Beyond Leadership:

Approaches To Comprehensive Succession Planning

CHAPTER 6

Succession Planning
What is Succession Planning?

Note on terms used

The term Succession Planning and Succession Management can be used interchangeably.

In this presentation, the term Succession Planning is used, but can be taken to mean Succession Management as well.

What is Succession Planning?

The short answer:

Managing key personnel transitions for

Maximum continuity of operations. Retention of institutional knowledge. Minimum disruption.

What is Succession Planning?

In the past, succession planning typically targeted only key leadership positions.
In today's organizations, it is important to include key positions in a variety of job categories.

Why Succession Planning?

With good succession planning, employees are ready for new leadership roles as the need arises, and when someone leaves, a current employee is ready to step up to the plate. In addition, succession planning can help develop a diverse workforce, by enabling decision makers to look at the future make-up of the organization as a whole. A pending transition of a leader or key employee may also be seen as an opportunity for change.

Comprehensive

Succession Planning involves:

First, Understanding the organization's long-term goals and objectives Identifying the workforce's developmental needs Determining workforce trends and predictions
Then, Aligning the organizations human resources strategies accordingly.

Beyond replacing people

Succession planning should include not only planning to replace people,
but should be strongly coordinated with other organizational planning. It should be tied to the management of all the transitions that your organization is now facing, or will one day face.

Succession Planning
The growing necessity for Succession Planning.

Two reasons why Succession Planning is becoming more important than ever:
1. Population trends show that the rate of retirements
of workers will increase in coming years.

2. The management principles growing out of

organizational excellence and quality movements are becoming standard practice among successful organizations.

Succession Planning
Population and Demographic Trends

Workforce Trends
By 2010, the number of 55-64 year-olds has expanded by 52 percent. While the number of 35-44 year olds, those normally expected to move into senior management ranks, has actually declined by 10 percent.

What is the impact of these population trends?

What exactly does the exit from the workforce of the Boomers really mean to organizations?

How serious is the coming retirement crisis?

Population Trends
US Births 1910-2000 by Year U.S. Births,
4,500,000 4,000,000 3,500,000 3,000,000 2,500,000 2,000,000 1,500,000 1,000,000 500,000 0
10 20 30 40 50 60 70 80 19 19 19 19 19 19 19 19 19 90

Births

Year

The Baby Boom

US Births 1945-1975 by Year U.S. Births,
4,500,000 4,000,000 3,500,000 3,000,000 2,500,000 2,000,000 1,500,000 1,000,000 500,000 0
10 20 30 19 19 19 19

1945

1975

Births

40

50

60

70

80 19

19

19

19

Year

19

90

The Baby Boomers turn 60

Projected Retirements Boomers Reaching Retirement Age
*These numbers do not represent the number of workplace retirements. They simply add 60 years to the birth data. There are many other factors that influence retirement rates.

Retirements

4,500,000 4,000,000 3,500,000 3,000,000 2,500,000 2,000,000 1,500,000 1,000,000 500,000 0

Average retirement age is now about 63, and is trending down. The round number 60 is used here for simplicity.
20 50

70

80

90

00

10

20

30 20

19

19

19

20

20

20

Year Reaching 60

20

40

Where we are now on the demographic curve

Projected Retirements Boomers Reaching Retirement Age 2006

4,500,000 4,000,000 3,500,000 3,000,000 2,500,000 2,000,000 1,500,000 1,000,000 500,000 0

Retirements

70

80

90

00

10

20

30

40 20

19

19

19

20

20

20

20

Year Reaching 60

20

50

What weve gotten used to in the previous 15 years:

About 2.6 million per year

4,500,000 4,000,000 3,500,000 3,000,000 2,500,000 2,000,000 1,500,000 1,000,000 500,000 0

Projected Retirements Boomers Reaching Retirement Age 1990 2005

Retirements

70

80

90

00

10

20

30

40 20

19

19

19

20

20

20

20

Year Reaching 60

20

50

What we can expect over the next 15 years:

Growing from 2.6 to 4.4 million per year, a 70% increase
Retirements

4,500,000 4,000,000 3,500,000 3,000,000 2,500,000 2,000,000 1,500,000 1,000,000 500,000 0

Projected Retirements Boomers Reaching Retirement Age 2008 2023

70

80

90

00

10

20

30

40 20

19

19

19

20

20

20

20

Year Reaching 60

20

50

How will immigration affect retirement rates?

Ellis Island

The Baby Boom Period

http://www.susps.org/overview/numbers.html

Impact of immigrants will be considerably less than that of Boomers

Just over 4 million immigrants entered the U.S. in the 1970s. If their average age at entry was 20, they are now about the same age as Boomers born in the 1950s, a decade in which over 40 million Boomers were born. http://www.susps.org/overview/numbers.html

What impact will immigrant population trends have on retirement rates?

Immigration rates are harder to analyze because of age at entry and other factors. Yes, the number of immigrants has been increasing dramatically in recent years, exceeding native births.

This will contribute significantly to rising retirement rates, but

the greatest impact of immigrants on retirement rates will lag behind the Baby Boom factor.

So how serious is the coming retirement crisis?

The number of retirements per year will increase over the next 15 years. At its peak in 15 years, the rate will approach twice the number of retirements per year compared to what were used to. However, the rate of increase will be gradual over the next 15 years.

Serious, but not an immediate emergency

This means that the rate of loss of institutional knowledge and leadership will be as much as double what were used to. However, adopting succession management practices now will enable organizations to cope with increasing retirement rates successfully, in plenty of time.

Succession Planning
The Impact of the Organizational Excellence, or Quality Movements

Organizational Excellence or Quality Movement

The adoption in Japan of Edward Demings quality circle and continuous improvement concepts resulted in tremendous gains in quality and value. This success led to Total Quality Management and all the other modern approaches to organizational excellence.

Demings Quality Circle

Adjust Plan

Check

Do

Organizational Excellence or Quality Movement

Over the years, research and experience have refined these concepts into a number of widely-agreed-upon ideas about what constitutes excellent organizational practices.
These widely-agreed-upon best-practices are represented by the Malcolm Baldridge and Florida Sterling award criteria.

The Seven Sterling Criteria:

1. 2. 3. 4.
Leadership Strategic Planning Customer and Market Focus Measurement, Analysis, and Knowledge Management 5. Human Resources Focus 6. Process Management 7. Organizational Performance Results

Succession Planning is chiefly concerned with 4 of the 7*

1. 2. 3. 4.
Leadership Strategic Planning Customer and Market Focus Measurement, Analysis, and Knowledge Management 5. Human Resources Focus 6. Process Management 7. Organizational Performance Results

*All 7 Criteria have succession planning implications, but these 4 represent the bulk of the necessary analysis, planning, development, and other actions.

Well use these four Sterling areas to frame our examination of Succession Planning.

Leadership Strategic Planning Measurement, Analysis, and Knowledge Management Human Resources Focus

Succession Planning and

Leadership

What are the competencies required of leaders?

Leadership
Dictionary.Com definitions:

Capacity or ability to lead: showed strong

leadership during her first term in office.

Guidance; direction: The business prospered

under the leadership of the new president.

Proportion of necessary broad skills at various levels

Executive

Manager

Supervisor

Worker

The Leadership Challenge

Model The Way

Enable Others To Act

Find your voice Set the example

Foster collaboration Strengthen others Recognize contributions Celebrate the values and victories

Inspire A Shared Vision

Encourage The Heart

Envision the future Enlist others

Search for opportunities Experiment & take risks

Challenge The Process

The Qualities of Leadership

Collaborative Inventive Skilled Visionary Mindful

Survey results
Interpersonal Skills Problem Solving Conceptual Skills Project Management Coaching *Technical Skills 77% 75% 63% 58% 47% 41%

*Technical Skills as used here are the competencies that are specific to your business or industry.

The soft skills are critical to leadership.

Yes, a fundamental understanding of the business youre leading is necessary.
Your best technical people may seem like a likely source of promising leaders, but do they also have the necessary soft skills?

Succession Planning and

Strategic Planning

Strategic Planning must precede Succession Planning

You have to know where you are going in order to plan to get there.
Succession Planning cannot occur without broader organizational planning.

Organizational Mission, Vision, and Values. Strategic Plans Long-term Goal & Objectives Strategic alignment within the organization

Strategic Alignment
Organizational Mission & Vision Organizational Strategic Plans Organizational Goals & Objectives Areas of responsibility in achieving these goals & objectives (departments). The people working in these areas.

Succession Planning is inextricably linked to Strategic Planning.

Sustainability of the organization. Adapting to changes in technology.

Adapting to new business processes.

Adapting to anticipated changes in markets, service requirements, etc. Facilitating growth.

Strategic planning precedes succession planning.

Before planning for the succession of key personnel, know where you want to go. Define Mission, Vision, Values, Goals & Objectives.

See that your current business processes and organizational focus are aligned with your vision and strategic plans.
But of course stay flexible and plan for change.

Succession Planning and

Measurement, Analysis, and Knowledge Management

Preserving and Sharing Institutional Knowledge

A morbid, but useful, question to ask about each key position: What would happen if a particular employee were to suddenly disappear (sudden accidental death, for example)?
Of course it would be personally & humanly tragic, but what would be lost to the organization? Former White House Chief of Staff Andy Card developed what he called a Hit By A Bus list.

Knowledge Management
With the departure of key leaders and other critical personnel, what knowledge will your organization lose? Its easy to take for granted the wealth of knowledge stored in our brains. Succession planning seeks to capture and retain the institutional knowledge that would otherwise be lost when key people leave. How do we do this?

Knowledge Management
World-class organizations have developed effective, wellintegrated systems for

Communication Learning Documentation

Communication: Vertical
Organizational Mission & Vision

Communicated

Communicated

Results, Mission, Innovation, Organizational Goals & Objectives Vision, Research, Values, Learning, Strategic Areas of responsibility in achieving these goals &then which Plans, objectives (departments). informs Goals, MVV & Objectives Planning The people working in these areas.

Down:

Organizational Strategic Plans

Up:

Communication: Vertical
How will the departure of key people affect things like

How strategic plans are translated into action plans.

How action plans are assigned and communicated down the org chart.
How progress on action plans is monitored.

How measures of performance are communicated up the org chart.

Communication: Horizontal
Organizational Goals & Objectives

Area 1

Area 2

Area 3

Everybody on the same page

Communication: Horizontal
How will the departure of key people affect things like

Coordination of activities between areas. How information about the organizations activities is shared. How one area knows where to go to find organizational support or resources.

Will the information gained by one area be available to those from another area who need it?

Learning
How will the departure of key people affect the availability of

External Knowledge
Industry practices Industry history Markets Industry trends Key Contacts Etc.

Learning
How will the departure of key people affect the availability of

Internal Data
Customer knowledge Unique characteristics of individuals Efficiency & effectiveness of processes Sources of materials and information Etc.

Documentation
Documentation is used here to describe the process of capturing and preserving the Institutional Knowledge that will be lost when key people depart, in order to make it permanent and useful...

...and to make it available to the people who will replace those who depart.
Quit reinventing the wheel with every major personnel transition.

Systematize Documentation
A systematic approach to documentation is essential for succession planning Of policy, procedures, plans, activities, etc. Accessible to all who need it
Require everyones work to be Organized systematically (standardized document management policies & procedures) Accessible & Transparent

Mature Systems
Legally mandated and regulated systems are usually relatively mature. Many of your documentation procedures and practices have been prescribed by law, And have been shaped by practice and necessity over many years.

However, not all your processes may be welldocumented.

Policy & Procedure Manuals

If they exist at all, they are often out of date. Systematically update these manuals. If you issue a policy memorandum, update the manual. If you implement a new procedure, update the manual. Easier than ever to do (online or with word processing)

Develop systematic approaches to planning and project management.

Microsoft Project is a good tool, but is complicated. You can adopt some of its key features yourself: Develop a simple form that outlines the important aspects of major projects, such as Goals Personnel involved Budgets Timelines and checkpoints Approvals

Succession Planning:

Human Resources Focus

Planning for the Succession of Key People

Human Resource Focus

Succession planning often starts with planning for the replacement of a single key leader (i.e., the founder). It may focus on all important leaders (i.e., senior management). It may also focus on Historically difficult to fill (or train for) positions Key technical positions Less desirable locations or specialties Mission critical positions

A step-by-step approach:
1. 2. 3. 4. 5. 6.

Identify key positions Decide on the initial scope of your SP efforts Identify competencies of selected positions Identify internal and external talent pools Create internal and external selection and recruitment processes Create and support employee development processes

1. Identify key positions

Start at the top of the org chart.
Work your way down to mid-level managers and key technical positions.

Prepare a list of all the positions for which succession plans are necessary or helpful.

2. Decide on scope
Plot the career trajectories of people in key positions on a timeline. Develop a long-range schedule for implementation of succession planning for the identified positions. Consider your organizations other long-range plans and trends. Prioritize the positions for which you want or need to develop succession plans.

3. Identify competencies of selected positions

This is easier to do with technical positions than with leadership positions. Develop lists of skills for key positions. Job (or Task) Analysis.

Consider, for each position, the required Knowledge Skills & Abilities Attitudes

Consider other characteristics of the selected positions

Determine challenges youll face in replacing people in particular positions, i.e., Scarcity of potential candidates Training and development issues Identify any other general human or professional qualities that your organization wants to have in its workforce (Values).

4. Identify talent pools and paths

Assess your internal talent pool first. Assess existing position structure. Look at the history of your hires and promotions. Identify entry level positions. Are there natural career development paths? Can you alter the structure to create such paths?

Assess performance potential.

Aptitude testing Employee Performance Evaluation System, including 360 evaluations

Preferences expressed in employees individual career development plans. Find strength in diversity
High performance + aptitude + career motivation = Potential

Top 7 competencies used to identify highpotential employees Decision-making (74%) Performance exceeds expectations (74%) Drive for results (66%) Analytical skills (63%) Potential in another function (63%) Problem-solving (59%) Cognitive ability (52%)

External talent pools

Look at the history of your hires and promotions Identify entry level positions. Research your industrys labor market. Identify institutional sources: Colleges, technical schools, military, etc. Identify like or related organizations: Can you offer incentives to lure talent? Identify appropriate employment services.

5. Selection and recruitment processes

Internal selection and recruitment Create career progression paths. Decide how open or closed your recruitment processes will be. For open processes, establish an internal promotion culture. Announce, publicize, and support the effort. Communicate clear lines of job progression. Follow through: promote from within.

External selection and recruitment

Where did your existing workforce come from? Target the most promising external talent pools. Establish relationships with institutional talent sources. Implement a systematic recruitment, assessment, and hiring process.

6. Create and support employee development processes

Integrate training and development plans with with Mission, Vision, & Values, and Strategic Plans. Align training and development plans with succession plans. Implement systematic training and development paths and options to develop the competencies identified as necessary for the organization.

6. Create and support employee development processes

Discuss each employees personal and professional goals, and help them achieve them.
Create career pathing plans for each employee.

Make and sustain the commitment to develop employees.

Create a plan to systematically pass on the wisdom of senior workers.

Mentoring Pairing Apprenticeship Cross-training

Team assignments Job rotation Shadowing Coaching

Benefits of Mentoring, Cross-training, etc.,

Adds to assignment flexibility, Provide for greater continuity of operations in unexpected (i.e., Hit by a bus) situations.

Give the employee a chance to evaluate potential career paths.

Provide employees with advancement opportunities Supports succession plans.

Succession Planning
Challenges and Recommendations

Seven Common Challenges Organizations Face Related to Succession Planning

1. 2. 3. 4. 5. 6. 7.
Finding the right employees to develop Time for the process Buy-in by senior leaders Organizational issues such as downsizing or mergers Implementation and follow-through Assessment and measurement Losing talented people

Recommendations:
1. Receive active support of top leadership. 2. Link to strategic planning. 3. Identify talent from multiple organizational levels, early
in careers, or with critical skills.

Recommendations:
4.
Emphasize developmental assignments in addition to formal training. Address specific human capital challenges, such as diversity, leadership capacity, and retention. Facilitate broader transformation efforts.

5.

6.