Part one of this series talked about the increasing importance of succession planning and development of talent during tough economic times.
It defined succession planning and why recruiters can and should play a role in a modern, world-class succession planning program. Part one also concluded by listing a series of metrics to evaluate existing programs based on their usage and design.
In part two, the focus will shift away from discussing what makes a great program to covering metrics that demonstrate what a great program accomplishes.
Part B: Plan Output or Success Measures
Group 3 – Output measures of plan success
The best plans have goals (and measures) that cover each of these areas:
- Percentage of all management positions filled by internal candidates (this is the broadest measure of development success because it covers all management and leadership positions). A high rate of internal placement (vs. external hires) can be considered as an indication that development efforts have been successful.
- The success rate of external hires over internal moves for plan jobs. Good development should result in a higher success rate (performance and retention) for internal moves.
- Percentage of interviewees for plan positions whose positions are designated as ideal jobs for stretch assignments. Ideally, 100% of the interviewees for open plan positions will be “on” the succession plan.
- Percentage of actual movers on the plan, where “movers” are the individuals who were actually transferred to or promoted into any designated plan position. Ideally, 100% of those actually selected from the interviews will come from the plan.
- Percentage of movers without the most tenure in the job. Natural movement generally means the candidate with the most tenure will receive the nod. Effective succession planning periodically selects a “not so obvious” candidate from those being interviewed.
- Percentage of movers from another department/business unit (again, “natural” movement generally means most positions are filled from within a department).
- Percentage of movers who jumped a level (natural movement generally means promoting individuals “up” one level). Successful succession planning occasionally promotes individuals more than one level up.
- Percentage of “on plan” movers who get promoted again (if a promoted individual is promoted again within three years, that can be considered as an indication that the first promotion was successful).
- Percentage of movers placed in their targeted business cycle. Innovators are placed in departments or business units that require innovation (i.e., start up business units). On the other end of a business cycle, efficiency experts are placed in cost-cutting or commodity business units, where their skills are a better fit to the business cycle that the unit is in.
- Percentage of job openings predicted accurately (successful plans prepare the individuals for movement at a designated time. Plans that successfully forecast openings within six months of their “projected time” are more effective than those that prepare individuals well before or way after they are needed).
- Percentage of jobs with a defined back-fill person for sudden openings. In some plans, having “backfill” replacements are considered to be a separate plan element. Effective plans have pre-identified qualified and tested individuals that can immediately fill a sudden “unplanned” opening, without a loss in productivity.
Group 4 — Indications of plan failure
In addition to the factors that make a plan successful, there are some events that demonstrate the plan has, at least in part, failed. Indications of obvious failure include:
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- Percentage of “on plan” movers who fail during their first movement after being put on the plan (an individual who must be removed from their first placement because of a bad “fit” or performance must be considered a failure).
- Percentage of movers who fail to stay in the “moved” position for at least two years (if someone must be removed or they voluntarily leave a position that they’ve been placed in, the placement can be considered a failure because of the obvious negative impact that it will have on business performance).
- Percentage of individuals on the plan who fail to stay with the firm at least four years (retention rates are important, so you must consider it a failure whenever someone on the succession plan is forced out or voluntarily leaves the firm).
- Positions filled by external hires who were not “on the plan” (if a plan has a provision for including external candidates in your succession hierarchy, consider it a major failure each time an “off plan” external hire is made).
- Percentage of individuals who are removed from the plan. It is essential to keep the plan vibrant by periodically “dropping” those who have failed to meet their development or performance targets. However, too high of a percentage being removed each year must be considered as either a failure in selection or a failure in development.
- Percentage of plan jobs vacant for more than 30 days. Effective succession processes fill plan openings rapidly, because the ideal candidate was successfully developed and prepared in advance. As a result, whenever a plan position remains vacant for more than 30 days or when it must be filled with an unplanned “interim” individual, it must be considered as a failure.
- Percentage of “not promoted” finalists who leave in frustration within one year. Whenever someone on the plan is moved into a plan position, obviously you have been successful. However, if any of the other “finalists” who were “interviewed” but later rejected for a particular position leave the firm within a year, consider that promotion at least a partial failure. Turnover among second or third choices is not unusual, but it should be prevented whenever possible because of the high costs associated with losing any individual with sufficient qualifications to be considered a finalist.
Group 5 — Measures of direct business impacts
The most powerful measures are those that demonstrate a measurable impact both on leadership development and business results. The three most direct measures of business impact are:
- Dollars saved by avoiding the added cost of outside hires. On average, external candidates for leadership positions and mission-critical roles receive a significantly higher salary than internal hires (some studies show the variance as high as 165%). Because of this cost differential, one of the most obvious advantages of effective succession planning is the cost-savings resulting from selecting a larger percentage of internal candidates.
- Percentage increase in team performance six to 12 months after a plan employee is moved into a leadership position. Less-direct measures of successful placements might include the percentage of bonus the mover receives (compared to the average), their performance appraisal score while in the job, or their relative ranking in forced-ranking exercises.
- The cost of avoided errors. The total dollar costs of errors that would have occurred if leadership positions were vacant too long or if they were filled by below-average leadership talent.
- Program ROI exceeds that of other HR programs (successful plans demonstrate to cynical CFOs that their benefits and dollar impact well exceed their costs).
When times are tough, a common characteristic of “survivors” is often their ability to shift their focus toward new and developing business needs. Obviously, when budgets are tight, headcounts aren’t likely to grow, but the need for great leadership talent will actually increase (because it takes great leadership to manage under severe budget constraints).
If you want to increase your visibility and business impact, now’s the time to get involved in succession planning. Given the upcoming baby boom retirements, and limits on recruiting actual talent, the shortage of internal leadership and mission-critical talent will soon become the top HR issue.