RESEARCH AND PRACTICE
IN HUMAN RESOURCE MANAGEMENT

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Taylor, T. & Bennett, A. (2002). Strategic Development of Organisational Talent: The Use of Succession Management Approaches, Research and Practice in Human Resource Management, 10(2), 56-69.

Strategic Development of Organisational Talent: The Use of Succession Management Approaches

Tracy Taylor & Adrienne Bennett

Abstract

Global demographic data unequivocally indicate that a large proportion of workers will be entering retirement in the next 5 – 10 years, resulting in intensified competition for new employees and increasing imperatives to retain good staff. This paper discusses the use of succession management approaches in the strategic development of an organisation’s high potential and talented employees. While succession planning has been used in human resources management for many years, it has been claimed that succession management is significantly different from its older variation and better attuned to contemporary business environments (Byham, Smith & Paese, 2001; Leibman, Bruer & Maki, 1996; Rothwell, 2000). The distinctions between these two approaches are discussed and the key components of succession management outlined. A comprehensive succession management programme in a large Australian organisation is presented as a case study. The evaluation of this succession management programme provides a measure of its impact on the promotion and retention of high potential staff as well as calculating the return on the organisation’s investment. In this instance succession management has provided the implementing organisation with a systematic and transparent process for successfully identifying, developing and promoting high potential employees and is an example of best practice in succession management.

Introduction

The prospect of a sizeable proportion of senior management departures in the next three to five years has highlighted a major business challenge, and many organisations are turning to succession management approaches as a strategic human resource management response to this situation (Bernthal, Rioux & Wellins, 1999; Guilford, 2000). Coupled with the departure of one generation of managers is uncertainty about how to ensure the retention of good staff from the next generation. HR Magazine (1999) has estimated that the number of 35-45 year olds in the United States currently in the early stages of their careers is projected to decline by 15 percent in the next 15 years, thereby substantially reducing the talent pool from which new leaders will emerge. The problem will be magnified as the number of 25-34 year olds continues to decline over the next decade, the predicted leadership gaps widens and organisations seek to find new leaders in an increasingly tight marketplace. Additionally, it has been reported that in 2000 the typical American worker had held nine jobs before reaching age 32 (Dobbs, 2001).

In Australia, it has been forecast that a large percentage of the workforce will retire in the next 5 to 10 years, and labour force participation is projected to decline to 60.6 per cent, with the rates for men to decline in every age group except those aged 60 and over; and the participation rate of women projected to rise in every age group except 15-19 year olds and those aged over 65 (Australian Bureau of Statistics, 1999). Currently in Australia the average age of retirement has dropped to 48 years of age (Australian Bureau of Statistics, 1997).

As organisations strive to implement systems that address these current and predicted high levels of management attrition and turnover rates, succession management programmes are receiving increasing attention (Baruch, 1999; Liebman, Bruer & Maki, 1996; Sullivan, 2000). In an attempt to strategically address this situation many organisations have started to internally target and develop talented staff using criteria that are linked to future organisational needs and role capabilities (Byham, Nelson & Paese, 2000). In other words, succession management approaches are being used to facilitate effective organisational positioning and development to ensure that within an organisation the ‘right’ leaders are available at the ‘right’ time (Rothwell, 2000).

This paper begins with an overview of the components of succession management and a discussion of its divergence from succession planning. The key elements of effective succession management are outlined along with models of implementation. The nexus of theory and practice is then illustrated through presentation of a case study outlining the implementation and evaluation of a succession management programme in a large Australian public sector organisation. Kirkpatrick’s methodological framework (Rothwell, 1994) was used to assess the effectiveness of this succession management programme. The programme outcomes are also analysed in accordance with literature based claims about the benefits associated with succession management approaches. The purpose of the paper is to highlight how succession management can be integrated into human resource management practices and be tied to employee training, development, and learning outcomes.

Succession Planning versus Succession Management

In the past a common method used to determine likely replacements for senior managers was referred to as succession planning. The term referred to a systematic and regimented system of identifying job position replacement, best used in relatively stable work environments. It relied heavily on performance management data and recommendations of key decision makers within the organisation (Rioux & Bernthal, 1999). The succession process was often decided and implemented in executive suites, behind closed doors, and surrounded by an air of secrecy. Promotion expectations were not always made clear and their measurement could be highly ambiguous (Liebman et al., 1996). Many organisations perceived succession planning as cumbersome, and neither effective in the retention of talented staff nor in the replacement of departing senior management (Byham et al., 2001).

It has been proposed that succession management emerged from frustration with succession planning, as the latter was not able to effectively respond to organisational restructures, team based work systems, diversity issues, global outsourcing, or talent shortages (Baruch, 1999; Byham et al., 2001; Metz, 1998). Succession management was formulated as a fundamentally and philosophically distinct course of action from succession planning. Succession management is a process that is used in the identification and development of high potential and talented staff in the search for an effective way to deal with the changing work environments of contemporary corporations. Ideally, it is a transparent approach that is embedded in organisational decision-making and actively supported by all levels of management. Succession management incorporates a broader range of standardised performance evaluation methods and involves gathering information on employee performance from multiple perspectives. It is thorough, and supplements subjective judgements of potential with independent objective assessment data related to key capabilities. The process involves the determination of required organisational capabilities, assessment and developing planning and programme evaluation. Each of these steps will be discussed in more detail later in the paper.

In a clear change from succession planning techniques, succession management practices focus on identifying and developing leadership capabilities, not specific job requirements. There appears to be consensus in the literature that a well designed and operated succession management process can deal with dynamic work environments, as it can be continually realigned to reflect current organisational business strategies and vision (Leibman et al., 1996; Rioux & Bernthal, 1999; Rothwell, 2000). The dynamic work environment to be served by succession management includes corporate downsizing, reengineering, decimated organisational levels, and broadened spans of managerial controls (Grossman, 1999). These processes are also intended to be more inclusive with respect to diversity aspects (Caudron, 1996; Wallum, 1993).

In theory, succession management processes are more objective than past methods of succession planning and are designed to redress perceptions of internal favouritism and ‘mirror’ or ‘halo’ effect decisions. It has also been suggested that diversity issues are better accommodated in succession management and that minority group’s benefit from its more objective implementation model (Linkage & Howard Inc., 1999). Succession management efforts are most likely to be successful if they are embedded in management operations and involve HR and other managers throughout the organisation (Linkage Inc., 1999; Walker, 1998) and are concerned with implications for other career planning practices such as formal education training or secondments (Baruch, 1999).

While succession management was initially conceived as an initiative mainly for the top echelon of business owners and managers in large companies it is now deemed as equally relevant for small and mid size employers and family run businesses (Randall, 1996). Due in large part to projected talent shortages and rising recruitment costs, not having a succession management process has even been seen as bordering on negligence (Grossman, 1999). Succession management is no longer merely about replacement issues, but rather it is a strategic responsibility to be shared among the organisation’s stakeholders (Sohall, 1997). Leibman, Bruer and Maki (1996) have added that the increasing diversity of workforce and social expectations will force organisations to rethink leadership development efforts and implement more objective and inclusionary talent identification programmes. This potentially presents an enormous opportunity for organisations via expanded work pools and increased diversity of ideas and values that could be addressed using succession management approaches (Eastman, 1995). Theoretically, sustaining innovation in organisations and responding to future organisational leadership needs should be embedded in succession management models. While succession management is thus essentially a very different method from succession planning, in much of the practitioner-based literature the terms are used interchangeably (Eastman, 1995).

Succession Management Components

In practical terms, succession management programmes can be located anywhere along a continuum of application. At the top-end are processes aimed solely at CEO replacement, ‘the process which plans an organisation’s transference of ultimate executive authority form one to another and the outcome which implements the process” (Santora, Clemens & Sarros, 1997: 109). At the other end of the continuum succession management programmes expansively encompass leadership development at all levels within an organisation. That is, “any effort designed to ensure the continued effective performance of an organisation, division, department or work group by making provision for the development and replacement of key people over time” (Rothwell, 1994: 5). The processes for both the top-end only and top to bottom end approach are the same, it is only the scope that varies.

Regardless of the particular organisation’s location on the continuum, the developmental focus of succession management is a consistent component. This focus involves the process of creating a clear picture of existing human resource strengths, relating them to anticipated needs and identifying areas requiring action (Cornerstone Consulting, 1999). Succession management is also viewed as a dynamic, on-going process of systematically identifying, assessing and developing leadership talents for future strategic tasks (Hagberg Consulting Group, 1999). Given this set of attributes, Walker (1998) has proposed that succession management might be better termed ‘executive resource planning’ or ‘leadership depth assurance’ to reflect its primary focus of developing staff capabilities. Byham, Smith and Paese, (2001) have added that the key to a successful succession management scheme is periodic re-evaluation along with buy-in and involvement of current executives.

While the components of an organisation’s succession management programme can vary as much as its scope of application, there are several critical elements that have been identified as key to effective succession management. Eastman (1995) has offered the following list of commonly reported effective practices:

These items are supported by international research findings (Purcell, 1995; Rioux & Bernthal, 1999; Tyson, 1997). Studies have indicated that highly effective succession management systems involve the CEO, have the support of senior management, involve line management identifying candidates, use developmental assignment, and link succession management plans to business strategies (Guinn, 1997). Development of leaders has also been linked to succession management systems which clearly establish competencies, are transparent in selection process, provide development opportunities and assesses these, provide guidance and feedback and align with a reward structure (Byham, Smith & Paese, 2001; Leibman, Bruer & Maki, 1996). In the case of General Electric’s programme, it has been reported that the organisation has ensured continued leadership development through a succession management process that covers employees during critical career milestone points to prepare them for new leadership challenges (Linkage Inc. & University of Michigan, 2000).

It is suggested that many organisations under-perform in succession management because it is a complex process and not easily implemented. Liebman, Bruer and Maki (1996) proposed that problems associated with succession management can include:

In particular, existing studies have revealed that the management style of the CEO can be an indicator of his/her attitude to succession and the chances of success or failure of succession management within an organisation (Schall, 1995; Sonnenfeld, 1997). Also, the composition of company boards has been found to impact succession processes. For example, Boeker and Goodstein’s (1993) longitudinal study spanned 22 years and 231 succession events and revealed that the greater the proportion of insiders on the boards, and the greater the concentration of ownership among board insiders, the more likely it was that an insider would be selected. Hambrick, Geletkanycz and Federickson (1993) found that there was a strong tendency for leaders to try and clone themselves, which influenced succession decisions. Anecdotal learning would also indicate that the identification and development of a pool of talented employees can have a deleterious effect on the morale of those outside the selected group and can also lead to expectations of fast tracking that organisations may not be able to fulfil. This latter issue is particularly relevant to the public sector where the current interpretations of merit selection and organisation structure may reduce timeliness and flexibility in capitalising on developed talent (National Academy of Public Administration, 1997).

Models of Succession Management

Rothwell (1994) has suggested that the direction, timing, planning, scope, degree of dissemination and amount of individual discretion, distinguish approaches to succession management. As previously discussed, there is a range of models for succession management and a continuum of implementation processes, depending on the individual organisation’s interpretation of the breadth of application of succession management. At its narrowest, the process would apply solely to the search for a new CEO, and at its broadest it would be fully integrated with the organisation’s entire staff recruitment, selection, training, development and promotion ethos. Regardless of scope, the first steps in developing an effective system of succession management have been identified as the determination of the required capabilities for staff members, the assessment of current capabilities, and the establishment of a development plan for existing staff (Western Australia Ministry of the Premier and Cabinet, 1999).

Determining Capabilities

The selection of key capabilities (or competencies) needed for success is often the first step in putting together a succession management plan. This begins with the analysis of the organisation’s strategic plan and allied documents to determine behaviours necessary to achieve the organisation’s goals. A range of methods is used to gather the information for this stage, and capabilities are validated using techniques such as:

Capabilities are not meant to be static and should be routinely reviewed, particularly if there is a change in business strategy or organisational structure. The identification and development of internal talent aims to foster a higher level of continuity of management. Having some pre identified management capabilities and personnel assessed against these criteria can assist an organisation to meet both long term and immediate managerial needs. With supportive human resources systems in place, decision makers will have access to more and better data on an internal candidate’s performance than on outside candidates.

Assessment and Development Planning

Following the establishment of capabilities, identified employees are then assessed against these capabilities. Assessment techniques can involve the use of performance appraisal data, multi rater feedback instruments, personality and psychological testing, analysis of work samples, simulations and role-plays. The choice of assessment will vary between organisations, but it is recommended that assessments are validated and transparent. After their assessment, participants are informed of their results including strengths and development opportunities. Development programmes that target the participant’s areas for improvement are then devised. These can include in-house training, formal education, job assignments, project based work and coaching. The process should aim to foster continuous learning for all participants (Metz, 1998).

The establishment of an acceleration pool for nominated participants is a feature of some succession management schemes. In an acceleration pool system, high potential candidates are identified and given training, coaching, and a wide range of professional experience within the organisation (Byham, Paese & Nelson, 2000). This identification and development of a pool of high potential employees marks another distinct change from earlier succession planning approaches. Large organisations might have more than one acceleration pool that could include a pool for supervisory level participants, one at middle management, and one for senior levels. Each pool, which might encompass one or two organisational levels, would prepare people for the next major step in the organisation. The size of a pool will depend on the number of positions it is expected to supply and the selection ratio that the organisation would like to have in filling target positions. The number of acceleration pools reflects how an organisation is structured, as well as how it thinks about its high potential and talented employees. Organisations may incorporate formal mentoring or coaching programmes for employees into acceleration poois.

A recent Bennis/Linkage survey (1999) of 5000 high performance organisations in the United States, identified ‘exposure to senior executives’ as the most critical programme for accelerating the development of high potential employees. Common practices include the acceleration through rapid, successive functional assignments, tailoring assignments to match individual needs, customizing management education, training and recruiting talent below the level needed to ‘mature’ in 2-5 years time (Hambrick, Geletkanycz & Frederickson 1993).

Research Study

Estimates of the proportion of businesses with a formal succession management process in place ranged from 10 percent to 15 percent (Guilford, 2000) - a quarter of U.S. organisations. In a survey of 19 companies in the United Kingdom (13 in the top UK “100”), 15 reported that they were actively engaged in managing succession within their organisation (National Academy of Public Administration, 1997). However, there is a distinct lack of empirical evidence of HR outcomes to accompany the general claims of a positive relationship between succession management and organisational performance (Huang, 2001). This article provides some preliminary insights into succession management by outlining a case study of the introduction and evaluation of a succession management programme.

Method

The case study organisation had no formal succession management or succession planning system in place prior to the introduction of the current scheme. The organisation did not have a consistent set of agreed leadership capabilities for internal staff, and management was concerned about projections of up to 30 percent senior staff retirements in the future three to four years. The organisation identified that leadership development and retention was a major issue for growing the business in the future and to effectively meet new business challenges. In response to this situation a succession management programme was developed for the top three leadership tiers within the organisation. The profile of the participants is outlined in Table 1.

Table 1
Succession management participant profile
Level Nos Assessed Male % Female % Average Age Average Service Years
Visionary 54 83 17 45.2 14.5
Strategic 171 78 22 42.4 13.5
Operational 177 64 36 41 11.8

Working with an external consultant the organisation designed, implemented and then evaluated a succession management scheme. The first step in the process was to undertake a capability profiling to meet the challenges of the next three-five years. A range of business plans, data on the organisation’s vision and direction, along with related data was analysed for critical success capabilities. During this stage of the project the commitment and ‘buy-in’ of senior managers across Australia was secured by using a two-phase data collection process. The first phase was to hold 18 individual meetings with strategic leaders within the organisation to solicit input on behaviours required for effective leadership. The individuals were selected by the organisation’s steering committee as the staff best able to articulate the leadership capabilities that were most crucial for organisational success. This process was then broadened, and 18 focus group interviews were undertaken with 108 operational leaders to gain their ideas on effective behaviours.

From these interviews, a draft list of capabilities was devised using the empirical and secondary data gathered with reference to previously validated leadership capabilities. The draft list was circulated for assessment in the form of a questionnaire to a representative group of experts within the organisation. The participants were asked to rate the importance of the capabilities at their level, rank the capabilities in order of importance and indicate the percentage of the requirements for this management level covered by the capabilities. Using the latter input the capability profiles were then written to ensure clear statements were organisationally relevant and integrated into existing competency frameworks. The profiles were created for use in future recruitment and selection, as well as in the second stage of internal participant assessment.

The next step was to identify candidates with leadership potential for the talent pools. That was achieved by conducting assessments using the capability profiles, performance ratings and observed skills and experience. During this stage of the process three groups were assessed; visionary/strategic managers, strategic/operational managers and operational/tactical managers.

All candidates were provided with detailed feedback on their assessed performance. In conjunction with the debriefing, all high potential candidates were provided with development plans and appropriate training programmes. Each candidate’s performance and development needs were then tracked conjointly with organisational requirements. As part of the continuous improvement and analysis process built into the programme’s implementation, the overall effectiveness of the succession management programme was evaluated after the first year.

Research Findings

The evaluation model was adapted from Kirkpatrick’s hierarchy of evaluation. Table 2 outlines the four levels of evaluation and their components. The evidence for the evaluation was collected by means of interviews, video case studies and organisational data on development planning, placements and utility analyses.

Table 2
Evaluation Framework
Level 1
Reaction
Measures of stakeholder perceptions of the effectiveness of the programme How satisfied are the participants, managers, HR and other stakeholders?
Level 2
Learning & Programme Progress
How well is each part of the programme meeting programme objectives? Focuses on what has been achieved
Level 3
Effective Placements
Behaviour change evidenced What % of vacancies in leadership positions can now be filled internally?
Level 4
Organisational Results
Organisations ability to be effective How is the succession management programme contributing to organisational results?

A total of 57 interviews were conducted with randomly selected stakeholders in the succession management programme. These included four groups - talent pool participants (29), their managers (9), HR managers (8) and group/general managers (11). The external consultant in collaboration developed the interview guides with the internal development unit. The interviews aimed to gather both quantitative and qualitative data on key aspects of the programme.

All stakeholder groups reported highly positive reactions to the succession management programme. On a 10-point scale the mean satisfaction was 7.5, and the participants conveyed descriptors such as ‘overdue’ and great ‘concept’. There was no significant difference in ratings between the four groups. The benefits most commonly citied were the identification of talent to meet the leadership needs of the future (58%); the development of leadership skills to improve both personal and organisational performance (26%); and the creation of a structured process for assessment and development (23%).

Concerns about the programme were centred on a perceived lack of follow-up to the process. In particular there was concern that ‘nothing has happened’ since the first development activity. It was also identified that more feedback on the impact of the programme at the organisational level was needed and a minor concern was expressed about the impact the programme had on staff that were not included, such as perceptions of elitism and jealousy.

The perceived usefulness and accuracy of leadership capabilities was rated high (m=8.02) with ratings below six on the 10 point scale. Overall the capabilities were reported to be comprehensive, accurate and reflective of best practice. Several interviewees noted that the capabilities were a “good start” and should be adaptable and reviewed regularly to reflect the changing needs of the organisation. The assessment and debriefing process was rated useful (m=7.47), while there were no significant differences between the four groups of the different levels, the participants with highest assessment scores rated the process higher (m=8.57) than those who were lowest in the bracket (m=6.75).

The development planning process rated positively (m=6.62) and there were no differences between the four groups. Interviewees who more satisfied with the assessment/debriefing process were also more satisfied with the development process (r=.40). Concerns identified were that the plans were impersonal or vague, and did not target development needs relevant to their job. Another issue raised was manager involvement, which ranged from very supportive to negative. Many participants reported that while their manager was supportive of development, it was not made a priority, which corresponded with managers’ comments about the difficulty in making time for development issues. Incidentally, participants and managers who reported greater manager involvement were also more satisfied with the development planning process (r=.55). An analysis of development activity indicated that the participants had completed 71 percent of development activities. Activities have included project work, courses, coaching and mentoring, on the job activities and a range of related actions. Analyses during the measurement period showed that 100 percent visionary and 50 percent strategic appointments were made from the talent pools.

Some 71 percent of participants reported that they had made changes to their behaviour as a direct result of feedback from the assessment process. Eight of the nine managers interviewed also reported that they had observed behavioural changes in their direct reports. The changes included becoming more assertive and pro-active with ideas; delegating more to direct reports and being better with feedback; and becoming more team oriented; and improving interaction skills such as listening, communication and empathy.

A return on investment and utility analysis were also undertaken to measure the value of the programme. Factors included in the calculations were the number of successful managers promoted from the talent pools, improvement in the validity of the selection process for promotion, estimated contribution back in tenure, estimated dollar value return on high performers, correlation of successful assessment results and on the job performance, and cost difference between new and old promotion processes. As the monetary outlay was confidential the actual figures cannot be reported here, but it can be reported that there was a 286 percent return on investment.

Discussion

The case study organisation’s staff demonstrated substantial ongoing commitment across most levels of the business, and there was general support for the process, not only at the highest levels, but also all the way down the line. In particular, most senior management involved in the programme were prepared to provide support and development opportunities for staff identified as high potential. These factors, no doubt, contributed to the high level of expressed satisfaction with the succession management process and its implementation, as evidenced in the programme evaluations. The problems identified were associated mainly with individual responses and isolated incidences of less than full support for the programme.

The employees targeted for development were more satisfied with the programme than those who scored low on their assessments. This highlights the importance of effectively managing the assessment, placement and promotion components, to ensure that employee dissatisfaction is minimised. While targeted staff appeared dedicated to continual assessment, development and feedback, they felt that some of their managers were somewhat less committed. This finding highlights the importance of involvement at all levels fully with communication to all staff.

In research on best practice in succession management Linkage (2000) reported that almost two thirds of best practice companies filled vacancies with internal candidates. In the case study 100 percent ‘visionary’ and 50 percent ‘strategic’ appointments were filled by internal candidates. These figures suggest that the programme has been relatively successful in this regard.

There are a number of other criteria on which an effective succession management system can be measured; although many of these dimensions require longer term measurement. The responsiveness of the programme to organisational restructures, fostering team development, encouraging diversity, and increasing globalisation entails continual evaluation over several years. In order to be effective and responsive to change, the systematic analysis of succession management programmes should be incorporated into the measurement of a programme’s performance. The case study demonstrates that significant benefits can accrue to a comprehensively designed, implemented and evaluated programme, but also highlights the depth of organisational support that is required for succession management to succeed and the critical importance of continuous evaluation.

Concluding Remarks

Succession management is a useful policy frame for businesses to use in the development and retention of high potential employees. Arguably, this strategic identification and deployment of a business’s human resources will lead to a more effective and successful long-term business development. However, succession programmes require substantial employee commitment and effective resource allocation, without full organisational support such programmes are unlikely to reach their full potential.

For effective succession management the HR function needs to develop resource and development strategies and processes that embed succession disciplines into standard organisational practices. While the day-to-day succession process is line owned, HR has a critical function in facilitation and data management. This encompasses management resource strategy, human resource planning, skills and capabilities analysis, recruitment and selection, and management development. Succession management cannot stand-alone; it must be linked with business strategy and its outputs.

Human resource management therefore is responsible for the development of policies that tie the succession programme into decisions on internal development and external recruitment, and strategies for the development of those capabilities, which will be needed now and in the future. The challenge of managing this process includes maintaining flexibility; allowing employees to make their own career decisions; and the need to increase diversity, and especially to ensure that the talents of women and minority group members are recognised and developed.

Succession management programmes, when aligned with business needs, can be used as a key element of an HR strategy to build customised, proactive career development for talented individuals. Clearly defined criteria for advancement, linked with concrete development opportunities that are aligned with corporate culture, provide employees with an unambiguous indication of what the organisation values and rewards in terms of career progression.

The presented case study evidence here indicates that the introduction of a succession management programme can provide an organisation with a number of positive outcomes. However, as this evaluation only examined the first phase of implementation, and ongoing analysis of the succession management programme and its impact will need undertaken. The establishment of any correlation between characteristics of a succession management programme and HR performance will require extensive research beyond that undertaken for this preliminary case study.

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