Succession planning
Encyclopedia
Succession planning is a process for identifying and developing internal people with the potential to fill key business leadership positions in the company
. Succession planning increases the availability of experienced and capable employees that are prepared to assume these roles as they become available. Taken narrowly, "replacement planning" for key roles is the heart of succession planning. Effective succession or talent-pool management
concerns itself with building a series of feeder groups up and down the entire leadership pipeline or progression (Charan, Drotter, Noel, 2001). In contrast, replacement planning is focused narrowly on identifying specific back-up candidates for given senior management positions. For the most part position-driven replacement planning (often referred to as the "truck scenario") is a forecast, which research indicates does not have substantial impact on outcomes.
Fundamental to the succession-management process is an underlying philosophy that argues that top talent in the corporation must be managed for the greater good of the enterprise. Merck and other companies argue that a "talent mindset" must be part of the leadership culture for these practices to be effective.
Research indicates many succession-planning initiatives fall short of their intent (Corporate Leadership Council, 1998). "Bench strength," as it is commonly called, remains a stubborn problem in many if not most companies. Studies indicate that companies that report the greatest gains from succession planning feature high ownership by the CEO and high degrees of engagement among the larger leadership team
Companies that are well known for their succession planning and executive talent development practices include: GE
, Honeywell
, IBM
, Marriott
, Microsoft
, Pepsi
and Procter & Gamble
.
Research indicates that clear objectives are critical to establishing effective succession planning. These objectives tend to be core to many or most companies that have well-established practices:
In other companies these additional objectives may be embedded in the succession process:
Most large corporations assign a process owner for talent and succession management. Resourcing of the work varies widely from numbers of highly dedicated internal consultants to limited professional support embedded in the roles of human resources generalists. Often these staff resources are separate from external staffing or recruiting functions. Some companies today seek to integrate internal and external staffing. Others are more inclined to integrate succession management with the performance management process in order simplify the work for line managers.
Large consultancies, such as McKinsey, have recently focused on the broader talent issue, but most consulting support to executive succession and development practices probably comes from numerous boutique firms and retired executives in the field.
The leading professional affiliation for succession-planning professionals is, arguably, The Human Resources Planning Society (publishers of People and Strategy Journal at http://www.hrps.org/), an international association with academic and practitioner membership from around the world.
POLITICAL SCENARIO: This is the case of a company linked to a large family, where it is expected that through inheritance, the property was spray quickly, possibly faster than the growth of own business, resulting in a dividend per head lower and lower. Identifying suitable members in the family can incorporate to address and possibly distinguish who may occupy the general direction afterwards. However, the existence of many members in the family can turn into conflicts of power, making it necessary to establish agreements and occasionally reorganize the business in terms of those individuals who, because of the obvious professional and human qualities can be recognized as leaders. In many cases this may mean separate reorganization to create new companies and business units.
OPENESS: When members of the next generation are numerous and among them is not possible to identify a person who possesses the characteristics necessary to assume leadership positions with expertise in family business, we have a scenario that we call Open, since the strategy more suitable for this type of organization is to shift some capital to others who can provide not only management skills but also liquidity for family members. This will succeed in securing the future of the business, creating more value for society and retention of jobs for their employees, not to please the family, getting money and avoid future complications.
FOREIGN MANAGEMENT: This scenario occurs when family members who control the business are not many, and yet, not having any of its members with a natural profile of leadership succession when they choose to appoint a non-family CEO .
NATURAL SUCCESSION: Families seeking to preserve its legacy business are the most favorable conditions in the presence of a stage of natural succession. This is the case of a company controlled by a few families, few heirs who in turn have identified among them a worthy successor, a strong name also is associated with the adequacy enough to drive its growth, the ability to run the organization, understanding market and commitment which means only a part of the family patrimony is also a source of value to society, other shareholders, customers, suppliers and even their own employees (stakeholders).
Arieu Family Business Succession Model (Spanish)
In many companies, over the past several years, the emphasis has shifted from planning job assignments to development, with much greater focus on managing key experiences that are critical to growing global business leaders. North American companies tend to be more active in this regard, followed by European and Latin American countries.
PepsiCo, IBM and Nike
are current examples of the so-called "game planning" approach to succession and talent management. In these and other companies annual reviews are supplemented with an ongoing series of discussions among senior leaders about who is ready to assume larger roles. Vacancies are anticipated and slates of names are prepared based on highest potential and readiness for job moves. Organization realignments are viewed as critical windows of opportunity to create development moves that will serve the greater good of the enterprise.
Assessment is a key practice in effective succession planning. There is no widely accepted formula for evaluating the future potential of leaders, but there are many tools and approaches that continue to be used today, ranging from personality and cognitive testing to team-based interviewing and simulations and other assessment center methods. Elliott Jaques
and others have argued for the importance of focusing assessments narrowly on critical differentiators of future performance. Jaques developed a persuasive case for measuring candidates' ability to manage complexity, formulating a robust operational definition of business intelligence. The Cognitive Process Profile (CPP) psychometric is an example of a tool used in succession planning to measure candidates' ability to manage complexity according to Jaques' definition.
Companies struggle to find practices that are effective and practical. It is clear leaders who rely on instinct and gut to make promotion decisions are often not effective. Research indicates that the most valid practices for assessment are those that involve multiple methods and especially multiple raters "Calibration meetings," composed of senior leaders can be quite effective judging a slate of potential senior leaders with the right tools and facilitation.
With organisations facing increasing complexity and uncertainty in their operating environments some suggest a move away from competence based approaches. In a future that is increasingly hard to predict leaders will need to see opportunity in volatility, spot patterns in complexity, find creative solutions to problems, keep in mind long term strategic goals for the organisation and wider society, and hold onto uncertainty until the optimum time to make a decision.
Professionals in the field, including academics, consultants and corporate practitioners, have many strongly held views on the topic. Best practice is a slippery concept in this field. There are many thought pieces on the subject that readers may find valuable such as "Debunking 10 Top Talent Management Myths", Talent Management Magazine, Doris Sims, December 2009. Research-based writing is more difficult to find. The Corporate Leadership Council, The Best Practice Institute (BPI) and the Center for Creative Leadership, as well as the Human Resources Planning Society are sources of some effective research-based materials.
Company
A company is a form of business organization. It is an association or collection of individual real persons and/or other companies, who each provide some form of capital. This group has a common purpose or focus and an aim of gaining profits. This collection, group or association of persons can be...
. Succession planning increases the availability of experienced and capable employees that are prepared to assume these roles as they become available. Taken narrowly, "replacement planning" for key roles is the heart of succession planning. Effective succession or talent-pool management
Management
Management in all business and organizational activities is the act of getting people together to accomplish desired goals and objectives using available resources efficiently and effectively...
concerns itself with building a series of feeder groups up and down the entire leadership pipeline or progression (Charan, Drotter, Noel, 2001). In contrast, replacement planning is focused narrowly on identifying specific back-up candidates for given senior management positions. For the most part position-driven replacement planning (often referred to as the "truck scenario") is a forecast, which research indicates does not have substantial impact on outcomes.
Fundamental to the succession-management process is an underlying philosophy that argues that top talent in the corporation must be managed for the greater good of the enterprise. Merck and other companies argue that a "talent mindset" must be part of the leadership culture for these practices to be effective.
Research indicates many succession-planning initiatives fall short of their intent (Corporate Leadership Council, 1998). "Bench strength," as it is commonly called, remains a stubborn problem in many if not most companies. Studies indicate that companies that report the greatest gains from succession planning feature high ownership by the CEO and high degrees of engagement among the larger leadership team
Companies that are well known for their succession planning and executive talent development practices include: GE
Gê
Gê are the people who spoke Ge languages of the northern South American Caribbean coast and Brazil. In Brazil the Gê were found in Rio de Janeiro, Minas Gerais, Bahia, Piaui, Mato Grosso, Goias, Tocantins, Maranhão, and as far south as Paraguay....
, Honeywell
Honeywell
Honeywell International, Inc. is a major conglomerate company that produces a variety of consumer products, engineering services, and aerospace systems for a wide variety of customers, from private consumers to major corporations and governments....
, IBM
IBM
International Business Machines Corporation or IBM is an American multinational technology and consulting corporation headquartered in Armonk, New York, United States. IBM manufactures and sells computer hardware and software, and it offers infrastructure, hosting and consulting services in areas...
, Marriott
Marriott
- Corporations :* Marriott International, international hotel company* Marriott Hotels & Resorts* Marriott Corporation , originally known as Hot Shoppes, Inc...
, Microsoft
Microsoft
Microsoft Corporation is an American public multinational corporation headquartered in Redmond, Washington, USA that develops, manufactures, licenses, and supports a wide range of products and services predominantly related to computing through its various product divisions...
, Pepsi
Pepsi
Pepsi is a carbonated soft drink that is produced and manufactured by PepsiCo...
and Procter & Gamble
Procter & Gamble
Procter & Gamble is a Fortune 500 American multinational corporation headquartered in downtown Cincinnati, Ohio and manufactures a wide range of consumer goods....
.
Research indicates that clear objectives are critical to establishing effective succession planning. These objectives tend to be core to many or most companies that have well-established practices:
- Identify those with the potential to assume greater responsibility in the organization
- Provide critical development experiences to those that can move into key roles
- Engage the leadership in supporting the development of high-potential leaders
- Build a data base that can be used to make better staffing decisions for key jobs
In other companies these additional objectives may be embedded in the succession process:
- Improve employee commitment and retention
- Meet the career development expectations of existing employees
- Counter the increasing difficulty and costs of recruiting employees externally
Field of Succession Management
There is a substantial body of literature on the subject of succession planning. The first book that addressed the topic fully was "Executive Continuity" by Walter Mahler. Mahler was responsible in the 1970s for helping to shape the General Electric succession process which became the gold standard of corporate practice. Mahler, who was heavily influenced by Peter Drucker, wrote three other books on the subject of succession, all of which are out of print. His colleagues, Steve Drotter and Greg Kesler, as well as others, expanded on Mahler's work in their writings. "The Leadership Pipeline: How to Build the Leadership Powered Company," by Charan, Drotter and Noel is noteworthy. A new edited collection of materials, edited by Marshall Goldsmith, describes many contemporary examples in large companies.Most large corporations assign a process owner for talent and succession management. Resourcing of the work varies widely from numbers of highly dedicated internal consultants to limited professional support embedded in the roles of human resources generalists. Often these staff resources are separate from external staffing or recruiting functions. Some companies today seek to integrate internal and external staffing. Others are more inclined to integrate succession management with the performance management process in order simplify the work for line managers.
Large consultancies, such as McKinsey, have recently focused on the broader talent issue, but most consulting support to executive succession and development practices probably comes from numerous boutique firms and retired executives in the field.
The leading professional affiliation for succession-planning professionals is, arguably, The Human Resources Planning Society (publishers of People and Strategy Journal at http://www.hrps.org/), an international association with academic and practitioner membership from around the world.
Family Business
Arieu proposed a model in order to classify family firms into four scenarios: political, openness, foreign management and natural succession.POLITICAL SCENARIO: This is the case of a company linked to a large family, where it is expected that through inheritance, the property was spray quickly, possibly faster than the growth of own business, resulting in a dividend per head lower and lower. Identifying suitable members in the family can incorporate to address and possibly distinguish who may occupy the general direction afterwards. However, the existence of many members in the family can turn into conflicts of power, making it necessary to establish agreements and occasionally reorganize the business in terms of those individuals who, because of the obvious professional and human qualities can be recognized as leaders. In many cases this may mean separate reorganization to create new companies and business units.
OPENESS: When members of the next generation are numerous and among them is not possible to identify a person who possesses the characteristics necessary to assume leadership positions with expertise in family business, we have a scenario that we call Open, since the strategy more suitable for this type of organization is to shift some capital to others who can provide not only management skills but also liquidity for family members. This will succeed in securing the future of the business, creating more value for society and retention of jobs for their employees, not to please the family, getting money and avoid future complications.
FOREIGN MANAGEMENT: This scenario occurs when family members who control the business are not many, and yet, not having any of its members with a natural profile of leadership succession when they choose to appoint a non-family CEO .
NATURAL SUCCESSION: Families seeking to preserve its legacy business are the most favorable conditions in the presence of a stage of natural succession. This is the case of a company controlled by a few families, few heirs who in turn have identified among them a worthy successor, a strong name also is associated with the adequacy enough to drive its growth, the ability to run the organization, understanding market and commitment which means only a part of the family patrimony is also a source of value to society, other shareholders, customers, suppliers and even their own employees (stakeholders).
Arieu Family Business Succession Model (Spanish)
Process and Practices
Companies devise elaborate models to characterize their succession and development practices. Most reflect a cyclical series of activities that include these fundamentals:- Identify key roles for succession or replacement planning
- Define the competencies and motivational profile required to undertake those roles
- Assess people against these criteria - with a future orientation
- Identify pools of talent that could potentially fill and perform highly in key roles
- Develop employees to be ready for advancement into key roles - primarily through the right set of experiences.
In many companies, over the past several years, the emphasis has shifted from planning job assignments to development, with much greater focus on managing key experiences that are critical to growing global business leaders. North American companies tend to be more active in this regard, followed by European and Latin American countries.
PepsiCo, IBM and Nike
Nike, Inc.
Nike, Inc. is a major publicly traded sportswear and equipment supplier based in the United States. The company is headquartered near Beaverton, Oregon, which is part of the Portland metropolitan area...
are current examples of the so-called "game planning" approach to succession and talent management. In these and other companies annual reviews are supplemented with an ongoing series of discussions among senior leaders about who is ready to assume larger roles. Vacancies are anticipated and slates of names are prepared based on highest potential and readiness for job moves. Organization realignments are viewed as critical windows of opportunity to create development moves that will serve the greater good of the enterprise.
Assessment is a key practice in effective succession planning. There is no widely accepted formula for evaluating the future potential of leaders, but there are many tools and approaches that continue to be used today, ranging from personality and cognitive testing to team-based interviewing and simulations and other assessment center methods. Elliott Jaques
Elliott Jaques
Elliott Jaques was a Canadian psychoanalyst and organizational psychologist. He developed the notion of requisite organization from his 'stratified systems theory', running counter to many others in the field of organizational development...
and others have argued for the importance of focusing assessments narrowly on critical differentiators of future performance. Jaques developed a persuasive case for measuring candidates' ability to manage complexity, formulating a robust operational definition of business intelligence. The Cognitive Process Profile (CPP) psychometric is an example of a tool used in succession planning to measure candidates' ability to manage complexity according to Jaques' definition.
Companies struggle to find practices that are effective and practical. It is clear leaders who rely on instinct and gut to make promotion decisions are often not effective. Research indicates that the most valid practices for assessment are those that involve multiple methods and especially multiple raters "Calibration meetings," composed of senior leaders can be quite effective judging a slate of potential senior leaders with the right tools and facilitation.
With organisations facing increasing complexity and uncertainty in their operating environments some suggest a move away from competence based approaches. In a future that is increasingly hard to predict leaders will need to see opportunity in volatility, spot patterns in complexity, find creative solutions to problems, keep in mind long term strategic goals for the organisation and wider society, and hold onto uncertainty until the optimum time to make a decision.
Professionals in the field, including academics, consultants and corporate practitioners, have many strongly held views on the topic. Best practice is a slippery concept in this field. There are many thought pieces on the subject that readers may find valuable such as "Debunking 10 Top Talent Management Myths", Talent Management Magazine, Doris Sims, December 2009. Research-based writing is more difficult to find. The Corporate Leadership Council, The Best Practice Institute (BPI) and the Center for Creative Leadership, as well as the Human Resources Planning Society are sources of some effective research-based materials.
Works cited
- Arieu, A (2010): "The legacy of family firms". Management Herald No. 88.
- Carroll,B.,Levy,L.,Richmond,D. "Leadership as Practice: Challenging the Competency Paradigm". University of Auckland Business School: Sage, 2008.
- Charan, R., Drotter, S., and Noel, J. "The Leadership Pipeline: How to Build the Leadership Powered Company". San Francisco: Jossey - Bass, 2001.
- Corporate Leadership Council, Governance of Human Resources in Global Organizations, Washington: The Advisory Board (Research Report), 1998.
- Goldsmith, M., Carter, L. "Best Practices in Talent Management: How the World's Leading Corporations Manage, Develop and Retain Top Talent. San Francisco: Pfeiffer, 2010.
- Jaques, E. Requisite Organization. Arlington, VA: Cason Hall Publishers, 1989.
- Kesler, G. “ Why the Leadership Bench Never Gets Deeper: Ten Insights About Executive Talent Development. ” People & Strategy, 2002, 25 (1), 32 – 44. http://www.kateskesler.com/publications/articles/item/33-why-the-leadership-bench-never-gets-deeper
- Mahler, W., Wrightnour, W. "Executive Continuity: How to Build and Retain an Effective Management Team". Homewood, IL: Dow Jones-Irwin, 1973.
- McCabe, Harry. 2007. Pass It On: The Entrepreneur's Succession Playbook. http://www.readpassiton.com ISBN 9780979912306
- McCall, M.W. "High Flyers: Developing the Next Generation of Leaders." Boston: Harvard Business School Press, 1998.
- Rothwell, W. Effective Succession Planning, New York: AMACOM, 2001.
Further reading
- Whitmore, Melissa. 2006. Success through succession: Implementing Succession Planning at the Texas Department of Insurance. Applied Research Project. Texas State University. http://ecommons.txstate.edu/arp/185/
- District Management Council: An Introduction to Succession Planning for Public School Districts
- Sims, Doris, 2009. The 30-Minute Guide to Talent and Succession Planning—A Quick Reference for Business Leaders
- McCabe, Harry. 2007. Pass It On: The Entrepreneur's Succession Playbook. http://www.readpassiton.com ISBN 9780979912306
- Kruger, Sarah; Raaf, James J.; Schuma, Richard P.; and Costello, Ellen (2008). "Here, Take the Wheel. Succession Planning Stories and Insights from Business Owners."