Manchester
United is not alone in failing to line up a replacement for its glorious leader
Sir Alex Ferguson. As Nic Paton reports, the pressing issue of succession
planning is far too often ignored by HR – so now is the time to take steps to a
brighter future
A
couple of years ago leadership development specialist Jeremy Webster was called
to an engineering and electrical firm to advise on succession planning. Sitting
down with the key board members, it quickly became clear the company faced a
major problem.
"Some
70 per cent of its senior management were at the top end of the age group and
soon to be retiring. They suddenly realised they did not have anyone to replace
them, and they had to do something about it, and quickly," he says.
To
compound the problem, the organisation was operating in a male-dominated
environment and in a sector where few graduates were coming on to the market,
says Webster, a partner at training and development consultancy MaST International.
This
may be an extreme example of what can go wrong when an organisation leaves
succession planning until the eleventh hour, but it is by no means unusual.
With population demographics on both sides of the Atlantic starting to change
as the baby boomers of the 1960s approach retirement age, succession planning
is an issue businesses need to address urgently.
As
Bill Byham, chairman and CEO of Development Dimensions International, puts it:
"We estimate 50 per cent of senior jobs within some organisations will be
open in the next five years. Within the US government, we are looking at 50 per
cent within three years and 75 per cent within five years. For older companies
or established ones it is going to be pretty similar."
Succession
planning is not solely about how you replace the Jack Welchs, Richard Bransons
or Sir Alex Fergusons of this world. It can mean simply how you ensure your
marketing department does not take its eye off the ball when the director
leaves in two years. At this level, the constant downsizing of middle
management and the shifting psychology of the workplace – with the end of the
job for life and an increasingly fluid, mobile talent pool of people – has
exacerbated matters.
No
one organisation will follow the same pattern or have the same needs when it
comes to succession planning. But, broadly speaking, getting it right involves
following five key steps.
1
Work out where you are going
Traditionally,
HR directors used to have a ‘people map’ of their organisation. It was reasonably
stable and there was a pipeline of people moving up the organisation that were,
metaphorically, tagged to slot into a particular role at a future date, says
Ian Tinsley, senior director at Hay Group UK.
Now,
though, not only do people move around much more, but also the business might
suddenly decide to buy a rival or agree a joint venture or partnership. The
business environment is much more dynamic and fast moving, and so that much
harder to plan ahead for.
"You
have to have as clear an understanding about what is the name of the game over
the next two to three years. What does the strategy say? What are you hoping to
achieve? Have you got the core competencies to achieve that and have you got
the pool of people who will help meet those evolving needs?" he asks.
Much
of the debate in HR over the past few years has been how to ensure HR
professionals become more strategic and business-oriented in their outlook and
ensure they are not simply sitting to one side of the business. This is never
more the case than in succession planning.
For
the HR professional, the trick, then, is to get beyond the humdrum, day-to-day
problems of the business, argues Webster. "HR is so busy looking at the
immediate problem that future problems are diminished until they become immediate
problems," he says.
2
Decide what skills you need to deliver on future goals
Understanding
where you are going requires an awareness of what you need to get there. One of
the first elements of this, argues HR consultancy Mercer Human Resource Consulting,
is adopting a definition of leadership.
This
should be a definition of the sort of leadership currently in place at the
organisation, what is best suited to it and what is needed in the future.
Part
and parcel with this is the need to work out the critical business roles within
the organisation, and make an assessment of the key talent. These might be top
performers or high flyers at the organisation, but they might also simply
managers further down the scale that are doing a good job, argues Phil Probert,
managing consultant for people and organisational change practice at PA
Consulting.
If
employees are being exposed to uninspiring or demotivating managers, it makes
sense that, if you want to bring talent to the surface in your organisation,
that is where you need to focus. It is not so much the 5-10 per cent of high
flyers you should be worried about, but the other 95 per cent, he suggests.
"If
you find you have got pockets of excellence and pockets of disillusion, then
that is when you have got to focus on what it is that is happening and what is
driving behaviour, and aim to reinforce the good and manage out the bad,"
he says.
"It
is like a football team," adds MaST’s Webster. "If the people in it
do not have the right skills, they do not play. But the whole thing has to be
geared to where the business is going, not where it is now. It is about trying
to develop people so that the business benefits."
Training
and development will normally be at the centre of this process. ITN, for
instance, underwent a significant rethink of its training and development
processes last year in which succession planning was a central element. It
launched a talent spotting exercise among its 1,000 or so staff that included
expanding the trainee scheme, focused on the company’s secondment scheme and
took a close look at its systems for mentoring.
A
long hard look at your managers is also important, as it is they who must bring
the right people on board. Managers tend to fall into two groups,
talent-finders and talent-avoiders, says independent recruitment consultant
James Simpson.
Talent-finders
make recruitment a priority, allocate time in their diaries to it, make
themselves available and do not ‘lose’ candidates because of delays. They are
never afraid to hire someone who will challenge everyone in their organisation,
they are persuasive and enthuse employees and reach decisions effectively and
make offers that are accepted.
Conversely,
talent-avoiders tend to be suspicious of the people coming up beneath them,
reschedule and delay interviews, avoid people who are too young,
over-qualified, too expensive or could challenge others in the team, including
them.
3
Work out how to measure your current skills against those you will need in the
future
Accurate
assessment of the skills within your organisation is needed if succession
planning is not to be a waste of time. The methods organisations will use will
inevitably vary, but will normally centre on measuring an individual’s
competencies and performance, both past and predicted.
According
to DDI’s Byham, who is also the co-author of Grow Your Own Leaders, it is
important to look at four main elements: job challenges, organisational
knowledge, competency to do the job and ‘derailers’. Derailers, he argues, are
things that cause executives to fail, perhaps a certain management style or a
psychological block, even something in their history or personal or family
make-up.
"Competencies
are often not up to date and aimed at how the organisation is now rather than
what the organisation is going to be in five or 10 years’ time," he says.
Most
organisations will use a variety of assessment tools, such as assessment
centres, tests, interviews, performance appraisal processes and acceleration
centres. But it is critical that behaviour is followed up and checked, as fewer
than 10 per cent of organisations do this, says Byham.
Sun
Microsystems, for instance, uses a ‘leadership skill profile’ to define the
people and business management skills of its executives. It also uses
360-degree appraisal, performance reviews, leadership training and education
and leadership conferences.
The
rapidly changing dynamic of the workplace means any system for measuring talent
has to work that much more quickly, adds Byham.
Firms
need to develop a wide pool of talent – ideally a porous one – which they can
draw upon. "People can enter the pool at different times in their careers.
It is for the people who would benefit the most from rapid development," he
explains.
Candidates
need to be given fast-track assignments, such as opening new plants, running a
division, launching a product or overseeing a downsizing initiative.
4
Address gaps
Despite
many CEOs spending a lot of time worrying about whether they have the right
people, both for the present and the future, the greatest challenge for the HR
director can be getting succession planning on the board agenda, making it a
priority and keeping it there.
"There
needs to be a strong HR person who can get this on the agenda. Someone who has
the weight to have this kind of debate with colleagues in the senior management
team is critical. Life goes on, people forget about it," argues Hay
Group’s Tinsley.
A
professional development strategy that targets key talent should be put in
place, suggests Mercer Human Resource Consulting. A strong retention programme
should complement this.
One
of the biggest mistakes in succession planning, and perhaps one of the most
common, is for an executive to seek a replacement rather than a successor. It
is no doubt human nature for an executive to want someone who will simply take
the business forward in his own image, but it may not be the best course for
the business.
A
high-profile, long-serving boss can also eventually become his own worst enemy.
The longer, for instance, that veteran retailer Ken Morrison remains at the
helm of supermarket chain Morrison – even if the firm is one of the most solid
performers in the FTSE – the louder the mutters become from the City. The
recent death of his deputy John Dowd has not helped matters.
"When
a senior manager leaves the stock can go down by 10 per cent. But, conversely,
GE can lose three top executives and see its stock go up because it has an
image of having a deep pool of good people," says Byham.
Another
common error includes trying to keep it in the family. Passing it to a child
must make proper business sense, not just be sentimentally attractive. A
succession panel can often be a useful solution in this sort of situation.
And
once at the top, one of the hardest things is knowing when it is right to go.
Bill Gates’ decision in January 2000 to hand day-to-day power at Microsoft over
to Steve Ballmer, who became CEO while he became ‘chief software architect’,
was all the more remarkable as a result.
5
Maintain skills
Succession
planning needs to be an ongoing process, not a one-off reaction to a panic,
stresses Caroline Dunk, chairman of consultancy CDA. It is also important to
make sure that, having been groomed for the top, key talent is not simply
headhunted.
"Succession
planning is an area that is consistently done badly. It has been handled as a
standalone process, a one-off by the board that has no link into other HR or
competency processes. Often it is not integrated, accurate or strategic,"
she says.
Dunk
cites the example of an internet service provider she worked with that had
split its annual appraisal from its development planning process. Another
client, a food company, literally had no strategic thinkers on board.
More
optimistically, within the UK at least, most large organisations have by now
recognised the need for diagnosing the needs and competencies of their
employees, and the value of coaching and mentoring, argues Fiona Sellers,
director of HR consultancy Courtenay,
In
some areas, succession planning has even moved out of the workplace. She cites
the example of a high-flying City worker whose firm recently spent £40,000 on
assessing and managing his lifestyle – at work and home – to help him, for
instance, relax and carve out time for creative thinking.
Sign up to our weekly round-up of HR news and guidance
Receive the Personnel Today Direct e-newsletter every Wednesday
"Succession
planning is a process that needs to be regularly updated, perhaps even every
month. Most organisations will panic and do succession planning behind closed
doors – it’s white smoke coming out of the chimney," adds CDA’s Dunk.
"You
need to have a clear set of succession criteria for the process – all jobs
above a certain level will be solved by this process, or a certain number of
moves a year. You need very clear criteria from the beginning."
