Jack Welch, the CEO of General Electric, believes that his most important job is motivating and assessing GE leaders and future leaders. He feels so strongly about it that he spends about 50 percent of his time on people issues. Welch likens his role in succession management to that of a gardener. “You have to go along with a can of fertilizer in one hand and water in the other and constantly throw both on the flowers.” He emphasizes that all of the plants in his garden need to be watered and nurtured (i.e., developed), but that some plants require extra fertilizer and attention to ensure that they will fully blossom. Equally important, Welch notes that some plants need to be weeded out so that the strongest can thrive and achieve their potential (Hymowitz & Murray, 1999, pp. B1, B4).
From our benchmarking for this book, we have overwhelmingly concluded that the most important factor in the success of a succession management program is the attention and backing provided by the CEO or COO (or the top executive of an SBU if the Acceleration Pool is confined to that unit). As a matter of convenience in this chapter, we’ll call the top executive “the CEO.”
Note
denotes that information on this topic is available at the Grow Your Own Leaders web site (www.ddiworld.com/growyourownleaders).
To assure the success of a succession management program, the CEO must work closely with other top company executives to accomplish several important initiatives:
Establish defined succession outcomes.
The management team must agree on the outcomes expected from the succession management system. The succession outcomes need to be in line with the organization’s strategy. The entire management team must clearly understand why succession management is important to the short- and long-term success of the organization. Otherwise, they won’t make the short-term decisions necessary to make the system work (e.g., moving people more rapidly through positions, taking people who aren’t completely ready for their new positions), nor will they agree to release the best people for developmental assignments for the good of the organization (even if the move is to another SBU). Measurements might include the length of time that executive positions are open before being filled, percentage of senior management positions filled from outside the organization, retention of pool members, etc. (See Appendix 16-1 for a discussion of measurement options.)
Demand measurement.
Someone should be responsible for periodically measuring the succession management system against the goals set by the organization. The CEO should demand that a periodic report be made.
Ensure alignment with key stakeholders.
A CEO alone can’t make an Acceleration Pool system work. We have seen programs fail when this has been tried. All key executives will be affected by the system, and all are important to its success. They must see the value of the system in relation to organizational goals.
Create a vision for the Acceleration Pool system and how it will operate.
Along with the executive team, the CEO makes basic decisions about the number of Acceleration Pools, the size of each one, the investment in special training programs for pool members, and how quickly each pool will be implemented. There’s no “standard” Acceleration Pool and, for that matter, no standard succession management system. Systems must be adapted to organizations depending on the organization’s size and structure and the speed at which people need to be developed. It should be noted that different parts of the organization might have different requirements relative to speed.
Establish the Executive Resource Board.
The CEO has the responsibility of establishing the Executive Resource Board. Who will be on the Executive Resource Board? If there is more than one pool, will there be more than one board? Key decisions must be made around who will facilitate the discussion of who gets into the pool and how they will develop. As discussed in Chapter 15, the facilitator needs to be a well-respected, credible, and unbiased individual. This person can be from the Human Resource group, an outside consulting organization, or the Executive Resource Board. If need be, the CEO can do the facilitating.
Assure that the best people get nominated for the pool.
The CEO needs to sell the importance of getting the best and brightest into Acceleration Pools. Because of parochial short-term thinking, SBU heads or other managers might be reluctant to share their high potentials. The CEO must show the importance of selection by personally being involved in reviewing people nominated for the pool and by asking questions of the nominators to identify people who might have been overlooked. The CEO needs to be a protector of standards—not letting people into the Acceleration Pool for the wrong reasons (e.g., someone who has been around a long time or whom everyone expects to be a successor).
Make a priority of succession management activities, such as Executive Resource Board meetings, and be an active member of the Executive Resource Board.
The presence of the CEO at these meetings is all-important to give the proceedings prestige and to show the CEO’s commitment. Nothing reflects concern and interest more than being an active member of the Executive Resource Board. It puts the CEO at the heart of the action in making decisions relative to the selection of pool members, their placement, and development. The CEO brings a unique grasp of organizational issues and direction. Without the CEO, the board can fragment into warring factions, with each protecting its own turf.
Personally encourage and coach senior managers to make decisions that will benefit pool members’ development.
Effective CEOs know about the opportunities for developing key talent, and they pass this knowledge along. They recognize that for a pool member to develop, a manager often must accept someone who is less than qualified. Effective CEOs not only apply pressure to managers to make the appropriate decisions, they also coach them in how to effect the change without negative impact to the manager’s organization.
Act as a mentor for one pool member.
While having the CEO as a mentor is extremely positive for the pool member, it is also an opportunity for the CEO to “walk the talk.” If the CEO can devote the appropriate time and energy to a pool member, managers below the CEO would have difficulty saying that they’re too busy. At management meetings the CEO should make a point to comment on any of his or her activities involving the pool member; this will serve to remind managers of the CEO’s ongoing commitment.
Support the Acceleration Pool system in all promotion decisions.
Force promotion decisions onto the Executive Resource Board. Don’t promote people outside the agreed-upon promotional system. When a promotion decision is being made, the CEO should always ask if the person is on the Acceleration Pool list. If not, was an Acceleration Pool member considered? On what basis was the decision made? While it’s not necessary that Acceleration Pool members fill all jobs, pool members should at least be considered. The CEO who circumvents the Acceleration Pool is punching a hole in the system; when enough holes are punched, the system will begin to fall apart.
Assure that diversity goals are met.
While delegated to the Executive Resource Board, diversity responsibility ultimately rests with the CEO. The CEO should ask for yearly statistics and take actions as needed.
Meet one-on-one with pool members as often as possible.
Remember when you were just starting up the organizational ladder and were maybe lucky enough to have a brief conversation with the CEO? It made you feel great, didn’t it? The same magic works today although many organizations are much less formal and have fewer communication barriers. Outstanding CEOs (and their key managers) make a point to talk with Acceleration Pool members every chance they get. They schedule breakfasts, lunches, and dinners with individuals and small groups of pool members. Such meetings give CEOs a chance to share ideas with the pool members, but most important, they provide opportunities to find out what is really going on in each pool member’s world. Asking a question like, “What are you up to?” is all that it takes to get a meaningful conversation going. Of course, such meetings provide yet another opportunity to observe and evaluate pool members, although caution should be exercised to avoid generalizing from a single, limited observation.
Attend and participate in Acceleration Pool training events.
We have long noted that the more the CEO and other top officers are involved in an Acceleration Pool development event (action learning or other executive training programs), the higher attendees rate its value. This is true in every organization we have observed, in all parts of the world. To instill the desired motivation and retain valuable people, organizations want pool members to identify with the company, to be concerned with its worldwide challenges and obstacles, to enjoy its success, and to psychologically feel like an owner of the company. To accomplish this, pool members need to feel that they are getting the inside story. CEOs can meet this need better than anyone else in the company. CEOs are admired—pool members want to understand their thinking and learn from their successes and mistakes. Pool members want to feel that the torch is being passed to them.
For all these reasons and many more, it is critical for CEOs to make appearances at training and other Acceleration Pool events. The best CEO appearances we have witnessed were those built around answering questions submitted in writing from the audience. The CEOs were absolutely honest and forthright. Adequate time was allotted to give extended answers, and the CEOs often stayed around for lunch or cocktails so people could follow up on issues.
Another successful strategy used by many executives and CEOs is the use of stories about personal experiences. They are powerful teaching tools during a program. See “The Pepsi Challenge” anecdote at the end of this chapter.
While we were benchmarking for this book, we also observed a number of common traps that many CEOs fall into relative to succession management. Here are some of their most common mistakes:
Thinking that having a good succession management system will lead to success. The existence of a well-designed succession management system is important, but merely having a system does not mean that it is working. Many CEOs breathe a great sigh of relief after they implement a new system, but then they don’t follow up. Their measure of success is the number of people in the system rather than the quality of people available to fill positions. It’s important to set measurable goals for the system and monitor its effectiveness through periodic reports.
Assuming short-term issues are more important than succession management. The quarterly pressure of meeting corporate operating numbers, the implementation of an important organizational change, competitive pressures, and many other factors can cause a CEO to put off succession management activities. The thinking is “Why worry about the future? If we don’t do well this quarter, there might not be a future.” There are tough calls to make, and the pressure to make shortcuts or postpone can be immense. But the best CEOs we interviewed really believe that the future of their organization is in the hands of the people they will develop; therefore, they make time for succession management activities. The best CEOs feel that there’s nothing more important for the long-term viability of their organization than developing high-potential people. Many of them also believe that the stock market is increasingly concerned about the depth of talent in publicly held companies and that this factor is considered when evaluating them. All the CEOs we talked to said that, increasingly, their boards are pressuring them to make sure that an effective succession management strategy is executed.
Thinking that they know who all the high-potential people are. Some CEOs delude themselves into thinking that they have a good feel for the up-and-coming people in the organization. They tend to select people for the Acceleration Pool based on their personal knowledge or observations; they don’t force a true look throughout the entire organization for candidates. This allows an “old boy” system to prevail and can give the lawyers and accountants who interact with the CEO an advantage over line managers.
Considering only individuals who have been personally observed. This is somewhat related to CEO Trap 3, but it particularly pertains to situations in which the CEO relies very heavily on chance observations of people. The CEO might observe someone making a presentation and reach a conclusion about that person. That presentation would, at best, offer only a glimpse of the individual’s talents. The person might have been poorly prepared for the presentation or, conversely, might have been extremely well coached. In either case the CEO’s initial impression about the person’s skills might be far off the mark. Also, what about others who didn’t have the chance to make a presentation and who might be equally or better qualified? CEOs can’t feel that they really know what’s going on in their organization based solely on their personal observations. There must be other systems in place to help them be sure they get the right people into the Acceleration Pool.
Choosing people who could handle last year’s problems. An effective Acceleration Pool produces people who can handle future challenges, which are often very different than the challenges facing current executives. Effective CEOs periodically check on the criteria for selection into the Acceleration Pool as well as the executive descriptors used to guide development to see if they are visionary.
Creating a pool whose members mirror the CEO. A CEO with an engineering background might tend to favor individuals with a similar background. The same holds true for CEOs with financial or scientific backgrounds. Early experiences might have been vital in preparing the CEO for his or her current position, but they might not be appropriate in today’s business world, given the rapid, often unforeseen changes in business direction and the speed at which individuals must move through the organization.
Not getting to know people in the Acceleration Pool. The CEO will be involved in decisions about Acceleration Pool members’ promotion and development. It is certainly helpful if the CEO actually knows the people whose future he or she is affecting. Effective CEOs make an effort to know pool members. When visiting regional or overseas offices, they make a point to talk to pool members and to see them in presentations and in other venues. One CEO we know tries to have a one-on-one dinner with a pool member in each town that he visits.
Stopping all recruiting and development of high potentials during a business downturn. It’s very tempting to respond to a bad business cycle by putting the brakes on recruiting or developing people. Both are mistakes in the long term. If you stop recruiting, in the future you will have a shortage of high-potential people who are ready to step into open positions. If you stop development, you frustrate people and increase turnover. Also, you prevent people from being ready to step up when the next upturn comes about. It is certainly appropriate to cut back on recruiting and development efforts, but stopping them altogether is, in most cases, the wrong quick fix.
Not letting people learn from their mistakes. There’s an old story about a middle manager who goes to the CEO’s office expecting to be fired because a business decision he made caused a $1 million loss for the company. Instead of getting fired, the individual gets another meaningful job when the CEO explains, “Why should we fire you? We’ve just invested $1 million in your education!” Many CEOs aren’t so forgiving; consequently, they lose good people and foster a work culture of fear that stifles creativity and bold decision making. When a person makes a wrong decision, that poor judgment must be considered as part of the individual’s total performance and his or her ability to learn from mistakes.
Being impatient. CEOs often become frustrated and give up their efforts when the succession management program fails to immediately yield a number of people who are ready to fill executive positions. Remember, just as it takes time to cultivate a garden, people need time to grow and develop. Succession management is a multiple-year strategy.
Another thing that can frustrate a CEO is having a number of people nominated for the Acceleration Pool who are not top-quality candidates. When this happens, the Executive Resource Board must spend excessive time sorting through people and making pool selections. This will cease to be an issue as the nominators learn the criteria used by the Executive Resource Board and as the board works out its own procedures.
Roger Enrico’s leadership seminars did not just happen. They were part of PepsiCo’s efforts to get a broad range of senior leaders to share their vision and experiences as part of an executive development process. Paul Russell, PepsiCo’s director of executive development, has changed the company’s widely benchmarked executive development system from a program based on the models and experiences of university professors and gurus to a program that is “by PepsiCo, for PepsiCo.” The new program uses a variety of executives to lead programs and coach individuals. But Dr. Russell doesn’t just schedule executives into courses—he spends several days in one-on-one sessions helping them develop a “teachable point of view.” A common format is using a statement of the leader’s personal philosophy followed by 15 to 20 major ideas that support the philosophy. Personal anecdotes illustrate each of the ideas.
We are not suggesting that a CEO give succession management first priority—just that it receives appropriate priority. The CEO and other executives must determine the priority relative to the organization’s short-and long-term goals. Then the CEO’s job is to see that the succession management program gets the attention appropriate for the priority.
Too often, the CEO fools himself or herself into thinking that things are going well relative to succession management when, in reality, they are not. This often happens when the CEO delegates too much succession management responsibility to others. It is perfectly appropriate for the CEO to get help from consultants or others in setting up the system and to delegate its operation to HR or other parts of the organization. But the CEO can delegate neither the attention required to create a “grow your own” organizational culture nor the backing to be sure that the Acceleration Pool system works.
Operating an Acceleration Pool system is expensive in terms of time required of people in the pool and those who support their development. It is important, then, for an organization to measure the system’s effectiveness. We also advise breaking out subgroups from the pool to get more specific data on each group. For example, you might break out data on pool members from lower or higher levels of the organization, or from different SBUs. Or you might separate the data on people having “average” high potential from those with exceptionally high potential. The data on each group might reveal very different results. Only by constantly measuring a wide range of factors can the Acceleration Pool system be improved and the enthusiasm for it sustained.
Listed below are some possible areas of measurement. Some produce “hard numbers,” such as turnover of pool members, and some produce opinions. All will be helpful in monitoring the progress of your Acceleration Pool system. Organizations should tailor their measurement to their particular needs and succession system.
Retention of pool members (voluntary and involuntary turnover).
Long-term performance of those selected from the pool (relative to others).
Percentage of nominated people selected for the pool.
Number of people in the pool (against goal).
Growth rate of the pool.
Advancement of pool members (number moved upward each year).
Percentage of times (against the goal) that senior positions are filled by non-pool members from within the organization.
Percentage of times (against the goal) that senior positions are filled from outside the organization.
Average time in position.
The length of time executive positions are open before being filled.
Cross-unit movement.
Quality of people in the pool (e.g., job performance problems, performance ratings, problems in selling people to managers for assignments).
Percentage of positions identified as “best development opportunities” that are filled by pool members.
Changes in average 360° feedback results of participants over time.
Diversity of pool members (race, gender, geography, function, SBU, educational background, etc.).
The reactions of people in the pool (survey results):
Satisfaction with their development.
Do they have development priorities?
Percentage of development objectives completed.
Do they feel like they are learning and being developed?
How many learning priorities were met in the past year?
Motivational level relative to their job and the organization.
Motivation for development.
Degree to which participating in the pool met their expectations.
Potential barriers to development, especially in the work environment.
Quality of development help received from manager.
Quality of mentoring.
Number of meetings with mentor.
Number of meetings with manager about development.
Follow-through on development assistance.
Difficulties/Problems.
Perception of improvements in their skills.
The reactions of supervisors/managers (survey):
Satisfaction with the Acceleration Pool system.
Quality of pool members.
Pool members’ ability to learn.
Pool members’ motivation to develop.
Number of meetings with pool members each month regarding development.
Hours spent each month aiding pool members’ development.
Hours spent each month getting to know individuals better.
The reactions of managers two levels up (survey):
Satisfaction with Acceleration Pool system.
Quality of pool members.
Pool members’ ability to learn.
Pool members’ motivation to develop.
Number of meetings with pool members each month regarding development.
Hours spent each month aiding pool members’ development.
Hours spent each month getting to know the individuals better.
Perceived ROI or impact on the bottom line.
Perceived impact on ROI 5—10 years from now.
The reactions of mentors (survey):
Satisfaction with Acceleration Pool system.
Quality of pool members.
Pool members’ ability to learn.
Pool members’ motivation to develop.
Number of meetings with pool members each month regarding development.
Hours spent each month aiding pool members’ development.
Hours spent each month getting to know individuals better.
Benefits gained by participating in the mentoring process.
Nature of the mentoring relationship (type of activities, most helpful activities).
Barriers to effective mentoring.
The reactions of the Executive Resource Board (survey):
Satisfaction with Acceleration Pool system.
Quality of candidates for the pool.
Availability of qualified people from the pool to fill executive slots.
Quality of diagnosis of pool members’ development needs.
Adequacy of information about pool members’ development.
Sufficient information about pool members to make assignments.
How meetings are run.
Attendance at meetings.
Board members’ commitment to their tasks.
Follow-through on development needs.
Quality of developmental suggestions.
Degree to which the pool supports the organization’s vision, values, and critical success factors.
Perceptions of leadership bench strength (changes and current level).
Managers’ success in developing pool members.
We are not suggesting that an organization look at all these factors, but we do advise that more is better. It’s good to get multiple views of the system because part of the succession management system might be working well, while another part might be in trouble.