In November 2012, Queen’s IRC launched a new program, Succession Planning, to an enthusiastic group of practitioners in Calgary. As an ice-breaking exercise, Queen’s IRC Director, Paul Juniper, asked participants to discuss their organizations’ plans in the event of a sudden loss of key leadership. While the discussion and ideas that came out of this exercise were stimulating and informative, they also confirmed two trends widely noted by practitioners, academics, and policy-makers alike. First, succession planning is increasingly critical to organizations of all sizes and in all industries or sectors. Second, most organizations have given succession planning some thought, but have yet to fully develop and implement an effective plan for the inevitable succession of managers and key employees at all levels.

This research brief complements the IRC’s recent focus on succession planning. It does this by providing an overview of contemporary academic perspectives on the need for effective succession plans. This review provides a helpful tool for practitioners and organizations seeking to develop, implement, maintain, or augment a succession plan that meets their organization’s specific needs. It includes an overview of effective elements in organizational succession plans, issues related to the succession of key leaders, the transfer of knowledge through succession planning, succession planning relative to the size of an organization, and succession planning in three components of the public sector (municipal administration, education, and health care).

Succession planning can be defined as a “systemic, long-term process of determining goals, needs, and roles within an organization and preparing individuals or employee groups for responsibilities relative to work needed within an organization” (Luna, 2012, p. 60). Succession planning was initially conceived of as a risk management strategy designed to mitigate the loss of key leaders in large organizations (Rothwell, 2010). Over time, however, succession planning has evolved into much more than this. Today, succession planning serves as a tool to manage knowledge and change, develop leadership capacity, build smart teams, and retain and deploy talent in a manner that helps an organization operate to its greatest potential (Groves, 2003). Doing so is increasingly important for several reasons. First, as Fink (2010) notes, individuals are becoming more and more strategic in their own career development and job searches. It is, therefore, increasingly important that organizations follow suit and develop strategies to ensure that they are able to attract and retain talent. Second, the complex nature of work and business in both the private and public sectors means that organizations cannot rely on the serendipitous replacement of talent, nor can they expect to have a pool of willing and qualified candidates ready and waiting, even during a recession (Fink & Brayman, 2006; Zepeda et al., 2012). Organizations must be proactive in identifying and developing qualified talent that can be called upon during both expected and unplanned succession events. Third, and importantly, planning for succession is necessary to maintain and develop knowledge and talent in a volatile political economy marked by international competition and the omnipresent need to be cost effective (Griffiths, 2012). By effectively planning for succession, organizations can realize cost savings and achieve the synergies necessary to thrive within the rapidly evolving contexts in which they operate. Finally, effective succession planning instills confidence in the employees of an organization (Bolt, 1989) and improves buy-in to the organization’s culture (Clunies, 2007). These are critical components not only of the successful operation of an organization on a day-to-day basis, but of the longer-term satisfaction and retention of employees.

Developing effective succession plans is also critical considering current demographic and economic trends. Many large companies and public sector organizations will face a dramatic turnover of key leaders in the next decade, as the ‘baby boomers’ (those born between 1945 and 1964) withdraw from the workforce en masse (Appelbaum et al., 2012). Ensuring that the wealth of knowledge accrued by this generation is transferred to younger generations—who will inevitably assume key leadership roles—with minimal impact on productivity is of the utmost importance. Moreover, the recent recession has exacerbated these challenges, as senior managers have delayed retirement in light of economic insecurity and the relaxation of mandatory retirement legislations (Luna, 2012; Masterson, 2011). This has prolonged managerial tenure in the short-term, while disrupting the leadership pipeline in the long-term (Leland et al., 2012). Without an effective plan for succession alongside increased retirements, organizations are likely to face crises in leadership. One consequence of this is that there may eventually be more urgency to select and develop managers from a smaller pool of applicants and with a steeper learning curve. Organizations are also more likely to face an increased frequency of succession events and leadership vacuums, which are fraught with risk and tend to lead to reactive (rather than proactive) decisions (Leland et al., 2012). Considering all of these factors, it is increasingly important to develop an effective succession plan sooner rather than later, and it is never too late to get started.

Elements of Effective Succession Plans

It is necessary to distinguish between a succession plan and an effective succession plan. Moreover, it is absolutely critical to understand the barriers to developing and implementing an effective succession plan. These barriers include (but are by no means limited to): organizational culture, low ascribed priority from top management and key leaders, insufficient resources for development and implementation, inadequate rewards (or a lack of understanding of the often hard-to-measure benefits of succession planning), ‘siloed’ employee groups and limited intra-organizational mobility or opportunity, a lack of role models or framework plans to provide a point of reference, and intensified competition for talent and leadership from other sectors or organizations (NAPA, 1997). Organizational complexity and both intra- and extra-organizational politics may also act as barriers to effective succession planning (Leland et al., 2012). In short, giving consideration to these barriers and their impacts is an imperative step in developing an effective succession plan.

A great deal of literature outlines the key aspects of an effective succession plan. Perhaps the most critical overarching requirement of any succession plan is that it is proactive and designed as part of an organization’s broader strategic plan (Rothwell, 2010). More specifically, effective succession plans should be prepared earlier rather than later, include adequate time for preparation on the behalf of all parties involved, be incorporated alongside all other improvement or restructuring plans, outline the roles and responsibilities of all parties (not just top management), give adequate consideration to present and anticipated needs, and be transparently linked to necessary standards and competencies (Hargreaves & Fink, 2006). Furthermore, the most effective plans pay close attention to managerial and leadership development at all levels of the organization, receive ongoing commitment from top management, are well communicated throughout the organization, dictated by organizational strategy, and, importantly, incorporated into recruitment, selection, retention, and development mechanisms (Reid & Gilmour, 2009). Continuity is also crucial; it is not unknown for a well-designed succession plan to exist on paper only to fade away after facing initial challenges, or more commonly, to be only partially or unevenly implemented (Charan, 2008).

It is also necessary to design a succession plan that accurately reflects the needs of an individual organization. In particular, the size of the company and their expected growth rate are important considerations when designing effective succession plans (Zepeda et al., 2012). For example, a highly rigid and formalized succession plan may be inconsistent with the needs of smaller employers, especially those with few formal leadership positions and those that thrive on flexibility. Rather, a plan focused on the diffusion of knowledge—both codified and tacit—throughout the organization may be most effective. Conversely, larger organizations and those that expect a moderate to high rate of growth or expansion in the immediate future may find more benefit in defining the skills and knowledge necessary to achieve success in specific roles in order to identify individual employees who may be willing and able to assume those roles. Moreover, private sector organizations tend to concern themselves more with planning for the succession of top management (Pissari et al., 2010), while public sector organizations—which often have well-defined job ladders and organizational designs—emphasize promotion from within at all levels as a means to develop and retain talent (Reilly, 2008).

Succession Planning and Key Leaders

The succession of senior management—namely the CEO—is the focus of a significant proportion of research on succession planning. One of the primary questions in this regard surrounds the decision to hire CEOs internally or through an external search, and their immediate impact on strategic change and organizational performance (Hutzshcenreuter et al., 2012). Each has advantages and disadvantages. Appointing a CEO from outside the organization is generally perceived to be prudent when a significant change in organizational strategy is necessary. Not only does a successor from outside the organization bring new perspectives, he or she is also devoid of social ties and other ‘baggage’ (Kesner & Dalton, 1994). However, outside succession often results in greater turnover of other members of the executive team than inside succession. Executives may feel demoralized for being passed over in favour of an outsider (Helmich & Brown, 1972) or loyalty to the predecessor may cause them to resign (Friedman & Saul, 1991). New leaders may also feel pressured to make changes simply as a means to demonstrate their authority. In so doing, they may reverse or restructure potentially productive decisions made by their predecessor, or reorient firm strategy in a manner consistent with their own experience rather than with the needs of the organization (Weisbach, 1995). Furthermore, it is widely noted that an organization can only digest a certain amount of change at once. If a succession event that results in the appointment of an external CEO comes during or immediately following a significant amount of change or restructuring, his or her ability to positively affect or implement new changes will be limited (Hutzschenreuter et al., 2012).

Internal candidates are often perceived to be the best choice in the succession of a CEO in organizations that are highly complex, multi-divisional, and international (see Conger & Fulmer, 2003). Not surprisingly, they are also thought to be a relatively safe choice for firms that are generally satisfied with their strategic direction and those that are interested in seeing through the development and implementation of a strategic plan already underway. However, internally-promoted CEOs have a diminished capacity to exercise real change to organizational strategy in the short-term (Bigley & Wiersema, 2002). The promotion of ‘heir apparent’ or pre-determined candidates may also be viewed as ineffective favoritism (Ibarra, 2005), especially in cases where the successor had a close personal relationship with the predecessor, and in the public sector (Luna, 2012).

Succession Planning and Knowledge Transfer

Succession planning is an extremely useful tool to help manage the transfer and diffusion of knowledge within an organization. Knowledge, both tacit and codified, is one of the most important sources of competitive advantage in contemporary organizations (Pfeffer, 1998). Additionally, succession planning can be used as a means to generate knowledge in order to achieve cost and operational efficiencies (Peet, 2012). Several research projects examine innovative ways to access, transfer, and generate knowledge within organizations in a number of different contexts. Not surprisingly, the potential loss of knowledge via retirement is of great concern, particularly in the private sector.

Koc-Menard (2009) suggests phased or flexible retirement arrangements, as well as corporate alumni networks to help manage knowledge. Appelbaum et al. (2012b) describe the value in providing training to senior leaders with plans to retire in the next five years. They note that training should not necessarily be directed to the acquisition of hard skills or competencies, but rather, should focus on soft skills related to public speaking, teaching, and multi-generational communication strategies. Senior leaders could then be tasked with running training, learning, and mentoring sessions for potential successors, concomitantly transferring, and generating knowledge while maintaining high levels of motivation and affirmation. Peet (2012) examines in detail the innovative practice of generative knowledge interviewing (GKI). The GKI process involves experiential-based or story-telling interviews between potential successors and senior leaders. The potential successor, or interviewer, attempts to “dwell within” the narrative of the senior leader being interviewed in a manner that allows them to document and verify the core capacities and key knowledge necessary to perform the tasks of the interviewee (p. 49). Peet also suggests that the GKI is best conducted on an ongoing (yet finite) basis. In one instance central to her research, she found that the GKI process resulted in immediate savings and benefits as a result of a better organizational understanding of the knowledge and capacities required for success in individual roles.

Succession Planning and Organization Size

The larger and more complex an organization is, the more essential it is to have an effective succession plan. Firms that fit this description are likely to incur greater costs when external candidates assume key leadership positions (Naveen, 2006). This is due not only to the resources directed to the job competition, but more importantly, to the high costs associated with the transfer of organization-specific knowledge to the successor. In these cases, an effective succession plan should meet several criteria (Conger & Fulmer, 2003). First, responsibility and commitment to the plan must be assumed not only by HR professionals and the executive team, but by local unit and division managers, and everyone in between. Without active commitment from top management and regular measurement of progress and process by HR, unit leaders may see more value in hiding or hoarding those with the most potential.

On the other hand, an effective succession plan encourages unit or division managers to identify potential high performers and leaders, knowing that apparent successors exist in the event that key local personnel or promoted. Moreover, large organizations are likely to find value in developing a succession plan that identifies ‘linchpin’ positions or roles that are at once critical to the organization and provide managers with exposure to multiple facets of the business, that focuses on the development of broadly-conceived skill sets through job rotation and mentoring, and that is flexible enough to meet the needs of a dynamic business environment. For example, Conger and Fulmer (2003) note that of the best practice companies involved in their study (Bank of America, Dow Chemical, and Eli Lilly), none expected their current plan to exist for more than one year without modification or revision.

Succession planning is also particularly important in small manufacturing enterprises, family-owned businesses, and the increasing number of highly specialized organizations that provide support for larger, coordinating firms (as examples, these organizations are particularly prevalent in Canada’s mining and energy sectors). For many of these firms, the loss of key individuals would jeopardize profitability or even the ability of the organization to continue operating. Smaller firms may also lack the flexibility and buying power of larger organizations, and are often unable to offer equally competitive wage and benefit packages or opportunities for advancement (O’Gorman, 2006). Moreover, in an era where profit margins are often razor thin, the owners and managers of smaller firms are unlikely to have the time to develop and implement a comprehensive succession plan. However, some type of succession planning remains important for smaller organizations, especially considering the aging workforce and skill shortages in several critical areas (Burke, 2011).

When planning for succession in smaller organizations, it is crucial to understand succession as a series of change processes over time, rather than a singular event (Bjomberg & Nicholson, 2012). Successors may be identified earlier and more explicitly, and may be afforded more control and autonomy than in larger organizations with more and more highly specific roles to fill. The succession process may therefore take place over a number of years and through a number of stages (Chrisman et al., 1998). This permits the development of critical skills under the watchful eye of more experienced owners and managers.

Succession Planning in the Public Sector

Municipal Administration

Succession planning in municipal administration has several particularities. The most notable of these is the fact that even in the most stable municipal governments, there is regular turnover in key leaders (Leland et al., 2012). Therefore, it is often beyond the mandate of elected leaders to plan for succession, as it may be outside their scope of work. Furthermore, successors may seek to implement initiatives that are wildly different than their predecessors, which may lead to succession plans that are ultimately scrapped and that constitute an inefficient use of scarce resources. Fiscal constraints and calls for austerity have also created a situation that limits the time that HR professionals can spend planning for succession, as they are generally and rightfully more concerned with fulfilling immediate, day-to-day obligations, than planning for an uncertain future. The shroud of politics is also a major consideration in municipalities, especially when promotions and advancement are considered. Research by Jarell and Pewitt (2007) suggests several courses of action and considerations for those seeking to plan for succession in municipalities. First, they note that managers can insulate themselves from the vagaries of politics by using outside consultants to provide objective assistance in developing a plan. They also note that having frank and open conversations about retirement—especially with older managers—is increasingly important to effective succession planning in municipal administration.

Education

Challenges in succession planning in both K-12 and post-secondary education are widely documented (Luna, 2012; Sweeney, 2012; Wallin, 2007; Zepeda et al., 2012). In both instances, researchers discuss how the role of educational leaders—including public school principals, school boards directors and superintendents, and university department heads and senior administrators—are increasingly complex and less desirable to preferred candidates. Compounding this is the fact that the majority of educators entered the profession to work as such, and do not necessarily possess the willingness or formal training that meet the needs of today’s education institutions. At the same time, educational leaders are being recognized as increasingly integral to a sector confronting calls for reform and restructuring from multiple fronts. Greater consideration for effective succession planning in education is therefore critical. However, doing so has proven difficult for several systemic and political reasons, including those mentioned above, as well as the public perception that time and resources spent on anything but the direct delivery of educational services constitutes administrative bloat and an irresponsible use of tax dollars (Greene et al, 2010). Public education institutions also lack the flexibility of private businesses in recruiting and hiring leaders and senior administrators, and are generally required to be more transparent and compliant with equal opportunity hiring practices (Zepeda et al., 2012). They also have relatively high rates of succession events, which can be disruptive or at best distracting when done on an ad hoc basis (Wahlstrom et al., 2010).

What, then, can be done to improve succession planning in the education sector? Identifying successors for educational leadership positions tends to be taken on by individual champions rather than by institutions as a whole (Caldwell, 2007). This, however, does not constitute a long-term solution to the challenges facing the sector. In public education, where several well-defined levels of management exist, it is important to engage in succession planning at all levels. Also important is a need to understand the complex labour relations climate in public education, where teachers are unionized almost exclusively and where union density among support staff is much higher than average. Demystifying and providing support for successors in this aspect of education may help increase the pool of willing successors. In short, an effective succession plan in the education sector can create a better informed and more qualified employee base that understands the needs of the organization and demonstrate a greater willingness to take on leadership roles (Wallin, 2007).

Health Care

Skill and worker shortages as a result of improper succession planning can result in inadequate staffing and poor performance in all aspects of the delivery of health services; something that is increasingly essential to an aging Canadian population. In particular, evidence demonstrates that effective succession planning and the quality of care in nursing are inextricably linked (Needleman et al., 2012). However, one of the most pressing challenges facing health care practitioners—particularly in hospital settings—is maintaining adequate leadership. According to Griffiths (2012), the most important step in addressing leadership shortcomings in health care is to actively recruit employees with demonstrated leadership ability, and to foster that ability from the outset. Moreover, the vast majority of health care practitioners have strong educational backgrounds, often with a focus on problem-solving and group learning techniques. In a study of succession planning at the world-class University of Pittsburgh Medical Centre, Wolf et al. (2006) found a multi-faceted plan that incorporates the identification of different types of leaders (e.g. operational, strategic), ongoing employee self-assessments of competencies, and mechanisms to identify competency and leadership gaps throughout the organization. Not only did this plan improve general performance and morale within this large hospital, but led to an initial return on investment of $500,000 in the first year, and a projected savings of $38,000,000 in the long term!

Conclusion

This literature review provides an overview of several key areas of research related to succession planning. What is most evident is that there is significant value in developing and implementing succession plans, so long as care is taken to ensure the plan fits the organizational context. Factors such as organizational structure and design, workforce demographics, firm size, and sector are important considerations in developing and implementing an effective and sustainable succession plan. The capture and transfer of important tacit knowledge related to the organization and its individual roles are also an important aspect of succession planning and the focus of a great deal of research. By engaging with succession planning as a tool for knowledge management, organizations can not only retain the expertise of key employees, but actually build upon it to create value, cost efficiencies, and improved employee morale.

 

About the Author

Dr. Brendan Sweeney has over ten years of experience teaching and researching labour relations in Canada and the US, with a particular emphasis on the forest industry and public education. In addition to Queen’s, Brendan has experience working and teaching at McMaster University, the University of Washington, and the University of Manitoba. Brendan’s research has been widely recognized, and he has received several awards, including a Fulbright Fellowship, the Labor and Employment Relations’ Association’s 2012 Best Paper Award, the University of Manitoba Teaching Excellence Award, and the Canadian Association of Geographers’ 2010 New Scholar Award for Excellence in Publication. Brendan’s research is featured or forthcoming in almost a dozen high-profile academic journals.

Brendan also has extensive experience as a high-performance athlete and coach. In addition to a distinguished collegiate lacrosse career, Brendan has coached men’s and women’s lacrosse at Queen’s (earning the 2005 OUA Coach of the Year Award) and women’s lacrosse at the University of Washington. He currently coaches both the men’s and women’s lacrosse teams at McMaster and the Burlington Chiefs Sr. A. women’s lacrosse club. He also received his high-performance coaching certification from the NCCP in May 2012.

 

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