $4.6 billion.

Historically, Home explains. Dole's seven business units were so autono- mous that corporate wasn't much more than a holding company. When Larry Kern became president in Febaiary 2001, he set out to keep as much decentral- ization as made sense while adding some corporatewide accountability and processes.

Succession planning (Dole calls it progression planning) was one such change. The process itself would require a change of culture and could become an agent for further culture change. "The idea of succession planning is contrary to being highly decentralized," says Sue Hagen, vice president of HR for North American operations, who led the effort.

Although Dole's annual turnover rate among top management is less than 10 percent, succession planning was on its radar screen for years, says Hagen. "Tal- ent is scarce. Time and cost to ramp someone up in our business is difficult and costly. It makes going outside more difficult."

Hagen talked informally to all corporate executives, and the leaders and staffs of each business unit, to generate consensus for succession planning for corpo- rate positions—corporate officers, business unit presidents and their direct re- ports. The initial group would be about 100, she says. Next year, another few hundred will be included.

The reaction was mostly positive, Hagen says. "We got a range of responses. It was more an issue of education, especially for the businesses based outside the United States. We had to educate them to what the objectives were going to be and why we do it centrally rather than decentralized."

Senior management approved the project, and Kern is especially enthusiastic, Hagen says. "He wants us to maximize the internal talent we have."

Defining the Processes Hagen's next step was to hold a series of in-depth interviews with the executives to determine which succession planning processes were needed and how often they should be conducted. The goal was to reflect as much of their thinking as possible. "One division wanted to review succession plans on their people six times a year. Another didn't want to do it at all," she says. Hagen compromised: Succession planning will be conducted twice a year. She also identified four com- petencies on which everyone would be evaluated: accountability, business acu- men, multifunctionality (cross-training), and vision/originality.

Kaiser and another Hewitt consultant. Lisa Labat, assisted Hagen with the Dole project. "One of the first questions we ask organizations is, 'What are the business needs?' " says Labat. They also ask, "What is your business today and where are you going to be taking it? What does that mean for the talent you need in place, especially at the top?"

Hagen did not want software to dictate the process, nor did she want to create a process and then search for software that exactly fit. Instead, she started to look

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at software while developing the process itself, looking for a package that is flexible, needs little customization, and is easy to learn. The Hewitt consultants pointed her toward several products but did not participate in the selection. Hagen also networked with other HR professionals who had adopted succession- planning software.

Many HRMS software suites have an optional succession-planning module, but neither Dole nor its business units have an HRMS. Since most employees are farm or factory workers, there is not much need for the detailed information an HRMS provides, says Hagen. "It would be overkill." In a way, the succession planning software Dole adopted will become a mini-HRMS for top personnel, she adds.

Hagen also wanted an application service provider (ASP) model. Outsourc- ing, including payroll, is common at Dole. Hagen didn't want to own and support technology, and she didn't want the small corporate information technology staff to have to work on it.

About 20 percent of the requests for proposals that Pilat NAI sees request an ASP model, and 50 percent want information about that option, Nardoni says. He expects 25 percent or more of his business to be ASP-based in the next two years.

Hagen identified products from nine companies and asked for presentations from four. She chose Pilat NAI's succession planning software because it was cost-effective and flexible. The inner workings ofthe system are invisible to Dole.

Pilat NAI runs the software on one of its servers for a monthly fee based on the number of users who will be system administrators plus a flat fee for the first 1,000 records stored on the software. Hagen serves as vendor manager, and a coworker handles day-to-day contact with Pilat NAI regarding development, troubleshooting, and user issues. The contract spells out confidentiality and fire- wall protection for the data.

Hagen began the project in March, selected the software in April, and began installing in May. The project began to roll out in September, and Dole expects to produce the first reports for management by the end of this year.

A Plan for Each Manager Installation required less than 10 percent customization and did not require the full-time involvement of anyone at Dole. One HR person pulled data from the payroll system and fed it into the succession-planning database, but that was a onetime task. The basic data gives users a starting point.

The users—top managers—access the program from the Web with a pass- word. They fill out a resume, including career interests, and note any mobility restrictions. They assess themselves on the four competencies. When they are done, the system automatically notifies their manager, who does an assessment and indicates whether he or she thinks the individual could be promoted. The manager also assesses overall potential and the risk of losing the user. This as- sessment then goes automatically to the division head, then the divisional HR director, then Hagen.

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All assessments will be pulled together in a report, to be reviewed by Kern, Home, legal counsel, and the chief financial officer. Hagen will use the informa- tion to create a career development plan for each individual, including seminars she'll organize. She'll also direct business unit leaders to potential candidates in other units when they have appropriate openings.

"The beauty is, for the first time we'll have a database that ties together these talent metrics and can serve as a clearinghouse for people available for opportu- nities," Hagen says. The system will also help Dole identify where it has talent gaps so it can better recruit from outside, adds Horne.

Dole's corporate management hopes all business units will eventually adopt similar succession planning processes and software, Hagen says. "I view this as a pilot, a very visible pilot," she says. "To get the buy-in of individual business units, we'll show them that this was adopted by their senior management and that it works."

Case 2: How Government Plans for Succession:

Public-Sector Succession—A Strategic Approach to Sustaining Innovation

In the public and private sectors alike, demand for change is the one constant. There is a loud call for leaders who can accommodate change personally and who can initiate and drive broad changes in their organizations. These demands make sense but raise a troubling issue. By relentlessly insisting on change, are we risking the loss of innovations recently realized? This is a particularly salient question for public-sector agencies, which are currently under attack from all sides.

In this article, I assert that while change must be on the agenda of any public agency for its very survival as well as for the public good, it is just as important to ensure that gains achieved in one administration be given a fair assessment and not be jettisoned, without review, to the god of change. Indeed, the impor- tance of "sustained innovation"—essentially keeping change alive—is an increas- ing challenge for public agencies.'

Will innovative programs created as a response to social problems be allowed to live out their "natural" lives, or will they be killed off before their time, inde- pendent of performance and outcomes? This issue is particularly acute in the transition between elected or appointed government officials—especially in a highly politicized environment that limits government's capacity to continue ef- forts across administrations. Moreover, one critical tool available to the private sector, succession planning, is rarely used by public agencies because the execu- tive's fortunes are generally tied to a particular administration. Many public-sector leaders have devised strategies for continuing efforts across administrations.

Source: Ellen Schall, "Public-Sector Succession: A Strategic Approach to Sustaining Innovation," Public Administration Review 51 :'^ (1997), 4-10. Used with permission oí Public Adminis- tration Review.

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Some establish support beyond the government, for example, from the business community or other local "elites"; some obtain early bipartisan political support. Still others avoid program demise by identifying a champion linked to the incom- ing administration so as to have a voice "inside," or by creating wide support within the agency (and other agencies) so that the new governor or mayor hears a consistent message. Finally, some administrators have succeeded in winning national recognition for their innovations so that discontinuing them is a per- ceived political risk.

As important as these approaches are, innovations also can be sustained by cabinet secretaries or agency heads engaging in succession planning, even though these people are as vulnerable to shifting political winds as their superi- ors. In fact, this level, where so much actual and potential innovation resides, represents a real opportunity for both preserving innovations and transferring them to subsequent regimes—provided the agency heads can, and will, extend their strategic vision beyond their own tenure. It is no longer sufficient to achieve change, difficult as it may be. The public-sector leader must learn to consider not only what can be but what will be, how what is achieved can be sustained. This requires future-oriented strategic thinking, which I argue must include attention to succession planning. Succession planning done well involves preparing the agency for a change in leadership, but it also includes assessing what has been valuable and how that can be preserved and transferred to the subsequent re- gime. It is this strategic, sustaining innovation aspect of succession planning that I focus on in this article.

First, I shall look at how research on succession in the private sector is both helpful and hindering for public-sector succession planning, especially in the realm of sustaining innovation, I will also examine the research that exists in the public sector and its relevance, I describe a series of constraints or barriers that must be overcome if succession is to be taken seriously in public-sector organiza- tions,

I present a case study drawn from my experience as Commissioner of the New York City Department of Juvenile Justice, where I served for seven years and managed my succession in a way that enabled the innovations that had been put in place to be retained and further innovations based on these to be created. I discuss the four interconnected strategies devised to implement this succession and show how they can help both in overcoming barriers to taking succession seriously and in shaping the legacy of a public-sector organization.

Succession and Succession Planning: A Brief Review of the Literature Most articles on succession and succession planning begin with a familiar lament: executive-level transition merits more attention than it gets in the literature (Rainey and Wechsler, 1988; Greenblatt, 1983; Gordon and Rosen, 1981; Austin and Gilmore, 1993). The relatively few authors who address the issue in the con- text of the public sector point out the even more serious gap on that side. The National Academy of Public Administration (NAPA), anticipating significant re-

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tirements in the Federal Senior Executive Service beginning in 1994, began a serious look at succession planning in the early 1990s (NAPA, 1992). The NAPA researchers also remarked on the lack of attention to public-sector transitions. In an article written in 1993, although published later, Farquhar refers to the "rapidly expanding" literature on succession (Farquhar, 1996), and in 1995, she edited a special edition of Human Resource Management on the topic of leadership tran- sitions (Farquhar, 1995).

Both the problem in the public sector and its consequences have been de- scribed by Rainey and Wechsler (1988), who argue, "Whether one adopts a broad or more specific approach to organizational performance and productivity, effec- tive transition management is essential to achieving positive results." At the same time, the authors characterize executive transitions at all levels of government as "marked by serious deficiencies in preparation, orientation, and communication" (p. 45). However, while noting that some research exists on the political manage- ment of transition at the presidential and gubernatorial levels, the authors do not make use of the broader literature on transition and executive succession that "would help guide an analysis of transition and change at the agency level— particularly within, not between, administrations.

Various frameworks help conceptualize transition generally and the issues that surround it. The most useful begin before the actual succession event (Rainey and Wechsler, 1988; Greenblatt, 1983; Gordon and Rosen, 1981) and draw atten- tion to what Rainey and Wechsler call the objective as well as subjective domains. But there is something missing even here. Greenblatt, for example, begins with what he terms the "anticipatory" stage but fails to capture the opportunity for a strategic view of this moment. Gordon and Rosen point out the need to attend to the time before the new leader arrives, but they still start with the new leader's being chosen. Rainey and Wechsler describe transition as a major "strategy influ- encing" event. This stops short of grasping transition's full potential to make, not just influence, strategy. They write as if the departing leader has no role in shap- ing the transition.

Although the literature gives some attention to the person leaving (Kets de Vries, 1988), more is given to the new leader and his or her dilemmas (Gouldner, 1950; Greenblatt, 1983; Gilmore and Ronchi, 1995). In a particularly interesting article on leadership during interregna, Farquhar (1991) examines 43 Legal Ser- vice Corporations and analyzes the dynamics and impact of interim administra- tions.

Other research distinguishes the important dimensions in which cases differ, arguably the most significant being the reason for departure. Not all CEO succes- sions are equally interesting for theorists. Fredrickson, Hambrick, and Baumrin (1988) suggest that firings and voluntary departures offer the most meat because only then are real choices made; their work focuses on dismissals. Austin and Gilmore (1993) also highlight the importance of the reason for transition. They outline various reasons and cite previous works on each—retirement, term expi- ration, protest, reassignment, illness, or death—but select for case analysis the

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leader who chooses to move on to a new opportunity. They are especially helpful in suggesting explicit strategies the departing leader can use to manage the exit process. On the topic of contemplating one's successor, Austin and Gilmore (1993, P- 52) comment, "It is striking how many executives have known that they will be leaving within a year or two and have not found a way either to focus on leadership succession or to expand the talent to help the organization cope with a change."

This is the territory that my article attempts to plumb further: the voluntary decision to leave, planned and discussed in advance, as opposed to the sudden and traumatic leaving that Farquhar (1996) has written about and strategically framed.

Taking Succession Seriously It is a serious matter that succession planning in the public sector, especially below the presidential level, has not, until recently, received much attention in the literature. However, a more critical issue is that it has not received much attention in the actual world of public service. This omission, in part, reflects the fact that leaders in the public sector have themselves not taken the issue of suc- cession planning seriously, except for obvious concerns like elections and man- dates. Doing strategic executive searches in the public sector is difficult, but that is a secondary factor. What is primary, I suggest, is changing public-sector culture so that focusing on succession and beyond becomes a hallmark of strategic lead- ership. The public-sector executive must begin to consider the end right at the beginning. The pull to get consumed by the demands of the present is strong but must be resisted. Creating a picture of what the leader wants to leave behind will actually help focus strategic choices as well as direct the leader's attention to often overlooked strengths of the existing organization.

Public-sector leaders must surmount four types of barriers to taking succes- sion seriously: (1) The leader's reluctance to take up the succession "task"; (2) The assumption that succession issues are beyond the scope of the leader's work; (3) Confusion about how the succession task should be framed—is it a matter of replacing oneself or of strategic "positioning?" and (4) Lack of information about how to take up the task—how to plan for succession in the midst of a shifting political environment and given regulatory and political constraints.

Reluctance to " D e a l " with Succession In The Hero's Farewell, a study of 50 prominent, retired, private-sector CEOs, Jeffrey Sonnenfeld (1988) discusses the "heroic self-concept of the departing leader" (p. 3) as having a great influence on succession. Part of that self-concept is a "sense of heroic mission, a feeling that one has a unique role to fill and that only the hero is capable of carrying out the responsibilities of the job." Sonnen- feld describes this attitude as "a barrier to the hero's exit" (p. 62). The greater the frustration with the heroic mission, and the more attached to the "heroic stature"

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of the office (another aspect of the heroic self-concept), the longer the CEOs Sonnenfeld studied stayed on the job (p. 69).

Sonnenfeld groups CEO attitudes toward departure into four categories rang- ing from complete reluctance to willingness. Monarchs will not leave voluntarily and either die in office or are overthrown. Generals leave with great reluctance and then plot comebacks. Ambassadors leave gracefully and maintain amicable ties to their old organizations. Governors are pleased to serve only a limited time and then leave to do something else, maintaining little contact with the company. Monarchs and generals are clearly the most averse to acknowledging that the end draws nigh, and that factor affects the likelihood of a succession planning process occurring at all.

Manfred F. R. Kets de Vries (1988) also writes about the reluctance of corpo- rate CEOs to tackle succession planning. As does Sonnenfeld, he focuses on the retirement-age CEO in the private sector who has to overcome the "hidden fears that plague us all" (p. 57) to face stepping down.

Drawing direct parallels between public- and private-sector research on suc- cession must be done carefully. Because the public sector has more short-term leaders than institution builders, one must take particular care in using the cate- gories Sonnenfeld has illuminated. Nevertheless, the public sector has its share of reluctant-to-leave leaders. Certainly there are generals who believe, against all evidence, that there is some chance they can survive even an unfriendly transition of mayor or governor and thus are averse to planning for a succession they do not want to happen. One also finds monarchs who are so imbued with their heroic sense of mission that they find it unthinkable that they ever would be forced to depart, no matter how unreasonable that belief may be. They therefore resist any attempt to broach the idea of succession, much less the planning for it.

The public sector has more than its fair share of governors, too. They seem an unlikely group on whom to depend for succession planning. Their investment in the agency is often minimal, as is the agency's in them. The hope for planning must lie with the ambassadors, primarily by encouraging them to enlarge the scope of their vision to include the task of succession planning.

Assuming That Succession Is Beyond the Scope of the Leader's Work Beyond personal reluctance lies the power of the group norm. The public sector is focused on the here-and-now, and authority is thought to be given, not taken up.

Both the private and not-for-profit sectors have a clearer focus on the future. While the American business community is sometimes criticized for attending too much to the short term, as compared to the Japanese, for example, it is clear that there are mechanisms and institutionalized roles within the private sector to carry the perspective of the future: the stockholders and the board of directors, if not the CEO. Regina Herzlinger (1994) has argued that this focus on the future and "intergenerational equity" is among the most significant responsibilities of the not-for-profit board. These future-oriented mechanisms and roles are weak or

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nonexistent in the public sector, certainly at the agency level. Those outside gov- ernment often call mayors and governors to task for budget wizardry that risks future crisis for present peace. If agency heads are held accountable at all, it is for their management of day-to-day problems, not their investment in the future.

The literature's lack of attention to accountability for the future both under- lines and reinforces the current situation. As more researchers turn their attention to this issue, it is possible there may be some shift in the public's expectations. It is likely, though, that it will need some greater push than that. Teaching in both graduate school and executive education programs can have a great impact. Just as faculty try to set a standard that expects strategic leadership from public-sector executives and discourages a narrow focus on fighting fires, teachers can extend their understanding of what it takes to be strategic. Faculty can "raise the bar" and draw a new picture of what excellence in the public sector demands: an attention to the future as well as to the present.

Confusion About the Succession "Frame" Succession planning, even in the private sector, has all too often been regarded as a replacement issue, not a strategic responsibility to be shared among the organization's stakeholders (National Academy of Public Administration, 1992; Kets de Vries, 1988). That is, the intent is to replace X by Y, who has similar skills and training. What is missing is the link between the vacancy, or the forthcoming vacancy, and the organization's strategic needs (Gratton and Syrett, 1990)— particularly those related to preserving the innovations it has achieved. Unprece- dented global competition is forcing companies in the private sector to rethink succession planning in this strategic light, and those failing to do so are increas- ingly being "punished" by either the market or their competition, and usually by both. I would argue that the need for such strategic thinking is equally acute in the public sector, albeit motivated by different factors. The approach, however, seems long in coming. Although some states have moved toward a more strategic view of executive recruitment, this effort has generally been initiated only after the leader has resigned or been terminated.^

Difficulty of Managing Succession in a Turbulent Environment There are actually two challenges to managing succession: technology and turbu- lence. Public-sector leaders have limited access to search technology and search firms; they may not even understand the steps in a strategic search process. The literature is thin on the subject and offers few clues about how to proceed. Turbu- lence now exists in all three sectors. It is not just in the public sector that strategic planning must somehow be both short- and long-term. The source of turbulence differs by sector (competition versus election, for example), but the swirling con- fused winds that each produces can make the process more complicated any- where. What separates the sectors is their reaction to turbulence.

Public-sector leaders too often allow the turbulence to limit their scope of action ("there will be a new mayor so I have no control"), whereas private-sector

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leaders are expected to "manage" the turbulence ("how can we move into this new market and fast?"). Elections need not doom the process of executive succes- sion. If the first three barriers could be overcome and leaders had the will—were expected to plan for succession and saw it as a strategic task—the technology could be acquired and the turbulence acknowledged but not succumbed to. Keeping these barriers in mind, we turn to an example of how a public-sector succession can be managed successfully and how hard-won innovations can sur- vive the transition.

Managing a Public-Sector Transition: A Case Study The New York City Department of Juvenile Justice was created as a separate executive-branch agency in 1979- I served as its commissioner for seven years, from 1983 to 1990. During my tenure, the department accomplished two major goals. We revitalized a bureaucracy that had originally been part of a "mega- agency" and had lost all sense of purpose and efficiency before being reincar- nated as a separate department in 1979 (Gilmore and Schall, 1986). We developed a clear mission and role for juvenile detention. Overall, we created an innovative organization, and believed that sustaining our innovations and the impetus to innovate were critically important.^ The executive staff of the Juvenile Justice Department had become a team in Katzenbach and Smith's (1993) sense. We had moved from being preoccupied with handling an endless supply of short-term issues toward building the capacity for and the pattern of looking ahead. Crucial to this focus was creating the notion of case management as a way to make real our newly defined mission of custody and care and to explore its implications for the children we served and the staff attending to them. Although I was offered opportunities to leave the department early on, I determined that two additional goals had to be reached before I felt "finished" enough to depart. The first in- volved institutionalizing our case management program throughout the agency. The second was receiving final city approval of our plans to replace a much maligned secure detention facility with two new, smaller, community-based facil- ities.

By early 1988, these goals were well on their way toward accomplishment, and I believed the time for new leadership was nearing. I discussed my role in the transition process with Tom Gilmore, an organizational consultant to the department and author of Making a Leadership Change (Gilmore, 1988). It is to his thinking and framework that we owe much of the work that followed, begin- ning with a retreat, in the fall of 1988, for the executive staff.

Launching the "Finishing U p " Phase During this multiday retreat, we began by discussing how our group was cur- rently faring and what work each unit in the agency would be undertaking in the next two years. Then, each executive staff member outlined what his or her own time horizon was likely to be, and how that did or did not dovetail with the work to be accomplished. In essence, we acknowledged we were launching a

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"finishing up" phase, with all that implied: pride in achievement, exhaustion from the effort, disappointment about unrealized goals, and full doses of the irritation and affection built up over the years. I announced my intention to leave at this time but did not actually leave for 18 months.

We then turned to issues of both legacy and succession: legacy to ensure that our innovations would survive and succession as a major strategy. As to succes- sion, we determined that we preferred someone from our own ranks. By the end of the retreat, not only had we "chosen" our candidate, the assistant commis- sioner for secure detention, she had begun to see herself as a possible successor. But how could we ensure that our legacy would be preserved? We invented four questions for ourselves, which we attempted to address simultaneously during the retreat and for the next year and more. We saw these challenges, in fact, as a set of Russian dolls, each nested in another:

• How could we get our candidate appointed as the next commissioner of the Juvenile Justice Department?

• If this failed, how could we get someone else who would continue our innovations and our vision?

• If this too failed, and a nonsupporter was appointed, how could we keep successful innovations alive?

• If all else failed, could we leave a "treasure map" so a future supportive commissioner could rediscover what we had done?

We tackled these questions simultaneously by scenario-playing, by anticipating pitfalls, and by creating alternative paths—^what Bardach (1977) calls the work of "dirty-minded implementors." Our strategies are discussed below in reverse order from the list of questions.

Designing a Treasure Map The idea was, if all else had failed, to provide the next supportive commissioner with a series of clues about our efforts—our treasures. We decided, for example, to leave behind the following:

• Traces of each of our innovative programs, rather than cutting any one (in the face of significant budget cuts) to spare the rest

• At least one staff person for each program so it could be fairly easily resur- rected

A A good written record in files and public documents about our accom- plishments

A Champions for each major initiative

More generally, we knew we were leaving behind a staff imbued with a vision of innovation and excellence.

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Our support and acknowledgment of the staff's good work had been a hall- mark of our administration, and we counted on their enhanced capacity to carry forward much of the innovation.

We were not naive enough to believe that, if discovered, our treasures would get resurrected under the same names and exactly in the same way. That was not the goal. We were not looking for eternal life; rather, we hoped that the clues might somehow provoke new ideas to sustain our momentum and direction.

Keeping Successful Innovations Alive The two new tactics we pursued were preparing people and "hardwiring" the system. We also took advantage of previous strategic decisions to help preserve our legacy of innovative programs.

Preparing People By early 1989 the executive staff began identifying talent at the next level down within each unit. Determining the criteria for such identification was not a simple matter, however, and provoked heated debates about overall skills, vision, agency mission, managerial ability, and other factors. Nevertheless, we compiled a list of about 30 people and then assessed each person's strengths and weak- nesses and the likelihood of the individual's staying on with the agency. We specified what each needed for professional development and began connecting her or him with appropriate opportunities—pledging that we would watch out for each other's staff and help them along the way. From this review, for example, we drew upon the talent of a staff assistant with the potential of developing managerial capacity and targeted a heretofore overlooked senior operational manager for more cross-agency work and exposure to the overall system. As we grew to understand who would be leaving, we discussed who could be groomed to take over.

Compiling this list helped immensely in focusing our training resources. As we learned of various city-wide programs, for example, we referred to our list so people on it could be offered these opportunities.

Hardwiring Some things in organizations have a life of their own; they go on against almost all efforts to change them. At the Juvenile Justice Department those things in- cluded the forms used to process kids. I remember two years into my tenure finding forms in use that predated the 1979 creation of the department as a sepa- rate agency. This infuriated me then. Later, it intrigued me. What about those forms made them survive despite our efforts to create new systems? They seemed almost like permanent fixtures of the agency; they were hardwired. In a deliber- ate effort to create an equivalent method with equal sticking power, we turned our attention to what we hoped might be our version of those old forms: the department's newly developed case-management computer-tracking system. We put a great deal of energy into moving that ahead. We believed that if a system

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was in place, hardwired, which in effect systematized the case management of individual children and reported data, it would carry a great deal of weight. We knew that weight could easily become inertia: it would take an effort of signifi- cant proportion to shift away from it.

Our focus on hardwiring also extended to the department's external relation- ships, particularly in the realm of oversight. "Blessed" with multiple agencies overseeing our work, we figured that if they became accustomed to receiving certain data, reported in certain ways, they would be likely to request that infor- mation and format subsequently and exert some pressure toward our case man- agement approach and system to receive it.

Strategic Decisions

Earlier, we had decided to run a community-based aftercare program ourselves rather than contract it out; doing so involved tremendous effort, including estab- lishing new civil service positions. We felt that in an (inevitable) financial crisis, it would be easier for the city to cancel contracts than to authorize layoffs, and we were right. We experienced successive rounds of budget cuts but were able to hold on to at least a core of staff. Also, our intensive home-based program. Family Ties, an alternative to costly state placement, was positioned as a revenue- enhancer: each staff person should not be charged to our budget as a cost, we insisted, but instead counted as saving the state and city together $70,000 per child placed with Family Ties. As a result, the Juvenile Justice Department actually added positions in the program when the overall budget was cut.

Finding a Successor W h o Would Continue Our Efforts Because New York City was facing a mayoral campaign (between David Dinkins and Rudolph Giuliani) as we were devising our legacy and succession strategies, we designed scenarios for each candidate based on whom he might want as commissioner of the Juvenile Justice Department. We brainstormed a range of issues including values, ethnicity, and gender and considered people fitting vari- ous profiles. We wanted to be able to present a list of real candidates if someone asked—and to present that list even if no one did. We then went on to think about who would likely be influential in the new mayor's decision-making proc- ess and whether we knew them or knew someone who did.

Getting Our Candidate Appointed David Dinkins was elected, and his approach to appointing commissioners was decentralized, bordering on the chaotic. Committees named for each agency were asked to interview candidates and make recommendations to the mayor. I knew the person chairing the Juvenile Justice group and talked with her directly. Along with others, our candidate was interviewed; she was recommended and ultimately selected to be the new commissioner.

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Managing the Feelings Although the decision to leave the Department of Juvenile Justice was strictly my own, and I strongly attempted to ensure that the transition was smooth, the proc- ess was hardly easy. Indeed, years after, when I began writing this article, I thought that I had announced my intention to leave six months prior to my depar- ture—only after checking notes did I realize it actually had been 18 months. This confusion reflects the difficulties involved. There were issues of authority, over hiring, for example, and the natural tension each of us felt between being ready to move on and reluctant to leave. Managing one's own succession is not a simple affair, which is why, in the public and private sector, the issue of succession itself and the process of seeking a successor are so often badly handled.

Yet I believe that when a team has invested as much as we had in creating and innovating organization, the work is unfinished if you have not attempted to think strategically about its continuation. Today, the department's case-manage- ment system and the Aftercare and Family Ties programs are all in place, although reduced by budget cuts. While my successor remained committed to the agenda we had developed together, she took the agency in new directions with a focus on prevention. She remained at Juvenile Justice for four years and her successor has worked hard to keep the basic programs in place and move the agency forward.

Moving Forward How can we persuade public-sector leaders to take up the task of succession? Sector does not matter when it comes to the leader's dark side; the wish to believe in one's own immortality and to stay in control (Kets de Vries, 1988) can be found in leaders across sectors. Although leaders in all sectors confront relentless demands on their time and energies, private-sector cultures work more power- fully to stress the need to plan ahead. We will have to cultivate that emphasis in the public sector if we seek it. We can begin by searching for stories or case examples of successful and strategic public-sector transitions. We can attempt to set the expectation through education, solidify it through public attention, and seek to attract ambassadors to the work of the public sector.

This is not the easiest of times to build a focus on the long term, however. There is a serious disconnect between the demands on, and expectations of, public-sector leaders and their lengths of stay. Perhaps the "connect" is all too clear: as citizens we ask a lot, offer little in terms of understanding and support (let alone compensation), blame easily, and reward infrequently. In any event, the average tenure of public-sector agency heads is less than two years. Given the impact of such a brief tenure on expected results, advice is being offered about how to shorten the learning curve or reach full speed more quickly. These observations, while well intentioned, seem inevitably to fall short. Public-sector leaders need to stay longer and focus more on the future to ensure the quality of government we need.

Democracies offer citizens an opportunity, through elections, to signal their

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preferences, and elected officials have the right to create new directions and change course. Yet both citizens and elected officials must avoid "change for change's sake." Not only can that attitude slide all too easily into simple-minded government-bashing, with the public increasingly losing respect for any govern- ment programs and any government worker; it also severely constrains govern- ment's capacity to go forward and build on the best of its efforts—in other words, its capacity to sustain innovation.

Both the public and those in the government need to learn to honor the past and build upon it. We must begin creating the expectation that the public sector can, and should, focus on the longer term. As I have suggested in this article, senior officials, whether elected or appointed, must not only think strategically during their tenure but also be oriented beyond their tenure. Developing the willingness and ability to devise an effective approach to succession planning is a crucial step in that process.

Acknowledgment The author wishes to thank Bob Behn and the participants in the 1994 Duke University Faculty Seminar on Organizational Innovation in State and Local Gov- ernment, sponsored by the Ford Foundation, for their reactions and assistance in working through issues of public-sector succession. Katherine Farquhar demon- strated extraordinary generosity in offering a thorough and thoughtful critique of an earlier version of this article. The comments of the anonymous reviewers are also very much appreciated. Finally, Tom Gilmore's earlier assistance and contin- uous support deserve acknowledgment here.

Notes 1. See Yin ( 1979) for an early discussion of the routinization of innovations. 2. In the early 1980s, the Edna McConnell Clark Foundation funded what

was then the executive search firm of Isaacson, Ford, Webb to be available to governors looking for new commissioners of correction. And the National Gover- nors Association, with funding from the Robert Wood Johnson Foundation, began a State Health Recruitment Center in the early 1990s that lasted no more than two years. Individual governors and mayors have turned to search firms from time to time, but most rely on a narrow pool of people they know.

3. The Department of Juvenile Justice won the Ford Foundation/Kennedy School of Government Innovation Award in State and Local Government in 1986, the first year of the awards program, for its case-management program for at-risk. youth. The department was also recognized in the Public Broadcasting System documentary, "Excellence in the Public Sector with Tom Peters." Additional pro- gram innovations included creating an Aftercare Program and adapting Home Builders to the juvenile justice system in a program we called Family Ties.

References Austin, Michael J. and Thomas N. Gilmore. 1993. "Executive Exit: Multiple Per-

spectives on Managing the Leadership Transition." Administration in Social Work, vol. 17 (1): 47-60.

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Bardach, Eugene.1977. The Implementation Game: What Happens After a Bill Becomes a Law. Cambridge, MA: MIT Press.

Farquhar, Katherine. 1991- "Leadership in Limbo: Organization Dynamics During Interim Administrations." Public Administration Review, vol. 51 (3): 210.

Farquhar, Katherine. 1996. "A Tough Act to Follow: Traumatic Executive Depar- ture and the Post-Transformational Context." Intemational Journal of Public Administration, December.

Farquhar, Katherine, guest editor. 1995. Human Resource Management, vol. 34 (spring).

Fredrickson, James W., Donald C. Hambrick, and Sara Baumrin. 1988. "A Model of CEO Dismissal." Academy of Management Review, vol. 13 (2): 255-270.

Gilmore, Thomas N. and Don Ronchi. 1995. "Managing Predecessors' Shadows in Executive Transitions." Human Resource Management, vol. 34 (1): 11-26.

Gilmore, Thomas N. 1988. Making a Leadership Change: How Organizations and Leaders Can Handle Leadership Transitions Successfully. San Francisco: Jossey-Bass.

Gilmore, Thomas N. and Ellen Schall. 1986. "The Use of Case Management as a Revitalizing Therne in a Juvenile Justice Agency." Public Administration Re- view, vol. 46 (3): 267-274.

Gordon, Gil E. and Ned Rosen, 1981. "Critical Factors in Leadership Succession." Organizational Behavior and Human Performance, vol. 27, 227-254.

Gouldner, Alvin W. 1950. "The Problem of Succession and Bureaucracy." In A. W. Gouldner, ed.. Studies in Leadership. New York: Harper & Brothers, pp. 644-662.

Gratton, Lynda and Michel Syrett. 1990. "Heirs Apparent: Succession Strategies for the Future." Personnel Management, January, pp. 34-38.

Greenblatt, Milton. 1983. "Management Succession: Some Major Parameters." Human Science Press.

Herzlinger, Regina. 1994. "Effective Oversight: A Guide for Non profit Directors." Harvard Business Review, July-August, pp. 52-60.

Katzenbach, Jon R. and Douglas K Smith. 1993- The Wisdom of Teams: Creating the High Performance Organization. Boston: Harvard Business School Press.

Kets de Vries, Manfred F. R. 1988. "The Dark Side of CEO Succession." Harvard Business Review, vol. 88 (1): 56-60.

National Academy of Public Administration. 1992. Paths to Leadership: Executive Succession Planning in the Federal Govemment. Washington, D.C.: National Academy of Public Administration.

Rainey, Hal G. and Barton Wechsler. 1988. "Executive-Level Transition: Toward a Conceptual Framework." Public Productivity Review, vol. 13 (1).

Rainey, Hal G. and Barton Wechsler. 1992. "Study of Succession Planning and Executive Selection: Preliminary Research Results." Literature Review and Annotated Bibliography, June.

Sonnenfeld, Jeffrey A. 1988. The Hero's Farewell: What Happens When CFO's Retire. New York: Oxford University Press.

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Yin, Robert K. 1979- Changing Urban Bureaucracies: How New Practices Become Routinized. Lexington, MA: Lexington Books.

Case 3: How a Nonprofit Organization Plans for Succession: Next in Line

Elaine's Perspective When my husband retired, I realized that the day was approaching when I would no longer work for the Greensboro Regional Realtors Association (GRRA). Hav- ing worked diligently to turn the association into a good-to-great organization—a Jim Collins concept explored in his book by the same name (2001, HarperCol- lins)—I made a deliberate decision that given the opportunity I would help the association continue on its path to excellence no matter who led the organization.

In the fall of 2000, I contacted the incoming board president and president- elect to discuss my decision to leave the association at the end of 2002.1 informed them that I had identified one employee as my potential successor—Michael Barr, GRRA's chief operating officer. Having worked closely with Michael for a little more than a year, I saw in him several qualities that exemplified leadership:

• Humility • A professional willingness to do what had to be done • The willingness to channel energy into the association rather than into

himself A The ability to credit staff and volunteers, when appropriate • A desire to develop both personally and professionally

Based on my recommendation to consider an internal candidate for my position, the incoming president and president-elect both felt that a succession plan was in order. The next decision was whether I or a consultant should put the plan together.

Shortly after my conversation with the president and president-elect, the full executive committee met and decided that I should create the succession plan. The committee believed that my knowledge of the association, its mission, and its needs—as well as my 10 years in its top staff position—gave me the insight required to create a thorough plan. Additionally, the committee expressed com- plete trust in me and my ability to not compromise the association. In total, the committee felt that a solid management plan for succession would be an impor- tant part of the association's efforts to develop talent, meet organizational needs, and improve the association's overall results on behalf of members.

Using my job description, a list of things that I did that were not in my official

Source: Elaine H. Ernest and Michael P. Barr, "Next in Line," Association Management, 55:10 (2003), 42. Used with permission oi Association Management.

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job description, knowledge gained from scanning literature on CEO skill sets, and my understanding of the association's strategic plan, I drafted a work plan that defined the responsibilities and challenges of the executive position and outlined the areas in which I would coach and mentor Michael. It was early March 2001 when I submitted this draft succession plan to the executive committee. The committee accepted the plan in mid-March, and Michael and I began discussions about his long-range career plans. I asked him questions such as:

• Are you interested in obtaining the Certified Association Executive (CAE) designation?

A Are you interested in expanding your responsibilities in the association and the community?

A Are you willing to travel with me to additional professional development seminars?

A Are you willing to work with me as your mentor for an opportunity to become a CEO? (No promises were made, of course.)

His affirmative answers noted, we started working through the actual plan out- line.

Because Michael was COO, all staff reported to him. To free up time for him to work through the succession plan, we diverted some of his day-to-day responsibilities to other staff members. Job descriptions for senior managers were reworked to lessen Michael's workload. To explain this shift in activities, we informed staff that the executive committee wanted Michael to be more involved with the overall operations and mission of the association. While this was taie, we did not apprise staff that Michael was being groomed as my potential replace- ment.

For the next 15 months, Michael and I spent a few hours each week reviewing the plan, setting priorities for the next month, making adjustments when neces- sary, and reporting to the executive committee on a quarterly basis. The commit- tee left the decisions of progress, needed training, and adjustments to me, with input from Michael.

Here are a few things that I learned from this experience.

1. Every CEO is capable of doing succession planning if he or she cares about the organization.

2. Succession planning is not an easy task. Little research is available about it, especially for the not-for-profit sector.

3. Succession planning is an excellent way to assess the organization, look at trends, peek at what is coming down the road, and realize your strengths and weaknesses as an executive.

Working through this plan with leadership and another high-level manager, it was easy to see what habits made the association successful and what areas

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needed more attention. It also solidified the organization's core values and made it clear what was important to continue.

Michael's Perspective After I agreed to and signed the work plan outline, I really got busy. I'd like to say the task ahead of me looked simple, but it didn't. At times I felt as though I was pledging a fraternity all over again. However, Elaine was a wonderful coach and mentor. Whether this adventure would turn out as suggested was anyone's guess. My focus was on learning as much as I could about association manage- ment, qualifying to sit for and passing the CAE exam, accomplishing the items detailed in the work plan, building a network of colleagues, and enjoying the experience. The plan was specific and intense. It outlined nine major compo- nents of the executive position and specified several competencies in each area. Following are the components of the work plan and some of my prominent accomplishments in each area.

Essential Management Responsibilities This area included nine components such as financial oversight, office adminis- tration, and understanding the parallel structures of the association. Accomplish- ments:

A Worked with and advised association volunteer groups, task forces, com- mittees, directors, officers, and presidents.

• Supervised staff; evaluated job descriptions, performance, salary adminis- tration, and work processes to provide high-quality and efficient services to the membership.

• Developed a three-year budget model and new reports for the board of directors on nondues revenue sources.

• Developed a new member benefits program that included affiliating with a local credit union and offering members discounts on local products and services.

Essential Administrative Responsibilities This component was primarily composed of human resources management is- sues such as employee performance, oversight of employee benefits plans, and compensation planning. Accomplishments:

A Coordinated employee searches that included position marketing, resume evaluations, telephone and on-site interviews, compensation negotiations, and follow-up correspondence.

A Researched and presented a new 401(k) retirement program and an em- ployee education assistance program, which the board approved.

Case Studies on Succession Planning and Management 357

Research and Statistics Among other things, this area dealt with member demographics, trends in the profession, and industry demographics. Accomplishments:

A Collaborated with a local university economist to provide our membership with local and regional market reports.

A Collaborated with a local university professor to produce an unbiased sur- vey for the association membership.

Information Technology This area included competencies such as keeping members up to date with in- dustry technology trends and continual analysis and implementation of the mem- bership's technology needs. Accomplishments:

A Developed and implemented a technology infrastructure plan that in- cluded replacing the phone system, upgrading computer software, and adapting wireless technology.

A Developed a new Web site that allows the membership to pay association bills online and provides segmented information according to inembers' preferences.

A Provided the membership with various technology-training opportunities, which had been requested through membership surveys.

Facilities Management This area covered everything from the HVAC system to aesthetics and landscap- ing. Accomplishments:

A Managed and supervised the association's banquet facility renovations and grounds beautification.

A Managed and supervised the association's building maintenance contrac- tors and banquet facility operations.

Strategic Planning True competency in this area was defined by the ability to keep staff focused on the vision of the association, continually evaluate the association's operations, and commit and adhere to the strategic objective of the organization. Accom- plishments:

A Participated in the research and preparation of the strategic planning board retreat, including negotiating with consultants, preparatory work with consultants, and execution of retreat, followed by the development and yearly refinement of the plan.

A Focused staff on association priorities to accomplish the strategic goals of the association within the set timeline.

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Internal and External Relations Government affairs, coalition building, and public relations were the bedrocks of this component. Accomplishments:

A Attended local, state, and National Realtor Association board of director meetings.

A Represented the association at the Triad Real Estate and Building Industry Coalition and at other regional coalitions.

A Continually represented the association at community events, local gov- ernment meetings, and association events.

A Networked with the leaders of the local and state associations.

Continuing Education One of the key thrusts of this area was attaining the CAE designation, showing a commitment to association management, and continual learning. Accomplish- ments:

A Attended numerous coaching and training seminars offered by ASAE, the National Association of Realtors, the North Carolina Association of Real- tors, and GRRA on various subjects.

A Earned my CAE designation.

General Working Knowledge The final component focused on understanding industry-specific processes, our bylaws, and the financial aspects of the association. Accomplishments:

A Trained to administer the association's professional standards and arbitra- tion process.

A Studied and enforced multiple listing service rules and regulations and association bylaws and rules and regulations.

A Acted as chapter administrator for 360-member North Carolina Certified Commercial Investment Members, which the association manages.

After working through each component of the succession plan, I submitted a letter to the executive committee expressing my interest in the CEO position. At this point it was May 2002, and I was able to include a detailed description of how I had accomplished the work set out in the plan.

Coming to the Conclusion A month later, the full board of directors met. The president informed the direc- tors that Elaine was leaving her position as CEO of GRRA at year's end. Copies of the completed work plan and Michael's letter of interest were distributed. Discus-

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sion ensued about the succession process and whether the job opening should be taken outside the organization.

A minority of board members felt that if Michael were tally qualified, he would win out in an extensive search. The majority of the directors, however, felt comfortable that the plan was comprehensive and that the executive committee had been sufficiently involved through its receipt of progress reports. An open search, in their opinion, would cost the association time and money. After taking a vote, the executive committee was granted permission to interview Michael for the position. If the committee was not satisfied with the interview, the search would be opened, and a selection committee appointed.

"Ten of eleven good-to-great CEOs came from inside the company," says Jim Collins in his book Good to Great. The Greensboro Regional Realtors Association found that to be the case after Michael's successful interview for the chief staff executive position. In mid-July 2002, more than a year after the draft succession plan was submitted, GRRA's board president started contract negotiations for the association's new president. Michael took over the top spot on January 1, 2003.

Mentoring Magic Since Michael P. Barr, CAE, took over as executive vice president of the Greens- boro Regional Realtors Association, North Carolina, in January, he has started his own mentoring program with senior staff. Read what he has to say on the subject.

Association Management: Why did you start the program? Michael P. Barr, CAE\ Being a product of mentoring, I saw the value in devel-

oping staff to their fullest and helping them with their career goals. Essentially that's what Elaine did for me. It's a win-win for both the association and the employees.

Association Management: What's involved? Barr. I meet regularly with staff. We consistently go over both their work

goals and professional goals. It's individualized according to their preferences, because we're trying to help them achieve their professional best. I take them to conferences, send them to workshops, and help them achieve the designation of their choosing. Basically, I go over their goals and objectives and help them get the education they need to obtain their goals. The board thinks that this is so important that it has increased the budget line item for staff development.

Association Management: Who can participate? Barr: It's open to anyone who has expressed an interest in association man-

agement. Obviously, it has to be tied to the job. Senior staff is really taking advan- tage of it.

Association Management: How's it been received so far? Barr. I have full participation. Those who have expressed an interest in learn-

ing what the top job entails, what running an association entails, are really re- ceptive to learning. Empowering them to take on projects and responsibility has been a big plus in the operation of the association.

Association Management: What advice would you give to staffers?

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Barr. Approach mentoring with the best attitude possible. It's a win no matter what happens. You're going to do a lot of extra work, but it's good preparation for executive-level positions. Get ready for long hours.

Resources Articles "Executive Selection: A Systematic, Team-Based Approach," Executive IdeaLink,

July 2001. "What If You Were Gone," Association Management, August 2000. "Mentoring: A Tool for Learning and Development," Association Educator, Octo-

ber 1999.

Books Knowdell, Richard L. Building a Career Development Program: Nine Steps for

Effective Implementation. Consulting Psychologists Press, 1996. Rothwell, William J. Effective Succession Planning: Ensuring Leadership Conti-

nuity and Building Talent Erom Witbin. AMACOM, 2000, Byham, William C , Audrey B. Smith, and Matthew J, Paese. Grow Your Own

Leaders: How to Identify, Develop, and Retain Leadership Talent. Financial Times, Prentice-Hall, 2002.

Wolfe, Rebecca Luhn. Systematic Succession Planning: Building Leadership From Within. 1996, Crisp Publications, 1996.

Web Site Succession Planning Library (www.managementhelp.org/staffing /planning/sccs_ pln/sccs_pln.htm)

Case 4: Small Business Case:

Passing the Torch

Jim Gibney, president of Warren Pike Associates, says he grew up in the business. "I was always drawn to mechanical things," says Gibney, whose family-owned power transmission and motion control business is headquartered in Needham, Massachusetts "As a child, I became interested in the business. During the school vacations, I would go in to the business and help out. There I got to learn from one of the best salesmen there is, my father."

Gibney characterizes his father as a master salesman and as a leader. He recounts his father's career at Warner Electric before purchasing Warren Pike Associates followed by the purchases of W.M. Steele Co. and Cohen Machinery Co. to form J,G. Industries, Inc. Gibney says his siblings were drawn to other interests and have pursued other successful careers, but that he followed his

Source: Richard Trombly, "Passing the Torch," Industrial Distribution, 90:4(2001), 69-72. Used with permission from Industrial Distribution.

Case Studies on Succession Planning and Management 361

father's footsteps from the beginning. He says that wasn't always a simple path. "My father was a hard worker and that was one of the values he instilled in me," says Gibney. "I worked my way up through the ranks. I've been in shipping and receiving, inside sales and outside sales before taking on a role in management."

His father still remains active in the company and retains the title of CEO, but after years of working hard for the company, he is able to work on something else—his golf game down in Florida. Meanwhile, Gibney has taken on the role of president.

"It was an easy transition," says Gibney. "I have been in upper management for so long and was already very familiar with the business. My siblings had never been involved with the business, so they weren't concerned with the process of succession. My father and I had discussed it over the years and we knew I would take over when the time was right." Gibney said they did very little in the way of formal succession planning.

"After some internal planning and adjustments," says Gibney, "we realized that the end of year 2000 would be the right time."

Gibney admits that part of the success of the transition relies upon keeping open channels of communication. While nothing was formalized in their plan- ning, the details of succession were discussed and understood by all parties, including JG Industries' 17 employees. "Communication is key," says Gibney. "We have a family atmosphere and we involve the employees in the business. People usually resist change and that can make succession difficult, but we in- volved them in the process. I think, by being included in this way, they are now excited by new opportunities in a rapidly changing industry."

Will his own children take over the family business? Gibney says his children are between the ages of seven and 13, so it is a little too soon to tell if they will be involved. "Perhaps, down the road," speculates Gibney.

Not all children grow into their parents' roles and not all successions occur so simply and with such positive results, points out Robert Middleton, a partner with the Chicago law firm of Nisen & Elliot.

"In most cases there are some hard truths," says Middleton. "Many entrepre- neurs spend their entire lives sacrificing time and energy only to have the whole organization fall apart and maybe tear the family apart in the process."

Marc Silverman, president of Providence, Rhode Island-based consulting firm Strategic Initiatives Inc., says that when he counsels a family business, the first thing is to try to separate the family from the business.

"Then we can decide what we want for the family and what we want for the business," says Silverman. "By looking at the family and the business, we can determine what they both need to be successful."

Silverman advises a team approach by getting all of the family involved. He suggests a family council to assist in planning for the business's future and in choosing a leader that will be best suited to the business—as well as resolving issues of the siblings that are not groomed for succession.

Outsiders can be an enormous amount of help, says Silverman, though he

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admits that can be difficult for entrepreneurs who are used to doing things in an autocratic style. It is hard to be objective and many of these issues are closely tied to the psychological issues of aging. He suggests bringing in a consultant early in the process if any obstacles develop,

"It is like tooth decay," says Silverman. "The problem gets bigger the longer you wait," Jefferey Gallant, a partner with Goodkind, Labaton, Rudoff & Su- charow, also suggests that businesses have an advisory board. It may be made up of family members, management, or outside professionals. Gallant says a board can decide on the important issues of who should lead and what their services are worth.

Gallant says he is usually brought in for estate planning and has to bring up the topic of succession. He helps decide what makes the most sense as far as tax options and retirement, as well as for the business.

"The next step is to get all the parties involved to buy in to it," says Gallant, "It is so much easier when the owner is involved rather than handling these issues as part of an estate,"

Case 5: Family Business Succession:

The Seeds of a Smooth Transition

A month before Christmas, the garden center at Shiloh Nurseries Inc. in Emigs- ville, Pennsylvania, looks like a scene from a Norman Rockwell painting, with decorations and holiday greens at every door and window. Along the path lead- ing to the side entrance, flowering cabbages are in full bloom.

Inside, Michael Stebbins, 47, is busy getting ready for a Christmas selling season that will be short because of the late arrival of Thanksgiving. After 27 years as co-owner of the nursery and landscaping business with his partner, Carl Jacobs, Stebbins knows exactly how he wants everything to look.

He also knows exactly what he wants to happen to the company when he and Jacobs retire. Both want Shiloh Nurseries to remain a thriving business.

That almost didn't happen for the family that owned the company before them. When its founder died with no estate plan, his wife and son discovered they were unable to work together. The son left to form his own nursery busi- ness, taking many of Shiloh's employees with him, and his mother was forced to sell the firm, which was tallying a modest $55,000 in annual sales. Today, Steb- bins and Jacobs employ 25 full-time workers and about 40 more seasonal em- ployees, and they expect to post sales of about $3 million this year.

The two owners have six children between them but none who wants to take over the business—they've had their nil of nursery life during high school and summers home from college. Nonetheless, Stebbins and Jacobs do have two longtime, highly valued employees—their top salesman and landscape architect.

Source: "The Seeds of a Smooth Transition," Nation's Business, 85:4 (1997), 25. Used with permis- sion from Nation's Business.

Case Studies on Succession Planning and Management 363

and their landscape supervisor—who would like to run a nursery and landscap- ing business someday,

Stebbins and Jacobs liked the idea of them mnning Shiloh, so they set up a buy/sell agreement with the pair under which the two employees will begin to buy the company over two consecutive five-year periods. Each employee will purchase 12 percent of the company's stock during the first five years and another 12 percent during the second, at a fixed price of two times book value (with book value being recalculated annually). Payments will be made on an installment plan bearing interest at the prime rate plus 1,5 percent.

After 10 years, the four principals will decide how to proceed. Jacobs, now 53, is likely to retire then, but Stebbins hasn't decided what he will do. Possible options include having the two employees purchase the remaining 52 percent of the company at that time or allowing a small number of other key employees to purchase some of that stock.

Either way, Stebbins and Jacobs are glad that the salesman and the landscape supervisor are becoming part owners, because they will be positioned to take over the business when necessary, Shiloh has taken out life-insurance policies on each of the four shareholding partners; the insurance is in amounts sufficient to ensure that if any of the partners dies before the buy/sell agreement is com- pleted, the other partners will be able to meet their obligations under the agree- ment.

To come up with their plan, Stebbins and Jacobs drew on the advice of an estate-planning firm. Estate Archetypes Inc, in nearby York, Pennsylvania,, and on Gordon Porter, a CPA and small-business consultant in Dover, Pennsylvania,, before approaching their lawyer to draft the necessary documents.

"One of the reasons I'm inclined to be so sure we're doing things right is because I'm proud of the fact that we took a small business and grew it success- fully," Stebbins says, "This is the company's 60th-anniversary year, and I'd like to see it be here for another 60 years."

Case 6: CEO Succession Planning Case:

Do You Have a CEO Succession Plan?

Jim Lumpkin's first move as interim chief executive officer (CEO) for U,S,- Agencies Credit Union was to eliminate the position he'd just vacated, "The credit union was top heavy," recalls Lumpkin, CEO of the Portland, Oregon, credit union, "At the time, we were spending too much money on management posi- tions. We needed a CEO who could handle both jobs,"

Then he insisted that the board undertake a detailed search, both inside and outside the credit union, for CEO candidates. "Our last CEO felt he was named by default. The board never did a full search so there never was that buy-in that

Source.- Bill Merrick, "Do You Have a CEO Succession Plan?," Credit Union Magazine 61-J (2001), 52, Used with permission from Credit Union Magazine.

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they had the right person," Lumpkin explains. "I stipulated that I wouldn't apply for the job unless the board went through a full search process and really looked for who they wanted. That way there wouldn't be any second-guessing."

The board named Lumpkin CEO after a five-month search, and he has served in that capacity for four years. But watching the board struggle through the proc- ess made him recognize the need for a detailed succession plan outlining steps the board should take in case of CEO turnover—whether by resignation, termina- tion, or death.

The credit union's recently completed succession plan details planning and preparation, general board guidelines, steps for emergency succession (broken down by the first day, week, and month), recruiting and hiring, desired qualifica- tions and attributes, and other information. "We're a smaller company and we look at our CEO as more of an operational CEO," Lumpkin notes. "So the CEO needs to know which areas he or she would be responsible for—accounting, asset/liability management, compliance issues, examination processes, human resource administration, and investments. If the CEO leaves, board members might wonder who else will leave and how they'll run the credit union. I wanted to identify skill sets and experiences they should look for."

Among other information, the plan lists nine basic steps for CEO replacement:

1. The board hopes for 90 to 120 days' notice of intent to leave so it can have an orderly transition. The board would like to hire the new CEO at least 30 days before the departure of the current CEO. It would be preferable to allow 60 days for this transition.

2. The board will appoint a search committee to monitor the plan and recom- mend final candidates to the full board. The board's executive committee will make up the search committee in part or in whole. It's recommended that the committee consist of three to five individuals. It's advisable that the current CEO not be a member of the search committee.

3. The board will decide whether the search committee will conduct the full search process or whether to use an outside consulting firm. If the board hires an outside firm, determine the company's responsibilities and cost, and specify details in a signed, written contract. Use a firm that's familiar with credit union needs and philosophy.

4. The executive committee, with the assistance ofthe interim CEO and man- agement team, will update the existing CEO job description, organiza- tional chart, and other information, and provide it to the search committee and/or consulting firm.

5. Advertising for the CEO position will appear in local and industry trade publications.

6. All resumes will be reviewed for basic qualities and experience. Interviews will be limited to three to five candidates. The search committee or con- sulting firm will present the best candidate to the board. If the board

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doesn't accept this candidate, the search committee or consulting firm will present the second choice.

7. Verification of candidate credentials and employability may include, but isn't limited to, educational transcripts, reference checks, credit bureau reports, CUMIS bond check, medical assessment as allowed by law, psy- chological appraisal, and chemical dependency testing.

8. Notification of the new CEO will be provided to the Oregon Department of Consumer and Business Services, National Credit Union Administration, Credit Union Association of Oregon, CUMIS Insurance Group, and credit union attorneys.

9. Publish articles in the quarterly newsletter to announce the current CEO's departure and introduce the new CEO.

"Having a plan makes the board and our state regulator feel better," Lumpkin says. "Also, staff knows that if something happens, the board will find a match that will fit members' needs, internal staffing needs, and the credit union's culture. It builds confidence throughout the credit union and reduces uncertainty."