succession management Report

1. Insight paper
Succession Management:
Assessment report

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Understanding the business impact of career
and succession management
To support your career and succession planning, this concise report presents facts,
figures and background from independent research, Lumesse extensive experience
and our customers’ own organisational best practices to illustrate the business impact
of optimal career and succession planning. If you haven’t yet taken this valuable
assessment, visit http://www.talentstrategyassessment.com/en/
Succession planning – the process of identifying and preparing successors for
critical positions within your organisation – is identified as one of the top three focus
areas for today’s HR departments. But succession planning is also among the most
difficult aspects of talent management to implement and measure. As a result, many
organisations either ignore it or simply fail to implement it.
One recent survey shows that 60% of organisations have no process for succession
planning.1
The same survey revealed that fewer than 12% have enterprise-wide
succession planning that is tightly aligned with their business strategy or is integrated
with other talent management processes.
1
Center for Creative Leadership and Bersin & Associates, April 2009, High-Impact Succession Management: Best Practices,
Models and Case Studies in Organizational Talent Mobility.

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Well-considered and effectively
implemented succession
planning:
• Creates a flexible and
sustainable business.
• Protects the present strengths
of your company and builds
for its future.
• Reduces risk and optimises
your organisation’s needs.
• Helps to more easily identify
the specific skills – technical
and professional – necessary to
shape your organisation’s future.
• Pinpoints the aspirations of
individual employees to help
them achieve their goals and
improves retention.
On the other hand, the failure
to implement career and
succession planning can put
your organisation at a distinct
disadvantage, especially with
today’s labour market being so
competitive. Still, having career
and succession planning isn’t
enough. It’s equally critical for an
organisation to ensure that its
career and succession planning
is integrated with a talent
management strategy; career
and succession management
should not only focus on filling
the most senior positions but on
developing executives, managers,
specialists and team leaders at
all levels.
Supporting the concept of
enterprise-wide career and
succession planning is a shift
away from viewing succession
planning as a secretive affair
for top-tier executives. Today,
successful organisations build
cultures of leadership and
development through the entire
company, and they involve the
individual in the process. This
enables employees to register
their career aspirations, their
hopes to move up the ladder,
and any other future plans they
may have or opportunities they
wish to take advantage of, such
as overseas assignments or
specialist project roles.

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2
AM Azure, 2008, Ten Years On: The Impact of Succession Management.
3
Bersin Associates, 2009 Talent Management Factbook.
Why it’s crucial to
have a succession
management process
organisation-wide
Ample evidence exists to show
that succession management
not only has a positive impact
on the overall performance
of an organisation but that
it may in fact be critical to
an organisation’s survival.
One recent study found that
organisations that lack effective
succession management are five
times more likely to go out of
business than organisations with
established and robust practices.2
Companies with established
succession management also
experience less downsizing and
lower turnover.3
Lumesse believes a formalised
succession management
process will reduce at least
three areas of risk:
1. Business risk (by minimising
the risk of having key
positions vacant).
2. The risk of unprepared
key successors.
3. The risk inherent in
transition situations.
Best practices indicate you should
be able to staff more than 80%
of your key executive positions
with internal talent. In addition,
at least 50% of those candidates
should be fully prepared to step
into their new roles within 12
months. “Eighty-five percent of
our identified successors will
be ready within one year,” says
Karl-Heinz Duchardt of German
chemical and pharmaceutical
giant Bayer AG, a Lumesse
customer.
Implementing succession
management requires
cooperation at many levels within
the organisation, but support and
engagement must begin at the
top. Top-level executives must
be educated about the business
impact of a formalised succession
management programme. To
reduce the ad hoc element
in placement decisions, the
programme must be established
at the top three levels of the
organisation.
Consistency in succession
planning is also essential to
ensure:
1. Candidates are identified
and developed based on the
same criteria across all units,
and manager and employee
expectations are being set
appropriately.
2. Transfers across divisions and
departments are fostered,
ensuring a sense of unity
across the organisation.
3. Greater potential for building
leaders with broadened
business knowledge.
4. The company’s employer
branding message is
strengthened.
Eighty-five percent of our identified successors
will be ready within one year.
Karl-Heinz Duchardt
Bayer AG

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Top-level succession
management is
critical, but it’s only
the first step
Although planning for change at
the top is essential, organisations
must apply succession planning
at all levels. They need to ensure
that key individuals – from first-
line supervisors upward – are
prepared to move up or move
horizontally to more than one
role. As important as this strategy
is, it’s often neglected. Fewer
than 40% of survey respondents
said their succession planning
includes mid-level managers and
skilled professionals. Even fewer –
11% – said their planning included
first-line supervisors.4
When an organisation
implements a proactive
programme to prepare
individuals for more than one
role, it helps build talent pools
in mission-critical and strategic
roles and develops a stockpile
of potential candidates at all
necessary levels, including upper
management. This enables
management to tap into a group
of ready individuals rather than
focusing on one person, and it
motivates and engages mid-level
managers, because they are
included in the organisation’s
succession programme. This
approach makes the entire
company more flexible and gives
mid-level management a stake in
the organisation’s future.
But preparation is the key.
Three important steps in
identifying and planning for
roles critical to the future of
your organisation are:
• Forecasting the demand
for those critical roles.
• Identifying the appropriate
internal talent for those
critical roles.
• Developing talent to close
any potential gaps.
“At RWE, succession planning
covers all executive management
roles,” says Claudia Venzke, head
of Group Talent Management
at RWE AG, Germany’s largest
electricity producer and the third
largest in the U.K. “Now, we are
beginning to extend this to the rest
of the organisation, starting this
year with the non-executive roles.”
4
Center for Creative Leadership and Bersin Associates.
At RWE, succession planning covers all executive
management roles. Now, we are beginning to
extend this to the rest of the organisation,
starting this year with the non-executive roles.
Claudia Venzke
Head of Group Talent Management at RWE AG

6. 5
Corporate Leadership Council, 2003, The Business Case for Succession Management.
6
Mankins, M., and Steele, R. undated, Turning Great Strategy into Great Performance.
7
Dherment-Ferere, Isabelle and Luc Renneboog, 2000, Share Price Reactions to CEO Resignations
and Large Shareholder Monitoring in Listed French Companies (August 2000).
The importance
of having bench
strength
Depth, or “bench strength,”
is crucial in any organisation.
Without bench strength, the
entire company can find itself
lacking when a key employee
leaves with little or no warning.
That is why it is important that
more than one employee be
ready and have the necessary
skills to assume each of the key
organisational roles. Succession
management that develops
bench strength also reduces
an organisation’s reliance on
the external market by being
proactive rather than reactive
when changes in leadership
occur. One study showed that
companies with above-average
bench strength were four times
more likely to outperform their
industry peers with above
average revenue growth over
36 months.5
Succession planning should
include a bench metric that
identifies potential successors
in key positions and will track
whether those successors are
ready to move into that role. A
study of strategy-to-performance
gap found that without the right
resources in position to replace
departing leaders, there was an
average shortfall or performance
loss of 37%.6
“Most of our executive positions
have more than one identified
successor,” says RWE AG’s
Venzke. “As a result, we are
more able to execute quickly
on internal placements.
Discontinuities are almost
nonexistent and therefore reduce
the risk of having vacancies
left open.”
It’s only effective
planning if your
successors fill their
intended roles
In top companies, proposed
successors assume their intended
positions – a key indicator of
the success of an organisation’s
succession planning. “More than
90% of executive positions are
staffed by an internal successor,”
says Duchardt of Bayer AG.
Failure to follow through and hire
from within can have a significant
financial impact. One study
of French corporations found
that companies using external
succession saw a large drop
in their share prices from two
weeks before until well after the
announcement of the change in
executives.7
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Internal succession also creates
more successful executives,
because they have the ability to
develop the necessary skills more
quickly than external candidates.
Another study showed that
64% of new executives hired
from outside of a company fail
at their new jobs8
, a huge waste
of money, when you consider
that external candidates usually
garner higher salaries than those
promoted internally.
If a pattern emerges of failing
to hire from among internal
candidates identified as
successors, your organisation
should take a hard look internally
and review its process for
identifying and developing
successors, with an eye toward
making sure that successors are
both developing the right skills
and developing them quickly
enough. If you fail to take this
step, you risk losing your key
people to competitors.
Don’t forget
retention strategies
as you manage for
succession
A true succession plan also
engenders retention. Without
retention strategies, you may
lose key people within your
organisation, which carries not
only a financial cost but may
also negatively affect your
company’s morale.
Career development heightens
employee engagement.
Organisations with higher
employee engagement can
expect an increase of up to
20% in performance and an
87% reduction in employees’
‘probability of departure’,
according to one report.9
Succession planning also should
not lead to disappointment,
which can happen if a previously
identified candidate perceives his
or her designation for promotion
as a promise but is not selected
for the position. The challenge is
to set the employee’s expectations
honestly and openly. When an
employee is earmarked for a
higher-level position, they need to
be aware that it is a recognition
that the employee has the skills
and talent for the job but that is
not a guarantee that the job will
be his or hers, and in fact, several
other people may be equally or
more qualified when the time
comes to fill the position.
8
Ciampa, Dan and Michael Watkins, Harvard Business School Press, 1999, Right from the Start.
9
Corporate Leadership Council, April 2007, Solutions to Discuss One of the Key Engagement Drivers
at the 5th Annual NY HR Week™ Conference - New Roadmap to Engagement.
A high rate of internationally experienced
employees strengthens the ability to take
on global challenges.
Karl-Heinz Duchardt
Bayer AG

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Here are seven key steps an
organisation should take to
combine retention strategies with
career and succession planning:
1. Create a framework to consider
the full cost of employee
turnover, with particular focus
on key positions and high-
performer turnover.
2. Start conducting exit
interviews to gather critical
information on why employees
leave the organisation.
3. Determine the factors that
keep top performers engaged.
4. Agree to a budget for
retention activities.
5. Highlight the full cost of
employee retention turnover
to business units and
managers with limited interest
in managing retention risk.
6. Initiate a programme focusing
on retention of incumbents
in key positions and high
performers in the short term.
7. Use technology to consistently
manage retention risk and to
profile and highlight at-risk
employees, especially high
potentials and top performers.
The value in
empowering
managers and
holding them
accountable
Many organisations put
significant effort and attention
into the planning process, but
they do considerably less to
hold managers accountable
for developing their workforce.
Holding managers accountable is
essential to achieving the optimal
outcome for succession planning
and developing.
From the CEO down, it is
instrumental to emphasise
active engagement in talent
management. Holding managers
accountable for development
of employees for succession
planning results in stronger
bench strength and increased
readiness to fill key roles.
“All of our managers with
leadership responsibility are
responsible and accountable for
developing the careers of their
direct reports, especially key
talent,” says Bayer AG’s Duchardt.
These practices also ensure
continued success in revenue
growth, customer satisfaction
and operational effectiveness,
and they forge an organisation’s
overall capability for future
competitiveness.
“Ensuring accountability for
career development reduces
the vacancy cost for discontinuity
and for external hires,” says RWE’s
Venzke. “It also motivates talent
to achieve top performance.”
Ensuring accountability for career development reduces
the vacancy cost for discontinuity and for external hires.
It also motivates talent to achieve top performance.
Claudia Venzke
Head of Group Talent Management at RWE AG

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The mastery of talent
mobility: A trait of
dominant companies
in the 21st century
In the last decade, the number
of employees on international
assignments increased by 25%,
a number predicted to grow
to 50% by 2020, according
to one study.10
The same
report indicated that global
organisations placed employees
in an average of 13 locations in
1998, a number that increased to
22 by 2009 and is predicted to
grow to 33 by 2020.
Yet 29% of Fortune 500
companies surveyed said they
have ‘nowhere near enough’
global leaders, and 56% said
they have ‘fewer than we need.’11
Additionally, 67% responded
that their current executives do
not have the global leadership
capabilities that they need.
For an organisation to become
or remain successful, this
disconnect must change.
Employees with international
experience have had the greatest
business impact on areas
such as development of client
relationships and sales growth.12
To master talent mobility and
dominate markets in the 21st
century, an organisation needs
to take four key steps:
1. Acquire the best talent,
regardless of geography.
2. Deploy the best people
from the global talent pool
against the best business
opportunities.
3. Create roles and responsibilities
for communication between
assignees and their home
managers or sponsors.
4. Develop leaders with the
global insight and experience
to manage across cultural and
geographic barriers.
“A high rate of internationally
experienced employees
strengthens the ability to take on
global challenges,” says Duchardt.
Talent mobility also allows
employees to develop their skills
in additional business lines,
functions or cultures, and also
makes them better-rounded.
This, in turn, helps prepare them
to take on more demanding
and expanded roles within the
organisation. A high level of
diversity in the workforce will be
very important as we march into
a new decade.
Many successful organisations
also transfer employees globally
to ensure a certain level of
performance from their overseas
investments. For example, they
may want employees with
international experience to
introduce a product in a new
region or manage a project
that is similar to one completed
in another region. Or, an
organisation may simply want
globally minded people in place to
support international customers.
10
PricewaterhouseCoopers, 2010, Talent Mobility 2020 Report.
11
Black, Stewart and Allen Morrison and Hal Gregersen, undated, Global Explorers London.
12
Mercer International, 2008, Mercer International Assignments Survey, 2008.

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Avoid the Mini-Me
syndrome: Strive for
diversity to ensure
global strength
The Mini-Me syndrome is the
result of senior management
filling key organisational roles
with people similar to their
predecessors, based on a
range of factors, including age,
education, leadership style,
experience, race and gender.
When an organisation fails to
plan for and promote diversity,
it risks losing pace with the
increasing diversity of the global
market. A succession plan that
recognises the value of diversity
enables your organisation to
move beyond antiquated notions
and better prepare for the future.
Among the benefits of a strategic
move toward diversity are:
• Developing a better
understanding of, and
increasing market share
among, multicultural
customers.
• Creating a corporate
reputation as a socially
responsible enterprise.
• Enhancing the organisation’s
reputation as an employer
of choice among a wider
population.
• Encouraging the diversity
of thought and perspective
among the workforce, thus
driving innovation in products
and services.
Summary
In the Lumesse research, 75%
of respondents say that among
their talent management
initiatives, career and succession
management at all levels has the
greatest positive impact on their
organisation.
From this view, it is imperative for
organisations to develop a clear
strategy for career and succession
planning tied to a total talent
management programme. This
strategy is essential to the ultimate
success of your talent initiatives.
The time and effort involved in
bringing the right stakeholders
together to develop a vision,
direction and clear set of priorities
on which to focus your efforts and
resources is time well spent.

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The lack of career and succession
planning can, meanwhile, put a
company at a distinct competitive
disadvantage. With high rates
of unemployment, the labour
market is very competitive.
The lack of proper succession
management makes it difficult
to retain valuable employees and
will hamper an organisation’s
ability to act quickly and
effectively to changes in
leadership or business direction.
It is critical to integrate career
and succession planning with a
talent management strategy, and
it’s important also to focus on all
positions within the organisation,
not just upper management.
Additionally, succession planning
should no longer be a discrete,
insular activity. Instead, it should
be about building a culture of
leadership and development
throughout the organisation.
Successful talent management
organisations integrate HR, the
lines of succession and other
functional stakeholders to
develop the future state of their
talent delivery model.
The successful and effective
talent strategy aligns HR
initiatives and processes to
the goals of the organisation
and in so doing, supports an
organisation’s ability to meet
its business targets. This is an
area of rapid development as HR
organisations transform their
capabilities and capacity to meet
their growing talent demands.

12. About
Lumesse is the only global company making talent management solutions work locally.
We help customers around the world to implement successful local talent management
initiatives that identify, nurture and develop the right people, in the right place, at the right time.
Our multi-cultural background and presence means we understand how to deliver talent solutions
that work the way our customers work, as individuals and as teams, because no two people,
organisations or cultures are the same. We regard differences as strengths, not as obstacles.
1,700 customers work with us in over 70 countries because they recognise that commitment,
innovation and value only come from people. We help customers to unlock and inspire that human
potential in their businesses. Our integrated talent management solutions are comprehensive,
intuitive, secure and fully internationalised into over 50 languages.
We have Lumesse offices and partners in more than 40 countries, covering EMEA, the Americas
and Asia-Pacific. To find your nearest office and talk to someone who speaks your language, visit:
www.lumesse.com/get-in-touch
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