Making succession planning relevant.
No longer is succession planning just about replacing key executives. Successful succession management comprises strategic talent management, in which an organization ensures it has the global human capital to perpetually adapt, respond, and succeed in an evolving business environment. It focuses on key talent pools—regardless of leadership level—whose performance makes the organization effective in the marketplace.
Integral to succession planning is the science of Industrial Organizational (I/O) psychology, which has been a key figure over the years in developing succession planning into a science with advanced skills and methods to help organizations improve their people decisions. By applying I/O psychology to succession planning, organizations are able to identify and understand the key capabilities needed to succeed in each role, and make more effective development and promotion decisions.
What does your succession plan look like?
Statistics show that an overwhelming number of organizations do not have a meaningful succession plan. In fact, 50 percent of organizations with revenues greater than $500 million do not have a working succession plan. Take a good look at your organization’s succession strategy. First, do you have a plan? If so, does it ensure that key people will be ready and available across talent pools, or is it aimed only at top executives? Does it tie into development across the organization or is it a function of each division with separate systems? Is it clearly linked to your organization’s business strategy?
Like many other organizations, you may have found that the recent economic crisis underscored the need for effective processes that not only look good on paper, but actually work in practice. What does it take to make succession planning work?
An enterprise-wide approach.
To work effectively, a succession plan must identify key roles and the capabilities required to succeed in those roles, determine current and potential talent for filling those roles, identify development needs, and take a broad, cross-functional view of talent pools. The ability to move people cross-functionally is important to succession, as lateral moves are often a viable—and overlooked—way to fill needed roles with high-potential people. The entire process needs to be mapped clearly to your organization’s overall business strategy.
Key components for succession planning.
Although organizations may have some components of succession planning in place, a broader approach is required to ensure that essential components effectively build on and complement each other. Components of successful succession planning often include:
- Business Review. Update the current state of business strategies and priorities; clarify the implications of the business strategy and vision for leadership roles and pivotal talent pools.
- Talent Needs Forecast. Estimate the number and kinds of talent needed to fill roles in a defined time frame. Include outlines of the performance challenges, capabilities, and selection criteria for key positions and pivotal roles.
- Talent Inventory. Identify and appraise key-position candidates and high-potential pools in terms of their performance, longer-term potential, and readiness for advancement. This may be summarized in an overall estimate of bench strength at key leadership levels.
- Talent Review. Review, discuss, and document key position plans and development plans for key individuals and talent pools. This is done by a representative group of organization leaders, usually the top management team for the business unit or a special committee or board established this purpose.
- Follow-Up and Progress Review. Regularly review, update, and oversee the execution of succession and development plans.
Of these processes, the talent inventory not only is one of the most critical, it’s the easiest to get wrong if the methodology is not mapped to the business strategy and objectives. I/O psychology can play an important role here; often, organizations seek outside assistance in meeting this need. Reliable, research-backed methodologies for evaluating potential and predicting future performance are critical for getting the right information.
In our work with clients, we have found that four key questions must be answered in the Talent Inventory:
- Who are the proven performers that deliver the right results in the right way?
- Which performers have the potential to grow into positions at a higher level?
- What do they need to get ready for promotion and how fast could they be ready?
- Which candidate is the best all around fit for a particular role or opening?
Organizations address these four questions in different ways. Some use simple managerial input; others use methodologies that are more rigorous. Unfortunately, most rely on performance observations and appraisals that are not calibrated across the organization, and that provide necessary but insufficient input for predicting success at higher levels. Current performance is a good predictor of future performance only if the context of future performance (level, scope, challenges, capability requirements) is similar.
Evaluations better gauge potential when they align the predictors of future success with the capabilities needed to be successful in a given role. Getting this information right is critical for making effective people decisions.
How can you make succession planning relevant?
In addition to having the right components, organizations with effective succession plans incorporate several important principles that guide their process and overall strategic talent management. In our client work, we have found that the hallmarks of successful succession planning hinge on the following principles, which are essential to making sure succession planning stays relevant, adaptable and effective.
- Make it an ongoing, integral business process, not a one-time or annual event. Discuss and refresh business and people plans on a regular basis.
- Link it to the vision, values, and strategy of the business. People plans should support the business strategy, especially the core competencies and values of the organization that provide its distinctive, sustainable competitive advantage. These should be reflected in the performance requirements and selection criteria for all key roles.
- Use credible, valid data for talent assessment. Design the right tools and processes to provide credible, accurate, up-to-date data that is objective and calibrated, so you can compare people across business units and geographies. Update data to capture critical transitions and changes in capabilities.
- Invest in active and systematic talent development. Identify potential and assess current strengths and development needs. Also develop proactive and systematic strategies to accelerate the development and measure the progress and growth of key individuals and talent pools.
- Provide incentives for development. People identified as high potentials should not be given guarantees of a promotion or a specific position. Instead, they should understand that the organization values them, and if they are willing to take on stretch assignments that entail significant personal risk, they will be supported and rewarded. In addition, view your talent builders as heroes (managers who sacrifice their own status and comfort to grow and promote others) and provide incentives for them to continue this work on behalf of the organization.
- Make sure talent is owned by the line, but facilitated by a strong HR function. The process and all the decisions made within the process must be owned by line managers, and sponsored and directed by the chief executive of the business unit. In addition, it must be supported by a strong, skilled, and credible HR function.
Making succession planning a relevant process for your organization requires a comprehensive approach that hinges on business strategy. A multilevel and layered approach can help your organization create a succession plan that ensures the right talent will be available when you need them, deploys readiness evaluations that map to business objectives, and provides relevant, actionable information for better people decisions.