Fail to plan and plan to fail

The powerhouse behind any company’s success is not its IT infrastructure or a polished
corporate strategy.
It isn’t even its reputation and a solid shareholder base. None of these things can provide
the stability and potential for revenue growth that can be achieved through good people.
The importance of having the right people in place permeates throughout the
organisation, and is nowhere stronger than in the highest echelons of power. choose a bad
one, and you could find that your company is being led downhill fast.

Furthermore, with the reputation of a company now often inextricably linked to that of its
CEO, the departure of a high profile figurehead can leave an organisation flailing –
directionless and lacking identity.
In an attempt to ensure that there is an adequate pool of potential successors to fill vacant
senior positions, organisations use succession planning strategies. These may cover a
range of activities, including developing the potential of existing employees and
identifying possible successors from within, as well as targeted recruitment to fill any
talent gaps that may exist in the company.
We invited a number of experts in this crucial area to provide their insight into the latest
thinking in succession planning.
A step-by-step guide to effective succession planning.
Caroline Dunk, leads consultancy firm cda's work on change management, HR
strategy and HR policy & process development.

Succession planning has always been something of a ‘Cinderella’ issue – neglected in

favor of other priorities. However, setting up an effective succession planning process
needn’t be complicated; it’s all about asking the right questions.

1. What is the succession planning process for?

You need to be asking whether the process is primarily about managing risk by protecting
against loss of key staff or about maximizing the talent pool available to the organisation?
How open are you prepared to be with individuals about their place in the succession plan
and what are the succession planning timeframes?
2. What are the assessment criteria?
It’s important to assess competence and potential against an agreed set of criteria, which
reflect the strategic priorities of the organization. Assessing potential has traditionally
been a challenge; models like cda’s ‘Leadership Talent Factors’ can provide a useful way
to tackle this.

3. Can succession planning be integrated into existing HR processes?

Ideally, assessment decisions will be made or confirmed as part of ongoing career
discussions so that data is constantly updated, managers are engaged in the process and
any resulting development plans are integrated with other development activity. Roles in
the process must be clearly specified, and usually a dedicated succession committee is
required to oversee the process and drive cross-business development.
4. How to measure the results?
‘What gets measured gets done’ – so how will succession data be reported? What
measures will be used to evaluate the success of the succession planning process? If these
requirements are clear at the outset, they will help shape the overall approach.
It’s only once these fundamental questions have been answered that thinking on the more
detailed aspects of succession planning, such as assessment processes, can start.

The corporate strategy

How does Destination Hotels & Resorts – the US’s fifth largest independent
management company with more than 6500 employees – ensure it has the leaders it
needs. VP of HR Robert Mellwig guides us through it.
Good leaders make a difference to an organization; great leaders make an exceptional
difference. The success of a leader can be simplistically measured in two parts: what
results they achieve individually or through their team and how they achieve these
results. Many companies have isolated these leadership success factors into specific
behaviors. When common behaviors are linked they can be ‘packaged’ as leadership
competencies such as motivating and inspiring others, communicating effectively,
driving continuous improvement, etc.
Strategy and vision
At Destination Hotels and Resorts, our overall learning philosophy is centered around
creating long-term careers and optimizing our return on human capital. Our goal is to
provide internal and external opportunities for our associates to grow and advance in their
career and lives. One of our core leadership competencies is ‘championing continuous
learning’, which is present in our selection, 360-feedback, performance management and
compensation process.
The strength within
The advantages of having staff rise up from within can be numerous. You will always
know more about your employees than someone who is not currently working with the
firm. Typically, companies are better able to manage salary planning when internal
candidates are considered.
We handle succession planning through a third party vendor – SumTotal Systems – with
whom we have built an extensive database. This is managed online through an employee
and manager ‘self-service’ concept that allows for real-time report and analytics to help
run our business. The system captures data on an individual’s background and creates an
online resume, and pulls in data from other systems like the 360-feedback process. This
enables us to view comprehensive records about our employee base, both at an individual
level and a business level. Reports can also be generated to answer key questions
surrounding employee readiness for promotion, who is available and interested in
taskforce assignments, etc….

Key metrics for our organization center around readiness for promotion and/or lateral
movement. We track this data as: ready now, ready in six months, ready in 12 months,
new hire and uncertain, and continue in current role. This allows us to gauge how
effectively we are able to build bench strength across functions and business lines. Our
metrics and success correlate to our ability to get more people ready for increased
responsibility over time.

Strategically, it is important to start with an aligned definition of successful succession

planning within your organization. What jobs matter the most and which people have the
highest impact on the organization?

In addition, thinking through the uniqueness of culture can be important. For instance, if
you use technology to track who is ‘ready’ for a promotion or lateral move within the
company, who will you grant access to in order to use that information? Can they see
across business unit lines and what will be the protocol to contact an individual should a
career opportunity become available? These questions tend to be answered in part based
on the culture, values and norms established in your organization.

The ability to forecast talent gaps and ensure you have concrete plans and strategies to
provide for optimum business continuity can be one of the most critical value-add
activities within a human resources group.

Our organizational turnover has improved since adopting this approach, by five percent at
the managerial level. Managers are required to log in to the system and update the data
twice each year, which reinforces the concept and renews their faith that someone is
actually looking at the data. Their manager is also required to update the manager’s
profile and communicate back to the associate, which reinforces the use and application
of the technology and process.
When associates recognize that an employer cares about them, their career and their
future and that they have a vehicle to help them manage this effort, their engagement and
commitment increase. If they believe there to be employment opportunities within your
organization and understand how to achieve their career goals, they will not spend time
‘on your clock’ searching for alternative employment. This translates to increased
productivity and ultimately impacts the bottom line, as retention improves and continuity
of leadership enables relationship building and business development with customers.
The art of succession planning
Bernard Cooke, Principal Consultant, OPP Ltd, on identifying derailment factors.
In January this year, international oil giant BP finally confirmed a date for Lord
Browne’s retirement and that Tony Hayward, head of the company’s exploration and
production business, will succeed him as chief executive. The choice of a successor for
one of the UK’s most high profile businessmen has been played out under a spotlight. It
is a valuable reminder – should senior management teams need one – of the importance
of a long-term and clearly communicated strategy for succession planning.
The rise of shareholder activism has placed a sharp focus on the importance of having
effective leaders at the helm of the world’s leading, public companies. Also, the
challenges of competing in a globalized economy have placed talent management firmly
at the top of the business agenda. Many organizations have responded effectively in their
approach to people management, but many have yet to step up and take the holisitic view
that succession planning requires.
Above all, a business should be considering its future leadership in the context of its
overall organizational strategy. What are the key goals and objectives of the business
over the next five or so years? Aligned with this, what skills and qualities will leaders
need to drive success? The development of a senior leadership team must be underpinned
by a long-term ‘talent management’ strategy that focuses on finding and keeping future
leaders of the right quantity and quality, at all levels.
This highlights an important consideration – that effective succession planning must look
beyond the development of a single figurehead to assembling and maintaining an
effective senior management group. Business performance does not depend on one
charismatic, highly talented leader – that individual must be supported by a team of
individuals with skills that complement each other, as well as those of their chief
executive.
A clear understanding of individuals’ strengths and their potential is the starting point, a
process that can be supported through effective analysis and psychometric tools. From
intellectual or cognitive ability through to drive and, critically, for senior managers,
interpersonal skills, it is important to have an insight into the capability of top people to
perform against the company’s business plan and deliver its objectives. Beyond this, team
chemistry is key; individuals who will work together need to be assessed as to whether
they can operate as a high-performing team, and a psychological approach to this is
particularly effective.
It’s also essential to gain insight into individuals’ likely ‘derailment factors’, those
characteristics that may surface under stress to cause even the most talented employee to
veer off course if they are not recognized and addressed. Such factors include, for
example, difficulty in changing or adapting to change, problems letting go, or, crucially,
difficulty in building and leading a team.
While it is important to have an understanding of and address these potential weaknesses,
effective succession planning should focus as much on developing and playing to the
strengths of each individual in the senior management team. Relevant individuals must
also have a high degree of self-awareness to ensure clarity about their own areas of
strength and possible pitfalls, as well as their impact on those around them. Ticking these
boxes will underpin a high performance group that works as a successful senior team.
The challenge, of course, is to ensure up-and-coming talent is identified at the earliest
stage of an employee’s time with an organization. In this way, potential may be groomed
and long-term loyalty encouraged through effective investment in, and support of, skills
development throughout the company. A focus on the next CEO alone is guaranteed to
leave you short of choices!
Don’t lose face
Jonathan Jordan, Chief Executive of Burson-Marsteller UK, on the impact of C-level
departures.
Q. Just how important is the image and reputation of C-level staff on the success of
a company?
A. Research confirms what every executive knows to be true – that CEO and corporate
reputation are inextricably linked and have a proven impact on the success of a business.
Burson-Marsteller has been conducting CEO and corporate reputation research since
1997, when research amongst C-level executives worldwide found that the average
estimated contribution of the CEO to a company’s reputation stood at 40 percent. In
2003, this figure jumped to 50 percent. The tremendous importance attached to CEO
reputation reaches far and wide, and its value has been proven in countries across
continents.
Even among consumers – a segment often considered less informed about business
matters – the CEO effect was found to be strong. In both the US and the UK, Burson-
Marsteller’s research on the general public found that a CEO’s reputation accounted for
48 percent of a company’s reputation. CEO reputation continues to matter the world over.
Q. Has this always been the case, and if not what’s changed?
A. More attention and pressure is being placed on CEOs than ever before. CEO
departures and corporate behavior make headline news worldwide. With the spotlight on
CEOs shining brighter each quarter, CEOs need to better understand the inextricable link
between their reputations and company reputations.

Companies are clearly recognising that their stakeholders were becoming more numerous
and diverse. With the rise of the internet came a deeper interest in corporate affairs. A
company’s constituencies were expanding beyond traditional groups such as the financial
community, the media and government regulators to encompass organizations such as
NGOs and pressure groups.
Technology empowered new stakeholders to voice their opinions, exert influence and
demand access to top management. News could be instantaneously communicated around
the world through the proliferation of TV stations and new media and every nook and
cranny of a company’s affairs were laid wide open to critique and scrutiny.
Q. Do you think companies realize this enough and take sufficient steps to safeguard
or plan for that reputation?
A. In light of these changes to the external business environment, there is greater
dependence by the CEO on his/her communications’ team. However, some companies
are better than others in planning and safeguarding their reputations. Leaders that are in
touch with their organizations and that actively engage with stakeholders are in a much
better position.
Q. So what can organizations do about it? How can they assess what impact their
reputation is having on the company as a whole?
A. It comes down to research. One Forbes 500 CEO offered this advice to new CEOs:
The first priority is to get in touch with the company’s reality. Undertaking research to
measure how key stakeholders (ie. employees, customers, prospects, vendors, suppliers,
partners and local community groups) perceive the company and its strengths and
weaknesses is critical. Well-designed research, independently performed and statistically
based is essential. There are also now multiple rankings and listings that measure how
well companies are perceived and admired, such as Fortune’s Most Admired Companies.
This provides an independent picture of the competitive landscape.
Q. How can they plan better for the future and ensure they have the kind of leaders
that will instigate success?
A. This is where effective succession planning is essential. CEO turnover is on the
increase, with the average tenure of chief executives just five to seven years. However,
despite shorter terms, they must leave the company stronger not weaker and in a better
position to be run by a successor. Chief Executives can personify a company’s vision and
voice, yet companies endure beyond their leaders. Successful leaders plan for an heir
apparent with the strength, values and experience to handle the next stage of the
company’s evolution.

• HR consultancy DDI – responses (Laura Buller)

• VP HR Boeing