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Transcript of Succession Management Practices Full Report Ddi
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
Benchmark Group
Because Development Dimensions International(DDI) understands how difficult it is to keep up withthe changing face of human resources, we keep trackof new trends in order to keep our clients as well asthe industry in general informed. Our clients, inparticular, frequently ask us for benchmarking dataand thought leadership on issues such as leaderdevelopment, advanced learning technology,performance enhancement, workforce effectiveness,selection, promotion, and succession management.
In addition to our established methods for trackingsuch trends, we began the DDI HR BenchmarkGroup. The group is an alliance of organizationscommitted to sharing information and benchmarkingcurrent HR practices. These organizations, aninternational mix of DDI clients and non-clients,have agreed to respond to periodic surveys in orderto provide current information in various areas ofhuman resources. The organizations represent ageographical and industry cross-section.
Participation allows organizations in this alliance toprovide current data through our surveys, receive theresults, and help us choose the survey topics. Theapproach is systematic and easy, and response andinterest have been outstanding.
Other Benchmark Reports
Volume 1: 1997�1998
Issue 1—A Survey of Trust in the Workplace
Issue 2—Performance Management PracticesSurvey Report
Issue 3—Workforce Development PracticesSurvey Report
Issue 4—Job/Role Competency PracticesSurvey Report
Special Reports
Global High-Performance Work Practices:A Benchmarking Study (1998)
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: [email protected]
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
1
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
The objectives of this study were to:
r Investigate how organizations make successiondecisions.
r Determine which characteristics of successionmanagement plans affect organizationaleffectiveness.
r Determine how succession managementapproaches affect organizational outcomes.
The report, based on survey results from more than260 members of the DDI HR Benchmark Group,addressed the following areas:
r General succession management practices.
r Characteristics of succession management plans.
r Links between succession management andorganizational systems.
r Methods of evaluating candidates.
r Bottom-line impact of succession managementpractices.
r Challenges driving the need for good successionmanagement.
System Characteristics
for Success
Survey results revealed that systematic successionmanagement plans are relatively new—three-quarters of the organizations with a formal plan havebeen using them for five or fewer years. However,the survey also revealed that an organization’sapproach to succession management—systematic ornot—influences the perception of the system’seffectiveness.
2
Findings Overview
Overall System Qualities
r Organizational support. The majority ofsuccession management programs:
— Involve the CEO (88%).
— Have the visible support of seniormanagement (93%).
— Link to business strategy planning (88%).
But almost half the respondents do not shareinformation, such as nominations, performance,and standings, with the candidates involved inthe succession management process.
r Identifying candidates. When makingsuccession decisions, 94 percent oforganizations consider employees’ career wishesand aspirations. Most organizations (88%) alsouse objective assessment data regarding currentperformance and readiness/potential.
r Development process. Most organizations usedevelopmental assignments (91%) and formaltraining programs (87%) as part of successioncandidates’ development. Mentoring/Coachingprograms are used less frequently (68%).
r Other practices. Almost half the organizations(44%) do not evaluate or compensate managersand executives based on their efforts to developdirect reports. Fewer (37%) rely on acomputerized system to plan and track progressof the succession management system.
Best Practices
r Organizations with highly effective successionmanagement systems are more likely to:
— Involve the CEO.
— Have the support of senior management.
— Involve line management in identifyingcandidates.
— Use developmental assignments.
— Link succession management plans tobusiness strategies.
These organizations report using the abovecharacteristics over 50 percent more thanorganizations with ineffective systems.
Evaluating Candidates
Findings Overview
On average, organizations rely on two sources ofdata when evaluating candidates for succession.
r The top two data sources for evaluatingcandidates are recommendations (97%) andperformance management data (95%).
r Only 24% of the respondent organizations useability testing and simulations/role plays asevaluation tools in succession management.
r Organizations with the most effective successionmanagement systems are more likely to usemultirater instruments (i.e., 360-degreefeedback) and simulations (including assessmentcenters) to evaluate succession candidates.
Links to HR Systems
Findings Overview
Linking succession management systems to a seriesof HR systems might involve using a commonmetric, such as competencies, to provide a basis forstructuring the systems.
r Managing work and careers. Nearly90 percent of organizations link successionmanagement systems to both performancemanagement and career planning.
r Training and development. More than85 percent of organizations also link successionmanagement to training and generalmanagement development programs.
r Compensation and EEO. Almost one-third ofrespondent organizations do not link successionmanagement systems to compensation, EEO, oraffirmative action.
3
Value and Impact
Findings Overview
r Linking succession management to multipleHR systems can improve organizationalperformance. Organizations linking successionmanagement to more than three HR systemsexperience greater improvement in customer andemployee satisfaction. For example,75 percent of the organizations with more thanthree system links report improved customersatisfaction, compared to only 43 percent oforganizations with links to three or fewersystems.
r Plans that cover multiple organizationallevels improve retention of quality employees.Organizations that have succession managementplans for two or more levels report the mostimprovement in employee satisfaction andretention of quality employees. Respondentsperceive plans that cover four or more levels ashighly effective.
Challenges
Findings Overview
Respondents were asked to choose the top threechallenges that drive their need for good successionmanagement.
r Business results and company growth. Nearlyhalf the organizations surveyed identify thedesire to improve business results (48%) andcompany expansion/growth (45%) as the mainchallenges driving the need for good successionmanagement.
r New skill requirements. Approximatelyone-third of the organizations report that futureleaders will require new skills to meet thechanging demands of business. A solidsuccession management plan helps organizationsprepare potential leaders for these new skillrequirements.
Participant Profile
The report is based on responses from more than 260organizations.
r The typical survey respondent is a humanresource director or manager (43%) or vicepresident (27%).
r Most (82%) respondents are from the UnitedStates; 12 percent are from Canada and Europe.
r The sample largely comprises manufacturingorganizations (42%). Service organizationsrepresented one-quarter of the sample;finance/insurance/real estate, 14 percent; andorganizations in transportation/communication/utilities, 12 percent.
r Forty-five percent of participating organizationsreported 1997 revenue in excess of $1 billion.
r Employees of responding organizations weremostly hourly (mean = 48 percent) andtechnical/professional (mean = 30 percent).
r Company size ranged from 80 to 330,000employees with a median of 6,000 employees.
A Look Forward
Survey results indicate that the traditional approachto succession management can no longer meet thechallenges facing businesses today. In the not sodistant past, succession management typically was a“secret” process involving only top executives;succession candidates rarely knew they were beingconsidered.
The new approach to succession management, whichinvolves all levels of the organization andincorporates both planning and development, betterequips organizations to meet the changing demandsof the business environment. This new processfocuses on meeting the needs of both theorganization and the individuals involved insuccession management. The CEO, top executives,and line management—all are responsible for
4
identifying and developing candidates. And, askingcandidates about their career goals and aspirationsproduces a better person-job fit.
Organizations almost always rely on performancemanagement data and recommendations to identifycandidates. Performance management systemsgather data regarding candidates’ past performanceand can identify developmental needs.Recommendations based on past performance alsoare useful. However, using more standardizedevaluation methods distinguishes effective fromineffective succession management plans. In thenear future we might see organizations increasinglyuse multirater instruments and simulations in themaking succession decisions. Gathering informationfrom multiple perspectives provides valuableinsights about individual strengths anddevelopmental areas.
In the past organizations might not have involvedHR in succession management. The survey resultssuggest that this approach is not very effective.Organizations benefit most when successionmanagement integrates with other HR systems andstrategically links to the overall business plan.This integration allows the system to respond tochanging organizational needs and to contribute tothe bottom line.
Organizations realize the need for effectivesuccession management systems and areadapting their approach to identifying anddeveloping individuals for leadership roles.Succession management is a significant part oforganizations’ efforts to develop their internaltalent, meet organizational needs, and improvebusiness results.
Respondent Comments
The following is a sampling of survey respondents’answers and comments when asked, What practicehas been most valuable in your organization’sapproach to succession planning?
Organizational Support
r Reliance on HR support and counsel.
r Senior management/management involved inprocess of identifying competencies/keyrequirements for manager and above positions.
r Involving line management in process design,implementation, and execution.
r Alignment with company strategy,competencies, and values.
r Involving the CEO.
Identifying Candidates
r Identifying needs for multiple candidates foreach senior management position.
r Using competencies to define readiness.
r Internal candidates’ assessments based oncompetencies, interpersonal skills, managerialskills, motivational fit, and performance results.
r Rating of potential combined with specificposition recommendations.
r Identifying high potentials and high-performingwomen and minorities.
Development Process
r Expose employees to multiple situations, tasks,projects to build their competencies.
r Individual development/Encouragement bymanager.
r Coaching and mentoring.
r Identifying cross-functional developmentalassignments.
r Establishing on-the-job developmentalassignments.
Other Practices
r Identify real needs in next three to five years.
r Calibrating performance and potentialassessment codes across departments forconsistency.
r 360 (degree) review and feedback.
5
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
The objectives of this study were to:
r Investigate how organizations make successiondecisions.
r Determine which characteristics of successionmanagement plans affect organizationaleffectiveness.
r Determine how succession managementapproaches affect organizational outcomes.
The members of the DDI HR Benchmark Groupwho responded to the survey provided informationabout the following issues:
r General succession management practices.
r Characteristics of succession management plans.
r Links between succession management andorganizational systems.
r Methods of evaluating candidates.
r Bottom-line impact of succession managementpractices.
r Challenges driving the need for good successionmanagement.
Definition
The term succession management refers to asystematic process for identifying and developingcandidates for leadership or management positions.The basic goals of succession management are to:
r Identify critical management positions withinthe organization.
r Determine future vacancies for those positions.
r Earmark people who would potentially fillthose vacancies.
r Develop succession candidates, usingapproaches such as training programs,mentoring, and challenging job opportunities.
Organizations can meet these goals and makesuccession decisions in many ways. This reportdiscusses various approaches to successionmanagement and identifies key characteristicscommon among highly effective systems.
6
General Profile
The survey asked organizations to provide generalinformation about their current approach to makingsuccession decisions. Specifically, the surveyaddressed the following areas:
1. Percentage of organizations with asuccession management system.
r A clear majority (61%) have a systematicprocess for making succession decisions.
2. Levels covered by a succession managementplan in organizations with a systematic processfor making succession decisions.
r Succession management plans coverapproximately 42 percent of managementand leadership jobs.
r Higher-level positions (CEO/functionalmanagers) are more likely to be covered bysuccession management plans than lower-level positions (frontline). (See Table 1.)
Table 1: Percentage of organizations with a clearly definedplan for making succession decisions at various levels.
Organization LevelSuccession Management
Plan in Place (%)
Top-level managers (CEO,CFO, COO)
80
Multidepartment or functionmanagers (managers ofmanagers)
85
Department, function, orproject managers (manager ofsupervisors)
53
First-level function supervisors(team leaders)
16
Individual contributors(professionals, frontline)
12
3. Process for identifying internal candidates.
r Seventy-one percent of the organizationssurveyed identify an internal candidate(s)for a position before it becomes vacant.
r Of those organizations, 81 percentidentify a pool of candidates as ready to fillthe position.
r Sixty percent of the organizations indicatethat a pool of two or three candidates wouldbe ready and available to step into a topmanagement position immediately.
4. Length of time organizations used a systematicprocess for making succession decisions.
r Systematic succession management plansare relatively new—three-quarters of theorganizations with a formal successionmanagement plan have been using it for fiveor fewer years.
5. Perceived effectiveness of successionmanagement efforts.
r Overall, organizations perceive theirapproach to making succession decisions asmoderately effective. On a 1–10 scale(10 being extremely effective) half therespondents rate their approach at 5 or less.
r When filling top management positionsinternally, organizations with a successionmanagement plan estimate that 71 percent ofthe people stay in the positions and aresuccessful.
r Respondents also indicate that, if given thechance, their organizations would reevaluateand rehire an average of 62 percent of theirleaders and managers.
7
6. Projected need for future successionmanagement systems.
r These organizations estimate that 21 percentof top management and 24 percent of middlemanagement positions will be vacant in thenext five years because of retirement orother reasons.
r More than half (52%) of the sample indicatethat within one or two years, theirorganizations plan to implement majorchanges in their approach to makingsuccession decisions.
Based on these findings, it is apparent that mostorganizations perceive a need for improvement insuccession management practices.
System Qualities
Succession management plans have many uniquefeatures or characteristics. For this reason thesurvey asked respondents to rate the degree to whichdifferent qualities/characteristics describe theirorganizations’ approach to succession management.Table 2 provides a breakdown of response ratings.The characteristics are grouped into four generalcategories: organizational support, identifyingcandidates, development process, and otherpractices.
Table 2: Qualities/Characteristics of succession management plans.
Not atAll
Some-what
VeryMuch
Organizational Support % % %
Relies on HR staff to providefunctional support and counsel.
5 34 61
Is visibly supported by seniormanagement.
7 37 56
Involves the CEO (or mostsenior leader).
12 23 65
Links to business strategyplanning.
12 50 38
Involves line management toidentify and/or developcandidates.
12 43 45
Shares ownership/responsibilityacross all levels of theorganization.
25 50 25
Openly shares information(e.g., nomination, performance,standings) with successioncandidates.
42 44 14
Identifying Candidates % % %
Measures or considers employeecareer wishes and aspirations.
6 57 37
Uses objective assessmentdata regarding employees’current performance andreadiness/potential.
12 50 38
Lists well-defined requirementsand competencies for positionsunder consideration.
18 55 27
Development Process % % %
Includes developmentalassignments.
9 55 36
Uses formal training programs. 13 58 29
Contains a time frame forachieving planned actions.
23 53 24
Uses university programs. 24 60 16
Involves a mentoring/coachingprogram.
32 58 10
Other Practices % % %
Changes in response to changingstrategic business plans.
13 51 36
Relies on a computerized systemto plan/track progress.
63 25 12
Evaluates/Compensates managersand executives based on theirefforts to develop direct reports.
44 51 5
8
Organizational support. CEOs are involved in themajority (88%) of succession managementprograms, and nearly all (93%) are visibly supportedby senior management. This support andcommitment from the CEO and top managementgive succession management a sense of urgency andimportance that filters down to line management;they are critical to the plan’s success.
A large percentage of the organizations also linksuccession management to business strategies andshare the ownership/responsibility of plans across alllevels of the organization. This strategic link allowsthe plan to reflect important organizational prioritiesand changing business needs.
However, almost half the organizations report thatthey do not openly share nomination, performance,and standings information with successioncandidates. Communicating this information canengender organizationwide support for the plan,facilitating its integration with the overall strategicplanning process.
Identifying candidates. Most organizations look atemployees’ career aspirations as well as objectiveassessment data when identifying and/or developingcandidates. Many also acknowledge the merit ofperson-job fit. It seems they realize the importanceof considering people who not only have thepotential to perform in the targeted positions, butalso aspire to be in those positions. A successionmanagement plan that involves candidates in theprocess meets organizational and individual needsmore effectively.
In addition, succession management plans that usecompetencies as a common metric alloworganizations to identify internal talent andfocus on areas for development. Therefore, it isimportant to list the competencies required for thetarget positions.
Development process. Effective successionmanagement also requires a strategy for developingsuccession candidates. Most successionmanagement plans provide candidates withdevelopmental assignments and formal training.
r Developmental assignments allow candidates tolearn from challenging job experiences, such asjob rotations or task forces. Providingcandidates with numerous and variedopportunities helps them develop the skillsnecessary for success in upper-level positions.
r The organizations surveyed use university andmentoring/coaching programs less often.Pairing candidates with mentors who furnishreal-life experience and insight can be a valuabletool for developing talent.
Other practices. Another key component of aneffective succession management plan is its abilityto track and monitor all the plan’s phases. However,despite the fact that computerized tracking systemsprovide more comprehensive, complete, accurate,and up-to-date information than a manual system,most organizations (63%) do not use them.
Not linking managers’ and executives’ evaluation orcompensation to their efforts to develop directreports is another common practice among manyrespondent organizations (44%). This link canincrease leaders’ accountability for supportingpeople’s long-term development.
9
Distinctive Qualities of the
Best Systems
The survey also was designed to identify qualitiesthat distinguish effective from less effectivesuccession management systems. Respondents wereasked to rate the effectiveness of their organization’scurrent approach to making succession decisionsusing a 10-point scale (1 being not at all effectiveand 10 being extremely effective). The surveyexamined differences in characteristics betweensuccession management systems rated extremelyeffective (7 and higher) and those rated ineffective(3 and lower).
Figure 1 highlights the top five characteristics thatdistinguish highly effective from ineffectivesystems.
r Highly effective systems are more likely to:
— Involve the CEO.
— Have senior management’s support.
— Involve line management in identifyingsuccession candidates.
— Use developmental assignments.
— Link the plan to business strategies.
Organizations with highly effective systems reportusing these characteristics over 50 percent more thanthose companies with ineffective systems.
10%
30%
10%
12%
75%
62%
82%
61%
63%
18%
0% 10% 20% 30% 40% 50% 60% 70% 80% 90%
Supported by seniormanagement
Links to business strategy
Involves CEO
Includes developmentalassignments
Involves line management
Percentage Using Practice "Very Much"
Highly Effective System
Ineffective System
Figure 1: Five characteristics that distinguish highly effective succession management systems.
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The number of organizational levels a successionmanagement plan covers and the process ofidentifying internal candidates also contribute to aplan’s success.
r The perception of a plan’s effectiveness links tothe number of organizational levels it includes.Respondents rated a succession managementplan that covered one level as moderatelyeffective. In contrast, they rated plans thatincluded four or more levels as highly effective.
r Respondents rated as more effective successionmanagement plans that identify a pool ofcandidates—rather than a single candidate—asready to fill the target position. Organizationsthat identify a pool of candidates also have abetter success rate (people who stay in positionsand are successful) than organizations thatidentify only a single candidate (71% vs. 63%).
Succession Candidate
Evaluation
Respondents were asked to rate the degree to whichtheir organizations rely on various data sources toevaluate candidates for succession. Table 3illustrates the percentage of organizations that relyon these sources of information.
Table 3. Data sources used to evaluate succession candidates.
Source
Not atAll
Some-what
VeryMuch
% % %
Recommendations 3 34 63
Performance reviews 5 37 58
Interviews 21 44 35
Analysis of work samples oroutputs
28 47 25
360-degree assessments 33 47 20
Personality/Psychologicaltesting and assessment
61 27 12
Simulations or role plays(including the assessmentcenter method)
76 19 5
Paper-and-pencil ability testing(e.g., intelligence)
76 17 7
Finding: Performance Management
Data and Recommendations Used
Most Frequently
On average, organizations rely mainly on two
data sources when evaluating candidates for
succession�performance reviews and
recommendations. Testing and assessment
techniques are used far less frequently.
r To evaluate candidates, almost every respondentorganization uses performance appraisal datasomewhat or very much. Appraisal dataidentifies individuals who exhibit exemplaryperformance. Past accomplishments andbehavior generally are good indicators of futureperformance. However, it’s important toremember that appraisal ratings are only as goodas the performance management system thatgenerates them. A 1997 study indicated that themost successful performance managementsystems require training (manager andnonmanager) and clear accountability for thepeople who use them.1
1 Bernthal, P., Sumlin, R., Davis, P., & Rogers, R. (1997). Performance management practices survey report. 1(2).Pittsburgh, PA: Development Dimensions International.
11
r Nearly 100 percent of the organizationssurveyed rely on recommendations as part of theevaluation process. Input from managersregarding succession candidates is valuable, butavoiding common biases is a caution. Usingstandardized recommendation forms designed toillustrate behavioral examples of a person’squalifications can help reduce bias and promotebehavioral observation.
r Respondent organizations infrequently usepaper-and-pencil ability tests, simulations, orpsychological tests to evaluate successioncandidates. Simulations can, however, be avaluable tool because they reveal candidates’strengths and areas for development and offer anopportunity to demonstrate skills in a controlledenvironment.
Finding: Organizations with Effective
Succession Management Systems Use
Standardized Evaluation Tools More Often
r Multirater instruments, such as 360-degreefeedback, are increasingly popular for gatheringa broad spectrum of information about humanbehaviors.2
— Overall, two-thirds of the surveyedorganizations use this type of assessment tosome degree in succession management.
— Organizations with highly effective systemsreported using these instruments more oftenthan companies with ineffective systems(73% vs. 45%). These instruments help:
r Gather information from multipleperspectives, such as supervisor, peers,and direct reports.
r Encourage employee involvement.
r Provide a means for assessing bothcurrent and future performance.
r Identify candidates’ developmental needs.
r Simulations (including assessment centers) arerarely used in the succession managementprocess, despite their ability to predict success atmore senior levels.
— Seventy-six percent of the organizationsreport that simulations are not part of theirevaluation strategy.3
— However, organizations with effectivesuccession management plans were fourtimes more likely to use simulations thanorganizations with ineffective plans(29% vs. 7%).
Role plays and simulations are valuablebecause they provide a standardized method forassessing critical competencies required forsuccess in upper-level positions. These methodsallow candidates to demonstrate skills notcurrently required in their jobs, while givingthem a realistic preview of what the targetpositions entail.
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.
12
Links to HR Systems
Succession management often has close ties with thedevelopment and implementation of anorganization’s HR strategy. This strategy involvesforecasting staffing needs, selection and retention ofquality employees, personal and professionaldevelopment, and career planning. Ideally,succession management plans integrally link to sucha series of human resource systems. Linkingsystems might involve using a common metric, suchas competencies, as a structural thread.
This part of the survey asked respondents to indicatehow closely their succession management plan linksto the following HR systems.
Performance management—Planning,tracking, and evaluating people’s performance.
Career planning—Focusing on individualdevelopment.
Training and development—Structuring orselecting developmental programs oropportunities.
General management developmentprograms—Enhancing managerial skills withnon-training-based programs.
Recruitment and selection—Identifying andevaluating both internal and external jobcandidates for positions.
Compensation—Determining compensation.
EEO and affirmative action—Complyingwith EEO laws and meeting affirmativeaction goals.
Table 4: Closeness of the link between succession managementplan and HR systems.
Not at
All
Some-
what
VeryMuch
System % % %
Performance management 11 44 45
Career planning 11 55 34
Training and development 12 54 34
General managementdevelopment programs
14 50 36
Recruitment and selection 16 59 25
Compensation 29 56 15
EEO and affirmative action 30 55 15
Finding: Linking Performance Management
and Career Planning Has Benefits
Most organizations link succession
management to both performance
management and career planning systems.
Linking succession management to performancemanagement and career planning holds advantagesfor the organization and succession candidates alike.Organizations can meet their strategic goals andindividuals can satisfy their personal aspirations.
Organizations benefit by:
r Increasing the likelihood of identifying anddeveloping the best candidates because they useobjective and job-relevant assessment data.
r Creating long-range business plans thatincorporate the strategic development ofinternal talent.
r Planning career paths for high-potentialindividuals who can help meet futurebusiness needs.
13
Candidates benefit by:
r Becoming actively involved in their own careerdevelopment.
r Having both short- and long-term career goalsand plans to meet them.
r Tailoring a personal development plan thatmeets their particular needs and career goals.
Finding: Training and Development and
General Management Development
Programs Critical
Preparing candidates for future organizational
demands by providing appropriate training and
developmental opportunities is a critical
component of succession management.
Effective succession management incorporates plansto train and develop managerial talent for the future.Job/Role competencies can provide the link totraining and development systems.4
Candidates and organizations can plan training anddevelopmental opportunities around the job/rolecompetencies required for future positions becausecompetencies help organizations:
r Identify skills and abilities required for successin a specific job/role.
r Assess individuals’competencies.
r Structure training and developmental activitiesfor specific job levels.
Organizations can use formal training programs,such as courses and seminars, to develop particularcompetencies and challenging work assignments orjob rotations to develop others. Linking successionmanagement to training and development ensuresorganizations that a set of qualified candidates willbe ready to fill open positions.
Finding: Recruitment-Selection Link
Ensures Qualified Candidates
More than 80 percent of organizations link
succession management to recruitment and
selection systems.
Job/Role competencies can serve as the link betweenrecruitment, selection, and succession managementsystems. Organizations can identify criticalcompetencies for current jobs and also project whichcompetencies will be important for success in futureleadership positions. This competency link allowsorganizations to recruit and select people who havethe right skills for a particular job plus the ability todevelop competencies critical for future success.
Using the competency link allows organizations toconsider succession during the assessment andhiring process. Selecting people who have thepotential to develop important skills ensures theorganization will have internal candidates qualifiedto step into leadership positions.
Finding: Few Link EEO and Affirmative
Action to Succession Management
Many respondent organizations do not link
their succession management systems to
EEO and affirmative action plans.
Nearly one-third of organizations do not linksuccession management to EEO/affirmative actionplans. This is unfortunate because such a link couldminimize the adverse impact of not representingwomen and minorities in managerial positions.
Developing the talent of women and minorities andpreparing them for upper-level managementpositions can create a diverse workforce. And tyingsuccession management to EEO/affirmative actionplans does just that.
4 Byham, W., & Moyer, R. (1996). Using competencies to build a successful organization (Monograph 25). Pittsburgh, PA:Development Dimensions International.
14
Bottom-Line Impact
In addition to determining the most commoncharacteristics of succession management, it isimportant to understand which practices link directlyto organizational success. Respondents rated theirorganization’s current performance on six successindicators:
r Financial performance
r Productivity
r Quality of products or services
r Customer satisfaction
r Employee satisfaction
r Retention of quality employees
Finding: Link to Multiple HR Systems
Improves Organizational Performance
Linking succession management to
multiple HR systems can improve
organizational performance.
Organizations experience improvements inbottom-line indicators even when successionmanagement links to just a few HR systems (seeTable 4 for a list of systems). However, as Figure 2illustrates, some areas experience greaterimprovements when succession management links toadditional HR systems.
r When a succession management system links tofour or more HR systems, the percentage oforganizations experiencing improvements incustomer and employee satisfaction increasessubstantially.
52%
71%
31%
43%
62%
82%
30%
51%
75%
69%
18%
67%
0% 10% 20% 30% 40% 50% 60% 70% 80% 90%
Financial performance
Quality of products orservices
Productivity
Retention of qualityemployees
Employee satisfaction
Customer satisfaction
Percentage Reporting an Increase in Performance
More than three systems
Three or fewer systems
Figure 2: Improvement in bottom-line indicators as a function of the number of HR system links.
15
r Linking succession management to a number ofHR systems:
— Fosters organizationwide consistency.
— Allows organizations to more effectivelyselect and develop individuals forleadership roles.
— Increases employee and customersatisfaction because leaders have developedthe skills to manage and relate to both.
r The number of system links does not seem todirectly affect an organizations’ financialperformance. Many factors contribute to acompany’s overall financial performance andhave a direct impact on the bottom line,including variables such as changes in themarket and increased competition. Therefore, itis not surprising that the number of system linksdoes not directly affect this outcome.
Finding: Covering Multiple Levels Helps
Retain Quality Employees
Organizations covering multiple organizational
levels with succession management plans
retain quality employees.
r Organizations that have succession managementplans for two or more levels report the mostimprovement in employee satisfaction andretention of quality employees.
— Including more organizational levels in asuccession management plan increases thelikelihood that positions in those levels willbe filled by competent leaders with theappropriate skills and abilities to performeffectively.
— Employees are more likely to be satisfiedwith their jobs if they believe their leadersare competent.
— Organizations that plan succession anddevelop internal talent are more likely toretain high-quality employees.
Challenges
Organizations need succession management for avariety of reasons. Respondents were asked tochoose the top three challenges that drive their needfor a good succession management system (Table 5).
Table 5. Challenges that drive the need for good successionmanagement.
Challenges Response (%)
Improve business results 48
Expansion and growth 45
New skill requirements tosatisfy business demands
39
Anticipated changes in skillsrequired of future leaders
32
Change in managementstructure
20
Retirement of currentmanagers
20
Recent merger/acquisition 18
Greater diversity inmanagement
18
New CEO or other leadershipchange
15
Increase retention 15
Immediate vacancies 12
Poor promotion/ placementhistory
7
Finding: Multiple Business Demands Drive
Need for Succession Management
r The desire to improve business results is themain challenge driving the need for a goodsuccession management system. Organizationsmust continually strive to improve the bottomline to survive in a competitive environment.
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Succession management, used in conjunctionwith other HR systems, can help organizationssee improved business results.
r Growth and expansion are other forces drivingcompanies to develop good successionmanagement systems. As companies continueto expand, the need for competent leadershipbecomes a necessity. A solid plan to developtalent ensures that individuals with theappropriate skills will be able to step into vacantor newly established positions.
r Organizations require a flexible successionmanagement system that will respond to theever-changing demands a business experiences.The skill requirements of key positions fluctuatewith organizational and environmental changes,and a succession management system mustreflect those changes. Succession managementmust be part of a company’s strategic businessplan if it is to identify and develop peopleneeded for the organization to achieve itsfuture goals.
A Look Forward
Survey results indicate that the traditional approachto succession management can no longer meet thechallenges facing businesses today. In the not sodistant past succession management typically was asecret process involving only top executives;succession candidates rarely knew they were beingconsidered.
The new approach to succession management, whichinvolves all levels of the organization andincorporates both planning and development, betterequips organizations to meet the changing demandsof the business environment. This new processfocuses on meeting the needs of both theorganization and the individuals involved insuccession management. The CEO, top executives,
and line management—all are responsible foridentifying and developing candidates. And askingcandidates about their career goals and aspirationsproduces a better person-job fit.
Organizations almost always rely on performancemanagement data and recommendations to identifycandidates. Performance management systemsgather data regarding candidates’ past performanceand can identify developmental needs.Recommendations based on past performance alsoare useful. However, using more standardizedevaluation methods distinguishes effective fromineffective succession management plans. In thenear future we might see organizations increasinglyuse multirater instruments and simulations inmaking succession decisions. Gatheringinformation from multiple perspectives providesvaluable insights about individual strengths anddevelopmental areas.
In the past organizations might not have involvedHR in succession management. The survey resultssuggest that this approach is not very effective.Organizations benefit most when successionmanagement integrates with other HR systems andstrategically links to the overall business plan.This integration allows the system to respond tochanging organizational needs and to contribute tothe bottom line.
Organizations realize the need for effectivesuccession management systems and are adaptingtheir approach to identifying and developingindividuals for leadership roles. Successionmanagement is a significant part of organizations’efforts to develop their internal talent, meetorganizational needs, and improve business results.
Center for Applied Behavioral Research
Sheila M. Rioux, Ph.D., Research Consultant
Paul Bernthal, Ph.D., Manager
17
Respondent Comments
The following is a sampling of survey respondents’ answers and comments when asked, What practice has beenmost valuable in your organization’s approach to succession planning? The responses and comments aregrouped into four general categories that parallel the report’s structure.
Organizational Support
r Reliance on HR support and counsel.
r Annual discussions about succession.
r Senior management/management involved in processof identifying competencies/key requirements formanager and above positions.
r Involving line management in process design,implementation, and execution.
r Formal reviews integrated with business and strategicplanning process.
r Alignment with company strategy, competencies, andvalues.
r The involvement, support, and expectations of seniormanagement.
r Involving the CEO.
r Involvement of line management.
r Links to business strategy.
r Linking it to the competency profile of our leaderincumbents is of major importance.
Identifying Candidates
r Identifying needs for multiple candidates for eachsenior management position.
r Ongoing formal and informal assessments of serviceand upper middle leaders.
r Using self-assessment or performance appraisals.
r Using competencies to define readiness.
r Internal candidates’ assessments based oncompetencies, interpersonal skills, managerial skills,motivational fit, and performance results.
r Rating of potential combined with specific positionrecommendations.
r Assessments of competency, readiness, and potentialamong a large group of employees in the samedivision—clear career path.
r Identifying high potentials and high-performingwomen and minorities.
r Measures and considers employee career wishes andaspirations.
r The identifying of young, progressive talent.
r Estimation of potential through self-assessment orappraisal system.
Development Process
r Expose employees to multiple situations, tasks,projects to build their competencies.
r Personal development plans.
r Individual development/Encouragement by manager.
r Involvement of a mentoring program.
r Line management responsible for development.
r A process for following through on developmentplans.
r Coaching and mentoring.
r Identifying cross-functional developmentalassignments.
r Establishing on-the-job developmental assignments.
r Focusing on well thought-out development plans.
Other Practices
r Identify real needs in next three to five years.
r Calibrating performance and potential assessmentcodes across departments for consistency.
r Identification of critical jobs and critical employees.
r Development of talent funnel and potential ratinggrid. Identifies gaps in various level of feedergroups.
r 360 (degree) review and feedback.
r Developing pools of high-potential managers andaddressing development based on their level ofachievement of competencies.
appendix
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Respondent Profile
Table 1: Regions
Region/Country Percent
Asia & Pacific Rim 3
Latin & SouthAmerica
4
Canada 7
Europe 5
United States 82
Central (31)
Northeast (21)
South (20)
West (10)
Table 2: Contact�s Position
Position Percent
Human resource directoror manager
43
Human resource vicepresident
27
Other 30
Table 3: Industry
Industry Type Percent
Manufacturing 42
Services 25
Finance/Insurance/Real Estate 14
Transportation/Communication/Utilities 12
Wholesale/Retail Trade 4
Mining and Construction 2
Other 1
Table 4: Industry Revenue
1997 Revenue Percent
More than $1 billion 45
$500 million to $1 billion 17
$100 million to $499million
23
$50 million to $99 million 6
$1 million to $49 million 8
Less than $1 million 1
Table 5: Employee Category
Mean Median Minimum Maximum
Hourly/Technical 48 50 0 93
Technical/Professional 30 25 0 87
Supervisory/Managerial 16 15 0 80
Other 8 0 0 99
Table 6: Number of Employees
Mean Median Minimum Maximum
Number of employeesat respondent’slocation
2,239 760 15 97,000
Number of employeesat all locations
18,581 6,000 80 330,000
Note: All percentages might not add up to 100% because of rounding.
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Respondent Organizations
ABB Power T&D Company, Inc.Acceptance Insurance Companies Inc.Ace Cash ExpressAdvocate Health CareAkron General Medical CenterAlfa Corporativo, S.A. de C.V.Alliance Data SystemsAllied Tube and ConduitAllient FoodsAlltel CorporationAlumax Primary Aluminum CorporationAmerican Multi-Cinema, Inc.American National Can, Pechiney GroupAmeriGas Propane, Inc.Ameritech Information Industry ServicesAmgen, Inc.AMR CorporationAnglian Water plcAnheuser-Busch CompaniesApplied Industrial TechnologiesArvin Industries, Inc.Ball CorporationBall Plastic ContainerBaptist Health Systems of South FloridaBaptist/St. Vincent’s Health SystemBarrick ChileBC Biomedical Laboratories Ltd.BC TelBDO Seidman, LLPBellagio Hotel CasinoBeth Israel Deaconess Medical CenterBethphage Great BritainBiogen, Inc.BJC Health SystemBlue Cross and Blue Shield of IllinoisBlue Cross and Blue Shield of North DakotaBlue Cross and Blue Shield of South CarolinaBMW AGThe Boeing CompanyBorg Warner Automotive, D.T.P.Bristol-Myers Squibb (Philippines), Inc.British Aerospace AirbusBrown-Forman CorporationBrunner Mond (UK) Ltd.Canon U.S.A., Inc.Carvajal S.A.Caterpillar Inc.Celanese Mexicana, S.A. de C.V.
Central Parking System, Inc.Cessna Aircraft CompanyCharter CommunicationsChase Manhattan BankCigarrera La Moderna, S.A. de C.V.Clarian HealthCleveland-Cliffs, Inc.Cole Taylor BankColgate-Palmolive CompanyColumbia Gas Transmission CorporationComdata CorporationCommerce Bank of Kansas CityCompUSA, Inc.The Consumers’ Gas Company LimitedCPI CorporationCummins Engine Company Ltd. (U.K.)Cytec Industries, Inc.Dahlberg, Inc.Daymon Associates, Inc.The Dexter CorporationDHL Airways, Inc.Dial CorporationDocumentum, Inc.Dr. Pepper/Seven Up, Inc.Duke Realty Investments, Inc.Dun & BradstreetDun & Bradstreet CanadaEast Kentucky Power Cooperative, Inc.E.B. Eddy Forest Products Ltd.Edify CorporationEdison InternationalEli Lilly and CompanyEli Lilly Canada Inc.EnmaxFederal Reserve Bank of DallasFederal Reserve Bank of Kansas CityFirst Western Bancorp, Inc.Fluor CorporationFluor Daniel, Inc.Fluor Daniel, Inc. (Philippines)Fort James CorporationFranco, Inc.The Fresh Market, Inc.Frito-Lay Europe, Africa, Middle-EastGATX Logistics, Inc.GATX-TerminalsGenAmericaGeneral Accident (Canada) Ltd.
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General Accident Group (Canada) Ltd.General Motors North American OperationsGeorgia Baptist Health Care SystemGlaxo Wellcome Philippines Inc.GPU NuclearGreat Clips, Inc.Grupo Gamesa S.A. de C.V.Grupo IMSA, S.A. de C.V.Gulf States Paper CorporationHamilton Health Sciences CorporationHard Rock CaféThe Harleysville Insurance CompaniesHarnischfeger Industries, Inc.Harris Corporation, RF Communications DivisionHarris Trust and Savings BankHealth Care Corporation of St. John’sHeinz U.S.A./Division of H.J. Heinz CompanyHexcel CorporationHoechst Celanese-TreviraHoffmann-La Roche Inc.Holnam, Inc.The Hon CompanyHotel Inter-Continental TorontoHughes Defense CommunicationsHunter Douglas Window Fashions, Inc.IMC Global Operations, Inc.Ingham Intermediate School DistrictInnovex, Inc.In-Sink-Erator, Division of Emerson ElectronicInternacional de Ceramica, S.A. de C.V.Isolyser Company, Inc.J&H/KVIJanssen-Ortho Inc.The John Galt CompanyJohnson & JohnsonJohnson & Johnson Medical Inc.Jollibee Foods CorporationJournal CommunicationsKimberly-Clark Forest Products Inc.Labatt Brewing Company LimitedLaidlaw Inc.Lawson Mardon Wheaton, Inc.Lennox Industries Inc.Lesco, Inc.Lexis-NexisLilly Industries, Inc.Magnifique Parfumes and Cosmetics, Inc. dba
PerfumaniaMastech CorporationMaverick Transportation, Inc.
Maytag CorporationThe McGraw Hill CompaniesMercedes-Benz U.S. International, Inc.Middle Tennessee Medical CenterMonsantoMonsanto Colombiana Inc.Mortgage Guaranty Insurance CorporationNabiscoNational Broadcasting Company Inc.National CityNational Police TrainingNational Steel CorporationNationsbankNavistar Financial CorporationNCH Healthcare SystemNeorx CorporationNestle Philippines, Inc.New York State Electric & GasNoranda Aluminum Inc.Nordson CorporationThe Northern Trust CompanyNovartis CorporationOccidental Chemical CorporationOracle Deutschland GmbHOttawa Civic HospitalPacific Hospital of Long BeachPalmetto Health AllianceParker Hannifin GmbHPayless Shoe Source, Inc.Pecten PoliestersPennsylvania Power and Light CompanyPerformance Inc.PGA Tour Inc.Philips Semiconductors Philippines, Inc.Pizza Hut, Inc.Porsche Cars North America, Inc.Portland General Electric–EnronPPG Industries, Inc.Praxair Inc.Praxair Mexico, S.A. de C.V.Premera-Blue Cross of Washington & AlaskaPrice WaterhousePromus Hotel CorporationQualcommReader’s Digest Association (Canada) Ltd.Red Lobster RestaurantsResearch Triangle InstituteReynolds & ReynoldsRoche Diagnostics-Boehringer MannheimRoche-Syntex Humacao PR
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Rosemount, Inc.Royal & SunAllianceRoyal Bank of Scotland plcRubbermaid IncorporatedRush Prudential Health PlansS.B. Hunt Transport Services, Inc.The St. Paul Companies, Inc.Samsung Austin SemiconductorSan Francisco ChronicleSandvik ChoromantSandvik Steel CompanySanta Rosa Health CareSara Lee Printables Operations MexicoSecurity Bank Holding CompanyThe Selmer Company, Inc.SGL Carbon AGSGS Philippines, Inc.Shands at AGHShangri-La Hotels and ResortsSiemens Business Communication Systems, Inc.Sisters of Mercy Health SystemSlater Steels CorporationSouthdown, Inc.SouthTrust Bank of Northeast Florida, N.A.Standard Commercial CorporationThe Standard Products CompanyThe Standard Register GroupStar TribuneSteelcase North AmericaStiefel Laboratories Inc.Strategic Management ResourcesSulzer Bingham Pumps, Inc.Sundstrand CorporationSWIFT (Society for Worldwide Interbank FinancialTelecommunications)TCF Financial CorporationTechnicolorTeledyne Specialty EquipmentTenet Health SystemTerre Haute First National BankTower Automotive Inc.Toyota Motor Manufacturing North America, Inc.The Trane Company; Worldwide Applied
Systems GroupTransamerica CorporationTransamerica Distribution FinanceUnion CampUnion Carbide CorporationUnion Federal Savings Bank
Unisys (UK) Ltd.United Parcel Service of America Inc.U.S. Airways, Inc.U.S. BancorpUniversal CareUniversity of Central ArkansasTRW Systems and Information Technology GroupUSAAValvoline CompanyViacom Inc.Vicorp Restaurants, Inc.Victoria’s Secret Bath and FragranceWabash National CorporationWalter Industries, Inc.The Wella CorporationWells LamontThe Westin CincinnatiWeyerhaeuser CompanyWhirlpool CorporationWilliam Wilson and AssociatesWilsonart International Inc.The Wood CompanyXerox GmbHYork County Hospital
Note: Because of response deadlines and incomplete data, not all respondent data was used for this report.
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