Succession Planning

Succession planning, the process by which an organization makes sure that it will have the right leaders in the right place at the right time, has always been one of the most important accountabilities of the chief executives and top leaders of organizations. However, the importance of succession planning to business success has never been greater or more widely recognized than it is now—a result of the globalization of industry, demographic and generational shifts, and the ever-changing challenges of leadership in today’s organizations. In fact, corporate boards have become more actively involved in CEO succession and are holding CEOs accountable for making sure that succession planning is in place below them.

The term succession planning, along with the scope and primary focus of this managerial function, has evolved over the last half century. During the 1950s and 1960s, the economies of developed nations were growing and a lean Depression generation was rising through the leadership ranks. The focus was on replacement planning, in which key positions were targeted and slates of candidates were identified as possible backups in case the current incumbent retired, was promoted, or was “hit by a bus.” The impetus was the realization that there were not a lot of candidates to fall back on, especially as the postwar economic expansion began to heat up, resulting in the need for more leaders to manage growing businesses.

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Human resources (HR) practitioners had few tools in these years, but assessment center methodology, created during the late 1930s and first applied to business during the 1950s in the AT&T Managerial Progress Study, laid the scientific foundation for the major contribution of industrial and organizational (I/O) psychology to the practice of succession planning: the definition of managerial competencies and the prediction of managerial success.

During the 1970s and 1980s, the process evolved into succession management. As the baby boom generation bulged its way through organizations, the focus was on figuring out a way to select and develop the right people from a plethora of possibilities so that the best would rise to the top—not by accident or good fortune, but by plan. The goal was no longer to just identify replacements for key positions at the top to minimize risk but also to develop a robust pipeline of leaders at all levels of the organization to ensure its continued growth and success. Included in this process at each major level (frontline, middle, and executive leadership) was the identification of high-potential individuals, appraisal of their strengths and skill and experience gaps, and plans for their development. Especially at the executive level, the people in this pipeline of future leaders came to be called corporate assets because they were valuable leadership resources of the whole company, not just the particular function or business unit in which they were based.

Companies such as AT&T, IBM, General Electric, and Exxon were on the leading edge in creating and using this kind of system. Industrial and organizational psychologists at these companies and in consulting firms serving a wide spectrum of companies were busy developing assessment centers, administering cognitive tests and personality inventories to screen for leadership potential, gathering observations of on-the-job performance and estimates of future potential through multiperspective interviews, and conducting in-depth behavioral interviews to help companies get data for promotion decisions and individual development planning. Today, General Electric is still touted as a leading example of succession management, with its Session C review of A, B, and C players, multilevel management curriculum, and decades-long dedication to building such a rich leadership pool that it has been able to “export” CEOs to other companies.

Despite auspicious progress in the field, there was so much change and churn in corporations during the 1980s and 1990s as a result of massive downsizing, major technological breakthroughs, and considerable merger and acquisition activity that many companies found themselves rebuilding their knowledge base around their key people and rediscovering or reinventing their expertise in managing succession during these decades.

Now, in the early 21st century, we are seeing the next stage in this evolution emerging—strategic talent management—-which is marked by a broadening of the corporate view of global talent management and a keener awareness that leaders are critical, but there are other pivotal talent pools (e.g., as diverse as global account managers and Disney World’s street sweepers) that must be acquired, developed, and managed proactively to achieve and sustain competitive advantage in a dynamic, global economy. In fact, a whole new HR decision science is beginning to emerge that provides theory and tools for tying business strategy to talent pool identification, development, and investment.

Succession planning began as a very secret process; charts were often placed on the walls of a locked “war room,” and people were not told that they were on them. In smaller, entrepreneurial companies, planning was frequently ad hoc, and plans were often sketched on the back of an envelope. In large corporations, succession plans were carefully compiled and elaborately detailed in heavy binders. The irony is that these plans were rarely used for real decision making. When the time actually came to pass the baton, the name on the replacement chart or key talent pool might no longer be seen as high potential, or the individual might no longer be available, interested, or willing to move.

The reasons were many: The needs of business were changing rapidly, and most plans were out of date almost as soon as the ink was dry. Unlike previous generations, the personal priorities and career aspirations of employees at this time were not always in sync with the corporation’s plans for them. Wars for talent were beginning to erupt, especially in the technology sector; the managers of high potential employees tended to hoard them because they were not willing to give up their power, privilege, and precious talent to submit to someone else’s plans for them. And executive leaders just didn’t trust the evaluations of performance, potential, and readiness that were served up by lower levels.

The key components of a comprehensive process have been evolving over time to cover the essential aspects of the succession or leadership continuity solution, including the following:

  • Business review: An update of the current state of business strategies and priorities; clarifying the implications of the business strategy and vision for leadership roles and pivotal talent pools
  • Talent needs forecast: An estimate of the number and kinds of talent needed to fill roles in a defined future time frame, including outlines of the performance challenges, competencies, and selection criteria for key positions and pivotal roles
  • Talent inventory: Identification and appraisal of key position candidates and high-potential pools in terms of their performance, potential, and readiness for advancement; sometimes summarized in an overall estimate of bench strength at key leadership levels
  • Talent review: A review, discussion, and documentation of key position plans and development plans for key individuals and talent pools by a representative group of organization leaders (usually the top management team for the business unit or a special committee or board established for this purpose)
  • Follow-up and progress review: A process for regular review, update, and oversight of the execution of succession and development plans

At the heart of the talent inventory are four key decisions about people:

  • Who are proven performers who deliver the right results in the right way?
  • Which of these has the potential to grow into positions at a higher level?
  • What do they need to get ready for promotion, and how fast will they be ready?
  • Which candidate is the best all-around fit for a particular role or opening?

Companies address these four questions in different ways. Some use simple managerial input, whereas others use more rigorous methodologies, but most rely on performance observations and appraisals that are not calibrated across the organization and provide necessary but not sufficient input for predicting success at higher levels. As any good I/O psychologist knows, current performance is a good predictor of future performance only if the context of performance (level, scope, challenges, competency requirements) is similar. This is where I/O psychology has the most to offer—defining the performance requirements of key jobs, measuring peoples’ current capabilities and future capacity, and accelerating the development of individuals and groups.

Starting with the definition of performance requirements in terms of the position responsibilities and the person capabilities to match them, I/O psychology has well-developed expertise and tools for job analysis. The terms currently in use are job modeling or strategic performance modeling, which recognize the highly dynamic nature of today’s organizations and the need to constantly reshape the critical roles within them.

In the domain of assessment, I/O psychologists provide tools and processes for in-depth and comprehensive assessments of leadership capability that can be used to supplement or check insiders’ observations, predictions, and plans. The lenses that internal managers look through are foggy, at best, and misleading, at worst. The I/O psychologist’s tools (e.g., measures of cognitive and personality traits that predict leadership potential, multimethod assessments of current leadership capability and readiness for more responsible roles) add significant value, especially when an individual’s capabilities are not well-known by decision makers, when he or she hasn’t been in situations that approximate the challenges of the target role, or when cultural and individual biases have a significant effect on organizational decisions.

Psychologists in the field of learning design and organizational development have additional wisdom and methodologies to offer succession management practitioners. These include powerful techniques such as intensive individual coaching, action learning methods, multilevel curriculum design, and process consultation.

Companies that are successful at managing succession embed the expertise of I/O psychology into their processes and follow several basic principles:

  • Make it an ongoing, integral business process. Succession planning must be an ongoing process, not a onetime or annual event, with business and people plans refreshed and discussed on a regular basis.
  • Link succession planning to the vision, values, and strategy of the business. People plans should support the business strategy, especially the core competencies and values of the corporation that give it its distinctive, sustainable competitive advantage. These should be reflected in the performance requirements and selection criteria for all key roles.
  • Use credible, valid data for talent assessment. The right tools and processes should be designed to provide credible and accurate data that is objective and calibrated so that comparisons of people can be made across business units and geographies. Data must also be updated to capture critical transitions and changes in capabilities.
  • Invest in active and systematic talent development. It must include not only identification of potential and assessment of current strengths and development needs but also proactive and systematic strategies for accelerating the development and measuring the growth of key individuals and talent pools.
  • Provide incentives for developing. People identified as “high potentials” should be given no guarantees of a promotion or a specific position, but they should know they are valued by the company and will be supported and rewarded if they are willing to take on stretch assignments that entail significant personal risk. In addition, talent builders (managers who sacrifice their own status and comfort to grow and promote others) should be made heroes and provided incentives to continue this work on behalf of the company.
  • Make sure succession planning is owned by the line but facilitated by a strong HR function. The process must be owned by line managers and sponsored and directed by the chief executive of the business unit, but it must be supported by a strong, skilled, and credible HR function.

Industrial and organizational psychology has a lot to offer, not only in providing accurate data for decision making and powerful tools to accelerate development but also in providing guidance for designing and managing the entire process. However, to be effective sources of expertise in this domain, I/O psychologists must become interdisciplinary in their research and practice and skilled in tapping into and connecting different specialty areas to create the multifaceted and systemic solutions required. They also need to do a better job of explaining and marketing their expertise, so that they don’t leave the field of succession management to the fads and fancies of the constantly changing marketplace.


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