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Scientific, Systematic Succession Planning
Business Journal

Scientific, Systematic Succession Planning

Picking successors the right way is hard, but it solves many performance issues

A Q&A with Randall Beck, a Gallup managing partner

When a company calls in a Gallup expert or two to talk about succession planning, those experts don't want to see biographies or résumés. And they certainly don't want to see potential hires. They want to see three or four dry erase boards.

That's because succession planning involves much more than filling in boxes on an organizational chart. If it's done right -- done scientifically -- succession planning creates a pool of leadership talent that can drive an organization, engage employees, and increase shareholder value. Developing the schematics of that plan takes a few dry erase boards, though, because a solid succession plan starts and ends with leadership, and there's a lot of territory to cover between those two points.

How strong are your leaders? How many of them do you have? Do you have employees who have the potential to be leaders?

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The first step involves a thorough diagnosis of the leadership talent a company has -- and a profound understanding of the talent it needs. It also requires taking a close look at the company's employees to assess their leadership potential. As Randall Beck, a senior managing partner for Gallup, explains in the following interview, this scientific approach can help an organization identify at least three solid internal candidates for every position. It also helps a company take a disciplined approach to assessing, developing, and hiring leaders. Succession planning is more than finding warm bodies to replace key personnel. It involves building a perpetual motion machine to find leaders. That takes analysis and strategy -- and three or four dry erase boards.

GMJ: What's wrong with hiring the person with the best looking résumé for a leadership role?

Randall Beck: That's a quick and easy way to fill an empty spot, but it won't help your business increase its capacity or its growth. That's closer to crisis management than it is to a real succession plan. For example, companies spend a lot of time trying to manage things like revenue, profit, productivity, or sales. To do that, they generally consider them independently: What can I do to move employee engagement? I'll do action planning. What can I do to increase revenue? I'll hire more salespeople. What can I do to move people up? I'll do development programs.

But what can you do to improve all of those things at the same time? Improve your organization's leadership. If you can increase the leadership strength in an organization, all those other numbers should go up. All in all, that's an easier way for organizations to drive their business outcomes.

Download the related white paper, "A Succession Plan That Works"

GMJ: So you're saying that succession planning is more than just figuring out who the next CEO ought to be -- it's diagnosing the overall health of your company and using leadership to improve that.

Beck: Right -- because the process of making organizations better is driven by leaders. How strong are your leaders? How many of them do you have? Do you have employees who have the potential to be leaders? What are you doing to turn their potential into success? How are you carrying those leaders into the future? Those are the first questions to answer. Once you know how many potential leaders you have versus how many you need, you can draft a strategy to go out and find them.

GMJ: But you can always hire outside leaders with track records.

Beck: When companies ask whether they should hire from the outside or from the inside, no matter what they decide, they usually arrive at the answer for the wrong reasons. They'll either say, "We only hire from within" or "We only go outside when we need certain skills."

When you hire from the outside, you don't know if the person you hire will assimilate into your organization's culture, and you don't know if his or her experience will translate into effective leadership in your industry. In my experience, it takes at least three years to assimilate with an organization, and nobody has three years to wait for a leader to understand what's going on. Leaders in a new role don't have a thousand days to prove themselves -- they have about a hundred days. So if it takes a thousand days for somebody to assimilate to an organization, but they only have a hundred days to prove they can lead, that's a formula for disaster.

GMJ: How do you find people who have the potential to be successful leaders?

Beck: The people with the potential for leadership are the high performers in your organization. The people with the greatest leadership potential and the highest performance are your "high potentials." There are five dimensions that are crucial for leaders: direction, drive, the ability to form relationships, influence, and execution. I believe we have the best executive leadership interview and assessment in the world. We can find out if a leader has those things and determine how much; we can compare him or her to a robust database of leaders we've assessed and studied. Building a tool like this is complicated. It took years for psychologists and mathematicians from all over the world to come up with the algorithm and the test, so I won't go into the details of it. But we can determine where you rank on a scale of leadership talent with pinpoint accuracy.

There are five dimensions that are crucial for leaders: direction, drive, the ability to form relationships, influence, and execution.

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GMJ: Can you help people increase their leadership potential?

Beck: Yes, by giving them what I call intended experience. So, figure out who the people are with leadership potential and high performance, then determine what their intended experience should be. You do that by looking at the superstars in your organization because you want more people like them. What things have they done that you would like others to do? Maybe they ran a division, worked on the shop floor, or have P&L experience. Maybe they've been expats or all have an MBA. Study all the things that make them great, look for commonalities, then put together a development program.

GMJ: Let's say you've assessed your employees and identified your high potentials. What do you do next?

Beck: Once you've assessed their leadership potential and collected their performance scores, you should keep track of those scores by entering that information into a database. Enter their names, enter the necessary intended experience, and enter their scores on the five dimensions of leadership.

Then, if you need to find a new CEO, you can run a query on the database to find the people with the right intended experience and measured leadership talent. Say you need a CEO with high direction scores, P&L experience, and an MBA. So you run a query in the database to find a match. Ideally, you should have at least three matches, because you don't want to bring in anybody who would be less successful than your current executive. And maybe circumstances dictate that you need an executive who is stronger in other dimensions of talent than your current executive is. You could change the dynamic not only of that entire team but of that entire organization by picking the right leader.

In the end, this scientific approach to succession planning enables you to backfill every leadership position. You can also identify gaps and determine how to fill them so you've always got a steady source of leadership. Building this kind of systematic approach isn't cheap, and it isn't easy -- just drawing out the system for it takes me three or four dry erase boards -- but it's critical, and companies need to do it. Just hoping that leaders will emerge or show up when you need them is almost corporate malpractice.

GMJ: Does this systematic approach help you determine if you need to hire from outside?

Beck: Yes. Say that a company has 300 openings but has identified only 90 high potentials. They're definitely short of the right kind of leaders, and they need to start selecting leaders from the outside. The company should get them on board early so they can have a three-year incubation period to get to know the culture before they're called on to lead -- and so they get those intended experiences and start developing their leadership potential.

GMJ: What if you need someone now?

Beck: You can lose anybody at any time. That's why you should continually be identifying high potentials so you have at least three people who can step into any given role at any given time. For your top hundred people, you should have three people in line who can take on their roles. That's the first test of an effective succession plan.

But if you don't have three people in line or if no one matches enough of your essentials, you'll have to go and find your leader outside your company. You've got to take the tradeoff, knowing that it's not as good of an option because there's a higher risk of failure in that situation. But in this case, you're likely better off going outside than putting someone from inside in place who doesn't match your minimum criteria. So there's a time to hire from outside the company, but it's usually not for many of the reasons that I hear.

GMJ: What reasons do people commonly give for hiring from outside?

Beck: They're usually about experience: "This candidate ran a company like this one" or "This person has twenty years of leadership experience." The problem is that those are the wrong criteria; they're answers to the wrong questions. The right questions -- the questions that predict performance -- are: Do they have the right talent? Will they fit our culture? Do they know our business? Once they've assimilated -- and if they have the talents to lead your organization -- the probability of success goes way up.

Look, if this is done right, you can put a pipeline in place that will help ensure that every leadership position is filled, now and into the future.

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GMJ: Is there any room for subjectivity in this process?

Beck: There is. Say you've run a query and found the three people with the right talents and intended experience for a particular leadership role. Now talk to them. See who's the person you like the most, the person you can get along with. Find out who will bring a dimension to your organization that you don't already have or who best exhibits the company's values. Maybe one of them is great at public relations or one of them meshes with the CFO. Once all the scientific assessments have been completed, subjective assessments are a critical part of succession planning.

GMJ: Why should any company go to all this work? Most companies manage a moderate degree of success without working this hard at identifying their leaders.

Beck: Look, this is a complicated process, but if it's done right, you can put a pipeline in place that will help ensure that every leadership position is filled, now and into the future. One way to guarantee failure is to say, "I've done a succession plan" then walk away thinking your work is done. Before you know it, you'll be saying, "I have a dozen positions to fill and I don't have any candidates." You should always be developing your pool, always sorting people into the high-potential group. If you do, when someone leaves your company, you'll have only one position to fill, but you'll have three candidates.

GMJ: The CEO role is often the most difficult to fill. Let's say you've identified a possible successor internally. Should you announce the person you've chosen?

Beck: No, never. What if the CEO doesn't retire for another six years? Now you've got someone in the organization who's just waiting for the CEO to leave. And if everyone knows she's going to be the next CEO, how will she do her current job? Announcing a successor creates too many gray areas. A better approach is to tell candidates, "You're one of the people who have the right criteria; you're somebody we're going to develop, and here are the leadership experiences that you need." Then you name your successor when you have an immediate need.

But if you're the CEO and you named your successor right now, how much confusion and chaos do you think that would create? It also pressures you to leave sooner. If you're going to name your successor, you should have a stated end date in mind, and the farthest out the date should be, I would say, is three years. Do it three years before you know that person has to take over. One way to think about it is like this: "The first year is my year, so you can watch me. The second year is our year, when we awkwardly lead together. And the third year is your year. I'll support you, and then I'll go."

GMJ: No wonder it takes so many dry erase boards.

Beck: Building a successful succession plan is a complex process. But in the end, it simplifies everything. The point is that it leads to better business outcomes. And achieving outcomes is the whole point of leadership.

-- Interviewed by Jennifer Robison

Download the related white paper, "A Succession Plan That Works"

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