Succession Planning

Succession planning, the process by which an organization makes sure that it will have the right leaders in the right place at the right time, has always been one of the most important accountabilities of the chief executives and top leaders of organizations. However, the importance of succession planning to business success has never been greater or more widely recognized than it is now—a result of the globalization of industry, demographic and generational shifts, and the ever-changing challenges of leadership in today's organizations. In fact, corporate boards have become more actively involved in CEO succession and are holding CEOs accountable for making sure that succession planning is in place below them.

The term succession planning, along with the scope and primary focus of this managerial function, has evolved over the last half century. During the 1950s and 1960s, the economies of developed nations were growing and a lean Depression generation was rising through the leadership ranks. The focus was on replacement planning, in which key positions were targeted and slates of candidates were identified as possible backups in case the current incumbent retired, was promoted, or was “hit by a bus.” The impetus was the realization that there were not a lot of candidates to fall back on, especially as the postwar economic expansion began to heat up, resulting in the need for more leaders to manage growing businesses.

Human resources (HR) practitioners had few tools in these years, but assessment center methodology, created during the late 1930s and first applied to business during the 1950s in the AT&T Managerial Progress Study, laid the scientific foundation for the major contribution of industrial and organizational (I/O) psychology to the practice of succession planning: the definition of managerial competencies and the prediction of managerial success.

During the 1970s and 1980s, the process evolved into succession management. As the baby boom generation bulged its way through organizations, the [Page 777]focus was on figuring out a way to select and develop the right people from a plethora of possibilities so that the best would rise to the top—not by accident or good fortune, but by plan. The goal was no longer to just identify replacements for key positions at the top to minimize risk but also to develop a robust pipeline of leaders at all levels of the organization to ensure its continued growth and success. Included in this process at each major level (frontline, middle, and executive leadership) was the identification of highpotential individuals, appraisal of their strengths and skill and experience gaps, and plans for their development. Especially at the executive level, the people in this pipeline of future leaders came to be called corporate assets because they were valuable leadership resources of the whole company, not just the particular function or business unit in which they were based.

Companies such as AT&T, IBM, General Electric, and Exxon were on the leading edge in creating and using this kind of system. Industrial and organizational psychologists at these companies and in consulting firms serving a wide spectrum of companies were busy developing assessment centers, administering cognitive tests and personality inventories to screen for leadership potential, gathering observations of on-the-job performance and estimates of future potential through multiperspective interviews, and conducting in-depth behavioral interviews to help companies get data for promotion decisions and individual development planning. Today, General Electric is still touted as a leading example of succession management, with its Session C review of A, B, and C players, multilevel management curriculum, and decades-long dedication to building such a rich leadership pool that it has been able to “export” CEOs to other companies.

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