Succession Planning: Extending Beyond The Executive Suite

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.

Why Bother With Succession Plans?

Succession Planning - Published March 2008
Creating Consistency:
Enterprise-Wide Succession Plans
by Agatha Gilmore


When its CEO left, the Northeast Georgia Health System (NGHS) celebrated his 40 years at the company.

When its COO left, the company celebrated his 27 years at the organization.

When several other 20-plus-year executives left, senior executives at NGHS started to panic.

"We went from a 40-year CEO with a community-minded culture to a growth plan that really just defies the imagination," said Jack Fulbright, vice president of human resources at the NGHS. "It's amazing."

The plight of the NGHS isn't unique. In fact, the scenario might become commonplace during the next few years. With more than 70 million baby boomers eligible to retire and not enough skilled workers to fill the ranks, the U.S. Department of Labor estimates the workforce will be short 10 million employees by 2010.

And according to research from the Aberdeen Group, fewer than half of organizations surveyed for the 2007 report "The Looming Leadership Void: Identifying, Developing, and Retaining Your Top Talent" currently have a succession planning strategy in place, though this number is expected to jump to 75 percent by the end of 2008.

"Succession planning, once reserved for the most senior positions at organizations and considered a component of leadership development, is being viewed more holistically across the organization and its stakeholders," wrote Aberdeen Research Director Kevin Martin.

Further, the concept of a successful succession plan has evolved. Gone are the days of the hush-hush, case-by-case replacement process. Today's market requires organizations to look at succession planning as a visible, integral, enterprise-wide part of their overall business strategies, plot out projected growth and be clear with employees about how they fit into the equation.

The Push to Promote From Within

"One of the reasons succession planning is so key is the way that we work is changing," said Ilene Ringler, principal of Ilene Ringler Associates, a consulting firm based in Phoenix. "So to have the right people ready to move when you need them is more critical than ever before."

This certainly became clear to those at the NGHS, who, without an integrated succession plan, had to wait until longtime employees retired before scrambling to find replacements.

"The organization knew these people were going to retire, and yet we still had to go out and replace the executives that we lost," Fulbright said.

This resulted in external hires of more than 60 percent in top executive jobs. Recruiting talent externally — perhaps one of the most costly and unwieldy side effects of not having an enterprise-wide succession plan — can have a debilitating effect on a company's bottom line.

For example, research done on CEO succession by the Hay Group showed hiring externally can result in shorter employment terms, less stable company culture and morale and compensation-related costs, as organizations often have to bump up pay to attract external hires.

The cost of recruiting new talent also is a factor, regardless of organizational level.

"The financial repercussions — and forget about the downtime of making a bad decision on the placement, in terms of lost business opportunity — just looking at the replacement costs, are significant," said Ron Garonzik, vice president of leadership talent at the Hay Group in New York. "Internal candidates are more likely to succeed because organizations that have figured it out have time to develop the candidates and to address the risks that they pose in relation to critical positions."

To help lessen the extent of external hiring in the future, the NGHS has since begun to implement an enterprise-wide succession planning strategy whereby each employee identifies three potential in-house successors, estimates how long it would take those successors to work into the positions and then helps create specific development plans for them.

"We just can't afford to have the inconsistency and the silos that existed in the past," Fulbright said.

Succession as Business Strategy

The push to promote from within also has helped highlight the fundamental connection between succession planning and key business goals around development and retention.

"Succession planning isn't this stand-alone thing," said Kevin Martin at Aberdeen. "It's something that feeds recruiting, performance management, learning and development."

For this reason, the first step in creating a successful succession plan is to think of it as a fundamental element of a dynamic business strategy. The plan should not only identify potential gaps within the organization, it should explicitly define current and future job roles.

"First and foremost, succession is about ensuring your business has the organizational capability in place to prosper," Garonzik said. "That means looking at the business context and strategy very carefully and understanding in terms of strategic requirements what the operating model needs will be going forward. How is the organization going to run to generate the revenue it requires?"

To fill these well-defined job roles requires a high level of openness and transparency within the organization.

"You have to know how the organization is going to grow and be really clear on what people need to know and need to be able to do to be successful in that future state," Ringler said. "And that's not just hard skills. It's how people like to work, what motivates them. It's, 'Do they want to be a part of the organization's growth?'"

While many organizations have high-potential programs, they often don't delve deeper to find out what the individuals themselves are interested in pursuing, Garonzik said. This depth can be particularly helpful when considering multigenerational workforce preferences.
"What we're really pushing companies to consider is, 'High potential for what, exactly?'" he said.

A consistent succession plan helps employees understand where they fit in the organization, as well as where they might want to grow. It also helps foster a culture of understanding that might assuage the effects of external hiring, Ringler said.

"If the culture is one of full disclosure, which many cultures are not, people know who the higher [potentials] are, so it helps people to know how the organization goes about doing its decision making," Ringler said. "And that helps the hi-pos know, or anybody know, 'How can I be part of the succession planning process?'"

This sense of employee empowerment has become a crucial advantage in today's market. Organizations that offer workers the opportunity to track their own progress will recruit the best talent, Martin said.

"It's no longer a nice to have. It really becomes a need to have," he said. "It becomes this holistic recruiting, developing, retention type of strategy."

It's also at this learning and development stage of succession planning that applying technology can vastly improve results.

"The automation brings consistency, it brings facilitation, it brings the ability to leverage that data into another system," Martin said. "[It] provides so much greater insight; it provides greater access organizationally to talent."

Dynamic Learning and Development

With such a deep-reaching organizational impact, the succession planning process might start as an human resources function, but ultimately would be taken over by department heads as it became fully integrated into the business strategy, said Mike Reingruber, group vice president at Plexus Scientific, a technology consulting company.

Additionally, other aspects of succession planning, such as knowledge capture and information sharing, would become dynamic, applied processes rather than one-time deals.

"[When an employee retires], you've got a very limited time period to extract what you can know from that person," Reingruber said. "[And] it's tough for someone who's now in your footsteps and doing your job to say, 'Let me check the lessons-learned repository and see what's there.' You don't self-prompt to go and look. A lot of the agencies are looking to replace antiquated systems with something a lot more proactive because it's actually applied."

Reingruber pointed to the Air Force as an example. Before engineers begin the design process for airplanes, he said they are prompted to read through closeout packages or after-action reports on similar projects. When they complete their projects, they are encouraged to make submissions into the knowledge database.

"You've kind of got to embed this idea of capturing these knowledge nuggets throughout their lifetime as an employee, so when they do leave, it exists somewhere, it's used proactively and the other folks — regardless of skill set or time within the organization — can access it," Reingruber said.

The use of technology at this point also is incredibly useful, Reingruber said. A lot of companies are experimenting with intelligent agents or digital repository systems. The program pulls up appropriate stored knowledge and processes for an employee who has just entered a new phase of a project. The employee then has the opportunity to review and apply the relevant information.

"Now, for the first time, we've actually got a requirement that's driving everybody to look at [intelligent agents], and we've got the technology to support it," Reingruber said.

Looking Ahead

Ultimately, the benefits of a consistent, enterprise-wide succession plan are vast and varied. Namely, organizations can adapt to the potential talent crisis by doing more with fewer resources.

"It's allowing the folks that are there to work more efficiently," Reingruber said. "As these folks retire, you may find out you can do just as well by having the information available with fewer resources."

Additionally, a company's ability to plan succession can have major effects on marketplace perception, as well as on the bottom line, Ringler said.

"From a customer service perspective, if the organization doesn't have that kind of solid planning in place, the potential loss to business is very large," she said. "Creating strategic partnerships has a lot to do with succession planning, [as does] creating good customer relationships, building your business base. All of those external profit benefits are in many ways based upon the organization's ability to run itself internally."

In the case of the Northeast Georgia Health System, which is set to open several additional centers as well as a whole new hospital in 2008, establishing an enterprise-wide succession planning strategy was a no-brainer.

"The need is recognized," Fulbright said. "This is going to be a significant cost-saving strategy in the long run

Let's be strategic and integrate our systems

published February 2008
Integrating Talent Management Systems Strategically by Leighanne Levensaler


With the increased emphasis on talent management, companies are looking to integrate at least some of these systems, while adding solutions for other processes, such as workforce planning, succession planning, recruiting and competency management. In response to the interest, software vendors of all types are scrambling to pull supporting modules into integrated suites.

When it comes to HR-related systems, most companies have a tapestry — or crazy quilt — of systems that have been built, bought and implemented over many years. HR technology infrastructures can include payroll, HRMSs, LMSs, applicant tracking, compensation and benefits, and performance management systems — all of which have different levels of maturity and are commonly owned by different parts of an organization.

Talent managers involved in setting their company's integrated talent management systems strategy have many good reasons not to leap into purchasing decisions. The market offers many options, with different strengths, maturity and levels of integration. Purchases should fit the company's IT architecture with an acceptable range for risk tolerance. How the organization governs talent management also comes into play.

There are major considerations involved in developing this critical system strategy. If skipped, absence of these important and often soul-searching steps will lead to confusion with the wide variety of systems, architectures, delivery models and approaches available.

Start With Business Problems

The first step is to identify business problems the organization wants to solve with an integrated talent management system. Problems typically fall into one of three hierarchical categories:

1. Automation. By implementing these systems, the organization will reduce the cost of errors, save time, reduce paper and better meet compliance requirements.
2. Process improvement. The company's goal is to better implement existing processes and perhaps even improve them because the software will facilitate a more integrated and complete, data-rich approach to a given process.
3. Business and talent breakthroughs: These systems will empower the organization to execute new tasks.

Focus on Talent Processes First

Recent research shows the greatest business results come not from HR systems, but the underlying processes. In fact, Bersin & Associates has identified the Top 22 processes (out of 62 studied) that drive highest levels of business impact. These include coaching; development-based performance management; the use of strategic competencies in recruiting, performance management and leadership development; implementation of skills and competency-based workforce planning; and creating personnel and organizational goals that align with current and strategic business goals.

These processes are not dependent on software solutions. Most are more dependent on company culture, business and organizational maturity. If the investment in talent management systems is to drive dramatic business impact (and positive change), examine and prioritize talent management processes first.

Once the talent manager determines which processes are most important to business success and how they should be prioritized, he or she will be better prepared to evaluate the available options and set expectations for future investments.

When examining current processes, also consider "breakthrough processes." Up to now, most of these processes have not been practical to achieve. But now, new, integrated technology options put them in reach. These include:

* Integrated performance and learning.
* Integrated performance management and
succession planning.
* Pay for performance.
* Integrated recruiting and performance
management.
* Career planning.

Great Read on High Potential Employees- Why You Need Them to Stay

Retaining High Potentials

by Norman Schippers (Talent Management Magazine)

According to a recent study by the Society for Human Resource Management, 12 percent of the workforce, on average, voluntarily resigned January through August 2006.

More-current statistics do not look any more promising — a February 2007 survey by Salary.com revealed that nearly 66 percent of tenured employees (people who have been in their positions for three to 10 years) plan to look for a new job in the next three months.

The threat of increased turnover is grabbing the attention of management, as well as human resources. The productivity costs of losing 12 percent of your workforce is certainly enough for companies to take action, but when combined with the financial and market impact, addressing retention issues quickly escalates to the top of upper management's priority list.

Studies show employee turnover can cost companies up to 40 percent of their annual profit. That's for the turnover of all employees, regardless of their performance levels. The financial impact of losing a significant number of high- potential employees (those who have been identified as your future leaders) can be exponentially higher.

to access the complete article online, go to :

http://www.talentmgt.com/succession_planning/2007/August/394/index.php