Emerging Best Practices and Trends in Succession Planning

Overview Succession Planning as a critical business process Trends influencing Succession Planning practices Emerging Best Practices in Succession Planning Well-executed succession planning pays off in public perception as well. Ninety-one percent of the “Most Admired Companies” (on a list compiled by Fortune magazine) have a CEO succession plan that is reviewed annually – if not more frequently – compared with 65% of organizations that did not make the list, and more than 80% have established plans for emergency replacement of other top officers (Hay Group, 2007). Encouragingly, a majority (73.5%) of organizations have a formal succession plan in place, with 53.9% reporting that the plan has been in place for over two years (Human Resource Institute, 2006). In addition, 28.1% of the 89 organizations polled by the Human Resource Institute (now the Institute for Corporate Productivity) in 2006 reported that they integrate succession planning with other business processes (Human Resource Institute, 2006). Implementing a good succession planning process is becoming a priority for most companies. According to the 2007 Corporate Issues Survey of about 1,090 training and HR leaders and line managers conducted by The Ken Blanchard Companies, 38% of upper management identifies succession planning as a top challenge in 2007 (The Ken Blanchard Companies, 2007). In addition, the results of a 2007 Deloitte survey of 531 HR and non-HR executives found that 76.1% identify “leadership development and pipeline” as one of the most critical people management issues (Deloitte Development LLC, 2007). As a result, organizations are beefing up retention efforts, learning and development initiatives, and succession planning – strategies identified as having the greatest positive impact by survey participants from the 2006-2007 SHRM Workplace Forecast (Society for Human Resource Management, 2006). But in spite of the data, many organizations still do not have an effective planning process in place. When DDI asked 385 leaders from around the globe how their organizations fared at managing leadership transitions, only 17% to 36% said their organizations are doing well on the following five tasks: “developing leaders before their next promotion, making decisions about promotions, supporting new leaders to help them cope, setting clear performance expectations, identifying high flyers” (Paese & Wellins, 2006).

More Details on this Topic This presentation was done with the help of an archived webcasts from Via People and help with i4cp. For sample scorecards and examples please visit the archive of the viapeople webcast on HR.com

What is Succession Planning? Succession Planning can be defined as a purposeful and systematic effort made by an organization to ensure leadership continuity, retain and develop knowledge and intellectual capital for the future, and encourage individual employee growth and development.

Why is Succession Planning such a “Hot Topic”? Board concerns and directives Increased costs associated with external searches Increased turnover People who had been regarded as successors for key positions left by surprise High performers are leaving Managers complain that they have no one ready to fill vacancies Employees complain that promotion decisions are made unfairly Insufficient numbers of women and/minorities at senior levels

Trends Impacting Succession Planning Shifting demographics Shortfall in the number of future leaders Increase in attrition in executive level positions Economic conditions resulting in massive downsizing and increasingly flat and dynamic organizational structures. Reduced loyalty among employees despite focus on employee engagement and involvement

Trends Impacting Succession Planning, contd. Recognition on the part of senior executives of the importance of values, competencies, intellectual capital, and leadership Increase in the complexity of executive positions Financial market and employee expectations Globalization Technology

Percentage of Organizations with a Succession Plan 2006 Succession Planning Survey Report Survey of 385 HR professionals Source: Society for Human Resource Management, 2006

Global CEO Succession Rates, 2005 CEO Succession 2005: The Crest of the Wave Study of the world’s 2,500 largest publicly traded companies Source: Booz Allen Hamilton, 2006

Study of the world’s 2,500 largest publicly traded companies CEO Performance-Related Turnover, 2005 (as a percentage of all departing CEOs) (“Global CEO Turnover,” Booz Allen Hamilton, 2006). Study of the world’s 2,500 largest publicly traded companies Source: Booz Allen Hamilton, 2006

HR Professionals’ Estimates of Readiness for Sudden Succession 2006 Succession Planning Survey Report Survey of 385 HR professionals Source: Society for Human Resource Management, 2006

HR Responsibilities in the Succession Process Survey of 385 HR professionals Source: Society for Human Resource Management, 2006

Incidence of Formal Succession Plans (HRI) Succession Planning Practitioner Consensus Survey. 86 organizations participated in the Succession Planning Practitioner Consensus Survey Source: Human Resource Institute, 2006

Succession Planning Data Collection About half (51.7%) of organizations have a system in place to gather information for their succession plans. (HRI) Succession Planning Practitioner Consensus Survey. 86 organizations participated in the Succession Planning Practitioner Consensus Survey Source: Human Resource Institute, 2006

Study of the world’s 2,500 largest publicly traded companies Succession Rates by Industry, Across the Seven Years of 1995, 1998, 2000-2004 Source: Booz Allen Hamilton (strategy+business [Lucier, et al.], 2005, p. 7) Study of the world’s 2,500 largest publicly traded companies Source: Booz Allen Hamilton, 2005

Study of the world’s 2,500 largest publicly traded companies Succession Rates by Industry, Across the Seven Years of 1995, 1998, 2000-2004 (continued) Source: Booz Allen Hamilton (strategy+business [Lucier, et al.], 2005, p. 7) Study of the world’s 2,500 largest publicly traded companies Source: Booz Allen Hamilton, 2005

Identifying High-Potential Talent A majority of organizations have a process in place for identifying high-potential talent. (High Potential Talent Practitioner Consensus Survey [Human Resource Institute], September 2005) Survey of 96 organizations Source: Human Resource Institute, 2005

Identifying High-Potential Talent Processes, by Length of Existence For many of the organizations that have a process for identifying high-potential talent, this is a relatively recent initiative. (High Potential Talent Practitioner Consensus Survey [Human Resource Institute], September 2005) Survey of 96 organizations Source: Human Resource Institute, 2005

Identifying High-Potential Talent Processes, by Position Among organizations that have an existing process for identifying high-potential talent, it is rare to examine all levels of employees. (High Potential Talent Practitioner Consensus Survey [Human Resource Institute], September 2005) Survey of 96 organizations Source: Human Resource Institute, 2005

Emerging Best Practices Top management involvement Targeted processes to focus on clearly defined, specific goals Comprehensive assessment programs based upon competencies Creation of talent databases incorporating performance, assessment, demographic, education, experience, and career interests Identification of future talent requirements Structured and individualized development programs

Best Practice 1: Top Management Involvement Communicates importance of planning for the future Allocation of adequate resources Modeling of effective coaching and development Key development resource to high potentials

Best Practice 2: Targeted Processes Evolutionary versus revolutionary Clearly defined set of goals Meaningful executive reviews Eliminate administrative burdens Using technology to facilitate data gathering, tracking and decision making

Best Practice 3: Comprehensive Assessment of Talent Behaviorally defined competencies Learning agility and derailment factors Defining performance and potential Early identification of talent Multi-source methods On-going feedback processes Continuous re-assessment Test learning agility, development of competence and performance

Best Practice 4: Creation of Talent Databases Integration of data from multiple systems, including HRIS, Recruitment, Learning.. Etc.. Definition of missing talent data elements Collection of missing talent data Education, competencies, experiences, career interests, mobility Reporting to facilitate decision making

Best Practice 5: Identification of Future Talent Requirements Competency, skill and experience requirements for critical positions Profiling the development content of key jobs P & L accountability Forming/managing external alliances Detection of current and future talent gaps Targeted career pathing and development Sourcing and recruitment plans to secure new external talent

Best Practice 6: Structured and Individualized Development Planning Formal, structured development plans Targeted, individual activities with emphasis on experience-based learning Transitional coaching during stretch assignments Reporting and tracking of progress and outcomes Accountability for performance

Continuing Challenges Ineffective balance between identification and development Identifying successors/hi-po’s not in line with most organizational cultures “Executive cloning” Poor linkage to business strategy Overemphasis on replacement planning Lack of top management support Poor business unit buy in Lack of organization-wide talent database

A Special Thanks to I4cp and Via People for much of the material For More Information: www.hr.com Debbie McGrath 905 727 1340 x 104 dmcgrath@hr.com A Special Thanks to I4cp and Via People for much of the material

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