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Four Keys to High-Performance Succession Management

Most organizations have not identified and purposefully developed an internal bench of talent that will enable sustained high-market performance in the future, but the good news is that this situation is reversible.

Thursday, February 19, 2015
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To instill a sense of urgency for developing wider and deeper benches of talent in critical roles, Kevin Wilde,  the chief learning officer at General Mills, presented his company's senior leadership team a visual picture in the form of three consecutive slides.

Each slide included the same number of boxes and each box represented a critical role in the company. For each slide, Wilde shaded in red the number of boxes that represented the critical roles filled by employees eligible to retire within the next one, three, and five years respectively. In each consecutive slide, the portion of boxes filled with red grew exponentially and overwhelmed the people sitting in the room. Wilde's case was made. According to Wilde, "the visuals on those three slides intensified the topic of succession, and what made it work was the graphic nature of colors as opposed to statistics."

Here's the stark reality: Most organizations have not identified and purposefully developed an internal bench of talent that will enable sustained high-market performance. If you don't believe this statement, chew on these facts: research from the Institute for Corporate Productivity found that, of more than 600 large employers surveyed around the world, only one in five (19 percent) indicated they are effective at identifying and preparing successors to fill executive-level roles and even fewer (15 percent) indicated they are equipped to do the same for mission-critical roles that extend beyond the C-suite. Put another way, 85 percent of organizations with at least 1,000 employees are not effective at managing talent gaps in critical roles. The cost of these gaps can be catastrophic and are just starting to be understood by corporate boards and executives.

The good news is that this pending disaster is reversible. Eight years ago, one of the oldest companies in the U.S. had a major problem that challenged its future growth: 80 percent of the company's organizational leadership roles were without ready-now successors and, as a result, the company filled 75 percent of those roles from outside the organization. Fast-forward to today and that equation has flipped: Two-thirds of that company's leadership roles have ready-now successors in place and 75 percent of its key positions are now filled internally. That same 100+ year-old company is now achieving record earnings. This is no coincidence.

Employers of all sizes are experiencing and will increasingly see competition for critical talent segments, the exodus of valuable talent and experience from their labor forces, and the flattening of their structures into leaner, more global, matrixed and connected organizations. Given these realities, i4cp's research into what distinguishes high-performance organizations makes it clear that these top companies must prioritize three initiatives: 1) Accelerate and broaden leadership development; 2) focus that development on creating leaders who can effectively influence and collaborate cross-culturally; and 3) establish deeper, more targeted levels of bench strength to fill the succession pipeline.

At high-performance organizations, these initiatives are not viewed in isolation. Rather, as so amply put by Jenny Dearborn, chief learning officer at software and services powerhouse SAP, "[t]hey work in complete synchronization to ensure consistency and connectivity with the needs of the business. In essence, it's an end-to-end solution that bridges strategic workforce planning with talent acquisition, and connects everything in between from onboarding, performance management, learning, and leadership development," Dearborn says. The process described by Dearborn, and many of her peers at leading organizations, is one of succession management.

To establish a high-performance succession management process, i4cp recommends organizations pursue the following four recommendations:

Quantify and communicate the impact.

Much like how Kevin Wilde effectively utilized data visualization to achieve senior-executive buy in to the need for succession management at General Mills, John Hooper (Weyerhaeuser Company's then senior vice president of HR and shared services) calculated the dollar impact of a bad, good, and great CEO successor decision in order to get Weyerhaeuser's board of directors to make CEO succession their foremost priority.

To quantify this, Hooper tracked two similar companies from different industries that had replaced CEOs in recent years-one made a bad hire and fired the CEO a year later; the other made a great hire and went on to enjoy record growth. Hooper correlated the timing of the CEO replacements with the market capitalization and revenue of those companies at the time of naming their CEO successors and one year later. He then used the variance of those two variables at both companies to calculate that the difference between making a bad, good, and great CEO successor decision at Weyerhaeuser would be in the multiple billions of dollars. That was enough for Weyerhaeuser's board of directors to fully support Hooper's CEO succession plan.

Extend succession planning beyond the executive level into critical roles.

High-performance organizations ensure ample benches of succession candidates at multiple organizational levels. These high-performers also recognize that succession management must include critical roles-those crucial to producing business results and capable of causing serious risk to the organization if left vacant for extended periods of time or filled by the wrong candidates. The purposeful application of planning for successors both layers below the executive level as well as more broadly across critical roles must also provide a clear and transparent link between those roles and the programs required to develop and provide exposure and visibility to their high potentials.

At a recent meeting of chief HR officers from several i4cp member companies, Patricia Nazemetz (former chief HR officer at Xerox and current principal of NAZ DEC, LLC) shared how a purposeful approach to identifying high-potential talent across the organization as well as communicating opportunities for advancement to those individuals was critical to the identifying Xerox's current CEO, Ursula Burns. Fortunately, Xerox had implemented a process to identify successor candidates who-with the right development-could become ready-now executive successor candidates. This was in response to board-level pressure for a succession planning process that would result in succession management throughout the organization.

"Without this process, Ursula may have left our company before she was ready to move to the C-Suite. As is often the case, competitor organizations vying for your talent will engage in the conversation about upside potential and career runway. Meanwhile, that same talent is completely unaware of her standing and value within her own company," Nazemetz said.

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Help high-potential employees discover and prepare for their next act.

Organizations must look beyond what it takes to attract and retain top talent, and focus on helping those individuals discover and prepare for "what's next" in their career-whether it's inside or outside of the company.

Edwards Lifesciences, a global leader in the science of heart valves and hemodynamic monitoring, is another instance of exemplary successor development and succession management. The company is focused on creating actionable development plans for the successors of all of the company's critical jobs. According to Christine McCauley, Edwards Lifesciences' corporate vice president of human resources, to further their progress in achieving this objective, the company is piloting a new program to ensure all senior talent designated as high-potential is cross-functionally reviewed by the executive leadership team. In essence, this will enable the CEO of Edwards Lifesciences and all of his direct reports to have visibility into both the senior high-potential talent and the roles deemed critical from every business unit, region and function. By engaging in this program, the company will be able to fill all strategic gaps via a much deeper and broader pool of talent, rather than limiting its search for critical jobs to successor candidates specific to a particular function. This will also provide more opportunity for those designated as high-potentials to further develop and advance within the organization.High-performance organizations also focus on candidates not chosen for current succession, developing them for more appropriate internal-or external-roles. Brokering candidate placements in influential positions with key customers or partners can strengthen important business relationships and connections, as well as build goodwill.

Measure both activity and quality related to succession decisions.

Tracking the number of roles filled by successor candidates ("hit rate") is just the beginning. The better gauge of your organization's ability to identify, develop, and place quality successor candidates is measured by the quality of hit rate. This measures the percentage of those successors that are viewed as successful once in their new role.

Another metric that goes hand-in-glove with quality of hit rate is "quality of movement." This helps organizations track and analyze what happens to a successor three, six, and 12 months after they ascend into their new role. Was that person able to contribute at full capacity within a reasonable time? If not, you may need to revamp or establish an onboarding process for newly-promoted successors, or even redefine what makes for a successor candidate. You may also interview the successor's immediate supervisor to understand that person's level of involvement in working with that successor. This is where analytics is going to play a critical role; helping organizations make better, data-driven decisions on successor candidates as well as customize the development opportunities available to each.

Kevin Martin is chief research and marketing officer at the Seattle-based Institute for Corporate Productivity, a research firm that studies high-performance organizations and discovers the people practices that drive market performance.

 

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