Succession planning is an important process and one that serves, as do many others, a specific role in the organization’s health, continuity and ability to compete effectively in the marketplace.
Succession planning is an essential component of a firm’s overall strategic plan. Succession plans establish who will step in to take the place of departing executives, project managers and other key personnel by objectively and proactively identifying, assessing and developing the skills of promising employees to provide tomorrow’s leadership for the company. The best-performing companies are those that prepare for leader succession thoughtfully and intentionally, with a line of sight to their envisioned future.
Unfortunately, the Great Recession threw retirement and leadership-development plans of many construction firms into disarray. Now that recovery is on the horizon, it is time to put leadership transition plans back on track. Remember the “war for talent” that dominated the headlines before the economy crashed? Well, it’s back, if it really ever went away. Not only will there be an exodus of baby boomers from the workforce in the next several years, along with fewer people left to replace them, but also many talented people in the A/E/C industry who were laid off during the Great Recession have moved on to different industries, never to return to construction. The time to revisit those succession plans is now.
Succession planning is a continuous and systematic process that should be tied to the organization’s strategic plan. In other words, the details of your succession plan are determined by what the company wants to be in the future. Succession planning includes identifying, assessing and developing talent to ensure leadership continuity. It must allow for unforeseen and constantly changing business needs and reflect the way the company wants to grow in the future by aligning with strategic objectives and goals. Careful succession planning now can make the difference in retaining key talent and ensuring your firm’s ongoing profitability and success.
INTERNAL VERSUS EXTERNAL CANDIDATES
As you begin thinking about what the leadership in your company will look like several years from now and who will be in these positions, there are a few things to take into account. First, you must decide if you have internal talent that can become the new leaders of the firm, or if you need to look outside the company.
When planning to replace key personnel, consider these questions:
- What are the strengths and weaknesses of existing personnel?
- Does the firm have the internal resources to fill the gap of a departing owner?
- Should the firm initiate an external search?
- How should it spread the word to identify candidates?
- Is an executive recruiter necessary to facilitate the process?
Many organizations prefer to choose their successors from within the company. By doing so, they reward loyalty and already have a good idea of the future leaders’ potential for success.
Once future leaders are identified, it is essential to provide developmental and training opportunities to them. One way to do this is through a cross-training program. Cross-training can be as simple as shadowing an experienced employee or receiving training. It also can be achieved through a job rotation program.
Job rotation is a management technique in which employees move among two or more jobs in a planned manner, thereby subjecting them to different experiences and a wider variety of skills. For example, potential leaders shift from their current positions to learn and solve new challenges in different areas of the company. This provides insight and understanding of various aspects of the business to the future leaders as well as raising their confidence levels as they solve important problems for the organization.
Job rotation should be organized around the future leaders’ strengths and the upcoming roles expected of them. Expose them to as many areas as possible so when they do rise to higher levels of leadership, they have an overall experience of their domain.
Reassigning an individual to another job or department for three months is certainly beneficial, but six months or longer is ideal. For senior executive candidates, field experience is especially advantageous.
Mentoring is a great way to help employees begin to think like leaders. Future leaders are paired with seasoned executives to learn more about their new role and how to achieve success in it. Mentors help to expand the mentees’ understanding of the skills needed to advance in the organization and increase their effectiveness on the job. They offer fresh perspectives, provide guidance and address questions and problems that their mentees may be having.
Mentoring is a win-win development opportunity for all involved. Mentors take an introspective look at their own practices, fine-tune their interpersonal skills and transfer knowledge. Mentees learn about best practices in the company and the industry and expand their professional networks.
Some companies have formal mentoring programs that require the mentor and mentee to meet a specific number of times throughout the year and report back to Human Resources or the Training Department on a regular basis. Other programs are less formal and do not require the reporting aspect — it is up to the company to decide which will work best in its unique culture.
Once future leaders begin stepping into their new roles, companies should consider executive coaching as a way of continued development. Executive coaching is a highly effective method of helping leaders expand existing skills or gain new ones for the future. Coaching helps an organization grow its leaders by providing a channel for discourse and feedback. With the right coaches in place, employees are motivated to achieve their best. It is hard to be a successful coach without having good leadership skills. Effective coaches will link valuable development activities to current and future performance expectations. They are empathetic, compassionate, patient, goal-oriented, ethical and good communicators.
- Emphasize business fundamentals through their knowledge of the industry.
- Share important contacts, both internally and industrywide.
- Communicate lessons learned, both through life and work experiences.
- Offer constructive, objective, honest feedback.
- Encourage teamwork and networking.
- Pay attention to details and have great organization skills.
Many companies hire executive coaches from the outside, which helps to ensure that they possess the necessary qualifications and certifications to be effective and successful.
REMEMBER TO CAPTURE THE KNOWLEDGE OF THOSE LEAVING
A few weeks after Bob retired, people realized that not only did a great employee leave, but also he took with him knowledge that no one else had. Questions about why, how, where and when were guaranteed to surface, because he had not taken the time to get some of his knowledge and lessons learned out of his head and into a computer.
If you have leaders that are beginning to think seriously about retirement, now is the time for them to share and document the best practices and processes that are central to your company’s success. One of the best ways to do this is through a knowledge management system (KMS). A KMS codifies what employees and customers know, and allows the company to share that information among its staff in an effort to devise best practices and lessons learned. There are numerous knowledge management systems available in the market, and your company should select the one that best fits its needs.
SUCCESSION PLANNING AT ZURICH
FMI spoke with Karen McDonald, who is head of Talent Management at Zurich North America and works closely with Zurich’s global talent management organization as well, about the ins and outs of succession planning in a large organization. Here are some of her insights and advice when planning for new leaders.
Chisholm: What are the main steps involved when you are mapping out a succession plan?
McDonald: Zurich is truly a global organization in that our succession planning process is established at the Group level with regional input and implemented on a regional basis. The process starts with identifying key roles of the leadership team and then the successors to those roles.
Chisholm: How do you identify the successors? How do you create that leadership pipeline for the future?
McDonald: We look at a wide range of factors, beginning with performance, when identifying successors to leadership roles. Once the successors are identified and placed on a succession plan, those plans are reviewed at increasingly senior levels of the organization. For example, we start by creating succession plans for country-based key roles. Once country-based plans are reviewed and approved, regional-based (in our case, North America) plans are developed. Once the regional-based plans are completed, functional-based plans are developed. This process is repeated throughout the organization, culminating with a global review at the Group level.
Succession planning is part of our overall talent management process, a global process that takes place throughout the year. Throughout the process, we seek to meet our pipeline needs by ensuring that our employees receive the development they need.
Chisholm: Do you have some electronic means or software that you use in this process
McDonald: Our succession planning process is enabled by technology. Also, we will upgrade our technology capabilities for the upcoming 2013 talent management process and are all pretty excited about taking our capabilities to the next level of technology.
Chisholm: What happens if you cannot find a successor internally? Do you start looking outside of Zurich?
McDonald: Our priority is to develop our people. However, if we discover that we need an external successor for a key role, it is noted and factored into our talent development processes. I do think what is helpful is since we are a global organization, we have access to a wider range of talent than we would if we were limited to a single regional market.
Chisholm: How far in advance do you start? With the aging of the baby boomers right now and people are going to be leaving the workplace in droves, how far in advance would you start to replace a senior VP who might be retiring five to 10 years down the line?
McDonald:We try to identify and develop talent throughout various stages of career progression. By doing so, we focus on creating a robust talent pipeline. We look not only at executives who are more advanced in their careers, but also at employees who are at an emerging stage of their career development.
Chisholm: Do you tell the employees in advance that they are being groomed for particular roles?
McDonald: We are piloting a program in which we hold “career conversations” with identified talents. The initial feedback on that program is very positive, and we are looking to extend the program to other “talent segments” in the future.
Chisholm: That leads me to another question as far as the development plans. Do you have internal training, or do you send people out for external training and development? How does that work?
McDonald: We do both. We have a number of internal development programs that are supplemented by external training as necessary.
Chisholm: How do you capture the knowledge of your outgoing employees, those who are retiring and need to be replaced? How do you capture their experience?
McDonald: In general, we have a culture of knowledge sharing, ranging from the collaboration that naturally occurs in the way people work together in teams to knowledge management processes and tools in which the company has invested. For example, we have a variety of knowledge databases for specific disciplines that are used throughout the company. As I said, knowledge sharing is something that is part of our ongoing culture and has been for a long time.
Chisholm: Are your succession plans tied to Zurich’s overall strategic plans? How does that fit in?
McDonald: Absolutely. We have a strategic workforce planning process that helps to link our succession plans to our overall strategic agenda. Indeed, the strategic plan provides the context for our succession plans. Among other things, the strategic plan informs the capabilities and competencies we seek to develop though our talent processes.
Chisholm: What are the main hurdles to all of this, from an internal perspective? What might get in the way of the process?
McDonald: I don’t know that I would characterize hurdles as “getting in the way” because people recognize that succession planning is an important process and enables our ability to compete in the marketplace. Ours is a complex business. There are a number of dimensions that need to be taken into account from a succession planning process. Each dimension of the business (i.e., Business Segment, Regional, Functional, etc.) adds an element that must be addressed to create comprehensive succession plans.
Chisholm: If you are grooming somebody to fill a leadership position, does she or he rotate into different roles throughout the company or go to different locations? For example, would somebody in North America go work at your headquarters in Zurich? How does that work?
McDonald: Yes, as part of the development plan, all of the dynamics that you mentioned come into play. As part of development planning, we might look at rotating people through key experiences. Most development takes place through experience. Development balances a variety of learning modes, but experience, along with targeted feedback, is what actually accelerates that development. As opportunities arise that are consistent with a person’s development needs, we try to match the opportunity to the need. So yes, we actively monitor the opportunities that we want to make sure an individual is able to experience as part of his or her development. Having global experience will be increasingly important in the future, and we will look to develop and foster for our employees in the future.
Chisholm: Are these people paired with mentors, either formally or informally, throughout the process?
McDonald: Yes. We have different programs in different parts of the company, but mentorship can happen both ways — informally and formally.
Chisholm: What roles are you looking at in terms of succession planning? Is it for executives only, or does it filter down to any other roles in the company?
McDonald: As I mentioned before, the succession planning process starts with identifying key roles of the leadership team and the successors to those roles. But the idea of having successors throughout the organization is key, and we do have succession plans for other roles outside of the leadership team.
Chisholm: Do you have a list of essential competencies that these people are going to need?
McDonald: Yes. In addition to the technical competencies that are required of each discipline, we have developed the Zurich Leadership Model, which defines leadership competencies across Zurich.
Chisholm: What advice would you give to others to make succession planning a seamless process?
McDonald: If you are starting from ground zero and are trying to implement it in your own organization, carve out a manageable part of the organization within which to pilot the process. Don’t try to accomplish everything in “one fell swoop.” Zurich has been at this for a while, and we have developed a certain level of capability around succession planning and development. My counsel would be to start with a manageable goal in mind and then, upon experiencing success, build on the process and expand it into additional parts of the organization. For example, you might want to start with specific roles in your organization or specific locations. But don’t try to undertake implementing everything at once. Bite off manageable chunks.
Chisholm: Is there anything else that you would like to add?
McDonald: Just that I think succession planning is an important process and it is one that serves, as do many others, a specific role in the organization’s health, continuity and ability to compete effectively in the marketplace. I think there is going to be an increasing emphasis on the entire talent management discipline and its role going forward, as some of the workplace dynamics we’ve discussed change in the coming years.
FMI Quarterly thanks Karen and Zurich for taking the time to speak on this important topic.
ASSESS YOUR LEADERSHIP PIPELINE
The succession planning processes differs from company to company, but an organization should take some actions to assess its leadership pipeline, as outlined below:
- Begin with commitment from senior management
- Link succession planning to strategic goals
- Project future leadership requirements
- Generate competency lists
- Create lists of potential candidates
- Assess internal talent’s business, management and interpersonal skills
- Gauge potential derailment factors
- Confirm motivation to lead
- Provide training and development opportunities
- Assign formal and informal mentors
- Offer executive coaching
- Evaluate demonstrated results
- Capture the knowledge of those leaving
- Continuously revisit and revise the succession plan as necessary
It is never too soon to begin. Successful leaders begin thinking about their successors the first day on the job since it can take at least three to five years to identify, assess and develop the talent that will one day take their places.
Kelley Chisholm is editor of FMI Quarterly. She can be reached at 919.782.9215 or via email at firstname.lastname@example.org.