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Succession Planning
Published June 2008
The Succession Fix
Cindy Marsh, Ph.D., L.P.
The purpose of a succession plan is to decrease interruptions and negative business impact in the event a leader leaves the organization. Traditionally, succession efforts focused only on C-suite-level positions, but pivotal non-C-suite roles also should be included in a comprehensive succession plan.
For most companies, showing leadership consistency during CEO transitions is essential to ensure business continuity and maintain the confidence of customers, investors and key talent. Imagine the business and stock implications for Apple if Steve Jobs' health scare had turned out differently or if McDonald's didn't have a successor ready in 2004 after Jim Cantalupo died suddenly of a heart attack at age 60.
Smart organizations also realize interruptions in leadership below the CEO level can have a major impact on business operations and productivity. This knowledge has prompted many companies to look for a more comprehensive succession management system that will allow them to operate seamlessly during any leadership transition.
Succession Value Beyond the C-Suite
Succession management should not be a stand-alone practice. A good succession management plan is woven into an overall HR system that values continuous talent assessment and development programs. For example, programs that identify which high performers have the potential to ascend the corporate ladder should be linked with succession management.
Succession management plans also should reflect overall business objectives and projected challenges. If a company has a large pool of baby boomers in executive positions that plan on retiring relatively soon, the succession plan should have a large pool of potential candidates ready or being readied to step into those roles.
Or if the business plans to expand into new global markets, talent to fill necessary roles abroad should be reflected in the plan. Executing these tasks will almost certainly require leaders outside the C-suite.
Every position at a business serves a functional purpose, but some roles are so crucial that even minimal disturbances could have a detrimental impact. The concept behind comprehensive succession management is to take the necessary steps to have the right people in these crucial positions and a pool of able candidates ready to fill them when the time comes.
Which Levels Should Have Succession Management Plans?
Knowing succession management is valuable and knowing how to execute a comprehensive succession management plan are two different things. One of the biggest challenges is deciding which levels and positions to focus on. Should there be a successor in the wings for every senior executive? What about mid-level leaders? Are there other specific positions that need attention?
Overall, succession management plans should include:
Chief executive suite (CEO, CFO, etc.).
Senior executive positions (frequently referred to as the Top 50, 100, etc.).
Pivotal roles.
Generally, constructing an expanded succession program to include every senior executive role makes sense. These roles have greater importance because the business units or groups they oversee would be significantly impacted by sudden transition or leadership gaps. However, it is essential to remember each business is different, and the unique aspects of each business model will determine other positions that should be included in a succession management plan. These positions are pivotal roles, positions that significantly impact operations or overall success regardless of leadership level.
Consider an engineering company. Program managers at engineering companies tend to manage multimillion dollar programs, as well as large teams. While the position is not in the senior executive ranks, a sudden transition or departure would dramatically impact a large number of employees, as well as a large budget. Thus, the program manager position is a pivotal role, and engineering organizations should have succession plans in place.
Another example can be found in the oil and gas industry. In this sector, some roles are responsible for negotiating deals on oil drilling rights or access to pipelines with other countries and competitors. The impact of these deals can last for 20 to 30 years and involve billions of dollars. Clearly, this is a pivotal role, and it's in the company's best interests to have successors ready to fill these spots should they turn over.
Define Skills and Experiences Successors Need
No two companies are the same. Nor should two succession management plans be the same. Each position included should be clearly defined.
That said, some skills and characteristics will be similar for positions at the same level. Vice presidents all will need certain leadership competencies to be successful. But they also will need a certain set of skills and experiences that are specific to their roles. Despite the positions being relatively equal in terms of compensation and job tasks, managers in France would need to function under different government regulations than their counterparts in China.
Despite the same VP status, a vice president of marketing would need a different set of skills and experiences than a vice president of finance. A succession plan should reflect all of this.
To maximize resources, broad-based skills training pertinent to multiple positions should be standard, and additional training dollars for tailored coaching or skills training should be available as needed. A full set of expectations and requirements for each role must be identified prior to setting up a pool of potential successors. After all, how can talent managers prepare to support a role without understanding the full breadth of responsibilities and tasks the role requires?
How Should You Identify Successors?
Generally, the best way to identify successors is to pay continuous attention to the performance assessments of the host organization's high-performance and high-potential employees.
Talent assessment might look at four components: performance, potential, readiness and fit. Performance indicates how well individuals are doing in their current roles and how they achieve results. Potential indicates whether individuals are capable of performing well several levels above their current roles. Readiness measures an individual's ability to take on a new role at the next level, now. And once an individual has the potential and readiness to take on a new role, his or her fit for the new position must be considered.
Fit should take into account whether the person's particular set of strengths are appropriate for the business challenges to be faced, whether his or her leadership style will mesh with the culture of the group or organization, whether the promotion is being given at the appropriate time in the person's career, whether the person is mobile and whether he or she has the right mix of experiences.
When designing a program, it also is important to understand work silos that may exist and block the organization's comprehensive succession plans. Ideally, a good succession plan should identify multiple people for any one position, and multiple positions for any one person. If a company is separated by specific business units or geographic areas, they tend to miss potential pools of talent outside of immediate work groups.
For example, many companies look to each individual leader to identify successors within each business unit. Although there may be likely candidates in this pool, the approach doesn't offer much breadth on an enterprise level. A director in one unit may have several traits and characteristics that, with some minimal additional experiences or skills training, could be a perfect fit for another business unit. Looking across business units allows talent managers to expand their potential talent pool and take advantage of leaders from different business units who can bring a broader range of business knowledge to a new position.
The goal of a succession program is to create the largest qualified pool of candidates possible for each position. When planning for the unknown, talent managers certainly do not want to put all of their employees/eggs in one basket.
Pushing the Right Development Experiences for Succession
When successors have been identified, the development process begins. Successors can be given general development opportunities and specific exposure to the roles they most likely will be asked to fill. Providing experiences does not need to be an activity separate from real work. In fact, development activities or experiences should be integrated with the host organization's business needs in the same way a company's strategic plan should align with its succession planning process.
Consider a high-level executive who is being groomed for the CEO position at XYZ Corp. This individual may have exceptional skills but might need more exposure to the overall business. This exposure might mean a stint as the CFO. In this particular company, the CFO position certainly has a high level of responsibility, but placing the high-level executive there offers lower business risk due to the overall strength of the finance function and the existing financial systems in place across the company's business units. By providing this experience, the high-level executive is able to do useful work while getting the necessary exposure and experience needed to further his readiness for the CEO position.
Address Business Risks and Talent Constraints
Finally, a good succession plan should address talent-related business risks. For key strategic initiatives or critical parts of the business, talent managers can't afford to lose a person in a pivotal role. The succession process should ensure there are viable successors being groomed, and where none are available, it should provide ways to bring in talent from outside.
Executing comprehensive succession planning proactively, before there is a crisis, will minimize the likelihood of business disruption. Similarly, a good succession process will identify where an organization's business plan may be at risk and highlight alternative approaches to achieve an organization's strategic goals.
Succession planning is not just for CEOs anymore. A solid succession plan should reflect business challenges, identify as many successors as possible and take the steps needed to ensure qualified candidates are ready to fill key positions and maintain business continuity.
