Human resources at hewlett packard case analysis

Effective Succession Planning

F O U RT H E D I T I O N

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American Management Association New York • Atlanta • Brussels • Chicago • Mexico City • San Francisco

Shanghai • Tokyo • Toronto • Washington, D.C.

Ensuring Leadership Continuity and Building Talent from Within

William J. Rothwell

Effective Succession Planning

F O U RT H E D I T I O N

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This publication is designed to provide accurate and authoritative information in regard to the subject matter covered. It is sold with the understanding that the publisher is not engaged in rendering legal, accounting, or other professional service. If legal advice or other expert assistance is required, the services of a competent professional person should be sought.

Library of Congress Cataloging-in-Publication Data

Rothwell, William J. Effective succession planning : ensuring leadership continuity and building talent from within / William J.

Rothwell.—4th ed. p. cm.

Includes bibliographical references and index. ISBN-13: 978-0-8144-1416-3 ISBN-10: 0-8144-1416-8 1. Leadership. 2. Executive succession—United States. 3. Executive ability. 4. Organizational

effectiveness. I. Title. HD57.7.R689 2010 658.4�092—dc22

2009032036

� 2010 William J. Rothwell. All rights reserved. Printed in the United States of America.

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About AMA American Management Association (www.amanet.org) is a world leader in talent development, advancing the skills of individuals to drive business success. Our mission is to support the goals of individuals and organizations through a complete range of products and services, including classroom and virtual seminars, webcasts, webinars, podcasts, conferences, corporate and government solutions, business books and research. AMA’s approach to improving performance combines experiential learning—learning through doing—with opportunities for ongoing professional growth at every step of one’s career journey.

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To my wife Marcelina, my daughter Candice,

my son Froilan, and my grandson Aden.

You are the people who matter to me!

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Contents

List of Exhibits — xiii

Preface to the Third Edition — xvii

Acknowledgments — xxxi

Advance Organizer for This Book — xxxiii

Quick Start Guide — xxxvii

What’s on the CD? — xxxix

Part I Background Information About Succession Planning and Management — 1

Chapter 1 What Is Succession Planning and Management? — 3

Six Ministudies: Can You Solve These Succession Problems? — 3

Defining Succession Planning and Management — 6

Distinguishing SP&M from Replacement Planning, Workforce Planning, Talent Management, and Human Capital Management — 12

Making the Business Case for Succession Planning and Management — 14

Reasons for a Succession Planning and Management Program — 16

Reasons to Launch Succession Planning and Management Depending on Global Location — 27

The Current Status of Succession Planning: What Research Shows — 27

The Most Famous Question in Succession: To Tell or Not To Tell — 29

Management Succession Planning, Technical Succession Planning, or Social Network Succession Planning: What Are You Planning For? — 30

Best Practices and Approaches — 31

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viii Contents

Ensuring Leadership Continuity in Organizations — 36

Summary — 41

Chapter 2 Trends Influencing Succession Planning and Management — 42

The Ten Key Trends — 43

What Does All This Mean for Succession Planning and Management? — 56

Summary — 56

Chapter 3 Moving to a State-of-the-Art Approach — 58

Characteristics of Effective Programs — 58

Common Mistakes and Missteps to Avoid — 63

The Life Cycle of Succession Planning and Management Programs: Five Generations — 75

Integrating Whole Systems Transformational Change and Appreciative Inquiry into Succession: What Are These Topics, and What Added Value Do They Bring? — 78

Requirements for a New Approach — 82

Key Steps in a New Approach — 83

Summary — 86

Chapter 4 Competency Identification, Values Clarification, and Ethics: Keys to Succession Planning and Management — 87

What Are Competencies? — 87

How Are Competencies Used in Succession Planning and Management? — 88

Conducting Competency Identification Studies — 89

Using Competency Models — 90

Newest Developments in Competency Identification, Modeling, and Assessment — 91

What’s the Focus: Management or Technical Competencies? — 92

Identifying and Using Generic and Culture-Specific Competency Development Strategies to Build Bench Strength — 93

What Are Values, and What Is Values Clarification? — 94

How Are Values Used in Succession Planning and Management? — 96

Conducting Values Clarification Studies — 96

Using Values Clarification — 97

What Are Ethics, and How Are Ethics Used in SP&M? — 98

Bringing It All Together: Competencies, Values, and Ethics — 100

Summary — 100

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Contents ix

Part II Laying the Foundation for a Succession Planning and Management Program — 103

Chapter 5 Making the Case for Major Change — 105

Assessing Current Problems and Practices — 105

Demonstrating the Need — 114

Determining Organizational Requirements — 118

Linking SP&M Activities to Organizational and Human Resource Strategy — 119

Benchmarking Best Practices and Common Business Practices in Other Organizations — 123

Obtaining and Building Management Commitment — 128

The Key Role of the CEO in the Succession Effort — 131

The Key Daily Role of Managers in the Succession Effort — 133

Sustaining Support for the Succession Effort — 133

Summary — 135

Chapter 6 Starting a Systematic Program — 136

Strategic Choices in Where and How to Start — 136

Conducting a Risk Analysis and Building a Commitment to Change — 137

Clarifying Program Roles — 139

Formulating a Mission Statement — 142

Writing Policy and Procedures — 149

Identifying Target Groups — 151

Clarifying the Roles of the CEO, Senior Managers, and Others — 155

Setting Program Priorities — 157

Addressing the Legal Framework — 158

Establishing Strategies for Rolling Out the Program — 167

Summary — 168

Chapter 7 Refining the Program — 169

Preparing a Program Action Plan — 169

Communicating the Action Plan — 170

Conducting Succession Planning and Management Meetings — 173

Training on Succession Planning and Management — 177

Counseling Managers About Succession Planning Problems in Their Areas — 185

Summary — 188

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Part III Assessing the Present and the Future — 189

Chapter 8 Assessing Present Work Requirements and Individual Job Performance — 191

Identifying Key Positions — 192

Three Approaches to Determining Work Requirements in Key Positions — 196

Using Full-Circle, Multirater Assessments — 201

Appraising Performance and Applying Performance Management — 204

Creating Talent Pools: Techniques and Approaches — 207

Thinking Beyond Talent Pools — 212

Summary — 214

Chapter 9 Assessing Future Work Requirements and Individual Potential — 215

Identifying Key Positions and Talent Requirements for the Future — 215

Three Approaches to Determining Future Work Requirements in Key Positions — 218

Assessing Individual Potential: The Traditional Approach — 224

The Growing Use of Assessment Centers and Portfolios — 233

The Latest Issues in Potential Assessment — 236

Summary — 237

Part IV Closing the Developmental Gap: Operating and Evaluating an SP&M Program — 239

Chapter 10 Developing Internal Successors — 241

Testing Bench Strength — 242

Formulating Internal Promotion Policy — 246

Preparing Individual Development Plans — 249

Evaluating Individual Development Plans — 257

Developing Successors Internally — 257

The Role of Leadership Development Programs — 265

The Role of Coaching — 265

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Contents xi

The Role of Executive Coaching — 267

The Role of Mentoring — 268

The Role of Action Learning — 270

The Role of Acceleration Pools — 270

Summary — 271

Chapter 11 Assessing Alternatives to Internal Development — 272

The Need to Manage for ‘‘Getting the Work Done’’ Rather than ‘‘Managing Succession’’ — 272

Innovative Approaches to Tapping the Retiree Base — 281

Deciding What to Do — 284

Summary — 286

Chapter 12 Integrating Recruitment with Succession Planning — 287

What Is Recruitment, and What Is Selection? — 287

When Should Recruitment Be Used to Source Talent? — 288

Internal Versus External Recruitment: Integrating Job Posting with Succession Planning — 289

Recruiting Talented People from Outside — 290

Innovative Recruitment Approaches to Attract High Potentials — 293

Summary — 296

Chapter 13 Integrating Retention with Succession Planning — 298

What Is Retention, and Why Is It Important? — 298

Who Should Be Retained? — 299

What Common Misconceptions Exist in Managing Retention Issues? — 303

Using a Systematic Approach to Increase the Retention of Talented People — 305

Summary — 306

Chapter 14 Using Technology to Support Succession Planning and Management Programs — 309

Defining Online and High-Tech Methods — 309

Where to Apply Technology Methods — 315

How to Evaluate and Use Technology Applications — 315

What Specialized Competencies Do SP&M Coordinators Need to Use These Applications? — 327

Summary — 328

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xii Contents

Chapter 15 Evaluating Succession Planning and Management Programs — 329

What Is Evaluation? — 329

What Metrics Should Be Used to Evaluate SP&M Programs? — 330

What Should Be Evaluated? — 331

How Should Evaluation Be Conducted? — 334

How Can SP&M Be Evaluated with the Balanced Scorecard and HR Dashboards? — 339

Summary — 347

Chapter 16 The Future of Succession Planning and Management — 348

The Fifteen Predictions — 349

Summary — 370

Appendix I: Frequently Asked Questions (FAQs) About Succession Planning and Management — 371

Appendix II: Case Studies on Succession Planning and Management — 377

Notes — 409

Index — 429

About the Author — 447

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List of Exhibits

P-1. Age Distribution of the U.S. Population, Selected Years, 1965–2025 —xxi

P-2. U.S. Population by Age, 1965–2025 —xxii

P-3. Organization of the Book —xxvii

1-1. How General Electric Planned the Succession —7

1-2. The Big Mac Succession —10

1-3. Demographic Information about Respondents to a 2009 Survey on Succession Planning and Management: Industries —17

1-4. Demographic Information about Respondents to a 2009 Survey on Succession Planning and Management: Size —17

1-5. Demographic Information about Respondents to a 2009 Survey on Succession Planning and Management: Job Functions of Respondents —18

1-6. Reasons for Succession Planning and Management Programs —19

1-7. Strategies for Reducing Turnover and Increasing Retention —23

1-8. Workforce Reductions Among Survey Respondents —26

1-9. Summary of Best Practices on Succession Planning and Management from Several Research Studies —32

2-1. Assessment Questionnaire: How Well Is Your Organization Managing the Consequences of Trends Influencing Succession Planning and Management? —44

2-2. Sarbanes-Oxley Act of 2002 —50

3-1. Characteristics of Effective Succession Planning and Management Programs —64

3-2. Assessment Questionnaire for Effective Succession Planning and Management —68

3-3. Chief Difficulties with Succession Planning and Management Programs —71

3-4. Simple Exercise to Dramatize the Need for Succession Planning and Management —76

3-5. Dow Chemical Company’s Formula for Succession —79

3-6. The Seven-Pointed Star Model for Systematic Succession Planning and Management —83

4–1. Interview Guide to Collect Corporate-Culture-Specific Competency Development Strategies —95

5-1. Demographic Information About Respondents to 2009 Survey on Succession Planning and Management: Job Functions of Respondents —107

5-2. Importance of Succession Planning and Management —108

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5-3. Making Decisions About Successors in Organizations Without Systematic Succession Planning and Management —109

5-4. Questionnaire for Assessing the Status of Succession Planning and Management in an Organization —112

5-5. Worksheet for Demonstrating the Need for Succession Planning and Management —116

5-6. Interview Guide for Determining the Requirements for a Succession Planning and Management Program —120

5-7. Interview Guide for Benchmarking Succession Planning and Management Practices —125

5-8. Opinions of Top Managers About Succession Planning and Management —129

5-9. Opinions of Human Resource Professionals About Succession Planning and Management —130

5-10. Actions to Build Management Commitment to Succession Planning and Management —131

5–11. Rating Your CEO for His or Her Role in Succession Planning and Management —134

6-1. Model for Conceptualizing Role Theory —139

6-2. Management Roles in Succession Planning and Management: Grid —141

6-3. Worksheet to Formulate a Mission Statement for Succession Planning and Management —145

6-4. Sample Succession Planning and Management Policy —150

6-5. Targeted Groups for Succession Planning and Management —152

6-6. Activity for Identifying Initial Targets for Succession Planning and Management Activities —153

6-7. Activity for Establishing Program Priorities in Succession Planning and Management —159

6-8. U.S. Labor Laws —161

7-1. Worksheet for Preparing an Action Plan to Establish the Succession Planning and Management Program —171

7-2. Sample Outlines for In-House Training on Succession Planning and Management —179

8-1. Worksheet for Writing a Key Position Description —198

8-2. Worksheet for Considering Key Issues in Full-Circle, Multirater Assessments —203

8-3. Relationship Between Performance Management and Performance Appraisal —206

8-4. Approaches to Conducting Employee Performance Appraisal —208

8-5. Worksheet for Developing an Employee Performance Appraisal Linked to a Position Description —211

9-1. Worksheet for Environmental Scanning —217

9-2. Activity on Organizational Analysis —219

9-3. Activity for Preparing Realistic Scenarios to Identify Future Key Positions —220

9-4. Activity for Preparing Future-Oriented Key Position Descriptions —221

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9-5. Steps in Conducting Future-Oriented Rapid Results Assessment —223

9-6. How to Classify Individuals by Performance and Potential —226

9-7. Worksheet for Making Global Assessments —228

9-8. Worksheet to Identify Success Factors —229

9-9. Individual Potential Assessment Form —230

10-1. Sample Replacement Chart Format: Typical Succession Planning and Management Inventory for the Organization —243

10-2. Succession Planning and Management Inventory by Position —244

10-3. Talent Shows: What Happens? —247

10-4. Simplified Model of Steps in Preparing Individual Development Plans —251

10-5. Worksheet for Preparing Learning Objectives Based on Individual Development Needs —253

10-6. Worksheet for Identifying the Resources Necessary to Support Developmental Experiences —255

10-7. Sample Individual Development Plan —258

10-8. Methods of Grooming Individuals for Advancement —260

10-9. Key Strategies for Internal Development —261

11-1. Deciding When Replacing a Key Job Incumbent Is Unnecessary: Flowchart —274

11-2. Worksheet for Identifying Alternatives to the Traditional Approach to Succession Planning and Management —282

11–3. Tool for Contemplating Ten Ways to Tap the Retiree Base —285

12-1. Worksheet to Assess How Often and How Well an Organization Uses Traditional External Recruiting Sources —291

13-1. Worksheet to Calculate the Cost of Turnover —300

13-2. Worksheet to Compare Your Organization on Best Practices in Employee Retention —307

14-1. Continua of Online and High-Tech Approaches —310

14-2. Starting Point for a Rating Sheet to Assess Vendors for Succession Planning and Management Software —312

14-3. Hierarchy of Online and High-Tech Applications for Succession Planning and Management —316

14-4. Worksheet for Brainstorming When and How to Use Online and High-Tech Methods —319

15-1. Hierarchy of Succession Planning and Management Evaluation —332

15-2. Guidelines for Evaluating the Succession Planning and Management Program —335

15-3. Worksheet for Evaluating the Succession Planning and Management Program —337

15-4. Sample Incident Report for Succession Planning and Management —338

15-5. Steps for Completing a Program Evaluation of a Succession Planning and Management Program —340

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15-6. Checksheet for Conducting a Program Evaluation for the Succession Planning and Management Program —342

16-1. Worksheet to Structure Your Thinking About Predictions for Succession Planning and Management in the Future —350

16-2. Worksheet to Structure Your Thinking About Alternative Approaches to Meeting Succession Needs —355

16-3. Age Distribution of the U.S. Population in 2025 —358

16-4. Age Distribution of the Chinese Population in 2025 —359

16-5. Age Distribution of the Population in the United Kingdom in 2025 —359

16-6. Age Distribution of the French Population in 2025 —360

16-7. Important Characteristics of Career Planning and Management Programs —364

16-8. Assessment Sheet for Integrating Career Planning and Management Programs with Succession Planning and Management Programs —366

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Preface to the Fourth Edition

The world moves faster than ever. Since the third edition of this book, many changes have occurred to shape succession planning and management as well as the related field of talent management. Just consider the changes:

In the World

' The Recession of 2007 and Beyond: As this edition goes to press, unemployment in the United States has exceeded 9 percent, and the United Nations projects that the global unemployment rate could climb higher than 6.1 percent. As a result, some business leaders question whether the time and money devoted to succession planning and talent management are worth it when layoffs are increasing.

' The Lingering Aftereffects and Legacy of 9/11: When the World Trade Center collapsed, 172 corporate vice presidents lost their lives. That tragic event rein- forced the message, earlier foreshadowed by the tragic loss of life in Oklahoma City, Oklahoma, that life is fragile and that talent at all levels is increasingly at risk in a world where disaster can strike unexpectedly. In a move that would have been unthinkable ten years ago, some organizations are examining their bench strength in locations other than their headquarters in New York City, Washington, or other cities that might be prone to attack if terrorists should wipe out a whole city through the use of a dirty nuclear weapon or other chemical or biological agent. Could the organization pick up the pieces and continue functioning without headquarters? That awful, but necessary, ques- tion is on the minds of some corporate and government leaders today. (In fact, one client of mine has set a goal of making a European capital the alterna- tive corporate headquarters, with a view toward having headquarters com- pletely reestablished in Europe within 24 hours of the total loss of the New York City headquarters, if disaster should strike.)

' The Aftereffects of Many Corporate Scandals: Ethics, morality, and values have never been more prominent than they are today. The Bernard Madoff scandal

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followed on the heels of earlier scandals affecting numerous Wall Street firms and, years before that, Enron, Global Crossing, and WorldCom. Many busi- ness leaders have recognized that ethics, morality, and values do matter. Cor- porate boards have gotten more involved in succession planning and management owing in part to the requirements of the Sarbanes-Oxley Act and to the recognition that many senior corporate leaders are at or beyond the traditional retirement age. And corporate leaders, thinking about succession, realize that future leaders must model the behaviors they want others to ex- hibit and must avoid practices that give even the mere appearance of impro- priety. And yet some CEOs receive large performance bonuses even when they lead their firms into bankruptcy.1

' Growing Recognition of the Aging Workforce: Everyone is still talking about the demographic changes sweeping the working world in the United States and in the other G8 nations. Some organizations have already felt the effects of talent loss resulting from retirements of experienced workers.

' Growing Awareness That Succession Issues Amount to More Than Finding Re- placements: When experienced people leave organizations, they take with them not only the capacity to do the work but also the accumulated wisdom they have acquired. That happens at all levels and in all functional areas. Succession involves more than merely planning for replacements at the top. It also in- volves thinking through what to do when the most experienced people at all levels depart—and take valuable institutional memory with them.

' Increasing Globalization of Talent: Workers in the West are heading to the Far East, where more opportunities exist even in the midst of financial crises. Talent is becoming more willing to travel where pay and benefits, as well as tax rates, are more favorable.

' Growing Interest in Tapping Retirees: Though experts may argue over whether a talent shortage has emerged or will emerge, business leaders are increasingly turning to their more experienced workers or seeking to find them.

Changes in Succession Planning

' Wide Acceptance of Talent Management and Talent Development: As is true in so many areas of management, these terms may well still be in search of meanings. They have more than one meaning. But, in many cases, talent man- agement refers to the efforts taken to attract, develop, and retain best-in-class employees—dubbed high performers (or HiPers), high professionals (HiPros), and high potentials (or HiPos) by some. Talent development may refer to efforts to groom HiPers or HiPos for the future and/or to tap them for transfer

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the specialized knowledge of HiPros. Think of it as selective attention paid to the top performing 10 percent of employees—that’s one way it is thought of.

' The Emergence of ‘‘Workforce Planning’’: Though some people think that suc- cession planning is limited to the top of the organization chart—which I do not accept, by the way—others regard comprehensive planning for the future staffing needs of the organization as workforce planning. It is also a popular term for succession planning in government, rivaling the term human capital management in that venue.

' Growing Awareness of Succession Planning: Decision makers have become aware of the need for succession planning as they scurry to find replacements, even in the midst of a global business slowdown, for a pending tidal wave of retirements in the wake of years of downsizing, rightsizing, and smart sizing.

' The Recognition That Succession Planning Is Only One of Many Solutions: When managers hear that they are losing a valuable—and experienced—worker, their first inclination is to clutch their hearts and say, ‘‘Oh, my heavens, I have only two ways to deal with the problem—promote from inside or hire from outside. The work is too specialized to hire from outside, and the organization has such weak bench strength that it is not possible to promote from within. So we better get busy and build a succession program.’’ Of course, that is much too limited a view. The goal is to get the work done and not necessarily to replace people, and there are many ways to get the work done.

' Growing Awareness of Technical Succession Planning as a Means of Addressing the Knowledge Transfer Problem: Though succession planning is typically asso- ciated with preparing people to make vertical moves on the organization chart, it is also as applicable to engineers, lawyers, research scientists, MIS profes- sionals, and other professional or technical workers who possess specialized knowledge. When they leave the organization, they may take critically impor- tant and proprietary institutional memory and knowledge with them. Hence, growing awareness exists for the need to do technical succession planning, which focuses on the horizontal level of the organization chart and involves broadening and deepening professional knowledge and preserving it for the organization’s continued use in the future.

' Continuing Problems with HR Systems and the Need for HR Transformation: HR systems are still not up to snuff. As I consult in this field, I see too little staffing in HR departments, poorly skilled HR workers with low credibility, ineffective competency modeling efforts, insufficient HR technology to sup- port robust applications like succession, and many other problems with the HR function itself. This observation includes timid HR people who are unwill- ing to stand up to the CEO or their operating peers, exert people leadership,

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and insist on accountability systems to make sure that managers do their jobs to groom talent while they struggle to get today’s work out the door.

' Widening Interest in Tactical Succession Planning: Many HR practitioners rec- ognize that they are often blamed for failing to find, keep, and develop tal- ented people. Yet, until now, too little attention has been devoted to the daily responsibilities of managers and workers in talent management. While HR has a role to lead the organization to strategic talent management, managers and workers have a daily role in tactical talent management.

The world continues to face the crisis of leadership described in the preface to the first edition of this book. Indeed, ‘‘a chronic crisis of governance—that is, the perva- sive incapacity of organizations to cope with the expectations of their constituents—is now an overwhelming factor worldwide.’’ That statement is as true today as it was when this book was published in 1994. Evidence can still be found in various settings: Many citizens have lost faith in their elected officials to address problems at the national, regional, and local levels; the religious continue to lose faith in high-profile church leaders who have been involved in sensationalized scandals; and consumers have lost faith that business leaders will act responsibly and ethically.2 Add to those problems some others: People do not trust the mass media, like newspapers or televi- sion stations, now owned by enormous corporations, to tell them the truth; they may not assume that reporters have even bothered to check the facts; and patients have lost faith that doctors, many of whom are pressured to hold down costs, to ‘‘do no harm.’’3

A crisis of governance is also widespread inside organizations. Employees wonder what kind of employment they can maintain when a new employment contract has changed the relationship between workers and their organizations. Employee loyalty is a relic of the past,4 the victim of the downsizing craze so popular in the 1990s that persists in some organizations to the present day. Employee engagement is a problem everywhere when 19 percent of all employees in the United States are actively working against the goals of their employers. Changing demographics makes the identification of successors key to the future of many organizations when the legacy of the cutbacks in the middle-management ranks, the traditional training ground for senior executive positions, has begun to be felt. If that is hard to believe, consider that many of the best-known companies in the United States could lose a high percentage of their senior executives to retirement at any time.5 Demographics tell the story: The U.S. population is aging, and that could mean many retirements soon. (See Exhibits P-1 and P-2.)

Amid the pressures of pending retirements in senior executive ranks and the increasing value of intellectual capital and knowledge management, it is more neces- sary than ever for organizations to plan for leadership continuity and employee devel- opment at all levels. But that is easier said than done. Systematic succession planning

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Exhibit P-1. Age Distribution of the U.S. Population, Selected Years, 1965–2025

25,000

20,000

15,000

10,000

5,000

0

16 –1

9

20 –2

4

25 –2

9

30 –3

4

35 –3

9

40 –4

4

45 –4

9

50 –5

4

55 –5

9

60 –6

4

65 –6

9

70 –7

4

75 –7

9 80

+

Age

P o p u la

ti o n (

th o u sa

n d s)

1965

1995

2015

Source: Stacy Poulos and Demetra S. Nightengale, ‘‘The Aging Baby Boom: Implications for Employment and Training Programs.’’ Presented at http://www.urban.org/aging/abb/agingbaby.html. This report was prepared by the U.S. Department of Labor under Contract No. F-5532-5-00-80-30.

is not consistent with longstanding tradition, which favors quick fixes to necessarily long-term, culture-changing succession planning and management (SP&M) issues. Nor is it consistent with the continuing, current trends in which too few people are thrown at too much work. Shallow internal talent pools are exacerbated by the use of outsourcing and contingent workers from which to choose future leaders.

In previous decades, labor in the United States was plentiful and taken for granted. Managers had the leisure to groom and test employees for advancement over long time spans and to overstaff as insurance against surprise losses in key positions. That was as true for management as it was for nonmanagement employees. Most jobs did not require extensive prequalification. Seniority (sometimes called job tenure), as measured by time with an organization or in an industry, was sufficient to ensure advancement. Succession planning and management activities properly focused on leaders at the peak of tall organizational hierarchies because organizations were con- trolled from the top down and were thus heavily dependent on the knowledge, skills, and attitudes of top management.

But times have changed. Few organizations have the luxury to overstaff in the face of fierce global competition from low-cost labor abroad and economic restructur-

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xxii Preface to the Fourth Edition

Exhibit P-2. U.S. Population by Age, 1965–2025

100000

20252015200519951965 1975 10000

20000

30000

40000

50000

60000

70000

80000

90000

1985

Year

16–24 yr olds 25–34 yr olds 35–44 yr olds 45–54 yr olds 55 & older

Source: Stacy Poulos and Demetra S. Nightengale, ‘‘The Aging Baby Boom: Implications for Employment and Training Programs.’’ Presented at http://www.urban.org/aging/abb/agingbaby.html. This report was prepared by the U.S. Department of Labor under Contract No. F-5532-5-00-80-30.

ing efforts. That is particularly true in high-technology companies where several months’ experience may be the equivalent of a year’s work in a more stable industry.

At the same time, products, markets, and management activities have grown more complex. Many jobs now require extensive prequalification, both inside and outside organizations. A track record of demonstrated and successful work performance—not just time in position—and leadership competency have become key considerations as fewer employees compete for diminishing advancement opportunities. As employee empowerment has broadened the ranks of decision makers, leadership influence can be exerted at all hierarchical levels rather than limited to those few granted authority by virtue of their lofty titles and managerial positions.

For these reasons, organizational leaders must take proactive steps to plan for future talent needs at all levels and implement programs designed to ensure that the

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Preface to the Fourth Edition xxiii

right people are available for the right jobs in the right places and at the right times to get the right results. Much is at stake in this process: ‘‘The continuity of the organi- zation over time requires a succession of persons to fill key positions.’’6 There are important social implications as well. As management guru Peter Drucker explained in words as true today as when they were written:7

The question of tomorrow’s management is, above all, a concern of our society. Let me put it bluntly—we have reached a point where we simply will not be able to tolerate as a country, as a society, as a government, the danger that any one of our major companies will decline or collapse because it has not made adequate provisions for management succession. [emphasis added]

Research adds weight to the argument favoring SP&M. First, it has been shown that firms in which the CEO has a specific successor in mind are more profitable than those in which no specific successor has been identified. A possible reason is that selecting a successor ‘‘could be viewed as a favorable general signal about the presence and development of high-quality top management.’’8 In other words, superior- performing CEOs make SP&M and leadership continuity top priorities. Succession planning and management has even been credited with driving a plant turnaround by linking the organization’s continuous improvement philosophy to individual de- velopment.9

But ensuring leadership continuity can be a daunting undertaking. The rules, procedures, and techniques used in the past appear to be growing increasingly out- moded and inappropriate. It is time to revisit, rethink, and even reengineer SP&M. That is especially true because, in the words of one observer of the contemporary management scene, ‘‘below many a corporation’s top two or three positions, succes- sion planning [for talent] is often an informal, haphazard exercise where longevity, luck, and being in the proverbial right place at the right time determines lines of succession.’’10 A haphazard approach to SP&M bodes ill for organizations in which leadership talent is diffused—and correspondingly important—at all hierarchical lev- els while the need also exists to scramble organizational talent quickly to seize business opportunities or deal with crises.

Succession Planning in Tough Economic Times

One difference between this edition and the previous one is the tough economic climate faced by organizations globally. Consider:

' In 2008, the U.S. economy shed 2.6 million jobs, the most since 1945.

' As this book goes to press, the United States has reached a jobless high of 7.2 percent, the most in 16 years.

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' Fewer than one in three workers qualifies for unemployment insurance bene- fits when they are laid off because, for one reason or another, they are not eligible.

' From the start of the recession in December 2007 through December 2008, the total number of mass layoff events (seasonally adjusted) was 23,485, and the number of initial claims (seasonally adjusted) was 2,394,434.11

' For all of 2008, on a not seasonally adjusted basis, the total numbers of mass layoff events reached 21,137, and initial unemployment claims reached 2,130,220, their highest annual levels since 2001 and 2002, respectively. Among the 21 major industry sectors, six registered series highs for both mass layoff events and initial claims for all of 2008: construction; transportation and warehousing; finance and insurance; real estate and rental and leasing; management of companies and enterprises; and accommodation and food services.12

In light of these conditions, some senior managers question whether it is worth- while to devote time and money to succession planning issues. They reason that, with so many people out of work or working below their skill level, it should be easy to find well-qualified replacements for the dwindling number of people who can afford to retire at a time that retirement funds have tanked along with the stock market.

But that logic is not necessarily true. The people thrown out of work do not necessarily match up nicely and precisely to the people who need to be replaced due to retirements or job growth. For instance, the biggest job growth is in health care. How many workers laid off from manufacturing or construction can become nurses?

The point is that succession planning is needed in good times as well as in bad. Employers must plan for their future, and planning for people is part of that. Relying solely on the external labor market for talent can be a suboptimal strategy, ignoring the value of company-culture-specific experience and wisdom.

The Purpose of This Book

Succession planning and management and leadership development figure promi- nently on the agenda of many top managers. Yet, despite senior management interest, the task often falls to human resource management (HRM) and workplace learning and performance (WLP) professionals to spearhead and coordinate efforts to establish and operate strategically oriented succession programs and to avert succession crises. In that way, they fill an important, proactive role demanded of them by top managers, and they ensure that SP&M issues are not lost in the shuffle of fighting daily fires.

But SP&M is rarely, if ever, taught in most undergraduate or graduate college

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degree programs—even in those specifically tailored to preparing HRM and WLP professionals. For this reason, HRM and WLP professionals often need assistance when they coordinate, establish, operate, or evaluate SP&M programs. This book is intended to provide that help. It offers practical, how-to advice on SP&M. The book’s scope is deliberately broad. It encompasses more than management succession plan- ning, which is the most frequently discussed topic by writers and consultants in the field. Stated succinctly, the purpose of this book is to reassess SP&M and offer a practical approach to ensuring leadership continuity in key positions and for key people by building leadership talent from within.

Succession planning and management should support strategic planning and stra- tegic thinking. It should provide an essential starting point for management and employee development programs. Without it, organizations will have difficulty main- taining leadership continuity or identifying appropriate leaders when a change in business strategy is necessary. Though many large blue-chip corporations operate best-practice SP&M programs, small and medium-sized businesses also need them. In fact, inadequate succession plans are a common cause of small business failure as founding entrepreneurs fade from the scene, leaving no one to continue their legacy,13

and as tax laws exert an impact on the legacy of those founders as they pass away. Additionally, nonprofit enterprises and government agencies need to give thought to planning for future talent.

Whatever an organization’s size or your job responsibilities, then, this book should provide useful information on establishing, managing, operating, and evaluat- ing SP&M programs.

Sources of Information

As I began writing this book I decided to explore state-of-the-art succession planning and management practices. I consulted several major sources of information:

1. A Tailor-Made Survey: In January 2009 I surveyed over 1,200 HRM profession- als about SP&M practices in their organizations. Selected survey results, which were compiled in February 2009, are published in this book for the first time. This survey was an update of earlier surveys conducted for the first edition (1994), second edition (2000), and third edition (2005). Though the response rate to the survey was disappointing, the results provided interesting informa- tion.