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Succession management crucial for business continuity, say experts

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Associate Partner at Phillips Consulting Limited (PCL), Foyinsola Akinjayeju, has said that without careful management of the leadership succession process, Micro Finance Banks (MFBs) could face power tussles with consequences of sudden exits across different grades and functions, loss of “tribal knowledge”, costs of abrupt hiring, uncertainty, chaos, damage to company’s culture among others.

Akinjayeju stated this while presenting a paper on ‘Steps for Effective Succession Management” at a conference organised by the Lagos State chapter of the National Association of Microfinance Banks.

She said, “preparing the next generation of leaders has become more imperative than ever. Some companies meticulously follow procedures of “next-in-line” for leadership roles yet their new leaders are ill-prepared for the role and end up as corporate placeholders, at the centre of chaos.”

She went on to distinguish between succession management and more common practices of succession planning and replacement planning, citing their areas of differences around Focus; Successors; and Time Investment required. While replacement planning focuses only on managerial positions and identifying talent to replace individuals who leave such positions, succession management, on the other hand, is concerned with corporate-critical positions across grades, profiling the talent (mix of job skills and unique competencies) required for such positions, identification of the suitable talent, deliberate development of the identified talent, and regular monitoring of the process to measure its effectiveness in respect of the strategic objectives of the organisation. Organisations who seek long-term sustainability must adopt a robust succession management system while focusing on talents who demonstrate high potential.

She advised business leaders not to plan for the present alone, but rather ask themselves if their people were the best talent for the future, a situation, which could be influenced through effective succession management.

Rob Taiwo, Managing Director of PCL, also highlighted the importance of character, which he indicated as a better determinant of performance over competence when hiring a leader.

In his words, “challenges often arise in the seemingly small areas like stakeholder engagement, culture, or perception and the one thing leaders need to keep going is grit.”

He also stated the need for a shared purpose between the CEO, the Chairman, and the Board. He stressed the importance of appropriate timing and extolled authentic leadership as a key success ingredient, admonishing CEOs to give guidelines only and not impose their methods on their successors.

The Central Bank of Nigeria (CBN) released a circular in 2018 on the review of the minimum capital requirements for microfinance banks (MFBs) in Nigeria, with phased implementation to commence this year. According to the CBN, the revision had become necessary because a large proportion of the MFBs was contending with inadequate capital base, among other challenges, and the sector needed to be strengthened so it could effectively cater to the financial needs of the unbanked or under-banked.

Under the new regulation, MFBs must increase their capital base by 150 per cent for unit MFBs operating only in the rural, unbanked or under-banked areas, and those with National licenses, or 900 per cent for unit MFBs operating in the urban and high-density banked areas of the society and State MFBs, by 2021 if no extension was allowed. In fact, under the phased implementation of the regulation, the new capital base required for MFBs by April of this year, is more than 200 per cent of the previous requirement, on average.

To achieve this target, MFBs will look for fresh injection of capital from existing shareholders, new investors or may undertake Mergers and Acquisitions (M&As) and an eventuality of leadership change from any of these options cannot be ruled out, coupled with the imminent retirement of some CEOs due to the policy limiting their tenors to 10 years.

The firm works with organisations across various sectors in delivering the following: design of succession management frameworks: reducing business risks and establishing sustainability beyond the founder(s), development of appropriate structures, operations & corporate governance: Aligning the company with best practices for continuity and sustainability beyond generations and aligning the group to a common culture.


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