Is Your Succession Planning Process “All Ornaments and No Tree?”

By: Michael A. Peterman

I work with a CHRO who once described her company’s succession planning process as “all ornaments and no tree.” On the surface, her feedback might seem somewhat surprising. After all, the company conducted biannual talent management roundtables during which its top 200 or so leaders (and their viability as possible successors for enterprise-critical roles) were discussed in detail. Prior to the roundtable, a dashboard for each leader was constructed consisting of a 9-box score, notable strengths and development needs, potential derailers, and competency ratings based on the company’s leadership model. During the roundtable, development actions for leaders were identified and succession charts updated, designating candidates as “ready now,” “ready in 1–2 years,” or “ready in 3–5 years” for a particular role.

So why, exactly, did the CHRO describe the approach, which is very typical of that used by many organizations, as “all ornaments and no tree?” Essentially, she was criticizing the process for lacking the substance that only objective data and rigorous analysis can provide. Indeed, a deeper look at the company’s succession planning process reveals a number of critical shortcomings. While useful in many respects, the company’s competency model had been built around more general capabilities instead of those required to lead at scale. As a result, it lacked precision as a predictor of future success in roles of increased scope and complexity. Compounding the issue, in its efforts to assess potential, the company was overindexing on prior performance along with a leader’s ability to curry the favor of key decision makers. In evaluating possible successors, the organization neglected to delineate and then evaluate candidates against the critical experiences needed for a given role. An absence of detailed analytics obscured the fact that several leaders had been identified as potential successors for as many as three or more roles. The organization’s leadership pipeline was a proverbial house of cards that was overly dependent on a small number of viable successors. 

As mentioned, the approach described above is all too common. Perhaps more so than at any other time, CEOs, other senior leaders, and even boards of directors are emphasizing the importance of building a robust pipeline of talent for enterprise-critical roles. But many organizations are unclear on exactly how to make their succession planning process more data driven and evidence based. Here, we offer recommendations for how to do so based on our work with clients who have successfully established best-in-class solutions for succession management. These organizations invest heavily in cultivating a strong pipeline of talent for the future. By doing so, they create a differentiating source of competitive advantage in their respective industries.

Focus on the right capabilities

The well-known book title What Got You Here Won’t Get You There: How Successful People Become Even More Successful succinctly summarizes perhaps the most common mistake made by organizations in succession management. There is a specific and unique set of capabilities that is essential to success in enterprise-leadership roles. However, in evaluating the viability of potential successors, most companies neglect to focus on these capabilities as much as they should. Instead, individuals are assessed against the company’s existing leadership or competency model. Because such models tend to be broadly focused on leadership at multiple levels in an organization, they invariably lack precision as predictors of success in enterprise-level roles. To increase precision, companies should assess candidates for succession against the following capabilities.

Leading the business: Establishing strategy to position the enterprise for both near- and long-term success

  • Seeing the Whole – Translating the broader landscape (enterprise, market, industry, regulatory, customer) into behaviors and actions that will drive enterprise objectives
  • Making Systems Decisions – Moving to decisions in the face of enterprise-level risk, competing priorities, limited resources, and diverse stakeholders
  • Leading the Future – Balancing the need to build confidence and drive outcomes in the near term with building momentum and capability for the long term

Leading people: Operationalizing strategy and leading increasingly diverse constituents in ways that maximize discretionary effort and performance

  • Focusing the Enterprise – Creating an overarching framework within which others can execute effectively
  • Influencing with Power – Driving alignment among diverse stakeholders and delivering compelling messages that move people to action
  • Creating Shared Values – Boldly setting the tone from the top that shapes decisions, behaviors, and interactions throughout the enterprise

Leading self: Demonstrating healthy, agile, and resilient habits and learning to thrive in challenging and rapidly changing environments

  • Reasoning with Agility – Connecting ideas and information in a flexible and fluid manner; learning and integrating new information in ever-changing circumstances
  • Thriving in High Stakes – Sustainably performing with stamina and consistency under intense pressure and pace
  • Knowing Yourself – Understanding and appreciating implications of leadership style amidst broadening power and influence

Whether conducted internally or in collaboration with an external partner, an assessment should be based on multiple sources of data. In terms of possible options, 360-degree feedback tools, simulations, structured interviews, and psychometric instruments can illuminate the extent to which a leader demonstrates each of the capabilities described above. We find it helpful to quantify a leader’s readiness for scale through a series of numerical ratings. Specifically, we integrate each of our assessment inputs to assign a 1–5 rating for each of the nine capability areas. A rating of 4 signifies that a leader is ready to take on additional scale. A rating of 5 means that a leader is truly exceptional in a given area. Ratings of 3, 2, and 1 indicate gaps in readiness of varying degrees. By employing a similar approach, organizations can more effectively pinpoint development needs at the individual level. Numerical ratings also support advanced analytics that speak more broadly to strengths and gaps in the leadership pipeline as a whole. As an example, when reviewing scores in the aggregate, one client discovered that many of its leaders had a penchant for execution that came at the expense of innovation and long-term planning.

Specify the knowledge and experiences that are needed

As with essential capabilities, organizations need to be precise in assessing leaders against the specific knowledge and experiences required for a given role. Doing so is critical both to evaluating a candidate’s viability as a possible successor and to matching leaders with development opportunities that allow them to move up the learning curve more rapidly. One of our clients needed to strengthen its pipeline of general managers. As with many organizations, the GM role was a linchpin in creating value for the company. To identify the knowledge and experiences required for the role, the organization conducted interviews with a number of its former and incumbent GMs. The interviews generated a comprehensive list of knowledge and experiences that included the following:

  • Has been fully accountable for a P&L
  • Has led a significant reorganization in excess of $10 million
  • Worked as an expat in multiple markets
  • Has been the lead in building strategy for a new business or product
  • Led a successful enterprise-wide transformation from beginning to end

A survey was used to determine a leader’s level of expertise in each of the areas identified as being critical to success in a GM role. The survey was completed by the leaders themselves along with their managers. The resulting output was then incorporated into talent roundtable discussions, and decisions became more data-based as a result.

Additional variables

A number of additional variables should be accounted for in the succession planning process.

  • Performance Ratings – Even though many organizations overindex on performance ratings in assessing potential, it is still informative to review a leader’s track record of success in current and prior roles.
  • Engagement Survey Data – Unfortunately, engagement survey results often cannot be tied back to a specific leader. When they can, however, the results provide useful data across a number of areas, including a leader’s ability to motivate and bring out the best in others.
  • Mobility – Many leaders are unwilling to work in certain parts of the world. By collecting data on mobility, organizations can ensure that a leader is willing to relocate to a particular geography in determining their viability as a successor.
  • Retention Risk – Though difficult to assess objectively, retention risk also should be considered as part of the succession planning process. As a best practice, managers and HR business partners should be checking in regularly with key talent regarding their aspirations and level of satisfaction with the organization. Compensation data also can be reviewed to help determine the likelihood that a leader might seek out greener pastures. Surprising departures of key talent cannot be eliminated entirely. However, by evaluating retention risk and then taking action where appropriate, organizations can help ensure that viable successors remain with the organization for the long term.
  • Releasability – When a critical role is vacated, companies sometimes discover that the next-in-line successor cannot be released from their current position to fill the void. By incorporating data on releasability into the succession planning process, organizations can proactively identify areas of risk and then create contingency plans as needed.
  • Diversity & Inclusion Data – It is absolutely vital for a company’s talent pipeline to be diverse. Therefore, organizations need to consider ethnicity, gender, and other relevant variables as part of succession management. Doing so can identify underrepresented groups, and corrective actions can then be taken.

Analytics

Many companies have underdeveloped analytics capabilities with respect to succession management. As a result, key questions can only be answered through a manual, arduous, and time-consuming process. In contrast, a number of best-in-class organizations have developed web-based analytics tools that allow key questions to be answered at the push of a button. Regardless of the specific tool and approach a company elects to use, it should organize its succession management data such that questions like the following can be easily explored.

  • For what percentage of our enterprise-critical roles do we have at least two “ready now” successors?
  • Are there key talent segments (e.g., general managers) for which the succession pipeline is deficient?
  • How often are we able to fill open enterprise-critical roles with internal, rather than external, candidates?
  • How many leaders are currently listed as potential successors for multiple roles?
  • How diverse is the talent pipeline? Which groups, if any, are underrepresented?
  • Which leadership capabilities (e.g., Leading the Future) are underdeveloped across the pipeline?
  • What is the average tenure in role of leaders in the succession pipeline?
  • What is the rate of attrition among leaders who have been identified as viable successors for key roles? How does this rate compare to that of employees in the company as a whole?

Companies can create a real source of competitive advantage by consistently making the right succession management decisions. To do so, many organizations have no choice but to replace their “ornaments” with an evidence-based approach that fully leverages data and analytics.

At RHR, we help companies build a robust pipeline of enterprise leaders through our Executive Bench® services. Our proprietary assessment targets the capabilities most critical for success in large-scale roles. Our insights and data on leaders are then integrated with existing talent planning systems to reduce risk in high-impact talent decisions. Our development program enhances scalability to prepare leaders for enterprise-level roles. To learn more about how our Executive Bench® services can help your organization, contact Jessica Foster.

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