Writing about integrated talent / human capital management last week reminded me that I still(!) haven’t finished my review of the Executive Guide to Integrated Talent Management (featuring me, Dave Ulrich, Peter Cappelli etc).
We’re now on to succession planning with two chapters from Marshall Goldsmith and then Rob Reindl at Edwards Lifesciences.
Marshall first, writing, not surprisingly, about CEO succession. And on this topic it’s a decent chapter, but as a contribution to the book and the topic of integrated talent management it’s pretty week as there’s actually nothing here about the need for integration.
There’s a lot on the benefit of focusing on internal vs external succession which you’ll probably realise I’ll support. But I do disagree with Goldsmith’s argument for this:
“How do you decide when not to develop your successor from inside the company? The answer, though complicated at one level, is quite simple at another. Do a cost-benefit analysis. What will it cost to bring in an outsider? What are the potential benefits? What are the costs to promote each candidate?| What are the benefits? And finally, are there any outsiders who cannot be matched by someone in the company? If the answer is ‘yes’, by all means hire the outsider. If the answer is uncertain or ‘no’, promote from the inside.”
There’s nothing wrong with this as a generic approach but in terms of CEO succession, the choice is all about the individuals you might consider. If you believe you’re likely to have stronger candidates outside, this should always be part of the process. Ideally though it should still start before you have a succession opportunity (or crisis). Ie you need to keep an eye on the market and identify potential candidates from outside at the same time that you do this internally. (Of course, if this early process suggests you’ve got the people you need inside you can relax the external scanning a little but it’s probably still worth continuing at a high level in case your internal talent leave.)
The following chapter from Rob Reindl, HR VP at Edwards Lifesciences is much more interesting and compelling. In particular, there’s a really good little case study of a CFO succession which I think is very progressive but possibly a little too focused for most organisations! (it’s a lot of effort for one person who could leave so hence very risky):
“After a couple of years of successful performance, the controller was identified as a successor to the CFO, to be ready in three to five years. His development needs to prepare to become CFO at that time included experience with treasury, risk management, tax matters, and working with the outside investor community.
During the next five years, Edwards incrementally added staff responsibility for the treasury, risk management, and taxes who reported directly to the controller, who thus began to take on these responsibilities on a developmental basis….
No doubt it took some finessing with some of the functional leaders who were told that they no longer reported to the CDO but were now going to report to the controller, but such tough calls need to be made, especially when you are preparing someone for a role like the CFO job.
In this case, we also needed to pursuade the existing CFO to relinquish these reporting relationships. Fortunately, she had aspired to be a business unit leader and we felt that she needed some operational experience before taking on that role. So we created a President of Global Operations role that included global manufacturing, supply chains, information technologies, and quality control. That experience prepared her to become a business unit leader.”
Isn’t that a great case study, and a lovely example of creating value – structuring the whole organisation around the key people, rather than simply the other way around.
The key then is to know your key roles, and, as Reindl describes, your development jobs – though I do think it will present problems for most organisations perhaps less focused on people than Edwards Lifesciences if the CHRO position is always seen as one of these jobs!
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