The State of Succession Planning

Succession planning is to talent management what strategy and global connectivity are to the modern enterprise: Without one the other could function, but it wouldn't function well. And, who would want the hassles that would result?

Succession planning — the identification, assessment and development of successors for critical roles within an organization — is not a new concept, but the process has been given new life.

In large part, this is due to the looming talent war that is set to occur as baby boomers retire en masse. Many experts say the exodus of many skilled employees is only the tip of the iceberg. Thus, organizations busily tag different talent pools that reflect their diversity and inclusion strategy as well as global leadership and expansion plans. They assess competencies against established business and performance objectives and execute closely linked workforce planning activities. The cost and effort of these activities suggest that succession planning is not only an important component of effective talent management, it's a vital one.

Identify the Talent

A majority of modern companies have some type of succession planning activity. Some processes might not be elaborate, or succession planning might address only the most senior positions. But savvy organizations know that without some type of plan to build bench strength and maintain a consistent, high-quality flow of talent, they risk losing their competitive edge and their stakeholders' confidence, missing growth opportunities and ultimately forfeiting the profitability and perhaps the viability of their organizations.

"The full question is: Who's managing the store?" said Chris Altizer, Pfizer vice president of global talent development. "Who are these people? What are their backgrounds? How well do we know them? Have we observed them over time? Have we moved them through a series of positions that have built the kind of trust and credibility that we would require to lead the company in times when so much more is at stake?"

The challenge is to tag key talent with the idea of forecasting and placing that talent against current and future business needs. The talent might come from different pools inside an organization, but identifying key performers can help retain significant knowledge and performance in critical roles in the event of an early or unexpected departure.

"Succession planning is very important for a number of reasons," said Fumiko Kondo, Intellilink Solutions managing partner. "One, it's really hard to find the right skilled people. You're better off trying to develop your people rather than always trying to hire in, especially at the management level. It's not only the skills that are important but also knowledge of the company, knowledge of the space they're in, knowledge of the strategy. Trying to give all of that to someone that you hire can be quite challenging."

It can be expensive not to plan for employee movement within the enterprise. Kondo said that if people have a career path, the chances are greater they will remain in the company, which is important when considering recruiting fees, lost productivity because of open key positions, and ramp-up or onboarding costs.

"People want more from their job than just a job — they want a career, they want to feel like there's fulfillment," Kondo said. "There are a number of studies that have been done where people talk about why people leave organizations, and people might say one of the top reasons is compensation, but it's really not. The bigger reason has a lot to do with their career. Is their manager giving them opportunities to work on things and to develop? Those softer aspects are so much more important than monetary rewards for people. Succession planning is one way that you can really try to get there."

Barbara Phillips, Pfizer director of global talent management, said it also is a way to plan for issues before they arise.

"I view succession planning as a risk management process as it relates to human capital," Phillips said. "It's thinking through what kinds of skills, knowledge, capabilities we are going to need to run this organization today and for the foreseeable future. What do we have? What don't we have? How are we going to develop or buy what we don't have? It's very much contingency planning, so staying — or trying to stay — one step ahead of the movement of talent and the changes in the environment is very, very valuable."

Assess the Talent

Once high-potential employees have been identified, there also should be some way to assess them to ensure the identification and development stages of succession planning are on target. While these three actions might not happen in that order and might happen at multiple times during the talent and performance management employee life cycle, each stage has value if you ensure people are prepared to step into critical positions.
Henkel, a manufacturer and vendor of brand name products and system solutions in international markets, has implemented formal assessment centers to help filter and organize key talent.

"Recently, I was in a competency assessment program where we take our identified high-potential people and put them through two-and-a-half days of simulated exercises," said Bill Reed, Henkel of America senior vice president of human resources. "They're observed by a number of observers and assessed on 12 important competencies that we think they need to have in order to be a successful Henkel manager. We assess how these high-potential people do on these different exercises, how they react and how others have reacted before them so that we have a database.

"It's not a pass/fail — it's just a very important step for these high-potential people to do. What comes out of it is a readiness assessment. Is this person ready now to move up? Will he or she be ready in a couple of years or a few months? You have the readiness assessment, and because I haven't yet met anybody who's perfect, you can identify weaknesses and put together a developmental plan to overcome those."

Succession planning assessments, which take place at one of three of Henkel's International Management Assessment Centers in North America, Asia Pacific and Europe, are all calibrated together to ensure Henkel maintains the same global talent standards.

Reed said the past decade has seen a significant increase in Henkel's succession planning activities as a result of acquisitions and growth. This brought a need to ramp up management succession programs such as the Management Competency Assessment (MCA) and Management Review (MR). All such programs help to create a leadership dialogue similar to a peer or customer review. These, along with 180-degree assessments and various development activities, link to form the Henkel Global Academy.

"We're always looking for a process to identify the high potentials earlier in their careers," Reed said. "A lot of people use the expression, 'Like cream, they rise to the top,' but they may not rise to the top until they're well into their careers. We push these programs well down into the organization, so we can find out who might be ready or who has the potential to be ready. The people who went through these programs, say six, eight years ago, are already in leadership positions throughout the company."

Develop the Talent

Once key talent has been identified for critical business roles, as candidates eligible for promotion or as high-potentials, they must be developed.

"Succession planning is a very important element of a broader talent management strategy and program, and it goes hand in hand with development activity," said Linda Rhijnsburger, Bell Canada director of talent management.

Communications solutions and service provider Bell Canada has a number of succession planning activities. Rhijnsburger noted that, like many large companies, it focuses more of these activities at the senior level. But there are other roles in the company that are considered critical skill positions. Thus, processes have been implemented to ensure they also can be filled if someone leaves or moves to another opportunity within the company.
 
"A couple of times a year, we do a formal review of our senior executive level, and as part of that review, we look at what are our most critical roles across the company," Rhijnsburger said. "It may be in a new growth area or in a stable area where we get a lot of our business today. If there's a gap behind one of those critical positions, we consider what we need to do to fill that. Whether it's to grow somebody internally or acquire somebody outside, we look at what is needed and put an action plan together.

"It doesn't make sense to me to have succession planning at every single level for every single job. The nature of our work world has changed so much, we look to skill and to develop people so that they can go into a number of jobs. Previously, our company was very singularly focused — they would look to back fill specific jobs as opposed to looking at certain jobs and then looking at a number of people who could fill those jobs. We need to have succession plans at the critical points: the executive positions and any level where there are critical skills required to move the business forward. We have some more work to do there, but I think we have some good, basic processes in place, and we're having regular discussions. 'Where is our business going? Do we have the right skill sets, the right capabilities? If we don't, what do we need to do to build them?'"

At Pfizer, succession planning development activity is a core part of the talent management process. Phillips said candidates are vetted according to their readiness for identified roles, as well as what is needed to develop that readiness.

"It's up to the leaders to really think through, 'OK, how am I going to work with these people based on their current strengths and development needs to get them ready?' The framework that we use for that is the Morgan McCall 70-20-10 guidelines, where 70 percent of the development should be experiential, on the job, stretch assignments; 20 percent coaching, feedback, mentoring and then 10 percent would be classroom," Phillips said. "We're taking a harder look and putting more rigor around, 'What do people need to get ready? What kind of assignment or move or increased responsibility can we give them in order for them to develop what they need to develop?' There's a very strong link among succession planning, leadership development and internal recruiting. You could also incorporate how we manage performance and assess people's performance and pay them. There's a lot of different pieces that go into it, but talent review meetings are the core of how we think about the succession planning process."

Altizer said Pfizer keeps an open mind in regard to determining high-potential employees.

"At Pfizer, talent is an open market," Altizer said. "So yes, we do succession planning. Yes, we do talent planning. Yes, we do development planning, but we're not going to predetermine who's going to be successful by only limiting developmental opportunities or roles to selected people. At some point in between, you pull that crystal ball out in terms of assessing potential and then make decisions about what opportunities and assignments the people with high potential are going to receive, recognizing that for every person that we put into one of these, there are scores of people that we don't."