Succession Planning - A 5 Step Process

Step 1: Identify critical positions

Critical positions are the focus of succession planning efforts. Without these roles, the
department or agency would be unable to effectively meet its business objectives. Workforce
projection data or demographic analysis is essential in identifying risk areas. A risk assessment
may also be conducted and compared to current and future vacancies to identify critical
positions within your organization.

Step 2: Identify competencies

A clear understanding of capabilities needed for successful performance in key areas and
critical positions is essential for guiding learning and development plans, setting clear
performance expectations, and for assessing performance. By completing the process of
competency or position profiling within your organization, current and future employees gain an
understanding of the key responsibilities of the position including the qualifications and
behavioural and technical competencies required to perform them successfully.

Step 3: Identify succession management strategies

Now that critical positions have been identified and have been profiled for competencies, the
next step is to choose from a menu of several human resource strategies, including developing
internal talent pools, onboarding and recruitment to address succession planning.

Step 4: Document and implement succession plans

Once strategies have been identified, the next step is to document the strategies in an action
plan. The Succession Planning: Action Plan provides a mechanism for clearly defining timelines
and roles and responsibilities.

Step 5: Evaluate Effectiveness

To ensure that the department or agency’s succession planning efforts are successful, it is
important to systematically monitor workforce data, evaluate activities and make necessary
adjustments.

When implementing succession plans, employers should ensure there are no discriminatory
selection and implementation practices.

Purpose

Recognizing that changes in management are inevitable, [Name of Company] has established a
succession plan to provide continuity in leadership and avoid extended and costly vacancies in
key positions. [Company Name]’s succession plan is designed to identify and prepare candidates
for high-level management positions that become vacant due to retirement, resignation, death or
new business opportunities.
Policy

It is the policy of [Company Name] to assess the leadership needs of the company to ensure the
selection of qualified leaders that are diverse and a good fit for the organization’s mission and
goals and have the necessary skills for the organization.

Procedures

The president/CEO is responsible for [Name of Company]’s succession plan. The president/CEO
chairs the Succession Planning Committee, which also includes the executive vice president, the
general counsel and the vice presidents of Human Resources and Finance.

1) Each January, a Succession Planning Committee meeting will be held. At each meeting, each
division head will:

a. Present to the Committee a review of the departmental succession plan.

b. Identify key positions and incumbents targeted for succession planning. This should include an
analysis of planned retirements, potential turnover, etc.
c. Identify individuals who show the potential needed for progression into the targeted positions
and leadership within the company.
d. Outline the actions taken in the previous six months to prepare identified individuals to assume
a greater role of responsibility in the future.

2) By the end of February each year, the Committee will approve targeted candidates.

3) By the end of March each year, the Committee will approve an outline of actions that will be
taken in the following six months to prepare individuals to assume a greater role of responsibility
in the future.

4) The president/CEO will periodically request updates from senior management on the
development process for each targeted candidate.

The Committee establishes a succession plan that identifies critical executive and management
positions, forecasts future vacancies in those positions and identifies potential managers who
would fill vacancies. Vacancies will be filled from within or, in the event no viable candidate is
available, on an “acting” basis while an external recruitment effort is conducted.

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This material is for informational purposes only and not for the purpose of providing
legal advice. You should always contact your attorney to determine if this information,
and your interpretation of it, is appropriate to your particular situation.
 Succession Planning Policy

A good succession-planning program aims to identify high growth individuals, train them and
feed the pipelines with new talent. Here’s an outline of one program.

Purpose
To ensure replacements for key job incumbents in executive, management, technical, and
professional positions in the organization. This policy covers middle management positions and
above in [name of organization].

Desired Results
The desired results of the succession planning program are to:

 Identify high-potential employees capable of rapid advancement to positions of higher

responsibility than those they presently occupy.
 Ensure the systematic and long-term development of individuals to replace key job
incumbents as the need arises due to deaths, disabilities, retirements, and other
unexpected losses.
 Provide a continuous flow of talented people to meet the organization’s management
needs.
 Meet the organization’s need to exercise social responsibility by providing for the
advancement of protected labor groups inside the organization.

Procedures
The succession planning program will be carried out as follows:

1. In January of each year, the management development director will arrange a meeting with
the CEO to review results from the previous year’s succession planning efforts and to plan for
the present year’s process.

2. In February top managers will attend a meeting coordinated by the management

development director in which:

A. The CEO will emphasize the importance of succession planning and review the
previous year’s results.
B. The management development director will distribute forms and establish due
dates for their completion and return.
C. The management development director will review the results of a computerized
analysis to pinpoint areas of the organization in which predictable turnover,
resulting from retirements or other changes, will lead to special needs for
management talent.
D. The results of a computerized analysis will be reviewed to demonstrate how
successful the organization has been in attracting protected labor groups into
high-level positions and to plot strategies for improving affirmative action
practices.
 3. In April the forms will be completed and returned to the MD director. If necessary, a
follow-up meeting will be held.

4. Throughout the year, the management development director will periodically visit top
managers to review progress in developing identified successors throughout their areas of
responsibility.

5. As need arises, the database will be accessed as a source of possible successors in the
organization.

Succession Planning Roadmap

How to build a robust succession planning program that aligns current talent development with
future leadership needs.

If your CEO has a sudden heart attack, do you know who will take the chief executive’s place?
What if your top executives are wooed away to another firm? Do you have the next generation
of leaders ready to fill those roles? If not, you may end up with an empty C-suite—or worse,
underqualified people moving into leadership roles because there is no one better to take over.

The only way to reduce the effect of lost leadership is through a strong succession planning
program that identifies and fosters the next generation of leaders through mentoring, training
and stretch assignments, so they are ready to take the helm when the time comes. Research
supports sound succession planning. A study some years ago from consulting firm Booz Allen
Hamilton concluded that “over their entire tenures, CEOs appointed from the inside tend to
outperform outsiders” when it comes to returns to shareholders. Yet many organizations
struggle to take their succession planning programs beyond a static list of names slotted for a
few top spots.

“Every company has a succession planning document,” says David Larcker, a professor in the
graduate school of business at Stanford University. “The question you have to ask is, ‘Will it be
operational?”

This Roadmap offers human resources leaders a framework and advice on how to create a
robust succession planning program that aligns talent management with the vision of the
company, ensures employees have development opportunities to hone their leadership skills,
and guarantees that the organization has a leadership plan in place for success in the future.

Jim Skinner, former CEO of McDonald’s Corp., was known to tell managers: “Give me the
names of two people who could succeed you.” It was just one way the CEO continued the
culture of succession planning at McDonald’s.

It was an understandable priority considering Skinner only landed in the role in 2005 after two
other CEO’s died suddenly over the course of just two years. And when he retired in 2012,
Skinner was confident that his successor, Chief Operating Officer Don Thompson, was ready to
take over, because he spent much of his seven years mentoring him.

“I basically felt the responsibility to the board of directors to be sure I provided them with
someone who could run the company when I’m gone,” Skinner told Fortune a year before his
retirement. “Until I was capable of doing that, I would not have left.”

This kind of leadership level commitment to training and mentoring the next generation is a vital
component of succession planning. And while most executives understand the importance of
succession planning efforts, few of them believe their organization excels in this category.

As companies begin to develop a succession planning process, they should consider these
fundamental issues:

High potential vs. everyone: Some companies focus all of their succession planning efforts on
“high potential individuals,” whereas others create a succession plan for everyone from the
moment they are onboard. The benefit of focusing on high-potential workers is you can channel
more resources and coaching toward those employees with the greatest promise. The risk is
that you overlook great people and alienate and frustrate the rest of the employees, which can
impact morale and turnover. “Most successful organization focus on everyone,” says Dan
Schneider, cultural architect at advisory firm The Rawls Group.

Hiring from within vs. bringing in someone new: Developing leaders internally takes time
and effort, but these homegrown candidates are more likely to be successful than external
candidates. According to a 2012 study by Matthew Bidwell, an assistant professor at the
University of Pennsylvania’s Wharton School, external hires are 61 percent more likely to be laid
off or fired, and 21 percent more likely than internal hires to leave a job on their own accord.
These outside hires also get paid more, but get lower marks in performance reviews during their
first two years on the job.

However, internal hires aren’t always an option. Fully 38 percent of firms anticipate they will
need to recruit externally for C-level roles in the next 12 months. Internal candidates are also
not always the best choice. If a company wants to move in a dramatically different direction, or
its current leaders leave before the next generation is ready, companies need to be open to
bringing in someone from the outside.

Factoring diversity into decision-making. Managers often seek people who are like them for
mentoring and promotion, which often leads to a plethora of white men leading organizations. If
companies want diversity in their leadership, the succession planning initiative should include
steps that actively promote women and minorities for leadership opportunities, and train
managers on how to encourage diversity on their teams.

Making sure you have support from the top. HR can build a great talent development plan,
but without active support from leadership, it won’t have the desired impact. HR leaders can’t
force executives to support their efforts but they can align talent management efforts with
strategic plans and educate executives and managers about the business value of succession
planning efforts.

Fluor’s leaders develop their own replacements

At Fluor Corp., the global construction and engineering firm headquartered in Irving, Texas,
talent management efforts are directly aligned with long-term strategic goals, and executives are
viewed as the company’s corporate talent scouts.

“Having a robust succession planning and talent review program and culture is just good
business,” says Glen Gilkey, Fluor’s senior vice president of HR. “It helps mitigate the risk that
leadership will be a constraint to growth.”

Part of every executive’s job is to identify high-performing employees and help them build their
skills and experiences so they can move up the corporate

ranks, Gilkey says. “Leaders are held accountable for the development of their people even if it
means moving them to another division,” he says.

Flour relies on a 70-20-10 model of talent development with 70 percent of the development
coming from experience, 20 percent from coaching and 10 percent from classroom or other
training. Leaders are expected to look for opportunities for employees to gain experience and to
provide them with the necessary support and coaching to be successful, Gilkey says.

To ensure this support occurs, executives are celebrated when one of their people succeeds,
and part of their compensation and promotion is tied to how effectively they support talent
management on their teams.

“Having a culture where people want to help others succeed can’t be understated,” Gilkey says.
“It doesn’t cost a lot of money, but it does require a lot of time on the part of the leadership
team.”

Stuart Dean, the architectural restoration company based in New York, is an 80-year-old family-
owned business, and all of it’s current shareholders are fourth-generation family members. Yet
two years ago, when the company needed a new CEO, it went outside the family to find its next
leader.

“We needed to go in a different direction,” says Adam Arkells, senior vice president and chief
human resources officer. The company had gone through a period of stagnant growth, and the
near-term plan called for global expansion. “We needed a different type of leader for the
company, someone who could bring cohesion and a single vision while also embracing the
family’s values,” says Arkells, who was part of the search committee.
That’s not to say the committee didn’t look within the family’s ranks to find a replacement. But
they weren’t hamstrung by the need to choose family over everyone else, Arkells says.
Ultimately, they chose Mark Parrish, a career executive with experience in international
commercial service industries.

It was a struggle at first. Some people doubted that someone outside of the family could lead
the company. But over the first year, he proved himself by demonstrating that he was honest,
thoughtful and invested in the success of the business, Arkells says. “””

And though the transition was a little difficult, the board and the employees are pleased with the
results. “Choosing an external candidate to run a family business can be an emotional struggle,”
Arkells says, “but you can’t let that get in the way of good business decisions.”

Making succession planning a priority must come from the leadership team, but implementation
of that plan is HR’s responsibility, The Rawls Group’s Schneider says. “HR’s role in succession
planning is to find people who fit the culture and to help them develop the skills to lead the
organization so it stays viable in the future.”

To do that, HR has to create a succession planthat links talent development with the strategic
goals of the board, the business and the staff.

A succession planning program compiles the skills, abilities and goals of each employee,
compares them to the needs of current and future roles, and tracks employee progress toward
being ready to fill those roles. Building a strong succession planning road map involves the
following steps:

Pack a BASKET: Create a specific model for every job that defines the behavior, attitude, skills,
knowledge, experience and talent, or BASKET, necessary to succeed in the role. These models
will help employees understand what’s expected of them in their current role and what it will
take to be ready to move forward.

Know where you are going: Be sure BASKET assessments consider the skills necessary to
fulfill future roles not just present ones. For example, if the company plans to expand globally,
the next generation of leaders should be comfortable working abroad; or if growth plans involve
rapid acquisitions, someone with finance skills and change management experience may be the
best choice for leadership positions.

Map the gaps: As part of the talent assessment process, HR should assess everyone in the
organization with an eye toward who is ready to take on key leadership roles today, in 36
months and in 72 months. Use the BASKET assessments to do a gap analysis with employees
to help them see what they need to do to be ready for the next level and how long that should
take. Report those findings to the C-suite and the board as part of your succession planning
updates.
Ask for directions: As part of the assessment, talk to employees about their career goals and
aspirations to be sure you are prepping them for a job they want. “Part of HR’s responsibility is
to make sure people have enough exposure to know where they want to be in the future,”
Schneider says. “That’s where a lot of succession planning programs go off-track.”

Identify roadblocks: Once you’ve completed the assessments, look for any bottlenecks in the
development process that could prevent candidates from moving forward. This may include
executives who block the way for the next generation, or glaring gaps in readiness for critical
roles. Ideally, you will have two to three candidates for every leadership position in varying
stages of readiness.

Make sure the board is onboard: Once assessments are complete, HR, the CEO and the
board of directors should come together to review the assessments and create a list of the top
candidates for each role. “The board is your jury and you need their support,” Miles says. By
working with the CEO and the board, you ensure that everyone is on the same page about
succession plans.

Keep your eyes on the road. Once you have a succession planning list in place and you know
where your next generation of leaders are in their development process, use talent
management tools, performance assessments, mentoring and stretch assignments to close the
gaps. Make sure employees are onboard with setting their own development goals, and track
their progress through regular performance assessments.

Check the map: Review the succession plan with the C-suite and the board at least every nine
to 15 months and whenever there is a major change in leadership or in corporate strategy. This
ensures that you are always up to date on the development of your top talent and that you
identify any changes in direction that might require a tweak to the plan.

As companies expand beyond 200 to 300 employees, it becomes challenging to oversee talent
management and succession planning efforts on paper. You cannot effectively track the career
development progress of hundreds of employees using spread sheets and sticky notes, says
Claire Schooley, senior analyst with research firm Forrester.

Fortunately, today’s generation of HR software systems are integrating succession planning

with their recruiting, onboarding, training and assessment modules, making it a seamless step in
the talent management process.

Schooley encourages companies to look for tools with visual features that allow them to
graphically identify talent gaps, color code individual readiness, and make side-by-side
comparisons of several individuals. “That can be extremely helpful to succession planning
efforts,” she says.

Even if you aren’t ready to make succession planning part of the way you use HR software, find
out if your vendor provides succession planning features that can be implemented later on. “You
don’t have to use everything at once,” Schooley says, “but it’s nice to know that it’s there when
you are ready.”

Some tools that integrate succession planning modules include:

SAP SuccessFactors’ succession and development module helps companies identify,

develop, and track talent and spot talent gaps that need to be addressed.

Features include:

 Tools that allow you to highlight and watch key positions for succession planning.
 Tracking tools to following high-performing employees through their career development
process.
 Reports and review features to assess an employee’s experience, skills and career
goals.
 Rating tools that allow you to appraise individuals, groups and departments using
competency-based criteria.

Oracle Taleo’s succession planning module is a cloud-based service that helps organizations
systematically consider both internal and external talent for key roles.

Features include:

 Comprehensive succession plans created using data captured in the recruiting and
performance review processes.
 Talent Pools and an Interactive 9-Box Matrix that assign and track development
progress for critical roles, and allow HR to assess employee groups using key
performance metrics.
 Candidate comparison features that display multiple talent profiles side by side.
 Embedded analytics so managers can segment and benchmark pools of employees.

Halogen Software’s eSuccession uses a talent pool approach that aligns the company’s
workforce competencies with strategic plans and follows a phased approach to succession
planning.

 Phase 1: Understanding workforce potential and retention risks through performance

appraisals. Includes tools to predict employee potential and identify opportunities for
promotion.
 Phase 2: Groom high-potential employees for future talent needs. Includes talent profile
tools to track and compare talent assessment updates and identify gaps.
 Phase 3: Recruit from within. Includes tools to assess talent and performance data
when filling open positions, calculating bench strength or measuring whether talent
development goals have been achieved.
Peoplefluent succession planning software helps businesses build a sustainable leadership
pipeline through internal talent development and recruiting.

Features include:

 Interactive succession planning charts and talent profiles to view the readiness of
potential successors for key positions.
 “Extended enterprise” succession features that optionally extends the succession
planning process outside the organization.
 A talent profile hub that captures historical performance management data for easy
reference.
 Tools for employees to research career opportunities and express interest within the
talent profile.

Silkroad Wingspan manages all employee information compiled from assessments,

appraisals, goals and development plans so that HR can automatically classify internal
candidates for a given position.

Features include:

 Career development tools that highlight the skills to be acquired by each employee, and
the anticipated time to complete development goals.
 Comparison tools that allow for views of all potential candidates side by side while
adjusting job-specific criteria.
 Separate modules that can operate individually or as an integrated employee
performance management system.

Look Out!

Companies make many mistakes when it comes to succession planning. Here are the most
common—and how to avoid them.

1. Using the past to plan for the future: You need to choose leaders whose skills align
with future goals. To avoid this trap, make sure succession plans align with the long-term
strategic vision of the business.
2. Stopping at the CEO: The best succession planning programs at least address the
entire leadership team as well as senior management. “Succession planning is a multi-
person event,” Schooley says. “If one person moves up, it creates a new hole and that
can ripple through the organization.”
3. Not getting the Board onboard: CEOs and HR often think they have a succession plan
in place only to discover the board disagrees. “It’s a big mistake to assume the viability
of a candidate in your mind without vetting it with the board,” Miles says. The best
programs incorporate the board of directors in planning and keep them up-to-date on
development efforts to ensure everyone is on the same page.
 4. Allowing human capital roadblocks to take root: When talented people top out in
leadership roles, they can prevent the next generation from moving up. The best
companies avoid these roadblocks by creating new positions, collaboration opportunities
and stretch assignments so future leaders have room to grow.
5. Succession isn’t part of the culture. Succession planning fails when there is no
incentive for executives to mentor their people, Schneider says. Best-of-breed
companies encourage executives to identify and develop talented young leaders and
align their compensation with these efforts. “It should be considered a badge of honor to
have your people selected for promotion.”
6. The wrong people making decisions. CEOs aren’t in the best position to choose their
successor, because they often are more focused on their current legacy than the
company’s future goals. The best companies involve HR and the board when making
succession planning decisions.

We’ve organized this roadmap into three phases to help you implement the planning and
execution of you succession planning program. Below is a summary of the “Plan,” “Do” and
“Review” of succession planning.

Plan

 Decide how deep you want to go: Just the C-suite? Management? Everyone?
 Determine whether you will focus on high-potential workers or extend succession
planning to a wider pool of employees.
 Define the skills and experience needed for key roles: Think about where the company is
going and what leadership skills you’ll need to get there.
 Evaluate whether your HR software offers succession planning tools and whether you
want to use them.

Do

 Assess employees’ current performance and identify any skill or experience gaps for
their future roles.
 Ask employees about their career goals so you are certain they want the role you are
grooming them for.
 Create training, mentoring and leadership opportunities for top talent to close the gaps.
 Work with the CEO and the board to create a list of two to three candidates for every top
position.

Review

 Review assessments of top talent with the board every nine to 15 months, and again
whenever there is a major change in leadership.
 Identify development roadblocks—such as lack of mentors or limited on-the-job
leadership opportunities—and look for solutions.
 Review succession plans during annual strategic planning, to ensure development goals
align with strategic goals.
 Be willing to adapt the succession planning list if your goals change, or if individual
employees aren’t showing the leadership development you need.