Your Succession Plan Is a Bust
Business Journal

Your Succession Plan Is a Bust

It's probably just a replacement plan. Here's how to create an effective succession plan -- one that makes your company stronger.

A robust succession plan. The key components of a high-performing company. And what defines a strong leader. These were the leadership topics that Randall Beck, managing partner at Gallup, tackled head-on in a conversation with Scott Robbin, senior content associate at Argyle Executive Forum.

Many companies don't know how many leaders they have, and they don't have a good definition of what a leader is.

An 11-year Gallup veteran, Beck has served as managing partner and has led the Midwest region and Canada since 2005. Before joining Gallup, he worked for 15 years in the automotive industry in the Detroit area.

Scott Robbin: What are the most important components of a succession plan?

Randall Beck: Succession planning isn't just naming the new CEO. In fact, it's not about putting a name behind a title at all. That's called replacement planning. Many companies don't have a formal succession plan in place, or if they do, it's old and dated. Often, the only time companies look at succession planning is during times of crisis, when they have to name somebody to fill a role quickly. But that's not succession planning either; that's crisis management. Many companies don't know how many leaders they have, and they don't have a good definition of what a leader is. A lot of companies don't even know how many leaders they need. But these are basic questions that organizations need to know how to answer.

Companies also need to have a formal stance on whether they should hire inside versus outside. My recommendation would be to always go for an inside hire if the company can find someone who has the level of talent required for the role as well as the necessary experience. You always have better probability on an inside hire, and you want a candidate who already has performance success in the company's current environment. If you bring somebody in from the outside, it can take that person up to three years to assimilate to the company and to the role. When you bring in a high-level leader, you want that person to have a major impact on the organization within 100 days, but it can take an outsider about 1,000 days to fit in.

If you have a succession need and you don't have somebody internally who can match the talent or level of experience that you need, it's acceptable to go with an outside hire, although it's really the lesser of two evils. At that point, the company should determine why its succession plan didn't have three available internal candidates when it needed them.

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

What are some of the best practices in creating a robust succession plan?

Beck: When a company builds a plan, it needs to be able to see the future and identify any holes or gaps before they affect the company. As you develop a succession plan and look at viable candidates, you could see several things. You might see a lack of candidates to choose from. You also might see a lack of future leaders.

Developing a plan in advance gives you time to react and develop more leaders. Take the CEO position, for example. You might identify three viable candidates, which is a good rule of thumb for filling any key role. But during the succession planning process, you might discover that none of the three candidates you've identified are ready for the role. You can then speed up the developmental process for the three high-potential candidates to get them ready in advance. You also might discover that you have a great candidate for a critical role, but if you moved that person into the new role, it would create a hole in another area of the company. Developing a succession plan in advance allows you to learn what the ripple effects might be.

The primary purpose of planning is to give you a chance to see flaws before they affect the company. You've got to be honest with yourself regarding the level of talent you have. What is the strength of your leadership pool? What is the bar that you're aiming for? A proper succession plan allows you to see a lot of things that you wouldn't see otherwise.

If you wanted to build a high-performance organization, where would you start?

Beck: The obvious places to start for a lot of companies are with selection and recruiting. The problem with that is that you have to build a suitable culture to select and recruit these people into or you'll end up having high turnover. So you should start by building an engaging and thriving culture with the people you currently have and one that you would want to bring new people into.

Once you build the culture, the next area to address is leadership. When I talk about leadership, I'm referring to the top three levels in a company -- the CEO, the direct reports to the CEO, and the people who report to those direct reports. That usually equals about a hundred people. Conduct stakeholder interviews with these leaders to understand where the company is headed. What is the CEO's vision? How do key leaders align with that vision? Is the company ready and able to make changes to match that vision? What level of talent or experience does the company need in the future to achieve its vision?

The mirror effect: You look like me and you act like me; therefore, you would be a good replacement for me.

You also need to understand the strength of your leaders. What type of leadership skills do they have, how strong are they, and how do they interact with members of their teams? We use an instrument called the executive leadership interview, or ELI, to look at leaders' experience. Who are the top-performing leaders? What made them successful? What key leadership experiences have they had, and can they obtain similar experiences in their current company? Once you identify common leadership experiences, you can begin to develop a fundamental basis for your high-potential leaders to prepare them for the next level of leadership.

The key is to understand the leadership you have, how your leaders interact with each other, what their vision is, and how that vision aligns with where the company is headed. You can develop a high-performance organization by making the company stronger every time you move an employee, either via a promotion, a lateral move, or when a person leaves the organization.

You seem to have almost a scientific approach to talent management. Can you describe your view in more detail?

Beck: Talent management does need to be scientific. There's too much subjectivity in the process today. A lot of leaders use what I call the mirror effect. You look like me and you act like me; therefore, you would be a good replacement for me. Or you're a person with whom I socialize and consider my friend. That's how companies begin to look like each other -- by promoting people they like. You need to understand what leadership looks like, have a common definition of it, and be able to measure it. We've developed the ELI over many years and validated it against many of the top leaders in the world today. The interview is a structured in-depth phone interview. The reason we do it over the phone is to remove any bias.

There are five key dimensions of leadership: direction, drive, execution, influence, and relationship. To be a leader, you must be talented in these five dimensions. Does the presence of those talents make you a leader? No. It increases your probability of being successful as a leader, but you also need key experiences. Having enough key experiences combined with innate leadership talent gives you high predictive probability for success as a leader, and that's what we try to measure and benchmark against.

We measure talent levels compared with our database for each of the five dimensions. For example, the level of talent a leader has combined with key experiences gives us a measure of the person's potential. Employees with a high level of talent and experience combined with high levels of overall performance are referred to as high potentials. It's not a new term, but it's a way to take out the subjectivity of talent management by having objective performance measures.

Gallup uses the term talent machine. What are the components of the talent machine?

Beck: The talent machine identifies the human capital of a company in a systematic way that delivers leadership on the other end. When you're hiring or recruiting, are you raising the bar on talent? Are you identifying what innate talent is and hiring for it? When you bring new hires into an engaging environment that matches their level of talent to the right role, are you able to measure that? Are you offering developmental opportunities for whatever an employee's job path is?

Having the right developmental opportunities depending on employees' level of potential is critical. Leadership development means identifying high-potential people in the scientific way that I mentioned earlier -- putting high potentials in roles where they're productive and developing them to the point that when your company needs a succession plan, you have a robust pool of talent with at least three appropriate choices for every executive role.

An effective talent machine fires on all cylinders. Every move a company makes, whether it's moving people up, out, or laterally, helps it become stronger. Everything is aimed at helping the company match its aspirations to its vision. A talent machine brings it all together.

What should organizations do to improve their overall leadership pool?

Beck: They need to have a realistic lens for the combination of talent, skills, knowledge, and strength of their current leaders. Once they have this, they need to ensure that the company's aspirations match the skill set or they need to raise the bar. You can't improve your overall leadership unless you know what you have. You have to audit that leadership. What is the overall level of your leadership? How strong are they? How many leaders do you have? How many leaders do you need? Do you need to work on building more capacity? Getting more leaders into the company is not something that you can do quickly. It takes several years to develop and nurture that talent. So getting those numbers up to the appropriate levels and then providing leaders with the right intentional developmental experiences is the magic formula to increasing leadership strength.

Preparing leaders is a lot easier if you stack the deck -- if you just load the company with talent.

What are some of the failures you've seen in organizations when it comes to their overall leadership?

Beck: The biggest one I've seen is that companies spend an inordinate amount of time identifying leadership competencies. It's a common term that means different things to different people. When it's applied in the wrong way, it can send companies on a wild goose chase. I've seen lists of 60-plus competencies that a company wants in its leaders. These include organizational agility, vision, strategy, and the ability to inspire others. These are all terms that sound great, but when you start adding up 40 to 50 competencies that leaders must possess, you soon realize that person doesn't exist.

When companies figure that out, they get excited because now they think they know what they need to do to develop the kind of leader they want. But a lot of these competencies are innate and can't be taught. Companies then spend a lot of time trying to train people to be someone they can't be, and that starts to frustrate employees, who become discouraged at always being told to work on something that they can't [do well].

A better approach is to find out what strengths the employee has and would need for a role and work on making the right fit. These competencies have a place in the overall leadership scheme, but they boil down to what I would call leadership values. These values are the minimum expectations of behavior. It's best if there are just a few of them, that they're consistent, and that they can be measured. Using 360-degree evaluations is a good way to measure leadership values. Everybody can demonstrate leadership values at any time, but real leadership talent is a rare thing. Companies waste a lot of time when they try to set up a development plan to make people become someone they're not.

Are organizations taking the right approach to prepare their leaders for management?

Beck: Some are. But preparing leaders is a lot easier if you stack the deck -- if you just load the company with talent. When we talk about the talent machine building an environment that engages your employees and then raising the bar of talent and hiring to match that bar, it's a lot easier to develop leaders and look for high potentials. If you're going to embark on the journey to increase leadership potential in a company, increasing the overall level of talent in every role goes hand-in-hand. You should hire for talent from day one. If you are just hiring based on experiences and don't have a good handle on the level of your company's talent needs, it becomes a lot harder to prepare employees for leadership roles.

Do generational differences in the workplace play a role? Is the process for preparing employees for leadership roles different for Gen Yers versus baby boomers?

Beck: Different generations learn in different ways, and you need to be aware of that. But when you boil down the core innate talents of a leader, they are the same from generation to generation. However, getting from point A to point B can be very different for different generations. It will be more beneficial to your company in the long run to understand what key outcomes you are striving for and know what talents you're looking for, and then allow the different generations to tackle the problems and challenges in their own ways.

This article originally appeared in Argyle Journal on April 25, 2012. Reprinted with permission.

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

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