Ashridge

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Talent management and succession planning

Overview

Introduction

Many business managers are often so caught up in day-to-day operations that they fail to find time to think about planning for the future of the business. When a vital member of staff leaves suddenly, falls ill, retires or dies, the business is left with the problem of filling the void and preventing serious loss of business performance. Effective succession planning is a key factor in ensuring the long-term survival of any business. The need to be able to find people with the right skills to fill key top jobs and to be leaders of the future has always been vital to organisations.

Successful implementation of a succession plan and the continued growth and development of the business rely on a highly effective process of talent management seeking out and nurturing the best performers for the future. This learning guide presents an overview of both the strategic talent management concept and the detailed succession planning process associated with it.

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Why talent management?

Talent management is a hot topic in the HR community at the moment. Articles, conferences and research reports containing those two words attract a large amount of interest. What has changed? Why has it moved up the corporate agenda?

The simple answer is that the business environment is changing. There are not enough talented people to meet current demands. In the developed world there is an ageing population, with a marked shortage of people aged 35-44 ' the middle and senior managers of the next few years. Many experienced employees, after a lifetime in a high pressure work environment, are looking to take early retirement or change careers. It paints a picture of a demographic time bomb.

Towards the end of the 20th century, there was a move from the 'paternal' business environment which owned an individual's growth and development, to it being a personal responsibility. Hard business decisions led to widespread downsizing, especially in the middle manager ranks, and individual managers have become responsible for many more direct-reporting staff than ever before. Often it is hard to give them all sufficient attention. HR departments may have changed their focus away from being development consultants. People feel less loyal to their employer in this new environment, where it may appear that humans are mere profit-making machines who are on their own in terms of personal development.

There has also been a societal change to a 'me' generation, that is more focused on personal fulfilment, rather than the 'duty' of previous generations. Where a person has unique or rare skills then job-hopping is often seen as a normal way to gain additional development and talents.

So is your organisation prepared for succeeding in this environment? Are there any signs that you are having problems hiring and retaining the most talented people?

Let's take a more detailed look at talent management. As you read through this learning guide you may be able to form a clearer picture of what you should be doing in this area. If you have time, you might want to try development activity 1 to start thinking about the talented people around you.

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What is talent?

..talent is like electricity. We don't understand electricity. We use it.

Maya Angelou, African-American writer and performer

As a concept, talent management is difficult to define. Many activities come under this umbrella term to help with the task of identifying, recruiting, developing, retaining and deploying talent. These activities appear in many different guises in organisations and assume different degrees of importance, depending on the business context and culture of an organisation.

You will find numerous articles in the form of 'ten steps' or 'top principles/concepts'. There is often little difference between them except perhaps how they are grouped and ordered. A good example, however is the Sloan et al 'five step model'(8) which present the usual Talent Management elements in a concise and comprehensive way:

Step 1: Clarify the existing value proposition for talent to offer a fair value exchange to employees, i.e. what you want and what you are offering.

Step 2: Identify the gaps in the talent pipeline, i.e. assess performance, potential, readiness and fit.

Step 3: Choose the best sourcing solution to fill the gaps, i.e. outsource, develop, transform and acquire.

Step 4: Align core talent management processes with the talent required to accomplish new strategies, i.e. attract, retain, select, transition, mobilise and develop.

Step 5: Build organisational support mechanisms, i.e. governance framework, training, talent reviews, measuring and rewarding progress.

Our case study-based research suggests an alternative way to categorise talent management. Corporate approaches to talent management are heavily shaped by some underlying core beliefs and perspectives. Often, these are implicit and rarely discussed by business leaders. To add to the complexity, there may be several different perspectives and beliefs which may only become apparent during in-depth discussions about talent management. Although different perspectives are not necessarily an issue, some of the perspectives sit less comfortably together and may result in ambiguous or conflicting messages about how talent is valued and developed.

Figure 1 below suggests how talent management can be viewed from five perspectives and how these alter the nuances and emphasis of talent management strategies.

Fig 1: Mapping the Talent Management (TM) Territory
Perspective Core belief Recruitment & Selection Retention Reward Succession Planning Development Approach
Process Include all processes to optimise people. Competence based, consistent approach. Good on processes such as WLB & intrinsic factors that make people feel they belong. Calculated according to performance review and some element of potential. Routine review process based on performance review cycle. PDPs and development reviews as part of performance management. Maybe some individual interventions
Cultural Belief that talent is needed for success. Look for raw talent. Allow introductions from in-house. Allow people the freedom to demonstrate their talent, and to succeed and fail. Flexible package according to individual needs. Develop in-house if possible, if not look outside. Individuals negotiate their own development paths. Coaching & mentoring are standard.
Competitive Keep talent away from the comp-
etition.
Pay the best so you attract the best. Poach the best from the competition. Good people like to work with good people. Aim to be the employer of choice. Offer more than the competition. If people leave it won't be for a better reward package. Geared towards retention ' letting people know what their target jobs are. Both planned and opportunistic approaches adopted. Mentors used to build loyalty.
Develop-
mental
Accelerate the develop-
ment of high potentials.
Ideally only recruit at entry point and then develop. Clear development paths and schemes to lock high potentials into career paths. Increments based on development as well as performance. Identified groups will be being developed for each level of the organisation. Both planned and opportunistic.
HR Planning Right people in the right jobs at the right time. Target areas of shortage across the company. Numbers and quotas approach. Turnover expected, monitored and accounted for in plans. Clear salary scales and structures. Detailed in-house mappings for individuals. Planned in cycles according to business needs.

The process perspective: Organisations should put in place systems that enable talented individuals to carve out a successful career in their chosen area. Talented people will thrive and progress if they meet the competency and performance requirements of the talent management process.

The cultural perspective: Talent management is more of a mindset than a set of activities. This perspective revolves around the belief that individuals will succeed if they are talented enough and that their success equates with business success. This is perhaps the least structured approach to talent management and therefore the one most likely to suit creative individuals, entrepreneurs and mavericks. With the absence of rules and processes, especially around promotion, individuals are free to create their own opportunities. In a sense, this approach to talent management has the most drama and risk; individuals have all the rope they need to hang themselves or prove their worth.

The competitive perspective: Talent management is about identifying talented people, finding out what they want and giving it to them ' if not, your competition will. This perspective flourishes in industries where the most valuable corporate assets are people-based and where intellectual property is everything. Consultancy, public relations/advertising and law firms know full well that if their most talented people leave for a competitor, they will not only lose critical knowledge and experience but also key customer accounts. In the worst cases, if entire talented teams are lost, the market may question whether the firm still retains a core capability. Traditionally, this approach depends on motivating talented people through financial rewards but the limitations of this tactic become apparent during serious talent shortages.

The developmental perspective: Talent management is about accelerated development paths for the highest potential employees. Organisations want to 'lock-in' talent by targeting recruitment at entry level and then developing and promoting from within to maximise career opportunities for high potentials. This perspective comes closest to the old psychological contract where the employer looks after the individual's career.

HR planning perspective: talent management is about having the right people matched to the right jobs at the right time and doing the right things. This approach is generally supported by a very sophisticated IT system which maps out various different scenario options and future possibilities as people are moved around the company like pieces in a game of chess.

While many of these definitions overlap, it can be a useful exercise to define and map your core perspectives and beliefs. As a quick mental exercise, try filling in the table below. Consider your personal perspective, that of your organisation with its current culture and TM strategy, and if possible, that of a group of people who could be labelled 'talented' in your organisation. It may be clear cut and you can select one box per column. Otherwise indicate the strongest core belief with a '1' and one supportive belief with a '2'. Are there any messages for your organisation from this exercise?

If there is a disconnect between the groups, or if there is confusion over where the core beliefs lie, then it is a strong indicator that you need to have a good look at your approach to talent management in the organisation.

CORE BELIEF MY PERSPECTIVE CORPORATE
PERSPECTIVE
TALENTED EMPLOYEES
Process
Cultural
Competitive
Developmental
HR Planning

If you want to try the same exercise with a number of people in the organisation, using a quiz-based format then try development activity 3.

Any talent management system is unique to each organisation and must be designed to take account of a unique blend of strategy, people, culture and systems. However, research done by Ashridge revealed thirteen dimensions that underly the strategic choices organisations face in various aspects of the talent management process. They are grouped into 4 areas:

  • Why talent? Business priorities, market conditions and cultural factors that make TM a strategic imperative.
  • Definition and entry point: How talent is defined, which groups of employees are targeted and the design of the TM system, especially entrances and exits.
  • Managing the talent: Considerations about who owns talent, depth and breath of conversations about talented individuals, how to develop and support these high performing employees.
  • Outcomes and benefits: How to measure the performance and potential of talented people, linking back to the process of reviewing, refining and reinventing the TM process in the light of changing business priorities.

If you are interested in exploring these 13 dimensions in your own organisation, try development activity 4 in the Development Activities section of this learning guide.

Talent Managemet is becoming a strategic conversion...

Talent management, however is not the same as performance management. Talent does imply a capability to perform well beyond the norm, and although everyone in an organisation needs their performance to be monitored and improved, there is an implied elitism to talent management.

But what other parameters define talent management? It may be worthwhile asking some of your colleagues to provide their own definitions to serve as a comparison. The core beliefs exercise above may have hinted that there is a variation within your organisation. Without a clear statement of what talent management means in the context of your organisation then it will be difficult to create a viable strategy to support it.

The mindmap in Figure 2 below might serve as an initial trigger for some of the areas to consider in your definition.

Fig 2: Definition of Talent Management

Definition of talent management

In their 2006 survey3 the CIPD found that only 20% respondents had a formal definition of talent management. 51% say they undertake talent management activities but there was inconsistency in what they really meant.

The report adds: 'There is no systematic and co-ordinated approach in the public and private sectors to developing and nurturing the next generation of business leaders. Judging talent is still very much an intuitive and gut feeling response'.

A changing world, confusion over meaning and no easy answers; that is probably why Talent Management is one of the hottest debated topics at the moment!

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Components of talent management

Talent management has a number of different components which work together. If we look at these elements and their areas of overlap we can break the talent management elephant down into manageable pieces and understand the critical issues. Figure 3 below illustrates the core components.

Fig 3: Components of Talent Management

Components of talent management

Strategy

Talent management is more than just a set of disparate activities but a collective approach to recruiting, developing and retaining talent within the organisation, which includes strategy and organisational culture. Excellence in some of these activities, for example in recruitment, does not necessarily add up to an organisational capability in talent management or ensure that talent management becomes a core part of how the organisation does its business. Talent management requires a more holistic and strategic view with the organisation making strong linkages between the strategies, values, culture, HRM processes and business measurements.

Talent management straddles many different functions and areas. It needs shared ownership across the organisation, rather than to be left as HRM's responsibility. From our research at Ashridge we have found that the impact of individual line managers, leadership teams and the organisation's culture appear to be critical.

As we have seen, talent management is about people, and the approaches to it are shaped by perspectives and beliefs within the organisation. Given this situation – it's complicated, it varies depending on the corporate culture, it has a personal impact on all involved and acts both strategically and at a detailed process level, – why bother?

(Talent management is) time consuming and hard work, but essential to create competitive advantage. It's the hardest attribute for competitors to follow.

Andy Horby, Chief Executive at HBOS

There is a keen interest in talent management from the financial markets. The value of a company is no longer based mostly on its tangible assets. The figures vary, but it is now accepted that between 50% and 80% of a corporation's worth comes from its intangible assets. Ocean Tomo claim that in the Standard & Poor 500 companies it has moved from 80% tangible in 1975 to 20% by 2006, a complete switch in only 30 years . It is also claimed that the largest component of those intangible assets is the perceived value placed on the top executives. So making best use of your employees has a direct impact on the value of the organisation and is no longer an internal issue. Now three key groups have a real interest in human capital ' the City, the organisations themselves and the Government. HR is definitely in the strategic space, and talent management in some form is vital for all competitive organisations.

Having decided that you are up for the challenge, there are some practical steps that you can take to make a success of talent management in your organisation and we can look at those now.

The role of HRM

As we mentioned before, HR should not be the only part of the organisation driving talent management, but HR is a core facilitator of the overall process and should play a role a strategic level.

This is where many organisations may have failed in the past. How strategic is your HR operation in terms of talent management? In the view of Farley (2005)7 HRM's credibility relies on it 'having an in-depth understanding of how people are key drivers of profit and success and the ability to manage talent to attain business goals', but HR has traditionally 'focused on transactional operations'. She argues that HR must stop looking at talent management activities, such as succession planning, recruitment and talent reviews, as 'discrete processes' but as 'highly interrelated from the standpoint of data'. HRM can pull together this interrelated data from across the organisation, showing the link between people, profits and business goals and thereby ensuring that HR becomes an 'effective facilitator of robust talent management decisions'.

You will need to find your own path within the framework of your own culture and corporate strategy, involving the right people from across the organisation. As the central facilitator you will need to ensure that they all share the responsibility for talent management on an ongoing basis.

However, key HR strategic responsibilities will be:

  • Developing and maintaining the connection between business strategy and talent
  • Being the leader of thinking about what the business needs to do to attract exceptional talent
  • Facilitating the ongoing review of talent
  • Designing and implementing the development strategy for critical management roles
  • Ensuring that valuable information is gained through the hiring, developing and leaving of employees, so that both success and requirements for change can be measured
  • Keeping talent management high on the agenda for the Board/other senior bodies.

How well do these ideas align with your own? How easy would it be for the HR leaders in your organisation to take on this role? If you have time, and have not already done so, you might want to try development activities 2 and 4 to help you think about how to define your corporate approach to talent management.

Jane Smith of Mouchel Parkman was brought into the organisation to implement a Learning and Development Strategy. She comments that although it is obvious and quoted in all the books, getting visible support from the top from the beginning is critical. "I need the top people to commit and demonstrate that this is right for the organisation. And it is not just getting people to do it, but to have the passion to do it." One very visible element is a one-day event for all managers called Taking the Lead, which is held every two months. It covers management expectations and behaviour, and is run not by trainers, but by the CEO and HR Director. "It is booked in the CEO's diary for the next three years", she highlights, and clearly demonstrates leading by example. "Having the top people deeply involved has a domino effect across the organisation."6

Apart from the critical strategic role of HRM there are other components from Figure 3 that we can examine in more detail, as described below.

Recruiting talent

Recruitment is a critical element of talent management in today's global marketplace. How long is it since you reviewed your recruitment processes? Do you know how successful they are? How attractive is your company to those from the outside? When did you last check? Are you looking at how recruitment will change in the future and are you changing to meet future needs?

Sources of talented employees may be changing. In the US and Europe, only 10% of current graduates have science or engineering degrees while in India the figure is over 40%. There is an incredibly diverse workforce and potential, often under-utilised, pool of talent waiting to join the working world. Our research shows that good diversity management appears to be a fundamental underpinning of a good talent management system, yet how many corporations are exploiting the available talent? Roles are increasingly global requiring employees who are willing to be international citizens and therefore traditional local methods of recruitment may not longer give the best results. Even apparent successful recruitment process may fill a position with a candidate suitable for today but possibly not for tomorrow.

Meena Anand of Standard Chartered Bank explains the challenges in their organisation: "What does talent mean when you are sitting in Afghanistan, in Zimbabwe? Is it the same worldwide? What are you looking for?" The bank found it challenging to find private bankers, who are rare, but when they altered their approach and determined which skills were required for private banking, they listed those such as networking and the ability to communicate. Banking skills could be taught. "We ended up selecting ex-tennis players and ex-lawyers", she notes. "Be clear what you are looking for and what a talented person looks like."6

Standard Chartered decided to be creative in their recruitment processes too. "We noted that our senior staff travel frequently and meet a lot of people. We told them they were targeted with finding two new people for the bank every quarter. It's in their objectives."

The bank has internal 'talent scouts' ' selected by the Board to be part of a recognised elite team because they are excellent people managers/developers. They search out and identify new talent within the organisation. Standard Chartered has a strong focus on finding the best talent available in a variety of ways.

The recruitment process may have to become far more active in order to compete successfully to obtain the best people, and there will have to be strong intangible benefits as well as financial inducements offered in order to attract people. Technology is playing a part in the introduction of new methods of recruitment through online agencies, which can not only tap into a more geographically-spread pool of future employees, but can often provide a higher volume and more diverse source of applicants than through traditional methods.

Google's Liane Hornsey speaking at the 2007 HR Director's summit emphasised the importance of a rigorous recruitment process:

"The main goal is to hire the right people. Never make do with someone because you're desperate ' only hire the best." Applicants have at least four interviews, and none are hired unless there is unanimous agreement between the interviewers. Senior staff spend 30 percent of their time on recruitment and the company employs 300 people specifically to focus on hiring. Even after a candidate is approved there is one final hurdle. The company's co-founder Larry Page has the final say. "He does say no to a lot of people that we say yes to," Hornsey comments. "We hire 100 percent high potential people. You have to be pretty astounding to get into Google." 6

Maybe you are not able to institute a recruitment system like that at Google, but what needs to change in your organisation? How should you prepare for the future with the best employees possible?

Finally, an excellent observation from Subir Chowdhury2 who says that talent should be treated as a customer when recruited and then as a preferred supplier when hired.

Retaining talent

Once the best people have been hired, then it is critical to retain and develop them. Here it becomes much more of a challenge. A Gallup study of 80,000 managers in 2005 concluded that the greatest drivers of employee engagement and retention are intangible, mostly related to the way a manager treats his or her employees5. One point is clear. Employees are more likely to stay if they have a good relationship and open communication with their immediate boss. So here is where another segment of the corporate strategic talent management team come into play ' the line managers.

How experienced are your leaders in retention skills? How open and fair is communication throughout the organisation? Are there any areas for improvement?

At the other end of the spectrum is the attention paid to those who are not performing well. How good are you at supporting them to turn the situation around, or even getting rid of managers who have a negative impact on the organisation? These people may in fact be causing more talented people below them to leave. It is always challenging to manage poor performance out of the organisation, and is often the reason why it is not acted upon. Many managers do not feel capable of saying "You are underperforming." In some organisations success has been found through the use of professional forum role play with actors, where real life situations are simulated. Do you support your staff in managing performance in a consistent manner and eliminating poor performance? Is it a hidden issue in your organisation?

If you lose talented people, you also lose a large amount of both tacit and explicit knowledge from the organisation, and it may take months or even years to catch up again. Do you have methods of retaining and sharing knowledge across the organisation which limit any damage when a key individual leaves?

See development activities 6 and 7 which contain questions that will help you to think more deeply about retaining talent and retaining knowledge within the organisation.

Developing talent

Of course a major part of retaining talent is developing the individuals. Employees remain engaged when they have professional and career development opportunities.

At Google the work structure follows a '70/20/10' model, where 70 percent of the employee's time should be spent fulfilling the job role, 10 percent of the schedule is time for innovation and creativity, and one day a week 20 percent is 'personal work', a period spent on personal development which will ultimately benefit the company. "People do not learn through going on training courses," Liane Hornsey says. "The vast majority of people learn through on the job learning ' training courses are [only] a tiny piece of what we do."

It is far more productive to allow employees to develop through individual project work. "We (also) let them put their ideas into practice to improve your business, giving them the time and space to work that idea," advises Hornsey. This strategy seems very successful, as voluntary attrition at Google is below three percent and the company was voted the number one employer by Fortune for 2007.

Hiring good people is a waste of time if there are no opportunities for continuous professional development. Although classroom training is seen as important to meet certain needs, the consensus is that rotations, secondments, special project assignments and personal coaching add the most value. Based on the experience of her consulting work, Jill Mahony of IBM Management Consulting believes that projects that stretch the individuals are what grow and retain employees.6

So who owns a talented employee's development? It has certainly changed over the last two decades, swinging from the paternalistic corporate responsibility to being fully in the employee's court. In today's changing business climate, we are probably somewhere in the middle. The organisation has acknowledged that its success is dependent on the individual's talents, potentially giving him or her more power in the employment relationship. However, the individual needs the organisation to provide a work community in order to develop and use his or her talents, shifting the power back to the employer. It is very important that the respective responsibilities of both sides are clear, otherwise the employee is not developed and may even decide to leave.

Once again corporate culture and core beliefs about talent management come into play. If the organisation has more of a 'pick and mix' approach to development then the career paths can be more closely tailored to individual needs, and therefore be more valuable to that individual. In some cases it might make sense to provide a normal, but accelerated common path for talented employees as in the case of high flying graduates, but care must be taken. In our research we have found cases where the individuals are developed so quickly that they miss out on some of the intangible corporate skills ' political, ethical and people relationships. If there is an accelerated path we have found that there may be benefits if you provide mentoring from experienced employees for the talent pool to ensure that they round out their business abilities.

Ken Tucker of the Gallup organisation5 believes that the majority of organisations focus on individual's weaknesses rather than their strengths and it may be better to focus on maximising strengths. It makes people feel good about themselves and may give a far larger return for the organisation as individuals become more motivated to help the organisation. Of course weaknesses are not to be ignored, and need to be developed where they cause issues.

Tracking and rewarding talent

One controversial area often debated is around defining who is talented in an organisation. Are the people genuine high flyers or are they people chosen 'in the own image' of their immediate manager? Are the 'talent skills' being selected today by those in power today going to be suitable for the leaders of tomorrow? Once someone becomes labelled as talented do they stay that way forever? What about those that may be slow starters or currently working in situations which do not show their talents?

Of course, those who have not been given the status of being talented may well feel second class citizens and become very demotivated. Given that talented individuals may only form a small percentage of the total population, then it could result in the majority of employees being unhappy – not at all desirable.

In our research and discussions with corporate people responsible for talent management, one word comes forward – 'fair'. As long as the system is fair to all, and is very clearly explained, then the issues are much lower. Offering employees fair rewards is more important than offering the same rewards. In addition, strong corporate values and beliefs can help prevent reward systems from driving behaviour.

Succession planning

Traditionally, large global organisations have operated highly-structured, mechanistic, secretive and top-down schemes aimed at identifying internal successors for key posts and planning their future career paths. Essentially, these schemes focused on ticking boxes and putting names in organisation charts, with graduates in particular being fast-tracked. The schemes worked reasonably well in a stable environment where structures were fixed and careers were long-term.

But with growing uncertainty, increasing speed of change in the business environment, and flatter structures, succession planning of this nature declined in the 1990s. How can you plan ahead for jobs that might not exist next year? One apparent result of this decline was the growing tendency for more and more people to be appointed to top jobs from outside organisations. Traditional succession planning also failed to take account of non-managerial roles, for example, a brilliant engineer who might be critical to the future of the organisation and who wanted to stay in a specialised role.

In recent years, there has been a revival of interest in succession planning. Growing evidence has been emerging that outsiders coming into top jobs have a tendency to stay only for a short time. These outsiders often make changes that look good on the surface but which are not necessarily in the long-term interests of the organisation. Finally, they develop a habit of moving on before their sins can find them out. These failings began to suggest that it might be better after all to develop people from inside who understand the organisation and its culture, and have loyalty to it.

Pitney Bowes Inc. whose revenue grew 11% in 2005 from $5.5 billion, has at least two people in line for most positions and 10-15 candidates for CEO and other senior positions (Economist Intelligence Unit 2006).

Modern succession planning looks quite different from its ancestors, with a wider vision. It also recognises that, whilst planning is a key element of the process, what is being planned and managed is the talent within the organisation.

Is succession planning a subset of talent management, or has talent management evolved out of succession planning? It doesn't matter. What is important is that succession planning activity should be clearly linked to the organisation's strategy. An organisation needs to know where it is going in order to plan what it needs to get there, and link HR strategy and processes to business results.

Successful succession planning integrates talent management with organisational strategic planning and anticipates changes in management, then puts plans in place to ensure that the business has the right people to grow to meet future needs. It is more than just replacement planning, and creates a culture of learning and development at all levels, building a structural developmental process for top managers and critical technical roles.

Why draw up a succession plan?

In the 2006 CIPD survey3 four in five participants report that succession planning activity took place in some form, but that they were more likely to do so on an ad-hoc basis.

The need for succession planning is summed up by a simple question. What would happen to the business if its leader(s)/key people became unavailable? Many businesses would be thrown into complete disarray. In the same way that people prevaricate about writing wills, many business people are able to find easy excuses for neglecting a succession plan. These excuses are never valid. If you have not done so before, try development activity 1 as an exercise to think about some of those key roles in your organisation.

When someone does leave the business without a proper succession plan in place, the effect can be devastating. Without clear direction, staff morale can fall, and investors or financiers can become nervous about where the business is heading. Customers may leave due to falling service standards, or because they have developed a personal relationship with the departing staff member rather than with the business. To add to the problem, all of this may make finding the right person much more difficult than it needs to be. The solution of investing time and effort in training an existing staff member to take over a more senior role is obvious.

When should succession planning start?

Yesterday would rarely be too soon! It is always imperative to have the insurance of an emergency plan on hand, but you need time on your side to grow suitable replacements and to plan for more manageable succession events, such as the retirement of a key manager. For small businesses/operations, planning well ahead may be even more vital as it is crucial that changes in personnel do not upset the balance and productivity of the small team.

Succession planning is a deliberate process. It prepares for that moment when someone is 'hit by a bus' and allows potential successors to be kept in the loop about all the key things to do with the job role they may one day fulfil. Research points to a common failure among leaders to master more general competencies such as public relations4 and therefore individuals may need to be groomed for linchpin positions ' which takes time. Good succession planning involves the Board, exposes potential top managers to the Board and encourages future CEOs to gain external exposure with important stakeholders such as investors and the media in an on-going, predictable, real time process.

There are also some critical career points at which both the organisation and individuals can have the opportunity to experiment and evaluate their capabilities.

At Intel employees who are recognised as talented and on the verge of promotion are given management experience by working with their peers in teams of ten where they have the responsibility of managing each other's performance and coaching each other before they actually have to manage a department.

Senior managers also look out for key business problems to solve, creating multidisciplinary virtual teams to work on them, targeting those who would benefit from the experience in terms of their management development8.

It may also be useful to give people early and realistic previews of various senior positions, through job rotation and shadowing, as it helps employees to self-select for the tougher, more senior jobs.

So succession planning needs to be started soon to catch people at the right points in their careers, to give them time to develop the right skills. From an organisational viewpoint it needs to be started soon to embed the process in the culture and prepare for the future in an increasingly competitive HR environment.

What are the key steps?

A general guideline for developing a succession plan would be the following steps, but it will vary depending on your organisation and the scope of the plan.

  1. Based on business plans and objectives, define the scope of the succession plan ' the key roles, required characteristics to fill them and estimated timeframes
  2. Define how potential candidates will be measured against these roles
  3. Identify candidates
  4. Evaluate candidates, match to roles
  5. Discuss then record succession plans and individual development plans
  6. Develop candidates in line with the plans
  7. Review and evaluate progress ' of the succession planning process itself and of the employees.

Of course this is described as a series of steps but it is a cyclical process where different triggers, such as a change in business direction or the emergence of new high flyers, will drive a return to an earlier step. The culture of the organisation may also mean that this formal process is not followed. If you are thinking of developing a succession plan, look at development activity 5 which contains a number of additional questions you can ask yourself.

What tools should be used?

To assess the development needs of replacement or high-potential candidates, there are both objective and subjective approaches, such as 360-degree feedback instruments, psychological assessments, supervisory and peer evaluations, and assessment centres. In addition, as mentioned in the Intel example above, there are longer-term evaluation exercises, job assignments and special projects. These processes evaluate the knowledge, skills, attitudes and behaviour of people to support their career development.

It is critical in that the methods used are justifiable in their approach and provide fair and accurate analysis of the talents required. The credibility of the talent management process is absolutely vital: for those managing it, for those deemed as talented and for those in the organisation who are not.

A variety of technological solutions can help with succession planning, including monster.com, Resumix (automated resum?? referral system) and TalentSmart, which offers 360–degree multi–rater assessments and other behavioural assessments. There are also a number of proprietary vendors of tools and assessment centres as well as consultants who support the process.

There should be built-in mechanisms to help replacement candidates implement, track, and evaluate their personal development plans, usually supported by software products. They may be part of an enterprise system, such as SAP or Oracle-Peoplesoft, or specific HRM products. Whatever is used, it needs to be secure, as well as easy to use and administer by all those who need access, as plans will not be maintained if the effort to do so is too great.

What the succession plan should cover

Although each organisation will use its own methods and systems to develop a succession plan, here are some key elements that it should include:

  • The short, medium and long-term strategy for the business
  • Identification and agreement of the skills/behaviours/attitudes needed to deliver that strategy
  • Definition of the scope of succession planning: Top 2-3 levels? Critical technical roles? All management roles? Graduate high flyers? Also a clear explanation as to why these roles have been chosen
  • Agreed tools to be used to measure key attributes of current incumbents and for the evaluation and assessment of potential future position holders. Also mechanisms to ensure fairness and quality of the assessment process
  • Definition of the skills/behaviours/attitudes currently required for people in key positions
  • Forecasts of when predicted succession events are likely to take place
  • Identification of staff members who possess the potential to fill key roles
  • Plans and mechanisms for the development of staff and migration into key roles
  • A clear strategy for retaining and training the next generation of leaders
  • Clear and effective reward packages for potential successors
  • Methods of managing, tracking and reviewing progress
  • Methods of communication ' at a macro level on the process and its success and at an individual level on personal progress, status and plans.

There is one key question:

Are the people in your business capable of delivering the kind of success the business is aiming for in the future?

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Hint and tips

There are many ways to go about talent management and succession planning, but below are a few hints and tips from those who have been through the experience or have evaluated what has happened in multiple organisations. It may help you to focus on the critical success factors for your own company.

Future vision – Organisations successfully using talent management processes have a very clear sense of their future strategic direction. They look to the future not just to the present.

Link to business – The biggest single challenge in business today may well be achieving a real connection between talent strategy and business strategy. A wide range of people processes often take place where no clear relationship is established with the ultimate aims and culture of the business.

Strategic positioning – Finding time is the greatest challenge in an organisation today. Talent management needs to be a strategic part of the business or people will not focus on it.

Senior ownership – The review process is very important. The overall talent management strategy as well as the succession plan should be reviewed at Board level or similar and progress (or lack of it) needs to be tracked and measured, with adjustments made where appropriate.

Responsibility – Talent management needs to be owned by line managers, the Chief Executive and Board and facilitated by HR.

Roles – The identification of the key roles is an important start to succession planning. Personalities and current position-holders must be set aside, with the role itself being made the focus. Some organisations are now defining role groups rather than individual roles, which allows for more flexibility and a greater pool of talent from which to select.

A position is labelled critical based not on who holds it, but on its importance in achieving business goals. It has nothing to do with the person, and everything to do with the business imperative.

Robert Reindl, Edwards Lifesciences Corp

Individual and corporate needs – Individual aspirations/talents and organisational goals need to be aligned. It is this joined–up quality that makes a significant difference – linking business strategy to people's daily experience of the organisation.

Routes to the top – There need to be different routes for people to progress and develop. Otherwise, the appeal will be limited to a narrow range of people. This approach requires an open mind, tackling questions like "How can we use this person's talents and energies?", "How can we organise our work differently?" or "Are we aiming for the right things?" Also, look outside the individual ' consider and encourage the behaviours required to operate effectively in a particular team or culture. Make sideways moves as tempting as a continuous upward growth.

Competencies – Use competencies as a part of the overall toolkit for evaluating talent and considering individuals for specific roles, but do not rely too much on them. Use a variety of methods of pinpointing talent.

Fairness and equality – Be fair and open in the talent management and succession planning process.

You need to spend between 30% and 50% of your time on discovering, recruiting, nurturing and retaining your corporate talent.

Tom Peters

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Conclusion

The demand for managerial talent is increasing and the supply is diminishing. The surge in global job opportunities from the mid-1990s together with increased transparency and accessibility through the internet have led to less emphasis on long-term loyalty and security as a value and more emphasis on individuals exploiting the benefits of having multiple companies on their CV. All of this may be good news for individuals but it presents a major challenge for companies in the war for talent.

A growing number of senior executives recognise that the task of attracting and keeping high-calibre people is becoming more critical to the business. It is an issue that is destined to become more pressing. Continued business success depends as much, if not more, on knowing which jobs are essential to the company as it does on pioneering innovative products or technology. It depends on identifying candidates years in advance, identifying what specific experiences they will need, and making sure those experiences are based on the needs of tomorrow. That is why senior management must be personally involved in selecting who gets the jobs. That is why talent reviews are arguably more important than many other items on the Board agenda.

Talent management is not a quick fix. It is not a one-off exercise. It requires a holistic organisational approach over a long period, and will need to change as the organisation changes, as the external environment changes and as talented people develop within it. Talent management will vary from organisation to organisation and is shaped by its strategy, people and culture.

Talent management is a strategic priority

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References

  1. Branham, L. (2005), Planning to become an employer of choice, Journal of Organisational Excellence, 24(3) pp57-68.
  2. Chowdhury, S. (2002), The Talent Era: Achieving a High Return on Talent, FT/Prentice Hall, New Jersey.
  3. CIPD (2006), Talent management: understanding the dimensions.
  4. Conger, J.A, & Fulmer, R.M. (2003), Developing your Leadership Pipeline, Harvard Business Review.
  5. Digeorgio, R. (2004), Winning with your strengths: an interview with Ken Tucker of the Gallup Organisation, Journal of Change Management 4(1) pp75-81
  6. ELN Conference on Talent Management, London, 30/3/07.
  7. Farley, C. (2005), HR's role in talent management and driving business results, Employment Relations Today, 32(1) pp55-61.
  8. Sloan, E.B., Hazucha, J.F., & Van Katwyk, P.T. (2003), Strategic Management of Global Leadership Talent, Advances in Global Leadership 3: pp235-274.

Last modified: 20/07/2007