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Succession

Management

Practices

Survey

Report
Succession Management Practices Survey Report
By Sheila M. Rioux, Ph.D., and Paul Bernthal, Ph.D.

HR Benchmark Group

Issue 1 (Vol. 2)

January 1999
About the HR Other Benchmark Reports
Benchmark Group Volume 1: 1997–1998
Because Development Dimensions International Issue 1—A Survey of Trust in the Workplace
(DDI) understands how difficult it is to keep up with
Issue 2—Performance Management Practices
the changing face of human resources, we keep track
Survey Report
of new trends in order to keep our clients as well as
the industry in general informed. Our clients, in Issue 3—Workforce Development Practices
particular, frequently ask us for benchmarking data Survey Report
and thought leadership on issues such as leader Issue 4—Job/Role Competency Practices
development, advanced learning technology, Survey Report
performance enhancement, workforce effectiveness,
selection, promotion, and succession management.
In addition to our established methods for tracking
Special Reports
such trends, we began the DDI HR Benchmark Global High-Performance Work Practices:
Group. The group is an alliance of organizations A Benchmarking Study (1998)
committed to sharing information and benchmarking
current HR practices. These organizations, an
international mix of DDI clients and non-clients,
have agreed to respond to periodic surveys in order
to provide current information in various areas of
human resources. The organizations represent a
geographical and industry cross-section.
Participation allows organizations in this alliance to
provide current data through our surveys, receive the
results, and help us choose the survey topics. The
approach is systematic and easy, and response and
interest have been outstanding.

To order previous or additional reports, call:

1-800-DDI-1514

(1-800-334-1514)

For more information contact:

Paul Bernthal, Ph.D.

Manager

HR Benchmark Group

Development Dimensions International

1225 Washington Pike

Bridgeville, PA 15017

Phone: 1-800-9-DDI-MAIL, extension 7533

Fax: 412-220-5204

E-mail: hrbench@ddiworld.com
contents

Executive Summary .................................................................................1

Survey Report ..........................................................................................5

Purpose ...............................................................................................5
Definition 5
...................................................................................................

General Profile ........................................................................................... 6


System Qualities ........................................................................................ 7
Distinctive Qualities of the Best Systems .................................................. 9
Succession Candidate Evaluation ............................................................ 10
Links to HR Systems ................................................................................ 12
Bottom-Line Impact ................................................................................. 14
Challenges ............................................................................................... 15
A Look Forward........................................................................................ 16
Appendix ................................................................................................17

Respondent Comments ......................................................................17


Respondent Profile .............................................................................18
Table 1: Regions
Table 2: Contact’s Position
Table 3: Industry
Table 4: Industry Revenue
Table 5: Employee Category
Table 6: Number of Employees

Respondent Organizations ....................................................................... 19


executivesummary

Succession Management Practices


By Sheila M. Rioux, Ph.D., and Paul Bernthal, Ph.D.

If given the chance, organizations would reevaluate and rehire an

average of only 62 percent of their leaders and managers…. In the

next year or two, 52 percent of these organizations plan major

changes to their succession management process.

Purpose r Methods of evaluating candidates.


r Bottom-line impact of succession management
The objectives of this study were to:
practices.
r Investigate how organizations make succession
r Challenges driving the need for good succession
decisions.
management.
r Determine which characteristics of succession
management plans affect organizational
effectiveness. System Characteristics
r Determine how succession management
approaches affect organizational outcomes.
for Success
Survey results revealed that systematic succession
The report, based on survey results from more than
management plans are relatively new—three-
260 members of the DDI HR Benchmark Group,
quarters of the organizations with a formal plan have
addressed the following areas:
been using them for five or fewer years. However,
r General succession management practices. the survey also revealed that an organization’s
r Characteristics of succession management plans. approach to succession management—systematic or
not—influences the perception of the system’s
r Links between succession management and effectiveness.
organizational systems.

1
Findings Overview These organizations report using the above

Overall System Qualities characteristics over 50 percent more than


organizations with ineffective systems.
r Organizational support. The majority of
succession management programs:
— Involve the CEO (88%). Evaluating Candidates
— Have the visible support of senior Findings Overview
management (93%). On average, organizations rely on two sources of
— Link to business strategy planning (88%). data when evaluating candidates for succession.

But almost half the respondents do not share r The top two data sources for evaluating
information, such as nominations, performance, candidates are recommendations (97%) and
and standings, with the candidates involved in performance management data (95%).
the succession management process. r Only 24% of the respondent organizations use
r Identifying candidates. When making ability testing and simulations/role plays as
succession decisions, 94 percent of evaluation tools in succession management.
organizations consider employees’ career wishes r Organizations with the most effective succession
and aspirations. Most organizations (88%) also management systems are more likely to use
use objective assessment data regarding current multirater instruments (i.e., 360-degree
performance and readiness/potential. feedback) and simulations (including assessment
r Development process. Most organizations use centers) to evaluate succession candidates.
developmental assignments (91%) and formal
training programs (87%) as part of succession
candidates’ development. Mentoring/Coaching
Links to HR Systems
programs are used less frequently (68%). Findings Overview
r Other practices. Almost half the organizations Linking succession management systems to a series
(44%) do not evaluate or compensate managers of HR systems might involve using a common
and executives based on their efforts to develop metric, such as competencies, to provide a basis for
direct reports. Fewer (37%) rely on a structuring the systems.
computerized system to plan and track progress
r Managing work and careers. Nearly
of the succession management system.
90 percent of organizations link succession
management systems to both performance
Best Practices management and career planning.
r Organizations with highly effective succession
r Training and development. More than
management systems are more likely to:
85 percent of organizations also link succession
— Involve the CEO. management to training and general
— Have the support of senior management. management development programs.
r Compensation and EEO. Almost one-third of
— Involve line management in identifying
candidates. respondent organizations do not link succession
management systems to compensation, EEO, or
— Use developmental assignments. affirmative action.
— Link succession management plans to
business strategies.
2
Value and Impact Participant Profile
Findings Overview The report is based on responses from more than 260
r Linking succession management to multiple organizations.
HR systems can improve organizational r The typical survey respondent is a human
performance. Organizations linking succession resource director or manager (43%) or vice
management to more than three HR systems president (27%).
experience greater improvement in customer and
r Most (82%) respondents are from the United
employee satisfaction. For example,
States; 12 percent are from Canada and Europe.
75 percent of the organizations with more than
three system links report improved customer r The sample largely comprises manufacturing
satisfaction, compared to only 43 percent of organizations (42%). Service organizations
organizations with links to three or fewer represented one-quarter of the sample;
systems. finance/insurance/real estate, 14 percent; and
organizations in transportation/
r Plans that cover multiple organizational
communication/utilities, 12 percent.
levels improve retention of quality employees.
Organizations that have succession management r Forty-five percent of participating organizations
plans for two or more levels report the most reported 1997 revenue in excess of $1 billion.
improvement in employee satisfaction and r Employees of responding organizations were
retention of quality employees. Respondents mostly hourly (mean = 48 percent) and
perceive plans that cover four or more levels as technical/professional (mean = 30 percent).
highly effective.
r Company size ranged from 80 to 330,000
employees with a median of 6,000 employees.

Challenges
Findings Overview A Look Forward
Respondents were asked to choose the top three Survey results indicate that the traditional approach
challenges that drive their need for good succession to succession management can no longer meet the
management. challenges facing businesses today. In the not so
r Business results and company growth. Nearly distant past, succession management typically was a
half the organizations surveyed identify the “secret” process involving only top executives;
desire to improve business results (48%) and succession candidates rarely knew they were being
company expansion/growth (45%) as the main considered.
challenges driving the need for good succession The new approach to succession management, which
management. involves all levels of the organization and
r New skill requirements. Approximately incorporates both planning and development, better
one-third of the organizations report that future equips organizations to meet the changing demands
leaders will require new skills to meet the of the business environment. This new process
changing demands of business. A solid focuses on meeting the needs of both the
succession management plan helps organizations organization and the individuals involved in
prepare potential leaders for these new skill succession management. The CEO, top executives,
requirements. and line management—all are responsible for

3
identifying and developing candidates. And, asking Organizational Support
candidates about their career goals and aspirations r Reliance on HR support and counsel.
produces a better person-job fit.
r Senior management/management involved in
Organizations almost always rely on performance process of identifying competencies/key
management data and recommendations to identify requirements for manager and above positions.
candidates. Performance management systems
r Involving line management in process design,
gather data regarding candidates’ past performance
implementation, and execution.
and can identify developmental needs.
Recommendations based on past performance also r Alignment with company strategy,
competencies, and values.
are useful. However, using more standardized
evaluation methods distinguishes effective from r Involving the CEO.
ineffective succession management plans. In the
near future we might see organizations increasingly Identifying Candidates
use multirater instruments and simulations in the
r Identifying needs for multiple candidates for
making succession decisions. Gathering information
each senior management position.
from multiple perspectives provides valuable
insights about individual strengths and r Using competencies to define readiness.
developmental areas. r Internal candidates’ assessments based on
In the past organizations might not have involved competencies, interpersonal skills, managerial
skills, motivational fit, and performance results.
HR in succession management. The survey results
suggest that this approach is not very effective. r Rating of potential combined with specific
Organizations benefit most when succession position recommendations.
management integrates with other HR systems and r Identifying high potentials and high-performing
strategically links to the overall business plan. women and minorities.
This integration allows the system to respond to
changing organizational needs and to contribute to Development Process
the bottom line.
r Expose employees to multiple situations, tasks,
Organizations realize the need for effective projects to build their competencies.
succession management systems and are
r Individual development/Encouragement by
adapting their approach to identifying and
manager.
developing individuals for leadership roles.
Succession management is a significant part of r Coaching and mentoring.
organizations’ efforts to develop their internal r Identifying cross-functional developmental
talent, meet organizational needs, and improve assignments.
business results.
r Establishing on-the-job developmental
assignments.

Respondent Comments Other Practices


The following is a sampling of survey respondents’ r Identify real needs in next three to five years.
answers and comments when asked, What practice
r Calibrating performance and potential
has been most valuable in your organization’s
assessment codes across departments for
approach to succession planning?
consistency.
r 360 (degree) review and feedback.

4
surveyreport

Succession Management Practices


The best succession management systems—
á Link to business strategy
á Involve the CEO and line management
á Include developmental assignments
á Have senior management support

Purpose Definition
The objectives of this study were to: The term succession management refers to a
systematic process for identifying and developing
r Investigate how organizations make succession
candidates for leadership or management positions.
decisions.
The basic goals of succession management are to:
r Determine which characteristics of succession
r Identify critical management positions within
management plans affect organizational
the organization.
effectiveness.
r Determine future vacancies for those positions.
r Determine how succession management
approaches affect organizational outcomes. r Earmark people who would potentially fill
those vacancies.
The members of the DDI HR Benchmark Group
who responded to the survey provided information r Develop succession candidates, using
about the following issues: approaches such as training programs,
mentoring, and challenging job opportunities.
r General succession management practices.
Organizations can meet these goals and make
r Characteristics of succession management plans.
succession decisions in many ways. This report
r Links between succession management and discusses various approaches to succession
organizational systems. management and identifies key characteristics
r Methods of evaluating candidates. common among highly effective systems.

r Bottom-line impact of succession management


practices.
r Challenges driving the need for good succession
management.

5
General Profile 3. Process for identifying internal candidates.
r Seventy-one percent of the organizations
The survey asked organizations to provide general
surveyed identify an internal candidate(s)
information about their current approach to making
for a position before it becomes vacant.
succession decisions. Specifically, the survey
addressed the following areas: r Of those organizations, 81 percent
identify a pool of candidates as ready to fill
1. Percentage of organizations with a
the position.
succession management system.
r Sixty percent of the organizations indicate
r A clear majority (61%) have a systematic
that a pool of two or three candidates would
process for making succession decisions.
be ready and available to step into a top
2. Levels covered by a succession management management position immediately.
plan in organizations with a systematic process
4. Length of time organizations used a systematic
for making succession decisions.
process for making succession decisions.
r Succession management plans cover
r Systematic succession management plans
approximately 42 percent of management
are relatively new—three-quarters of the
and leadership jobs.
organizations with a formal succession
r Higher-level positions (CEO/functional management plan have been using it for five
managers) are more likely to be covered by or fewer years.
succession management plans than lower-
5. Perceived effectiveness of succession
level positions (frontline). (See Table 1.)
management efforts.
r Overall, organizations perceive their
Table 1: Percentage of organizations with a clearly defined approach to making succession decisions as
plan for making succession decisions at various levels.
moderately effective. On a 1–10 scale
Succession Management
Organization Level Plan in Place (%) (10 being extremely effective) half the
respondents rate their approach at 5 or less.
Top-level managers (CEO, 80
CFO, COO) r When filling top management positions
Multidepartment or function 85 internally, organizations with a succession
managers (managers of
managers) management plan estimate that 71 percent of
Department, function, or 53 the people stay in the positions and are
project managers (manager of successful.
supervisors)
First-level function supervisors 16 r Respondents also indicate that, if given the
(team leaders) chance, their organizations would reevaluate
Individual contributors 12 and rehire an average of 62 percent of their
(professionals, frontline)
leaders and managers.

6
6. Projected need for future succession Table 2: Qualities/Characteristics of succession management plans.
management systems. Not at Some- Very
All what Much
r These organizations estimate that 21 percent Organizational Support % % %
of top management and 24 percent of middle Relies on HR staff to provide 5 34 61
management positions will be vacant in the functional support and counsel.
next five years because of retirement or Is visibly supported by senior 7 37 56
management.
other reasons.
Involves the CEO (or most 12 23 65
r More than half (52%) of the sample indicate senior leader).
that within one or two years, their Links to business strategy 12 50 38
organizations plan to implement major planning.

changes in their approach to making Involves line management to 12 43 45


identify and/or develop
succession decisions. candidates.

Based on these findings, it is apparent that most Shares ownership/responsibility 25 50 25


across all levels of the
organizations perceive a need for improvement in organization.
succession management practices. Openly shares information 42 44 14
(e.g., nomination, performance,
standings) with succession

System Qualities
candidates.
Identifying Candidates % % %
Measures or considers employee 6 57 37
Succession management plans have many unique career wishes and aspirations.
features or characteristics. For this reason the
Uses objective assessment 12 50 38
survey asked respondents to rate the degree to which data regarding employees’
different qualities/characteristics describe their current performance and
readiness/potential.
organizations’ approach to succession management.
Lists well-defined requirements 18 55 27
Table 2 provides a breakdown of response ratings. and competencies for positions
The characteristics are grouped into four general under consideration.
categories: organizational support, identifying Development Process % % %
candidates, development process, and other Includes developmental 9 55 36
assignments.
practices.
Uses formal training programs. 13 58 29
Contains a time frame for 23 53 24
achieving planned actions.
Uses university programs. 24 60 16
Involves a mentoring/coaching 32 58 10
program.
Other Practices % % %
Changes in response to changing 13 51 36
strategic business plans.
Relies on a computerized system 63 25 12
to plan/track progress.
Evaluates/Compensates managers 44 51 5
and executives based on their
efforts to develop direct reports.

7
Organizational support. CEOs are involved in the Development process. Effective succession
majority (88%) of succession management management also requires a strategy for developing
programs, and nearly all (93%) are visibly supported succession candidates. Most succession
by senior management. This support and management plans provide candidates with
commitment from the CEO and top management developmental assignments and formal training.
give succession management a sense of urgency and
r Developmental assignments allow candidates to
importance that filters down to line management;
learn from challenging job experiences, such as
they are critical to the plan’s success.
job rotations or task forces. Providing
A large percentage of the organizations also link candidates with numerous and varied
succession management to business strategies and opportunities helps them develop the skills
share the ownership/responsibility of plans across all necessary for success in upper-level positions.
levels of the organization. This strategic link allows
r The organizations surveyed use university and
the plan to reflect important organizational priorities
mentoring/coaching programs less often.
and changing business needs.
Pairing candidates with mentors who furnish
However, almost half the organizations report that real-life experience and insight can be a valuable
they do not openly share nomination, performance, tool for developing talent.
and standings information with succession
candidates. Communicating this information can
engender organizationwide support for the plan, Other practices. Another key component of an
facilitating its integration with the overall strategic effective succession management plan is its ability
planning process. to track and monitor all the plan’s phases. However,
despite the fact that computerized tracking systems
provide more comprehensive, complete, accurate,
Identifying candidates. Most organizations look at and up-to-date information than a manual system,
employees’ career aspirations as well as objective most organizations (63%) do not use them.
assessment data when identifying and/or developing
Not linking managers’ and executives’ evaluation or
candidates. Many also acknowledge the merit of
compensation to their efforts to develop direct
person-job fit. It seems they realize the importance
reports is another common practice among many
of considering people who not only have the
respondent organizations (44%). This link can
potential to perform in the targeted positions, but
increase leaders’ accountability for supporting
also aspire to be in those positions. A succession
people’s long-term development.
management plan that involves candidates in the
process meets organizational and individual needs
more effectively.
In addition, succession management plans that use
competencies as a common metric allow
organizations to identify internal talent and
focus on areas for development. Therefore, it is
important to list the competencies required for the
target positions.

8
Distinctive Qualities of the Figure 1 highlights the top five characteristics that

Best Systems
distinguish highly effective from ineffective
systems.
The survey also was designed to identify qualities r Highly effective systems are more likely to:
that distinguish effective from less effective
— Involve the CEO.
succession management systems. Respondents were
asked to rate the effectiveness of their organization’s — Have senior management’s support.
current approach to making succession decisions — Involve line management in identifying
using a 10-point scale (1 being not at all effective succession candidates.
and 10 being extremely effective). The survey
examined differences in characteristics between — Use developmental assignments.
succession management systems rated extremely — Link the plan to business strategies.
effective (7 and higher) and those rated ineffective
Organizations with highly effective systems report
(3 and lower).
using these characteristics over 50 percent more than
those companies with ineffective systems.

Figure 1: Five characteristics that distinguish highly effective succession management systems.

63%
Involves line management
12%

61%
Includes developmental
assignments
10%

82%
Highly Effective System
Involves CEO
30% Ineffective System

62%
Links to business strategy
10%

75%
Supported by senior
management
18%

0% 10% 20% 30% 40% 50% 60% 70% 80% 90%


Percentage Using Practice "Very Much"

9
The number of organizational levels a succession Table 3. Data sources used to evaluate succession candidates.
management plan covers and the process of Not at Some- Very
identifying internal candidates also contribute to a Source All what Much
plan’s success. % % %
Recommendations 3 34 63
r The perception of a plan’s effectiveness links to
Performance reviews 5 37 58
the number of organizational levels it includes.
Interviews 21 44 35
Respondents rated a succession management
plan that covered one level as moderately Analysis of work samples or 28 47 25
outputs
effective. In contrast, they rated plans that
360-degree assessments 33 47 20
included four or more levels as highly effective.
Personality/Psychological 61 27 12
r Respondents rated as more effective succession testing and assessment
management plans that identify a pool of Simulations or role plays 76 19 5
(including the assessment
candidates—rather than a single candidate—as center method)
ready to fill the target position. Organizations Paper-and-pencil ability testing 76 17 7
that identify a pool of candidates also have a (e.g., intelligence)
better success rate (people who stay in positions
and are successful) than organizations that
Finding: Performance Management
identify only a single candidate (71% vs. 63%).
Data and Recommendations Used
Most Frequently

Succession Candidate On average, organizations rely mainly on two

Evaluation data sources when evaluating candidates for

succession—performance reviews and

recommendations. Testing and assessment


Respondents were asked to rate the degree to which
techniques are used far less frequently.
their organizations rely on various data sources to
evaluate candidates for succession. Table 3 r To evaluate candidates, almost every respondent
illustrates the percentage of organizations that rely organization uses performance appraisal data
on these sources of information. somewhat or very much. Appraisal data
identifies individuals who exhibit exemplary
performance. Past accomplishments and
behavior generally are good indicators of future
performance. However, it’s important to
remember that appraisal ratings are only as good
as the performance management system that
generates them. A 1997 study indicated that the
most successful performance management
systems require training (manager and
nonmanager) and clear accountability for the
1
people who use them.

1
Bernthal, P., Sumlin, R., Davis, P., & Rogers, R. (1997). Performance management practices survey report. 1(2).
Pittsburgh, PA: Development Dimensions International.

10
r Nearly 100 percent of the organizations r Gather information from multiple
surveyed rely on recommendations as part of the perspectives, such as supervisor, peers,
evaluation process. Input from managers and direct reports.
regarding succession candidates is valuable, but
r Encourage employee involvement.
avoiding common biases is a caution. Using
standardized recommendation forms designed to r Provide a means for assessing both
illustrate behavioral examples of a person’s current and future performance.
qualifications can help reduce bias and promote r Identify candidates’ developmental needs.
behavioral observation.
r Simulations (including assessment centers) are
r Respondent organizations infrequently use
rarely used in the succession management
paper-and-pencil ability tests, simulations, or
process, despite their ability to predict success at
psychological tests to evaluate succession
more senior levels.
candidates. Simulations can, however, be a
valuable tool because they reveal candidates’ — Seventy-six percent of the organizations
strengths and areas for development and offer an report that simulations are not part of their
3
opportunity to demonstrate skills in a controlled evaluation strategy.
environment. — However, organizations with effective
succession management plans were four
times more likely to use simulations than
Finding: Organizations with Effective
organizations with ineffective plans
Succession Management Systems Use
(29% vs. 7%).
Standardized Evaluation Tools More Often
Role plays and simulations are valuable
r Multirater instruments, such as 360-degree because they provide a standardized method for
feedback, are increasingly popular for gathering assessing critical competencies required for
a broad spectrum of information about human success in upper-level positions. These methods
2
behaviors. allow candidates to demonstrate skills not
— Overall, two-thirds of the surveyed currently required in their jobs, while giving
organizations use this type of assessment to them a realistic preview of what the target
some degree in succession management. positions entail.

— Organizations with highly effective systems


reported using these instruments more often
than companies with ineffective systems
(73% vs. 45%). These instruments help:

2
Howard, A., Byham, W., & Hauenstein, P. (1994). Multirater assessment and feedback (Monograph 23). Pittsburgh, PA:
Development Dimensions International.
3
Byham, W. (1992). The assessment center method and methodology: New applications and technologies (Monograph 7).
Pittsburgh, PA: Development Dimensions International.
11
Links to HR Systems Table 4: Closeness of the link between succession management
plan and HR systems.

Succession management often has close ties with the Very


Much
Not at Some-
All what
development and implementation of an
organization’s HR strategy. This strategy involves System % % %
forecasting staffing needs, selection and retention of Performance management 11 44 45
quality employees, personal and professional Career planning 11 55 34
development, and career planning. Ideally, Training and development 12 54 34
succession management plans integrally link to such General management 14 50 36
a series of human resource systems. Linking development programs

systems might involve using a common metric, such Recruitment and selection 16 59 25
as competencies, as a structural thread. Compensation 29 56 15
EEO and affirmative action 30 55 15
This part of the survey asked respondents to indicate
how closely their succession management plan links
to the following HR systems.

Finding: Linking Performance Management


and Career Planning Has Benefits
Performance management—Planning,
tracking, and evaluating people’s performance. Most organizations link succession

management to both performance


Career planning—Focusing on individual management and career planning systems.
development.
Linking succession management to performance
Training and development—Structuring or management and career planning holds advantages
selecting developmental programs or for the organization and succession candidates alike.
opportunities. Organizations can meet their strategic goals and
individuals can satisfy their personal aspirations.
General management development
programs—Enhancing managerial skills with Organizations benefit by:
non-training-based programs. r Increasing the likelihood of identifying and
developing the best candidates because they use
Recruitment and selection—Identifying and
objective and job-relevant assessment data.
evaluating both internal and external job
candidates for positions. r Creating long-range business plans that
incorporate the strategic development of
Compensation—Determining compensation.
internal talent.
EEO and affirmative action—Complying
r Planning career paths for high-potential
with EEO laws and meeting affirmative
individuals who can help meet future
action goals.
business needs.

12
Candidates benefit by: Finding: Recruitment-Selection Link
Ensures Qualified Candidates
r Becoming actively involved in their own career
development. More than 80 percent of organizations link

r Having both short- and long-term career goals succession management to recruitment and

selection systems.
and plans to meet them.
Job/Role competencies can serve as the link between
r Tailoring a personal development plan that
meets their particular needs and career goals. recruitment, selection, and succession management
systems. Organizations can identify critical
competencies for current jobs and also project which
Finding: Training and Development and competencies will be important for success in future
General Management Development leadership positions. This competency link allows
Programs Critical organizations to recruit and select people who have
the right skills for a particular job plus the ability to
Preparing candidates for future organizational develop competencies critical for future success.
demands by providing appropriate training and

developmental opportunities is a critical


Using the competency link allows organizations to
component of succession management. consider succession during the assessment and
hiring process. Selecting people who have the
Effective succession management incorporates plans
potential to develop important skills ensures the
to train and develop managerial talent for the future.
organization will have internal candidates qualified
Job/Role competencies can provide the link to
4 to step into leadership positions.
training and development systems.
Candidates and organizations can plan training and
developmental opportunities around the job/role Finding: Few Link EEO and Affirmative
competencies required for future positions because Action to Succession Management
competencies help organizations:
Many respondent organizations do not link
r Identify skills and abilities required for success their succession management systems to
in a specific job/role. EEO and affirmative action plans.

r Assess individuals’competencies. Nearly one-third of organizations do not link


succession management to EEO/affirmative action
r Structure training and developmental activities
plans. This is unfortunate because such a link could
for specific job levels.
minimize the adverse impact of not representing
Organizations can use formal training programs, women and minorities in managerial positions.
such as courses and seminars, to develop particular
Developing the talent of women and minorities and
competencies and challenging work assignments or
preparing them for upper-level management
job rotations to develop others. Linking succession
positions can create a diverse workforce. And tying
management to training and development ensures
succession management to EEO/affirmative action
organizations that a set of qualified candidates will
plans does just that.
be ready to fill open positions.
4
Byham, W., & Moyer, R. (1996). Using competencies to build a successful organization (Monograph 25). Pittsburgh, PA:
Development Dimensions International.

13
Finding: Link to Multiple HR Systems
Bottom-Line Impact
Improves Organizational Performance
In addition to determining the most common
characteristics of succession management, it is Linking succession management to

multiple HR systems can improve


important to understand which practices link directly
organizational performance.
to organizational success. Respondents rated their
organization’s current performance on six success Organizations experience improvements in
indicators: bottom-line indicators even when succession
management links to just a few HR systems (see
r Financial performance Table 4 for a list of systems). However, as Figure 2
r Productivity illustrates, some areas experience greater
improvements when succession management links to
r Quality of products or services
additional HR systems.
r Customer satisfaction
r When a succession management system links to
r Employee satisfaction four or more HR systems, the percentage of
organizations experiencing improvements in
r Retention of quality employees
customer and employee satisfaction increases
substantially.

Figure 2: Improvement in bottom-line indicators as a function of the number of HR system links.

75%
Customer satisfaction
43%

51%
Employee satisfaction
31%

Retention of quality 30%


employees 18%
More than three systems
Three or fewer systems
82%
Productivity
71%

Quality of products or 62%


services 52%

67%
Financial performance
69%

0% 10% 20% 30% 40% 50% 60% 70% 80% 90%


Percentage Reporting an Increase in Performance

14
r Linking succession management to a number of — Organizations that plan succession and
HR systems: develop internal talent are more likely to
— Fosters organizationwide consistency. retain high-quality employees.

— Allows organizations to more effectively


select and develop individuals for
leadership roles.
Challenges
Organizations need succession management for a
— Increases employee and customer
variety of reasons. Respondents were asked to
satisfaction because leaders have developed
choose the top three challenges that drive their need
the skills to manage and relate to both.
for a good succession management system (Table 5).
r The number of system links does not seem to
directly affect an organizations’ financial
Table 5. Challenges that drive the need for good succession
performance. Many factors contribute to a
management.
company’s overall financial performance and
have a direct impact on the bottom line, Challenges Response (%)
including variables such as changes in the Improve business results 48
market and increased competition. Therefore, it Expansion and growth 45
is not surprising that the number of system links New skill requirements to 39
satisfy business demands
does not directly affect this outcome.
Anticipated changes in skills 32
required of future leaders
Change in management 20
Finding: Covering Multiple Levels Helps structure
Retain Quality Employees
Retirement of current 20
managers
Organizations covering multiple organizational
Recent merger/acquisition 18
levels with succession management plans
Greater diversity in 18
retain quality employees.
management
r Organizations that have succession management New CEO or other leadership 15
plans for two or more levels report the most change

improvement in employee satisfaction and Increase retention 15

retention of quality employees. Immediate vacancies 12


Poor promotion/ placement 7
— Including more organizational levels in a history
succession management plan increases the
likelihood that positions in those levels will
be filled by competent leaders with the Finding: Multiple Business Demands Drive
appropriate skills and abilities to perform Need for Succession Management
effectively. r The desire to improve business results is the
— Employees are more likely to be satisfied main challenge driving the need for a good
with their jobs if they believe their leaders succession management system. Organizations
are competent. must continually strive to improve the bottom
line to survive in a competitive environment.

15
Succession management, used in conjunction and line management—all are responsible for
with other HR systems, can help organizations identifying and developing candidates. And asking
see improved business results. candidates about their career goals and aspirations
produces a better person-job fit.
r Growth and expansion are other forces driving
companies to develop good succession Organizations almost always rely on performance
management systems. As companies continue management data and recommendations to identify
to expand, the need for competent leadership candidates. Performance management systems
becomes a necessity. A solid plan to develop gather data regarding candidates’ past performance
talent ensures that individuals with the and can identify developmental needs.
appropriate skills will be able to step into vacant Recommendations based on past performance also
or newly established positions. are useful. However, using more standardized
evaluation methods distinguishes effective from
r Organizations require a flexible succession
ineffective succession management plans. In the
management system that will respond to the
near future we might see organizations increasingly
ever-changing demands a business experiences.
use multirater instruments and simulations in
The skill requirements of key positions fluctuate
making succession decisions. Gathering
with organizational and environmental changes,
information from multiple perspectives provides
and a succession management system must
valuable insights about individual strengths and
reflect those changes. Succession management
developmental areas.
must be part of a company’s strategic business
plan if it is to identify and develop people In the past organizations might not have involved
needed for the organization to achieve its HR in succession management. The survey results
future goals. suggest that this approach is not very effective.
Organizations benefit most when succession
management integrates with other HR systems and
A Look Forward strategically links to the overall business plan.
This integration allows the system to respond to
Survey results indicate that the traditional approach changing organizational needs and to contribute to
to succession management can no longer meet the the bottom line.
challenges facing businesses today. In the not so
distant past succession management typically was a Organizations realize the need for effective
secret process involving only top executives; succession management systems and are adapting
succession candidates rarely knew they were being their approach to identifying and developing
considered. individuals for leadership roles. Succession
management is a significant part of organizations’
The new approach to succession management, which efforts to develop their internal talent, meet
involves all levels of the organization and organizational needs, and improve business results.
incorporates both planning and development, better
equips organizations to meet the changing demands
of the business environment. This new process Center for Applied Behavioral Research
focuses on meeting the needs of both the
organization and the individuals involved in Sheila M. Rioux, Ph.D., Research Consultant
succession management. The CEO, top executives, Paul Bernthal, Ph.D., Manager

16
appendix
Respondent Comments
The following is a sampling of survey respondents’ answers and comments when asked, What practice has been
most valuable in your organization’s approach to succession planning? The responses and comments are
grouped into four general categories that parallel the report’s structure.

Organizational Support
r Reliance on HR support and counsel. r Measures and considers employee career wishes and
aspirations.
r Annual discussions about succession.
r The identifying of young, progressive talent.
r Senior management/management involved in process
of identifying competencies/key requirements for r Estimation of potential through self-assessment or
manager and above positions. appraisal system.
r Involving line management in process design,
implementation, and execution.
Development Process
r Formal reviews integrated with business and strategic
planning process. r Expose employees to multiple situations, tasks,
projects to build their competencies.
r Alignment with company strategy, competencies, and
values. r Personal development plans.
r The involvement, support, and expectations of senior r Individual development/Encouragement by manager.
management. r Involvement of a mentoring program.
r Involving the CEO. r Line management responsible for development.
r Involvement of line management. r A process for following through on development
r Links to business strategy. plans.
r Linking it to the competency profile of our leader r Coaching and mentoring.
incumbents is of major importance. r Identifying cross-functional developmental
assignments.

Identifying Candidates r Establishing on-the-job developmental assignments.


r Focusing on well thought-out development plans.
r Identifying needs for multiple candidates for each
senior management position.
r Ongoing formal and informal assessments of service Other Practices
and upper middle leaders.
r Identify real needs in next three to five years.
r Using self-assessment or performance appraisals.
r Calibrating performance and potential assessment
r Using competencies to define readiness. codes across departments for consistency.
r Internal candidates’ assessments based on r Identification of critical jobs and critical employees.
competencies, interpersonal skills, managerial skills,
motivational fit, and performance results. r Development of talent funnel and potential rating
grid. Identifies gaps in various level of feeder
r Rating of potential combined with specific position groups.
recommendations.
r 360 (degree) review and feedback.
r Assessments of competency, readiness, and potential
r Developing pools of high-potential managers and
among a large group of employees in the same
division—clear career path. addressing development based on their level of
achievement of competencies.
r Identifying high potentials and high-performing
women and minorities.
17
Respondent Profile

Table 1: Regions Table 4: Industry Revenue


Region/Country Percent 1997 Revenue Percent
Asia & Pacific Rim 3 More than $1 billion 45
Latin & South 4 $500 million to $1 billion 17
America
$100 million to $499 23
Canada 7 million
Europe 5 $50 million to $99 million 6
United States 82 $1 million to $49 million 8
Central (31) Less than $1 million 1
Northeast (21)
South (20)
West (10)
Table 5: Employee Category
Mean Median Minimum Maximum
Hourly/Technical 48 50 0 93
Table 2: Contact’s Position Technical/Professional 30 25 0 87
Position Percent Supervisory/Managerial 16 15 0 80
Human resource director 43 Other 8 0 0 99
or manager
Human resource vice 27
president
Table 6: Number of Employees
Other 30
Mean Median Minimum Maximum
Number of employees 2,239 760 15 97,000
Table 3: Industry at respondent’s
location
Industry Type Percent Number of employees 18,581 6,000 80 330,000
at all locations
Manufacturing 42
Services 25
Finance/Insurance/Real Estate 14
Transportation/Communication/Utilities 12
Wholesale/Retail Trade 4
Mining and Construction 2
Other 1

Note: All percentages might not add up to 100% because of rounding.

18
Respondent Organizations
ABB Power T&D Company, Inc. Central Parking System, Inc.
Acceptance Insurance Companies Inc. Cessna Aircraft Company
Ace Cash Express Charter Communications
Advocate Health Care Chase Manhattan Bank
Akron General Medical Center Cigarrera La Moderna, S.A. de C.V.
Alfa Corporativo, S.A. de C.V. Clarian Health
Alliance Data Systems Cleveland-Cliffs, Inc.
Allied Tube and Conduit Cole Taylor Bank
Allient Foods Colgate-Palmolive Company
Alltel Corporation Columbia Gas Transmission Corporation
Alumax Primary Aluminum Corporation Comdata Corporation
American Multi-Cinema, Inc. Commerce Bank of Kansas City
American National Can, Pechiney Group CompUSA, Inc.
AmeriGas Propane, Inc. The Consumers’ Gas Company Limited
Ameritech Information Industry Services CPI Corporation
Amgen, Inc. Cummins Engine Company Ltd. (U.K.)
AMR Corporation Cytec Industries, Inc.
Anglian Water plc Dahlberg, Inc.
Anheuser-Busch Companies Daymon Associates, Inc.
Applied Industrial Technologies The Dexter Corporation
Arvin Industries, Inc. DHL Airways, Inc.
Ball Corporation Dial Corporation
Ball Plastic Container Documentum, Inc.
Baptist Health Systems of South Florida Dr. Pepper/Seven Up, Inc.
Baptist/St. Vincent’s Health System Duke Realty Investments, Inc.
Barrick Chile Dun & Bradstreet
BC Biomedical Laboratories Ltd. Dun & Bradstreet Canada
BC Tel East Kentucky Power Cooperative, Inc.
BDO Seidman, LLP E.B. Eddy Forest Products Ltd.
Bellagio Hotel Casino Edify Corporation
Beth Israel Deaconess Medical Center Edison International
Bethphage Great Britain Eli Lilly and Company
Biogen, Inc. Eli Lilly Canada Inc.
BJC Health System Enmax
Blue Cross and Blue Shield of Illinois Federal Reserve Bank of Dallas
Blue Cross and Blue Shield of North Dakota Federal Reserve Bank of Kansas City
Blue Cross and Blue Shield of South Carolina First Western Bancorp, Inc.
BMW AG Fluor Corporation
The Boeing Company Fluor Daniel, Inc.
Borg Warner Automotive, D.T.P. Fluor Daniel, Inc. (Philippines)
Bristol-Myers Squibb (Philippines), Inc. Fort James Corporation
British Aerospace Airbus Franco, Inc.
Brown-Forman Corporation The Fresh Market, Inc.
Brunner Mond (UK) Ltd. Frito-Lay Europe, Africa, Middle-East
Canon U.S.A., Inc. GATX Logistics, Inc.
Carvajal S.A. GATX-Terminals
Caterpillar Inc. GenAmerica
Celanese Mexicana, S.A. de C.V. General Accident (Canada) Ltd.

19
General Accident Group (Canada) Ltd. Maytag Corporation
General Motors North American Operations The McGraw Hill Companies
Georgia Baptist Health Care System Mercedes-Benz U.S. International, Inc.
Glaxo Wellcome Philippines Inc. Middle Tennessee Medical Center
GPU Nuclear Monsanto
Great Clips, Inc. Monsanto Colombiana Inc.
Grupo Gamesa S.A. de C.V. Mortgage Guaranty Insurance Corporation
Grupo IMSA, S.A. de C.V. Nabisco
Gulf States Paper Corporation National Broadcasting Company Inc.
Hamilton Health Sciences Corporation National City
Hard Rock Café National Police Training
The Harleysville Insurance Companies National Steel Corporation
Harnischfeger Industries, Inc. Nationsbank
Harris Corporation, RF Communications Division Navistar Financial Corporation
Harris Trust and Savings Bank NCH Healthcare System
Health Care Corporation of St. John’s Neorx Corporation
Heinz U.S.A./Division of H.J. Heinz Company Nestle Philippines, Inc.
Hexcel Corporation New York State Electric & Gas
Hoechst Celanese-Trevira Noranda Aluminum Inc.
Hoffmann-La Roche Inc. Nordson Corporation
Holnam, Inc. The Northern Trust Company
The Hon Company Novartis Corporation
Hotel Inter-Continental Toronto Occidental Chemical Corporation
Hughes Defense Communications Oracle Deutschland GmbH
Hunter Douglas Window Fashions, Inc. Ottawa Civic Hospital
IMC Global Operations, Inc. Pacific Hospital of Long Beach
Ingham Intermediate School District Palmetto Health Alliance
Innovex, Inc. Parker Hannifin GmbH
In-Sink-Erator, Division of Emerson Electronic Payless Shoe Source, Inc.
Internacional de Ceramica, S.A. de C.V. Pecten Poliesters
Isolyser Company, Inc. Pennsylvania Power and Light Company
J&H/KVI Performance Inc.
Janssen-Ortho Inc. PGA Tour Inc.
The John Galt Company Philips Semiconductors Philippines, Inc.
Johnson & Johnson Pizza Hut, Inc.
Johnson & Johnson Medical Inc. Porsche Cars North America, Inc.
Jollibee Foods Corporation Portland General Electric–Enron
Journal Communications PPG Industries, Inc.
Kimberly-Clark Forest Products Inc. Praxair Inc.
Labatt Brewing Company Limited Praxair Mexico, S.A. de C.V.
Laidlaw Inc. Premera-Blue Cross of Washington & Alaska
Lawson Mardon Wheaton, Inc. Price Waterhouse
Lennox Industries Inc. Promus Hotel Corporation
Lesco, Inc. Qualcomm
Lexis-Nexis Reader’s Digest Association (Canada) Ltd.
Lilly Industries, Inc. Red Lobster Restaurants
Magnifique Parfumes and Cosmetics, Inc. dba Research Triangle Institute
Perfumania Reynolds & Reynolds
Mastech Corporation Roche Diagnostics-Boehringer Mannheim
Maverick Transportation, Inc. Roche-Syntex Humacao PR

20
Rosemount, Inc. Unisys (UK) Ltd.
Royal & SunAlliance United Parcel Service of America Inc.
Royal Bank of Scotland plc U.S. Airways, Inc.
Rubbermaid Incorporated U.S. Bancorp
Rush Prudential Health Plans Universal Care
S.B. Hunt Transport Services, Inc. University of Central Arkansas
The St. Paul Companies, Inc. TRW Systems and Information Technology Group
Samsung Austin Semiconductor USAA
San Francisco Chronicle Valvoline Company
Sandvik Choromant Viacom Inc.
Sandvik Steel Company Vicorp Restaurants, Inc.
Santa Rosa Health Care Victoria’s Secret Bath and Fragrance
Sara Lee Printables Operations Mexico Wabash National Corporation
Security Bank Holding Company Walter Industries, Inc.
The Selmer Company, Inc. The Wella Corporation
SGL Carbon AG Wells Lamont
SGS Philippines, Inc. The Westin Cincinnati
Shands at AGH Weyerhaeuser Company
Shangri-La Hotels and Resorts Whirlpool Corporation
Siemens Business Communication Systems, Inc. William Wilson and Associates
Sisters of Mercy Health System Wilsonart International Inc.
Slater Steels Corporation The Wood Company
Southdown, Inc. Xerox GmbH
SouthTrust Bank of Northeast Florida, N.A. York County Hospital
Standard Commercial Corporation
The Standard Products Company
The Standard Register Group
Star Tribune
Steelcase North America
Stiefel Laboratories Inc.
Strategic Management Resources
Sulzer Bingham Pumps, Inc.
Sundstrand Corporation
SWIFT (Society for Worldwide Interbank Financial
Telecommunications)
TCF Financial Corporation
Technicolor
Teledyne Specialty Equipment
Tenet Health System
Terre Haute First National Bank
Tower Automotive Inc.
Toyota Motor Manufacturing North America, Inc.
The Trane Company; Worldwide Applied
Systems Group
Transamerica Corporation
Transamerica Distribution Finance
Union Camp
Union Carbide Corporation
Union Federal Savings Bank

Note: Because of response deadlines and incomplete data, not all respondent data was used for this report.

21
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