January 3, 2023 – What holds true for traditional talent management, in general, holds true for succession planning in particular. Both suffer from the same flaw: a focus on supply rather than demand, according to a new report from Hein Knaapen, managing partner of CEO.works.
“Talent management is about the uninterrupted availability of the right talent to drive continuous company performance; succession planning is specifically about having the right candidates for concrete vacancies,” he said. “Rather than wait for vacancies to occur, we proactively run our venerated routines for identifying potential successors as a separate process inside HR. That process is disconnected from the business. Consequently, the focus is much more on the supply of people than on the evolving demands of the roles we are filling. While this reflects our very human tendency to think about people first, it also presents problems for business in today’s highly dynamic environment.”
Succession management, from a reductionist point of view, is about ensuring the continuity of talent in critical roles. And yet continuity of talent is not equally relevant in every role. “Obviously, it does not look good—or even make sense—to not have a succession plan for your CEO, CFO, and CHRO roles,” Mr. Knaapen said. “And so each year we prepare them. Outside the C-suite, we have traditionally sought to fill vacancies in a hierarchical fashion. Seniority rules. That leaves us stuck in the past: Any list of critical roles we come up with reflects the organization chart (which is, more often than we’d care to admit, outdated).”
Mr. Knaapen explains that below these top layers of the organization, there exist many more roles deeply embedded in the business. “We usually do not need to go through the hassle of planning for these: We simply start looking for candidates when an incumbent leaves,” he said. “I remember years ago leading the executive committee of one of the companies I worked at through a lengthy annual succession planning process. They would vent their personal views about people whom they had worked with for a long time and not give much consideration to the key deliverables of the roles to be filled.”
“Succession conversion (i.e., the percentage of vacancies filled from the candidate list) was an appalling 35 percent,” said Mr. Knaapen. “Not a result to be proud of.”
Hein Knaapen is managing partner of CEO.works in Europe, with over 35 years of experience in delivering transformative talent solutions in multinational companies. Prior to taking up a partnership with CEO.works, he worked in senior HR positions at Unilever before becoming CHRO at KPN Telecom in 2005. Mr. Knaapen then became CHRO at ING Bank, where he developed and implemented the company wide people strategy for over 53,000 employees, while also reducing the HR budget by 20 percent. His role within CEO.works is a particularly important one given the sudden value destruction that has occurred in many large corporates, family-held companies, and private equity firms due to the COVID-19 pandemic.
Mr. Knaapen began to question the use of a hierarchical, supply-based approach. First, he says, it has no connection with what needs to be delivered at various times and places in the enterprise—and those needs can change rapidly. “Businesses have to adapt to unforeseen circumstances,” he said. “Role requirements have to evolve. The pace of succession often has to differ from one type of role to another and from one part of the operation to another.”
Second, Mr. Knaapen notes that even in cases where a seniority-based succession plan is executed flawlessly, the company can still be left with many surprises. “Portions of the business may stall or break down when all top leadership roles are occupied,” he said. “High-potential candidates may fail. The ratio of successful appointments to unfilled vacancies may disappoint. In my experience, a focus on demand produces more nuanced, value-based succession plans that can move in rhythm with each part of the business.”
Years later, as CHRO at another company, Mr. Knaapen had to find a successor for the long-time head of an extremely important corporate function when the incumbent unexpectedly left. Their job deliverables, he quickly discovered, were numerous and very vague. “Reviewing them all in light of the current business strategy and external environment led me to suggest to the CEO that there were really only four deliverables that mattered,” said Mr. Knaapen. “That insight into what was critical helped us put together a shortlist of internal players—many of whom we had not even seen before as candidates for the vacancy—who were highly qualified to produce exactly what we needed.”
4 Changes to Refocus on Demand
Demand-oriented succession planning aims to enhance company performance. Mr. Knaapen explains that linking succession management to business reviews builds a bridge between the enterprise’s ability to create value and its performance. Holding up that bridge are roles critical to value delivery and the few critical outcomes each must produce. Mr. Knaapen offers four changes can help you make the shift from supply to demand in your succession planning:
1. Use “contributions to value” to determine role criticality. Specifically, define roles in terms of their contribution to creating value, protecting value that is at risk of being destroyed, or fulfilling fiduciary responsibilities for the company. “This will reduce the volume of your work: Instead of creating across-the-board succession plans for everyone with seniority, you will only need to prepare a plan in situations where you cannot afford discontinuity in the role,” he said.
How Succession Planning Can be Your Secret Weapon
It takes more than money to win over the best legal candidates, says a new report from DHR Global. A strong succession plan can provide the growth opportunities that matter to prospects. Not only does it mitigate risk, but it boosts engagement and retention in the legal department.
2. Challenge your concept of “potential.” General assessments of potential lack solidity. “They tend toward subjectivity, in that, without anything specific to measure against, they become assessments of behavioral preferences,” Mr. Knaapen said. “Unfortunately, humans are biased toward seeing those who behave similarly as having more potential than those who behave differently. Redefine potential as a person’s ability to deliver specific outcomes in a specific context in the future.”
3. Get very clear, precise, and selective about deliverables. The more precise you are now about what a critical role must deliver, the easier it will be to select talent, according to Mr. Knaapen. “The vaguer you are about deliverables, the greater the risk of a misfit between the individual and the role,” he said. “If there is a gap between a person’s capabilities today and where you need them to be tomorrow, you can design a set of actions to close that gap and ensure they are a better fit for that future role.”
4. Pay attention to the rhythm of each initiative and each area of the business. Mr. Knaapen notes that this will dictate the right cadence for your succession planning reviews. The rhythms may occur at a much faster cadence in some areas or initiatives of the business than in others. For example, he explains that the demands of a role will evolve faster if it is involved in the transformation of the company than if it is in a quieter part of the business.
“Succession planning is one area of a CHRO’s responsibilities where focus trumps exhaustiveness,” said Mr. Knaapen. “It is not about making sure you have someone ready to fill every role in the workforce. It is about having the right talent available to fill the critical roles that drive company performance.”
Contributed by Scott A. Scanlon, Editor-in-Chief; Dale M. Zupsansky, Managing Editor; and Stephen Sawicki, Managing Editor – Hunt Scanlon Media