Succession Planning

As an avid hockey fan, I’ve followed the Detroit Red Wings for a number of years and have shared in the collective joys and disappointments of the teams’ successes and failures.  I’ve watched the team win Stanley Cups and also be eliminated in the first round of the playoffs.  But despite that, one thing remained consistent:

Team captain Steve Yzerman.

Yzerman was named captain as a fresh-faced 21-year-old, back in 1986, and brought stability to team leadership.  He succeeded Danny Gare in wearing the “C” on his jersey after Gare was traded to the Buffalo Sabres.  Before Yzerman took on the mantle of team captain, the Red Wings endured an ever-changing flux in leadership, with no single player serving more than two seasons as the designated leader of the team.  Steve Yzerman would go on to serve 20 years as the Red Wings’ captain.

As Yzerman’s career reached its twilight, the team had to consider his successor as captain.  Fans and media speculated wildly, of course, and all pondered the effects of his eventual departure from the team as both its leader and one of its best players.  When his successor was eventually named, the team and fans breathed a sigh of relief, for none was more appropriate of a choice than defenseman Nicklas Lidstrom.

Even still, Lidstrom wasn’t a 21-year-old kid when he was named captain, and was already approaching the twilight of his own career.  So what is the team and its fan-base to do when the inevitable retirement of Lidstrom comes to pass (as it did in the summer of 2012)? (Detroit Red Wings)

The Detroit Red Wings had a succession plan.

Succession planning is not just naming an individual to take over after a leader departs.  Succession planning is a process that has to begin before it’s needed, so that when key employees depart an organization, their successors can be installed with minimal delay and with minimal disruption to an organization’s operations.

Forming a Plan

The specific elements of a succession plan will vary from organization to organization, and from situation to situation within the organization.  As illustrated in this diagram from Human Resource Management by Mathis & Jackson, several questions must be answered during several steps. (Mathis & Jackson, 2011)

Other questions that must be addressed exist as well during the planning process. Are potential successors to be groomed from within the organization or should the organization look to outsiders, who may be free of biases or come with fresh ideas?

Are candidates for succession evaluated on their potential or current performance?  In this case, does the ideal candidate have the potential to learn the intricacies of the job, or should they already have the skills and knowledge?

Examples Based on Organizations

As previously noted, succession planning methods can vary depending on the organization’s characteristics.  A large corporation will have different needs and an approach than a small business with perhaps one principal and few employees.  Change is difficult in any situation, but effective succession planning can minimize the disruption that comes from change.

Large, private organizations such as corporations can often take more time to groom successors or develop a formalized succession plan.  A nursing program in Florida conducted a study on the effects of a formalized succession plan which took the process from conducting research into the job requirements, the hierarchy of existing staff, and the processes in which potential nurse leaders would be identified and groomed to step into leadership positions as senior leaders depart, thus growing a sense of continuity. (Sherman, Dyess, Hannah, & Prestia, 2013)

Government institutions, on the other hand, find it more difficult to enact a formalized program due to external factors.  Such factors include:

• Budgetary considerations that limit the number of staff in any particular specialty, which therefore reduces the pool of potential successor candidates for positions that are not elected

• Lack of incentive to extend oneself beyond one’s scope of work.  For example, an elected official may not consider the ramifications of succession because it was not what that official was elected to do, or make part of the job.  In addition, time or term limits artificially narrow the official’s view of the bigger picture. (Leland, Carman, & Swartz, 2012)

Finally, small businesses may not have the time or staff to consider and plan for what happens if the principal is incapacitated.  A one-person law firm with several clients may operate well enough based on the attorney’s personal experiences and knowledge, but if that attorney suffers a medical emergency or condition and is no longer able to practice, it presents the very real questions of what happens to clients, especially if their cases were still pending.  Legal cases often require volumes of research and deadlines with courts that are not easily duplicated or rescheduled. (Berson, 2013)

Conclusion

While the manner and method of planning for the succession of leaders of an organization will vary, organizations of all types and sizes should consider adopting a plan of some sort.  Whether it’s a formalized plan chock full of research and files and identified candidates or a memo on a hand-written sheet of paper that details what the organization should do, some form of plan will minimize the shock and disruption to the organization’s operations.

It is thus the reason why, in the case of the Detroit Red Wings, Henrik Zetterberg was groomed from early in his career with the Red Wings to eventually become the new captain.  His locker stall was placed next to Yzerman’s, and as a fellow Swede, Lidstrom took Zetterberg under his wing.  Thus, it was no surprise when Zetterberg was named the captain of the Red Wings following Lidstrom’s retirement.  The Red Wings had a succession plan in place, one that was developed over ten years.

References

Berson, S. A. (2013). The death of a practice: as a lawyer nears the end, her friend faces the dilemma of closing down a firm. ABA Journal, 42.

Detroit Red Wings. (n.d.). Detroit Red Wings Written History. Retrieved February 2013

Leland, S. M., Carman, J. G., & Swartz, N. J. (2012). Understanding managerial succession planning at the local level: a study of the opportunities and challenges facing cities and counties . National Civic Review, 44.

Mathis, R. L., & Jackson, J. H. (2011). Human Resource Management. Mason: South-Wester Cengage Learning.

Sherman, R. E.-B., Dyess, S. P.-B., Hannah, E. M., & Prestia, A. M.-B. (2013). Succession Planning for the Future Through an Academic-Practice Partnership: A Nursing Administration Master's Program for Emerging Nurse Leaders. Nursing Administration Quarterly, 18-27.

Employee Compensation: Determing Pay-Scale

Introduction


There are certain steps an employer must take when determining the pay scale within an organization. When considering employee compensation, one must consider all forms of pay given from the employment. This includes both direct financial payments, meaning wages, salaries, incentives, commissions, and bonus, and indirect financial payments, meaning benefits like insurance and vacation bonuses.


Payscale Reform

It is also imporant for the employer to consider the behavoir and reactions from its employees if  the payscale determination is reforming a current pay structure. According to a study done in the Journal of Occupational and Organizational Psychology, when reforming a current pay scale, employers often overlook how the change can impact the behavior of their employees. The following is an excerpt from the study:

“Although organizations often hope that a pay system reform will be beneficial, the results are often mixed, and researchers have increasingly sought to understand when and why reforming a pay system will promote desired outcomes However, prior research has largely ignored how emotional reactions towards a new pay system impacts attitudes and behaviors in the workplace. This omission is striking given that employee affect has been found to be (1) sensitive to organizational change and (2) an important predictor of several of the desired outcomes that employers seek to encourage by implementing a new pay system.”

When reforming a pay scale, not everyone within the organization will be happy. But fortunately, according to the study, a positive reaction from an employee during a pay scale change can predict the longevity of the employee. Those who will leave may have already had turnover intentions.

“In addition to shedding light on the relation between affective reactions and future affect-driven behaviours, this work demonstrates that affective reactions predict judgment-driven behaviours such as turnover. Although prior work has shown that positive mood was negatively related to turnover intentions, the current findings show that positive affective reactions were negatively related to actual turnover behaviour. Thus, those employees with high positive affective reaction to the pay reform were more likely to stay with the organization 2 years later than those with low positive affective reaction.”


Action Steps to Invent/Reform a Payscale
The employer should take the following steps and make the following considerations:


1. Define each position within the company. Determine the core competencies required to perform the job tasks at hand. Decide skills and education required to perform at an adequate level. The employee committee should determine the worth of each job within the organization.


2. Research wages at other companies for similar positions within your geographical and demographic areas. Conducting a salary survey of what other employers pay for comparable jobs will help set a benchmark since your prospective employees may also be applying for these positions. If you need highly qualified employees to be competitive, set your pay scales higher to attract top talent. If you need to save money to be competitive, offer lower pay ranges.


3. Group similarly paid jobs into pay grades.Confidentiality is one of the most important aspects of conducting a compensation analysis, but the information will need to be gathered from the HR department with a specialist who knows how to be compliant with the private information.


4. Develop rate ranges. Set your wage scale based on how competitive you want to be. The organization's overall competitiveness will depend on elements such as employee pay, expected growth, ability to attract and retain employees and the industry forecast.


5. Create pay scale incentives. Creating a method for giving pay raises can offer employees incentive to do their job well, for example, based on time on the job or factors such as whether employees obtain the core competencies needed for their jobs. You can also assign pay raises based on performance or on whether employees acquire certain skills.


Creating a pay scale from scratch can present its challenges, but overall, after doing some research, a strategic pay scale can give employees incentive and motivation to perform their best and strive for more than average or satisfactory. A strong pay scale can increase the organization's overall quality grade of work environment, encouraging the employees to be motivated.


References

Balkin, D. B., & Gomez‐Mejia, L. R. (1990). Matching compensation and organizational strategies. Strategic management journal, 11(2), 153-169.

Busines Inc. (n.d.). INC. Retrieved January 30, 2013, from www.inc.com/creating-a-salary-pay-scale

Mayhew, R. (n.d.). How to Conduct a Compensation Analysis | eHow.com. eHow | How to Videos, Articles & More - Discover the expert in you. | eHow.com. Retrieved January 16, 2013, from http://www.ehow.com/how_8033747_conduct-compensation-analysis.html

Media, D. (n.d.). How to Create a Competitive Wage Scale | Chron.com. Small Business - Chron.com. Retrieved January 16, 2013, from http://smallbusiness.chron.com/create-competitive-wage-scale-11626.html

Tenhiälä, A., & Lount, R. B. (2013). Affective reactions to a pay system reform and their impact on employee behaviour. Journal of Occupational and Organizational Psychology, 86(1), 100-118.