Succession planning is key to smooth process: how well internal succession is handled says much about a company's ability to groom its next generation of leaders, in finance and elsewhere. Companies that do it right have well-engineered processes and a commitment to thoroughness.

• Author: Marshall, Jeffrey
• Position: Management

It was a tragedy that can happen to any company at any time: The chief information officer at Parsons Brinckerhoff, the international engineering and construction management firm, died suddenly of a heart attack. But, instead of scrambling, the company immediately replaced him with a designated short-term successor, who filled the job for eight months until a permanent replacement, located with the help of a recruiter, took over.

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Richard A. Schrader, the company's executive vice president and CFO, notes that the CIO's death came just after top company officers had met on a thorough succession program in which they looked at everything from replacing key managers literally overnight to identifying "young stars" who could be top management material well down the road.

A key first step, Schrader says, was identifying people who could fill in immediately in a "hit by the bus" scenario, should one of 20 key company executives fall ill, be in an accident or die suddenly. Aided by a consultant, the management team went through that exercise with the top cadre--the CEO, Schrader, the CIO, general counsel, HR director, etc.

Schrader--FEI's Vice Chair for 2005-6--then met with the company treasurer, who would be his designated replacement on an emergency basis. "I sat down with her, and said, 'Here are some things that you need to know about.' If there is specific knowledge or a specific place to find something, that needs to be communicated. That gets into what things are in process."

Succession is often a sticky wicket, at any size firm. While CEO succession stories get the most attention, succession planning is--or should be--a staple of corporate policy that also involves managers of the business units and departments. Some companies do it very well; others do it poorly, and large organizations generally do it better than small ones, experts say. When succession groundwork hasn't been well laid, that's generally when recruiters get called in to find a new leader.

Fortunately, say a number of recruiters and personnel specialists, companies are doing a better job of looking ahead and planning. Some of that, however, may be less than voluntary: More and more, directors are asking senior executives to demonstrate that they have succession plans in place, from the CEO to a few rungs down the organization chart. "Boards of directors are much more attuned to this as risk management issue," Schrader says.

"Succession is a deliberate process," says Nancy Mobley, president of Insight Performance Inc., a human resource consultancy in Dedham, Mass. "A lot of people consider this a mystery, but the No. 1 rule is to be...