Identifying and Developing Leaders and Future Leaders…Yes, the Need for Succession Planning

Background
There are no strong companies, without having strong current leaders and a strong bench of emerging leaders. Although this has always been true, never in recent history has the need for outstanding leaders been more acute than it is today. In today’s challenging economy, CEO’s and senior executive teams are facing enormous challenges when it comes to achieving and sustaining breakthrough operating results. Globalization, economic change, more stringent regulation, and tougher governance make realizing shareholder value increasingly difficult. In the midst of these massive challenges, all organizations-- urgently need leaders who think creatively, strategize effectively and respond with speed and competence to high-pressure situations. But if its current leader identification and development practices do not change quickly, few companies will soon boast few such leaders.     

Current succession planning processes in the global corporate environment today are insufficient to do the job. The gap between those in senior executive positions and those prepared to move into them is widening by the day. And just as Boards and senior executive teams are beginning to recognize the problem, they are running into new demographic and workforce challenges that make the leadership crisis all the more challenging, especially in the United States, Europe, and Far East. By some estimates, up to 40 to 70 percent of any organization’s management population is currently eligible to retire. While aging thins the ranks of senior executives, other forces have contracted the pool of those available to take over the reins. In the United States, for example, changes in many organization’s pension systems are making it easier for executives to leave senior positions, while downsizing during the 1990s and 2000’s have deprived many organizations access to some of the best and the brightest. Therefore, the succession planning debate is not only about the numbers; the quality and state of readiness of those who will take over leadership is also at issue.                                                

A number of big and successful companies have taken action to upgrade their succession planning practices and address their leadership pipeline issues. Three companies that have made significant progress are GE, P & G, and IBM. Many others, such as FedEx, Office Depot and Navy Federal Credit Union have launched major projects to improve their succession planning practices. The record is mixed across, however. In general, many large companies and most mid-sized and small companies are struggling with succession challenges. Most of America’s federal agencies and in fact most of other nations’ governmental entities are in the same boat. Most are struggling with these issues. There is little question, considerable work remains to be done.

Worthwhile programs such as accelerated leadership identification at the senior manager level are unsustainable if proper attention is not paid to the pipeline of talent currently filling those ranks. Such approaches can address short-term needs but tend to divert decision-makers’ attention from the critical task at hand—building a sustainable talent identification, development and retention process that accounts for the demands of an workforce.

As part of well-crafted succession planning and leadership development programs, innovative practices such as job rotation, leadership development through coaching, mentoring, action-learning, and next-generation behavioral performance evaluation must all be considered. All of these practices, and other methods of identification and tracking of leaders, will be required to increase the speed with which go develop talent and close the widening leadership gap. On the bright side, some companies already have some of the tools they need to succeed. The challenge though is putting these and other innovative tools to use in a structured manner to build an enduring leadership succession program.

The “Stealth Fighter” Model:
The Power of Your Succession Management Value Proposition

The “Stealth Fighter” Model offers a compelling, symbolic way to understand the predictive relationships that exist between critical human capital/succession management processes (the 4 D’s), critical “leading indicators” (capability, commitment and alignment—more on these later), intermediate outcomes and ultimate outcomes. The 4 D’s essentially act as the 4 turbo-charged engines that propel the “Stealth Fighter” towards its’ target—defined as an agencies “Future Desired State” and the required leadership competencies to execute both the current and future business strategy. By way of analogy—if the 4 engines are “well oiled” and functioning at a high level (i.e., optimized) and working together (i.e., integrated), they will propel the “Stealth” towards its’ goal.

In practical terms, an organization’s Succession Management Value Proposition (SMVP) is the holistic sum of the following practices: (1) Demarcation-performance management; (2) Diagnostic—objectively assessing leaders and potential leaders; (3) Deployment-structured meetings to integrate performance and potential assessments, calibrate capability, determine development options, and identify potential replacement scenarios; and (4) Development—coaching, on-the-job development and training programs---- and their relative impact on multiple levels of agencies outcome—such as capability, commitment and alignment (leading indicators), intermediate outcomes such as individual and team performance, bench strength, percentage of women and minorities promotions versus percentage in pool, percentage of women and minority successors, retention rate of successors, percentage of key positions filed internally, promotion rate of successors, success rates of those promoted and cost to fill key roles (lagging indicators), and ultimate outcomes such as organizational revenue, profits and operating ratios.

Regardless of the exact words used to capture a given organization’s SMVP, one thing is sure, the elements identified in the “Stealth” need to be well thought out, believed in, communicated, executed, and measured (assessed)—continuously. At its core, a great SMVP encompasses everything leaders and future leaders experience and receive as they are employed by the agency—including the degree of engagement they experience, their comfort and “fit” within the culture, the quality of leadership, the rewards they experience, etc. A great SMVP always encompasses the ways in which an agency fulfills the needs, expectations, and dreams of leaders. More than anything, a great SMVP clearly connects winning succession management practices to business and operating metrics.

As was discussed earlier, there exists no better way to create the belief in the value of the human capital asset, than by demonstrating the connectedness between winning succession practices and operational success. The research is clear and compelling. The Hackett Group’s 2011 Talent Management Performance Study involving hundreds of Fortune 500 Companies and government agencies—gathered both qualitative and quantitative data showing enterprise financial, operational and process payoff’s from talent management. Organizations with the most mature talent management capabilities (i.e., the 4 D’s) had significantly greater EBITDA, net profit, return on assets, return on equity, and operational results than those organizations who were immature in their talent management processes. Additionally, mature talent management organizations had leaders who believed in the value of the human capital asset, were passionate about investing in building and growing talent, were relentless in their assessment of leaders, individuals and teams, and shared their human capital responsibilities with line managers and the Human Resources function.

It is clear that organizations that excel operationally, excel initially with their human capital/succession management practices. They select and promote only those leaders and future leaders who demonstrate (as a result of performance and objective assessments) they have the highest probability of being successful; they benchmark and essentially “certify” (as a result of assessments) that leaders and future leaders have the capability, commitment and alignment required to execute strategy; they provide a rich, compelling, engaging and dynamic learning and performance support environment that motivates leaders and future leaders to become the best they can be; and they reward and recognize those who truly execute.

A strong SMVP foundation leads to: (1) Capability-“Can Do”; (2) Commitment-“Will Do”; and (3) Alignment-“Must Do”. Great organizations excel in creating the belief that their leaders and future leaders have the “can do” (i.e., the skills, the talents, the behaviors) to execute; the “will do” (i.e., passion, motivation, drive) to execute; and “must do” (i.e., an overwhelming sense of connectedness to the culture, mission, strategy and values of the organization) to execute. To put in different words, a strong SMVP is the foundation for any agency to build and sustain a culture in which leaders and future leaders become continuously more capable, committed and aligned. In fact, agencies that excel in promoting and developing leadership talent—with a focus and unwavering commitment to optimizing these “leading” indicators---as indicated earlier—achieve impressive operating results.

Succession Planning: The What and Why

Succession planning is about identifying and developing your best talent (present and future) and preparing them to assume higher-level roles or other key roles. Succession planning and management can also be interpreted as an organizations’ intelligent approach to dealing with the inevitable loss of key talent they may be experiencing now or that they project in the future (based on workforce plans). Organizations with succession plans have created intelligent contingencies for successfully combating their present and future losses. Organizations without succession plans have no choice but to react to the inevitable losses they encounter with panic and reactiveness, resulting in ineffective succession decisions. Ultimately, as the Stealth Model predicts, when organizations are not intelligent about deploying their top talent, individual and team performance suffers and operating results decline—significantly.

Succession planning is needed for several reasons. One key reason is that the current workforce is aging rapidly. Given the large number of baby boomers nearing retirement, all organizations must prepare for these losses. Compounding this problem are the indisputable generational realities all organizations are facing and the resulting talent gaps, both in sheer number and quality (i.e., readiness) associated with those who are Generation X. Not only do organizations need to prepare for a mass exodus of older workers, they must prepare for life with fewer workers in general. Furthermore, many baby boomer executives have the talents and capabilities that many high-potential and emerging leaders do not yet possess. If these talents are not transferred effectively to younger leaders and future leaders, they will become lost forever.

One thing is sure: The retention of key talent for every organization is no longer a nice-to-have. The Stealth Model clearly provides all organizations with a predictive path for achieving breakthrough operating results by successfully executing the four D’s—Deployment, Diagnosis, Development,, and Demarcation. Clearly, any organization that uses an intelligent approach to optimizing their four D’s—by definition—improves their chances of retaining the key talent required to propel their agency to greatness. All talent, especially Gen Xers and Gen Yers—want exciting, challenging work and opportunity, transparency, and equitable treatment. A succession plan provides a concrete road map for achieving these objectives.

Research Findings on Succession Planning

Research findings support the importance of succession planning. Executive Development Associates’ 2013 global research study and report (“Executive Trends Survey”), which I coauthored with Bonnie Hagemann and John Maketa (Pearson) clearly identified the top priority for organizations, regardless of sector, industry, or geography: the need to increase bench strength. This finding was also the number one priority in our 2009 and 2011 studies. The second priority: The need to accelerate the development of high-potentials and emerging leaders clearly is related to building bench strength. Given the rapid environmental changes that organizations face and the large number of people entering retirement age, accelerating the development of the high-potential and emerging leader talent pools becomes vital. As the number of key positions eventually becomes greater than the number of ready-now candidates, the task of offering accelerated development becomes even more critical as a means to attract and retain talent. Organizations that fail to offer such opportunities will lose talent—in numbers and quality—because people will gravitate toward organizations that offer such opportunities.