New Twists in Succession Planning

Although grooming and choosing future leaders is one of the most ancient of human practices, some top-notch corporations are adding modern twists via new succession planning processes. An HRI survey conducted in late 1999 found that, among the firms with formal succession plans, many had implemented some type of innovation in recent years.

One innovation is the move away from traditional, linear forms of succession planning. One respondent wrote, “Our focus is on identifying high-potential people and accelerating their development for any number of jobs. There is lots of cross-departmental and cross- subsidiary movement in an attempt to keep the approved candidates challenged.” Another noted, “We do not do position back-up lists. We create ‘Strategic Talent Pools’ from which successors can be pulled for a variety of positions.”

Information technology is also helping to change the way succession planning is performed. In some cases, all processing and data consolidation are conducted via a Web-based tool. This type of system reportedly allows managers easier access to key data. One HR professional stated that “online plans can be updated and accessed in meetings.”

Some organizations are also trying to make selection criteria more rigorous. A survey participant wrote that not only are data stored and retrieved from a central Web site but formal metrics for evaluation are used in a “highly structured and formalized process.” Another company has created a matrix that allows comparisons of ratings from one year to the next, and one uses a test to determine management potential. Yet another firm provides an “Experience Profile” tool that employees and managers “can use to identify needed work experiences to increase competitiveness when future positions arise.”

Some firms are forging stronger links between management development and succession planning. In one instance, a company has decided to operate the two programs in tandem. The succession planning program projects five and ten years into the future and identifies the top three candidates for manager-level and higher positions. A second program identifies employees believed to have potential at the level of vice-president or higher; development plans are created to help these targeted employees realize their potential.

Further innovations are likely in the near future. About half of the surveyed organizations with formal succession planning processes intend to make changes in them over the next several years. Such changes may be an indication of the growing importance of succession planning. HRI’s recently published survey on the role and structure of HR found that HR professionals ranked succession management as 14th in importance in a field of 45 current practices and programs in 1999 – but it zoomed to 4th place when participants predicted the most important issue five years in the future.

Of course, there isn’t a single “right way” to perform succession planning and executive development. The best strategy will depend on such factors as corporate culture, type of business, the speed at which an industry is changing, etc. However, some companies have become known for their ability to recruit, develop and promote effective leaders over the long haul. Fortune magazine notes that General Electric and consulting firm McKinsey have produced “an astonishing number of CEOs of other major companies.” It is an interesting pairing because, whereas McKinsey tends to recruit the top graduates of ultra-exclusive schools worldwide, GE is proudly anti-elitist, being a place where “a fancy degree sparks at least as much suspicion as admiration,” reports Fortune.

Yet, what these firms have in common is more important than what separates them. "Both companies are extreme meritocracies," said Noel Tichy, who used to run GE's Crotonville management center and is coauthor of The Leadership Engine. Not only do they recruit top people, they both devote a great deal of time and money to formal education and training. Moreover, their managers undergo intensive performance evaluations. “Deep, honest, frequent performance reviews are difficult, even painful, which is why most companies don't do them,” reports Fortune. “But they are clearly one of the most significant reasons GE and McKinsey produce so many outstanding managers.” Top leadership is deeply involved in the evaluation process in both firms, and both organizations expose future executives to a wide array of different business challenges.