Succession management is one of the most important functions in business today. It ensures capable leaders are ready for critical roles, fosters business continuity, aids talent retention and can strengthen a company culture. It also helps leaders at multiple levels to grow, contribute more and advance their careers. Done right, succession management plans contribute to business wellness and build a solid foundation for ongoing success.
Organizations with effective succession management processes can enjoy higher shareholder returns, greater profits, faster revenue growth, operating efficiency improvements, greater customer satisfaction and stronger overall employee engagement scores than those with less effective programs. They also retain institutional knowledge and save money identifying and recruiting replacement candidates. Development plays a key role.
The Learning-Talent Connection
“The partnership between learning leaders and those orchestrating succession planning is a critical element of success at General Mills,” said Kevin D. Wilde, vice president of organization effectiveness and chief learning officer at General Mills, and author of Dancing With the Talent Stars. “Through a variety of strategic development efforts, we can more fully realize the potential of our best talent.”
Despite the benefits and importance of succession planning, many companies are ill-prepared for succession because identifying capable talent, ensuring future leaders are ready for the next role, making good decisions about who to place in the next role and gaining consensus among key stakeholders is challenging.
Internal talent development was the second-ranked critical challenge for CEOs in The Conference Board’s CEO Challenge 2012 research report, “Human Capital.” To ease the challenge, there are eight key elements important to effective succession management efforts. Companies differ in their level of maturity and sophistication within each element, so it is helpful to begin by determining how well a company applies each of the elements, identifying gaps and then making improvements in the areas most easy to leverage.
Global leadership company PDI Ninth House used this “maturity model” approach in research it conducted with Bersin & Associates in 2012, which examined the maturity of companies’ high potential development programs. It found that organizations with top leadership development programs are eight times better at creating a strong bench and six times better at engaging and retaining leaders.
Learning leaders play a critical role in succession management because they are responsible for development for leaders in critical positions, as well as high-potential talent. The most effective learning leaders have a good understanding of all eight elements of succession, contribute to each element and take the lead to accelerate candidates’ development.
Eight Elements of Succession Management
1. Link the people strategy to the business strategy. Each organization’s business strategy is unique. Some aim to expand into new countries, while others strive to renew their commitment to customer service or make greater advances in technology. Whatever it may be, the business strategy must drive talent strategies, influencing decisions about the types of positions that are required, the necessary skills and characteristics for leaders, how to develop and prepare those leaders via learning experiences and how to measure program impact.
2. Identify target roles. Most organizations include roles at the top of the house in succession planning. Some companies also include pivotal roles where variation in the leader’s performance has the largest impact on organization success and strategic priorities. For example, in an organization focusing on international expansion, country managers are pivotal. In one emphasizing innovation, R&D and customer insight, leaders could be pivotal.
Segmenting talent enables companies to devote scarce resources — money, time, attention, training and assignments — to those in the roles that make the most difference. This is more efficient and effective than allocating scarce resources equally across all roles.
3. Define leadership role requirements. Talent planning requires answering key questions, such as: Which roles are needed? How many people are needed, and how many do we have? What is each role required to do and deliver? What skills and experiences are needed? Learning and talent leaders can create a success profile for the role by answering these questions:
• What is the business strategy and context for this role? What are the key business objectives and challenges?
• What are the main leadership challenges?
• What essential competencies and skills are required? What leadership style fits and doesn’t fit with the culture? What factors cause derailment?
• What experiences are important?
4. Identify and assess succession candidates. Most candidates show strong performance in their current roles and have a relevant track record of experience. But effective succession planning requires predicting future performance in new, more challenging roles without supporting data.
Learning leaders can focus on four types of information when helping to identify and assess candidates:
• Performance: Examine the candidates’ performance track record in their current and recent roles. Strong current performance should be a prerequisite for consideration for higher-level roles.
• Potential: Infer candidates’ underlying potential to succeed at higher-level challenges if nurtured over time.
• Readiness: This is the most challenging to assess. The new role will require more advanced competencies and likely development. Therefore, current performance is at best a limited indicator of future success.
• Fit: Use a structured judgment process to match up candidates’ characteristics with the business challenges for a specific role, culture and team.
Esterline Corp., a specialized manufacturing company, sought to gain insight into the bench strength of its mid-level leaders.
“We wanted to kickstart a more formalized program that would give us confidence in who we viewed as the organization’s future leaders,” said Sara Dnell, HR program manager at Esterline.
Esterline worked with PDI Ninth House to create a virtual assessment program that includes online instruments, surveys and simulations, plus development suggestions and just-in-time learning video modules.
“We expect that the outcome of these exercises will be a solid succession management path that we couldn’t get with our previous approach,” Dnell said. “Our next step will be to look at participant results and create a development approach to help them realize their full potential.”
Holcim, a supplier of cement, aggregates and ready-mix concrete, grew rapidly and recognized that it needed to accelerate development for identified successors in key commercial and operations leadership roles regionally and globally. The company created development assessment centers based on its leadership competency model and strategic business priorities. Previously, Holcim assessed candidates at a local or regional level, which limited individuals’ development.
“Knowing with certainty the leadership impact and readiness of our people to fill key roles is important,” said Alan Le Map, Holcim’s global head of leadership development.
5. Conduct talent reviews based on calibrated data. Learning leaders can help to examine a pool of talent, clarifying who is high potential, who is ready for which roles, which gaps candidates must fill, how to develop specific people and how to develop the group overall. Data on performance, potential and readiness, as well as a consistent process across the enterprise to evaluate talent lead to more rigorous and valuable discussions about individual candidates and the talent pool. Learning leaders add value by shedding light on the appropriate next steps for each candidate, including development gaps to close, relevant training and coaching, and real-world assignments that fit development needs. Further, their insights into talent group development needs can help shape better learning interventions.
6. Accelerate talent development. Learning leaders should take the lead to ensure succession candidates develop individually and collectively. To accelerate talent development, the strongest companies use a variety of tools. The primary focus should be on providing on-the-job development. Stretch assignments are especially important for high potentials, who are motivated by challenges and increased responsibilities. Consider assigning candidates to strategic business projects, and regularly rotate their specific duties and assignments to give them a more complete and enriching experience.
“The data from the development assessment centers helps us target the development of successors who are not quite yet ready,” Le Map said. “For example, we assign them projects to deepen their exposure to business challenges or a mentor with strengths from which they can learn. The business heads involved in the assessments get to know talent across regions better and then take on the role of sponsor or coach.”
Thoughtfully designed learning programs are a valuable supplement for high potentials. The strongest programs incorporate relevant content, personal feedback, cross-organizational peer groups, visibility to top-level leaders, action learning projects and self-learning tools, and follow with accountability, using concepts on the job. Learning through others, such as coaches and mentors, also is valuable for targeted learning to close gaps and to facilitate transitioning to the next role.
A good rule of thumb is to devote 70 percent of one’s time and effort toward on-the-job training, 20 percent with others such as coaches and mentors, and 10 percent to training and reading.
Aquatic equipment provider Pentair’s executive development program (EDP) for high-potential, mid-level leaders is a multi-year program that uses its senior leaders, business professors and consultants as faculty for a globally diverse cohort of participants in four weeklong modules: leadership; finance; the Pentair Integrated Management System — which includes lean enterprise, talent management, innovation and growth; and global business, which is taught on the ground in an emerging market, such as China.
“This program clearly has fueled bench development and succession in the company because participants apply what they learn in their action learning coaching assignment and cascade their knowledge to the next level of high-potential leaders,” said Fred Koury, Pentair’s senior vice president of human resources. “Today, EDP alumni comprise 40 percent of all business unit leadership team members globally.”
Grooming high-talent senior co-op leaders for executive positions is also a key initiative for member-owned, agriculture cooperative Land O’Lakes.
“To accelerate the development of these talented leaders, we’ve created the Land O’Lakes Executive Agribusiness Program in partnership with Purdue University’s Center for Food and Agribusiness,” said Karen Grabow, senior vice president, business development services. “This program provides academic and hands-on knowledge and tools via Purdue residencies, distance learning, action learning projects and an international experience.[An] assessment process complements those experiences with self-insight and customized development planning essential to enhancing leadership effectiveness.”
Learning leaders also can ensure promoted candidates have help in their new roles by establishing a clear on-boarding process with coaching support and planned access to mentors and key stakeholders.
7. Build governance and accountability. The companies with the healthiest succession plans have clear governance. Ultimate accountability for talent decisions lies with the CEO and line leaders, just as the ultimate accountability for business financial decisions lies with the line. Learning leaders and talent managers play critical roles in designing and implementing processes and tools to enable better decision making. They educate line leaders on how to make better succession decisions, as well as how to be more effective coaches and mentors for future leaders.
8. Measure and improve. Measure both individual leaders and the process as a whole. For candidates, look at ongoing performance ratings — both results and how they are achieved — success in new challenges and whether they close development gaps. For the process, consider the following questions: How much did high potentials develop? How many high potentials were promoted? How many were successful in their new roles? How many roles had to be filled from outside? Is bench strength improving with more ready leaders, smaller gaps and the appropriate backfill for critical positions? How can leaders continue to improve the process? “The results are clear — most participants succeed in securing a promotion or a favorable lateral move, and we have improved the percentage of top-level management roles filled from succession plans to 75 percent over the last three years, with 90 percent of top roles filled internally,” Holcim’s Le Map said.
Succession management requires time, focus and commitment to get it right. Learning leaders are integral to the entire process because so much of it depends on developing and preparing high potentials for future responsibilities. By paying attention to these eight elements, companies can improve succession management and help ensure they have the right leaders in the right places.
Kraig King is executive consultant for board and C-suite solutions, and Joy Hazucha is senior vice president, leadership research and analytics for PDI Ninth House, a global leadership company. They can be reached at editor@CLOmedia.com.