At some point in the next 10 years, Great Britain will have a new monarch. Whether the successor to Queen Elizabeth II will be her son, Prince Charles or grandson, Prince William, remains to be seen. What isn’t likely is that the position will be filled by an individual outside the line of succession to the throne, despite their obvious qualifications for the role – Cate Blanchett, for example, is an actress who served with distinction as the title character in the “Elizabeth” franchise. Should England be invaded for the umpteenth time, I have full faith in her ability to vanquish all approaching sailboats.
Of course, private sector firms have significantly more leeway to appoint potential successors than that conferred by birthright (family-owned firms aside). Succession planning programs are thus geared towards expanding the pool of potential leaders while minimizing risks – of vacancies, unqualified applicants, and poor investments in leadership development, and specifically:
- Identify and prepare leaders and managers for future openings
- Assess the progress of high potential employees
- Develop leadership skills
- Create a diverse pipeline
- Proactively move talent internally to maximize the return on investments in people
- Target retention & engagement programs toward individuals named as successors
- Qualify external candidates using objective criteria
- Improve leader productivity through exposure to high-profile projects
- Quickly fill sudden vacancies in key roles
Spending on leadership development programs continues to increase. Kim Lamoureux’s “Boosted Spend on Leadership Development” blog includes figures from Bersin’s 2012 Leadership Development Factbook showing that leadership development spending rose by 14 percent from 2011 to 2012; firms were spending $6,016 per senior leader and $7,116 on each high-potential employee.
Allied with a range of other qualitative (e.g., media coverage of CEO transitions) and quantitative (e.g., correlations between share price and confidence in firm leadership) implications, succession planning is essential to the strategic HR agenda.
As such, this blog looks at one aspect of succession planning: metrics and analytics used to measure the efficiency and effectiveness of the process. It is the last in a series of “Seize the Data” posts – you can read others related to Learning, Recruiting, and Performance Management metrics.
With each post, I have sought the input of peers who approach the terrain from different angles – practitioners, researchers, consultants – so that I might uncover new ideas and differing opinions. In this case, I spoke to Steve Hunt, Vice President of Customer Research at SuccessFactors and a thought leader with 20+ years of experience in the talent management space, as well as Luke Marson, SAP Mentor and Director, Cloud HCM & Technology Solutions at HRIZONS.
1. What’s conventional practice for using data to measure the impact of succession planning programs?
I am not sure that there is one. With succession planning focused on the individual (which specific people might potentially fill an open position), metrics tend to focus on individual data (which staff are ready now?) or simple descriptive statistics (what percent of the total succession pool is ready now?). For organizations new to succession planning, the most immediate need is for leadership quantity (how many?) and to a less extent, quality (are they the right ones?). In essence, do they have an adequate amount of talent “on the bench” to replace key individuals, should they choose to leave.
Less common are conventional metrics intended to convey the impact of the program at-large. For example, does the investment in maintaining and developing a robust cadre of successors deliver the right return? Does it make strategic and financial sense to regularly go outside the pool to fill specific roles? What is the right balance of formal and informal learning?
One of Steve’s favorite succession ROI metrics is increasing the number of internal promotions versus external hires. There is data showing that internal promotions are much less expensive than external hires, positively impact the retention of high-potentials, and tend to be more successful than external hires.
2. What are some barriers to the utilization of succession metrics?
According to Luke Marson, companies in general under-utilize analytics; this is especially so in the realm of succession planning, where data is limited in explaining the value of investments in such programs. This is certainly understandable. With the focus on individual experience, a process relying heavily on leader-led discussions of candidate “fit”, and very tangible objectives (“fill as many succession positions with internal candidates as possible), a small set of foundational metrics may be more than sufficient.
Assuming that the organization does want to move beyond those, a common challenge is linking succession data with related sources – performance, engagement, team productivity, financials, social network data, etc. – which requires resources, urgency, technology, and cross-functional expertise. Is it worth the effort?
Another factor that limits the value of succession metrics, and succession planning in general, is a tendency for leaders to circumvent succession processes. They may conduct succession planning exercises, but when it comes time to make a hiring decision they just hire someone they know rather than going back and looking at who was identified as a high potential in the succession plan.
3. What might be examples of foundational metrics to apply to succession planning?
Steve advises firms to be cognizant of how succession planning can take on different forms – with replacement planning, firms identify who has the qualifications to fill the role today, whereas leadership development planning takes a longer-term view of individuals’ performance in current role and the potential to perform future roles. As such, foundational metrics will vary according to the type of succession planning in use. Some examples of core metrics might include:
Demand for Successors
- Positions Without Ready Candidates Rate
- Percent of Critical Roles With HiPo Candidate as Potential Successor
- Successor Position Volatility (how often positions become vacant)
Supply of Candidates
- Internal Placement Rate – Successor Positions (the percentage of successor positions filled with internal candidates)
- Staffing Rate – Ready Now (variations could be “in two years” or “in five years”)
- Staffing Rate – Multi-Country Experience (for international firms)
- Promotion Rate – Successors
- Percent of Successors Without a Readiness Assessment
- IDP Completion Rate – Successors
- Average Days in the Succession Pool
The following is an example of how one company tied these types of metrics together into an overall score of succession “health” by measuring both the supply of potential successors and the demand for those individuals. This SuccessFactors Workforce Analytics customer created what they called a “Bullpen” index to measure the strength of their succession bench. While they applied the model specifically to retail store manager positions, it has general application, as described below.
Step 1: Calculate the number of manager changes (demotions + terminations + promotions + transfers) over a 12-month rolling period.
Step 2: Assess the number of:
a. “Ready to Manage” Staff (Managers in Waiting + Experienced Managers in Training Who Are Ready to Manage a Store)
b. Midpoint to Ready Staff (Managers in Training + Experienced Managers in Training)
c. New to Midpoint Staff (Managers in Training + Experienced Managers in Training, all with fewer than X days of experience)
Completing Step 2 enables the calculation of the Total Bullpen: Ready to Manage + Mid to Ready + New to Midpoint
Step 3: Calculate the Bullpen Score: Algorithm based on frequency of manager change and manager bench strength. For example, low manager change and high strength result in a high score.
4. What about more advanced analytics?
Steve suggests quantifying employee potential, based on three questions:
a. What have they done? This is the easiest to measure by comparing candidates based on past performance and weightings of previous activities/skills/experiences.
b. What could they do? This is more difficult to assess, but can be assessed using a combination of personality and ability measures. It is important to be careful using these sorts of assessments to make future predictions. But if done correctly they can reliably predict future performance in roles that require doing things that candidates may have never done before.
c. What do they want to do? This is much harder to measure but is important. Unfortunately how someone answers questions such as “I want to run a P&L business in APAC” doesn’t exactly lend itself to comparative analysis. But putting some thought into asking candidates about their career motives is critical or else you may see your high potential candidates turning down the future jobs you have planned out for them.
A few final thoughts about looking at the health of the overall succession program. In 2004, CLC Metrics wrote a short paper entitled Metrics-Enabled Succession Management Planning. Included were four potential threats to successful succession planning. I really like this framework, so have summarized it below, with questions that can be translated into metrics:
a. Vacancy Risk: How many critical leadership positions will open up over the next year? Are successors identified for each forecasted vacancy? How much coverage do we have?
b. Readiness Risk: What percentage of successors have the skills they need to succeed? What percentage of successors have the experience they need to succeed?
c. Transition Risk: How well do we recruit “good fits” for the organization? How well do we onboard new executive recruits?
d. Portfolio Risk: How well does our skills inventory match up with our requirements? How well do we match scarce skills to positions that call for them?
Beyond the talent management metrics discussed above, there is always the opportunity to translate workforce measures into financial data. Questions that come to mind might include:
- What is the net cost of hiring external candidates, rather than sourcing internally, when filling succession positions?
- Which leadership development activities are most effective in boosting the number of Ready-Now successors, and what would be the expense associated with delivering those programs to every member of the succession pool?
- What is the cost of turnover for a high-potential successor, compared to non-successors?
5. Any final words of advice?
For more ideas on creating an effective succession planning program, and measuring the results, see the SuccessFactors 2013 white paper “Closing the Experience Gap: How Succession Management and Employee Development Can Prepare Your Workforce for the Future”.
All the best for 2014.