THE EXECUTIVE’S GUIDE TO SUCCESSION PLANNING profilesinternational.com The Executive’s Guide 1 to Succession Planning
t’s called succession planning: the process and only 54 percent are actively for identifying and developing the people grooming someone for the role. Iwithin an organization, with the potential 2. There is No Plan Already in Place to fill key business and leadership positions Companies do not have an actionable in the future. When implemented incisively, process in place to select senior succession planning should be a natural executives, and while many believe progression. Henry David Thoreau spoke on they have an effective succession plan in his observations of the succession of trees place, only 25 percent report having an to Middlesex cattle gazers in 1860. Moses adequate pool of successor candidates passed his staff to Joshua when he could no ready for leadership positions. On top longer continue into the Promised Land. of that, roles in the succession-planning The President of the United States knows process are not well defined, and exactly who is next in line should he be companies agree that succession unable to execute his office. It’s a simple, planning involves the combined prudent, practical process; yet recent efforts of the board of directors, the studies and interviews with business senior management team, and support executives and directors show that only 46 staff—such as the human resources percent of them have a formal succession department—but they do not plan in place. What’s more, only 25 percent structure an evaluation process that of them said they had an adequate pool of formally assigns roles to each of these viable candidates for a CEO position. Why is groups, which requires their that? participation. 3. Companies Misunderstand the Purpose 3 REASONS FOR RELUCTANCE of Succession Planning 1. Enterprises Don’t Connect Skills and Many companies think planning for Experience succession is simply to “reduce risk” Organizations often do not make the rather than to “find the best connection between the skills and successors” and generate shareholder experiences required to run the value benefits through the identification company, and the individual of strong, appropriate leadership. candidates who are best suited to Succession plans are frequently not eventually assume senior executive connected with coaching and internal positions. Thirty-nine percent of talent development programs, so they companies do not have an internal are treated as distinct activities rather candidate who they deem prepared than one continuous program to to immediately assume the CEO position, gradually develop leadership skills in
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By identifying 5-POINT STRATEGIC WORKFORCE SCHEME Despite such disparaging numbers when current labor it comes to companies with an adequate succession plan, one study found a trends, businesses whopping 92 percent of companies have can project and some level of workforce planning; however, only 21 percent have put thought into a understand how strategic, long-term approach to closing long it will take to the supply-and-demand of talent gap. If distinguished employees are going to be fill a certain role. crucial to a succession program, then it is axiomatic that a good workforce plan is in place. Even if a company already has a the organization, which also improves workforce plan in progress, it’s a good idea employee productivity. to objectively review the system, and find ways in which it may be improved. It seems that organizations misunderstand 1. Have a Set, Clear View of the Business the true nature of succession planning— Strategy or do not realize the full benefits of putting Ultimately, the workforce exists to an ongoing procedure in place, and are implement that business strategy, so if it therefore reluctant to implement one. is unclear, the workforce cannot possibly Maybe the reason is the amount of work at its fullest capacity. Elements of a development it takes to implement a business strategy that should be looked succession plan seems daunting, and at are areas that should grow, areas that not worth the investment of time and should be more profitable, and areas resources. that should be abandoned. What these changes will do to the current and future Whatever the hesitation, state of the business, and how far and succession planning is the investment fast the changes can be implemented, of not only dollars and time, but of should also be considered. effort in high-potential identification, 2. Take into Account Labor Market Factors developmental activities, and executive By identifying current labor trends, assessment as well. If a company already businesses can project and understand has an effective strategic workforce strategy how long it will take to fill a certain role. in place, implementing a succession plan These factors include macroeconomic should be a cake walk. forecasts, demographic trends,
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regulatory changes, and the particular ensure improvement is being made, and talent movement within the singular that the course will be kept. industry. 3. Identify and Anticipate Future Talent Clearly, there can be no succession without Demands effective workforce planning. Once a company has translated a business strategy into operational requirements, designing the jobs and organizing them accordingly should follow. The most important things to remember are focusing only on the essentials, and designating the critical roles and employee segments necessary to accomplish every aspect of the workforce strategy. 4. Identify Any Talent Gaps and Form a Strategy to Close Them There are typically four options to consider when filling these gaps: • Develop existing internal talent • Transfer talent that may not fit in one 3 CRITICAL STEPS IN role into another that they might be SUCCESSION PLANNING more qualified to perform Succession planning is like a flight of stairs. • Move talent out of the company It’s a set route with stages in place to elevate altogether a person to a higher level. In succession • Recruit outside talent, or obtain planning, there are essentially three steps. temporary outside labor 5. Implement the Plan 1. Identifying the Critical Positions in Your Once implemented, workforce planning Company should be an ongoing process These are people that organizations concurrent with succession planning. simply can’t function without. Top It needs to be backed by the top-level management may be obvious, but executives in the company, and taken there’s also middle management and in manageable stages. Also, tracking new-hires to consider. If a person has progress as the program continues helps been recently hired into a company,
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especially in the current economy, then individuals in an organization, and they are probably crucial to at least one aligning their personality and behavioral aspect of an operation. What would traits with the needs of roles that will happen if they left? Are they the only later have to be filled. Once these one? Look for opportunities to top candidates are identified, upper cross-train in the case that something management and leadership should happen. This has the added throughout the company need to get benefit of giving employees visibility into involved in the process. They can also the future of their careers, thus providing help identify people whose talents were security, loyalty, and engagement. The not as obvious. same goes for middle management; some are probably nearing retirement These leaders then must take on a age, and will need to be replaced in the mentoring role, and start developing near future. Look at what makes these and grooming the individuals they deem exceptional, so that when the time inevitably comes, they will be able [There] are people to take the mantle of leadership in a that organizations smooth, worry-free transition. This development process needs to be simply cannot committed to and maintained function without. throughout the entire life of the company. What would 3. Keep a Database on Hand This database should be full of happen if they left? information gained through the initial company-wide succession planning set-up. As new employees come into people special and essential, and find the organization, their job-fit criteria, similar attributes in other employees. competencies, skills, and weaknesses Knowing the key roles in an organization should be recorded and added to the is the obvious first step toward database, including their personality succession planning. and behavioral traits. That way, when 2. Identify and Assess Potential the first wave of transition begins, a sort Successors of Rolodex of potential candidates will This step entails finding the high- be at hand to continue the process. The potential and high-performing executives will already know who has
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the potential to be promoted, and will IBM be able to match the next generation of In June of 2011, Virginia M. Rometty leaders into the right job-fit more succeeded Sam Palmisano as the easily, matching them with the duties company’s president and CEO, and its first and responsibilities that maximize female top executive. IBM has a practice of performance, employee morale, and retiring its upper management at the age of company success. Applicant Tracking 60, so it was a long-foreseeable transition. Systems enable executives and She was an internal candidate, with 30 years managers to source, screen, manage, of experience with the company, and ran and promote exceptional talent. one of IBM’s best organizations. Investors, shareholders, and customers all saw this as a With these procedures in place, a successor well thought-out, safe transition. will be ready to effectively transition into their new leadership role, without any panic, HP crisis, or public anxiety. HP had a long series of unplanned CEO changes. From Carly Fiorina (2000-2005) THE APPLE SHOULDN’T to Robert P. Wayman (2005), to Mark Hurd FALL FAR FROM THE TREE (2006-2010), to Cathy Lesjak (2010), to Leo The year 2011 saw three highly-publicized Apotheker (2010-2011), to Meg Whitman succession plans play out: IBM, HP, and (2011-present). In each case, the new CEO Apple—the most memorable being Steve seemed radically different from the previous, Jobs’ replacement, mostly due to ample and it appeared that the board was unable news coverage. to build successors from within. While there
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may be good reasons for these transitions, While some HP does not have a process for internal CEO succession, and the results have wreaked business models havoc on the company. HP’s stock dropped 32 percent in the following months, and management seemingly because of uncertain leadership styles aren’t and poor succession planning. for everyone, Apple succession Of course, the most famous transition in 2011 was that between Steve Jobs and Tim planning is. Cook. Jobs was famous for his succession plan, and even had an Apple University in place to develop future leaders. Cook had however, had no real succession program been groomed for years to take over the in place, and jumped between six CEO’s position, so it came as no surprise that he from 1999 to 2011—all of whom were was Jobs’ replacement. Cook—who has outsiders—and the company clearly paid worked for Apple since 1998—overhauled a penalty for their negligence of Apple’s manufacturing processes, and is succession. widely credited for building the Apple supply chain. Despite the fact that NECESSARY FOR ALL BUSINESS SIZES Apple’s stock dropped 6 percent While some business models and following Jobs’ death, the succession management styles aren’t for everyone, transition was fairly smooth, and succession planning is. When most people Apple regained its value quickly in think of succession planning, their mind the subsequent years. goes to images of big corporations with lots of stakeholders—and for good The moral of these stories is: a succession reason. However, succession planning is plan all but guarantees the success of a as important to small and mid-size business. IBM went smoothly because the businesses as it is to enterprises. Both preceding CEO stepped aside for the small and mid-sized businesses need to upcoming Rometty as expected, and follow the same succession protocol as Jobs’ death—while less expected—had larger corporations. Regardless of size, stakeholders concerned, but his well- succession planning needs to be a top planned succession program proved that priority for any business that wants to he left the company in the right hands. HP, continue for generations to come.
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CONCLUSION Profiles solutions like theProfileXT® , Succession planning improves employee CheckPoint 360°™, and Profiles Sales commitment and engagement, accelerates CheckPoint™ can help you identify those top career development, and is not only cost performers who will make the best transition effective, but in many instances profitable. into leadership roles when the time comes. Companies that want to succeed need to identify those already in the company that One thing is for sure; a successful can fill leadership vacancies, and invest in organization must have a succession their development and grooming until the program in place if it plans to endure in time comes to take on an upper the long-term. management role.
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The Executive’s Guide to Succession Planning. Copyright 2014 by Profiles International. Pro- duced in the United States of America. All rights reserved. No part may be reproduced in any form or by any electronic or mechanical means including information storage and retrieval systems without written permission from the publisher.
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