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Everyone at the roundtable must prepare themselves and their staff for rotation. HRM reports on the value of mentoring and succession planning to increase the longevity of your talent pool
Some managers may hold their position at the top for generations, and some directors may stay put for years, but everyone knows that no one will last forever in the boardroom.
The death of McDonald's chairman and CEO, Jim Cantalupo in April has stirred a new awareness among executives about the importance of succession planning. Charlie Bell's swift ascendance to the top of the executive food chain shows that the company was prepared for the super-sized disruption, and that human resource managers around the globe should take note.
In the event of resignation, new position openings or critical events such as death or unexpected retirement, the company's human resources sector can never be too prepared.
What works
Unfortunately, there is no formulaic succession model for employers to slot into their organisation like a skeleton key - but there are guidelines to follow when planning the best one for yours.
Mercer principal of performance and talent management for Australia and New Zealand, Arlene Wherret suggests that there are several key guidelines for human resource managers to consider when designing a succession model. They must ensure that:
- the model is in line with the strategic business plan
- the board owns the planning process
- the plan is achievable
- the decisions made are defensible.
The succession plan in place at St George Bank that sees up-and-coming managerial starlets journey towards the top is appropriately called 'Star Trek'. Every year, the best 300 staff are identified by a group of executives and categorised according to their performance standards, potential and professional interests. After observing whether lateral or promotional moves are on the cards for these employees, the executive body selects from this group the sixty employees who are most likely or deserving of a move up the staffing ladder.
Brett Wright, chief general manager of HR at St George Bank knows the Star Trek model to be effective and efficient. "We've developed a tool that allows people to move into opportunities as they arise, and we have very good retention of our top people as a result," he says.
Employees were not only identified for the succession of senior positions, but also for roles with equal responsibility in different business units.
"Part of our plan is to broaden the employee's experience," says Wright.
Selection
The most important decision for employers is working out which individuals to select. In a top-down succession model, executives will be looking for individuals who are evidently high-potential workers.
Practice manager for human capital solutions at Hudson Global, Alan Simpson believes that, primarily, HR managers must have integrity.
"HR managers have to understand the organisation they're seeking to populate. They have to know the organisational structure, the roles that make up that structure, and the competencies and characteristics that make up those roles," says Simpson.
Simpson believes regular performance management checks are central to keeping track of this information.
"Succession is less about who you know and more about what you've done," says Wherret.
The most difficult thing for employers is working out which individuals to select, how many to select and who is going to be involved in the decision-making process.
Models
There are three standard succession planning models - each with its own string of pros and cons. The most commonly followed and easy to use plan is management-driven, in which the incumbent identifies the staff member(s) that are suitable successors in the short, middle and long term. These potential successors may or may not be informed, but the incumbent will often set up a mentor/mentee relationship with the selected individual. The replication that this kind of relationship encourages could be detrimental for the business, as the successor may not bring a fresh perspective to the role.
Selection of the successor is also narrowed to who the incumbent knows - eliminating other talented employees.
Instead of the one-on-one approach, it is perhaps better to involve the entire senior management team when selecting the 'next best things'. In most cases it is also better and fairer to choose a team of candidates based on particular criteria. This method reduces bias in the selection process, but does not dispense of it altogether. Some senior managers may recognise certain individuals based on their level of visibility - effectively discarding potentials in other areas purely because their job doesn't allow for interaction with management. The other difficult issue is deciding on the level of exposure the decisions and processes of succession planning should have. According to Wherret, the issue of transparency is a "hot and hard" one. "My bias is towards a higher level of transparency - if people know they're being considered, this increases motivation," says Wherret.
Transparency can alternatively work to the detriment of other areas of staff - those employees who do not make the cut can often be left feeling dejected and senior executives may feel uneasy when their once confidential decision-making is now see-though. But Wherret argues this is all for the better.
"HR managers need to get used to the concept of risk and exposure. The progression towards this transparency must be transitional, not sudden," she says.
Bottoms up
Succession failure occurs when senior management base their plans on what they assume are the ambitions of their employees. The supposition that everybody must want to ascend the corporate ladder is a dangerous succession booby trap ready to lasso the ankles of unsuspecting executives. The philosophy behind the bottom-up strategy is that, once senior management has outlined the criteria for the position(s), all employees at a particular level are invited to judge whether their own ambitions are aligned with the requirements of the position.
Employees are put in the driver's seat from here on in, selecting for themselves which development programmes they wish to participate in, and which training modules they will need to complete to fulfil their own professional goals. They are given the authority to project their own career paths and are able to match this up with the company's goals. Senior management would then provide feedback on the employee's progress - information that would then be utilised openly when the time came for a manoeuvre to take place.
The global scale
The level of confidentiality is the main issue that distinguishes succession-planning trends in the West from those in the East.
"Transparent decision-making is accepted theoretically in western cultures, but in many Asian cultures there is still that shroud of secrecy. There is also a high percentage of family businesses in Asia, so succession decisions are often made and kept between relatives," says Wherret.
The small scale
The lifespan of any business is proportional to the quality and maintenance of its succession plan, but for SMEs whose average shelf life is shorter than large companies and MNCs, succession planning should be the number one priority for survival.
In a recent small business survey on succession and exit planning it was found that almost 40% of business owners are planning on leaving their businesses in the next five years, with many intent on retiring. CPA accountants estimated that 66% of retiring business owners are planning to use their business to supply their retirement income, but since only 38% of owners have a succession plan in place, their hopes are set too high.
A sturdy succession plan will undoubtedly make the rollover of the business into new hands create no more than a tiny financial ripple.
Mentoring
The common misconception about mentoring programmes is that they are equivalent to coaching or training. Unlike the coach or the trainer, the mentor provides guidance for the mentee's professional career path rather than show them the industry-specific ropes of a particular role or leadership qualities.
"Mentoring is very much about the imparting of wisdom and knowledge," says Simpson.
After discussing the employee's needs, Hudson organises for a third party mentor to take on the role. Ensuring the two parties are well matched is something Hudson considers imperative.
"I remember organising a mentoring program for a senior executive administrator - she had just moved to Melbourne and wanted her mentor to introduce her to different people in her area in the new city. We presented three options to her and she chose the mentor she thought to be most suitable."
St George also has a mentoring program that is implemented on a needs basis in which the supervision and education of the employee is customised towards a particular senior position.
While Wherret knows the relationship between mentor and mentee is almost always constructive and beneficial, her reservations towards the approach lie with the relationship between mentor and manager.
"Is the relationship confidential, or is the mentor required to report back to the manager?", questions Wherret. Either way, she says, hierarchical uncertainties and privacy issues often arise that serve only to confuse the employee's understanding of their position, rank and professional relationships.
Whether you choose to take the bottom-up, top-down or one-on-one approach, ensuring that replacements occur smoothly is a matter of total strategic commitment from the organisation. HRM
Succession Planning Case Study: Mercer Human Resource Consulting
Situation
Over 15 years, a small trucking firm grew into a big distribution company.
Concurrently, the industry itself evolved, with clients seeking integrated logistics solutions and the internet becoming the preferred means of customer contact.
Challenge
To meet the challenges of growing technically diverse business lines, executing an e-commerce strategy, and managing the pace of growth through acquisition, the company needed a formal executive development program and succession plan. But what specific capabilities were required? And which company executives had the talent to lead and succeed?
Actions
Mercer identified the skills future leaders would need by interviewing board members and senior executives who could outline the company's long-term strategy, management approach and technical operations. Next, we assessed key executives, including a review of career achievements and psychological profiling. We evaluated individual strengths and weaknesses against our criteria and made our recommendations to the board. Finally, we formulated education programs, work assignments, and professional activities to develop any missing, but desired skills. Currently, we are creating team training for lower-level managers, including career assessment and planning tools, to prepare them for advancement.
Results
The company now has criteria for effective leadership and knows where the promising talent is within its organisation. Individual work plans are in place to develop the potential of key leadership candidates. The succession process has been demystified and management has the tools to develop future leaders who can successfully execute the business strategy.
Reasons for implementing a succession plan
- To accelerate the development and improve the retention of talented people. This argument is particularly relevant to the development and retention of talented women, a group often neglected in organisations
- To identify ongoing needs for replacement and design appropriate training and employee development programs
- To increase the pool of talented employees to fill key positions
- To add value to the organisation's strategic plan and contribute to ongoing business strategies
- To ensure individuals receive appropriate developmental opportunities and are successful in their career goals
- To ensure that the organisation has full access to the intellectual capital of their employees
- To improve employee morale and commitment to the organisation
- To encourage the development and advancement of the diverse group of employees
Mentoring Case Study: HRworkbench
Situation
HRworkbench was encountering market resistance in the USA based on the absence of a "US Presence". There were also quality assurance issues that emerged because customer expectations in the USA were very different from experiences in Australisia and Europe. It was decided that they needed a base in the USA, run by people with both a sound understanding of the US business processes and the capability to transpose overseas philosophy and uniqueness into that market.
Challenge
The challenge was to find a leader for the US operation who had US business experience and grow them into their way of operating in the most cost effective manner. This person had to be someone they could trust. The focus was to find someone with the right personal characteristics, and then mentor them into the position of EVP Americas.
Actions
After extensive research, they offered one of their very capable authors the position.
The mentoring programme to date has involved:
- a series of computer facilitated learning programmes
- discussion with the CEO on the content and application of those programs
- conducting sessions at their own Distributor conference
- using the full product range and writing market material for those products for the US market to fully understand the "essence" of them
- telephone conversations with the CEO twice weekly with an agenda of issues to discuss, including case studies of application of business strategies
- exposure to their Global network of Distributors
Results
The person was successfully moved into the EVP role on 1 January 2004. An office was launched on 1 May 2004, two months ahead of plan, and the current business activity levels indicate that the budget for Americas operations for the first 12 months will be exceeded.