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Succession Management: Identifying and Cultivating Tomorrow's Leaders

  • ID: 42819
  • Report
  • January 2001
  • 113 pages
  • American Productivity & Quality Center, APQC
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By strategically linking the human resource function to the strategic direction of an organization, succession management can anticipate the future needs of the organization. It serves the purpose of finding, assessing, developing, and monitoring human capital. While serving as trusted advisers and confidants of the CEO, succession management teams may also reflect the concerns and needs of line executives throughout an organization’s business units. Succession management identifies and monitors various talent pools in order to address the future needs of the organization using available talent. Not having the right talent in place can curb the potential growth of a business. With impending retirement for baby boomers and increased demands for diversity, leading organizations are building systems that provide talented, high performers with opportunities to grow.

To discover what leading practitioners of this complex art have learned, 16
sponsors embarked on a journey to learn from best-practice organizations Dell
Computer, Dow Chemical Company, Eli Lilly and Company, PanCanadian Petroleum, and Sonoco Global Products. One of the clearest insights from this journey is that succession management is a continuous process that requires an ongoing commitment of the executives, divisional HR staff, and succession management specialists. The best-practice organizations in this study did not fully succeed in their initial efforts at succession management. Similarly, none have rested on their laurels since implementing working processes. They continually refine and adjust their systems as they receive feedback from line executives, monitor developments in technology, and learn from other leading organizations. For example, Dell reduced the degree of computerization for
succession management data in response to feedback from the field. Conversely, Lilly focused on providing a single centralized and synchronized database of succession information.

Collaboration between the CEO and succession management teams can create
a virtual cycle of success. All best-practice partners felt fortunate to have the enthusiastic support of top management. But this support was not gratuitous and was earned by providing an essential service. At Dow, the process was designed with the active involvement of the CEO, the vice president of human resources, and the Workforce Planning Strategic Center. At PanCanadian, the CEO is the key sponsor for succession management, and a senior management committee of vice presidents steward the process at the corporate level. Talent assessment is a semi-transparent process in best-practice organizations. Most managers receive feedback and information about their developmental needs and suggested activities for further growth. Individuals who have high potential are seldom told of this designation to avoid raising expectations. At Lilly, an eight-page talent identification questionnaire is used to evaluate the assumed potential of 15,000 associates on performance, potential derailment factors, and learning agility. Similarly, Dell uses scaling calls to determine an individual’s level of talent.

Best-practice partners use a core set of competencies or behaviors to establish a standard of comparison for assessment. Most organizations use a subset of leadership competencies that are aligned with the core set. These competencies are a basis for performance management, and four out of the five partners use competencies to identify high-potential candidates. Furthermore, partners use fewer competencies than sponsors on the basis that simplicity and focus are stronger advantages than comprehensive efforts. Dow has moved from having different competencies for each global business to a common set of seven used throughout the corporation. The use of technology in succession management varies widely among partners. Yet, Web-based systems seem to offer great potential for worldwide access and large-scale integration of data. Dell has moved from more extensive, global software applications to a much simpler MS Excel workbook to organize data. Sonoco moved to integrate four commercial applications—PeopleSoft, HRCharter, Lotus Notes, and ExecuTRACK—into a seamless system that can be accessed globally and updated daily.

Best-practice partners employ a wide range of developmental activities to engage leaders and extend their capabilities. Job assignments are the most significant developmental activity, and most partners dedicate considerable time to creating stretch developmental opportunities consistent with the organization’s needs as well as with the needs of the individual. Dow Chemical, for instance, offers mentoring, coaching, active learning, and university-based programs. Dow’s internal research indicates that graduates of its internal executive education program showed improvements in strategic thinking, external focus, customer orientation, and global view. Dow also offers an extensive array of training courses online. All best-practice partners use some variety of a nine-box matrix for classifying the performance of their managers. In most instances, this matrix (popularized by General Electric) assesses individuals on the basis of their performance and perceived potential. The major metric by which succession systems are evaluated is the percentage of openings filled from within the firm. Sonoco finds that its nine-box matrix is 80 percent to 90 percent accurate in identifying candidates for key positions.

At Dow, the hit rate of the succession plan is the key measure. If the person selected for an open position was on the list of potential successors, the system is believed to be working. The current hit rate of 75 percent to 80 percent shows considerable improvement from the past and is viewed as a reasonable target. Other key metrics include diversity and cross-functional assignments. Lilly has a measurement system that ensures its senior management cadre includes diversity in gender, ethnicity, and geographic origin. Finally, a unified approach to succession management is important to maintain consistency across business units and geographic areas and maintain objectivity in succession management. All best-practice organizations in this study advised to keep the process simple.

STUDY FOCUS

Drawing upon input from the subject matter expert team of Dr. Robert Fulmer,
Dr. Jay Conger, and James Kouzes and secondary research literature, the APQC study team identified four scope areas for research. The following areas guided the design of the data collection instruments and were critical in guiding the progress of the study:

1. deploying a succession management process,
2. identifying the talent pool,
3. engaging future leaders, and
4. monitoring and assessing the program.

STUDY FINDINGS

Deploying a Succession Management Process
1. Best-practice organizations solidify the position of succession planning as an integral process by exhibiting a link between succession planning and overall business strategy. This link gives succession planning the opportunity to affect the corporation’s long-term goals and objectives.

2. In best-practice organizations, human resources is typically responsible for the tools and processes that enable successful succession planning. Business or line units are generally responsible for the deliverables. Together, these two groups produce a comprehensive process.

3. Technology plays an essential role in best-practice organizations to facilitate the succession planning process. Ideally, technology serves to facilitate the process (make it shorter, simpler, or more flexible) rather than be the focus of the process or inhibit it in any way.

Identifying the Talent Pool

4. Best-practice organizations use a cyclical, continuous identification process to focus on future leaders.

5. Best-practice organizations use a core set of leadership and succession management competencies that are separate from corporate core competencies.

Engaging Future Leaders

6. Best-practice organizations emphasize the importance of specific, individualized development plans for each employee because a key to succession management is the development of high-potential employees.

7. Individual development plans dictate which developmental activities are needed, and partners have a mechanism in place to ensure that employees conduct the developmental activities. Typically, that mechanism is the involvement of a human resource partner who oversees employee participation in developmental activities.

8. Best-practice partners most frequently rely on the fundamental developmental
activities of coaching, training, and development and utilize all developmental
activities to a much greater extent than do sponsor organizations.

9. In addition to traditional executive education programs, best-practice partners increasingly use special assignments, active learning, and Web-based development activities.

Monitoring and Assessing the Program

10. Best-practice organizations develop methods of assessment to monitor the succession planning process. These methods vary according to business goals and
company culture.

11. Recommendations for success from best-practice organizations include keeping the process simple, engaging technology to support the process, aligning succession management with overall business strategy, and securing senior-level support for the process.

METHODOLOGY

Developed in 1993, the APQC consortium benchmarking methodology serves as one of the premier methods in the world for successful benchmarking. It is an extremely powerful tool for identifying best and innovative practices and for facilitating the actual transfer of those practices.

Phase 1: Plan
Phase 2: Collect
Phase 3: Analyze
Phase 4: Adapt
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- Sponsor and Partner Organizations

A listing of the sponsor organizations in this study, as well as the best-practice (“partner”) organizations that were benchmarked for their innovation and advancement in succession management.

- Executive Summary

A bird’s-eye view of the study, presenting the key findings discovered and the methodology used throughout the course of the study. The findings are explored in detail in following sections.

- Findings

An in-depth look at the key findings of this study. The findings are supported by quantitative data and qualitative examples of practices employed by
the partner organizations.

- Partner Organization Case Studies

Background information on the partner organizations, as well as their innovative succession management practices.
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