William J. Rothwell - Effective Succession Planning (2005)(3-e)(en)

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Exhibit 5-7. (continued)

16.What special problems has your organization encountered with succession planning and management? How have those been solved?

Exhibit 5-8. Opinions of Top Managers About Succession Planning and

Management

Question: How would you summarize the opinions of top managers in your organization about a succession planning program? Circle all response codes below that apply.

Opinions of Top Management	Percentage Response
They don’t believe succession planning is worth
the time required for it.	9%
They have no clue why such a program might
be worthwhile.	9%
They believe that a succession planning pro-
gram is worthwhile but are not aware of how to
manage it efficiently and effectively.	55%
They believe a succession planning program is
worthwhile and that a formal program is better
than an informal program.	27%
I don’t know what they think about a succession
planning program.	- 0 -
Other Comments	None
Total	100%

Source: William J. Rothwell, Results of a 2004 Survey on Succession Planning and Management Practices. Unpublished survey results (University Park, Penn.: The Pennsylvania State University, 2004).

would answer those questions about top management opinions in your organization. Turn then to Exhibit 5-9 and consider how you would characterize your own opinions about systematic SP&M.

Understanding How to Secure Management Commitment

To understand how to secure management commitment, Diane Dormant’s classic ABCD model remains a helpful tool.11 ABCD is an acronym based on

Making the Case for Major Change	119

Exhibit 5-9. Opinions of Human Resource Professionals About Succession Planning and Management

Question: How would you summarize your opinions about a succession planning program? Circle all response codes below that apply.

Your Opinions	Percentage Response
I don’t believe such a program is important.	- 0 -
I believe that other methods work better in identifying and
preparing possible successors.	- 0 -
I believe a succession planning program is worthwhile but
other programs are more important for this organization
right now.	- 0 -
I believe a succession planning program is important.	36%
Succession planning is critically important to this organiza-
tion at this time.	64%
Other Opinions	None
Total	100%

Source: William J. Rothwell, Results of a 2004 Survey on Succession Planning and Management Practices. Unpublished survey results (University Park, Penn.: The Pennsylvania State University, 2004).

the first letter of several key words. Dormant’s model suggests that large-scale organizational change—such as the introduction of a systematic SP&M pro- gram—can be understood by examining adopters (who is affected by the change?), blackbox (what is the change process?), change agent (who is making the change?), and domain (the change context).12

The most valuable feature of Dormant’s model is her view that different strategies are appropriate at different stages in the introduction of a change. The change agent should thus, to facilitate change, take actions that are keyed to the adopter’s stage in accepting an innovation.

Dormant believes that adopters progress through five identifiable stages in accepting an innovation.13 During the first stage—awareness—adopters have little information about the innovation. They are passive and are generally unwilling to seek information. In that stage, change agents should advertise the innovation, making efforts to attract attention and provide positive information.

In the second stage—self-concern—adopters are more active. They express concern about how they will be individually affected by a change and pose questions about the consequences of an innovation. Change agents in this stage should enact the role of counselor, answering questions and providing relevant information.

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In mental tryout—the third stage—adopters remain active and ask pointed questions related to their own applications of an innovation. Change agents should enact the role of demonstrators, providing relevant examples and demonstrating to adopters how they may apply an innovation to their unique situations.

In hands-on trial—the fourth stage—adopters are interested in learning how to apply an innovation to their own situations. Their opinions about the innovation are being formed from personal experience. Change agents should provide them with training and detailed feedback about how well they are applying the innovation. Testimonials of success will be persuasive during this stage, helping to shape the conclusions reached by the adopters about an innovation.

Adoption is the fifth and final stage. By this point adopters have integrated the innovation into their work and are interested in specific problem solving that is related to their own applications. Change agents should provide personal support, help adopters find the resources they need to perform effectively, and provide rewards for successful implementation.

Applying these stages to the process of obtaining and building management support for systematic SP&M should be apparent. The appropriate strategies that change agents should use depend on the stage of acceptance. (See Exhibit 5-10.)

An important point to bear in mind is that a succession planning program will be effective only when it enjoys support from its stakeholders. Indeed, the stakeholders must perform SP&M for it to work. In short, they must own the process. Hence, obtaining and building management commitment to SP&M is essential for a systematic program to work.

The Key Role of the CEO in the Succession Effort

The CEO’s role in the SP&M process is the key to success—or failure—in pri- vate-sector organizations. Let me state it clearly: It is a make-or-break role. While it may seem that CEOs are asked to be ‘‘involved’’ in everything, which is sometimes interpreted to mean ‘‘give lip service to it and then delegate it,’’ SP&M does not fall in that category. To put it in blunt terms, if the CEO is not hands-on involved in leading the succession effort, it will fail. SP&M cannot be just delegated to the HR department, for the simple reason that HR cannot hold senior executives accountable for talent development in the same way that the CEO can. Well-known CEOs like former G.E. Chairman Jack Welch devote much of their time to thinking about, and acting on, succession issues.14

Fortunately, several factors have come together to put SP&M on the CEO’s personal radar screen. One factor is that boards of directors are becoming more involved with succession. Consider:

Making the Case for Major Change	121

Exhibit 5-10. Actions to Build Management Commitment to Succession Planning and Management

Stage of Acceptance	Appropriate Actions
Awareness		Advertise SP&M to management employees.
		Provide general information about SP&M.
Self-Concern		Answer questions.
		Provide relevant information.
Mental Tryout		Provide relevant examples of applications of
		SP&M policy/practices to specific functions or activities
		within the organization.
		Demonstrate how SP&M may be used in each organi-
		zational area.
Hands-on Trial		Offer training on SP&M.
		Meet with top managers individually to discuss SP&M
		in their areas.
		Collect and disseminate testimonials of success.
Adoption		Provide personal support to top managers on applica-
		tions of systematic SP&M.
		Help program users perform effectively through indi-
		vidualized feedback and counseling.
		Identify appropriate rewards for SP&M.

Succession planning has become the second most important topic discussed by boards. (Top of the list is making sure that the right chief executive is in place to begin with.) The frequency with which chief executives come and go adds to the pressure. The average chief executive’s tenure has dwindled in the past decade from eight years to less than five. That leaves little time to groom the next generation. Big companies rarely pick from outside. To do so is usually a sign that they are in trouble. For the board, drawing up a succession plan is a good way to spot future problems. But there are advantages for the boss, too. After all, one way to secure a sort of immortality is to pick one’s own successor. In most companies, the succession process is controlled mainly by the chief executive.

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However, many CEOs are uncooperative, partly because they hate the idea of retirement.

Even Disney now listens. Sarah Teslik, executive director of the Council of Institutional Investors, a lobbying group, says that she has demanded for years that Disney draw up a succession plan, but Michael Eisner, the company’s domineering CEO, has refused to allow it. When she talked to senior Disney executives two months ago, they assured her that a plan now existed—although they refused to say what it is. Ms. Teslik thinks that behavior has been changed by the insistence in the Sarbanes-Oxley Act that boards meet in ‘‘executive session’’—that is, without the executives present. ‘‘I personally asked Mr. Sarbanes for this provision for that purpose,’’ she recalls. ‘‘How can directors talk about your succession while you are in the room?’’15

A new survey of boardroom practice by Korn/Ferry International, another search consultancy, finds that only 33 percent of boards had a management succession committee or process in 2001. By this year, that had leapt to 77 percent.

A second factor is that aging senior executives have placed personal pressure on CEOs to pay attention to succession, lest they find themselves saddled with the workload of a retiring senior executive while harried HR staff try to source a qualified replacement. A third factor is that terrorism has made succession a prudent risk-management issue—one sure to be brought up by increasingly cautious auditors.

But what exactly should CEOs do? Here are some practical suggestions:

1.Discuss the issue with the board, his or her key reports, and the VP of HR to decide what succession program would be most desirable for the organization. Of course, that information can be gathered by an external consultant—often a good idea—and then handed to the CEO in a report that recommends actions and next steps.

2.Become familiar enough with issues associated with succession to be able to discuss the topic intelligently. That includes otherwise arcane topics—to CEOs at least—such as competency modeling.

3.Insist on an action plan that senior executives can buy into.

4.Hold senior executives accountable for grooming talent in their divisions and departments, perhaps by changing the executive bonus plan

Making the Case for Major Change	123

to put a portion of the bonus at risk for making or not making measurable goals for talent development.

5.Chair periodic meetings of senior executives to discuss how they are grooming talent—and especially HiPos—in their areas.

Of course, there is much more that CEOs can do. But they must be convinced of the importance of SP&M to do anything. Just to provide a basis for reflection, rate your CEO on his or her role in SP&M, using the simple rating sheet in Exhibit 5-11.

Summary

When preparing to introduce a systematic succession planning program, begin by assessing the organization’s current succession planning and management problems and practices, demonstrating the business need for succession planning and management, determining the organization’s unique succession planning and management requirements, linking the succession planning and management program to the organization’s strategic plans and human resource plans, benchmarking succession planning and management processes in other organizations, and obtaining and building management commitment.

This chapter has reviewed these steps and thereby demonstrated ways by which to make the case for change. The next chapter emphasizes the importance of clarifying the roles of each level of management in the succession planning and management program; developing a program mission statement, policy, and philosophy; identifying target groups; and setting program priorities.

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Exhibit 5-11. Rating Your CEO for His/Her Role in Succession Planning and Management

Directions: For each item listed in the left column below, check a box in the right column to indicate whether your organization’s CEO is actively performing successfully. Be honest.

The CEO of My Organization:	Yes		No
Takes a hands-on approach to succession issues.
Sets a positive example by choosing his or her own
successor.
Sets a positive example by developing his or her own
successor.
Considers succession issues whenever he or she
makes business decisions of strategic import.
Discusses his or her thinking about succession issues
with others.
Holds managers accountable for succession issues.
Holds managers accountable for developing talent.
Rewards managers for developing talent.
Chairs ‘‘talent shows’’ of the organization in which
the developmental needs of promising people are
discussed and by which senior managers are held ac-
countable for developing the people they have.
Total Score	Number		Number
(Add up the yes and no boxes and then insert the	of Yes		of No
sums where indicated at right. Obviously, the more	Boxes		Boxes
yes boxes your CEO has, the closer his/her role is to
being successfully engaged in the succession plan-
ning and management efforts of your organization.)

C H A P T E R 6

S TA R T I N G A S Y S T E M AT I C P R O G R A M

An organization should be ready to start a systematic succession planning and management (SP&M) program once the case has been persuasively made that one is needed. Starting a systematic SP&M program usually involves taking such actions as conducting a risk analysis and building a commitment to change; determining roles in the SP&M program; formulating a mission statement; writing a program policy; clarifying the procedures; identifying groups targeted for action; defining the roles in the SP&M program of the CEO, senior managers, and others; and setting program priorities. This chapter focuses on these issues.

Conducting a Risk Analysis and Building a Commitment to Change

Where do an organization’s leaders begin in conducting a risk analysis? In building a commitment to change? Those are, of course, related questions.

A risk analysis is simply an assessment of what level of risk an organization faces owing to the loss of key people. (Key people exist at all levels and not just at the top.) The risk analysis is conducted in one of several ways. For example, one way has been mentioned earlier in this book. First, the organization’s payroll system is used to project the estimated dates of retirement eligibility for the entire workforce. Second, the percentage of the whole organization eligible for retirement over rolling three-year periods is assessed. Third, the same analysis is done by job code, geographical location, functional area or department, and hierarchical level. The aim is to cast a wide net, looking for trouble spots where high percentages of a whole group, such as the entire accounting department or the St. Louis office, for example, would be eligible for retirement during a given three-year period. Use three-year periods because problems may not be apparent in a single year. But if the cumulative percentage of the retirement-eligible workforce over a rolling three-year period is high—say, over 50 percent—then you can mark it as a trouble spot and move on.

The goal of this exercise is to find parts of the organization where the risks

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are the highest of losing people. While skeptical managers may not see a need for a succession program for an entire organization, they can be convinced to do something if they see a high percentage of the entire workforce or those in one area are affected.

There are other ways to do risk analysis. Sometimes they can be just as effective and persuasive to decision-makers. For instance:

▲Do ‘‘what if’’ scenarios. Pose questions to decision-makers: How long would it take to replace a key person owing to sudden death, disability, or resignation? And what would the organization do in the meantime to ensure that the work gets done? Ask decision-makers to estimate the economic or other impacts that would result from the sudden loss of a key person at any level.

▲Do historical studies. Look to the past. Ask what key people losses have been experienced by the organization in the past and how they were handled. (I have found that the sudden loss of a handpicked successor for the CEO’s job is sometimes a most persuasive way to launch an SP&M program, for the simple reason that the CEO feels the pain personally and will not suffer in silence for long.)

▲Build awareness. Prepare a simple visual aid with the organization chart showing, in red, the percentage of people at risk of loss owing to retirement; prepare another visual aid that shows the years of experience at risk of loss in key departments.

Other approaches to building persuasive cases for action are possible. Data and measurements can help. Just think—what data are most likely to convince decision-makers of the need to establish a succession program, and how can that data be gathered? Then set out to collect that information, analyze it, and present it to decision-makers. Do not forget, however, that decision-makers, once convinced of the need for action, will expect you to have in hand an action plan or series of recommendations about how to establish the SP&M program.

Clarifying Program Roles

What are roles? How can roles in an SP&M program be clarified so that organizational members know what they should do to support the effort? This section answers these questions.

Understanding Roles

A role is an expected pattern of behaviors and is usually linked to a job in the organization. Although most organizations outline responsibilities in job descriptions, few job descriptions are sufficiently detailed to clarify how job incumbents should carry out their duties or interact with others. However,

Starting a Systematic Program	127

roles do permit such clarification. Indeed, ‘‘a role may include attitudes and values as well as specific kinds of behavior. It is what an individual must do in order to validate his or her occupancy of a particular position.’’1

Role theory occupies a central place in writings about management and organizations. Internalizing a role has often been compared to the communication process. (See Exhibit 6-1.) Role senders (role incumbents) bring to their roles expectations about what they should do, how they should do it, and how they should interact with others. Their expectations are influenced by their previous education, experience, values, and background. They are also influenced by what they are told about the role during the recruitment, training, and selection process. Role receivers—others in the organization with whom role senders interact—observe these behaviors and draw conclusions from them based on their own expectations. They provide feedback to indicate whether the behavior matches what they expect. That feedback, in turn, may affect the role senders’ expectations and behaviors.

To complicate matters, individuals enact more than one role in organizations. For instance, they may serve as superiors, colleagues, and subordinates. They may also enact roles outside the organization, such as spouse, parent, child, citizen, churchgoer, or professional. Each role may carry its own culturally bound expectations for behavior.

Enacting multiple roles can lead to role conflict. For example, supervisors may be expected by their employers to act in the best interests of the organization. That means they must occasionally make hard-eyed business decisions. On the other hand, supervisors may also be expected to represent the interests and concerns of their subordinates to the employer. To cite another example, human resource managers may perceive their role to be facilitative and feel that they should provide advice to operating managers when they decide HR issues. But operating managers may expect them to act forcefully and proac-

Exhibit 6-1. A Model for Conceptualizing Role Theory

Role senders		Take		Role receivers
					Interpret
(with				(with
		action.						Provide
internalized				internalized	action.
expectations				expectations				feedback
about their				for the role).				about match
role).								or mismatch
								with role
								expectations.

Feedback may change role senders' expectations.