Succession Planning

Succession planning refers to an effort by organizations to select and develop future leaders who are prepared to replace current leaders. As such, a literature search will typically include articles that refer to analogous terms, such as the following:

  • Replacement planning—to plan who will replace which key leaders in the firm
  • High potential management—to select and develop persons who have the potential to replace the top 50 to 150 leaders
  • Management and leadership—to put in place programs that develop future development leaders, not only for specific positions but, also, as a general talent pool. Sometimes succession planning refers to top-level leaders, whereas leadership and management development refer to lower level leaders
  • Career and individual—to have a process and program for helping future leaders manage their own careers so that they qualify for key leadership positions

Successor Selection

Personal traits that are often considered in potential appraisals are

  • Good interpersonal skills
  • Oral and written communication skills
  • High intelligence
  • Client orientation
  • Achievement motivation or drive
  • Results orientation
  • Dealing successfully with adversity and hardship
  • Operational effectiveness or resource management
  • Ability to relate issues to business strategies
  • Ability to get things done without being overbearing or disrupting the organization (political skills)
  • Ability to organize, plan, and be efficient
  • Ability to select and develop key staff
  • Stress management

Succession PlanningJack Zenger and Joseph Folkman maintain, based on their leadership skills studies, that a future leader must have the minimal acceptable amount of each of these characteristics: an ability to learn from mistakes and develop new skills, interpersonal competency, being open to new ideas, taking personal responsibility for results, and an ability to take initiative. To not have an adequate amount of even one of these is to have a “fatal flaw.” Researchers agree that some very bright people have fatal flaws that, unless they are corrected, disqualify them for future leadership positions, what Morgan McCall has called “derailers.”

Beyond this, say Zenger and Folkman, it is important for leaders to build on and develop combinations of strengths in the following areas: leading change, having excellent people skills, being competent in your area of expertise, driving for results, and displaying high integrity and ethical character. Other researchers agree that those choosing successors must consider a full range of leadership criteria, including “soft” skills and integrity, not just the ability to work hard, produce results, and be brilliant. Being able to accept risk and learn, and not only perform, is a foundational idea.

There is also a literature on the efficacy of various methods for selecting successors based on organizational criteria. Some of these methods include performance appraisals, boss recommendations, assessment centers, 360-degree feedback, psychological tests, competency profiles, kind of educational degree, place where the degree was received, and difficulty of the job assignments.

One critical problem is how to select a future successor (or leader). Some characteristics looked for in succession planning profiles are known to be stable for a long period of time (e.g. intelligence); however, the practice of identifying a future leader for an unknown business environment based purely on currently acceptable skill sets and current performance ratings may be flawed. As observed by Jon Briscoe and Douglas T. Hall, some metacompetencies that are sometimes cited as future-oriented are ability to work across boundaries, flexibility and willingness to change, team effectiveness, technical competency, and global mind-set.

Finally, it can be argued that what successful managers and professionals do at one career stage is not comparable to the knowledge and skills needed at higher level leadership stages. One must be able to acquire the advanced knowledge and skills at each relevant level or career stage to be considered a future leader.

Successor Development

Another critical issue in succession planning is how to train, develop, evaluate, and fine-tune future successors. As with selection, each industry and company has its own specific set of requirements.

In general, four models for the leadership development of successors have emerged, and while some companies use only one of these, many employ an amalgamation of them.

Model 1: Job Rotation

Numerous organizations believe that there exists an ideal portfolio of job experiences that future leaders need before assuming top-level positions. They develop successors by transferring them, every 18 to 36 months, across a variety of positions: working in different functions (e.g. marketing, supply chain), working for a key people developer or mentor, working in a significant line or decision-making capacity working globally.

There are numerous problems with this approach. First, the average tenure of a talented person is much shorter today than it was in the past, so future leaders must be developed quicker and there is less time for extensive job rotation. Second, some of the most talented people are geographically bound and cannot easily accept job transfers. Third, it is unclear if occupying current jobs is good training for unknown future work or even if the position one occupies today will exist 5-10 years later.

Model 2: Talent Pool

Another option is to train future leaders more generally as part of a talent pool from which to draw successors as needed. Using this approach, the organization encourages its talent to accept various projects, enroll in courses, and take advantage of various opportunities that develop metacompetencies. Any assignments that include cross-boundary teams, “stretch” jobs, cutting-edge technology, key networking opportunities, or unusual personal growth are encouraged to prepare an individual for an unknown future leadership opportunity.

The problem with this approach is that it is difficult to retain upwardly mobile and talented future leaders when there are no visible paths or concrete signals leading toward upward mobility. Conversely, it is easy to raid another organization’s underutilized talent pool.

Some companies have found ways to integrate succession planning and leadership training so that future leaders are more generally developed but still able to understand the variety of future opportunities and what is necessary to be a candidate for each position.

Model 3: Buy Talent From the Market

Some advocate that it is more efficient to seek key talent from the labor market, where they have already been trained and developed by others. This is different from recognizing that it is impossible to promote from within for all leadership positions, because it is impossible to always find the best person within the organization. Or as Kees Krombeen, former director of management development at Philips Electronics, told the author, “We grow our own trees but sometimes a job calls for a rare wood that we just don’t have.”

Boris Groysberg, Ashish Nanda, and Nitin Nohria argue that many “stars” from the outside are more like sputtering comets in their new jobs. The authors believe that the best successors have demonstrated inside the organization’s own culture how to be an effective business leader. They conclude that companies should raise their own stars and then take sufficient actions to retain them.

Model 4: Smaller Is Better

One of the surprising recent findings of Jon Briscoe and Brooklyn Derr is that numerous Fortune 200 companies now carefully develop their future successors using a mix of Models 1 and 2 above. However, they plan to shrink their successor pools and include only those who have both the talent to become high-level future leaders and who appear that they will remain with the company, if treated well, long enough to make a leadership contribution. This means that instead of a future leader talent pool of 800-1,000, the new successor pools are 200-300.

Methods used to develop talent for future leadership are internal and external coaching, mentoring programs, internal and external courses, assessment centers, project task forces, cross-boundary teams, international assignments, hardship assignments, and turnaround assignments.

Some researchers have also pointed out that different cultures have different paradigms and assumptions about successor profiles and how to develop future leaders. It is important to note here that this entry is discussing the models used by large multinational corporations and by organizations in the United States.

Systems Perspective

Succession planning is managed in a variety of ways. One approach to succession planning asks the human resources or management development departments to develop procedures for selecting and developing future leaders at various levels and to then propose to top management at least two possible successors for every key position. This is a kind of replacement planning. Another succession planning system ensures that there are two to three people from the general talent pool who are being developed and could be candidates, along with outsiders, for the key leadership posts.

Robert Guenther points out that after 172 corporate vice presidents perished in the World Trade Center disaster of September 11, 2001, many firms began taking their succession planning more seriously. The current population demographics, where lots of the leadership population is now over 55 years of age in the economically advanced nations and where there is scarcity in the under-30 age group, only seem to accelerate this felt need. Many companies are experiencing high turnover among senior leaders.

Most companies have a system to ensure that talented future leaders are recognized, selected, trained, developed, evaluated, and either eliminated or advanced at various critical stages. Whether formal or informal, open or secret, focusing only at the top, or going further down the hierarchy, there is normally some recognition that it is important to have “a leadership pipeline” and “leadership bench strength.”

A variety of models of succession planning have been suggested in the literature. One is the Inverted Funnel model, which looks at succession as selection, development, and fine-tuning over time. Another approach is the Rotary Model, which focuses on shorter tenure and on more fluid and faster in-and-out talent pool movement relevant to the new world of work. The Manager-Once-Removed (MOR) system focuses on developing an individual to move up two levels, whereas the Four Stages Model describes developmental issues for professionals and managers at four periods in the career based on learning competencies appropriate to each experience level or career stage.

Critical Issues

Some critical issues have been highlighted in succession planning:

  • What are the new leadership criteria for the twenty-first century? Subsequently, what are the necessary key competencies?
  • How do we prevent top leadership from selecting successors who are their clones? The future may require very different leaders from the present.
  • How do we ensure that the best people reach the top, not only those who have arranged their lives to per­form continuously, move whenever necessary, and demonstrate company loyalty? Having motivation and stamina may not be the same as having talent.
  • A related concern: How do we prevent burnout in the future leader group as they go from stretch to stretch assignments? How do we keep them from self-selecting off the succession track?
  • Also related: How can talented women (and men), concerned about having and rearing children or being involved in elder care, take time-outs for care-taking without completely losing their opportunities?
  • Another critical issue in succession planning is how to make selection competency based (not just cronyism, traits, and style).
  • How do we prevent the “Hawthorne Effect” on designated successors moving along under the limelight but not adequately challenged or questioned?
  • How can we focus not only on short-term performance but also on learning? Some very developmental assignments (e.g., global assignments) may be fraught with cultural frustrations and performance failures but high in learning potential.
  • How do we keep managers from hoarding their best talent and preventing them from undertaking developmental assignments or job rotations? If these high potentials are allowed to leave, the managers are likely to be judged less productive.
  • With the change in organizational structures in so many industries, how do we give greater emphasis to non-managerial leadership development (e.g., becoming a key team leader)?

Conclusion

Succession planning is currently one of the top five topics in human resource management. This may be due, in large measure, to the unique demographics (explained above) at this moment in time. Another perspective, however, is that preparing future leaders to succeed current leaders is one of the major responsibilities of any top management group.

See also:

References:

  1. Briscoe, J. P. and Derr, C. B. 2003. “The Roundabout Model: A Flexible Approach to Managing Leadership Development.” Paper presented at the Academy of Management Annual Meeting, August, Seattle, WA.
  2. Briscoe, J. P. and Hall, D. T. 1999. “Grooming and Picking Leaders Using Competency Frameworks: Do They Work?” Organizational Dynamics Autumn 28(2):37-52.
  3. Conger, J. A. and Fulmer, R. M. 2003. “Developing Your Leadership Pipeline.” Harvard Business Review 81(12):76-85.
  4. Derr, C. B., Briscoe, J. P. and Buckner, K. 2002. “Managing Leadership in the United States.” Pp. 3-27 in Cross-cultural Approaches to Leadership Development, edited by C. B. Derr, S. Roussillon, and F. Bournois. Westport, CT: Quantum.
  5. Derr, C. B., Jones, C. and Toomey, E. L. 1998. “Managing High-potential Employees: Current Practices in Thirty-three U.S. Corporations.” Human Resource Management 27(3):273-290.
  6. Groysberg, B., Nanda, A. and Nohria, N. 2004. “The Risky Business of Hiring Stars.” Harvard Business Review 82(5):92-100.
  7. Guenther, R. L. 2004. “Is It Time to Replace Your Replacement Strategy?” Harvard Management Update 4:3-6.
  8. Lombardo, M. M. and Eichinger, R. W. 2000. “High-potentials as High Learners.” Human Resource Management 39:321-331.
  9. McCall, M. W., Jr. 1998. High Flyers: Developing the Next Generation of Leaders. Boston, MA: Harvard Business School Press.
  10. Zenger, J. H. and Folkman, J. 2002. The Extraordinary Leader: Turning Good Managers into Great Leaders. New York: McGraw-Hill.