Business-Focused Succession Planning

May 17, 2016

Business-Focused Succession Planning

Succession planning has evolved over the years from an approach focused almost exclusively on having a replacement ready for the CEO to a comprehensive plan for assessing and managing talent moves across multiple levels—focusing on management positions and critical jobs. In some cases, the focus remains on high-potential employees; in other cases, the focus is more broadly on talent across all levels of the organization. Either way, succession planning must become more comprehensive, less subjective, and be linked directly to business outcomes and business strategy, with the goal of creating a strong pipeline of leaders across the organization. There also needs to be an acknowledgement of typical succession planning obstacles:

  • Senior managers not spending enough high-quality time on talent management
  • Line managers not sufficiently committed to the development of people
  • The organization being “siloed” and not encouraging constructive cross-functional collaboration; limitations in the sharing of resources
  • Line managers unwilling to differentiate their people as top, average, or underperformers
  • Senior leaders in the organization not aligning the talent management strategy with the business strategy
  • Line managers not addressing chronic underperformance effectively
  • Succession planning and/or resource allocation processes not being rigorous enough to match the right people to the right roles

In addition, we have the issues that come with running talent review meetings:

  • Measures of potential are extremely subjective
  • Performance ratings can also be very subjective
  • Talent decisions made in talent review meetings are often driven by two things:
    • The biggest title in the room
    • The biggest mouth in the room
  • Having to “calibrate” a measurement tool (performance ratings) before the conversation even starts tells you everything you need to know about the rigor of that measurement tool
  • The 9-box never references driving actual business outcomes

    The most important question to ask of current succession planning processes is:

    “How can we build a pipeline of leadership talent if we don’t know what skills, competencies, experiences, attitudes, and education actually drive business results?”

    Below are the key tasks/components associated with business-focused succession plans:

  • Customizing the approach to your organization (based on current and future business challenges and desired outcomes, which can come with assumptions)
  • Facilitating talent planning sessions with leaders
  • Getting candidates on the “right” career path
  • Linking employee data to business outcomes
  • Assessing the overall health of your talent pool with actual analysis
  • Creating leadership programs based on true talent-pool development needs as well as on individual development needs that are driving business outcomes

Here is a four-step approach that includes several practical tools that will help your organization to be successful during each step of the process.

1. Assess business impact of current people data. After organizational leaders have reviewed the business strategy and identified key business metrics or outcomes that the organization hopes to achieve through the succession planning process (for example, reduction of high-performer turnover or having ready-now replacements for critical roles), the next step is to link people assessments (such as competency ratings, performance ratings, and attitude surveys) to the business metrics. This step allows organizations to identify the people factors (e.g. competencies, performance levels, and attitudes) that drive the critical business outcomes. Identifying these factors involves first conducting or compiling data from assessments that capture the key competencies (e.g. multi-rater/360), areas of personality (e.g. valid personality assessment), employee attitudes (e.g. employee opinion survey), objective performance metrics (e.g. strong performance review/performance management system) and actual business results. Organizations may also wish to include in this assessment phase ratings of employees’ potential for advancement (e.g. ready-now or ready within six months to one year). Other assessments could be conducted (e.g. cognitive ability), but for now this is a strong list with which to start.

2. Conduct the cause-effect analysis to identify the factors that drive business outcomes. Align the data for each individual leader to connect his or her competencies, personality, or other characteristics to the key business outcomes for which each leader is held accountable. This analytic rigor prioritizes the organization’s goals and adds a level of depth beyond having only the opinions (and biases) of key stakeholders in the succession planning process. Furthermore, this data-driven process helps organizational leaders overcome the challenges associated with differentiating talent and ensures that the key factors driving business outcomes are at the forefront of talent decisions.

3. Build and customize your talent/succession scorecard. Here’s a sample:

This scorecard is completely focused on what drives the business because it displays only those key areas of performance and behaviors (the “what” and the “how”) that were shown to have a significant impact on business outcomes (in the first step above). By clearly depicting each leader’s level of performance across the categories that drive business outcomes, this approach helps calibrate ratings assigned during talent planning meetings and reduces the opportunity for biases to influence the rating process. When reading the scorecard from left to right, it quickly becomes apparent which individuals are performing well across the critical areas and which are in need of further development in their current role before they can take on new responsibilities or roles.

Additionally, when reading from top-to-bottom within each of the key areas assessed, developmental needs that exist across the entire talent pool become obvious. The most glaring issue raised in the scorecard is employee attitudes, indicating that across the talent pool, employees’ attitudes, which are a key driver of business outcomes, are problematic. The scorecard helps organizational leaders readily identify this as an area in which developmental investments are needed. Another key outcome from the scorecard is the ability to calculate an overall Talent Pool Health Score, which can be used to track progress in developing the key talent in your organization. The Talent Pool Health Score represents a summation of all talent health scores for the individuals assessed.

4. Incorporate information from all leaders in your organization, beyond the high potentials. The scorecard allows leaders to uncover individuals who are high performers on the critical business drivers who may not have been considered part of the original pool of future leaders. The highly objective nature of the scorecard also allows leaders to reconsider those originally classified as high-potential leaders, who may be vastly underperforming on competencies or results critical to the business. The scorecard will help the organization avoid missing opportunities to develop talent that may originally have been overlooked or over-investing in individuals who should not be part of the future leader talent pool.

The Authors: 

Scott Mondore, Ph.D., is cofounder and managing partner of SMD, an HR technology company with the only patented assessment tools that link data to business outcomes with customized action planning tools. He is an executive, turnaround-CEO, technology innovator and best-selling author and speaker with over 17 years of experience in the areas of HR technology, analytics, strategy, talent management, measurement, sales and customer experience. He is the co-author of two best-sellers: Investing in What Matters: Linking Employees to Business Outcomes (SHRM, 2009) and Business-Focused HR: 11 Processes to Drive Results (SHRM, 2011). He has also published numerous articles in prestigious business and psychology journals in the areas of leadership effectiveness, employee litigation, assessments, and employee safety.

Find out more about Scott at http://www.smdhr.com/scottbio.pdf

Follow Scott on Twitter at @ScottMondore