Whatever happened to succession planning?
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An interesting email showed up in my inbox today, from the PR folks who represent Heidrick & Struggles, the big recruiting firm. And it notes that only 55% — 44 out of 80 — of the Fortune 1000 CEOs who got their jobs last year were promoted from within.
You hear CEOs recite, almost like a mantra, that among their most important tasks is grooming their own successors. And you’d be hardpressed to find a company that cannot trot out a detailed succession plan.
Clearly, they’re doing something wrong. Either we’ve still got a crop of egomaniacal CEOs who need to feel irreplaceable, and thus are “grooming” people who they know that, when the time comes, the board will recognize are unfit for the job.
Just as likely these days, the CEO is leaving under a cloud, and his/her chosen successor is tainted as well.
And, of course, there’s the ongoing belief that fresh blood means better blood. Sometimes it does — if you’ve been living in an analog world, it’s probably a good idea to bring in a digital brain. Kodak was right, I think, to bring Antonio Perez in from HP with a clear eye to making him CEO (which they of course did)
But there’s a lot to be said for veterans, too. Look what happened at Xerox when it brought Rick Thoman in from IBM? He nearly destroyed that company — and it took Anne Mulcahy, a veteran who knew the troops and were trusted by them, to get the company back on track. Her successor, Ursula Burns, is a long-time Xerox gal, too — and from what I can see, knows her stuff. (quick aside: It’s been fun to watch Xerox go from white male to white female to black female…Bravo!)
Whatever the reason, if there was ever a time that companies needed seamless, turmoil-free succession at the top, this is it. Get with it, directors — this should be one of your top agenda items for 2010.
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Ms. Deutsch,
I will tell what I think is an interesting story along these lines. I was asked to consult with someone doing a study of exactly this issue in a fairly large municipality. This individual had reviewed all of the appointments to managerial position within the civil service positions over the previous five years. What she had been asked was what were the variables that best predicted who would get those appointments. The municipality had a program of trying to prepare their employees for promotion to managerial positions (i.e. succession planing). The HR staff wanted to compare those hired from within with those hired from without and to see which elements of their succession planning program best advanced internal advancement. The results of study were that none of them did. In general outside candidates did better than internal candidates and it made no difference if those who were promoted from within had participated in the program or not. The process of evaluating candidates did not reward individuals who took part in continuing education for example. Candidates who had continued going to school while they were employed in their existing position were no more likely to be promoted to a managerial position than those who had made no effort at continuing education. The same was true for every other part of the process that was supposed prepare people for promotion. Either this program was ineffective at actually preparing these individuals to be managers or the candidate evaluation system was unable to measure that preparation or other candidates were simply better prepared despite their lack of training. This system of course is supposed to, in theory, eliminate the type of personal “grooming” that would give one candidate an “unfair” advantage.
What I suspect is that unless a single individual is explicitly designated “heir apparent”, succession planing does not really mean very much.
What I find particularly interesting in your tale is that the emphasis was on getting the promotion, not on excelling at the higher level job. I’d be curious to know whether the handful of people who went through the extra training and educational preparation and did, in fact, get promoted, performed better in the higher job than either outsiders brought in, or non-prepared folks who were promoted.
In response to another comment. See in context »Ms. Deutsch,
No, they did not. I was asked to help with the statistical analysis. The candidates with extra training were no more likely to get promoted than those without. To put it in statistical term, the null hypothesis was that there was no difference between these two group and the null hypothesis was not rejected. If fact, the internal candidates, without or with training were less likely to get the managerial appointment than the external candidates.
In response to another comment. See in context »I understand that. My question wasn’t clear — are they sure that the criteria they used for promotion were valid? Did they ever attempt to gage whether the people who did get promoted did in fact do a better job than the people who did not? I don’t know exactly how that study would be done, but it would be an interesting after-the-fact look at whether they are weighting attributes and experiences properly.
Ms. Deutsch,
Ah, well that is a very different question. There are typically three parts to a civil service exam for this sort of position, the actual application itself, an objective written portion, and an oral interview. In terms of qualifications, I have never seen a gradation, one is either qualified or not. For example, one either has a college degree in public administration or not. One either has five years experience in local government finance or not. Are the questions asked during the written or oral portions truly diagnostic of preparation to be a manager? Who knows, I sure don’t. I have seen interviewees who look great on paper and answer all of the written questions perfectly but totally crumble during the oral portion. Beyond that, so much of what makes any manager excel is about personality, do they “click” with the rest of the team. That is the really hard part, figuring out who meshes well with a given group. You cannot get that from an application or written exam, or even sometimes with the oral interview. That is why this idea of succession planning is somewhat overblown and misleading.
In response to another comment. See in context »@david,
Perhaps you are pointing out a difference between civil service positions and private enterprise jobs, but I think not. I’ve hired tens of managers over the years, and I’m inclined to believe that success is as much a result of the circumstances as it is of the individual. There is, of course, talent involved, but different talents are required by different situations. And never discount the factor of luck.
All in all, succession planning is a shell game that reinforces the myth that executives are superior human beings. Neutron Jack Welch, the CEO’s CEO, might have been a failure if he had started off in a different situation.
Hello Misterb,
No, at the end of the day there is no real difference between the public and private sector, at least not at the managerial level. I understand the idea that there is a lot of “institutional memory” that can get lost if succession is not well planned but there is so much more to being a manager than just knowing how things work and where the bodies are buried (although those are really important). I could hire a guy tomorrow and train him or her for a year and teach him or her everything I know but if that person cannot get along with the crew that is being managed, or his or her superiors, it does not mean a thing.
You are also right about the fetishes that surround being manager. It is fascinating they way people (even those who should really know betyer) are impressed by the “right degree” from the “right school” and how some magic training in the “right way” to be a manager is going to make all of the difference.
In response to another comment. See in context »I think there’s another thing to be said for promoting from within. If you’re a hard-working employee with ambitions to rise higher, your morale is going to be a lot better if you feel that you are working for a company that recognizes diligence, competence and loyalty, and rewards it with promotion. if you and your colleagues have been working your tails off, and the company blithely brings in an outsider, it doesn’t give you much of an incentive to keep striving.
In response to another comment. See in context »Oh, and in terms of Neutron Jack — can’t agree with you on that one. Welch was the first CEO who ever said that the time to cut jobs was when the company was doing well and the economy was thriving — that way the downsized employees have a much better chance at landing a new job, and the company has the luxury of rethinking lines of reporting, spans of control, etc., without the wolf nipping at its heels. That’s routine thinking now — but he was the first. It wasn’t luck.
BTW, Welch also refused to look at the internet as a business. From day one he said, The internet is a tool, we will employ it to make our business more efficient — but GE never invested in dot-coms or went the dot-com route itself. What he did too was institute a program called destroyyourbusiness.com — he made every business leader create a scenario of how a dot-com company might make deep inroads into GE business, and then come up with a contingency plan to prevent it. Again, not luck.
Do you think being laid off when your company is doing well and the economy is thriving is going to give you much incentive to keep striving? And do you think it’s a coincidence that it’s routine thinking to cut jobs when the company is doing well and we have unemployment over 10%?
What’s the point of doing succession planning when your division might get shut down next week because the company is doing so well?
We have very different ideas about what makes a good CEO.
In response to another comment. See in context »we do indeed. Whether a laid-off employee keeps striving is no longer the problem of the company that laid him/her off. Welch had a rule of thumb about culling out the bottom 10% of performers each year. He didn’t just fire willynilly, he weeded out people he thought were subpar — and doing it at a time when they could land softly, I think, was the right thing to do.
In response to another comment. See in context »