Succession planning is not an issue that many organizations address in any systematic way. Because many companies may be facing other organizational challenges, thinking about who the next executive director might be or what would happen if the director of finance suddenly left is not high on their priority list. There are many reasons why organizations need to be thinking about succession planning. The most important reason, of course, is that we rely on staff to carry out our missions, provide services and meet our organization's goals. We need to think about what would happen to those services or our ability to fulfill our mission if a key staff member left. Another reason to focus on succession planning is the changing realities of workplaces. The impending retirement of the baby boomers is expected to have a major impact on workforce capacity. There are some emerging realities about the workforce in Canada: Firstly vacancies in senior or key positions are occurring in numerous organizations simultaneously and demographics indicate there are statistically fewer people available to fill them. Secondly Baby boomer retirements are on the rise just at the time when the economy is growing and increasing the demand for senior management expertise. Thirdly, there is no emerging group of potential employees on the horizon as in past generations (i.e. baby boomers, women entering the workforce, large waves of immigration). Fourthly, many organizations eliminated middle manager positions during restructuring in the 1980s and 90s and no longer have this group as a source to fill senior level vacancies. Lastly, younger managers interested in moving up do not have the skills and experience required because they have not been adequately mentored This is because middle managers, who would normally perform this type of coaching role, were eliminated
With careful planning and preparation, organizations can manage the changes that result from a generational transfer of leadership as well as the ongoing changes that occur regularly when key employees leave an organization. Although the type and extent of planning will be different, organizations both large and small need to have some sort of succession plan. Effective succession planning supports organizational stability and sustainability by ensuring there is an established process to meet staffing requirements. Boards and executive directors can demonstrate leadership by having the strategies and processes in place to ensure that these transitions occur smoothly, with little disruption to the organization
What is succession planning?
A succession plan, simply put, is a component of good HR planning and management. Succession planning acknowledges that staff will not be with an organization indefinitely and it provides a plan and process for addressing the changes that will occur when they leave. Most succession planning focuses on the most senior manager - the executive director, however, all key positions should be included in the plan. Key positions can be defined as those positions that are crucial for the operations of your organization and, because of skill, seniority and/or experience, will be hard to replace. One of the clearest insights discovered is that effective succession management is a journey, not a destination. The best-practice partners in this study did not succeed in their first efforts at succession management. Similarly, none have rested on their laurels since having their process up and running. They continually see and adjust their systems as they receive feedback from line executives, monitor developments in technology, and learn from other leading organizations. For example, Dell reduced the degree of computerization for succession management data in response to feedback from the field. Conversely, Lilly focused on providing a single integrated, centralized, and synchronized database of succession information.
Process of succession planning:
Step I. Monitoring Future Needs
Succession management identifies and monitors various talent pools within the organization to match the future needs of the organization with the bench strength of available talent. Not having the right talent in place is often a growth-limiting factor in achieving business potential. With the impending retirement of baby boomers and increased demands for diversity, leading organizations are building systems that provide talented, high performers opportunities to grow. For example, Sonoco identifies eight separate pools that are sorted by division or business unit. Pan Canadian focuses on "bright lights" and critical skills but also looks across the organization, especially for high potential young managers reporting to senior executives.
Step II: Talent Assessment
Talent assessment is a semi-transparent process in best-practice organizations. Most managers receive feedback and information about their developmental needs and suggested activities for further growth. Individuals who have been designated as high potential are seldom told of this designation to avoid raising expectations. For Example, at Lilly, an eight-page talent identification questionnaire is used to evaluate the assumed potential of 15,000 associates on performance, potential derailment factors, and learning agility. Similarly, Dell uses scaling calls to determine an individual's level of talent. Best-practice partners use a core set of competencies or behaviors to establish a standard of comparison for assessment. Most organizations use a subset of leadership competencies that are aligned with the core set. Dow has moved from having different competencies for each global business to a common set of seven used throughout the corporation.
Step III: Technology Used to Integrate Data
The use of technology in succession management varies widely within the best-practice organizations. Yet, web-based systems seem to offer great potential for worldwide access and large-scale integration of data. As suggested previously, Dell has moved from more extensive global software applications to a much simpler MS Excel workbook to organize data. Sonoco moved to integrate four commercial applications (PeopleSoft, HRCharter, Lotus Notes, and ExecuTRACK) into a seamless system that can be globally accessed and updated daily.
Step IV: Developmental Activities
Meet Organizational Needs Best-practice partners employ a wide range of developmental activities to engage leaders and extend their capabilities. These firms spend considerable time creating stretch developmental opportunities that are consistent with the organization's needs, as well as with those of the individual. Several firms reported that they would give people a temporary assignment as a part of, or tied in with, an action learning assignment. For Example, Dow Chemical offers mentoring, coaching, and action I earning along with university-based programs. Dow's internal research indicates that graduates of their internal executive education program showed improvements in strategic thinking, external focus customer orientation, and global view. Dow also offers an extensive array of training courses on-line. They report 14,000 on line courses were completed online in one week. Eli Lilly uses individualized developmental plans, 360-degree feedback, job rotation and a formal mentoring program as part of their developmental arsenal.
Step V: Subject Firms Measure Performance
The major metric by which succession systems are evaluated is the percentage of openings filled from within the firm. Sonoco finds that the performance/ promotability matrix is 80 percent to 90 percent accurate in identifying candidates for key positions. For example, At Dow, the hit rate of the succession plan is the key measure. If the person elected for an open position was on the list of potential successors, the system is believed to be working. The current hit rate of 75 to 80 percent shows considerable improvement from the past and is viewed as a reasonable target. Other key metrics include diversity and cross-functional assignments. Lilly has a measurement system that ensures its senior management cadre includes diversity in gender, ethnicity, and geographic origin. Finally, a unified approach to succession management can help to maintain consistency between different business units and geographic areas, and can contribute to objectivity in an organization's strategic human resources. For many firms, the first step in realizing these benefits will be to place succession management on the strategic radar. Then, an organization is prepared to benefit from the following best-practice principles.
In most of the world's major industrial countries, corporate law assigns the job of selecting the chief executive officer to the board of directors. In practice, however, the board's role in managing a succession process, though important, is distinctly subordinate to that of the incumbent CEO. Indeed, in the case of large publicly held corporations, if the board is actually and not just formally choosing the CEO, it is usually a sign that the succession process has failed and that the incumbent chief executive is on the way out.
A fast-departing CEO usually signals poor economic performance, although most high performing companies regress toward the average within a decade. One constant associated with companies that can sustain high performance is that they manage succession well. And more often than not, these long term high performers pick insiders to succeed incumbents. Careful case-by-case analysis of succession suggests that the reasons for this difference in performance have to do not only with knowledge of the company's technologies, operations, and competitors, but also its capabilities and culture. Moreover, increasingly competitive global markets mean that world-class efficiency, capability for innovation, and customer focus are all necessary for a company's sustained success. To achieve these capabilities, continuity in leadership is critical.
In the face of the complexity of modern companies and the growing demands on leadership, turnover at the top is increasing, as is the number of outsiders chosen to be new CEOs. As indicated by recent events at Merrill Lynch and Citigroup, they were in the throes of a succession crisis. Many companies think a horse race is all they need to pick a winner, without worrying about whether the horses are fast enough for the years ahead. These are companies that pride themselves on being obsessive about managing for performance, on paying and promoting those who deliver, while firing those who don't. But often they turn out to be companies that think developing general managers is a waste of time, human relations an administrative task to be delegated and then ignored, and succession what you worry about the year before the CEO retires.
Te best place to look for a CEO successor is inside the organization, the trend is toward hiring outsiders. Why? Because the process of nurturing great candidates is demanding, and many corporations do a poor job of developing insiders who might do a good job of leading them. As a result, many companiesmore specifically the CEO and the boardare often forced to go outside for candidates. In addition, when many CEOs and their directors finally turn to the subject of succession, they may have a bias against insiders. Many chief executives who think that way have created a self-fulfilling prophecy. Most problematic, the insiders who have demonstrated good performance sometimes seem to lack strategic vision. They are inside-the-box operators who don't understand the need for change.The answer to problems with CEO succession is what I call inside-outsiders. These are men and women who have performed well and risen high, but have maintained their objectivity. They are aware of how much change is needed to sustain success or turn around a failure, but they also know the organization, its culture, and its people. They can do more than bring in consultants or make across-the-board cuts. Beyond getting short-term profits, they can build for future growth. These unusual people are often found at the periphery of the organization, managing new businesses or new markets.
Real Life Example:
Take General Electric'sJeff Immelt, for instance. The first GE chief executive to come from sales, he had dramatically increased the scale and potential of GE's medical systems business far from the corporation's core engine-and-turbine operations. Other well-known examples of the inside-outside CEO areProcter & Gamble's A.G. Lafley, who rose through the ranks in P&G's personal-care business and spent years building its successful Far East operation, and Sam Palmisano, chairman and CEO of IBM, who in a company known for closed systems and hardware championed open systems and software. But if performance has been poor, a natural response might be that the insiders are part of the problem. There may be some truth to this.
Unless the company's organization permits several managers to have experience running business units, it is hard to sort out the insiders who haven't made mistakes.
In my opinion this can be a succession planning tool that not only follows today's industry recognized best practices Talent Pool model - but is also practical and affordable to implement and use. The company where I will work should first recognize me as a potential candidate as their future HR Director first and then start their succession planning. This not a isolated method which is bounded within a department or should be planned for a particular position, it should be implemented for each supervisory and managerial positions so that all employee should practically see their clear growth opportunity and the path. This can be the best way to retain most valuable human capital.
The first step they should involve in their planning should be Performance Management The performance management process offers a prime opportunity to have managers assess who may have the potential to fill key positions in the company in the future. Managers should already start thinking about employee's performance in their current jobs, talking over career development opportunities, assessing their skills and competencies, and judging the probability that an employee will choose to continue working for the company Managers will be able to collect key pieces of confidential succession planning data as a component of the performance management process, or a talent assessment process, and that data will become a part of the employee's talent profile. The manager can assess and provide; a prediction of the employee's overall potential - ultimately where the candidate may aspire to in the company; the estimated time it will take to reach that potential; a indication of the risk that the employee will leave the company, when and why a recommendation for career development in a talent pool; This information can be kept current with periodic reassessments. They can assess everyone in their workforce or focus on a certain division or geography as an initial step. The next step should be
High Potential Analysis, where the managers should identify talent overall or within a particular group, which can be used to identify the best internal candidates for development, or to find potential candidates for an immediate succession requirement. The analysis plots each employee according to the key ratings of performance score and potential rating in a nine-box grid that easily identifies "high potential" employees and lets the viewer drill down into the talent profile for any employee that meets the qualifications. From here, individuals identified can be nominated directly into a talent pool for development purposes or scheduled into an upcoming talent assessment process. On the other hand the employee should have the ability to track their individual development plans and keep their manager updated on their progress. The plan provides a clear roadmap for high potential employees to close the gaps required to become qualified successors. When detailed talent and performance assessment data exists for high potential employees, it can be queried as needed for a number of different purposes: to find successors for open positions, an input into the calculation of bench strength or to measure whether the expected increase in the talent pool of promotable.