Succession Planning in 2020
Succession planning is defined as the practice by which a company ensures employees are recruited and developed to fill key roles within the company. It’s a process all companies should have, but interestingly enough many still don’t have a formal strategy in place. In fact, former Corporate SVP Human Resources, Executive Development and Service Excellence at Fiserv, Inc. and HR Exchange Network advisory board member Jack Bucalo says some consider the process useless.
“The success of any succession planning program is directly and inexorably tied to one basic premise - the respect that the CEO and line executives have in the Chief HR Officer. If the CHRO has earned that respect by being an equal business partner; the program will succeed or fail based on the validity and usefulness of its content,” Bucalo said. “Conversely, if the CHRO does not have that respect, the program is doomed to failure and will be considered by line management as nothing more than another HR paperwork exercise.”
The data supports that theory showing a 50/50 split on having a formal succession planning strategy in place. While that seems interesting, further analysis yields a far more impactful point. 100% of respondents are practicing succession planning, formal or otherwise.
Larry Brand is the Chief Human Resources officer for Elkay Manufacturing. He is focused on succession planning and all of the challenges related to the topic.
Put simply, Brand said the purpose of succession planning is to “fulfill the future needs of your company.” But under the type of market climate companies are dealing with today, he said it’s much more difficult to hire outside talent for key positions.
So, where to begin?
Bucalo says there are many key points in any succession planning program that will determine whether or not it will be successful.
- You should recognize that this is a LINE MANAGEMENT plan. In the end, the line executives who use the data in the plans will rely on their own inputs and those of their line management peers far more heavily in comparison to any competency model, behavioral test data, et al. Such models and data are considered a distant second when compared to the CEO and top line management's viewpoints, so don't waste a lot of time, money and effort on such tools.
- You must get the practical support of the CEO and top management to USE the data in the plan whenever a promotional, compensation (salary, bonus and stock) or development opportunity occurs. The CEO must convince everyone that this is a critical need of top management and the Board. If the CEO does not use the plan data in this regard, the plan will likely fail.
- To EARN that support, each plan must list only succession candidates who are VIABLE ones, and not ones that HR allowed a line executive to list without being properly vetted. To the extent possible, it is best to agree upon the recommended succession candidates in person with the line management executive, rather than having them listed electronically, so that the HR leader can challenge any inappropriate person at that time. If the listed succession candidates are not REALISTIC ones, the plan will likely fail.
- The HR leader responsible for administering the program should KNOW IN DETAIL:
- Each management position and what it really takes to be successful in it in terms of experience, technical/job knowledge, management/executive skills, financial skills, interpersonal and leadership skills, and…
- each succession candidate and his/her skill sets and past performance results achieved against key specific business objectives.
Knowing this information allows the HR leader to effectively interact with line executives and to be able challenge any succession candidate who is recommended for a particular position, but is NOT really a viable candidate due to some performance and/or skill deficiencies. Some line executives want to fill-in all or most of the slots to make their organization look good. If the HR leader does not really know the above information well enough to challenge any line executive, the plan will likely fail.
- For the top two or three organization levels, and lower if possible, it is highly recommended that the data be acquired in a face-to-face discussion with the appropriate executive. Also, all recommended succession candidates should be vetted by HR and line management to insure that all are viable and realistic ones. Even the data that is submitted electronically should be subject to a detailed vetting process.
- The plan is NOT a matter of the software, forms or procedures. Do not spend a lot of time and energy on such matters, as top line management could correctly care less about them. Conversely, spend your time and energy learning the information noted in the fourth point above and acquiring the comments of appropriate line management executives regarding each recommended succession candidate's ability to do the job. Getting their thoughtful and accurate comments is critical to your success because, in the end, it is line management's opinion that matters the most to the CEO.
- Establish a Personal Development Plan for all incumbents and succession candidates, especially those at the middle/upper and top management levels, for the upcoming year and monitor it to ensure compliance. In doing so, recognize that almost all succession candidates typically possess an excellent set of interpersonal skills. Therefore, coaching such candidates is usually inappropriate unless a major flaw exists. Most of their development should deal with giving them more exposure to the parts of the company's business that they are unfamiliar with, such as involvement in the strategic, financial and budget planning for key divisions, cross functional assignments, exposure to a particular function that they are unfamiliar with, interaction with higher level management and/or the Board on particular subjects, etc.
- Here are some critical skills for upper/middle and upper management candidates:
- Business function knowledge - how well the candidate understands the various business functions, (sales, marketing, software development, manufacturing, operations, etc.) and the sub functions within each function, e.g. for manufacturing, this includes production, quality control, manufacturing engineering, inventory control. etc.
- Business Interaction acumen - the candidate's knowledge of AND ability to effectively interact with the upper/middle and top management executives from other business functions.
- Financial acumen -the candidate's understanding of the key financial numbers on the company and division's income and cash flow statements, how the profitability of its current products relate to them, budget planning and performance, and the company's strategic plan goals.
- Business Strategy skills - product/market research, product/market development and planning, strategic thinking and planning, and financial and product contingency planning.
- Executive skills - championing innovation, leadership, consistently achieving profitable financial results, successful strategic growth, establishing an appropriate work culture, outside audit and market analyst interaction, Board and top management interaction, etc.
- Management skills - planning (including MBO), controlling, organizing and leading.
- The program should track the promotional, compensation (salary, bonus and stock), development plan progress and turnover data of every incumbent and succession candidate in an effort to quantitatively demonstrate the worth of the program while highlighting any potential problems.
In sum, if the Board, CEO and line executives consider the CHRO as an equal business partner, the plan has an excellent chance of being successful. However, in addition, the finalized succession candidates must be considered realistic ones, the plan data must be utilized by line management and the development plans must be followed. If all these elements are accomplished well, the program will likely succeed.
Bucalo points to a strong process for carrying out a succession planning strategy, but that strategy must be supported; strengthened.
Based on the gathered data, coaching and mentoring is the process by which that is done. Why? The analysis is simple when looking back to previous pieces of data. While millennials make up the majority of the workforce, they do not make up its entirety. There is a vast resource available to companies in the form of baby boomers and/or moderate to upper level employees. The sharing of knowledge increases the chances of success while offers those moderate or upper level employees a chance to “unlearn and reinvent.”
Another question must be asked, not of the candidate, but of the company: should the candidate be informed he or she is in line to succeed a senior level or C-Suite official. It’s dependent on each company to answer that question.
In any case, the process of succession planning is not a short one.
For HR professionals, it’s very detailed-oriented and long. The best case scenario would be for the outcome to fall between two and four years. Hastened processes, for instance in the situation of an unexpected opening, will be fraught with issues.
Other problems could include whether or not the candidate wants to move ahead.
No doubt, the talent will have some key questions of their own:
- Am I ready?
- How will this impact my work/life balance?
- What will the process include?
Levels of Responsibility
While HR will certainly be responsible for much of the planning, the reality is the process must be cross-generational. In fact, the majority of the responsibility falls on the baby boomers.
Boomers must be involved if success is the goal. “This more falls on the Boomers and people like myself in the HR leadership role to figure out how we get the next generation ready than it is the next generation somehow trying to change themselves so that they fit the mold that we want,” Brand said. “Because that mold is broken. We have different leadership expectations coming and that’s the work our company is doing right now to get ready for that generation.”
Some suggestions on how to accomplish this include:
- Intergenerational cohorts
- Educational opportunities between C-Suite officials and succession talent
- Leadership programs
The most important piece of this is making sure current leaders have the opportunity to relay their knowledge and experiences to those up-and-coming candidates. Senior leaders, for the most part, are where they are because they have succeeded and failed in previous positions. While future leaders must be allowed to succeed and fail on their own, part of the preparation process is learning from those whom have gone before.
Connecting the Dots
While it is a long process, succession planning is absolutely critical to the continued and future success of a company. Knowing where you’ve been is just as important as knowing where you are and where you’re going. Succession planning is all about regenerating the role with a new person when the need arises, and in that way, leaders and companies can avoid demise and insure success.
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