Succession Planning

The e-Advocate Quarterly Magazine Joshua 1: 1-9

Succession Planning

“Helping Individuals, Organizations & Communities Achieve Their Full Potential”

Vol. V, Issue XX – Q-4 October | November | December 2019

The Advocacy Foundation, Inc. Helping Individuals, Families and Communities Achieve Their Full Potential

Succession Planning “Helping Individuals, Organizations & Communities Achieve Their Full Potential

1735 M arket Street, Suite 3750 Philadelphia, PA 19102

| 100 Edgewood Avenue, Suite 1690 Atlanta, GA 30303

John C Johnson III, Esq. Founder & CEO

(878) 222-0450 Voice | Fax | SMS www.TheAdvocacyFoundation.org

Page 2 of 40

Page 3 of 40

Biblical Authority

Joshua 1:1-9 (NET) The LORD Commissions Joshua 1 After Moses the LORD ’s servant died, the LORD said to Joshua son of Nun, Moses’ assistant: 2 “Moses my servant is dead. Get ready! Cross the Jordan River! Lead these people into the land which I am ready to hand over to them. 3 I am handing over to you every place you set foot, as I promised Moses. 4 Your territory will extend from the wilderness in the south to Lebanon in the north. It will extend all the way to the great River Euphrates in the east (including all of Syria) and all the way to the Mediterranean Sea in the west. 5 No one will be able to resist you all the days of your life. As I was with Moses, so I will be with you. I will not abandon you or leave you alone. 6 Be strong and brave! You must lead these people in the conquest of this land that I solemnly promised their ancestors I would hand over to them. 7 Make sure you are very strong and brave! Carefully obey all the law my servant Moses charged you to keep! Do not swerve from it to the right or to the left, so that you may be successful in all you do. 8 This law scroll must not leave your lips! You must memorize it day and night so you can carefully obey all that is written in it. Then you will prosper and be successful. 9 I repeat, be strong and brave! Don’t be afraid and don’t panic, for I, the LORD your God, am with you in all you do.”

Page 4 of 40

Page 5 of 40

Table of Contents Succession Planning

______

Biblical Authority I.

Introduction

II.

Exit Planning

III.

Succession Management

IV.

Family Firms

V.

Role of Advisors

VI.

Best Practices

VII. Microsoft – Corporate Affairs VIII. IBM – Corporate Affairs Attachme nts A. Integrating Leadership Development and Succession Planning Best Practices B. Succession Planning Tool - Survey C. Talent Pools or Talent Puddles

Copy right © 2014 The Advocacy Foundation, Inc. All Rights Reserved.

Page 6 of 40

Page 7 of 40

Introduction Succession planning is a process for identifying and developing internal people with the potential to fill key business leadership positions in the company.

Succession planning increases the availability of experienced and capable employees that are prepared to assume these roles as they become available. Taken narrowly, "replacement planning" for key roles is the heart of succession planning.

Effective succession or talent-pool management concerns itself with building a series of feeder groups up and down the entire leadership pipeline or progression (Charan, Drotter, Noel, 2001). In contrast, replacement planning is focused narrowly on identifying specific back-up candidates for given senior management positions. For the most part position-driven replacement planning (often referred to as the "truck scenario") is a forecast, which research indicates does not have substantial impact on outcomes.

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. M erck and other companies argue that a "talent mindset" must be part of the leadership culture for these practices to be effective.

Succession planning is a process whereby an organization ensures that employees are recruited and developed to fill each key role within the company. Through your succession planning process, you recruit superior employees, develop their knowledge, skills, and abilities, and prepare 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 your organization expands, loses key employees, provides promotional opportunities, and increases sales, your succession planning guarantees that you have employees on hand ready and waiting to fill new roles.

According to a 2006 Canadian Federation of Independent Business survey, slightly more than one third of independent business owners 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. The results are backed by a 2004 CIBC survey which suggests that succession planning is increasingly becoming a critical issue. By 2010, CIBC estimates that $1.2 trillion in business assets are poised to change hands.

Research indicates many successionplanning initiatives fall short of their intent (Corporate Leadership Council, 1998).

"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 that are well known for their succession planning and executive talent development practices include: GE,

Page 8 of 40

Honeywell, IBM , M arriott, M icrosoft, 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 data base 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 M eet the career development expectations of existing employees Counter the increasing difficulty and costs of recruiting employees externally

Page 9 of 40

Page 10 of 40

Exit Planning With the global proliferation of Small and M id-sized Enterprises (SM E’s), issues of business succession and continuity have become increasingly common. When the owner of a business becomes incapacitated or passes away, it is often necessary to shut down an otherwise healthy business. Or in many instances, successors inherit a healthy business, which is forced into bankruptcy because of lack of available liquidity to pay inheritance taxes and other taxes. Proper planning helps avoid many of the problems associated with succession and transfer of ownership.

Business Exit Planning is a body of knowledge which began developing in the United States towards the end of the 20th century, and is now spreading globally. A Business Exit Planning exercise begins with the shareholder(s) of a company defining their objectives with respect to an eventual exit, and then executing their plan, as the following definition suggests: Business Exit Planning is the process of explicitly defining exit-related objectives for the owner(s) of a business, followed by the design of a comprehensive strategy and road map that take into account all personal, business, financial, legal, and taxation aspects of achieving those objectives, usually in the context of planning the leadership succession and continuity of a business.

Objectives may include maximizing (or setting a goal for) proceeds, minimizing risk, closing a Transaction quickly, or selecting an investor that will ensure that the business prospers. The strategy should also take into account contingencies such as illness or death.

All personal and business aspects should be taken into consideration. This is also a good time to plan an efficient transfer from the point of view of possibly applicable estate taxes, capital gains taxes, or other taxes.

Sale of a business is not the only form of exit. Forms of exit may also include Initial Public Offering, M anagement Buyout, passing on the firm to next-of-kin, or even bankruptcy. Bringing on board financial strategic or financial partners may also be considered a form of exit, to the extent that it may help ensure succession and survival of the business.

In developed countries, the so-called “baby boomer� demographic wave is now reaching the stage where serious consideration needs to be given to exit. Hence, the importance of Business Exit Planning is expected to further increase in the coming years.

Page 11 of 40

Succession Management There is a substantial body of literature on the subject of succession planning. The first book that addressed the topic fully was "Executive Continuity" by Walter M ahler.

M ahler was responsible in the 1970s for helping to shape the General Electric succession process which became the gold standard of corporate practice. M ahler, who was heavily influenced by Peter Drucker, wrote three other books on the subject of succession, all of which are out of print. His colleagues, Steve Drotter and Greg Kesler, as well as others, expanded on M ahler's work in their writings. "The Leadership Pipeline: How to Build the Leadership Powered Company," by Charan, Drotter and Noel is noteworthy. A new edited collection of materials, edited by M arshall Goldsmith, describes many contemporary examples in large companies.

M ost large corporations assign a process owner for talent and succession management. Resourcing of the work varies widely from numbers of highly dedicated internal consultants to limited professional support embedded in the roles of human resources generalists. Often these staff resources are separate from external staffing or recruiting functions. Some companies today seek to integrate internal and external staffing. Others are more inclined to integrate succession management with the performance management process in order simplify the work for line managers.

Workforce Planning Workforce Planning: is the systematic identification and analysis of what an organization is going to need in terms of the size, type, experience, knowledge, skills and quality of workforce to achieve its objectives. It is a process used to generate business intelligence to inform the organization of the current, transition and future impact of the external and internal environment on the organization enabling it to be resilient to current structural and cultural changes to better position itself for the future.

Strategic Workforce Planning: usually covers a three to five year forecast period, aligned to business needs and outcomes.

It focuses on identifying the workforce implications, current, transition and future of business strategic objects and includes scenario planning.

Operational Workforce Planning: usually covers the next 12-18 months and should align with the timeframe of the business planning cycle. It is the process and systems applied to gathering, analyzing and reporting on workforce planning strategy.

There are fundamental activities that make up a Workforce Plan: Getting Started Establishing the team, building the business case; linking corporate, business, finance and workforce

Page 13 of 40

strategy; establishing communication plan to engage stakeholders; segmenting the workforce against strategic priorities; reviewing existing data; identifying information gaps; identifying future focused business scenarios.

Future Workforce View Future View is determining the organization’s needs considering the emerging trends and issues identified during the Environment Scanning.

Analysis and Targeted Future

Environment Scan Environment Scanning is a form of business intelligence. In the context of Workforce Planning it is used to identify the set of facts or circumstances that surround a workforce situation or event.

Once critical elements are identified through quantitative and qualitative analysis, the future targets that are the best fit in terms of business strategy and is achievable given the surrounding factors (internal/external, supply/demand) are determined.

Current Workforce Profile Risk Assessment and Risk M itigation Current State is a profile of demand and supply factors internally and externally of workforce the organization today.

the both the has

The process is about determining appropriate actions to manage risk assessment and identify risk mitigation strategies to deliver the targeted future.

Transition Workforce Profile demand and supply factors for the transition from current to future workforce.

Action plan to embed strategic workforce planning into business planning process.

M onitor and measure impact of strategic workforce planning on business outcomes.

Page 14 of 40

Page 15 of 40

Family Firms Arieu proposed a model in order to classify family firms into four scenarios: political, openness, foreign management and natural succession.

POLITICAL SCENARIO: This is the case of a company linked to a large family, where it is expected that through inheritance, the property was spray quickly, possibly faster than the growth of own business, resulting in a dividend per head lower and lower. Identifying suitable members in the family can incorporate to address and possibly distinguish who may occupy the general direction afterwards. However, the existence of many members in the family can turn into conflicts of power, making it necessary to establish agreements and occasionally reorganize the business in terms of those individuals who, because of the obvious professional and human qualities can be recognized as leaders. In many cases this may mean separate reorganization to create new companies and business units.

OPENESS: When members of the next generations are numerous and among them is not possible to identify a person who possesses the characteristics necessary to assume leadership positions with expertise in family business, we have a scenario that we call Open, since the strategy more suitable for this type of organization is to shift some capital to others who can provide not only management skills but also liquidity for family members. This will succeed in securing the future of the business, creating more value for society and retention of jobs for their employees, not to please the family, getting money and avoid future complications.

FOREIGN M ANAGEM ENT: This scenario occurs when family members who control the business are not many, and yet, not having any of its members with a natural profile of leadership succession when they choose to appoint a non-family CEO .

NATURAL SUCCESSION: Families seeking to preserve its legacy business are the most favorable conditions in the presence of a stage of natural succession. This is the case of a company controlled by a few families, few heirs who in turn have identified among them a worthy successor, a strong name also is associated with the adequacy enough to drive its growth, the ability to run the organization, understanding market and commitment which means only a part of the family patrimony is also a source of value to society, other shareholders, customers, suppliers and even their own employees (stakeholders).this will help in improved succession planning.

Page 16 of 40

Page 17 of 40

Role of Advisors A Prior preparation needs to be done for the replacement of a CEO in family firms. The role of advisors is important as they help with the transition of leadership between the current generation leaders and the successors. Advisors help family owned businesses establish their own leadership skills. This process is relatively long if the successors want to be accepted by all employees.

They need to take higher managing position gradually to be respected. During this process, the successors are asked to develop different skills such as leadership. This is where the role of advisors fully exemplifies its importance. It is when the managing position is shared between the first generation leader, the second and the advisors. An advisor helps with communication because emotional factors between family members can affect badly the company.

The advisors help manage everything during a predetermined period of time and make the succession process less painful and eventful for everybody. In these cases, an interim leadership is usually what is best for the company. The employees can get accustomed to changes while getting to know the future CEO.

Page 18 of 40

Page 19 of 40

Best Practices Companies devise elaborate models to characterize their succession and development practices. M ost 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 are 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 create 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 there are many tools and approaches that continue to be used today, ranging from personality and cognitive testing to team-based interviewing and simulations and other assessment center 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 (CPP) 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 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 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

Page 20 of 40

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 organization 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 M anagement Myths", Talent M anagement M agazine, Doris Sims, December 2009.

Research-based writing is more difficult to find. The Corporate Leadership Council, The Best Practice Institute (BPI) 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.

Today, corporations consider succession planning a part of a holistic strategy called “talent management”. According to the company PEM CO, “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.

The Cognitive Process Profile The Cognitive Process Profile (CPP) is an automated simulation exercise that externalises and tracks thinking processes to evaluate: •

a person's preferred cognitive style

Page 21 of 40

•

• • •

a suitable work environment (according to Elliott Jacques stratified systems theory) personal strengths and development areas learning potential the judgement and strategic capability of adults in the work environment

Unlike conventional psychometric ability and IQ tests, which primarily measure crystallised ability in specific content domains, the CPP measures information processing tendencies and capabilities. It also measures 'fluid intelligence' and 'learning potential', by tracking information

processing in unfamiliar and fuzzy environments. The CPP predicts cognitive performance in complex, dynamic and vague (or VUCA) work contexts such as professional, strategic and executive environments.

It was developed by Dr S M Prinsloo, founder of Cognadev, and released in 1994.

Since then it has been translated into several languages and applied internationally for the purposes of leadership assessment, succession planning, selection and development, team compilation as well as personal and team development within the corporate environment.

Page 22 of 40

Page 23 of 40

Microsoft Corporate Affairs Microsoft Corporation is an American multinational corporation headquartered in Redmond, Washington, that develops, manufactures, licenses, supports and sells computer software, consumer electronics and personal computers and services. Its best known software products are the M icrosoft Windows line of operating systems, M icrosoft Office office suite, and Internet Explorer web browser. Its flagship hardware products are Xbox game console and the M icrosoft Surface series of tablets. It is the world's largest software maker measured by revenues. It is also one of the world's most valuable companies.

M icrosoft was founded by Bill Gates and Paul Allen on April 4, 1975, to develop and sell BASIC interpreters for Altair 8800. It rose to dominate the personal computer operating system market with M S-DOS in the mid-1980s, followed by M icrosoft Windows. The company's 1986 initial public offering, and subsequent rise in its share price, created three billionaires and an estimated 12,000 millionaires from M icrosoft employees. Since the 1990s, it has increasingly diversified from the operating system market and has made a number of corporate acquisitions.

In M ay 2011, M icrosoft acquired Skype Technologies for $8.5 billion in its largest acquisition to date.

As of 2013, M icrosoft is market dominant in both the IBM PC-compatible operating system and office software suite markets (the latter with M icrosoft Office). The company also produces a wide range of other software for desktops and servers, and is active in areas including Internet search (with Bing), the video game industry (with the Xbox, Xbox 360 and Xbox One consoles), the digital services market (through M SN), and mobile phones (via the Windows Phone OS). In June 2012, M icrosoft entered the personal computer production market for the first time, with the launch of the M icrosoft Surface, a line of tablet computers.

With the acquisition of Nokia's devices and services division to form M icrosoft M obile Oy, the company will re-enter the smartphone hardware market, after its previous attempt, M icrosoft Kin, which resulted from their acquisition of Danger Inc. Corporate Culture Technical reference for developers and articles for various M icrosoft magazines such as Microsoft Systems Journal (M SJ) are available through the M icrosoft Developer Network (M SDN). M SDN also offers subscriptions for companies and individuals, and the more expensive subscriptions usually offer access to pre-release beta versions of M icrosoft software.

In April 2004 M icrosoft launched a community site for developers and users, titled Channel 9, that provides a wiki and an Internet forum. Another community site that provides daily videocasts and other services, On10.net, launched on M arch 3, 2006. Free technical support is traditionally provided through online Usenet newsgroups, and CompuServe in the past, monitored by M icrosoft employees; there can be several newsgroups for a single product.

Page 24 of 40

Helpful people can be elected by peers or M icrosoft employees for M icrosoft M ost Valuable Professional (M VP) status, which entitles them to a sort of special social status and possibilities for awards and other benefits.

Noted for its internal lexicon, the expression "eating our own dog food" is used to describe the policy of using pre-release and beta versions of products inside M icrosoft in an effort to test them in "real-world" situations. This is usually shortened to just "dog food" and is used as noun, verb, and adjective. Another bit of jargon, FYIFV or FYIV ("Fuck You, I'm [Fully] Vested"), is used by an employee to indicate they are financially independent and can avoid work anytime they wish. The company is also known for its hiring process, mimicked in other organizations and dubbed the "M icrosoft interview", which is notorious for off-the-wall questions such as "Why is a manhole cover round?".

M icrosoft is an outspoken opponent of the cap on H1B visas, which allow companies in the U.S. to employ certain foreign workers. Bill Gates claims the cap on H1B visas makes it difficult to hire employees for the company, stating "I'd certainly get rid of the H1B cap" in 2005.

Critics of H1B visas argue that relaxing the limits would result in increased unemployment for U.S. citizens due to H1B workers working for lower salaries.

The Human Rights Campaign Corporate Equality Index, a report of how progressive the organization deems company policies towards LGBT (lesbian, gay, bisexual and transsexual) employees, rated M icrosoft as 87% from 2002 to 2004 and as 100% from 2005 to 2010 after they allowed gender expression.

Corporate Affairs The company is run by a board of directors made up of mostly company outsiders, as is customary for publicly traded companies. M embers of the board of directors as of September 2014 are: John W. Thompson, Dina Dublon, Bill Gates, M aria Klawe, David M arquardt, M ason M orfit, Satya Nadella, Charles Noski, Helmut Panke and John W. Stanton. Board members are elected every year at the annual shareholders' meeting using a majority vote system. There are five committees within the board which oversee more specific matters. These committees include the Audit Committee, which handles accounting issues with the company including auditing and reporting; the Compensation Committee, which approves compensation for the CEO and other employees of the company; the Finance Committee, which handles financial matters such as proposing mergers and acquisitions; the Governance and Nominating Committee, which handles various corporate matters including nomination of the board; and the

Page 25 of 40

Antitrust Compliance Committee, which attempts to prevent company practices from violating antitrust laws.

When M icrosoft went public and launched its initial public offering (IPO) in 1986, the opening stock price was $21; after the trading day, the price closed at $27.75. As of July 2010, with the company's nine stock splits, any IPO shares would be multiplied by 288; if one was to buy the IPO today given the splits and other factors, it would cost about 9 cents. The stock price peaked in 1999 at around $119 ($60.928 adjusting for splits). The company began to offer a dividend on January 16, 2003, starting at eight cents per share for the fiscal year followed by a dividend of sixteen cents per share the subsequent year, switching from yearly to quarterly dividends in 2005 with eight cents a share per quarter and a special one-time payout of three dollars per share for the second quarter of the fiscal year. Though the company had subsequent increases in dividend payouts, the price of M icrosoft's stock remained steady for years.

One of M icrosoft's business tactics, described by an executive as "embrace, extend and extinguish," initially embraces a competing standard or product, then extends it to produce their own version which is then incompatible with the standard, which in time extinguishes competition that does not or cannot use M icrosoft's new version. Various companies and governments sue M icrosoft over this set of tactics, resulting in billions of dollars in rulings against the company. M icrosoft claims that the original strategy is not anti-competitive, but rather an exercise of its discretion to implement features it believes customers want.

Page 26 of 40

Page 27 of 40

IBM Corporate Affairs .

The International Business Machines Corporation (IBM) is an American multinational technology and consulting corporation, with headquarters in Armonk, New York, United States.

IBM manufactures and markets computer hardware and software, and offers infrastructure, hosting and consulting services in areas ranging from mainframe computers to nanotechnology.

The company was founded in 1911 as the Computing Tabulating Recording Company (CTR) through a merger of three companies: the Tabulating M achine Company, the International Time Recording Company, and the Computing Scale Company. CTR adopted the name International Business M achines in 1924, using a name previously designated to CTR's subsidiary in Canada and later South America. Securities analysts nicknamed IBM Big Blue in recognition of IBM 's common use of blue in products, packaging, and logo.

In 2012, Fortune ranked IBM the No. 2 largest U.S. firm in terms of number of employees (435,000 worldwide), the No. 4 largest in terms of market capitalization, the No. 9 most profitable, and the No. 19 largest firm in terms of revenue. Globally, the company was ranked the No. 31 largest in terms of revenue by Forbes for 2011. Other rankings for 2011/2012 include No. 1 company for leaders (Fortune), No. 1 green

company worldwide (Newsweek), No. 2 best global brand (Interbrand), No. 2 most respected company (Barron's), No. 5 most admired company (Fortune), and No. 18 most innovative company (Fast Company).

IBM has 12 research laboratories worldwide and, as of 2013, has held the record for most patents generated by a company for 20 consecutive years. Its employees have garnered five Nobel Prizes, six Turing Awards, ten National M edals of Technology, and five National M edals of Science. Notable inventions by IBM include the automated teller machine (ATM ), the floppy disk, the hard disk drive, the magnetic stripe card, the relational database, the Universal Product Code (UPC), the financial swap, the RDBM S and SQL, SABRE airline reservation system, DRAM , and Watson artificial intelligence.

The company has undergone several organizational changes since its inception, acquiring companies such as Kenexa (2012) and SP SS (2009) and organizations such as PwC's consulting business (2002), spinning off companies like Lexmark (1991), and selling off product lines like its personal computer and server businesses to Lenovo (2005, 2014).

Corporate Affairs IBM 's headquarters complex is located in Armonk, Town of North Castle, New York, United States. The 283,000-square-foot (26,300 m2) IBM building has three levels of custom curtain wall. The building is located on a 25-acre (10 ha) site. IBM has been headquartered in Armonk since 1964.

Page 28 of 40

The company has twelve research labs worldwide—Almaden, Austin, Australia, Brazil, China, Dublin, Israel, India, Tokyo, Watson (New York), Zurich and Nairobi— with Watson (dedicated in 1961) serving as headquarters for the research division and the site of its annual meeting. Other campus installations include towers in M ontreal, Paris, and Atlanta; software labs in RaleighDurham, Rome, Cracow and Toronto; Chicago is IBM 's oldest research center once at Chicago, Johannesburg, Seattle; and facilities in Hakozaki and Yamato. The company also operates the IBM Scientific Center, Hursley House, the Canada Head Office Building, IBM Rochester, and the Somers Office Complex. The company's contributions to architecture and design, including Chicago's IBM building which was the centre of IBM 's research division after World War II up until the 1980s 330 North Wabash building designed by Ludwig M ies van der Rohe, were recognized with the 1990 Honor Award from the National Building M useum.

IBM 's Board of Directors, with 14 members, is responsible for the overall management of the company. With Cathie Black's resignation from the board in November 2010, the remaining 13 members (along with their affiliation and year of joining the board) are as follows: Alain J. P. Belda '08 (Alcoa), William R. Brody '07 (Salk Institute / Johns Hopkins University), Kenneth Chenault '98 (American Express), M ichael L. Eskew '05 (UPS), Shirley Ann Jackson '05 (Rensselaer Polytechnic Institute), Andrew N. Liveris '10 (Dow Chemical), W. James M cNerney, Jr. '09 (Boeing), James W. Owens '06 (Caterpillar),

Samuel J. Palmisano '00 (IBM ), Joan Spero '04 (Doris Duke Charitable Foundation), Sidney Taurel '01 (Eli Lilly), and Lorenzo Zambrano '03 (Cemex).

On January 21, 2014 it was announced that IBM executives would forgo bonuses for fiscal year 2013. The move came as the firm reported a 5% drop in sales and 1% decline in net profit for 2013, from the prior year.

The company stated that it would invest more than $1.2bn expanding its data centers and cloud-storage business, building 15 new centers. Chief Executive Virginia Rometty after turning in ten quarters in a row of flat or sliding sales said “We’ve got to reinvent ourselves like we’ve done in prior generations.”

Famous inventions by IBM include the following: • • • • • • • • • • • • • •

Automated teller machine (ATM ) Floppy disk Hard disk drive Electronic keypunch M agnetic stripe card Virtual machine Scanning tunneling microscope Reduced instruction set computing Relational database Universal Product Code (UPC) Financial swap SABRE airline reservation system Dynamic Random Access M emory (DRAM ) Watson artificial intelligence

Page 29 of 40

Page 30 of 40

References 1. http://en.wikipedia.org/wiki/Succession_planning 2. http://en.wikipedia.org/wiki/M icrosoft 3. http://en.wikipedia.org/wiki/IBM 4. http://en.wikipedia.org/wiki/Cognitive_Process_Profile 5. http://en.wikipedia.org/wiki/Workforce_planning 6. http://hbswk.hbs.edu/item/7413.html 7. http://bschool.pepperdine.edu/appliedresearch/content/groves3.pdf 8. http://www.naccho.org/about/upload/successionplanningtool_wiesman-1.pdf 9. http://www.successfactors.com/static/docs/sfguidesuccessionplanningr3.pdf

Page 31 of 40

Page 32 of 40

Attachment A

Integrating Leadership Development and Succession Planning

Page 33 of 40

The current issue and full text archive of this journal is available at www.emeraldinsight.com/0262-1711.htm

Integrating leadership development and succession planning best practices Kevin S. Groves College of Business and Economics, California State University, Los Angeles, California, USA

Leadership and succession planning 239 Received March 2005 Revised October 2005 Accepted March 2006

Abstract Purpose – Organizations often fail to utilize managerial personnel effectively for leadership development and succession planning systems, and many execute these critical practices through separate human resource functions that shift the responsibility for leadership development away from line managers. The purpose of this article is to present a best practices model for optimal development of the leadership pipeline and a series of practical recommendations for organizations.

Design/methodology/approach – A group of 30 CEOs and human resource executives across 15 best practice organizations were asked via semi-structured interviews to describe the content and delivery of their respective organizations’ leadership development and succession planning practices.

Findings – Analysis of interview data indicated that best practice organizations effectively integrate leadership development and succession planning systems by fully utilizing managerial personnel in developing the organization’s mentor network, identifying and codifying high potential employees, developing high potentials via project-based learning experiences and manager-facilitated workshops, establishing a flexible and fluid succession planning process, creating organization-wide forums for exposing high potential employees to multiple stakeholders, and establishing a supportive organizational culture.

Research limitations/implications – The interview data are drawn from a relatively small number of executives and from a single industry, which may limit the overall utility of the findings.

Originality/value – This study offers needed empirical support for the value of integrating leadership development and succession planning practices through utilization of managerial personnel. Management development practitioners will benefit from assessing their respective organizations’ current practices vis-a`-vis those discussed here, while scholars may utilize the best practices model for generating further research on the role of managerial personnel in talent management systems.

Keywords Leadership, Management development, Succession planning, Leadership development, Best practice Paper type Research paper

Organizations of all sizes and industries are currently facing a range of leadership development challenges, including decimated mid-management levels that often rob high-potential managers of critical on-the-job experiences, depleted resources for employee development, and a rapidly aging workforce that may create shortfalls of The author is grateful to Jim Gauss, Elaina Genser, and Nick Fraunfelder of Witt/Kieffer, Inc. for their support of this research project and for arranging the CEO and executive interviews. He would also like to thank Linda Fry of Witt/Kieffer for her work on the interview transcriptions.

Finally, the author would like to acknowledge the Voluntary Hospitals of America (VHA) for its support of this research project.

Journal of Management Development Vol. 26 No. 3, 2007 pp. 239-260 q Emerald Group Publishing Limited 0262-1711 DOI 10.1108/02621710710732146

JMD 26,3

240

experienced managerial talent for senior leadership positions (Rothwell, 2002). The widespread flattening of organizational structures and significant changes in work arrangements force executives and management development professionals to rethink how high potential managers attain the requisite developmental experiences for senior leadership. Furthermore, US workforce statistics suggest that succession planning poses an incredible challenge as the baby boomer generation retires and far fewer college-educated workers are prepared to replace them. In addition, a recent Journal of Management Development article (Kilian et al., 2005) articulated the specific career advancement challenges that women and people of color often face in corporate environments, including a lack of mentors and personal networks, stereotyping, and a lack of visible and/or challenging assignments.

However, research evidence suggests that many highly successful companies overcome these and other challenges by marrying the leadership development and succession planning processes for optimal identification, development, and placement of leadership talent (Conger and Fulmer, 2003). Eli Lilly, Dow Chemical, Bank of America, and Sonoco Products are examples of firms that avoid the near-sighted replacement approach to succession planning and adopt a long-term perspective for developing and managing talent throughout their organizations. Indeed, Kur and Bunning’s (2002) recent review of succession planning and leadership development practices argued that “corporate leadership development can no longer simply rely on planning the replacement of existing leaders” (p. 761) and that organizations must focus on developing the leadership function rather than individual leaders. Unfortunately, many organizations confuse effective talent management with replacement planning, which is focused narrowly on identifying specific back-up candidates for given senior management positions and essentially functions as a forecast (Kesler, 2002). Conversely, highly successful organizations focus on creating a comprehensive set of assessment and development practices that support the entire pipeline of talent across the organization (Charan et al., 2001).

There is also growing evidence that organizations are increasingly engaging managerial personnel in the leadership development process, and that managers add unique value to building the leadership pipeline beyond that of management development specialists, consultants, academics, or other professionals (Tichy, 2004; Allio, 2003). The most prominent example of this approach is General Electric’s (GE) John F. Welch Leadership Center at Crotonville, a comprehensive development program in which executives and managers at all levels are largely responsible for teaching the curriculum and delivering a range of leadership development activities (Tichy, 1989). Each year several thousand GE managerial employees attend leadership development programs primarily taught by corporate officers, business unit CEOs and other senior executives, and early-career managers. In addition to conducting workshops on key GE strategic challenges, executives facilitate action learning projects in which participants return to their organization with aggressive agendas for change. Not surprisingly, many CEOs at leading companies have adopted the executive-led approach to leadership development, including 3M’s Jim McNerny, Yum!Brands’ David Novak, Home Depot’s Bob Nardelli, and Nokia’s Jorma Ollila. The basic philosophy of this approach is best articulated by one of the architects of GE’s program, Noel Tichy, who is currently director of the Global Leadership Program at the University of Michigan Business School:

Companies are successful to the extent that they have leaders at all levels of the organization.

Any institution that invests in the development of leaders at all levels is going to get ahead of its competition. However, the worst people in the world to develop leaders are professors and consultant leadership trainers. There is an industry of such trainers traveling from company to company attempting to do the job of a leader. It’s the principle job of a leader to help develop the next generation of leaders. Unfortunately, many leading companies do not build good leadership pipelines because their leaders don’t do the teaching of their own managers.

There are some exceptions . . . but they’re not common (Allio, 2003).

The purpose of this article is to better understand how organizations effectively marry leadership development and succession planning systems while fully engaging managerial employees in the process. The exemplary talent management approaches by leading companies suggest that the field of management development stands much to gain by a clearer understanding of how leadership development and succession planning are effectively integrated, and the roles that managers and management development professionals perform in such a process. This paper is organized into several sections. To begin, a review of the extant research on leadership development practices and a description of the present study’s participating executives, organizations, and research procedure are provided. Next, I discuss a best practices model that summarizes the key findings of this study regarding the integration of leadership development and succession planning practices. Furthermore, I present the implications of this model in the form practical recommendations for organizations and management development practitioners. Finally, I discuss the limitations of this study and provide a critical analysis of the study’s leadership development best practices.

Research review and study participants The sample of executive participants and organizations was selected based upon their outstanding commitment to executive development and demonstrated effectiveness in executive succession decisions. The participants in this study included 30 CEOs and senior human resource executives across 15 US healthcare organizations, including seven single-site hospitals, seven multi-site healthcare systems, and one medical group.

Both the CEO and senior human resource executive were interviewed at each organization given the critical roles that both executives perform in the leadership development process. All executives were recruited for the study through contacts at a leading national healthcare executive search firm in the USA. Discussions with senior partners at several of the firm’s locations identified 15 national healthcare organizations renowned for best practice leadership development methods and highly successful CEO successions. The criteria for leadership development best practices were derived from the extant research, particularly reviews and meta-analyses by Collins and Holton (2004), Day (2001), Burke and Day (1986), and Kur and Bunning (2002). According to these reviews, best practice leadership development methods include: .

360-degree feedback; . executive coaching; . mentoring; . networking; . job assignments; and . action learning.

Leadership and succession planning 241

JMD 26,3

242

The best practice leadership development methods are summarized in Table I. The US healthcare industry was targeted in this study for several reasons. The industry faces particularly challenging hurdles to effective leadership development and succession management, including many of the challenges discussed earlier in this article. A recent nationwide study of 1,600 hospitals and health systems demonstrated that nearly two thirds of responding CEOs believe there is a shortage of healthcare leaders who are prepared to assume executive roles in the future (Doody, 2002). A majority of these CEOs also noted that the healthcare industry drives away many of its future leaders through lack of resources, proper mentoring, and developmental opportunities. The current trend among hospital CEOs is to retire between the ages of 55 and 60, suggesting that many of the industry’s top hospital systems will need to identify a new CEO in the near future (Thrall, 2001). Also, the industry overall has experienced tremendous cuts in middle-management positions that provide valuable developmental experiences and contribute to succession planning. Consequently, leadership development programs in hospitals and healthcare systems must strive to fill a need that middle-management levels once provided. Thus, the healthcare industry provides fertile ground for studying the growing roles that managers at all levels are performing in the talent management process.

The primary method of data collection was semi-structured interviews with each executive. The interviews consisted of several questions that sought to identify talent management best practices and understand how leadership development and succession planning are effectively integrated utilizing managerial employees. The interviews were conducted in the executives’ offices and tape-recorded for subsequent transcription and analysis. Interviewees were asked the following: .

What are the primary leadership development and succession planning practices in your organization? .

What are the critical success factors for effectively integrating leadership development and succession planning practices? .

How are managerial personnel utilized to deliver an integrated talent management process?

The interview transcripts were analyzed using the content analysis technique (Weber, 1985), a quasi-statistical approach that turns textual responses into quantitative data for statistical testing. Across the three questions, there were 396 responses from the 30 executives. To implement the content analysis technique, I teamed with two research professionals to independently code the interview text according to the primary research questions. Next, we compared one another’s codes, discussed disagreements, and arrived at an agreed upon list of primary codes. In order to gain verification of the coding scheme outside our research group, we sent our list of codes and transcripts to two outside reviewers. Once additional codes were added and modified according to the outside reviewers’ feedback, we clustered the master list of codes into six primary research themes: (1) Developing Pervasive Mentoring Relationships; (2) Identifying and Codifying Leadership Talent; (3) Enhancing High Potentials’ Visibility; (4) Assigning Action-Oriented Developmental Activities;

Multi-source ratings of leadership performance; organized and presented to management personnel Practical, goal-focused one-on-one learning; usually with a professional coach or more senior manager Advising/developmental relationship with a more senior manager; both formal and informal mentoring relationships Developing connections with other managers in different functions, workgroups, or geographic areas Providing stretch assignments in terms of job role, function, or geographic area; often requiring skills and knowledge just beyond the individual’s capability Project-based learning directed at current, critical business problems; often involving cross-functional teams of high potential managers

360-degree feedback

Executive coaching

Action learning

Job assignments

Networks

Mentoring

Description

Leadership development practice

Baird et al. (1999), Blackler and Kennedy (2004), Dotlich and Noel (1998), Jennings (2002)

Dwyer (2003), Forret (2004), Kram and Isabell (1985), Ragins and Cotton (1999) Campion et al. (1994), McCauley and Brutus (1998), Ohlott (1998), Stewart (1984)

Chao et al. (1992), Dwyer (2003), Lankua and Scandura (2002), Ragins and Cotton (1999)

Atwater and Waldman (1998), Kluger and DiNisi (1996), Waldman et al. (1998), Walker and Smither (1999) Hall et al. (1999), Kilburg (1996), Olivero et al. (1997)

Key references

Leadership and succession planning 243

Table I. Leadership development best practices

JMD 26,3

244

(5) Leadership Development Through Teaching; and (6) Reinforcing an Organizational Culture of Leadership Development.

In the sections below, each theme is described and supported with excerpts from the interview data, and an integrated model of leadership development and succession planning is provided. Table II illustrates the research themes, frequency and percentage of responses, and example excerpts.

Integrating leadership development and succession planning The model presented in Figure 1 summarizes the primary research themes from this study regarding how organizations successfully marry leadership development and succession planning processes through active utilization of managerial personnel.

Starting with the upper left box, the model depicts managers performing the critical role of developing mentoring relationships in their own workgroup and throughout the organization. Among other functions, mentoring relationships consist of discussions regarding career planning, assessment of core strengths and areas of improvement, and development of leadership competencies. Managerial personnel are also actively engaged with human resource professionals in identifying high potential employees and assessing the bench strength of their respective units. As high potential employees emerge, managers at all levels are engaged in delivering leadership development activities such as teaching in-house courses and workshops, facilitating action learning projects, and creating assignments that fall outside the employee’s functional background. Next, high potential managers demonstrate their talents through organization-wide forums, including leadership academies that showcase action learning projects for top management team members and board members. Finally, succession decisions for managerial positions are driven by consideration of a diverse range of candidates rather than exclusively direct reports. Below, each of these research themes and their corresponding best practice findings are discussed in the context of interviewee excerpts and research on leadership development and succession planning.

Developing pervasive mentoring relationships Research on mentoring relationships in organizations provides strong evidence that employees with mentors are much more likely to experience a range of positive outcomes, including enhanced job performance, greater promotions and compensation, organizational commitment and job satisfaction, personal learning, and reduced turnover intentions (e.g. Lankua and Scandura, 2002; Chao et al., 1992; Dwyer, 2003; Turban and Dougherty, 1994). Indeed, research demonstrates that mentors provide prote´ge´s with both psychosocial benefits (e.g. acceptance, encouragement, and coaching) and career facilitation benefits (e.g. sponsorship, exposure, and challenging assignments) (Kram and Isabell, 1985; Noe, 1988; Yukl, 2006). The executives in this study reported that their organizations actively promote the value of mentoring by delivering formal mentoring programs and encouraging the formation of informal mentoring relationships among managers and high potentials. Managers develop mentoring relationships with high potential employees of varying business units, work experience, and functional/product expertise, thereby creating a mentor network. The practice of managers developing a network of mentors rather than traditional

I mean as much as we have courses and things like that it really comes down to putting people into roles, giving them stretch assignments and then seeing how they do it. And that’s when we look at our succession planning documents and the like, and they really become a collection of our assessments of people based upon how they’ve done with the myriad of projects and assignments that we’ve given them and then we measure them against that We identify second, third, and fourth tier to any leadership position so we know who’s behind the current leader and then who is the next level behind that and we examine those individuals. We look at their assignments, roles, and backgrounds. It’s a dynamic list that every six months to a year we are repositioning people, talking about people, dropping people off, and putting others back on I think that there is much more of an interim or progressive process than the kind of traditional mentoring role where you’re in a job and you can see the person ahead of you and you learn from one particular person doing that individual job. You’re going to work with physicians, you’re going to work with administrative individuals, nursing leadership, and as you solve problems you’re always learning from the people you’re solving with I interview the top 155 jobs in this company; I don’t care where they are. What I look for is the cultural fit and their ability to learn and teach. Because fundamentally if you don’t have an organization of mentors and teachers and those who are willing to learn, then you have nothing, because the cultures will take on a totally different light. I insist that people become both the learner as well as the teacher The [Academy] has been a good thing for us to be able to see talent that might exist that we wouldn’t otherwise get to see. It gives my level exposure to someone that unless I had some reason to cross paths, I would never cross their path. Some managers may not have been on the fast track, but then they were part of this Academy and all of a sudden, when a position like the CEO of one of the other hospitals opened up, that was the person to take The manager is supposed to talk in each case with the person reporting to them about just where they are career wise in terms of aspirations, where they are going, etc. Then we’ve been able to take certain dimensions and then overlay them into our performance review process. This is the first year that we’ve actually incorporated the succession planning dimensions in the performance review

Assigning action-oriented developmental activities

Reinforcing a culture of leadership development

Enhancing high potentials’ visibility

Leadership development through teaching

Developing pervasive mentoring relationships

Identifying and codifying leadership talent

Examples

Integration success factors

22 (5.4)

30 (7.7)

67 (16.9)

73 (18.5)

94 (23.8)

110 (27.7)

Frequency (percentage) of responses

Leadership and succession planning 245

Table II. Frequency and percentage of responses for integration success factors identified by CEOs and human resource executives

JMD 26,3

246

Figure 1.

How an integrated leadership development and succession planning process requires active manager participation

one-on-one mentoring is consistent with recent research suggesting that mentor networks are critical to managerial career success in today’s organizations and that having multiple mentors is strongly correlated with high promotion rates (de Janasz et al., 2003). For example, one of the leading single-site hospitals in the study augments existing informal mentoring relationships with a formal mentoring program designed to provide employees greater access to a network of highly experienced leaders. Based on the premise that employees need multiple mentors at different points in their career, and that access to experienced leaders through informal means is often quite difficult for many employees, the organization’s mentoring program develops high potentials’ leadership competencies through personal coaching, group discussions, career guidance, and exposure to senior leaders. The CEO of this hospital illustrates the personal learning benefits of mentoring relationships and the importance of managers adopting a proactive role in providing developmental opportunities to high potential employees: I think if I had not had that experience of starting off going to board meetings, working on projects that were of significance to the organization, I think that I probably would be more reluctant to give people that opportunity now when they come into this organization. So because of that orientation and the opportunities [my mentor] gave me, it has translated into an administrative resident here right now who is working on a problem related to increasing group health costs. It’s a very important issue for us and that’s her project, so she’s giving board presentations, attending medical executive staff meetings, and I just don’t know that I would have been as open to creating those opportunities for somebody just starting out if my mentor hadn’t had that orientation with me and other administrative fellows that were around at the time.

The finding that the organizations in this study widely endorsed both informal and formal mentoring for leadership development purposes is consistent with recent

research and practice. While mentoring has long been a popular approach to developing high potential managers (Yukl, 2006), the effectiveness of mentoring programming for developing high potentials is largely dependent on the quality of the relationship, type of program, and manner in which the program is developed and maintained. The inclusion of an informal mentoring program is critical given research suggesting that informal mentoring is often more successful than formal mentoring due to possible personality conflicts, lack of mentor commitment, and lower levels of career guidance and psychosocial support associated with assigned mentors (Noe, 1988; Ragins and Cotton, 1999). Furthermore, the design and maintenance elements of the organizations’ formal mentoring programs were consistent with Hegstad and Wentling’s (2004) recent assessment of exemplary formal mentoring programs in top performing US companies. Specifically, the formal mentoring programs across organizations in the present study are offered to a wide cross-section of managerial personnel and do not provide incentives for mentor participation to better ensure intrinsic motivation. Furthermore, significant effort is devoted to a structured process of matching participants based on common background and interests, prote´ge´ developmental needs and mentor expertise, and job level. As cited in Hegstad and Wentling’s (2004) assessment, the organizations in the present study did not devote significant attention to evaluating the impact of mentoring programming on actual leadership development outcomes (e.g. changes in leadership competencies), instead focusing on evaluative metrics centered on participation and satisfaction. More discussion of the limitations and critique of the organizations’ talent management systems will be provided later in the paper.

Identifying and codifying leadership talent In addition to playing a primary role in developing effective mentor networks, managers must also be actively involved in identifying and codifying leadership talent across the organization. While the methods and tools for such purposes differed across the sample of organizations, including committees, survey instruments, and career development color-coding systems, two common themes emerged from the executives’ responses: (1) avoiding the replacement approach to succession planning by adopting a long term perspective on identifying and developing leadership talent throughout the organization; and (2) fully engaging managerial personnel in the talent identification and codification process.

In the excerpt below, the CEO of a national, multi-site healthcare system describes his respective organization’s survey instrument and career development system for identifying and codifying leadership talent: I think [the previous senior executive team members] were primarily concerned about the CEO level. We took it much more broadly than that and said “we really need to determine our level of leadership talent, system-wide in management”. We put together a questionnaire and we have been driving it down the organization. We did it initially at the executive level, and so what I did was sit down with all my reports and talk to them about their career plans, pull out their own resumes, etc., and I evaluated them using a fairly simple scale: (1) those that were still learning the skill set required to do their current job very well, (2) those that were

Leadership and succession planning 247

JMD 26,3

248

really quite capable and doing their existing job well but were probably anxious to look for new opportunities to challenge themselves, and (3) those that clearly were at the step where they needed to have a broader responsibility or we were going to lose them if we didn’t find new opportunities for them. I did that with all of my executives and they were responsible for doing that for their subordinates, and then the administrators, etc.

An important finding related to avoiding the replacement mentality is resisting the temptation to designate an heir apparent for key executive positions. Best practice organizations resist the tendency to designate an heir apparent and focus on identifying and developing multiple potential successors for a range of positions (e.g.

Kur and Bunning, 2002; Conger and Fulmer, 2003; Charan, 2005; Biggs, 2004).

Although executive team members are expected to identify someone who could immediately serve in an emergency situation, most of the organizations do not target individuals for executive succession. The CEO of a renowned single-site hospital noted: We certainly have an expectation that in every key executive position, there is someone who is identified as someone who could step in on the short-term. I would say that it would be more the exception rather than the rule where there would be a kind of conscious commitment to groom someone for specific succession. The approach we take is to work on their people skills development and leadership capabilities in general.

Of course, the enormous risks in identifying and developing an heir apparent include the possibility of that person leaving the organization before the position is available, the inflexibility that saddles the succession decision, and severely damaged morale and potential turnover of leadership talent not targeted for succession (Biggs, 2004). In the case of CEO succession, Biggs’s research suggests that heir-apparent designations are often unable to assume the CEO role because: . . . formally designating an heir may be the equivalent of placing a target on the heir’s back.

Issues dealing with the departing CEO may be transferred onto the head of the heir-apparent, and the heir become the target of ill-will really meant for the departing or departed CEO (Biggs, 2004, p. 107).

The general consensus among the executives in this study is that organizations are better served by investing the necessary time and effort in identifying and developing multiple high potential managers to ensure flexibility in key executive successions.

Indeed, research shows that organizations with outstanding reputations for leadership development, including Colgate-Palmolive, Eli Lilly, Dow Chemical, Bank of America, and Sonoco Products, adopt a very flexible and fluid approach to succession planning (e.g. Charan, 2005; Conger and Fulmer, 2003; Tichy, 2004; Fulmer and Conger, 2004). In short, employees fluidly move on and off the list of high potentials and a diverse range of candidates is considered for succession, not merely direct reports. Consistent with the present study’s findings, Charan’s (2005) review of CEO succession best practices describes the highly flexible process at Colgate-Palmolive in which leadership evaluation begins in the first year of employment for managerial personnel while lists of high potentials are developed, debated, and regularly revised by multiple stakeholders (subsidiary leaders, local general managers, division heads, and the Colgate-Palmolive Human Resource committee composed of Colgate’s CEO, president, COO, and senior VP of HR). Throughout their respective careers, high potentials receive assignments that truly stretch their abilities and expose them to new markets and consumers, outside executive coaching, 360-degree feedback, and a series of

“visibility programs” in which they meet with the company’s most senior leaders. As illustrated in Figure 1, many executives in the present study emphasized the importance of considering multiple candidates for a given vacancy and not devoting undue attention to the immediate direct reports as likely successors. The CEO of a multi-site system asserted:

Leadership and succession planning

It doesn’t have to be the obvious person in the hierarchy because I’ve seen it just too many times where we took somebody out of this little niche and stuck them in a different area and an amazing blossoming occurs. Sometimes it doesn’t work and you can’t penalize that person . . . if they don’t work out here, we’ll move them over here and we don’t just wipe them out and say you’re on your own.

249

Similarly, a critical consideration for the succession decision is the opportunity to enhance the diversity of the senior executive team. Several executives cautioned that relying too much on the hierarchy to identify likely successors (replacement planning) severely limits opportunities to enhance senior management diversity, a finding widely reported by practitioners and researchers (e.g. Kilian et al., 2005; Leibman et al., 1996; Kesler, 2002; Rollins, 2002). In the present study, the CEO of a multi-site system stated that: . . . the weakness [of asking executives to identify and groom high potentials] is obvious; you can fall in love with yourself and you can be incredibly insulated if you’re beginning to hire [and develop] only like and then like picks like. I try to balance that as best I can by recognizing that across the broader 200 plus managers in our organization we still have a tremendous amount of diversity, and from that we’re going to have people looking.

Thus, organizations that avoid the replacement planning approach to success reap the dual benefits of a truly comprehensive assessment of leadership talent and potentially optimal placement of minority candidates for executive positions. Indeed, Kilian et al.’s (2005) recent review of the career advancement barriers for women and persons of color concluded that mentoring programs, formal networks, and high potential identification and development systems are critical means of improving diversity at senior ranks.

The researchers also asserted that organizational leaders must emphasize diversity in the high potential identification process “by requiring diverse slates (even if it requires going to external sources), and then appointing qualified women and minorities whenever possible. There is evidence that such a targeted focus gets better results” (Kilian et al., 2005, p. 64).

Assigning action-oriented developmental activities In addition to fluidity and flexibility regarding lists of high potential employees, another hallmark of exemplary succession planning systems is a sharp focus on action-oriented developmental activities designed to enhance leadership competencies aligned with the organization’s strategic goals (e.g. Rothwell, 2002; Kesler, 2002; Charan, 2005). As illustrated in Figure 1, the executives reported a range of developmental activities at their organizations, including stretch assignments, action learning projects, and internal courses and workshops. While these activities are consistent with research on leadership development best practices (Burke and Day, 1986; Day, 2001; Collins and Holton, 2004; Yukl, 2006), the executives’ responses also indicated that effective execution of such activities demands active participation from managers at all levels – a critically important design feature that distinguishes the

JMD 26,3

250

leadership development philosophy of these organizations. The CEO, senior executives, and mid-career managers, with the support of human resource professionals, deliver the projects, assignments, and courses. Regarding stretch assignments, the executives reported that the many developmental benefits include exposing high potentials to several functional and product areas, providing invaluable working experiences with a variety of executives and colleagues, and collecting diagnostic data on high potentials’ performance to inform the succession planning decisions. As managers’ developmental needs change over the course of their career, executives task them with stretch assignments that address the organization’s strategic issues and adjust the lists of high potentials according to their performance on such assignments. The integral role of stretch assignments is illustrated by excerpts from the CEOs of two multi-site healthcare systems: Some people view giving people more of the same thing develops them, and it really doesn’t, it just burns them. The diversity is key and sometimes even if it seems like it’s from out of left field, it’s amazing sometimes how well someone can take a project and run with it. We have given people assignments that at first they resisted and said, “this doesn’t have anything to do with whether I get an increase in pay” or “I just really don’t think that resonates with me”.

And we encourage them to take it for six months and emphasize that they’re not going to be a failure if we change, but to just try it out. It’s amazing how sometimes they just grab on to it and run. And I probably push that even more because that’s what they did to me.

We provide a rotation of job assignments and leadership development opportunities. Our people can stay guaranteed in place, but we may take them for a six-week ride into different management projects. And we’re able to see how they respond under stress, how they react, what comes naturally, where they have gaps, how they responded, and then be able to better craft their career needs as they go forward.

The finding that many organizations in this study utilized developmental assignments to for leadership development purposes is highly consistent with current research and practice. Researchers at the Center for Creative Leadership (CCL) have long studied the relationship between specific types of work experiences and leadership development (e.g., McCall et al., 1988; McCauley, 1986, McCauley et al., 1995), concluding that the amount of challenge, variety of tasks or assignments, and quality of feedback impact how much high potentials gain from developmental assignments. While there exists some evidence for the effectiveness of developmental assignments, such as longitudinal research at AT&T suggesting that diverse, challenging assignments early in one’s career facilitates career advancement (Bray et al., 1974; Howard and Bray, 1988), the research overall suggests that different skills are acquired from different types of developmental assignments. The organizations in the present study invest significant time and resources in matching high potentials’ developmental needs with the specific challenges and learning opportunities afforded by various developmental assignments. As reviewed above, high potentials’ performance on developmental assignments is tracked and utilized to inform succession planning decisions and subsequent assignments (e.g. McCauley et al., 1995).

Enhancing high potentials’ visibility In addition to developmental assignments, action-learning projects served as a critical component of the executive development programs across the organizations. This type of hands-on leadership development method, dubbed “action learning” by Reginald

Revans (1982), has been a very popular approach to executive development for well over 20 years (Tichy, 1989, 2004; Day, 2001; Collins and Holton, 2004). In short, action learning projects assemble a group of high potential employees to study current business issues and make recommendations to senior management. Indeed, action-learning projects are central components of exemplary executive development programs at leading companies, including Eli Lilly, Bank of America, Dow Chemical, GE, and Dell (Conger and Fulmer, 2003; Fulmer and Conger, 2004). For example, Eli Lilly implements a bi-annual action learning program that assembles high potentials to focus on strategic issues identified by the CEO. The program involves identifying 18 employees with executive director potential, representing a mix of functions and regions, and employing them in teams that will work for six weeks to gather relevant data, interview subject matter experts and customers, and review best practice organizations. The program culminates with a formal presentation of recommendations to senior managers and the CEO, who often implements the recommendations immediately or suggests further analysis. A recent action learning project at the company involved developing an e-business strategy to generate growth.

After interviewing more than 150 people over five weeks, the team presented a set of recommendations to senior managers and the CEO. A distinguishing feature of the present study’s best practice organizations is that action-learning projects are delivered through organizational-wide forums to enhance high potentials’ visibility across the organization and develop their network. These forums, dubbed “leadership academies”, typically house the entire executive development program but showcase action-learning projects as the culminating activity. Created to simultaneously develop high potential managers and expose them to multiple organizational stakeholders, a leadership academy is comprised of action learning projects and executive-taught workshops that are intended for early to mid-career managers who would benefit from in-depth exposure to managerial expectations and the inner workings of their organization. Across all of the leadership academy components, the action learning project and consequential exposure to senior executives and board members are critical program outcomes. Executive team members, board members, program participants, and academy alumni are called upon to generate project topics. At the end of the one-year program, participant teams present the results of their project to peers, executive team members, and board members at widely attended graduation ceremonies. Program faculty, comprised mostly of senior executives and managers, monitor progress on the projects throughout the year and provide necessary support to ensure completion. The following list includes examples of projects completed at one healthcare system’s leadership academy: . a year-long study of employee relations and the organizational changes necessary to make the organization a great place to work; . a comprehensive study of operational and cultural changes for improved customer service; and . an exploratory study of the potential benefits of developing a “smartcard” for patients and the community.

There are clearly many important benefits that accrue to organizations that invest in the development of a leadership academy as a vehicle for developing and exposing

Leadership and succession planning 251

JMD 26,3

252

high potential managers. In addition to limited costs and reducing the organization’s dependence on consultants, leadership academies serve as a powerful vehicle for promoting cultural understanding across business units and providing powerful cross-functional learning experiences for groups of high potentials (Conger and Fulmer, 2003). These experiences force employees to look beyond their functional silos to address major strategic issues, thereby learning general management competencies that will be required in more senior positions (Kur and Bunning, 2002). Furthermore, action learning projects are showcased for senior management teams (and board members, in some cases) to allow for greater contact with high potential managers who may not otherwise have any exposure to the upper levels of the organization. One CEO explains the value of his multi-site system’s leadership academy in identifying and developing leadership talent: The Academy has been a good thing for us to be able to see talent that might exist that we wouldn’t otherwise get to see. It gives my level exposure to someone that unless I had some reason to cross paths, I would never cross their path and if I did, it would be fairly brief. Some managers may not have been on the fast track, but then they were part of this Academy and all of a sudden, when a position like the CEO of one of the other hospitals opened up, that was the person to take. Even though some people thought it an odd choice, it was the right choice because we actually got to see them in a way that nobody else had seen them.

Leadership development through teaching Consistent with the philosophy that managers are instrumental in developing the leadership pipeline, the organizations in this study require senior executives to teach classes and facilitate workshops on a series of leadership development topics. At one multi-site health system, senior executives from each hospital visit other campuses and present three-hour workshops on the operational, strategic, and cultural issues currently facing their respective hospital. The system’s CEO, who participates in these sessions by discussing strategic planning and how each hospital’s plan supports the system’s strategic plan, reports that the “executive series” helps managers at each hospital understand other hospitals’ perspective on operations, competition, financial indicators, and other performance issues. Among the many advantages of the executive series, he states that “managers can understand the other hospitals’ perspective, and the series helps the integration of the system and the development of system culture but also an appreciation of the different hospital cultures”. Similarly, executives at another multi-site system teach classes that describe “a day in the life” of an executive for management personnel across the system. The CEO of this system reports that “the senior executives, my executive team, we teach classes ourselves for all of our managers on what we call ‘a day in the life’”. The purpose of the sessions is to provide managers an opportunity to question the CEO and members of his executive team about their jobs, career progression, the challenges they faced and how they overcame them, and other executive development issues.

Research on executive development programs at leading companies supports the notion that managers must play an active role in developing the next generation of leaders through teaching experiences with high potential employees (Tichy, 2004).

Dell, PepsiCo, 3M, GE, and Yum! Brands are just a few examples of organizations that have managers at various levels (including CEO) teach a range of classes to further develop their own leadership abilities and help build the organization’s talent pipeline.

At GE, CEO Jeff Immelt asserts that the most important core competency of a GE leader is to be a teacher (Tichy, 2004). More than 15,000 high potential middle managers at GE are given fulltime assignments as “Black Belt” teachers of six sigma, the company’s highly successful total quality management program (Harry and Schroeder, 1999). The Black Belts, who must take a two-year leave from their regular jobs, teach all 300,000 employees how to apply the six sigma quality methodology to their projects. The interactive, two-way learning process involves high-potential teachers learning from and drawing on the knowledge and experience of the students.

The highly interactive teaching process results in managers developing their leadership abilities and advancing their knowledgeable of the business through significant interaction with students. Many of the CEOs and human resource executives in the present study stated that the ability to teach and coach others was a critical leadership competency that their respective organization uses for selection decisions and leadership development planning. The president and CEO of a 22-hospital healthcare system described his philosophy on leadership development through teaching: I interview the top 155 jobs in this company; I don’t care where they are. It doesn’t make any difference whether they’re physician leaders or otherwise. What I look for is the cultural fit and their ability to learn and teach. Because fundamentally if you don’t have an organization of mentors and teachers and those who are willing to learn, then you have nothing, because the cultures will take on a totally different light. I insist that people become both the learner as well as the teacher.

The finding that the organizations in the present study actively encourage learning and knowledge sharing by tasking their leaders with teaching responsibilities is consistent with research on how leaders facilitate learning organizations (e.g. Senge, 1990; Crossan et al., 1999; Huber, 1991). Current research suggests that leaders create conditions favorable to learning by encouraging and supporting relevant learning practices such as manager-led workshops, after-activity reviews, benchmarking, six sigma, TQM, and quality circles (Yukl, 2006). By teaching employees and high potentials the fundamental operational, financial, and cultural issues facing their respective organization, the hospital and health system leaders are developing and refining shared mental models for understanding how the organization functions in its environment. Furthermore, the teaching process facilitates systems thinking and the ability to solve complex, systemic problems by helping employees better comprehend their conscious beliefs about the causes of organizational performance and also uncover their implicit assumptions of the reasons for success or failure (Senge, 1990).

More generally, the teaching process actively reinforces the value of learning, encourages the effective dissemination of knowledge, and helps employees understand how they may apply such knowledge to their work and collectively influence important outcomes in the organization.

Reinforcing an organizational culture of leadership development As illustrated in Figure 1, the integration of leadership development and succession planning practices through managerial engagement requires a supporting organizational culture. Specifically, the talent management process must be reinforced by an organizational culture characterized by strong and visible CEO commitment to leadership development (e.g. Hillman et al., 1990; Valerio, 1990).

Leadership and succession planning 253

JMD 26,3

254

Research on leadership development strongly supports the notion that regardless of actual developmental methods, the acquisition of leadership skills is facilitated by visible CEO and other senior leadership support, immediate supervisor support, and an organizational culture that values learning and development (e.g. Ford and Weissbein, 1997; Tracey et al., 1995; Yukl, 2006). The CEOs in this study, as well as Jim McNerney (3M), David Novak (Yum!Brands), Jeff Immelt (GE), and Roger Enrico (PepsiCo), make leadership development a top strategic priority and create a supportive organizational culture. CEOs and their senior management team members must go well beyond gratuitous support of leadership development by teaching courses and workshops, facilitating action learning projects, and engaging direct reports in regular discussions of high potential employees. Without strong support from the CEO and senior executive team, managers and employees will inevitably view leadership development and succession planning as non-essential activities and prioritize their efforts accordingly (e.g. Conger and Fulmer, 2003; Kesler, 2002; Ford and Weissbein, 1997). While human resource professionals play a critical role in developing the tools and processes for identifying, codifying, and developing leadership talent, managers at all levels must assume primary responsibility for building the organization’s leader pipeline.

Another powerful component of an organization’s culture is the performance management system and the manner in which managerial behavior is rewarded (Schein, 1992). Research on employee motivation and reward systems suggests that many organizations set out to reinforce desirable behaviors such as teamwork and the development of people skills, yet they reward contrary behaviors – individual performance and technical accomplishments (Kerr, 1995). Organizations that fully engage managers at all levels in the leadership development and succession planning system reinforce such behavior through the managerial performance appraisal and reward process. The CEO of a 58-hospital system stated that: . . . the supervisor is supposed to talk in each case with the person reporting to them about just where they are career wise in terms of aspirations, where they are going, etc. Then we’ve been able to take certain dimensions and then overlay them into our performance review process. This is the first year that we’ve actually incorporated the succession planning dimensions in the performance review.

Similarly, the CEO of another multi-site system reported: . . . we require every manager in our organization, as a part of their performance review, to have identified two people within their own supervisory purview to develop. Managers must believe that [the persons they identified] have demonstrated high potential, and then we try to talk with those people about the possibilities of moving up in the organization and assess their interest and so forth.

Incorporating leadership development and succession planning responsibilities into managerial job expectations and performance appraisal criteria are effective means of ensuring that succession planning is a top priority among managers at all levels (e.g.

Kilian et al., 2005; Charan, 2005; Yukl, 2006).

Limitations and critical evaluation Although the sample of CEOs and human resource executives provided rich qualitative data regarding the leadership development and succession planning systems at best practice organizations, the relative number of participating organizations and

executives was somewhat limited. Furthermore, due to the fact that the sample of organizations was selected based on demonstrated excellence in CEO successions and leadership development practices, the range of organizations in the study was restricted. Finally, several best practice organizations, and their senior executives, declined to participate for reasons that included company policy precluding participation in such research studies, time constraints, and resistance to the research methodology and/or recording of interview responses.

Despite the range of best practice findings regarding leadership development and succession planning, a critical analysis of the organizations’ talent management systems reveals areas of improvement. First, very few executive responses described efforts to empirically evaluate the effectiveness of their respective organization’s talent management practices. Several recent leadership development reviews and meta-analyses (e.g. Collins and Holton, 2004; Day, 2000; Kur and Bunning, 2002) concluded that most organizations fail to empirically evaluate the implementation and outcomes of their leadership development programs, which robs them of the opportunity to diagnose problem areas or needed programmatic changes. The application of theory-driven evaluative methods (e.g. Chen, 1990), which model the conceptual links among program components and outcomes as well as key mediating and moderating variables, would allow program developers to diagnose needed changes. Given the paucity of evaluative research on leadership development practices, organizations would benefit from consultation with outside management development researchers to design appropriate evaluation studies that assess changes in knowledge (learning), behavior (expertise), and results (performance) (e.g. Collins and Holton, 2004; Kirkpatrick, 1998). Second, surprisingly few of the executive responses described 360-degree or multi-source feedback as a core leadership development practice. In fact, several executives indicated a general resistance to 360-degree feedback because of a perceived lack of convincing evidence for the efficacy of such methods. Although multi-source feedback is one of the most popular methods of management development and is widely used in large organizations (London and Smither, 1995), the empirical research on its effectiveness for leadership development purposes is mixed. Kluger and DeNisi’s (1996) meta-analysis found a weak positive effect of behavioral feedback on performance, while Waldman et al. (1998) concluded that behavioral feedback can be useful in some situations but the evidence overall fails to support its widespread use as a leadership development tool. More recently, management development professionals have asserted that the manner in which behavioral feedback data are presented to managers determines the effects on leadership development outcomes (e.g. Conger and Toegel, 2003; Seifert et al., 2003; Toegel and Conger, 2003); specifically, the utilization of group workshops and one-on-one follow up meetings with facilitators to help managers interpret their behavioral feedback is much more effective than simply producing a feedback report for participants.

Additional areas of improvement stemming from a critical analysis of the organizations’ talent management systems include the general lack of outside perspectives on talent management and the implementation of action learning projects.

The complete reliance on internal personnel for leadership development programming may create an insular perspective that limits the creativity and diversity of leadership development best practices. Furthermore, the implementation of action learning projects, which represent core leadership development methods at the best practice

Leadership and succession planning 255

JMD 26,3

256

organizations, could be enhanced with greater attention to recent research on action learning design principles that produce optimal leadership development outcomes.

Specifically, Conger and Toegel (2003) recommend that projects focus on multiple learning experiences to build declarative knowledge as opposed to a one-time action learning experience, which is characteristic of the present study’s organizations and very common in industry. Action learning project participants should be offered the opportunity to move directly into job assignments that build upon the project’s lessons, policy recommendations, and/or organizational changes, which will perpetuate the learning process. Furthermore, action learning projects should involve ample and regular opportunities for reflective learning, which include active and objective feedback from coaches, facilitators, and teammates. Conger and Toegel (2003) state: . . . without reflection and feedback, action learning would no different from a normal day on the job. An individual’s personal interpretation of feedback can be ambiguous, and sometimes actually the wrong lessons can be learned from [action learning] experiences (p. 336).

Rather than allow opportunities for reflective learning at the end of the project, participants should reflect daily on the learning gains to that point in the project and avoid the tendency to allow task accomplishment overcome the process of learning.

Conclusions It is clear that organizations of all sizes and industries face incredible challenges in preparing managerial personnel to assume future leadership positions. This article has introduced a best practices model for integrating the leadership development and succession planning process through optimal utilization of managers and a supportive organizational culture. The specific practices that organizations and management development professionals must execute to effectively build their leadership pipeline are summarized below: . develop the organization’s mentor network by fully engaging all managers in mentoring relationships with direct reports and high potential employees in other work units; . ensure active manager participation in the organization’s method of identifying and codifying high potential employees; . fully engage managers at all levels in leadership development activities, including teaching courses and creating projected-based learning experiences (e.g. stretch assignments and action-learning projects) for high potentials; . ensure a flexible and fluid succession planning process by avoiding heir apparent designations, frequently updating lists of high potentials based on project-based performance, and basing succession decisions on a diverse pool of candidates; . create organization-wide forums (e.g. leadership academy) for exposing high potentials to multiple stakeholders, including senior executives and board members; . establish a supportive organizational culture through active CEO and senior management participation in development programs and performance appraisal and reward systems that reinforce managerial engagement; and . evaluate the effectiveness of leadership development practices through empirical studies that model program theory and assess knowledge, behavior, and results outcomes.

References Allio, R. (2003), “Interview: Noel M. Tichy explains why the virtuous teaching cycle is integral to effective leadership”, Strategy & Leadership, Vol. 31 No. 5, pp. 20-6.

Atwater, L. and Waldman, D. (1998), “360 degree feedback and leadership development”, Leadership Quarterly, Vol. 9 No. 4, pp. 423-6.

Baird, L., Holland, P. and Deacon, S. (1999), “Learning from action: imbedding more learning into the performance fast enough to make a difference”, Organizational Dynamics, Vol. 27 No. 4, pp. 19-32.

Biggs, E.L. (2004), “CEO succession planning: an emerging challenge for boards of directors”, Academy of Management Executive, Vol. 18 No. 1, pp. 105-7.

Blackler, F. and Kennedy, A. (2004), “The design and evaluation of a leadership program for experienced chief executives from the public sector”, Management Learning, Vol. 35 No. 2, pp. 181-203.

Bray, D.W., Campbell, R.J. and Grant, D.L. (1974), Formative Years in Business: A Long-Term Study, AT&T Study of Managerial Lives, Wiley, New York, NY. Burke, M. and Day, R. (1986), “A cumulative study of the effectiveness of managerial training”, Journal of Applied Psychology, Vol. 71 No. 2, pp. 232-45.

Campion, M., Cheraskin, L. and Stevens, M. (1994), “Career-related antecedents and outcomes of job rotation”, Academy of Management Journal, Vol. 37 No. 6, pp. 1518-42.

Chao, G., Walz, P. and Gardner, P. (1992), “Formal and informal mentorships: a comparison of mentoring functions contrasted with nonmentored counterparts”, Personnel Psychology, Vol. 45 No. 3, pp. 619-36.

Charan, R. (2005), “Ending the CEO succession crisis”, Harvard Business Review, Vol. 83 No. 2, pp. 72-81.

Charan, R., Drotter, S. and Noel, J. (2001), The Leadership Pipeline, Jossey-Bass, San Francisco, CA. Chen, H. (1990), Theory-Driven Evaluations, Sage Publications, Newbury Park, CA. Collins, D. and Holton, E. (2004), “The effectiveness of managerial leadership development programs: a meta-analysis of studies from 1982-2001”, Human Resource Development Quarterly, Vol. 15 No. 2, pp. 217-48.

Conger, J. and Fulmer, R. (2003), “Developing your leadership pipeline”, Harvard Business Review, Vol. 81 No. 12, pp. 76-90.

Conger, J. and Toegel, G. (2003), “Action learning and multi-rater feedback as leadership development interventions: popular but poorly deployed”, Journal of Change Management, Vol. 3 No. 4, pp. 332-48.

Crossan, M., Lane, H. and White, R. (1999), “An organizational learning framework: from intuition to institution”, Academy of Management Review, Vol. 24 No. 3, pp. 522-38.

Day, D. (2001), “Leadership development: a review in context”, Leadership Quarterly, Vol. 11 No. 4, pp. 581-613. de Janasz, S., Sullivan, S. and Whiting, V. (2003), “Mentor networks and career success: lessons for turbulent times”, Academy of Management Executive, Vol. 17 No. 4, pp. 78-91.

Doody, M. (2002), “Future healthcare leaders you need to know”, Healthcare Financial Management, Vol. 56 No. 11, pp. 98-100.

Dotlich, D. and Noel, J. (1998), Action Learning: How the World’s Top Companies are Recreating Their Leaders and Themselves, Jossey-Bass, San Francisco, CA.

Leadership and succession planning 257

JMD 26,3

258

Dwyer, R. (2003), “Career progression factors of Aboriginal executives in the Canada federal public service”, Journal of Management Development, Vol. 22 No. 9, pp. 881-9.

Ford, J.K. and Weissbein, D.A. (1997), “Transfer of training: an updated review and analysis”, Performance Improvement Quarterly, Vol. 10 No. 1, pp. 22-41.

Forret, M. (2004), “Networking behaviors and career outcomes: differences for men and women?”, Journal of Organizational Behavior, Vol. 25 No. 3, pp. 419-37.

Fulmer, R. and Conger, J. (2004), Growing Your Company’s Leaders: How Great Organizations use Succession Management to Sustain Competitive Advantage, Amacom, New York, NY. Hall, D., Otazo, K. and Hollenbeck, G. (1999), “Behind closed doors: what really happens in executive coaching”, Organizational Dynamics, Vol. 27 No. 3, pp. 39-53.

Harry, M. and Schroeder, R. (1999), Six Sigma: The Breakthrough Management Strategy Revolutionizing the World’s Top Corporations, Currency, New York, NY. Hegstad, C. and Wentling, R. (2004), “The development and maintenance of exemplary formal mentoring programs in Fortune 500 companies”, Human Resource Development Quarterly, Vol. 15 No. 4, pp. 421-48.

Hillman, L.W., Schwandt, D. and Bartz, D. (1990), “Enhancing staff members’ performance through feedback and coaching”, Journal of Management Development, Vol. 9 No. 3, pp. 20-7.

Howard, A. and Bray, D.W. (1988), Managerial Lives in Transition: Advancing Age and Changing Times, Guilford Press, New York, NY. Huber, G.P. (1991), “Organizational learning: the contributing processes and the literatures”, Organization Science, Vol. 2 No. 1, pp. 88-115.

Jennings, D. (2002), “Strategic management: an evaluation of the use of three learning methods”, Journal of Management Development, Vol. 21 No. 9, pp. 655-65.

Kerr, S. (1995), “An academy classic: on the folly of rewarding A, while hoping for B”, Academy of Management Executive, Vol. 9 No. 1, pp. 7-13.

Kesler, G. (2002), “Why the leadership bench never gets deeper: ten insights about executive talent development”, Human Resource Planning, Vol. 25 No. 1, pp. 32-45.

Kilburg, R. (1996), “Toward a conceptual understanding and definition of executive coaching”, Consulting Psychology Journal: Practice and Research, Vol. 48 No. 2, pp. 134-44.

Kilian, C.M., Hukai, D. and McCarty, C.E. (2005), “Building diversity in the pipeline to corporate leadership”, Journal of Management Development, Vol. 24 No. 2, pp. 155-68.

Kirkpatrick, D. (1998), Evaluating Training Programs: The Four Levels, Berrett-Koehler, San Francisco, CA. Kluger, A. and DiNisi, A. (1996), “The effects of feedback on performance: a historical review, meta-analysis, and a preliminary feedback intervention”, Psychological Bulletin, Vol. 119 No. 2, pp. 254-84.

Kram, K. and Isabell, L. (1985), “Mentoring alternatives: the role of peer relationships in career development”, Academy of Management Journal, Vol. 28 No. 1, pp. 110-32.

Kur, E. and Bunning, R. (2002), “Assuring corporate leadership for the future”, Journal of Management Development, Vol. 21 No. 9, pp. 761-79.

Lankua, M.J. and Scandura, T.A. (2002), “An investigation of personal learning in mentoring relationships: content, antecedents, and consequences”, Academy of Management Journal, Vol. 45 No. 4, pp. 779-90.

Leibman, M., Bruer, R. and Maki, B. (1996), “Succession management: the next generation of succession planning”, Human Resource Planning, Vol. 19 No. 3, pp. 16-29.

London, M. and Smither, J.W. (1995), “Can multi-source feedback change perceptions of goal accomplishment, self-evaluations, and performance-related outcomes? Theory based applications and directions for research”, Personnel Psychology, Vol. 48 No. 3, pp. 803-39.

McCall, M.W., Lombardo, M.M. and Morrison, A. (1988), The Lessons of Experience, Lexington Books, Lexington, MA. McCauley, C. and Brutus, S. (1998), Management Development through Job Experiences: An Annotated Bibliography, Center for Creative Leadership, Greensboro, NC. McCauley, C.D. (1986), Developmental Experiences in Managerial Work, Center for Creative Leadership, Greensboro, NC. McCauley, C.D., Eastman, L.J. and Ohlott, P.J. (1995), “Linking management selection and development through stretch assignments”, Human Resource Management, Vol. 34 No. 1, pp. 93-115.

Noe, R.A. (1988), “An investigation of the determinants of successful assigned mentoring relationships”, Personnel Psychology, Vol. 41 No. 3, pp. 457-82.

Ohlott, P. (1998), “Job assignments”, in McCarty, C., Moxley, R. and Van Elsor, E. (Eds), The Center for Creative Leadership Handbook of Leadership Development, Jossey-Bass, San Francisco, CA, pp. 127-59.

Olivero, G., Bane, D. and Kopelman, R. (1997), “Executive coaching as a transfer of training tool: effects on productivity in a public agency”, Public Personnel Management, Vol. 26 No. 4, pp. 461-9.

Ragins, B. and Cotton, J. (1999), “Mentor functions and outcomes: a comparison of men and women in formal and informal mentoring relationships”, Journal of Applied Psychology, Vol. 84 No. 4, pp. 529-50.

Revans, R.W. (1982), The Origin and Growth of Action Learning, Chartwell-Bratt, London.

Rollins, G. (2002), “Succession planning: laying the foundation for smooth transitions and effective leaders”, Healthcare Executive, Vol. 18 No. 6, pp. 14-22.

Rothwell, W. (2002), “Putting success into your succession planning”, Journal of Business Strategy, Vol. 23 No. 3, p. 32.

Schein, E.H. (1992), Organizational Culture and Leadership, 2nd ed., Jossey-Bass, San Francisco, CA. Seifert, C., Yukl, G. and McDonald, R. (2003), “Effects of multi-source feedback and a feedback facilitator on the influence behavior of managers toward subordinates”, Journal of Applied Psychology, Vol. 88 No. 3, pp. 561-9.

Senge, P.M. (1990), The Fifth Discipline: The Art and Practice of the Learning Organization, Doubleday-Currency, New York, NY. Stewart, R. (1984), “Developing managers by radical job moves”, Journal of Management Development, Vol. 3 No. 2, pp. 48-85.

Thrall, T. (2001), “A leadership vacuum”, Hospitals and Health Networks, Vol. 75 No. 9, pp. 44-7.

Tichy, N. (1989), “GE’s Crotonville: a staging ground for corporate revolution”, Academy of Management Executive, Vol. 3 No. 2, p. 99.

Tichy, N. (2004), The Cycle of Leadership: How Great Leaders Teach their Companies to Win, HarperBusiness, New York, NY. Toegel, G. and Conger, J. (2003), “360-degree assessment: time for reinvention”, Academy of Management Executive, Vol. 2 No. 3, pp. 297-311.

Leadership and succession planning 259

JMD 26,3

260

Tracey, J.B., Tannenbaum, S.I. and Kavanagh, M.J. (1995), “Applying trained skills on the job: the importance of the work environment”, Journal of Applied Psychology, Vol. 80 No. 2, pp. 239-52.

Turban, D.B. and Dougherty, T.W. (1994), “Role of prote´ge´ personality in receipt of mentoring and career success”, Academy of Management Journal, Vol. 37 No. 3, pp. 688-702.

Valerio, A.M. (1990), “A study of the developmental experiences of managers”, in Clark, K.E. and Clark, M.B. (Eds), Measures of Leadership, Leadership Library of America, West Orange, NJ, pp. 521-34.

Waldman, D., Atwater, L. and Antonioni, D. (1998), “Has 360 degree feedback gone amok?”, Academy of Management Executive, Vol. 12 No. 2, pp. 86-94.

Walker, A. and Smither, J. (1999), “A five-year study of upward feedback: what managers do with their results matters”, Personnel Psychology, Vol. 52 No. 2, pp. 393-423.

Weber, R. (1985), Basic Content Analysis, Sage Publications, Beverly Hills, CA. Yukl, G. (2006), Leadership in Organizations, 6th ed., Prentice-Hall, Upper Saddle River, NJ. Corresponding author Kevin S. Groves can be contacted at: kgroves@calstatela.edu

To purchase reprints of this article please e-mail: reprints@emeraldinsight.com Or visit our web site for further details: www.emeraldinsight.com/reprints

Attachment B

Succession Planning Tool Survey

Page 34 of 40

Succession Planning and Management Best Practices John Wiesman, MPH, CPH Clark County Public Health My dissertation research conducted as part of the University of North Carolina-Chapel Hill, Gillings School of Global Public Health executive DrPH program in health leadership found 25 succession planning and management best practices in the scientific literature. These best practices can help inform the types of activities an agency might want to include in a workforce development plan that prepares high performing-high potential staff for the next level of leadership in an agency.

Definitions: When using the following table, consider succession planning to mean the systems and procedures used to identify, develop, and retain high performing-high potential individuals (HP-HP) for future management and leadership roles and how HP-HP are placed into those roles. This could mean developing field staff for their first supervisory job all the way up to preparing staff for the top job in your agency.

In addition, consider high performing- high potential individuals (HP-HP) to mean persons who are performing very successfully in their current role and for whom the organization deems as having strong potential for promoting within the organization.

The table below, which contains the 25 succession planning and management best practices, can help an agency determine what is currently being done in their agency.

Contact information: John Wiesman 360.397.8404 John.wiesman@clark.wa.gov

1

Best Practice

Our agency does this agency-wide

Our agency does this in parts of the agency, but not agency-wide

Our agency does not do this

Not sure of the extent to which my agency does this

Pre-employment activities: Q1 Our agency uses student internships and/or practicums as a means of identifying HP-HP for entry-level positions in our agency Activities for selecting HP-HP Q2 Our agency identifies HP-HP from our workforce Q3 Our agency assesses individuals for job competencies that are a level or more above their current position to help identify HP-HP Q4 Our agency assesses individuals for learning agility (an individual’s readiness and ability to learn from experiences and be adaptive to changing environments) Q5 Our agency assesses individuals for problematic behaviors that may derail their career Q6 Our agency creates lists of individuals to be developed for higher level positions

2

Best Practice

Our agency does this agency-wide

Our agency does this in parts of the agency, but not agency-wide

Our agency does not do this

Not sure of the extent to which my agency does this

NOTE: THE QUESTIONS BELOW APPLY TO PERSONS YOUR AGENCY HAS ALREADY IDENTIFIED AS HP-HP Activities for competency/leadership development in individuals identified as high potentials: Q7 Our agency rotates HP-HP through jobs in various parts of the agency or encourages lateral moves specifically to develop the high potential Q8 Our agency identifies crossfunctional projects, task forces, or teams for HP-HP employees to serve specifically to develop their knowledge, skills, and ability Q9 Our agency sends HP-HP employees to technical and/or management/leadership trainings Q10 Our agency conducts 360 degree feedback assessments for HP-HP employees as a tool to help them identify areas of growth Q 11 Our agency develops individualized development plans with HP-HP employees specific to their preparation for new positions in the agency

3

Best Practice

Our agency does this agency-wide

Our agency does this in parts of the agency, but not agency-wide

Our agency does not do this

Not sure of the extent to which my agency does this

Q12 Our agency gives HP-HP employees exposure to general organizational management (as opposed to program management) Q13 Our agency purposively assigns HPHP employees stretch projects/assignments to develop their knowledge, skills, and/or ability Q14 Our agency creates action-learning projects for HP-HP employees in which teams of people work on a project strategic to the agency’s development and then has them formally report on the project to the highest levels of management Q15 Our agency creates and delivers internal workshops and courses specifically for HP-HP employees Q16 Our agency encourages development by having HP-HP lead training sessions Activities for coaching and mentoring Q17 Our agency assigns new employees a mentor or coach

4

Best Practice

Our agency does this agency-wide

Our agency does this in parts of the agency, but not agency-wide

Our agency does not do this

Not sure of the extent to which my agency does this

Q18 Our agency offers HP-HP employees mentoring and coaching opportunities by someone other than their supervisor Activities for individual HP-HP goal setting & performance measurement Q19 Our agency uses formal meetings with HP-HP employees to define and further develop their job descriptions specifically to create developmental opportunities to help them prepare for new positions in the agency Q20 Our agency uses HP-HP employee and supervisor dialogues to set performance goals specific to their development for new roles/jobs Q21 Our agency evaluates a HP-HP employee’s performance against their development plan and that evaluation is put in writing and verbally discussed with the HP-HP employee

5

Best Practice

Our agency does this agency-wide

Our agency does this in parts of the agency, but not agency-wide

Our agency does not do this

Not sure of the extent to which my agency does this

Retaining HP-HP Employees by Placing them into New Positions Q22 Our agency limits some or all recruitments to internal applicants only, specifically to help retain HP-HP employees, and then may or may not open the recruitment to external applicants Q23 Our agency sometimes creates new lateral-level positions specifically to give HP-HP employees the opportunity to gain new experience within the agency or to retain HP-HP Q24 Our agency sometimes creates new higher-level positions specifically to give HP-HP employees the opportunity to promote within the agency or as a tool to retain a HP-HP employee Q25 Our agency increases a HP-HP employee’s pay specifically to retain the employee in the agency (either to prevent the employee from looking elsewhere or to retain the employee when the employee has been offered a position elsewhere)

6

7

Attachment C

Talent Pools or Talent Puddles

Page 35 of 40

A D V E R T I S E M E N T

Best Practices in Succession Planning ■ Talent Pools or Talent Puddles?

Best Practices in Succession Planning

Halogen . . . . . . . . . . . . . . . . .S3

Research released in the Harvard Business Review (“When Growth Stalls,” M. S. Olson, D. van Bever, and S. Verry) states that a major cause of growth stalls in successful companies is a lack of a strong talent bench. A game plan should identify the areas in which to expand talent pools and the key talent needed to sustain organizational growth. Competencies should be defined for critical positions in order to find the right talent. However, it is imperative to…

■ Successful Succession: Continuity and Mobility

Taleo . . . . . . . . . . . . . . . . . . .S5

The new economic landscape of recession and recovery has raised the bar for HR. Now is the time to respond and create programs that add business value. Many factors have combined to make succession planning a top priority and your greatest opportunity for talent management effectiveness. Business strategies are more agile and dynamic. Growth creates new roles. Mergers and acquisitions cause job realignments. Retirement waves leave open…

■ Succession Management: Sustainable Leadership for the Future

SAP

. . . . . . . . . . . . . . . . . . .S7

Talent is a scarce resource. The level of competition and generational shifting of the leadership pool has made it increasingly difficult for organizations to find the quantity and quality of leaders needed to ensure success. At the same time, the torrid pace of change in the marketplace is making for an uncertain future, leaving many at a loss as to who they should even be looking for in the first place.

Research conducted of registrants for Aberdeen’s 2010 HCM Summit found…

SPONSORS

Special Advertising Supplement to Workƒorce MANAGEMENT

S1

What HR leaders are reading.

If you’re driving the transformation of HR, you’re focused on using workforce management to create business value. You’re managing change at a fast pace. Which means that you need information you won’t find in traditional HR magazines. You need Workforce Management, a business magazine with a high-level view of what’s working and what isn’t. Get the news you can use to stay ahead. It’s a stimulating read, with award-winning, high-level content. Subscribe today. For channels about specific topics, breaking news, access to HR community forums and more, go to workforce.com

A D V E R T I S E M E N T

Best Practices in Succession Planning

Talent Pools or Talent Puddles?

Best Practices in Succession Planning H A L O G E N S O F T WA R E

Defining Competencies

R

esearch released in the Harvard Business Review (“When Growth Stalls,” M. S. Olson, D. van Bever, and S. Verry) states that a major cause of growth stalls in successful companies is a lack of a strong talent bench.

A game plan should identify the areas in which to expand talent pools and the key talent needed to sustain organizational growth.

Competencies should be defined for critical positions in order to find the right talent. However, it is imperative to understand the difference between competencies and skills.

Skills are often task-oriented and can be easily trained; competencies are behavioral-based and often come as a result of direct experience.

Aligning competencies to the overall goals of the business gives an organization an overarching and common umbrella for talent management, branding, and leadership development and gives managers a common language for hiring and assessing performance. It also provides quantitative information to make investments in people, processes, and technology; provides benchmark data; and provides business leaders with tools to make objective talent decisions. Most importantly, properly aligned competencies give employees a set of clear objectives for contributions and self-development.

Identifying Talent Pools Companies can take a proactive approach to talent pools with a four-step approach: 1. Identify the skills and competencies required to support threeto five-year strategic plans and cultivate these in high-potential employees.

2. Establish and develop a large number of promotable employees for all key areas in the organization, not just for leadership and executive positions.

3. Increase employee engagement and retain key talent.

4. Be ready at any point to fill key roles throughout the organization.

Developing internal talent pools enables an organization to prepare for succession in all areas. It is important that the organization groom successors from within the talent pool, conduct ongoing talent assessments to measure progress, and identify gaps. “Many organizations have little or no visibility into the skills of their talent pool,” says Frank Horvath, President and CEO of Integrated Group Synergy. Having visibility helps determine who is ready to take the next step and who may have come into the organization with skills critical to filling the role of the business.

Recruiting from within often achieves the best results. When looking at its internal talent pool, an organization should be able to easily identify candidates for succession or immediate openings and see who is ready for the next level.

Accountabilities: An organization should set and measure specific outcomes.

Skills/Competencies: An organization should make programs available to employees to close skill gaps.

Goals: The organization should have clear goals, and make sure its people have the skills to reach those goals.

Reviews/360º: The organization should have the ability to identify top talent with needed skills and certifications.

Though these areas are all important, they do not carry the same weight; HR practitioners should emphasize accountabilities, skills, and key competencies as a way to reach goals and gather better reviews for every employee.

Putting the Plan Together To accomplish talent management objectives, an organization should have a clear, well-defined plan with integrated goals for both the organization and the individual.

“A strong infrastructure should be in place to identify and develop the organization’s bench strength,” says Horvath. That infrastructure requires a blend of three key elements—assessment, validation, and development—that will work in concert to identify the talent to fill an organization’s short- and long-term staffing needs.

These elements are three critical components of a talent review process. An individual’s performance and potential should be assessed over time to determine readiness to move into new and different roles. Development should be targeted for individuals based on their assessments.

Talent Management Integration Optimizing bench strength provides insight into organizational/ team/individual competency, makes it easier for the organization to identify and track high-performing leadership/functional/ technical talent, facilitates the mobility of talent, and enables a competencydriven approach for managing talent.

“In order to optimize bench strength, a company should have competencies and competency definitions management as a foundation,” explains Horvath. “And also have clear discussions around the organization’s plan and approach to looking at talent pools, and lessening the gaps associated with talent.”

“Having process integration and system enablement is critical. HR practitioners should align the talent management process and understand business needs, but also have a system technology approach to help accomplish a talent management plan.” ■

Based on an HCI webcast presented by Halogen customer Kim Ellis, Senior

Establishing Performance Accountabilities

Director of HR, SNC Lavalin O&M, and Frank Horvath, President of

There are four areas essential to obtaining an optimal level of performance within the organization:

Integrated Group Synergy. For the complete version of this paper, and the SNC Lavalin O&M succession planning case study, visit www.halogensoftware.com.

Special Advertising Supplement to Workƒorce MANAGEMENT

S3

ManageNewsletterFullpage.rmay2010.qxp

5/27/2010

12:14 PM

Page 1

Stay connected and informed with

Workforce Management newsletters Now there are six sources for the latest HR news and trends— and each one is free!

All of the Workforce Management newsletters have growing distribution lists made up of action-oriented HR professionals looking for real-world solutions to workforce management challenges.

Sign up for all six Workforce Management newsletters:

Delivers weekly

Delivers twice monthly

Delivers twice monthly

Delivers twice monthly

Delivers monthly

Delivers as breaking news hits!

Access is free, you simply need to register to become a member! Subscribe today at www.workforce.com/register

A D V E R T I S E M E N T

Best Practices in Succession Planning

Successful Succession: Continuity and Mobility S H E L L E Y S C H M O K E R , S E N I O R D I R E C TO R , P RO D U C T M A R K E T I N G | TA L E O C O R P O R AT I O N

T

he new economic landscape of recession and recovery has raised the bar for HR. Now is the time to respond and create programs that add business value. Many factors have combined to make succession planning a top priority and your greatest opportunity for talent management effectiveness. Business strategies are more agile and dynamic. Growth creates new roles. Mergers and acquisitions cause job realignments. Retirement waves leave open positions. Predicted skills shortages mean fewer high caliber employees.

Implementing a succession plan is your opportunity to make the business more effective while improving employee engagement and productivity. The business needs to have the right people in the right roles with a pool of successors readily available to ensure continuity.

Your people need to see a clear career path and opportunities for both advancement and mobility if you want to keep them engaged.

Successful succession planning covers both bases with the business able to rapidly fill key roles when they become vacant with the best people available.

From Talent Management to Talent Intelligence The talent management lifecycle starts when people engage with the organization in the recruitment process and continues through onboarding, performance, development, and compensation. At each stage, information is captured and feeds into a common framework or talent profile. Using a unified talent management platform, HR and line managers can then use talent intelligence to connect individual skills and competencies with personal career desires, open positions, and company goals. Then you can measure performance, compensate accordingly, and develop individuals for succession and success.

Succession for All Succession planning uses talent profile information to build ranked talent pools, enable internal mobility, and power processes to staff critical positions. With unified talent management, succession planning is not limited to top executives. Talent intelligence makes succession applicable throughout the organization through a holistic, thorough, and strategic methodology. Now the process drills down to identify individuals who can fill roles while providing a balanced view of long-term needs, readiness, and development. This new mindset offers a depth chart of bench strength in ranked talent pools that include internal employees through mobility, external active candidates, and potential best-fit passive candidates in a single view.

Cultural Transformation and Business Results Implementing an effective succession plan can produce big results in an organization. The Bersin & Associates case study Hardwiring Performance Measurement: North Shore-Long Island Jewish Health System Focuses on Talent Management to Increase Patient Care Quality describes how this healthcare leader transformed their culture and boosted their bottom line: By looking at the entire employee lifecycle, from hiring to career

development to succession, the health system was able to systematically and rapidly make overall improvements in talent management, company culture, and business results.

They identified key positions, developed high-potential employees, and created key talent pools. An integrated approach ensured consistency across the process and delivered success.

Seven Elements of Successful Succession • Business aligns strategy with individual preferences.

• HR defines positions, behaviors, skills, and knowledge.

• Management identifies key talent risks and vulnerabilities.

• Succession templates replicate across the organization.

• Senior and line management support adoption.

• Technology unifies all major talent processes.

• Intuitive systems enable everyone to participate.

In Succession Planning: A Strategic Linchpin for Talent Management, you can read in detail how succession planning makes a difference. Of particular note are the four key risk factors that an organization can minimize with a formal succession plan.

Corporate Leadership Council research points out four risks that succession planning addresses.

Four Succession Risk Factors Vacancy Organizations identify those positions that are most critical to success and develop appropriate interventions to ensure that the positions are always filled.

Readiness Organizations provide development opportunities and experiences for high potentials.

Transition From the organization’s point of view, it is important that new leaders be able to succeed and that they stay in their jobs.

Portfolio Development and succession decisions must include an appreciation for the evolving needs of the organization.

Succession planning reduces risk, ensures continuity for the organization, and creates mobility for engaging high potential individuals. That’s why it’s important to see it from all perspectives.

The organization needs to ensure continuity and performance while minimizing risk. The individual needs to see a career path, development, and internal mobility. When all are addressed, everyone wins. ■

To read Hardwiring Performance Measurement: North Shore-Long Island Jewish Health System Focuses on Talent Management to Increase Patient Care Quality and Succession Planning: A Strategic Linchpin for Talent Management, visit taleo.com.

Special Advertising Supplement to Workƒorce MANAGEMENT

S5

The online hub for everything and everyone you need to know in

Compensation, Benefits and Rewards.

Use the Compensation, Benefits and Rewards channel on the workforce.com website as your information hub for this topic, 24/7. Get the most current stories, trends and special reports. Search by subject or company. Get news you might have missed. Find archived in-depth features. Visit the Commerce Center for a list of and information about different segments within the category, such as Retirement Benefits, Health Benefits or Rewards & Incentive Vendors.

Each directory includes profiles and links to resources and vendors, cutting down on your research time.

Access is free, you simply need to register to become a member!

> Go to: workforce.com/benefits

A D V E R T I S E M E N T

Best Practices in Succession Planning

Succession Management: Sustainable Leadership for the Future M O L L I E L O M BA R D I / J U S T I N B O U R K E , A B E R D E E N G RO U P ( F O R S A P ) | S A P

Executive Summary

workforce means that many companies will be losing their most

T

alent is a scarce resource. The level of competition and

experienced people. And the ensuing rush to fill that void will leave

generational shifting of the leadership pool has made it

an external pool of leadership talent that is anything but bountiful.

increasingly difficult for organizations to find the quantity

Topping all of this is the fact that the business landscape is changing

and quality of leaders needed to ensure success. At the same time,

faster than ever before, both for better and worse. The global econ-

the torrid pace of change in the marketplace is making for an

omy has become shockingly fragile, and the world is becoming

uncertain future, leaving many at a loss as to who they should even

flatter, and at the same time the rate of technological advancement

be looking for in the first place. Research conducted of registrants

has led to increasingly disruptive innovations. This means that new

for Aberdeen’s 2010 HCM Summit found that the top initiative, as

skills will be needed, and organizations will need to concoct new

identified by 72% of these senior-level human resources, talent and

strategies in order to fill those voids.

line of business executives, was to strengthen the leadership pipeline.

As is the nature of business, when pressures arise they are not

But with so much uncertainty, it will come down to much more

met with tepid response. Organizations know that leadership is

than simply starting up the recruiting engine and interviewing new

something that they cannot do without, and when it becomes more

candidates. The war for talent will be won by companies that are

scarce, they need to get better at finding and developing it internally.

able to identify their most critical roles based on the future vision

In 2008, Aberdeen found that 53% of companies had some sort of

of the business, determine if and how the existing leadership mold needs to be re-cast, and build the means of both finding and developing the right people for the job. This study of over 260 organizations looks at how the Best-in-Class build and manage their succession bench to produce better results today and mitigate risk and uncertainty in the future.

succession strategy in place, whether formal or informal. In 2010, that number has increased to 75%. But in order to build that sustainable flow of leadership, there are a number of barriers that will need to be overcome.

First and foremost, organizations have difficulty viewing talent as a global resource. Talent hoarding can easily occur unintentionally (or, on occasion, intentionally) when those accountable for succes-

Benchmarking the Best-in-Class

sion have no visibility into potential outside of their immediate team

The best way to understand the business case for succession

or department. At the same time, there may even be reluctance on

planning is to look at the bigger picture—workforce readiness and

the part of the individual leaders to engage in what they perceive as

leadership sustainability. The term “sustainability,” of course, is

bringing about their own replacement, leaving them to keep their

most commonly associated with environmental stewardship

best people a well-kept secret. As a result, companies are prone to

today. But in reality, the same exact principles apply when looking

missing future leaders that may be right under their noses. Further-

at organizational talent. Simply put, sustainability refers to the

more, there still remains that road block in building the business

capacity to endure. In a business environment, this is done through

case. For succession to gain any traction, senior leaders will need to

careful and responsible management of talent resources, as well as

be on board, not only because they pull the most weight but because

an organizational mindset that doesn’t sacrifice long-term competi-

it is essential for succession to be built upon the needs of the

tiveness for short-term gains. This means that succession can no

business. In fact, 24% of companies indicated that they don’t have

longer be a simple disaster contingency in the event that a leadership

enough knowledge of the top business priorities, either because they

role becomes suddenly open. If the competition changes, if the

aren’t communicated properly from the top or because HR doesn’t

economy changes, if consumer expectations change, the skills that

have enough business acumen. And lastly, building the capability to

helped to lead the company before may no longer be the right fit.

It will be important to have a deep and diverse cadre of talented

measure high potential and put that data to use in building bench strength is one that has shown to be a significant barrier. ■

leaders in order for the organization to endure.

Companies are facing a confluence of forces that contribute to a shortage of not just leadership quantity, but quality as well. The

Excerpted from Aberdeen Group’s “Succession Management: Sustainable

anticipated mass departure of the baby boomer generation from the

Leadership for the Future,” July 2010.

Special Advertising Supplement to Workƒorce MANAGEMENT

S7

A D V E R T I S E M E N T

Best Practices in Succession Planning

For more information on the companies that contributed to this white paper, visit their web sites, or contact them directly at:

TALEO

HALOGEN SOFTWARE

4140 Dublin Boulevard Suite 400 Dublin, CA 94568 Phone: (888) 836-3669 www.taleo.com

495 March Road, Suite 500 Ottawa, Ontario Canada K2K 3G1 Phone: (613) 270-1011 www.halogensoftware.com

SAP AMERICAS 3999 West Chester Pike Newtown Square, PA 19073 Phone: (800) 872-1727 www.sap.com

For information on participating in upcoming Best Practice White Papers, contact: Jason Asch, Advertising Sales Director (212) 210-0112 ■ jasch@workforce.com Chicago Headquarters 360 N. Michigan Ave. Chicago, IL 60601 (312) 649-5200 www.workforce.com

S8

Special Advertising Supplement to Workƒorce MANAGEMENT

Workƒorce

M MA AN NA AG GE EM ME EN NT T

Page 36 of 40

Page 37 of 40

Notes ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________

Page 38 of 40

Notes ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________

Page 39 of 40

Page 40 of 40