Succession planning


Succession planning is a process and strategy for replacement planning or passing on leadership roles. It is used to identify and develop new, potential leaders who can move into leadership roles when they become vacant. Succession planning in dictatorships, monarchies, politics, and international relations is used to ensure continuity and prevention of power struggle. Within monarchies succession is settled by the order of succession. In business, succession planning entails developing internal people with managing or leadership potential to fill key hierarchical positions in the company. It is a process of identifying critical roles in a company and the core skills associated with those roles, and then identifying possible internal candidates to assume those roles when they become vacant. Succession planning also applies to small and family businesses where it is the process used to transition the ownership and management of a business to the next generation.

Business succession planning

Effective succession or talent-pool management involves building a series of feeder groups up and down the entire leadership pipeline or progression. In contrast, replacement planning is focused narrowly on identifying specific back-up candidates for given senior management positions. Thought should be given to the retention of key employees, and the potential impact their departure may have on the business.
The practice of business succession planning is conducted either by organisations themselves, or with the support of specialist Management consulting firms.
Fundamental to the succession-management process is an underlying philosophy that argues that top talent in the corporation must be managed for the greater good of the enterprise. Merck and other companies argue that a "talent mindset" must be part of the leadership culture for these practices to be effective.
Organizations use succession planning as a process to ensure that employees are recruited and developed to fill each key role within the company. Through one's succession-planning process, one recruits superior employees, develops their knowledge, skills, and abilities, and prepares them for advancement or promotion into ever more-challenging roles.
Actively pursuing succession planning ensures that employees are constantly developed to fill each needed role. As one's organization expands, loses key employees, provides promotional opportunities, or increases sales, one's succession planning aims to ensure that one has employees on hand ready and waiting to fill new roles. Succession planning is one of important processes in leadership pipeline.
According to a 2006 Canadian Federation of Independent Business survey, slightly more than one third of owners of independent businesses plan to exit their business within the next 5 years - and within the next 10 years two-thirds of owners plan to exit their business. The survey also found that Small and medium-sized enterprises are not adequately prepared for their business succession: only 10% of owners have a formal, written succession plan; 38% have an informal, unwritten plan; and the remaining 52% do not have any succession plan at all. A 2004 CIBC survey suggests that succession planning is increasingly becoming a critical issue. The CIBC estimated that by 2010, $1.2 trillion in business assets would be poised to change hands.
Research indicates many succession-planning initiatives fall short of their intent. "Bench strength", as it is commonly called, remains a stubborn problem in many if not most companies. Studies indicate that companies that report the greatest gains from succession planning feature high ownership by the CEO and high degrees of engagement among the larger leadership team.
Companies well known for their succession planning and executive-talent development practices include: General Electric, Honeywell, IBM, Marriott, Microsoft, Pepsi and Procter & Gamble.
Research indicates that clear objectives are critical to establishing effective succession planning. These objectives tend to be core to many or most companies that have well-established practices:
  • Identify those with the potential to assume greater responsibility in the organization
  • Provide critical development experiences to those that can move into key roles
  • Engage the leadership in supporting the development of high-potential leaders
  • Build a database that can be used to make better staffing decisions for key jobs
In other companies these additional objectives may be embedded in the succession process:
  • Improve employee commitment and retention
  • Meet the career development expectations of existing employees
  • Counter the increasing difficulty and costs of recruiting employees externally
  • Monitor the flight risk of key talent
  • Identify multiple successors for specific roles
  • Review regularly the career plans and mobility preferences of potential successors

    Process and practices

Companies devise elaborate models to characterize their succession and development practices. Most reflect a cyclical series of activities that include these fundamentals:
  • Identify key roles for succession or replacement planning
  • Define the competencies and motivational profile required to undertake those roles
  • Assess people against these criteria - with a future orientation
  • Identify pools of talent that could potentially fill and perform highly in key roles
  • Develop employees to be ready for advancement into key roles - primarily through the right set of experiences.
In many companies, over the past several years, the emphasis has shifted from planning job assignments to development, with much greater focus on managing key experiences that are critical to growing global-business leaders. North American companies tend to be more active in this regard, followed by European and Latin American countries.
PepsiCo, IBM and Nike provide current examples of the so-called "game-planning" approach to succession and talent management. In these and other companies annual reviews are supplemented with an ongoing series of discussions among senior leaders about who is ready to assume larger roles. Vacancies are anticipated and slates of names are prepared based on highest potential and readiness for job moves. Organization realignments are viewed as critical windows-of-opportunity to utilize development moves that will serve the greater good of the enterprise.
Assessment is a key practice in effective succession-planning. There is no widely accepted formula for evaluating the future potential of leaders, but many tools and approaches continue to be used today, ranging from personality and cognitive testing to team-based interviewing and simulations and other Assessment centre methods. Elliott Jaques and others have argued for the importance of focusing assessments narrowly on critical differentiators of future performance. Jaques developed a persuasive case for measuring candidates' ability to manage complexity, formulating a robust operational definition of business intelligence. The Cognitive Process Profile psychometric is an example of a tool used in succession planning to measure candidates' ability to manage complexity according to Jaques' definition.
Companies struggle to find practices that are effective and practical. It is clear that leaders who rely on instinct and gut to make promotion decisions are often not effective. Research indicates that the most valid practices for assessment are those that involve multiple methods and especially multiple raters. "Calibration meetings" composed of senior leaders can be quite effective in judging a slate of potential senior leaders with the right tools and facilitation.
With organisations facing increasing complexity and uncertainty in their operating environments some suggest a move away from competence-based approaches. In a future that is increasingly hard to predict leaders will need to see opportunity in volatility, spot patterns in complexity, find creative solutions to problems, keep in mind long-term strategic goals for the organisation and wider society, and hold onto uncertainty until the optimum time to make a decision.
Professionals in the field, including academics, consultants and corporate practitioners, have many strongly held views on the topic. Best practice is a slippery concept in this field. There are many thought-pieces on the subject that readers may find valuable, such as "Debunking 10 Top Talent Management Myths", Talent Management Magazine, Doris Sims, December 2009. Research-based writing is more difficult to find. The Corporate Leadership Council, The Best Practice Institute and the Center for Creative Leadership, as well as the Human Resources Planning Society, are sources of some effective research-based materials.
Over the years, organizations have changed their approach to succession planning. What used to be a rigid, confidential process of hand-picking executives to be company successors is now becoming a more fluid, transparent practice that identifies high-potential leaders and incorporates development programs preparing them for top positions. corporations consider succession planning a part of a holistic strategy called "talent management". According to the company PEMCO, "talent management is defined as the activities and processes throughout the employee life cycle: recruiting and hiring, Onboarding, training, professional development, performance management, workforce planning, leadership development, career development, cross-functional work assignments, succession planning, and the employee exit process". When managing internal talent, companies must "know whether the right people, are moving at the right pace into the right jobs at the right time". An effective succession-planning strategy, coupled with solid career-development programs, will help paint a more promising future for employees.