Assignment Content
Based on your readings and other research:
Answer the following questions:
1. What is succession planning?
2. Why is succession planning important?
3. How do you define “potential”?
4. What do you see as the key connection between Leadership Development and Succession planning? Feel free to give an example of a company who does this well.
A Blue Beetle Books Publication
Succession Planning 101
Growing Communities One Idea At A Time
Copyright © 2012 Blue Beetle Books
Succession Planning 101
Published as an eBook original by
Blue Beetle Books.
No part of this eBook may be reproduced in
any manner whatsoever without the written
permission of Blue Beetle Books.
Blue Beetle Books
204-900 Wollaston St., Victoria, BC V9A 5B2
Tel: 250-704-6686
E: [email protected]
www.bluebeetlebooks.com
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Succession Planning 101
Table of Contents
Introduction …………………………………………………………………………………………………………….4
Business Succession Planning – An Overview …………………………………………………………..6
Critical Succession Planning: Roles and Players …………………………………………………….11
What Are Your Succession Options? ………………………………………………………………………14
Keeping the Business in the Family ………………………………………………………………………..16
Business Succession: Management Buy-Outs ………………………………………………………..18
Valuing Your Business ……………………………………………………………………………………………20
Selling your Business …………………………………………………………………………………………….23
How Much Does Succession Planning Cost? ………………………………………………………….25
The Editor’s 10 Succession Planning Mistakes People Make …………………………………..27
Business Succession Planning Checklist ………………………………………………………………..29
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The aim of this eBook is to provide a basic overview of some of the
key points you should consider when developing a succession plan,
and to encourage you to think seriously about starting to plan your
exit strategy, whether that will be five years or twenty years away.
A Canadian Federation of Independent Business (CFIB) survey,
carried out in 2006, found that 66 per cent of small to medium
enterprise business owners surveyed planned to exit their business
within ten years.
When one considers that one-third of the population of Canada are baby boomers (some 11 million)
there will be a lot of business owners looking toward retirement in the coming years.
Another interesting finding in the survey was that only 10 per cent of people planning to sell had a
formal succession plan, with 38 per cent saying they had an informal, unwritten plan and over half had
no plan at all.
If you have a family business, have you thought about the future? Do you plan to work until they carry
you out in a pine box, or would you like to have an exit strategy which will see your business continue,
and provide some much needed income for your retirement? Perhaps you are looking for a new
adventure? CFIB found that one in ten of those surveyed were selling up to start another business.
In either case you have a number of decisions to make when deciding your exit strategy. Are you
going to pass the business on to a family member? Or will you simply find someone else to run the
business for a period of time until you finally decide to sell it (sort of semi-retirement)? Will you sell it
to one of your management staff, or even an employee cooperative? Or, are you selling the business
to an outsider who may, or may not need you to hang around and provide training, coaching or other
support? Will you retain an interest in the business, perhaps in terms of transitional profit sharing, or
as a shareholder? How will the transition be financed, especially if you are handing over to a family
member or employees? Of course, you could simply close the business completely and sell the assets.
Of course, before any of the questions above can be considered you need to get your advisors and
stakeholders involved. Creating an advisory team is a good idea; bring together your accountant and
lawyer, your bank manager and financial advisor, add a tax advisor (oh, yes there will be significant tax
issues), family members, your company’s management team, a business valuator, possibly a business
broker and anyone else whose opinion you trust (a mentor perhaps).
Introduction
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But, we’re jumping the gun a little here; before you do anything you need to sit down and clearly think
through what your long-term goals and objectives are, both in business and personal terms. Once
you’ve gone through this process, discuss your thoughts and conclusions with everyone involved (all
stakeholders) and see whether they share your vision.
This short list of considerations should show you that a succession plan is vital if you are to be
successful in transitioning out of your business.
Selling your business, or simply exiting it and letting someone else run it, can be traumatic, after
all we get emotionally attached to our businesses, especially if we have been in business for
many years, but it will be a great deal more stressful if you put your head in the sand and expect
succession to just happen.
Even if you don’t plan to retire anytime soon, start succession planning now, remember, it’s a long-
term process, not a one-time event. Treat the challenge of exiting your business as just another great
opportunity and you may end up with one of the best business experiences of your life.
Mike Wicks
(Publisher: Blue Beetle Books Inc.)
Warning: This book provides a basic overview to the subject of succession planning only and the
authors make no warranties as to the accuracy of information as it relates to the reader’s specific
business, or circumstance. Do not act on any information contained in this publication without first
consulting an accountant and lawyer.
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When it comes time for a business owner to hand
over the reins to someone else, it’s important
that there is already a plan in place outlining
the logistics of the transition in order to ensure
a smooth hand over. This plan is a business
succession plan.
Succession planning can be a complex process,
although breaking it down into its component
parts makes developing one a whole lot easier.
Many factors need to be considered including:
determining the value of the business; settling tax
and debt obligations; choosing and working with
successor(s); and communicating the plan to all
interested parties.
Why Is a Succession
Plan Necessary?
Entrepreneurs give their lives to building their
businesses, it’s one of the crowning achievements
of their lives, so they often have a deep-seated
desire to see them continue after they retire. They
feel a commitment to their customers, or clients, to
their community and even their suppliers.
Without a clear succession plan many businesses
fail after the original owner retires, sells the
business, or passes away. This is a great pity,
a waste of resources and usually affects the
livelihood of many people.
For larger companies it is critical to implement a
succession plan across a broad segment of the
company, from lower supervisory roles to high-
level managerial positions. This approach is more
conducive to identifying, developing, and keeping
key leadership personnel, and avoiding the a
shortage of skilled and knowledgeable staff during
and after the transition period.
Business Succession Planning – An Overview
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When Should Succession Planning
Be Done?
It is never too early to begin succession planning.
In fact, it should be done even when it seems
things are going well and the current owner has
no plans to step down from a leadership role, or
retire. Sometimes, a sudden and drastic change
to the physical or mental health of the owner, or
their untimely death may make it necessary for
a business to be either sold or transferred to the
ownership of someone else. These unforeseen
circumstances are not so disruptive if there is a
comprehensive succession plan already in place
long before they occur.
Planning well ahead makes sense. The owner can
supervise the development of the succession plan
and build into it all the necessary steps to ensure
an efficient transition from current ownership to the
next, regardless of whether they are available to
handle it themselves.
There is a strong case for a succession plan to
be built into the start-up business plan. Building
a company from the ground up with systems in
place for every department makes sense and these
systems form the basis of your succession plan.
Think of a Pizza franchise, everything is systemized
to the point that a new franchise owner can step
in and start a new store quickly and easily. At
any time, but the earlier the better, carry out this
exercise – pretend that you are going to franchise
your business and consider what would go into the
Franchisee’s manual.
Once you have a plan it should be reviewed every
six months or so to ensure that everything it
contains is still valid. All businesses are dynamic
and six months is a long time, so update your plan
to reflect current situations and requirements of
the company as well as to take changing laws and
regulations into account.
Key Components of a
Succession Plan
Before you start, take a time-out and think about
what the perfect scenario would be when it’s time
for you to exit your business. That will give you
a good starting point. Your plan should have a
cover page, a table of contents and an executive
summary, much like your business plan.
What follows is a brief overview of the key
elements of a succession plan, but we advise
you to pick up a template from your local bank,
or Canada Business Network office. Community
Futures Development Corporations also often
have templates.
Establishment of goals: It’s always a good idea to
think about what outcome you want to see before
you start planning. You need to ask yourself many
questions before you even begin to consider the
actual process of transition, such as whether you
will play any active role in the company’s future
operations, how the sale will affect your employees,
customers, suppliers, and other stakeholders in the
company, whether the company itself will change
locations, and whether the name of the company
will change or remain the same (e.g. if the company
bears your name, are you happy for a new owner to
continue using it?).
Also consider what you want to get out of the deal
and what your successors are, or might be, looking
for. This is particularly relevant if members of your
family will be taking over the business.
Are you the sole owner? Is it just you who are
leaving the business, or do you have a partner, or
partners to take into consideration? Be clear about
who the plan is referring to and who it isn’t.
Are you leaving the business entirely, or planning
to work part-time? Are you considering bringing
in someone else to run the business, while you
still own, or part-own it, or are you looking to sell
out completely? Outline the type of succession
you envisage.
Executive summary: This is written last and will
provide the reader with an overview of the key
elements of the plan. It will also provide basic
information on the business such as whether it is
a proprietorship, partnership or incorporation and
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details of what the company’s primary products
and services include.
Expectations: What are your goals and
expectations, both for the business and personally?
What will a successor be looking for? You may
already know this if a family member is a potential
successor; if not you might want to put yourself in
the shoes of a prospective purchaser – what will
they be looking for?
Identification of successors: Sometimes,
owners decide to simply sell the business outright,
whereas others wish to appoint a family member,
close friend, business partner, or even a current
employee as their successor. List each potential
candidate being considered and individually note
their qualifications, training, dedication, and overall
suitability to run your business in the future. This
should be an unbiased look at potential successors.
It is very important that you make it clear as to
whom ownership of the business will go to, exactly
when that will occur, and under what conditions.
The business and it how works: Describe the
current business in more detail including its
products, services, customers, competitors,
strengths, weaknesses, opportunities and threats. Be
honest and provide the reader with an understanding
of the businesses and its current standing.
Outline the future of the business, is it growing,
or contracting? Is it opening new markets,
developing new customers bases? Is it re-tooling,
or developing new products or services? Add sales
projections and other financial statements that will
provide a clear picture of the company’s prospects.
Provide an overview of how the business runs on
a day-to-day basis and describe the systems in
place that keep things on track, and who has what
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responsibilities. Then outline how these will work
after succession.
Outline all those who will need to be involved in
the planning process. This can include spouses,
children, other family members and key employees,
especially departmental, or divisional managers.
Provide details of how family, or management are
involved with the succession plan and eventual
transition of the business to a new owner, or family
member. Also consider what role family members
that are not part of the business will have in the
decision-making process.
Personnel after succession: Create a table
that lists the names and job titles of all your key
employees (include any partners, or co-owners
remaining the business). Now add two more
columns; one that lists the relevant skills required to
do that job and another that details the training they
will need to move into that position.
Identification of company structure and method
of transfer: The structural components and levels
of management, roles and responsibilities of
employees, and policies and procedures of the
company’s operations should be clearly explained.
It should be clearly stated how the transfer of
ownership will affect each manager and employee
and what roles will change. You should create an
organization chart that shows what the company
will look like when you have left.
Consider and make note of how control of the
business will actually be transferred, and how the
assets will be handled. How will payment be made
and over what timeline? Are you assisting with
financing, is the successor, or purchaser handling
that themselves?
Training for successor: What training do you intend
to provide for your successor? A lot will depend
on whether your successor already works in your
business in a key managerial role, and the level of skill
and knowledge they possess. If you are selling to a
complete outsider then you will have to include a full
orientation of all systems, policies, and procedures.
The legal stuff: You will need to detail all the
administrative and legal paperwork that will be
required. This will include share transfers, new
partnership agreements, name changes, GST/
PST/HST, domain names, memberships, business
licences, permits and many more things that are
currently in your name.
Any outstanding agreements or contracts will need
to be legally passed over, so these should be listed
in the plan.
If your business is a partnership, and you have
a shareholder’s agreement, then you may want
to discuss with your lawyer what the terms are
surrounding any buy/sell agreement and what
effect this will have on your plans to sell your share
of the business.
You will have to make note of, and take into
consideration the tax implications of exiting your
business. This is where your accountant can be
extremely valuable.
Business valuation: It is necessary to know how
much the business is worth before a selling price
can be determined. This can be done by hiring
a certified public accountant (CPA) a broker, or
a realtor, or by mutual agreement between all
partners involved in the transaction. Your plan
should have a business valuation and also list all
assets and liabilities.
Timetable: Although this may change as things
progress, create a timetable of all the activities
the plan requires. This will allow you to monitor
progress and let all stakeholders know how things
are progressing, on a regular basis.
Communications strategy: Outline the method
by which you will keep all stakeholders informed
as to developments; this should include regular
meetings with all involved. Remember, you will
also need to communicate with employees,
especially with regard to the transition of authority
from you to your successor and his, or her, new
management team.
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Personal: A succession plan does not have to
limit itself to just the business activities – it’s your
plan, include details of how your retirement will
look, how much money you will need to do the
things you want to do and decide whether you
will bow out of the business entirely, or keep
your hand in by sitting on the board, acting as an
advisor, or even doing some consulting work.
Risk management: Whatever can go wrong,
will go wrong so you need to plan for the “what-
ifs” of life. For instance, you should consider the
possibility that you could die before being able to
sell your business, or hand it over to a successor.
You should ensure that you make it clear what
your wishes are if this should happen, and make
sure that you have a will that details what should
happen to the business, or your shares if the
worst happens. Make sure you note down in the
plan, what insurance you have, where your will is
and who will handle the succession if you are not
around to do it yourself.
Communicating the Plan
The importance of communicating the succession
plan to all parties involved cannot be stressed
enough. A plan that only the owner and upper
management personnel are aware of is not going
to be very helpful if an unexpected transfer
of ownership has to be made. In a smaller
company, all employees should be part of the
entire planning process. That way, they feel they
contributed to it and are much more likely to
ensure that the plan is effectively implemented
when the need occurs.
In larger companies, it is a good idea to create
committees representing all levels of employment,
from non-management workers through to
top level management so that input from all
departments can be considered during the
planning stages. When all parties who will be
affected by the succession plan feel they took
part in its development, they are more likely to
want to see its successful implementation.
When the time comes to initiate the plan, outside
parties such as customers and suppliers should
be made aware of how the change in ownership
will affect their relationship with the company.
Professional Services
In all but the simplest family owned business
successions, it’s highly advisable to retain the
services of a business lawyer and a certified
public accountant. These professionals will help
ensure all legal ramifications have been thought
out and that all required documentation, taxes,
and regulations have been given proper attention.
It is also important to make sure that there are no
misunderstandings between the parties involved
in the transaction.
When seeking out the help of these professionals
it is important to choose carefully to ensure that
you can work well with the personalities involved,
and that they can also work well together. Ask
each professional what services they can provide,
along with any limitations. Make sure you fully
understand the rates being charged and in the
case of professionals charging hourly rates, ask
for estimates as to how long each part of the
process will take.
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Business succession represents a key strategy for
the continuity of an organization, particularly its
leadership and executive management in critical
functions. Too often, especially with businesses
led by charismatic managers or owners,
succession planning takes a back seat until the
very last moment when a replacement absolutely
needs to be identified. By having a succession
plan in place well in advance, a business can
avoid this panic and thus have a better chance of
choosing a prepared candidate for a leadership, or
ownership position. To make the plan successful
however, the right players need to be involved.
This includes a variety of stakeholders both inside
a business and in some cases outside, depending
on their own role and interaction. Each one plays a
critical role in helping a smooth succession.
Remember it’s often not just about new
ownership; it can also involve members of the
management team, who may be part of the
owner’s family, or who just consider the transition
of ownership a good time to retire. In other cases
the new owner may decide to bring in their own
executive management team. So in this chapter,
we’ll look at management succession as well as
ownership succession.
Family
Succession planning always involves family
members in one way or another. If the plan is to see
the business ownership and management transition
to a son or daughter, or another family member,
they should be involved as early as possible in
the planning process. If they are young and the
planned transition is many years away, they can be
Critical Succession Planning: Roles and Players
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introduced to the business by way of part-time
work and thereby groomed to take over, potentially
over several decades. If they are already in the
business, then they should be an integral part of the
transition team.
Even when there is no plan to have a family member
take over a leadership role in the business, they
should still be an integral part of the transition plan.
As an owner exits a business that has been a major
part of their life for many years the impact will be felt
across their whole family.
Top Management
A successful transition of ownership relies on
support from all levels of management. Executives
have worked long and hard to build up protocols
and systems that have improved the business
considerably. It is important to get them on side so
that they will support the new owner and train them,
and any new management staff to ensure that the
company continues to operate as efficiently as it
has in the past.
Middle Management
Middle management is the backbone of a company
and a new owner, or new executive team are going
to need the support of front-line employees. Any
resistance from middle management could easily
thwart efforts to transition a new management team
into the business.
Staff
It is important for a new owner to take over a
motivated staff, so rank and file employees should
not be forgotten when developing a succession
plan. They should be involved, when the time is
right, and their opinions sought wherever possible.
The last thing an owner wants when touring a
potential successor around his, or her, business
operations is for staff to be surly, or show any level
of discontent.
Business Partners
Very few businesses and companies are able
to operate on their own without the help and
partnership of other businesses. This may be
in the form of supplies, services, outsourced
functions, shared markets and selling, etc. The
list can be extensive. Leaders of a business need
to be connected with critical business partners,
as shared agreements can represent significant
lifelines for a company’s immediate future. As a
result, external business partners can have an
influence on succession planning in a company,
especially if a potential successor does not work
well with such vendors and supporters. While at
best the external perception may end up being just
an opinion, it’s one that executive management
should be paying close attention to for continued
growth and cooperation.
Banking and Financing Partners
Succession candidates need to be aware and
understand who the financial players are that help a
business operate and thrive with regard to banking
and financing. While these players do not directly
make decisions on a company’s direction, they can
have significant say on the funding needed to pay
for such operations.
Look to your bank account manager for advice on
financing the succession planning and business
transition itself. They will also be able to provide
information on financing options for family
members, management, or others considering
buying the business. They can also be a source of
industry information and have a good handle on the
current economic situation.
Accountants will help with a whole range of
things including developing financial statements,
advising on tax issues, assisting you if there is
any restructuring of the business to attend to, and
making you aware of any tax implications, or ways
to reduce taxation. They will also be an integral part
of assessing how much your business is worth.
Lawyers
Your lawyer will play an important role in your
succession planning, and ultimate exit from the
business. They will draft any purchase, or sale,
agreements you might need, prepare wills, help with
powers of attorney, set up trusts, offer tax advice
and deal with anything to do with the restructuring
of your business.
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Business Valuators
It is wise to get a professional valuation carried out
on your business to ensure you will get the maximum
amount possible for it. There are dozens of different
ways to value a business so trying to do it yourself is
unlikely to provide a valuation that is sound enough
for the majority of potential buyers. A professional
valuator has the skills to assess the value of the
shares in your company. Not only that, they are
able to offer an unbiased valuation, which will give
potential buyers, or investors, confidence that the
valuation is credible.
Brokers
Business brokers are like realtors, they will hopefully
find a buyer for you and help you prepare your
business for sale, by giving you advice on making it
more attractive to potential buyers.
Counsellors or Mentors
In every region in Canada, and in most communities
there are Community Futures Development
Corporations, Enterprise Centres, and Chambers
of Commerce that often have counsellors, or run
mentorship programs that can assist small business
owners with their succession planning. In addition the
Canada Business Network has an excellent website
offering advice, and regional offices throughout the
country that are a good place to start when searching
for help www.canadabusiness.ca/eng.
Facilitators
There are facilitators that specifically work with
family businesses, not only to guide them through
succession planning, but also to act in a mediation
role when families find themselves unable to agree
on matters. The Canadian Association of Family
Enterprises (CAFE) is a great organization to check
out, whether you are dealing with transition, or
other issues involving your family in business. The
home page of their website proclaims: Helping
Business Families Through Shared Experience,
which sums up their mission. They may well have
a local group in your community that may be able
to recommend a facilitator, or provide the help you
need within the chapter. They also publish a book
called: Family Business Succession, which may be
well worth checking out.
Conclusion
The above list is not meant to be exhaustive as
there are other players and groups that may,
or at least should have a say in your particular
businesses succession plan. The key thing to
remember is that succession planning is a
systemwide issue and, when managed correctly,
incorporates the input of both internal and external
stakeholders.
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Running a business can be an extremely rewarding
experience both financially and emotionally.
However, regardless of how well you do at running
a business, it can’t last forever. As a business
owner you have a responsibility to your employees,
customers, and potentially the community, to
start thinking about what you will do with your
businesses when you decide to retire, or move
onto another challenge. As an owner of a company,
evaluating your succession options can be
challenging. When you find yourself in this situation,
there are three primary options to consider. All of
these options come with a few pros and cons, but
depending on your situation, one may stand out as
the obvious choice for you.
Pass to a Successor
The first option to consider is passing your
ownership interests on to a successor. This
successor could theoretically be anyone you want.
You could pass the business on to one or more of
your children, to your spouse, to a business partner,
or to a good friend. When you pass a business on
to a friend or family member, you have the ability, if
you so wish, to give away your share of ownership
in the company.
When passing ownership of your business to
your children there are several useful tax planning
opportunities you might want to take advantage of,
such as estate freezes. This is a process by which
you take steps to stop, or limit, the future growth of
your assets and provides for future growth to accrue
to the benefit of your spouse or children. An estate
freeze is normally accomplished by the transfer
of capital assets into a company in exchange for
preferred shares in the company and a promissory
note, or by the exchange of common shares in a
company for preferred shares having a redemption
value equal to the fair market value of the common
shares. When holding shares of an existing company,
a freeze can be accomplished by reorganizing the
capital or stock dividends.
Of course, getting the advice of your accountant,
and perhaps a tax consultant specializing in
succession planning is vitally important if you are
to minimize the tax implications of handing your
business over to family members.
Transfer to an Employee or a
Management Buyout
Another option to consider when it comes to creating
a succession plan is transferring ownership of the
business to an employee, or allowing a partner to
buy out your share of the company. With either of
What Are Your Succession Options?
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these options, the party who plans on buying your
share of ownership in the business will pay you a set
amount for the value of your shares. The good thing
about this approach is that it can sometimes generate
a large amount of cash that you can use during your
retirement years, or to start another business.
One of the challenging things about using this
strategy is that it can be difficult to accurately
value your share of ownership in the business. To
value a business, you may need to hire a certified
public accountant or a business appraiser. There
are many different ways to value a business
and, it can sometimes be difficult to ensure the
estimate is accurate.
After coming up with an agreed-upon amount for the
transfer, or purchase of ownership, many business
owners set up a buy-sell agreement. With this
type of agreement, the exact terms of the sale will
be discussed and put in writing. The terms could
include an event that triggers the sale of the business
ownership and the amount to be paid for the
ownership share. For example, the business owner
could set up a buy-sell agreement with a minority
partner in the business. When the primary owner dies,
the minority owner will pay a set figure to the estate of
the deceased owner to get his share of the business.
To come up with the money for the transaction,
many buy-sell agreements use life insurance
policies. For instance, each partner in the business
may take out a life insurance policy on the other
partner. This way, when one partner dies, the others
automatically get enough money to buy out the
deceased owner’s share.
Selling the Business
The third option to consider is selling your business.
Instead of coming up with a long-term succession
plan, you simply sell the business immediately. With
this option you can list your business for sale with a
business broker, or try to sell the business on your
own. The buyer pays you a sum of money and then
you turn the business over to them. This is often the
simplest option and doesn’t require much planning
on your part.
Transition Periods
Regardless of which option you choose, you may
need to allow some time for a transition period.
When you pick a successor, you will, over time,
teach that successor everything they need to know
to run your business efficiently. This will allow you
the satisfaction of knowing your successor will be
competent to carry on your legacy in the business.
If you sell the business, you may arrange with the
buyer to stay on for a period of time to show them
the company’s systems, policies and procedures
and introduce them to staff and key customers,
or clients. This period can be in the form of a
paid consultancy, or included as part of the sales
agreement.
Conclusion
Before you make a decision what route you think will
be best for you and your business, research in more
detail the options discussed above and again later in
this book in more detail. Gather all your stakeholders
together and explore the options that make sense for
your business. Remember, this is your exit strategy
and it’s important to you and your company’s future
Things to consider include:
• What is best for the business?
• What makes sense financially?
• What makes sense with regard to potential tax
implications?
• Are there any family members ready and
capable of taking over, or will they need
grooming over time?
• How will any decision affect family unity?
• How important is it to you that the business
retains its reputation in the community?
• How important is it to you to protect your
employee’s jobs?
• Is it important to you that your customers
continue to be serviced?
• Do you want to remain involved with the
business, or are you ready to cut all ties?
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Keeping a family business in the family requires a
great deal of thought and planning. One of the first
important steps may be for the founder, or current
business owner, to clarify why he or she wants
to keep the business in the family. If the purpose
is simply to provide a livelihood for his or her
heirs, the same purpose might be accomplished
by selling the business, setting up a trust, and
letting the heirs receive interest payments for
the rest of their lives. If the founder, or current
owner of a business, wants his or her heirs to be
self sufficient and have to earn a living, ensuring
a livelihood for them could be accomplished by
financing college educations and allowing them to
follow their own interests.
Completing a written mission statement can help
clarify reasons for keeping a business in the family.
Many people who own family businesses believe
that their business provides a service that people
in their community need. A family that operates
a hardware store may believe that their friends
and neighbors would not be able to find the
products they sell at reasonable prices at a large
home improvement centre, for instance. Other
families strongly believe that an art or craft that is
part of their family tradition, is worth preserving
and sharing to enhance the quality of life in their
community. Whether the business is large or small,
Keeping the Business in the Family
17 www.meridianregion.caCommunity Futures Meridian Region
having a mission for the business is critical to
keeping the business in the family.
Once a clear mission has been established,
succession planning must begin. An important first
step may be to simply ask the potential successors
if they are interested in spending their lives working
in the family business. They may not be. If they
are undecided, conditions or time limits should
be set. This will prevent conflict between family
members in the future, should a family member
fail at a career, or become disenchanted and want
to come back into the family business. A founder
or owner must make clear who he or she wants to
succeed them. Other family members may have
made erroneous assumptions that need to be
dispelled. If a successor or successors have been
clearly designated, and are interested in following
the family tradition, they must be properly trained
and educated.
The successors need to have specialized, as well
as general, training. Much of this training can be
provided by the founder or current leader, but it
is also important to receive outside training. If, for
example, the family business is a restaurant, the
restaurant could benefit from having the successor
complete culinary school. Beyond that, a successor
needs to have an education in general business.
They need to know about finance,
human resource management,
marketing, and need to develop
leadership and decision-making
skills. Critical thinking skills
will help a young
person, whether or not they stay in the family
business and if they do stay, these skills will make
the business far more likely to succeed.
An important part of a successor’s education may
be to take a job outside of the family business,
after graduation from college or technical school.
If nothing else, this step will determine whether
the potential successor is employable. One of
the reasons that many family businesses fail after
the founder has passed the business on to his or
her offspring, is that their child would have great
difficulty finding, or holding down, a decent job if
not for the family business. A potential successor
who is successful outside of the family business
will gain the confidence needed to run the family
business successfully, and will thus have credibility
with the employees. They will be seen as having
earned their leadership position rather than simply
inheriting it.
It is important to continue to receive feedback
from both inside and outside of the family, even
after succession has taken place. Many family
businesses establish family councils, or forums,
to help the successor remember the mission and
vision of the business. Such groups can also serve
as a vehicle for succession planning into the next
generation, and can arbitrate disputes among
family members. Boards of directors, and non-
family members in senior management positions,
will help a successor focus on ensuring the
business remains competitive.
An important part of succession planning is for
the founder or owner to actually retire once the
succession is complete (once orientation and
training has been carried out). Continuing to
have a hand in the business after succession can
undermine the successor’s confidence and cause
unnecessary conflict. The founder needs to know
when it’s time to quit and hand over the reins to the
next generation.
One of the keys to success of a family owned
business transition is to involve stakeholders
from the outset. The owner of the business must
communicate with every family member involved
18 www.meridianregion.caCommunity Futures Meridian Region
what he, or she is thinking of doing, and then
include them every step of the way during the
development of the succession plan.
A management buyout differs from a leverage
buyout, where a financial sponsor takes a
controlling interest in a certain company. In the
case of the former, existing managers take a
significant part of the assets of a company.
Targeted Companies
The following characteristics of a company will
make certain companies more likely to be targeted
for a management buyout:
• Very low to no debt
• Decreased price of stock to reflect
market conditions
• Hard assets as low cost collateral
• New management producing a boost in cash
flow from new operational improvement
When companies begin to meet these
conditions, management may start considering
undergoing a buyout.
How Does Management
Buyout Work?
There exist a number of benefits of a management
buyout rather than other sorts of buyouts. For
example, the process of due diligence does not
take as much time since the management is already
aware of the ins and outs of their own company.
In fact, the managers will typically know more
about the operational practices than the sellers
themselves, which provides sellers the opportunity
to give them only the most basic of warranties.
The knowledge the managers have of the company
can also be a concern for owners because this
knowledge provides some threat of an unfair
advantage.
Generally, private companies are the target for
management buyouts. Should public companies be
acquired, then chances are good that the manager
will close the deal by making the company private.
The primary reason that management buyouts
occur is because the managers fear their jobs
could be in jeopardy, if an outside source were
to acquire the company. During the process, the
managers gain the benefit of better profits should
the company remain a success.
Approaching Employees
During a management buyout, the managers will
generally ask employees to submit an application,
so that they can decide whether or not they
want to hire them back after the buyout. Should
Business Succession: Management Buy-Outs
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they hire them, new employment terms will be
discussed, including insurance, salary and more.
Depending on how the buyout goes, the terms will
dictate how employees are paid for any vacation
days that were accumulated, or if they will be
carried over into the new agreement.
Challenges With
Management Buyouts
There are many challenges with management
buyouts. For example, the quality of the
management team, the financing of the transfer,
and the future dynamic of the employees.
Above all else, the management must be able to
provide a strong team with good skills and a good
balance of knowledge. The investors and financial
partners that become a part of this team will want
to know that the company and its team is solid,
and that they can easily work with one another
to further the company’s business. The biggest
challenge is to convince investors that the team
one has built is strong.
It is entirely possible that some managers will not
be included in the buyout process. They might
choose to leave the company, which can result
in some destabilization, especially if they were
key team members with unique skills. Not only
does the new team need to figure out where
there is tension, but they must also prevent and
eliminate dissension by, for instance, adopting
profit measures and redefining roles in order to
generate loyalty.
On one hand, since the managers are fully aware
of how their businesses run, the purchase offer
that they make will generally be closer to fair
value than third party offers. Of course, they also
know what their talents and skills can contribute,
so the negotiations may be more arduous than
outside offers.
The owner-manager will also need to consider
what should happen if there is a breakdown when
negotiating with employees. When this occurs, the
employees may not want to go with a third party
and decide to resign, potentially lessening the
company value.
Management Buyout Financing
Getting the finances for the buyout typically
requires the managers to meet with a number of
sources. The first thing they may do is try to get
financing from a bank. However, the risks involved
can make banks a bit wary of making these types
of loan. If a bank does not want to get involved,
then the next step is usually private equity
financing. Private investors are the most common
source of management buyout financing, and
investors gain a portion of the company shares.
If the firm is actively soliciting a number of
bidders, the management team must be able to
quickly assess numerous factors before placing
their own bid:
• The value of the company from the perspective
of management
• The value of the company from the perspective
of other competing buyers
• The ability of the company to support the
financing — as well as the subsequent options
like private investors or bank lenders —
available to managers
This information makes it possible for managers to
compete equally when they are up against another
bidder. With the right information, managers can
save their jobs through management buyout.
Although management buyouts are becoming more
popular, smaller businesses may not be best suited
to this form of exit strategy. They are complicated
and often it is difficult for management to
access the financing required. Another issue is
whether your business has employees with the
requisite skills and leadership qualities. Therefore
management buyouts can often take a lot longer
to come to fruition than simply selling the business
for instance.
20 www.meridianregion.caCommunity Futures Meridian Region
Creating a succession plan, of some sort, for
your business is a necessary step that all owners
must take at some point unless of course you
choose to simply close the business down when
you retire. As part of the process of creating
a succession plan, you have to determine the
value of your business. Before you can pass your
business interest onto an heir, or sell it to a third-
party, you must first figure out how much the
business is worth. Coming up with an accurate
value for the business can be a bit of a challenge,
as there are several methods open to you. If you
want your succession plan to be successful, you
have to come up with a value that is as close as
possible to the company’s true value.
Determining the value of a publicly traded
company is somewhat simpler. You can come
up with a fairly accurate value by looking at the
number of outstanding shares of stock that are
in the market place and multiplying that number
by the market price for the stock. When coming
up with a value for a privately owned company,
the process is a little more involved. If there are
shares of stock for your company, they are not
trading actively in the stock market.
When it comes to valuing your private
business, it’s best to hire a
professional valuator who will
give you an unbiased,
fair market value. A
certified
public accountant, or a business appraiser could
also help you put a price on your business.
What follows is a quick primer on the various
ways a business can be valued; this in itself
points to how complicated valuing a business
can be.
Multiple of Revenue
One of the most common ways to determine a
value for a business is to use a multiple of annual
revenue. With this approach, you simply multiply
the annual revenue of the company by a specific
number. For example, you might multiply your
annual revenue by three in order to come up with
a value for the business. The multiple that you
use can vary significantly from one business to
the next. Typically, a
common multiplier will
be used for an industry
and type of
business.
Valuing Your Business
21 www.meridianregion.caCommunity Futures Meridian Region
To figure out the proper multiple to use for your
calculation, you may need to research the norms
in your industry. This could involve checking to
see how much other similar businesses sold for,
or consulting with an appraiser to get some ideas.
Earnings Based
This is probably the most commonly used method
of valuing a business. It looks at what the business
has earned in the past, and what it is likely to earn
in the future. The price is based on management
forecasts, which are open to scrutiny and the
vagaries of the economy. It may then be combined
with the method above where the annual revenue
is multiplied by an industry norm.
Discounted Cash Flow
Another way to gauge the value of a business is
to use a discounted cash flow analysis. With this
strategy, you calculate how much cash flow the
business will create over a period of time. Then
you use an expected rate of return, such as the
rate of government Treasury bills, to calculate how
much money you would need to invest to earn
that rate. This helps create an upper limit for your
investment so that you see how much it would
take to bring in that much profit through regular
investment channels.
Asset Value
A simple way to estimate a value for your
business is to simply look at the assets that it has.
If you were to buy everything that the business
owns, how much would it cost? You can typically
get this information from your balance sheet. Look
at the total company assets and compare them to
the liabilities. The difference between the assets
and the liabilities represents the current asset
value of the company. But remember, this method
does not take into consideration the goodwill
you have built for your business, which will have
an effect on future earnings. Nor does it factor in
your market share, which may well influence the
true value of the business.
Market Value
One of the ways realtors value residential
properties is to compare similar houses that have
recently sold in the same neighbourhood. This
works well in this situation as usually very similar
houses can be considered. In the corporate
world it may be difficult to find “apples-to-
apples” comparisons, but if you can then this
might be worth looking at because it will at least
give you a rough guide as to value.
Maximizing the Value
If you are in the process of creating a
succession plan, you may want to maximize the
value of your business. For example, if you’re
planning on selling your business at some point
to an employee so that you can use that money
for your retirement, you want to maximize the
amount that you get. As a business owner,
there are a number of steps that you can take to
maximize the value of your business.
One of the important things that you need
to do is get your financial records in order.
This includes creating standard accounting
statements such as the balance sheet, income
statement and statement of cash flows. If you
do not have these documents created regularly,
investors will be hesitant to buy your business.
You can also maximize the value by creating
systems that help keep everything running. For
instance, creating a comprehensive training
program for your employees so that they are all
qualified to do their jobs with little oversight, can
be beneficial.
Investing in a state-of-the-art inventory system
could also be an improvement that adds value,
or at least make the company more attractive,
as it will minimize lost or stolen inventory for the
new owner.
As in all businesses, nothing happens until
something sells, so a company which has a first
rate sales and marketing strategy, an active and
skilled sales team and is exploring, and opening
new markets is going to be far more attractive
than one that is treading water waiting to be sold.
22 www.meridianregion.caCommunity Futures Meridian Region
Disposing of any assets that are not assisting in
the growth of the business, or even worse are
costing the core business money is a good idea
before putting the business up for sale, or starting
the transition process to a family member.
Good business relationships (goodwill), and
human capital, can also have an impact on the
value of a business. For example, if you secure
an exclusive deal to be a distributor of a new
product, this could make your business more
attractive. If you have really talented employees or
patents on new products, this can also add value
to your business.
Many banks offer advice on how to maximize
the value of your business during succession
planning and exiting your business.
Considerations
While the value of a business can be determined
in many different ways, it is up to you to do your
best to make it look attractive to potential buyers.
For instance, some businesses do not appear
to be very profitable at first glance. That is, they
might only show a small profit on the books.
However, many businesses that only show a
small profit actually pay a healthy salary and big
bonuses to the owner of the business, as a return
on capital invested. This makes the business
appear to be less profitable, but in reality, the
business can be a very successful venture.
If you’re trying to make the business appear more
attractive, you may need to stop taking bonuses
and cash payments out of the business for a
certain amount of time, to allow investors to see
how much profit the company generates. Once
you have done your best to maximize the value of
the business, get a new valuation of the company
done so that you can include the new value in
your succession plan.
Don’t forget human capital. The value of your
company may drop significantly if key managers,
and those employees with specialist skills,
decide to leave during the sales process due
to uncertainty, or because they are ‘poached’
by your competitors. Prospective purchasers
want to take over a going concern, one that has
the ability to continue with minimum disruption
during and after the transition. Remember
this when developing your succession plan
and develop strategies to include your key
personnel in the future of the business. This
is another good reason for maintaining strong
communication between your succession
planning team and your employees.
Remember, the value of your business is less
about its historical value, and more about its
future value. How important are you, as the
owner, to the success of the business? For
instance, take the case of a car dealership where
the name of the owner is part of the business
name such as Smithwicks Subaru. If the owner
has become a pillar of the community, and is a
well-known local philanthropist who appears in
television commercials and print advertising for
the dealership, then what affect will it have on the
business when he retires? If the business is being
sold to a third-party, it could decrease potential
revenues. If on the other hand this entrepreneur
is selling to his son or daughter and has, over a
period of several years, groomed family members
to take over and made the business a true “family”
business then the effect might be minimal.
23 www.meridianregion.caCommunity Futures Meridian Region
As the recent tough economic times ease,
and the baby boomer generations peaks,
many small business owners are preparing to
sell their companies. Increased profitability,
stronger revenues and increased liquidity in
the marketplace are all contributing towards an
environment where selling a business is again
desirable. Before you make the leap, consider if
this is the right time.
Is Now the Time to Sell?
A solid history of profitability, a competitive
advantage, growth opportunities, a great location,
a strong customer base, a skilled management
team and dedicated, loyal employees all contribute
to a buyer’s decision to purchase your business. If
the company owns intellectual property rights on a
product, or has a long-term contract, it can sweeten
the deal for potential buyers.
Selling your Business
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Emotions play a role in the decision to sell a business.
Years of work can be heartbreaking to part with for the
avid workaholic, or raging entrepreneur. For others,
this is not an issue. If work has ceased to be fun, or
you have stopped striving to expand the business,
it may be time to step aside. In today’s increasingly
competitive market place, especially from companies
selling online, many older business owners may feel
too overwhelmed to continue. Whether it’s just time
to retire, or whether you are suffering from burnout,
selling a business can be a viable option as the
economy improves.
Preparing it for Sale
Before anything else can be done, small business
owners should hire an appraiser to discover the value
of their business. Professionals can take stock of
your business’s finances and give you an accurate
estimate of the value, before you decide whether to
put it on the market. Afterward, you should make
sure all the company’s documents are in order. Being
prepared shows prospective buyers that the business
has been managed competently and allays any
fears they have about the company’s prospects. At
least three years of balance sheets, profit-and-loss
statements and tax returns will need to be provided.
Current lists of inventory and equipment should also
be included. During the due diligence phase, much
of this documentation will be required as well as any
contracts and agreements.
What are Purchasers Looking for?
Purchasers are ultimately looking to find the best
business they can within their price range. As they
look closer into buying a particular small business,
they will ask to see all the financial documents,
leases and documentation. The buyer will use
these tools to discover the possibility of any future
problems, or current financial dilemmas. They
want to see a strong history of profitability and
growth opportunities in the field. Other factors that
may nudge their decision could be the location,
employees, or the amount of customers.
Marketing your Business
Selling a business is impossible if there is not a
buyer. Using a variety of marketing techniques,
small business owners can market their own
business and find a purchaser. However, many
companies choose to hire an experienced business
broker to handle all of their marketing needs. If you
choose to take this path, make sure the broker has
references to back up their promises.
Without a broker, a small business needs to create
an aggressive marketing plan. Trade publications,
personal networks and on-line websites can
all be used to find potential purchasers. Two
marketing materials are especially important in the
process. The first is a one page document that
offers the businesses basic information without
revealing its identity. After serious buyers are
found and confidentiality agreements are signed, a
comprehensive selling prospectus can be provided.
Where to Look for Buyers?
Potential buyers can be found through numerous
Internet websites that are designed to specifically
help small business owners. Trade organizations,
newspapers and magazines in the business’s field
can also be used to promote to potential purchasers.
Taking out an advertisement is one of the most
common ways of getting quality leads. If these
methods fail, turning to a small business broker will be
necessary. However, a broker will take a percentage
of the purchasing price, so remember this when
assessing what amount you need to get from the sale.
Where Can you Get help?
Small business owners do not have to do all the
work on their own. From appraisals to marketing,
professionals exist whose entire job is to simplify
the process. If the small business owner wants
to do all the work on their own, they can turn to
several professional organizations for advice. The
Federal government, Canada Business Network
website offers a great deal of advices and contact
information. There are dozens of web sites that
list businesses for sale and others which provide
directories of small business brokers.
Selling a small business does not have to be a
stressful process. With the right paperwork, marketing
and professional assistance, a small business owner
can achieve the results they want in a timely manner.
Experienced professionals are always on hand to
help out any business owner overwhelmed by the
process. By carefully researching the marketplace
and preparing financial statements, a small business
owner can simplify and speed the entire process.
25 www.meridianregion.caCommunity Futures Meridian Region
Succession planning for a business should be started
as early as possible for many reasons, most of which
have been discussed earlier in this book, but an
additional benefit is the fact that when you develop a
plan over time any costs incurred are also spread out
of several years.
There are both internal and external costs involved,
and different costs depending on whether the
business is organized as a sole proprietorship,
partnership or corporation. The internal costs of
succession planning involve the time and other
administrative resources necessary to make
a clear and coherent plan. The external costs
involve retaining attorneys to draft wills and other
documents, hiring consultants who specialize in
succession planning to audit the business and
make suggestions, and perhaps hiring accountants
or financial planners to advise on how to handle
the tax consequences of transferring a business
from one generation to the next. The internal
costs associated with succession planning can
be calculated in the same way as other business
planning and development costs; remember to
include the time required for owners, or managers
to hold meetings with potential successors to gauge
their interest and expectations.
If no potential successors can be found, a plan
will need to be developed to liquidate the owner’s
interest in the business upon retirement. The
expectations of an owner will rarely coincide
completely with the expectations of potential
successors, so a plan to resolve differences
and keep communication open will need to be
developed. A balance will need to be found between
the retirement income needs of the owner and the
amount of income a potential successor expects.
The type of business will determine the costs of
training a successor to take control of the business.
Training costs may include tuition to obtain a college
degree, but will also include the time spent by
employees of the business to train a successor
on specific procedures, protocols and systems.
A business will not be taxed specifically on
succession planning, but the tax consequences
of any plan to transfer the assets of a business
from one person to another should be one of the
first things considered. A chartered accountant or
How Much Does Succession Planning Cost?
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lawyer can advise on how to structure a business to
lessen the tax burden. One method that a chartered
accountant may advise is to use an estate freeze as
mentioned earlier.
A consultant may charge between $10,000 and
$20,000 to conduct an organizational audit to
help determine everything that may be involved in
establishing a succession plan. Spending this kind
of money may be cost effective in many instances,
as it may vastly reduce administrative and other
internal costs of conducting such an audit in-house.
Once a succession plan has been established, there
will be costs associated with having legal counsel
draft documents and provide legal advice on how to
proceed. Lawyers may charge $3,000 for an initial
meeting to discuss a plan and draft a summary of
how to proceed. Having a lawyer draft a will and
prepare various powers of attorney may cost another
$2,000 to $5,000. Lawyers may charge between
$300 and $3,000 each for preparing various trusts
associated with transferring the business assets,
depending on the complexity of the trust document.
The Ontario Ministry of Agriculture, Food and Rural
Affairs has posted clear and detailed information
about farm succession planning. The information is
targeted toward operators of family farms, but the
principles enumerated in these documents can be
extremely useful for anyone who is starting to think
about succession planning. A good place to start is
the Farm Succession Planning Steps and Checklist,
by Peter Coughler and Christine Wenger. (Order #
10-025, March 2010) http://omafra.gov.on.ca/english/
busdev/facts/10-025.htm.
Financing the Transition or
Acquisition
Whatever option you end up deciding on, someone
has to come up with the money to buy you out. And,
that is where much of the difficulties occur when
trying to sell your business and decide on who will
succeed you.
Of course, you may decide to help fund the
acquisition yourself in some way, if your successor is
having difficulty in raising the required finances.
The route you take will very much depend on your
specific circumstances and we could not hope
to cover all eventualities in this introduction to
succession planning, but here are a few things to
consider that will have an affect on how financing
might transpire:
• Are you selling an incorporation? As in a legal
entity? Or a proprietorship, or partnership? In
the case of the last two, what you are selling are
personal assets.
• Are you selling just the business, or the property it
operates out of as well?
• Are you selling the whole business, or only part
of it?
• Are all the assets included, or just some of them?
• Do you intend to stay on in any capacity? If so will
you be paid? Will you retain shares and receive
dividends? This could affect the selling price and
conditions, not to mention your tax situation.
• How and when do you want to be paid? There
may be tax implications if you want to be paid in
full at closing, as opposed to being paid out over
time. Other options include selling shares over
a period of time, receiving dividend payments,
accepting part-payment and continuing to work
in the business with the eventual goal of receiving
a higher payout at the end.
• Will you help finance the purchase, or do you
expect the buyer to find their own financing? If it
is the former and you extend payment over a long
time, then this could affect your asking price (i.e.
you will expect to be paid more for the business).
• Any decision you make will have tax
implications so get advice from your lawyer,
your accountant and your bank manager before
making any final decisions.
• No matter how keen a potential buyer, or
successor, it’s their ability to raise enough equity,
and to finance the remainder of the price you are
asking, within in a reasonable amount of time,
that makes them a viable successor. If they can’t
do this, then look for someone else.
27 www.meridianregion.caCommunity Futures Meridian Region
This is by no means a comprehensive
list, succession planning can be a
minefield, but here are some of
the primary pitfalls to avoid.
1. Starting to plan too late. If
you are in business and haven’t
started your plan, assuming it
will all work itself out in the end,
you’re already behind the eight-ball.
This laissez faire attitude will come
back to bite you when you least expect
it. You never know what’s around the
corner – any of us could get hit by a
bus tomorrow; if it was you, what would
happen to your business, and how would
your loved ones manage?
2. Not having a set of defined goals. You’ve
heard this before about business planning. I
know it’s a pain, but you need to know what
your goals are before you decide on how
you’re going to get there – or you may end up
somewhere else!
3. Not involving all the stakeholders.
Succession planning is not a solitary exercise.
If you intend your successor to be a member
of your family, bring everybody concerned
together and form a family council; start
meeting, start planning – get your act together.
Then there’s the management team, they need
to be involved – after all it’s these people who
run the company on a day-to-day basis.
4. Not getting buy-in from all the players. If
you are blind to the fact that several of the
stakeholders (and this could include partners,
family, management, staff) are unhappy, or
nervous about your succession plan, this
can destabilize your business. It can lead to
family strife and the loss of key employees.
Communicate the plan (it needn’t be the whole
plan – remove, or black out the confidential
sections) to everyone involved, ensure they
understand it and get their feedback.
5. Trying to fit a square peg into a round hole. I
know, I know, you’ve always dreamed that your
son would follow in your footsteps, but a degree
in ancient Greek literature may not make him
best suited to running your fabrication plant.
6. Selling cheap. So, you really want your
grandson to take over the business that took
you 40-years to establish. He’s keen, but he’s
got no money and little chance of getting
enough to finance the purchase. But heck, he’s
family right – you can make allowances? Don’t
let sentimentality cloud your judgement when
your retirement is at stake.
7. Not creating an organizational culture that
encourages succession. Companies that have
a strong culture, that all employees have bought
into and are empowered by, are much more
The Editor’s 10 Succession Planning Mistakes People Make
28 www.meridianregion.caCommunity Futures Meridian Region
attractive to buyers. They are also more
likely to breed successors. Check out
your organizational culture – does
it stand up to scrutiny?
8. Not having contingency
strategies in your succession
plan. “The best laid plans of mice
and men oft go awry” the saying
goes. Your plan should take
into consideration that various
things could happen to affect
the strategies it lays out. Carry
out a simple risk analysis and
consider all the disasters that
could occur over the years that
might affect your succession
plan, and develop strategies to
deal with them.
9. Not training your successor.
There’s nothing worse than
seeing your life’s work go down the drain.
Even if you took a lump sum when you retired
from the business, and its future success
will have no effect on whether you have a
comfortable retirement or not, watching as
everything you built gets screwed up by the
ineptitude of your successor will gall you –
won’t it?
10. Not keeping your plan up to
date. After all the effort you put into
developing your plan you put it on a
shelf in your office and leave it there
for several years, while life and your
business change dramatically around
you. At some point, the time will come
when you need it and you’ll discover
that it’s so out of date that it’s of little to
no use. Let’s hope it’s not when you have
suddenly fallen ill and need to accelerate
your exit strategy, or worse still when
your spouse reaches for it after that
proverbial bus hits you.
29 www.meridianregion.caCommunity Futures Meridian Region
The Succession Planning Checklist below was
kindly supplied courtesy of Community Futures
Meridian Region, East Kindersley, Saskatchewan
(www.meridianregion.ca).
The following checklist will act as a guide to things
that you need to consider now that you have
decided to start work on a succession plan for
your business. Treat it as both a starting point, and
something to help keep you on track.
BUSINESS SUCCESSION PLANNING CHECKLIST
30 www.meridianregion.caCommunity Futures Meridian Region
GOALS AND OBJECTIVES
o Identify need for succession plan
o Develop vision, goals and objectives
o Establish personal retirement goals
o Identify family/stakeholder goals
o Establish a team of professional advisors
DECISION MAKING
o Involve family members in the decision-
making process
o Establish a method for dispute resolution
o Communicate your wishes to family/
stakeholders
SUCCESSOR(S)
o Identify successor(s)
o Ownership
o Management
o Identify required training for successor(s)
o Provide training to build vision for the future of
the business
o Provide support to successors
ESTATE PLANNING
o Address taxation implications to the owner/
business upon sale or transfer of ownership
o Develop an estate and personal financial
plan for owner, spouse and the succeeding
generation
o Detail retirement income needs
o Provide for involved and non-involved
family members
CONTINGENCY PLANNING
o Identify potential problem areas
o Develop “What If” scenarios including
action plans
CORPORATE STRUCTURE AND
TRANSFER METHODS
o Is business to be transferred to family members,
or sold?
o Define roles and responsibilities for family
members and key employees
o Fill key management positions
o Identify role(s) for retiring owner
o Restructure the business, if required
o Consult with professionals (lawyer, accountant,
financial advisor, business broker, appraiser etc.)
BUSINESS VALUATION
o Obtain professional input to determine a fair
market value for the business
o Determine exactly what is to be sold
o Give consideration to: profitability, business
location, inventory level, financing of buyout
EXIT STRATEGY
o Determine method of transfer
o Establish a timeline for implementation of the
succession plan
o Publish the plan so that affected individuals
are aware
o Communicate regularly with all parties
IMPLEMENTATION/FOLLOW- UP
o Review the Plan on a regular basis and update
as necessary
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SHRM Foundation’S EFFEctivE
PRacticE GuidElinES SERiES
Developing Leadership
Talent
A guide to succession plAnning And
leAdership development
�
by Dav�d V. Day, Ph.D.
A guiDe to succession
PlAnning AnD leADershiP
DeVeloPment
SHRM Foundation’S EFFEctivE PRacticE GuidElinES SERiES
developing leadership
talent
��
This publication is designed to provide accurate and authoritative information regarding the subject matter covered. Neither the pub-
lisher nor the author is engaged in rendering legal or other professional service. If legal advice or other expert assistance is required,
the services of a competent, licensed professional should be sought. Any federal and state laws discussed in this book are subject to
frequent revision and interpretation by amendments or judicial revisions that may significantly affect employer or employee rights and
obligations. Readers are encouraged to seek legal counsel regarding specific policies and practices in their organizations.
This book is published by the SHRM Foundation, an affiliate of the Society for Human Resource Management (SHRM©). The
interpretations, conclusions and recommendations in this book are those of the author and do not necessarily represent those of the
SHRM Foundation.
©2007 SHRM Foundation. All rights reserved. Printed in the United States of America.
This publication may not be reproduced, stored in a retrieval system or transmitted in whole or in part, in any form or by any means,
electronic, mechanical, photocopying, recording or otherwise, without the prior written permission of the SHRM Foundation, 1800
Duke Street, Alexandria, VA 22314.
The SHRM Foundation is the 501(c)3 nonprofit affiliate of the Society for Human Resource Management (SHRM). The SHRM
Foundation maximizes the impact of the HR profession on organizational decision-making and performance by promoting innova-
tion, education, research and the use of research-based knowledge. The Foundation is governed by a volunteer board of directors,
comprising distinguished HR academic and practice leaders. Contributions to the SHRM Foundation are tax deductible. Visit the
Foundation online at www.shrm.org/foundation.
For more information, contact the SHRM Foundation at (703) 535-6020
LEADERSHIP
talEnt
dEvEloPinG
���
v Foreword
vii Acknowledgments
ix About the Author
1 Developing Leadership Talent
3 Business Case for Succession Planning
and Leadership Development
6 Succession Management, Not Just
Planning
18 Leadership Development
23 Developmental Practic es
31 Conclusion
33 References
37 Sources and Suggested Readings
contents
table of
v
Dear Colleague:
As a busy human resource professional, you probably find it difficult
to keep up with the latest academic research in the field. Yet knowing
which HR practices have been shown by research to be effective can
help you in your role as an HR professional.
That’s why the SHRM Foundation created the Effective Practice
Guidelines series. These reports distill the latest research findings and
expert opinion into specific advice on how to conduct effective HR
practice. Written in a concise, easy-to-read style, these publications
provide practical information to help you do your job better.
The Effective Practice Guidelines were created in 2004. The SHRM
Foundation publishes new reports annually on different HR topics.
Past reports, available online at www.shrm.org/foundation, include
Performance Management, Selection Assessment Methods, Employee
Engagement and Commitment and Implementing Total Rewards
Strategies. You are now reading the fifth report in the series,
Developing Leadership Talent.
For each report, a subject matter expert with both research and
practitioner experience is chosen to be the author. After the initial
draft is written, the report is reviewed by a panel of academics and
practitioners to ensure that the material is comprehensive and meets the
needs of HR practitioners. An annotated bibliography is included with
each report as a convenient reference tool. This process ensures that the
advice you receive in these reports is not only useful but also based on
solid academic research.
Our goal with this series is to present relevant research-based knowledge
in an easy-to-use format. Our vision for the SHRM Foundation is to
“maximize the impact of the HR profession on organizational decision-
making and performance, by promoting innovation, education, research
and the use of research-based knowledge.”
We are confident that the Effective Practice Guidelines series takes us one
step closer to making that vision a reality.
Frederick P. Morgeson, Ph.D.
Chair, Research Applications Committee
Professor of Management
Michigan State University
Foreword
v��
Content editor
Frederick P. Morgeson, Ph.D.
Professor of Management
Eli Broad College of Business
Michigan State University
Acknowledgments
ProjeCt Manager
Beth M. McFarland, CAE
Manager, Special Projects
SHRM Foundation
Major funding for the Effective
Practice Guidelines series is
provided by the Human Resource
Certification Institute (HRCI) and
the Society for Human Resource
Management (SHRM).
reviewers
Berrin Erdogan, Ph.D.
Assistant Professor of Management
School of Business Administration
Portland State University
Mark Fogel
Corporate Vice President, HR and
Customer Care
Leviton Manufacturing Co., Inc.
Robert J. Greene, Ph.D., SPHR,
CCP, CBP, GRP, GPHR
Chief Executive Officer
Reward $ystems, Inc.
Elinor K. Hite
Strategic Director, Human
Resources & Organizational
Development
YMCA of the USA
Robert C. Liden, Ph.D.
Professor of Management
University of Illinois at Chicago
Daphne Logan
Vice President, Human Resources
America’s Second Harvest
The SHRM Foundation is grateful for the assistance of the following individuals
in producing this report:
�x
About the Author
David
V. Day
David V. Day is Professor of Organisational Behaviour in the Lee Kong
Chian School of Business, Singapore Management University. He has
also held positions as Adjunct Research Scientist for the Center for
Creative Leadership and Senior Research Fellow for the U.S. Army
Research Institute Consortium of Research Fellows.
Dr. Day has published more than 50 journal articles and book chapters,
many pertaining to the core topics of leadership and leadership
development. His research has been published in the Journal of Applied
Psychology, Personnel Psychology, Academy of Management Journal,
Journal of Management and Leadership Quarterly, among other
journals. Dr. Day serves on the editorial boards of Human Performance,
Journal of Applied Psychology, Journal of Management and Personnel
Psychology and also serves as Associate Editor of Leadership Quarterly
and Human Resource Management Review.
He is a Fellow of the American Psychological Association and the
Society for Industrial and Organizational Psychology. Dr. Day maintains
membership in the Academy of Management, Asia Academy of
Management, Southern Management Association and the International
Association of Applied Psychology.
Dr. Day is the lead editor on the book Leader Development for
Transforming Organizations: Growing Leaders for Tomorrow (Lawrence
Erlbaum Associates, 2004) and the forthcoming book An Integrative
Theory of Leader Development: Connecting Adult Development, Identity
and Expertise (Psychology Press, 2008). He served as a civilian
member of the U.S. Army Training and Leader Development Panels
recommending future directions for officer, non-commissioned officer
and Army civilian training and development. Dr. Day received his Ph.D.
in industrial and organizational psychology from the University of
Akron in 1989.
x
Effective succession planning involves more than just a replacement
planning process. It also includes a comprehensive employee
development system.
An advertising campaign a few years ago promised “no surprises” in a hotel
chain’s hospitality services. That is a motto that most HR professionals
would embrace. Unfortunately, surprises are inevitable. When a key employee
announces that she is leaving the organization, effective immediately, it could
be one of those nasty surprises that create incredible turmoil. Not only was this
person anointed as “high potential” (i.e., having the potential to be developed
for a senior leadership role) and slotted for a more responsible upper-level
position, her departure can create a domino-like effect that leaves leadership
gaps all along that succession line. Despite the inevitability of surprises, what
matters most is how the HR function is prepared to respond in such occasions.
The foundation for coping successfully with staffing surprises is succession
planning. Organizational survival in a globally competitive environment depends
in part on having identified and developed replacements (i.e., successors) for key
positions.[1] This is the essence of succession planning. A more formal definition
of succession planning is the process of identifying one or more successors for
key positions and preparing them for expanded organizational responsibilities
through job assignments and other developmental activities.[2] The part of this
definition regarding preparing individuals for expanded responsibilities overlaps
with what is typically considered as leadership development—broadening the
capacity of an individual to be effective in leadership roles and processes.[3]
When an event such as a surprise resignation occurs, it is impossible to jumpstart
a dormant succession system. This is because effective succession planning
involves more than just a replacement planning process. It also includes a
comprehensive employee development system.[4] When a sudden leadership void
is experienced, it makes no sense to then start the development process. It is too
late, because proper development can take months or even years. For this and
other reasons, succession planning and leadership development initiatives must
be linked in explicit and coherent ways to best manage the leadership talent of
an organization.
Now consider what happens in the event of a surprise resignation when there
is an integrated succession management initiative in place. In such cases, the
loss of any one individual is not so traumatic to the organization because of
a greater overall capacity for leadership. There is the capability to fulfill the
job responsibilities of the person who is leaving through existing employees,
at least temporarily. There is not one person but any number who can step in
and assume part or all of the open job responsibilities until a successor can be
appointed either from the inside or as an external hire. An implication of this
deep leadership capacity is that no one is irreplaceable. Indeed, the greater the
number of irreplaceable employees in an organization the more at risk that
organization is to turnover trauma.
Developing Leadership Talent
Develop�ng leadersh�p talent �
“Death of the ‘Irreplaceable’ CEO
Successor” provides an example
of an organization that pinned
its succession hopes on one very
talented individual only to have
tragedy strike. Surprises do not only
happen when the CEO or other
key employees suddenly quit or
retire. As the case illustrates, there
are dangers of designating only one
possible successor to a key position,
regardless of its level.
Leadership bench strength, the
leadership pipeline and leadership
capacity are popular metaphors for
the underlying issue of ensuring
that an organization’s leadership
is adequately developed to face
current and future challenges.
Regardless of the term that is
used, the particular concept
emphasizes that leadership is not
centralized in a single or small
number of individuals. It begins
with the belief or organizational
norm that leadership is everyone’s
business. Why? Because the kinds of
challenges faced in today’s globally
competitive environment are way
too complex for any individual
to figure out alone. In order to
survive and thrive, successful
organizations must be keenly aware
of their leadership talent and how
to best develop it across all levels.
Succession planning and leadership
development are key processes
in assessing and developing an
organization’s leadership talent.[6]
� Develop�ng leadersh�p talent
Death of the “Irreplaceable”
CEO Successor
organization: Kerzner internat�onal
ltd
Kerzner operates one&only luxury
hotels w�th propert�es �n mex�co,
mald�ves, maur�t�us and other
locat�ons.
Headquarters: Bahamas
Founded: �993 as sun internat�onal
hotels, ltd.
2005 revenues: $745.7 m�ll�on
executive chairman and founder:
soloman “sol” Kerzner (age 7�)
Handpicked successor: howard
“Butch” Kerzner (age 4�, son)
the leadersh�p future had been
planned and everyth�ng was look�ng
good for Kerzner internat�onal. the
ag�ng and somet�mes embattled
cha�rman/founder had appo�nted
h�s popular and talented son Butch
to be h�s successor. the elder
Kerzner was plann�ng on eas�ng �nto
ret�rement.
tragedy struck when Butch was
k�lled �n a hel�copter crash wh�le
survey�ng s�tes for a new luxury
resort �n the Dom�n�can republ�c
on october ��, �006. shortly
after Butch’s death, Kerzner
rece�ved word that a proposal for
an �ntegrated resort �n s�ngapore,
wh�ch was be�ng champ�oned by
Butch, had been rejected by the
s�ngapore government. th�s was
a v�tal project for the company’s
future, and �t suddenly van�shed. on
top of �t all, the company was aga�n
faced w�th a d�lemma of who would
succeed the founder. instead of a
4�-year-old ceo who had been
carefully developed for the job over
many years, the company would be
led by sol Kerzner and Paul o’ne�l
(age 6�), who was coaxed out of
ret�rement to help fill the leadersh�p
vo�d left by Butch’s death.
what this case illustrates:
• the potent�al problem of �nvest�ng
all development efforts �nto a
s�ngle successor—no matter how
talented—and not develop�ng a
broader capac�ty for leadersh�p or
a deeper leadersh�p p�pel�ne.
• the �nab�l�ty to jumpstart a
dormant or �nact�ve success�on
process when there �s a cr�s�s.
• success�on surpr�ses are not
l�m�ted to the sudden departure of
the �ncumbent ceo (�n th�s case).
Why d�d no one ask the obv�ous
quest�on �n advance: What
would happen �f Butch d�ed?
Would more deta�led scenar�o
plann�ng have helped foresee
th�s part�cular form of turnover
trauma?
source: The Wall Street Journal[5]
Before joining Goldman Sachs, Steve Kerr was a prominent figure running GE’s
legendary Management Development Institute at Crotonville—the world’s
first major corporate university—during Jack Welsh’s tenure. Kerr argues that
intensive employee development is a “huge competitive advantage” in terms of
recruitment as well as retention, in addition to building the leadership capacity
needed to stay competitive in today’s business environment. Regardless of
industry sector, there are several overarching and interrelated reasons why
succession planning and leadership development are crucial concerns.
Speed of change is increasing, and the type of change that organizations
experience is likely to be radical and discontinuous. This argues for greater
shared leadership in organizations. Shared leadership supports more effective
change management in terms of both sensing needed organizational changes
and building momentum for change more quickly than relying on a single
change leader.[7]
Complexity in the challenges faced by organizations across most industry sectors
is increasing exponentially. This has resulted in the heightened feeling of “vu
jade” (as compared with déjà vu)—I have never been here before, I have no
idea what is happening, and I don’t know who can help me.[8] Such complexity
typically exceeds the capacity of any single leader to make sense of and develop
workable solutions.
Task migration occurs whereby traditionally higher-level leadership
responsibilities are transferred to leaders at lower levels. This is partly a function
of the trend toward redesigning flatter organizations in which greater leadership
gaps become apparent, but it is also due to greater speed and complexities of
challenges. What was typically handled by senior leaders in the past has been
handed down to junior leaders so the former can focus on even more complex
issues.
Business Case for Succession Planning and
Leadership Development
“The rate of change is not going to slow down anytime soon. If anything, competition in most industries will probably
speed up even more in the next few decades.”
John P. KoTTer
AuThor, LeADing ChAnge
“It’s very odd to me. The assets walk home at night. If people are your most important asset, you ought to develop
them. It’s Goldman’s philosophy that not only do people have to be developed, it ends up being a huge competitive
advantage.”
STeVe Kerr,
ChieF LeArning oFFiCer,
goLDmAn SAChS
Develop�ng leadersh�p talent 3
Every managerial
employee should
have an individual
development
plan and be held
accountable for
making progress on
it every year.
4
Recruitment and retention are
tied to issues associated with
whether employees feel that their
professional potential is being
developed and used in the best
possible way. Having opportunities
across the organizational spectrum
to participate in leadership
development efforts is something
that can provide an incentive to join
and remain with an organization.
Major Reasons Why Succession
Planning and Leadership
Development Are Important
• rap�d, rad�cal and d�scont�nuous
change
• increas�ngly complex challenges
• greater leadersh�p respons�b�l�ty
at lower levels
• recru�tment and retent�on of the
best talent
These factors are the primary
drivers behind the need for effective
succession planning and leadership
development, but there are
potentially many others that could
be included. Rather than providing
an exhaustive list to try to justify the
business case for development, it
might be more persuasive to imagine
the future of your organization
if you did not engage at all in
succession planning and leadership
development. What would be the
odds of long-term survival and
success? The ultimate sin is to do
nothing; however, there are difficult
challenges associated with designing
and implementing an integrated
succession planning and leadership
development system. What follows
is an overview of the key criteria of
an effective system and some of the
most pressing challenges associated
with each factor.
KEy ASPECTS OF AN
EFFECTIvE SuCCESSION
MANAgEMENT SySTEM
Formal: A formal process is
one in which the key pieces are
standardized throughout an
organization. An informal process
occurs in an unplanned and ad-
hoc manner. There is a risk of
succumbing to informal, ad-hoc
development approaches that place
the entire burden for development
onto the individual employee. While
it is important for employees to
accept final responsibility for their
development as leaders, without a
formal process that links experiences
with expected developmental
outcomes, there is no oversight in
terms of what is being developed
and when. The use of informal
succession planning processes also
risks wasting time and money in
terms of potentially developing the
wrong things in the wrong people.
Informal often means reactive and
opportunistic. Formal systems
require organizational discipline
to design, implement and sustain.
The result can be instrumental in
buffering an organization from
succession surprises, and it can be
a source for competitive advantage
in other ways (e.g., recruitment,
adaptability).
Develop�ng leadersh�p talent 5
Systemic: An overall systems-
wide perspective on leadership
development helps to build a
broader leadership capacity and a
deeper pipeline of leaders. The focus
is not just on those at the top but
includes most or all management
levels. There is a related tendency
to focus attention on high-potential
employees. This makes sense in
terms of potentially maximizing the
return on investment (ROI) from
developmental efforts. On the other
hand, an unintended consequence
is that it allows a significant part
of the organization to atrophy. Bill
Drath from the Center for Creative
Leadership has made the point that
leadership development efforts
too often are like focusing on the
whitecaps in the ocean and entirely
missing the unseen force of the deep
blue sea.[9]
Systematic: The most effective
succession planning and leadership
development initiatives are
connected across levels into a
coherent whole. There is a roadmap
for development such that the
skills, competencies, attitudes and
perspectives that are developed
at one level are built upon at a
higher level. By being systematic,
the development initiative builds
explicit linkages across leadership
levels. Succession planning also
incorporates diagnostic tools
and methods for assessing the
developmental readiness of
employees for particular experiences.
Tailored: Overly generic leadership
development initiatives lose
sight of the universal importance
of individual differences in
developmental readiness. People
differ in the extent that they are
ready for developmental “stretch”
assignments that are at the core of
many of the most effective leadership
development initiatives. When it
comes to succession management,
Jack Welch was probably the best
known CEO-champion of tailored
succession management. His Chief
Learning Officer at the time (Steve
Kerr) claimed that Welch “knows
intimately” the career paths of
more than a thousand employees
in GE and would spend fully one
quarter of his time on the GE
succession planning process known
as Session C.[10] This level of CEO
involvement in succession planning
is extraordinary and probably
unlikely in most other organizations.
At minimum, however, every
managerial employee should have
an individual development plan and
be held accountable for making
progress on it every year.
Experientially based: Leadership
development is not a discrete event.
Rather, it is a significant part of
ongoing work-related experience.
Research shows that executives
find learning from work-related
experience to be a more powerful
force for their development as
compared with classroom-based
learning.[11] State-of-the-practice
development focuses on helping
leaders learn and develop from
their work experiences rather than
taking them away from their work to
develop.
This section has provided a general
overview and introduction to
some of the issues and challenges
associated with succession planning
and leadership development. The
next section will delve into the area
of succession management in more
detail before turning attention to
leadership development and a final
section on general conclusions and
guidelines.
Succession management, not Just Planning
Different succession processes can be placed on a continuum ranging from
relatively simplistic and bounded to relatively complex and comprehensive.[13]
At the most simplistic end of the continuum, replacement planning denotes
a minimal succession approach in which successors (i.e., replacements) are
identified at the top two or three managerial levels, but there is little or no
development of those successors other than ad-hoc on-the-job experience. The
focus is on forecasting, with no attention to development issues. Succession
planning falls near the middle of this continuum of succession processes. It is
more systematic and extensive than replacement planning because it is linked
with intentional development initiatives targeted at successors; however, it is
mainly for the top two or three management levels, like replacement planning.
Succession management anchors the most comprehensive end of this continuum
in that it identifies successors (replacement planning), develops them (succession
planning) and is also directed at all managerial levels. The overarching goal of
succession management is to have a pool or pipeline of prepared leaders—and
not just a list of prospective candidates—across all organizational levels to fill
vacancies in key positions when needed.
“Succession planning cannot take place in a vacuum. It should also be an intensive, comprehensive initiative, much
more than a preparation of a list of names that will be tabled if the CEO is hit by a bus. Similarly, succession plans will
not increase the productivity growth rate of the firm if they are designed only to allow the internal auditor to tick the
box: succession plan in place.”
PAuL CAnTor,
Former ChAirmAn,
ruSSeLL reynoLDS ASSoCiATeS CAnADA[12]
Continuum of Succession Processes
Replacement Planning Succession Planning Succession Management
ident�fy successors ident�fy successors ident�fy successors
Develop successors Develop successors
include all organ�zat�on levels
BASIC COMPREHENSIvE
6 Develop�ng leadersh�p talent
A well-designed and rigorously
implemented strategic management
process is “mission critical” to
achieving organizational goals.[14]
Consider data from the Bureau
of Labor Statistics (www.bls.gov)
indicating that 32 million workers
are over the age of 50 and that
fully 40 percent of workers will be
retirement-eligible in the next five
years in the fields of health care,
manufacturing and government
services. Couple these data with
estimates that approximately
two-thirds of external senior
management hires fail within the
first 18 months on the job. Taken
together, these facts point to an
aging and mobile workforce where
successful performance at higher
levels cannot be assumed.
Succession management helps
to provide continuity in the
leadership pipeline and to develop
a deeper capacity for leadership and
performance. But to implement an
integrated and effective succession
management process there first
needs to be an explicit link drawn
between what the organization
values as talent and the core
strategies of that organization.
After this has been accomplished
(which is no mean feat), an honest
and thorough evaluation of the
organization’s talent pool and
developmental needs is conducted.
Although it might be tempting
to jump right into a succession
management process, there are
key questions that first need to
be answered.[15] Without some
shared understanding of what
these questions mean to your
organization, there is little sense in
trying to implement a succession
management system. Informed
answers to these questions form the
foundation of the organizational
context in which the succession
management system resides. If
the answers to these questions
are ambiguous, contentious or
otherwise open concerns, then there
is no internal compass for the system
and it will likely fail.
Key Questions Impacting the Design of your Succession
Management System
Continuum of Succession Processes
Replacement Planning Succession Planning Succession Management
ident�fy successors ident�fy successors ident�fy successors
Develop successors Develop successors
include all organ�zat�on levels
BASIC COMPREHENSIvE
• What �s a key or “corporate-cr�t�cal”
pos�t�on?
• What const�tutes a h�gh-potent�al
employee?
• What are the common aspects of
exemplary job performance?
• how should the organ�zat�on fill key
pos�t�ons?
• What percentage of open pos�t�ons
should be filled from w�th�n the
organ�zat�on?
• What percentage of key pos�t�ons
should have at least one �dent�fied
successor?
• how should h�gh-potent�al employees
be prepared for advancement?
• how des�rable are �nternat�onal
ass�gnments for des�gnated
successors?
• What are the respect�ve roles and
respons�b�l�t�es of employees and hr
�n the process of prepar�ng h�gh-
potent�al employees and des�gnated
successors?
• how �mportant are �nd�v�dual
employee career goals and object�ves
�n the success�on management plan?
• how open and transparent should
hr be �n commun�cat�ng w�th
�nd�v�duals who are �dent�fied as
h�gh-potent�als and des�gnated
successors?
Develop�ng leadersh�p talent 7
� Develop�ng leadersh�p talent
EFFECTIvE SuCCESSION MANAgEMENT SySTEMS
This section outlines the approaches of two successful organizations to the
succession management process (Dow Chemical and SmithKline Beechum) and
also provides an example of a commonly used tool in assessing the talent pool of
an organization (see Figure 2). An important point to note about this process
is that the evaluation of high-potential employees ultimately is a subjective
process based on the expert opinions of those who serve in supervisory roles.
It is also often hashed out in discussions among a small group of managers.
The quality and the honesty of these discussions are critical for a successful
talent identification process. If the conversations about employees’ potential are
superficial and vacuous, then the entire succession management process is at
risk. A climate of honesty, trust and transparency is an important factor in the
system’s ultimate success.
Additional reading:
conger, J. A., & Fulmer, r. m. (�003, December). Develop�ng your leadersh�p
p�pel�ne. Harvard Business Review, 81, 56-64.
Source: steve rob�son, Ph.D., sen�or hr leader—talent management, Dow
chem�cal company
Succession Management
Process at Dow Chemical
Company
Step 1: h�gh-level rev�ew of the
talent p�pel�ne by the ceo and h�s
d�rect reports (yearly).
Step 2: rev�ew of each bus�ness
funct�on and strateg�c area focus�ng
on what new capab�l�t�es w�ll be
needed to del�ver th�s strategy and
any new corporate-cr�t�cal roles that
w�ll be needed.
Step 3: rev�ew of top �00 leaders
us�ng the “n�ne-Box” performance/
potent�al gr�d (see F�gure �).
Step 4: Development and
d�scuss�on of success�on plans for
h�gh- and med�um-r�sk corporate-
cr�t�cal roles that ex�st now and are
ant�c�pated �n the future.
Step 5: Developmental plann�ng for
th�s populat�on.
Features of the Dow succession
management process:
• Dow ph�losophy: replacement
plans and successor l�sts are
useful tools, but the real value of
these processes �s to focus the
organ�zat�on on develop�ng �ts
employees to better prepare them
for other jobs at Dow.
• Dow reaches deep �nto �ts
p�pel�ne from entry-level
profess�onals to the d�rector level.
• Approx�mately 5 percent of
the profess�onal/manager�al
employee populat�on �s �dent�fied
as corporate h�gh-potent�als
and targeted for accelerated
development at the herbert henry
Dow Academy (followed by five-
month act�on-learn�ng projects),
external execut�ve educat�on
courses or a custom mBA
course.
High Potential/
Low Performance
Demonstrated h�gh potent�al
for advancement but �s not
meet�ng current performance
expectat�ons
needs coach�ng and
�ntervent�on: Wrong job or
wrong boss?
High Potential/
Medium Performance
Demonstrated h�gh potent�al
and cons�stently meets
performance expectat�ons
Valued talent who needs
add�t�onal challenge, reward,
recogn�t�on or opportun�ty to
develop
High Potential/
High Performance
h�ghest potent�al for sen�or
leadersh�p pos�t�on who
usually always exceeds
performance expectat�ons
star talent who should be
targeted for accelerated
development opportun�t�es
Medium Potential/
Low Performance
Promot�on potent�al one level
or lateral move w�th greater
challenge but presently
underperform�ng
cons�der coach�ng or
correct�ve act�on
Medium Potential/
Medium Performance
Promot�on potent�al one
level or lateral move w�th
greater challenge; presently
meet�ng but not exceed�ng
performance expectat�ons
Keeps th�ngs runn�ng but
m�ght need add�t�onal
mot�vat�on, greater
engagement or add�t�onal
rewards
Medium Potential/
High Performance
Promot�on potent�al one level
or lateral move w�th greater
scope or challenge; always
meets and usually exceeds
expectat�ons
strong contr�butor who
could have add�t�onal
developmental challenges to
grow and poss�bly �mprove
potent�al
Low Potential/
Low Performance
has reached career potent�al
and �s not del�ver�ng
counsel or term�nate
Low Potential/
Medium Performance
spec�al�zed techn�cal talent
or has reached career
potent�al but cons�stently
meets performance
expectat�ons
mot�vate and focus
Low Potential/
High Performance
spec�al�zed techn�cal talent
or has reached career
potent�al but cons�stently
exceeds performance
expectat�ons
Valuable �n develop�ng
others; reta�n and reward
Figure 2: “Nine-Box” Succession Planning grid
P
O
T
E
N
T
I
A
L
P E R F O R M A N C E
Develop�ng leadersh�p talent 9
�0 Develop�ng leadersh�p talent
Leadership Planning Process at
SmithKline Beecham
Background: sm�thKl�ne Beechum (sKB) was
formed �n �9�9 through a merger of sm�thKl�ne
Beckman (Ph�ladelph�a, PA) and the Beechum
group (london). ne�ther firm had very well-
developed or cons�stently �mplemented human
resource development pract�ces.
Objective: Develop a cons�stent, rel�able and
standard�zed leadersh�p plann�ng process �n a
post-merger env�ronment. it was bel�eved that
such a process also would help to bu�ld a un�fied
culture and enhance worker engagement and
retent�on that had been damaged by the merger.
Plan: the hr team was asked by sen�or
management �n �993 to develop three leadersh�p
plann�ng �n�t�at�ves that could be �mplemented
across the ent�re organ�zat�on: (a) success�on
plann�ng process; (b) execut�ve development
process; and (c) leadersh�p competency model
(see “leadersh�p competenc�es” box). Although
three separate teams were formed �n�t�ally, �t
became apparent that these were �nterrelated
targets. As a result, all teams agreed to work
together as one team w�th the s�ngle goal
of leadership planning. hr people from all
l�ne bus�nesses were �nvolved, �nclud�ng the
pharmaceut�cals bus�ness, over-the-counter
products bus�ness, corporate, europe and
�nternat�onal. in add�t�on, there was an adv�sory
board of l�ne managers.
Key Learning Points:
• make sure the process �s “l�ne owned” and
“l�ne dr�ven:” l�ne management must be
engaged and �nvolved from the outset.
• start small and p�lot before launch.
• tra�n managers before the p�lot �s �mplemented.
• recogn�ze that there w�ll be fa�lures from the
p�lot and learn from them.
• enl�st many advocates.
• l�nk the plan des�gn to the needs and v�s�on of
the ceo and sen�or management team.
Results: the leadersh�p Plann�ng Process
has been fully endorsed and �mplemented as
the way that sKB �dent�fies and supports the
development of �ts managers.
Prev�ous developmental plann�ng was
�ncons�stent, and success�on plann�ng was
l�m�ted to a small, el�te group of execut�ves.
th�s process has changed to focus on the
development needs and potent�al of a larger
group of managers w�th�n sKB.
By �999, more than �,500 employees
part�c�pated �n the leadersh�p and
Developmental rev�ew process and over �30
group d�scuss�ons were held. on average, each
group d�scussed 35-40 managers, allocat�ng
approx�mately �5 m�nutes of d�scuss�on per
person.
group d�scuss�ons allow sKB to regularly take
an �nventory of management talent.
source: manz�, l., & Abramson, J. (�999).
sm�thKl�ne Beechum. in D. g�ber, l. carter & m.
goldsm�th (eds.), Linkage Inc.’s best practices
in leadership development handbook (pp. 397-
4�4). lex�ngton, mA: l�nkage Press.
SKB CORE vALuE LEADERSHIP COMPETENCIES
Innovation
• th�nk strateg�cally
• innovate
• champ�on change
Customer
• improve systems and processes
• comm�t to qual�ty
• Focus on customer needs
Integrity
• lead courageously
• Foster open commun�cat�on
• Act w�th �ntegr�ty
Performance
• establ�sh plans
• manage execut�on
• influence others
• Dr�ve for results
People
• Foster enthus�asm and teamwork
• reward and celebrate teamwork
• Attract and develop talent
• Bu�ld relat�onsh�ps
Personal Effectiveness
• use sound judgment
• convey �nformat�on
• Adapt and develop oneself
• Know the organ�zat�on and the bus�ness
Figure 3 distills some of the basic points in this section and provides a general roadmap to managing the succession
management process.
The 21 SmithKline Beecham Leadership Competencies [16]
goal: goal: goal:
understand the context ident�fy pos�t�ons and talent Prepare and develop talent
Key Questions: Key Steps: Key Processes:
how to define key pos�t�ons? enl�st top management support Assessment
how to define h�gh potent�als? ident�fy key pos�t�ons by funct�on/area challenge
What �s exemplary performance? rev�ew talent (“n�ne-Box” gr�d) support
how to fill key pos�t�ons? Develop success�on plans by pos�t�on
make or buy for key pos�t�ons? D�scuss developmental plann�ng
scope of �ntended success�on plan?
how to prepare successors?
hr’s role and respons�b�l�t�es?
cons�der �nd�v�dual career goals?
level of system transparency?
PREPARATION PLANNINg DEvELOPMENT
Figure 3: The Succession Management Process
Develop�ng leadersh�p talent ��
�� Develop�ng leadersh�p talent
Although many of the issues
associated with succession
management apply to small as well as
large organizations (e.g., identifying
key positions, identifying successors),
there are some unique challenges
and opportunities in small- and
medium-sized organizations when it
comes to succession management.
suCCession ManageMent
in sMall- and MediuM-sized
enterPrises (sMes)
The majority of organizations do
not have the size and resources of
Dow or SmithKline Beechum when
it comes to succession management.
There are distinct opportunities and
challenges associated with succession
management in SMEs. Some of the
opportunities include the following:
(a) the smaller number of employees
allows for more personalized and
tailored development plans; (b)
there is a greater likelihood of
designing an integrated initiative
across levels; and (c) a formal
succession management system
could be a “force multiplier” when it
comes to recruitment and retention
as compared with the competition.
Specific challenges for SMEs include
(a) fewer available resources to
devote to succession management;
(b) less in-house staff with the
expertise to develop and manage an
integrated succession management
initiative; and (c) resistance from
family owners to open succession
lines to non-family members.
Research conducted by the Canadian
Federation of Independent Business
indicated that only 10 percent
of SME owners have a formal
succession plan, 38 percent have
some sort of informal (unwritten)
plan and more than half do not
have any succession plan at all.[17]
For this reason, it is difficult to
identify best practices in succession
management for SMEs—there
are too few firms that engage in
a formal succession management
processes and those that do are
not forthcoming in the literature
about what is done. Indeed, a recent
review of the available literature on
the topic urged SMEs to devote
greater resources and attention to
formal succession planning as a way
to promote long-term survival and
prosperity.[18]
As further evidence of this
knowledge gap, a recent review of
what is known about managing
HR in small organizations was
completely silent on the topic of
succession management.[19] The
report did note that program costs
and time spent away from the job
are important considerations for
deciding what opportunities to offer
employees in terms of training and
development. The sources for formal
training and development are also
more restricted with SMEs, which is
another reason informal practices are
more likely in small organizations
than formal practices.
That does not mean that SMEs
should be complacent with using
informal succession management
practices. There are distinct
advantages associated with formal
succession management in terms
of being able to handle unexpected
staffing surprises, especially
regarding sudden turnover in
key positions. It does not take
much in the form of expertise or
other resources to identify the key
positions in an organization and to
nominate one (or preferably more)
possible successors. It is potentially
trickier to provide the kinds of
developmental experiences needed
to prepare potential successors for
more responsible positions. That
is why bringing in an external
consultant for advice on leadership
development might be the best call
for many SMEs. Remember, it is
an investment in your talent and
in the future of your organization.
Scrimping on the talent development
part of succession management
might save a few dollars in the short-
term, but it puts the organization at
risk for long-term failure.
Succession Management in SMEs:
Opportunities and Challenges
Challenges
– Fewer resources to devote to
succession management
– Fewer staff with expertise
to develop and manage a for-
mal succession management
system
– resistance from current family
owners to potential non-family
successors
opportunities
– Personalized and tailored
employee development plans
– greater likelihood of an inte-
grated system that reaches
across all levels
– Formal succession manage-
ment as a force multiplier for
recruitment and retention
Develop�ng leadersh�p talent �3
researCH on suCCession
ManageMent
There is not a lot of scholarly
research on the topic of succession,
with the exception of CEO
succession (see suggested readings
at the end of this report). However,
recent descriptive research examines
the prevalence of succession
planning in organizations as well as
HR’s role in the succession planning
process. [20] There is good news
and bad news from these findings.
In terms of prevalence, the good
news is that more than half of the
survey respondents (58 percent)
indicated that they had some kind of
a succession plan in place. The bad
news is that this percentage was split
equally (29 percent each) between
those with a formal and those with
an informal succession plan, with
smaller organizations indicating
that their processes were more likely
to be informal rather than formal.
This is bad news because the report
findings also document that in
comparisons across organizations
with formal and informal succession
plans, those with formal plans were
more likely to:
• Identify employees who could
potentially fill future vacancies in
leadership positions.
• Consider the organization’s
long-term objectives and goals.
• Identify prospective vacancies in
leadership positions.
• Identify potential succession
gaps.
• Integrate succession planning
with the organization’s strategic
planning process.
• Emphasize diversity in the
workplace.
• Include a specific focus on the
succession of women candidates.
• Update employees on the steps
the organization plans to use in
the succession planning process.
There are three noteworthy
implications from these specific
findings. Those organizations with
formal succession planning are more
likely than those with informal
planning to (1) be more proactive
in identifying and developing their
leadership talent; (2) be more
attuned to diversity issues; and (3)
have a more transparent succession
planning process.
Another notable finding from the
survey results is the time frame
for the future skills considered in
succession plans. Of those reporting
having either a formal or an informal
plan in place, 84 percent considered
skills that would be needed one year
in advance, 76 percent considered
skills that would be needed two
years in advance, and 62 percent
considered skills what would be
needed three years in advance. But
this percentage drops to under half
for projecting four (47 percent) and
five (44 percent) years in advance
and plummets to 14 percent when
the time frame is six years out.
leadersHiP CoMPetenCies
A pessimistic interpretation of these
results would be that organizations
are taking a relatively short-term
orientation in projecting their
future employee skills needs;
however, it may be that it is just
too difficult to project future skills
needs more than three years in
advance. The workplace is changing
quickly and in unpredictable ways.
If this is the case, then there are
important implications for leadership
competency models—typically, a
formal framework endorsed by an
organization that summarizes the
important leadership attributes
to be used in selection, training
and development. Is it worth
the investment in developing a
competency model if there is a good
chance that the kinds of knowledge,
skills and abilities that support those
competencies cannot be reliably
predicted much into the future?
This is a highly charged issue that
unfortunately goes beyond the scope
of this report. Suffice to say that
the HR field is split as to whether
leadership competency models are
a worthwhile contribution to the
succession management process in
particular or to the organization as a
whole more generally.
The questions at the core of leader-
ship competency controversy [21]
include:
• Can a single set of competencies
describe all effective leaders?
• Does having more of each
characteristic make a person a
better leader or is there a point
of diminishing returns?
• Can organizations accurately
predict what leader competencies
will be needed in the future?
• What is the evidence that HR
systems that are based on
competencies work effectively?
At present, there are no agreed-
upon answers to these important
questions. HR professionals are
encouraged to carefully evaluate the
potential pros and cons of leadership
competency models and avoid
blindly jumping on the competency
bandwagon.
As the box “Not All Competencies
Are Leadership Competencies”
illustrates, there are other
competencies in addition to
leadership competencies. This is
an important distinction in terms
of succession management and
workforce development. Some
knowledge and skills that are gained
through training or experience are
more appropriate for addressing
the technical challenges that
organizations face. These are the
kinds of problems that can be solved
by experts or senior authorities in
a given field. On the other hand,
adaptive challenges are those issues
that come “without easy answers.”
The solutions to adaptive challenges
lie not in technical answers but with
the people themselves.[22] Leadership
is inherently about people, which
is why adaptive challenges require
the application of highly developed
leaders. It also helps to explain why
the most sophisticated technical
experts may not make the best
leaders in a given setting. In terms
of succession management, high-
potential employees have both
strong technical skills as well as
the potential to develop a strong
leadership competence.
obstaCles to eFFeCtive
suCCession ManageMent
Ultimately, an investment in
succession management is an
investment in individual and
organizational learning. But like
many things, this is easier said than
done. There are many potential
factors that can derail a succession
management process. Here is a brief
list and discussion of some of the
most likely culprits:
• Event-based or episodic thinking:
This one plagues succession
planning as well as leadership
development. Both are ongoing
processes, yet the conventional
thinking is that they are addressed
episodically. Succession planning
typically is conducted only once a
year, and leadership development
is treated as a series of “loosely
coupled” events or episodes,
usually in the form of programs.
Some of the most potent forms of
development are embedded in the
actual work (e.g., action learning,
job assignments). It is a mistake
to try to completely de-couple
development from work.
• No strategy for development: What
is the organization’s philosophy
of leadership and development?
These are key concerns in terms
of presenting and defining the
concepts and principles that
will serve as the pillars of the
conceptual framework for the
initiative.
in terms of
success�on
management, h�gh-
potent�al employees
have both strong
techn�cal sk�lls as
well as the potent�al
to develop a
strong leadersh�p
competence.
�4
Develop�ng leadersh�p talent �5
• Assuming it is solely a staff
function: In many cases, the
HR function has the primary
responsibility for succession
management. A common mistake
and typical obstacle to effective
implementation is failing to
engage line management from the
outset.
• Over-embedding the initiative
in a single champion: Having a
champion, especially at top levels,
is an important driver for success;
however, if the initiative becomes
too heavily associated with any
one person—no matter how
high-ranking—this could lead to
follow-through problems if that
champion derails or leaves the
organization.
• Not connecting with strategic
business imperatives: Development
for development’s sake might be
a generally good thing; however,
it is not helpful for long-term
support. It is easy to lose sight
of what specifically needs to
be developed and why. If the
target of development activities
is supposed to be leadership
competencies, then there should
be a visible and widely agreed
upon competency model that is
grounded in the organization’s
strategic business plan. But
there is some risk associated
with leadership competency
models because they require
organizations to be able to
accurately predict the future.
• Under-emphasizing personal
accountability: The ultimate
responsibility for development
rests with the individual leader.
Only so much can be done
in any development program
or initiative. There should be
personal accountability and
follow-up so that learning and
development become intentional
processes that occur in a
continuous and ongoing manner.
If there is a personal development
plan in place (and there should
be), keeping to that plan must
be the primary responsibility of
the leader with support from the
organization.
• Lack of fit with organizational
culture: Trying to implement
a formal system with a lot of
preparation and paperwork in
an informal culture would likely
be met with resistance, if not
outright hostility. Introducing
an informal system into a
highly structured and formal
organization may result in
the initiative not being taken
seriously. There should be some
degree of fit between succession
management formality and the
organization’s culture; however, it
should be noted that a succession
management system can be
used as part of a comprehensive
organizational change initiative
to move the culture from formal
to informal or from informal to
formal.[23]
Not All Competencies Are
Leadership Competencies
russell reynolds Assoc�ates, a global
execut�ve search firm, d�st�ngu�shes
between three broad competency
sets to better �dent�fy and recommend
cand�dates that are most l�kely to
meet all three competency areas:
Industry-Related Competencies
(Industry expertise)
• industry knowledge
• cl�ent focus
• global perspect�ve
Implementation Competencies
(How things get done)
• Flex�b�l�ty and adaptab�l�ty
• commun�cat�on sk�lls
• results or�entat�on
Leadership Competencies
(Setting overall direction and
enhancing development)
• strateg�c ag�l�ty (�nclud�ng v�s�on)
• integr�ty and trust
• Develop�ng subord�nates
Source: cantor (�005).
�6 Develop�ng leadersh�p talent
• Lack of adequate support for
development: Support in the
form of resources as well
as positive reinforcement is
absolutely necessary for individual
development. Without support,
efforts directed at assessment
and challenge become exercises
in futility. As noted previously,
one of the biggest wastes of
development investments
involves sending individuals for
leadership development and then
not supporting their personal
changes in thinking and behaving
when they return to the job. It is
elementary: Sending a changed
person back to an unsupportive
environment is highly unlikely
to accomplish much of anything
except heightened feelings of
frustration and discouragement.
“Improving the Succession
Management Process” provides
a very general assessment of your
current succession management
practices. After assessing your
organizations’ current system,
use the recommendations on the
checklist to make improvements.
Succession planning and succession
management—as compared with
replacement planning—involve
developing employees for more
responsible future assignments.
There are many ways of
accomplishing this goal, but one
frequently used strategy is leadership
development. This approach is based
on the assumption that more senior
positions involve greater leadership
expectations and responsibilities for
incumbents. Whereas technical c
ompetencies develop relatively early
in a manager’s career, the leadership
competencies needed to excel at
higher levels require extra attention
as part of an ongoing and systemic
succession management process.
Key Recommendations for Succession Management
• understand the un�que context
of your organ�zat�on.
• recogn�ze that smes have
spec�al challenges and
opportun�t�es when �t comes to
success�on management.
• ident�fy key pos�t�ons and
the talent potent�al for these
potent�als (“n�ne-Box gr�d” may
be helpful).
• establ�sh success�on plans for
key pos�t�ons that �dent�fy at
least one and preferably more
than one potent�al successor.
• engage �n deta�led
developmental plann�ng for the
targeted successor populat�on.
• use leadersh�p competency
models w�th caut�on—the future
�s �mperfectly pred�cted.
• Avo�d the bas�c obstacles
to an effect�ve success�on
management system.
• Work toward cont�nuous
success�on management
system �mprovement.
Develop�ng leadersh�p talent �7
IMPROvINg THE SuCCESSION
MANAgEMENT PROCESS
to assess your organ�zat�on’s current success�on
management process and determ�ne how much
�mprovement �s needed, read each of the follow�ng
statements and check ‘yes’ �f �t descr�bes your
organ�zat�on’s current pract�ce or ‘no’ �f �t does not.
1. Simplified process: l�m�ted amount of advance
preparat�on and paperwork (too much complex�ty
�ncreases res�stance to the system).
___Yes ___no
2. Decentralized process: encouragement of
local creat�v�ty and ownersh�p beyond a set of
standard core elements.
___Yes ___no
3. Fit with organizational culture: is the degree
of system formal�ty cons�stent w�th the preva�l�ng
culture?
___Yes ___no
4. Emphasis on learning skills and
adaptability: Focus�ng on the core concept of
learn�ng how to learn.
___Yes ___no
5. Recognition of on-the-job development:
ident�fyng appropr�ate “stretch ass�gnments” for
accelerat�ng development.
___Yes ___no
6. variety built into assignments early in the
manager’s career: Develop�ng adaptable
leaders when they are just start�ng the�r careers
and not just when they reach the�r 40s or 50s.
___Yes ___no
7. Encouragement of constructive
developmental conversations: hav�ng frank,
comprehens�ve conversat�ons w�th one’s boss on
a regular bas�s.
___Yes ___no
8. Managers coached before they give career
developmental feedback: is coach�ng on how
to prov�de construct�ve developmental feedback
part of the success�on management process?
___Yes ___no
9. Encouragement of individual mentoring for
high-potential managers and senior-level
executives: Are one-on-one mentor�ng (sen�or
levels) and mentor�ng networks (jun�or levels)
encouraged and supported?
___Yes ___no
10. Built-in accountability with regard to
feedback on whether personal development
plans are implemented: Are managers
held accountable for produc�ng a h�gh-qual�ty
developmental plan and for act�ng on �t?
___Yes ___no
total the number of ‘yes’ responses you checked. if
you checked ‘yes’ 0-3 t�mes, then the system probably
needs �mprovement, 4-6 ‘yes’ answers �s good w�th
some �mprovements �n place, and 7-�0 �s excellent,
w�th many effect�ve pract�ces be�ng �mplemented.
source: A vers�on of th�s checkl�st was publ�shed �n
Organizational Dynamics, vol. 3�, Ayse Karaevl� and
Douglas t. (t�m) hall, “grow�ng leaders for turbulent
t�mes: is success�on plann�ng up to the challenge?”
p. 77. copyr�ght elsev�er (�00�). repr�nted w�th
perm�ss�on.
�� Develop�ng leadersh�p talent
Although there are literally hundreds of definitions for the term leadership,
there are relatively few that concisely define leadership development. One such
definition that focuses on the development of individual leaders (as opposed
to organization development) is “the expansion of a person’s capacity to be
effective in leadership roles and processes.”[24] One way of expanding a person’s
leadership capacity includes but is not limited to helping to develop knowledge,
skills and abilities that the organization values with regard to leadership.
Interest in leadership development has exploded over the past decade as
organizations look for ways to better address increased competitive pressures,
respond quickly and flexibly to rapidly changing conditions, and innovate and
exploit emerging technologies. It is thought that investments in leadership
development pay off in terms of creating a sustained competitive advantage that
will propel organizations forward in the 21st century economy.[25] For example,
some estimates have placed the market value of General Electric at $20 billion
higher than its breakup value, with much of that value attributable to the quality
and depth of GE’s leadership capacity.[26]
It should be remembered that leadership development is incomplete as a
stand-alone system. The design of a leadership development initiative should be
grounded in succession management, anchored in the organization’s strategy
and feasible given the organization’s size and resources. Specifically, the who
and what of leadership development are ultimately based in the foundation
set by succession management. The leadership development system builds on
this information by establishing the how and the when in terms of practices
and processes. It is important to keep in mind that the purpose of leadership
development is not to create programs. Instead, it should be about designing
and implementing practices and processes—developmental systems—that
capitalize on work-related experiences to help achieve the organization’s
strategy.
Estimates from those who have worked extensively in the field of leadership
development indicate that as much as 80 percent of the learning and
development of those who eventually move into senior management stems
from experience, 10 percent from classroom education and training and the
other 10 percent from coaching and mentoring.[27] These estimated percentages
Leadership Development
“The people we hire, and the focus we put on their development as leaders, are critical to P&G ’s ability to innovate
and compete. Nothing I do will have a more enduring impact on P&G’s long-term success than helping to develop
other leaders.”
A.g. LAFLey,
Ceo, ProCTor & gAmBLe
Develop�ng leadersh�p talent �9
reinforce the importance of
providing meaningful developmental
experiences for developing leaders.
The philosophy at Goldman Sachs,
however, is more balanced in terms
of making use of all three ways of
learning: (1) learning from formal
classes; (2) learning from other
people (mentoring); and (3) learning
on the job (experiential learning).
Regardless of the respective
percentages, the state of the practice
is to emphasize developing leaders in
the context of ongoing work rather
than taking leaders from their work
to develop.
leadersHiP develoPMent
CHallenges
Embedding development in
ongoing work is valuable in terms
of enhancing the job relevance of
developmental experiences. The
more technical term for this is
transfer of training, and it is one of
the most pressing challenges when
conducting classroom training
and development programs.
Specifically, what can be done so
that the knowledge, skills and
abilities developed through training
are applied back on the job?
This is a particular problem with
leadership development because
sending a changed person back to
an unchanged system often is an
exercise in futility. Without support
back on the job for the personal
changes made as a part of a training
and development program, it is
unlikely that such changes will stick.
But when the changes come about
from on-the-job developmental
experiences, the transfer is more
likely to be successful because
the gap between learning and
application is minimized in terms of
both time and distance.
individual diFFerenCes
A different challenge to effective
leadership development is that
there are individual differences
in developmental readiness. Just
because someone is a certain age
or has been in a particular job for
a certain number of years does not
automatically mean that he or she
is ready for a given developmental
experience. This is where the
importance of a solid succession
management plan comes into play.
Having a deep understanding of
someone’s career development
to date in conjunction with an
honest appraisal of that person’s
leadership potential and job
performance through a “Nine-Box”
assessment can provide much needed
insight into the present level of
developmental readiness for a stretch
experience.
Even with the best-designed
developmental experience, there will
be individual differences in learning.
This pertains to differences both
in the amount and in the types of
learning. Two people participating
in the identical 360-degree feedback
experience are likely to take away
different things from the experience.
For example, one person might
come away with a greater sense
of self-awareness in terms of the
impact of his or her behavior on
subordinates whereas another person
learns to provide more constructive
feedback to his or her peers. This
is largely inevitable because of
individual differences in terms of
developmental needs and the way
that we each construct our own
learning.
learning goal orientation
It is tough to learn from experience
if attention is focused entirely
on maximizing job performance.
The issue is not how to replace
performance but how to elevate
learning so that it is as valued as
performance. Influential work in the
field of motivation has distinguished
a performance goal orientation
from a learning goal orientation.[28]
With a performance orientation, the
goal is to gain positive judgments
by demonstrating mastery and
avoid negative judgments of one’s
competence. With a learning
orientation, the goal is to increase
competence by developing mastery.
A potential challenge with on-
the-job development is that the
focus is entirely on demonstrating
performance mastery with little
or no attention to learning and
developing mastery. As a result, the
potential learning benefits associated
with a developmental experience are
reduced, which negatively affects
long-term return on investment.
It is also unrealistic to expect that
learning will be valued more than
performance because that has
career-limiting implications in terms
of lower “Nine-Box” performance
evaluations. One way to overcome
this is to coach individuals on how
to become more intentional about
their learning through disciplined
self-reflection, journaling and
proactive feedback-seeking behavior.
�0 Develop�ng leadersh�p talent
evaluating tHe iMPaCt oF
leadersHiP develoPMent
The holy grail of sorts in leadership
development is demonstrating the
impact and value-added to the
organization in the form of return
on investment. Different kinds
or levels of evaluation criteria
can be used (see “Criteria for
Evaluating Leadership Development
Initiatives”), but the ultimate
criterion is to show that leadership
development interventions positively
affect the organization’s bottom line
(also called the results criterion). At
least one prominent person in field
of leadership development—Steve
Kerr of Goldman Sachs—believes
that trying to directly document
cost savings or productivity
enhancements is “silly” because
there are so many other factors that
can affect those numbers. For this
reason, Kerr prefers to focus on the
evaluation criteria of reactions and
transfer. ROI or results may not be
important at Goldman Sachs, but
the rest of us probably better find
ways to demonstrate value-added to
the bottom line.
If it is not possible to run true
experiments (and it rarely is in
organizations), then the evaluation
methodology becomes less rigorous
and more subjective. At an entirely
subjective level, one approach is
to ask key stakeholders to describe
the changes in the organization
since implementing the leadership
development initiative and then
estimating dollar value of those
changes and the degree that the
initiative affected those figures.[29]
Using a similar technique, it has
been estimated that executive
coaching provides an average
return of about six times the cost of
coaching.[30] Unfortunately, more
rigorous attempts at estimating
the economic impact of training
and development in a Fortune 500
pharmaceutical company indicated
a negative ROI for executive
training on motivating subordinates,
leadership skills training and
teambuilding.[31]
Besides performance, it is advisable
to think of other potential criteria
of interest, such as retention. The
bottom line (pun intended) is that
there are numerous possible ways
to evaluate leadership development
initiatives, and reviewing them all
is beyond the scope of this report;
however, there are recommended
sources available to serve as sound
professional guides.[32] And to
be able to estimate the impact
of an intervention, evaluation
research must be conducted and
designed into the initiative from the
beginning, which is often resisted for
a multitude of reasons, including the
additional expense and the circular
logic that a program would need
to have demonstrated value before
being adopted so there would be no
reason to evaluate it.[33]
One final thought about leadership
development evaluation and
estimating ROI: One of the future
outlooks on learning from a recent
think tank sponsored by Chief
Learning Officer Magazine predicted
that alignment of learning will
replace ROI as the biggest challenge
facing HR professionals. That is,
the greater analytic capability found
in many organizations today will
be used primarily to help ensure
the alignment of training and
development with business needs
rather than trying to estimate the
direct effect of development through
an ROI study. There appears to be
greater acceptance of the value of
employee development such that it
does not require ROI justification,
but it does require greater alignment
with strategy and business goals to
be effective.
ConCePtual FraMework
For develoPMent
Before taking on the task of
designing or adopting the
experiences that will serve as the
core of a leadership development
initiative, it is worthwhile to
reflect on what makes experiences
especially developmental. Because
experiences are not all equally
developmental, a relevant question
is what distinguishes those that
are potent forces for leadership
development from those that seem
to have little impact. Doing so can
help to identify an overall conceptual
framework for shaping development.
One approach to this issue is the
ACS model proposed by researchers
at the Center for Creative
Leadership (see Figure 4 on page
22).[34] The philosophy underlying
this model is that any experience
can be made more developmental
to the extent that it incorporates
or enhances aspects of assessment,
challenge and support (ACS).
Develop�ng leadersh�p talent ��
• Assessment refers to a diagnosis of
the current state of the individual
or organization in terms of
leadership capacity. These data
help to clarify what needs to be
learned, improved or changed.
The data can come from oneself
(e.g., self-reflection, scores on
personality inventories) or from
others (e.g., feedback, customer
evaluations). Good assessment
data also provides the motivation
to close the gap between the
current and an ideal future state.
If no gap exists, this assessment
data can still be helpful in terms
of enhancing self-confidence.
• Challenge occurs when current
capabilities are tested. More
challenging experiences are those
that require some stretch out of
comfortable and habitual ways of
thinking and acting. It involves
some willingness for risk-taking
and feeling a little (or a lot)
uncomfortable. It is through
taking on a developmental
challenge that the limits of
how things are normally done
become apparent. Challenges
are motivating in terms of the
desire to master a new skill or
way of thinking. Challenges
also offer the opportunity for
experimentation and exposure to
new perspectives.
• Support in the form of
positive reinforcement from
co-workers, bosses and the
broader environment helps
to build self-confidence and
master the challenge at hand.
Developmental challenges
are often difficult physically,
psychologically and emotionally.
Without substantial support, it
is hard to bring about lasting
changes at an individual,
group or organizational level.
As noted in several places in
this report, sending a changed
person into an unsupportive
interpersonal environment is one
way that organizations waste
their resource investments in
development.
Criteria Definition
Measurement Approaches
(Examples)
Reactions
how part�c�pants l�ked or felt about the exper�ence
(affect); or part�c�pants’ percept�on of the usefulness
of the exper�ence to subsequent performance (ut�l�ty
judgments).
• Post-exper�ence quest�onna�re of
emot�onal affect (“sm�le sheet”)
• Post-exper�ence quest�onna�re of
perce�ved pract�cal value
Learning
the level of knowledge compared to before the
exper�ence; how much knowledge �s reta�ned
over t�me; behav�oral changes as a result of the
development exper�ence.
• Knowledge tests
• mental models (e.g., understand�ng of
a doma�n)
• sk�ll demonstrat�on
Transfer
the extent to wh�ch what was learned �n the
developmental exper�ence �s appl�ed back on the
job.
• rat�ngs of behav�or (e.g., 360-degree
rat�ngs)
• self-report
Results
Any cr�ter�a �n wh�ch un�t or organ�zat�onal �mpact �s
assessed.
• Product�v�ty ga�ns
• customer sat�sfact�on
• employee morale
• Profitab�l�ty
Criteria for Evaluating Leadership Development Initiatives
�� Develop�ng leadersh�p talent
The most powerful developmental
experiences are ones that include
a variety of assessment, challenge
and support mechanisms. The
developmental process is also one
that shapes and is shaped by the
ability and motivation to learn.
Developmental experiences are
thought to enhance both of these
aspects of learning, but these
components of learning also influence
the quality of the developmental
experience. As an example, someone
with little ability or motivation to
learn will get comparatively less from
a developmental experience than
someone who is able (developmentally
ready) and motivated. But rich
experiences will also enhance learning
ability and motivation.
The relationships between
developmental experiences, the
ability and motivation to learn, and
leadership development all take place
in an organizational context. Aspects
of the organization’s context, such as
its size, mission, strategy and culture,
influence the leadership development
process. This influence extends to
the overarching focus, the degree
of integration with other processes,
how systemic it is and ultimately
who is responsible for the system.
No two organizational contexts are
identical, and therefore, no two
leadership development systems
are the same. Instead of blindly
adopting “best practices” showcased
in other organizations, it would be
advisable for HR professionals to first
carefully consider their own particular
organizational context with regard to
the fit and feasibility of a particular
practice.
The next section elaborates on
some of the more commonly used
developmental practices in leadership
development.
Figure 4: Model of Leadership Development
Assessment challenge support
Developmental exper�ences
leadersh�p
Development
Ab�l�ty and mot�vat�on to learn
organizational
Context
source: adapted from van velsor & McCauley (2004), p. 4.
Perm�ss�on to repr�nt granted by the center for creat�ve leadersh�p and adapted from the center for creat�ve leadersh�p
handbook of leadersh�p Development (�nd ed.) publ�shed by Jossey-Bass / a W�ley �mpr�nt ©�004.
A major way in which developmental practices differ is in terms of how
embedded each practice is in the ongoing work context. Classroom learning and
360-degree feedback tend to be removed from the everyday work experience
whereas others, such as job assignments and action learning, are highly
embedded practices. But any practice can vary in terms of job embeddedness.
For example, feedback and coaching can be done off-site and away from the job
or take place in the moment by a peer, a boss or a mentor.
There are four general types of leadership development practices: education,
assessment, coaching and experiential learning. It is generally better to include
a variety of developmental practices because that variety can help to enhance
learning motivation and also build a broader skills base. Decisions must then be
made regarding whether a leadership development initiative will tap deeply into
a particular type of practice, sample across all types but more superficially or try
to maximize both the depth and the breadth of developmental practices.
What follows is a brief review of the main types of leadership practices.
Additional readings review these developmental practices in more detail[35]
with case study examples.[36] Sample practices from each of the four categories
are reviewed, followed by a brief case study from a medium-sized nonprofit
organization that has been involved in a substantial and meaningful leadership
development initiative.
eduCation
Classroom programs continue to be the backbone of most leadership
development initiatives. Formal classroom programs tend to run for three
to five days and generally take place in an off-site location. Open enrollment
programs are targeted to qualified participants across any number of
organizations, whereas custom programs are designed to address the specific
leadership challenges of a client organization. There are myriad private vendors
of open-enrollment and custom leadership development programs, including
nonprofit organizations, consulting firms and executive education branches
of most major business schools. A particular strength of classroom programs
is the standardization of content that is delivered to participants. A particular
limitation is the uncertainty of transfer of development from an off-site
classroom back to the job. Classroom programs also tend to foster episodic or
event-based thinking about development (i.e., it occurs only during a special
program).
“If we are going to go anywhere, we’ve got to have talent. And I’m going to put my money in talent.”
rAy KroC,
FounDer, mCDonALD’S
Developmental Practices
Develop�ng leadersh�p talent �3
�4 Develop�ng leadersh�p talent
Corporate universities are at the
extreme end of the education
spectrum. A corporate university
is defined as a centralized in-
house training and education
facility to better align training
and development with business
strategies.[37] Some corporate
universities are only for in-house
training and development whereas
others also offer open-enrollment
and custom developmental
programs. Corporate universities
represent a considerable investment
in the learning and development
of employees but also signal a
commitment to the value of
investing in human capital. Despite
their expense, corporate universities
are the fastest growing segment of
the adult education market.[38] One
of the reasons for this growth is that
the shelf life of knowledge is
becoming increasingly shorter, and
therefore, the need for continuous
learning on the part of employees
is more acute. Although they
take different forms and styles of
education, the prototype of the
corporate university is GE’s Welch
Leadership Center (Crotonville,
NY). In addition to offering a full
complement of courses as part of
their catalogs of offerings, many
corporate universities—including
Crotonville—enlist current and
former managers as the faculty
instructors, sometimes even the
CEO. The advantage of such
an approach is that the course
offerings can be tightly tailored
to organizational needs in terms
of succession management and
leadership development. Also, the
manager-instructors bring a lot of
credibility to their teaching.
Besides some of the same limitations
associated with transfer as noted
with other classroom programs,
corporate universities run the risk of
falling prey to the “General Motors
Syndrome” that perpetuates the
status quo and leads to corporate
inbreeding.[39] GM was heavily
criticized years ago for using
executives as leadership instructors
who were teaching outdated
worldviews and developing future
leaders in ways that worked in the
past but were no longer relevant for
success in the future. GM learned an
invaluable lesson from its previous
mistakes and now is responsible for
one of the most exemplary corporate
universities serving Saturn Motors,
a wholly owned GM subsidiary.
Additional background on Saturn’s
corporate university success story
can be found in a “best practice”
review of leadership development
practices.[40]
Because of the fast-growing use of
corporate universities, a few of the
various approaches are presented in
the chart Corporate Universities.
This illustrates the variety of
organizations that have developed
in-house universities (some well-
known, others less so) as well as
the diversity in learning approaches
adopted by the represented
organizations. Corporate universities
are not just for big organizations.
SMEs are also developing their
own “universities” to enhance
ongoing skills training and leadership
development.[41] For those HR
professionals potentially interested in
championing a corporate university
initiative in their own organizations
(either large or small), a good place
to start is the Corporate University
Xchange (www.corpu.com) or a
comprehensive book on the topic.[42]
• Improved recruitment:
recru�ts are attracted to
ongo�ng opportun�t�es for
growth and development
offered by �n-house un�vers�t�es.
• Increased revenues: there
are est�mates of pos�t�ve roi
assoc�ated w�th some of the
tra�n�ng �n�t�at�ves housed �n the
un�vers�ty.
• Reduced turnover: one
est�mate �n a small call center
was that average monthly
turnover dropped from ��%
to 6% s�nce a un�vers�ty was
started.
• Better employee
advancement: un�vers�t�es
bu�ld sk�lls that accelerate
employee advancement.
• Wider talent pool:
un�vers�t�es help to enhance
the �nternal labor pool for
h�gher-level pos�t�ons, reduc�ng
the dependency on the external
labor market.
Source: Fenn (�999).
Reported Benefits of Corporate
universities for SMEs
Develop�ng leadersh�p talent �5
CORPORATE uNIvERSITIES
Motorola university: one of
the first learn�ng organ�zat�ons
to �mplement v�rtual real�ty �n
manufactur�ng tra�n�ng. it now
also offers for-profit learn�ng and
cert�ficat�on serv�ces (e.g., s�x
s�gma) to outs�de organ�zat�ons
and �s an �ndependent subs�d�ary of
motorola.
www.motorola.com/
motorolaun�vers�ty.jsp
Boeing Leadership Center: the
emphas�s �s on execut�ve learn�ng
�n wh�ch Boe�ng leaders are
brought together from all across
the enterpr�se. the center works �n
partnersh�p w�th the bus�ness un�ts
to prov�de leadersh�p development
opportun�t�es that translate to on-
the-job successes. managers are
requ�red to take core leadersh�p
courses at the center at spec�fic
trans�t�on po�nts �n the�r careers:
when they rece�ve the�r first
manager�al ass�gnments, become
managers of managers, prepare
for execut�ve respons�b�l�t�es and
assume a pos�t�on w�th global
leadersh�p respons�b�l�t�es.
www.boe�ng.com/companyoffices/
aboutus/leadersh�pcenter/�ndex.html
Disney Institute: the inst�tute
�s based on the v�s�on and �deals
of Walt D�sney and cla�ms to be a
recogn�zed leader �n exper�ent�al
tra�n�ng, leadersh�p development,
benchmark�ng and cultural change
for bus�ness profess�onals across
the globe. it offers part�c�pants
the opportun�ty to “exper�ence the
bus�ness beh�nd the mag�c” of
D�sney’s core bus�ness strengths:
leadersh�p Development, Qual�ty
serv�ce, customer loyalty,
organ�zat�onal creat�v�ty and
teambu�ld�ng.
www.d�sney�nst�tute.com/
Hamburger university—
McDonald’s Center of Training
Excellence: mcDonald’s “global
center of excellence” was founded
�n �96� �n the basement of �ts first
restaurant w�th an �n�t�al graduat�ng
class of �4. today, more than 5,000
students attend hamburger u each
year. the m�ss�on of the un�vers�ty
�s to be the best talent developer
of people w�th the most comm�tted
�nd�v�duals to Qual�ty, serv�ce,
cleanl�ness and Value �n the world.
the curr�culum �s al�gned w�th the
spec�fic career paths of mcDonald’s
employees, �nclud�ng development
paths for crew, restaurant managers,
m�d-managers and execut�ves.
www.mcdonalds.com/corp/career/
hamburger_un�vers�ty.html
John F. Welch Leadership
Center: th�s “granddaddy” of
corporate un�vers�t�es was opened
as the management Development
inst�tute at crotonv�lle by general
electr�c �n �956. the inst�tute was
renamed recently as the John F.
Welch leadersh�p center after
�ts former cha�rman and ceo. it
hosts several thousand part�c�pants
a year, �nclud�ng �mportant ge
customers and partners to top
ge execut�ves. most of the
tra�n�ng �s classroom-based, w�th
some e-learn�ng for preparat�on
coursework. Plans are �n the works
for develop�ng v�rtual learn�ng
commun�t�es where students and
the�r teams engage �n a bus�ness
s�mulat�on after complet�ng the�r
coursework. the teams w�ll run
a v�rtual bus�ness and compete
aga�nst other graduates. the faculty
�s about equally spl�t between ge
execut�ves, ge project managers,
un�vers�ty faculty and external
techn�cal experts. early career
leadersh�p tra�n�ng courses are open
to everyone �n the organ�zat�on;
however, many programs can be
taken only by execut�ves who have
been nom�nated by the ceo of the�r
bus�ness. the top two courses are
ava�lable only w�th the approval of
ge’s current cha�rman and ceo.
www.ge.com/en/company/news/
expanded_tra�n�ng.htm
Schwan’s university: the schwan
Food group �s one of the largest
prov�ders of branded frozen foods
�n the world, w�th annual sales of
around $3.5 b�ll�on and more than
�4,000 employees worldw�de. the
un�vers�ty was founded �n �00�
and offers programs �nternally and
externally on top�cs that �nclude
leadersh�p development, �nd�v�dual
employee development, �nterv�ew�ng
sk�lls tra�n�ng, sales tra�n�ng, call
center tra�n�ng and computer sk�lls
tra�n�ng. the un�vers�ty emphas�zes
�ts ab�l�ty to prov�de custom tra�n�ng
and development solut�ons to
meet spec�fic bus�ness needs for
organ�zat�ons of all s�zes.
www.schwansun�vers�ty.com
�6 Develop�ng leadersh�p talent
assessMent
Personality inventories are paper-
and-pencil or Web-based assessment
instruments. They are relatively
easy to use and can be effective in
building individual self-awareness by
providing participants with insight
into their personal tendencies and
values. They can also be used in
helping participants appreciate
individual differences in others and
understand why other people may
act the way they do. Personality
inventories tend to be popular with
participants (i.e., elicit positive
reactions) because people generally
enjoy learning about themselves.
The Meyers-Briggs Type Indicator®
is an example of an assessment
instrument that is commonly used in
leadership development workshops
as a way to introduce participants to
different personality types.
Multi-source ratings/360-degree
feedback is also a very popular
development practice. It involves
the systematic measurement of
the perceptions of an individual’s
leadership performance from an
entire circle of relevant viewpoints,
including self, subordinates, peers,
supervisors and even external
stakeholders such as customers
and suppliers. Supposedly, such a
comprehensive assessment from
various role perspectives can provide
an accurate picture of the impact of
a leader’s behavior on others. The
gap between self ratings and others’
ratings can be used to estimate
individual self-awareness, which has
been shown to be positively related
to managerial performance.[43] A
potential weakness of this practice is
that the resulting ratings can lead to
confusion if they do not converge
across rating sources. For this
reason, multi-source ratings are most
effective when linked with executive
coaching.
Assessment centers offer a
comprehensive method for assessing
an individual’s leadership potential.
Traditionally, assessment centers
have been used for selecting
managers for middle- and upper-
level jobs by assessing their skills
through different assessment
exercises that measure performance
across a number of dimensions.
Developmental assessment centers
are used exclusively for employee
development, with a heavy emphasis
on assessment with feedback.
Specifically, it is a collection of
workplace simulation exercises that
provide individuals with practice,
feedback and coaching on a set of
behavioral dimensions that (a) can
be developed and (b) are considered
to be critical to professional
success.[44] Their use is becoming
increasingly popular. Survey
results indicate that developmental
planning was reported as a popular
reason for using an assessment
center (39 percent of responses),
following selection (50 percent)
and promotion (48 percent).[45]
Advantages of developmental
assessment centers include that they
are thorough and comprehensive
and link the important components
of assessment, challenge and
support. On the downside, they are
expensive and time-consuming to
design and implement. There is no
reliable data to suggest that they are
more effective than feedback and
coaching on their own.
CoaCHing
Executive coaching is valuable
in helping leaders make sense of
their assessment data, putting
together an actionable development
plan, implementing the plan and
providing support and follow-up
assessment of behavioral change.
The Individual Coaching for
Effectiveness (ICE) model for
middle- and higher-level leaders
consists of three phases: (1)
diagnosis (one or two days of
assessment and feedback); (2)
coaching (one day per month for
six consecutive months); and (3)
maintenance/support (periodic
contacts and review sessions to help
maintain the personal changes).[46]
An important factor to consider
with coaching is the training and
experience of the particular coach.
At present, there are no licensing
requirements to call oneself an
executive coach, and as a result,
there is considerable variability in the
background and skills of those in the
coaching business. Caveat emptor!
Mentoring is considered a formal
or informal process in which
a more senior person takes a
vested interest in the personal
and professional development of
a more junior person, usually a
professional colleague. The research
on mentoring is voluminous: more
than 500 published articles in
scholarly and popular-press outlets
on the topic appeared in a recent
10-year period.[47] Of particular
interest is the finding that informal
mentoring programs tend to be
more effective and receive more
favorable responses than formal
programs. There also is recent
interest in the issue of “marginal
mentoring” that recognizes that
not all mentoring experiences are
positive or beneficial.[48] It is an
unfortunate reality that few leaders
get any training on how to be
effective mentors even when there
is a formal mentoring program in
place. Other cautions with regard
to mentoring include that it is very
time-intensive for both parties
and that there may be insufficient
numbers of qualified mentors for
those in very junior positions. This
is why some have advised using
mentoring only in targeted situations
involving high-potential managers
and senior-level executives. In more
large-scale applications with junior
employees, it may be more realistic
to set up mentoring networks,
in which employees are assisted
in identifying existing helpful
relationships and then trained in
how to better use these relationships
for their development.[49]
exPeriential learning
Job assignments have long been
favored as a leadership development
practice, especially those assignments
that “stretch” the thinking or other
capabilities of the target leader.
This makes sense in that it is widely
believed that leaders view their most
potent developmental activities to be
experiential based, especially on-the-
job experiences. Putting developing
leaders into stretch job assignments
is a valuable developmental tool;
however, you do not want to put
people in over their heads too
much. There are two fundamental
questions in using job assignments
for leader development: (a) how
prepared should someone be for a
stretch assignment; and (b) what is
the right assignment for this leader
at this time? It requires an intimate
knowledge of the career goals, career
paths and developmental readiness
of those leaders.
Action-learning projects constitute
an approach that is based on the
assumption from adult learning
theory that people learn most
effectively when working on
organizational problems in real
time.[50] Action learning typically
takes place in project teams
composed of people from diverse
functions and locations working
together for six to 12 months on an
issue considered to be strategically
important to the organization. What
makes or breaks action-learning in
terms of development is the degree
that ongoing learning is valued as
much as performing well. External
coaches are often used to help
facilitate team self-reflections and to
enhance learning and development.
An example of a successful action-
learning initiative for the purpose of
system-wide leadership development
in a nonprofit organization is
described in “Catholic Healthcare
Partners Leadership Academy.”
there are two
fundamental
quest�ons �n us�ng
job ass�gnments
for leader
development:
(a) how prepared
should someone
be for a stretch
ass�gnment; and
(b) what �s the r�ght
ass�gnment for th�s
leader at th�s t�me?
�7
�� Develop�ng leadersh�p talent
Additional reading:
o’connor, P. m. g., & Day, D. V. (�007). sh�ft�ng
the emphas�s of leadersh�p development: From
“me” to “all of us”. in J. A. conger & r. e. r�gg�o
(eds.), The practice of leadership: Developing
the next generation of leaders (pp. 64-�6). san
Franc�sco, cA: Jossey-Bass.
Source: Jon c. Abeles, ed.D., sen�or V�ce
Pres�dent, talent management and D�vers�ty,
cathol�c healthcare Partners.
Catholic Healthcare Partners
Leadership Academy
Background: cathol�c healthcare Partners (chP)
�s a m�ss�on-dr�ven, not-for-profit health system.
chP operates acute care hosp�tals, long-term care
fac�l�t�es, hous�ng s�tes for the elderly, home health
agenc�es, hosp�ce programs, wellness centers and
other health care organ�zat�ons that meet the health
care needs of people �n ind�ana, Kentucky, oh�o,
Pennsylvan�a, tennessee and nearby states.
Objectives:
• ident�fy a pool of h�gh-potent�al execut�ves
w�th a capac�ty for greater respons�b�l�ty �n the
organ�zat�on.
• Bu�ld a p�pel�ne of leaders comm�tted to carry�ng
on the organ�zat�on’s m�ss�on and values.
• Develop a greater sense of “us” �n execut�ves
across d�fferent geograph�c reg�ons.
Academy Activities:
• mult�ple classroom sess�ons focus�ng on
custom�zed �nd�v�dual 360-degree assessment
and development based on the �dent�fied
leadersh�p factors of:
– Pass�on for m�ss�on and values.
– servant leadersh�p or�entat�on.
– Ab�l�ty to handle complex mental processes.
– B�as for act�on.
– Ab�l�ty to develop others.
• team-based act�on-learn�ng projects t�ed to
strateg�c �mperat�ves of chP.
• ind�v�dual and team coach�ng.
• evaluat�on of �nd�v�dual progress, the �nfluence on
chP and the role of h�gher-level support �n the
development and transfer of learn�ng and act�on.
Outcomes:
Individual Participants
• Development of a deeper connect�on and
comm�tment to the chP m�ss�on and values.
• enhanced comm�tment to the development of
people who report to them.
• greater self-awareness.
• improvement �n sett�ng and ach�ev�ng goals.
• Better effect�veness �n work�ng across
organ�zat�onal boundar�es.
Organization
• created cross-reg�onal and cross-funct�onal
networks, result�ng �n a deeper understand�ng of
chP as an �nterrelated system.
• Developed networks for shar�ng �deas and best
pract�ces.
• Act�on-learn�ng projects advanced �5
key �n�t�at�ves �n chP, �nclud�ng a more
comprehens�ve focus on d�vers�ty �n the
workplace and better partnersh�ps w�th other
health care organ�zat�ons.
Develop�ng leadersh�p talent �9
Research published by Linkage,
Inc. indicates that across eight major
manufacturing and pharmaceutical
firms, the most developmentally
potent component of leadership
development initiatives is action
learning.[51] Other identified
components are listed in the figure
below in order from most to least
meaningful.
Of the four general types of
developmental practices, education
and experiential learning were
represented most often on this
list, with assessment and coaching
being less represented. Nonetheless,
360-degree feedback (assessment)
was rated as the third most
developmentally potent activity
behind two different forms of
experiential practices. Does that
mean that action learning and job
rotations must be included for a
successful leadership development
initiative? Not at all. Small- and
medium-sized organizations may
not have the resources in the form
of staff to engage in action learning
or the depth of talent to be able to
send employees on cross-functional
or global job rotations.
The bottom line is that any
leadership development initiative
must be a logical extension of
succession planning, based on the
organization’s strategy, and should
be feasible given the organization’s
size and resources. There are a
multitude of possible developmental
practices that can be adopted. As
noted previously, the goal should
not be to choose those practices that
have worked in other organizations
but rather to choose those that can
best serve your purpose. Disciplined
implementation and follow-through
are more important factors in the
success of the initiative than the
particular practices that are adopted.
INITIATIvE
Act�on learn�ng
cross-funct�onal job rotat�ons
360-degree feedback
exposure to sen�or execut�ves
external coach�ng
global job rotat�ons
exposure to strateg�c agenda
mentor�ng
internal case stud�es
execut�ve mBA
Accelerated promot�on
Profess�onal conferences
TyPE OF DEvELOPMENTAL PRACTICE
exper�ent�al learn�ng
exper�ent�al learn�ng
Assessment
educat�on
coach�ng
exper�ent�al learn�ng
educat�on
coach�ng
educat�on
educat�on
exper�ent�al learn�ng
educat�on
L
e
a
st
m
e
a
n
in
g
fu
l
M
o
st
m
e
a
n
in
g
fu
l
30 Develop�ng leadersh�p talent
• the overarch�ng goal of leadersh�p development
�s to enhance the capac�ty for �nd�v�duals to be
effect�ve �n leadersh�p roles and processes.
• leadersh�p development �s grounded �n
success�on management, anchored �n the
organ�zat�on’s strategy and des�gned to fit the
organ�zat�onal context.
• there are bas�c challenges assoc�ated w�th
any leadersh�p development system regard�ng
�nd�v�dual d�fferences, a strong performance
goal or�entat�on and demonstrat�ng value-
added.
• Any exper�ence can be made more
developmental by add�ng greater levels of
assessment, challenge and support.
• ind�v�dual ab�l�ty and mot�vat�on to learn
�nfluence development. recogn�ze and enhance
those aspects of ab�l�ty and mot�vat�on to
max�m�ze the effect�veness of leadersh�p
development.
• choose those developmental pract�ces that
best fit w�th the organ�zat�onal context rather
than s�mply adopt�ng what has been successful
elsewhere, espec�ally �f the contexts are
str�k�ngly d�fferent.
• one �mportant aspect of context �s
organ�zat�onal s�ze. small- and med�um-
s�zed enterpr�ses generally do not have the
resources needed to des�gn and del�ver
the�r own �n-house leadersh�p development
�n�t�at�ves. For th�s reason, tak�ng advantage of
open enrollment programs and development
programs offered through corporate un�vers�t�es
may be more sens�ble for meet�ng the
leadersh�p development needs of smes.
Key Recommendations for Leadership Development
Develop�ng leadersh�p talent 3�
An integrated succession management program that links succession planning
with leadership development can be a source of competitive advantage for
organizations. Such a system can help buffer organizations in turbulent times
of great uncertainty when it seems like there is a nasty surprise at every turn.
Effective succession management helps to build a deep capacity for leadership.
Not only is there leadership bench strength and a full leadership pipeline,
there also is a highly developed workforce that is adaptable and attuned to the
challenges and opportunities that are presented in their work.
Succession management can also aid in the recruitment and retention of the
talent that is needed to be competitive in the global economy. Most employees
today want more from their work than a paycheck. The opportunity to grow
and develop as part of one’s work is a factor that can attract and retain talent.
A survey of 242 city employees polled by recruitment consultants Robert Half
Financial Services indicated that of those actively looking for a new job, over
half (52 percent) cited better career development potential as the main reason.
In comparison, only 16 percent said that better pay was their main job search
motivation.[52]
Having a deep capacity for leadership can be a source of competitive advantage
in terms of helping an organization achieve its strategic goals and realize its
mission. This report addressed aspects of succession management, including
succession and development planning as well as examples of specific leadership
development practices that can be tailored for your own particular organization.
It is important to reiterate that there is no one best way to plan for change or
to develop a workforce. Those decisions need to be made in the context of an
organization’s strategy, mission and culture. There is no guarantee that what
works in a large multinational organization would also work successfully in a
regionally based small- or medium-sized enterprise. Investments in all phases
of the talent management process must be made with a careful and detailed
understanding of the specific organizational context. Foremost of these concerns
is that it must be linked to the organization’s overall strategy, otherwise there is
little chance of it being supported or sustained.
Succession management and leadership development are sound investments in
the organization’s future. The resources provided in this report in the form of
research, guidelines, examples and the annotated bibliography can serve as a
beginning point for thinking about how your organization can best invest in its
future.
Conclusion
“The ability to learn faster than your competitors may be the only sustainable competitive advantage in the future.”
aRiE dE GEuS, FoRMER HEad oF PlanninG,
RoyaldutcH SHEll
A deep capacity for leadership can be a source of competitive
advantage and can help an organization achieve its strategic goals
and realize its mission.
Develop�ng leadersh�p talent 33
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50. revans, r. w. (1980). Action learning. london: Blond
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(1999). Linkage, Inc.’s best practices in leadership
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Investments in all phases of the talent management process must
be made with a careful and detailed understanding of the specific
organizational context and must be linked to the organization’s
overall strategy.
Develop�ng leadersh�p talent 37
Berke, D. (2005). Succession planning and management: A guide to
organizational systems and practices. Greensboro, NC: Center for Creative
Leadership.
This is an update on an annotated bibliography on succession planning first
published by the Center for Creative Leadership in 1995. This updated report
is broader in scope and includes, in addition to linkages between succession
and development, a review of the literature on CEO succession, high potentials
and succession systems and architecture. Each of these four content areas is
preceded by a brief introduction and summary of core issues. In conclusion,
the author offers suggestions for organizing the various elements of succession
management and planning: (a) establishing clear roles; (b) determining and
implementing appropriate systems and processes; and (c) ensuring necessary
resources. Overall, it is recommended that to maximize the desired outcome
from a succession process, it is crucial to design a succession system that fits with
the culture of the organization.
Fegley, S. (2006). SHRM 2006 succession planning survey report. Alexandria,
VA: Society for Human Resource Management.
The report summarizes the results of a survey conducted in December 2005
with a sample of the members of the Society for Human Resource Management.
The goal was to gauge the prevalence of succession planning and to gather
input from human resource professionals regarding their role in the succession
planning process. A total of 385 HR professionals completed the survey. Among
the key findings was the fact that over half of the sample indicated that their
respective organizations had either a formal or informal succession plan in place.
The majority of existing plans included executive-level, senior management and
middle-management positions. A number of comparisons were made between
those respondents reporting that a formal plan was in place and those with an
informal plan. HR professionals from organizations with formal plans were
significantly more likely to rate their organizations as being better prepared to
immediately fill a vacancy if a key leader left the organization. It was emphasized
that succession planning must include leadership development in order to have a
pipeline of leaders ready to move into positions of greater responsibility. This is
an imperative to remain competitive in today’s turbulent global economy.
Sources and Suggested readings
3� Develop�ng leadersh�p talent
Karaveli, A., & Hall, D. T.
(2003). Growing leaders for
turbulent times: Is succession
planning up to the challenge?
Organizational Dynamics, 32(1),
62-79.
Based on research conducted
on 13 best-practice succession
programs (BP, Boeing, Chase
Manhattan, Citigroup, Dell, Eli
Lilly, Ericsson, Hewlitt-Packard,
JP Morgan, Motorola, Southwest
Airlines, Sun Microsystems, U.S.
Army), the authors conclude that
the current business environment
has rendered traditional succession
planning approaches obsolete.
Organizations need to do a better
job of creating deep talent pools
and preparing leaders at all levels for
future challenges. One of the biggest
obstacles to success is focusing too
much on succession events (i.e.,
replacement of key individuals) at
the expense of attending to the
ongoing process by which leaders
are developed over the span of their
careers. Seven elements of best
practices in succession planning
processes are identified, including a
definition of “high potential” that
is specific to the organization, an
individualized development process
and a focus on developing broad
and deep talent pools rather than
“crown princes and princesses.”
They also identify some ongoing
challenges in building a state-
of-the-art succession planning
process, including the tendency for
executive cloning (selecting leaders
on the basis of past performance
and current fit with organizational
needs rather than taking a future-
oriented perspective), too much
stress on the identification of talent
and overlooking development,
and a weak link between leader
development and strategy. A helpful
checklist is included for diagnosing
improvements in corporate
succession planning programs
(reprinted in this report).
Munro, A. (2005). Practical
succession management: How to
future-proof your organization.
Burlington, VT: Gower.
The author of this practically
oriented guide to succession
management is a director of a
consulting firm specializing in
the link between organizational
effectiveness, succession
management and leadership. The
book is comprehensive in terms of
addressing the major components
of succession management that are
organized into three sections: (1)
examining the context for succession
management; (2) formulating a
succession game plan (including
managing the appointment process,
identifying business risks, creating a
talent blueprint and strengthening
the leadership pipeline); and
(3) implementing sustainable
succession management. One of
the more provocative parts of the
book presents the author’s views
on leadership competencies. His
perspective on competencies is that
as with any big idea, the consultancy
sector saw an opportunity and
“a gravy train moved out of the
station and picked up speed”
(p. 60). This is an interesting
comment from someone who is a
director of a consulting firm! But
it highlights one major criticism
of the competency movement that
it is mainly driven by consulting
revenues and not by science. Overall,
it is unclear whether the advice on
succession management offered
in this book will “future-proof”
your organization; however, it
does provide a comprehensive and
sophisticated guide to designing and
implementing an effective succession
management system.
Rothwell, W. J. (2005). Effective
succession planning: Ensuring
leadership continuity and building
talent from within (3rd ed.). New
York: American Management
Association.
A review on Amazon.com claims
that this book “must surely be one
of the driest books ever written on
this topic.” But this same reviewer
acknowledged that it is probably
one of the most thorough books
available on succession planning.
The book includes a wide variety of
checklists, guidelines, exercises, case
studies and other applied examples
to help offset the pedantic writing
style (the author is a professor of
human resource development). It
offers a comprehensive guide to
the succession planning process.
It provides a detailed plan for
instituting a long-term succession
planning program that includes
everything from early action
steps to ongoing evaluation
and revision. It also describes
how to develop, monitor and
evaluate skills and competencies
in individual employees so as
to promote effectively from
Develop�ng leadersh�p talent 39
within the organization. The
author also introduces eight
key trends that are affecting the
future of succession planning
and management, including how
increasing globalization will affect
the succession management process,
the role of technological innovations
and the need to better balance work
and family demands.
Mercer Delta Consulting. (2006).
The role of the board in CEO
succession: A best practices study.
Washington D.C.: National
Association of Corporate
Directors.
This study surveyed 23 companies
that experienced a recent CEO
succession. The participating
organizations were chosen by a panel
of corporate governance experts
based on their CEO succession
planning “best practices.” The
companies that participated had
2004 revenues ranging from $3
billion to $151 billion and came
from a broad spectrum of industry
sectors. Individual interviews were
conducted with a director from each
company who was knowledgeable
about the succession process.
Analyses of the interviews suggested
10 best practices with regard to
CEO succession: (1) plan three to
five years out; (2) ensure full Board
involvement; (3) establish an open
and ongoing dialogue and an annual
review; (4) develop and agree on
selection criteria; (5) use formal
assessment; (6) interact with internal
candidates; (7) stage the succession
but avoid “horse races;” (8) develop
internal candidates rather than
recruiting externally; (9) have the
outgoing CEO leave or stay on as
chair for just a limited time; and (10)
prepare a comprehensive emergency
succession plan.
suCCession researCH
Ballinger, G. A., & Schoorman,
F. D. (2007). Individual
reactions to leadership succession
in workgroups. Academy of
Management Review, 32(1), 118-
136.
In this theoretical paper, the
authors provide some insights into
developing a case for a “leadership
succession effect” that can be
generalized across groups. They
integrate perspectives from cognitive
appraisal, relational leadership
and trust in developing a model
of individual affective (emotional)
reactions to leadership succession.
Propositions are offered as to how
these affective reactions influence
work attitudes and behaviors.
Of particular importance is the
quality of the relationship with the
predecessor leader. More positive
relationships with a prior leader are
thought to create the likelihood
for greater trust in the new leader,
higher motivation to perform and
higher job satisfaction; that is unless
these positive relationships are
associated with increased negative
affect associated with the leader’s
departure from the workgroup.
From a practical perspective, those
responsible for hiring and placing
new leaders in ongoing workgroups
should consider the quality of
relationship with the predecessor
and the affective reaction of group
members to the leader’s departure.
This should influence how to
introduce a new leader and what
kinds of training this might require.
An innovative aspect of this reading
is that it changes the focus of
succession from the successor to
those in workgroups who must cope
with changes in their leadership.
Cabrera-Suárez, K. (2005).
Leadership transfer and the
successor’s development in the
family firm. Leadership Quarterly,
16(1), 71-96.
This qualitative case study examines
factors associated with the transfer
of leadership in family firms to the
next generation of the owner family.
A review of the relevant literature
suggests two general factors that
might affect successor success in
family-run businesses: training for
leadership and commitment to the
firm. Seven succession cases from
the automobile distribution industry
are examined. Three of these cases
were considered to be completely
successful, three were partially
successful, and one was deemed a
failure. The criteria used to evaluate
succession success were growth in
economic indicators for the firm
and the satisfaction of all parties in
the succession episode. Academic
training for leadership was not
found to differentiate among the
more and less successful successions;
however, having a supportive
predecessor and supportive non-
family managers were suggested as
important factors. Commitment to
the firm, as compared with having
40 Develop�ng leadersh�p talent
no other professional opportunities
or being expected to take over as a
family tradition, was an important
distinguishing factor. Overall, it
was concluded that the quality of
interpersonal relationships in the
firm, the successors’ expectations
and the role of the predecessor were
the most critical factors in shaping a
successful family business succession.
Giambatista, R. C., Rowe, W.
G., & Riaz, S. (2005). Nothing
succeeds like succession: A critical
review of leader succession
literature since 1994. Leadership
Quarterly, 16(6), 963-991.
This paper reviews the leader
succession research from 1994-
2004, subsequent to the review
by Kesner & Sebora (1994). The
present authors conclude that
the state of theory in succession
literature is fragmented and
variable. Suggestions are offered
for improving succession research
in the areas of research design,
setting, construct validity, internal
validity and external validity. From
their comprehensive review of the
literature, the authors suggest the
following practical implications:
(a) simplistic notions of succession
should be disregarded; (b) boards
and incumbent CEOs need to
emphasize formal succession
planning, especially in small
organizations where such plans
seem to be mostly nonexistent;
(c) close attention should be paid
to the abilities and background of
successor candidates because those
factors matter; (d) board members
should remember that their own
abilities and background affect
their candidate impressions; and
(e) boards should consider the
complexity of the job and the time
needed to master it and therefore
avoid hasty evaluations of new
leaders, especially CEOs.
Kesner, I. F., & Sebora, T. C.
(1994). Executive succession:
Past, present, & future. Journal of
Management, 20, 327-372.
Although this review has been
updated and extended by
Giambatista, Rowe and Riaz
(2005), it provides a comprehensive
examination of the history of
succession research. It examines
this history in three phases: (1) the
emergence of the field in the 1950s
and 1960s; (2) building theory and
gaining empirical evidence in the
1970s; and (3) the explosive growth
of the field in the 1980s. The review
of succession-related topics under
each of these historical periods
is exhaustive, but it is of primary
interest to those with an interest
in succession research. There is a
relatively brief section on succession
planning that notes that fewer than
50 percent of firms in the early
1980s used any form of succession
planning—formal or informal—and
for those that did use succession
planning, the responsibility was
primarily with the CEO. Comparing
these results with the recent SHRM
report on succession planning
(Fegley, 2006) shows that there
has been movement toward a
greater prevalence of succession
planning and management processes
in organizations and that the
responsibility for this planning is no
longer as focused on the CEO.
Rowe, W. G., Cannella, A. A.
Jr., Rankin, D., & Gorman, D.
(2005). Leader succession and
organizational performance:
Integrating the common-sense,
ritual scapegoating, and vicious-
circle succession theories.
Leadership Quarterly, 16, 197-219.
The research question of interest
in this study is whether changing
leaders matter for team performance.
The sample in question consisted of
the National Hockey League teams
over the course of 60 years. The
leaders in question were coaches
and general managers of their
respective NHL teams. Results
supported the hypothesis that
leader succession does affect team
performance; thus, leaders do matter
when it comes to performance.
The authors suggest that possibly
a more important question may be
when the succession should occur
to better realize performance gains.
Successions during a season had a
negative effect on team performance
whereas those that occurred in a
previous season were associated with
a positive effect. This is consistent
with the axiom that there is no
long-term gain without short-
term pain. Although many other
kinds of organizations do not have
seasons like the NHL, some do
have busy seasons and off seasons
(e.g., tax accounting firms and
those associated with the tourism
industry). Generalizing the present
findings to other organizations
would require an understanding of
the cyclical aspects of their business.
Shen, W., & Cannella, A. A.,
Jr. (2002`). Revisiting the
performance consequences of
CEO succession: The impacts of
successor type, postsuccession
senior executive turnover, and
departing CEO tenure. Academy
of Management Journal, 45, 717-
734.
This study investigates the
importance of succession context
in terms of the performance
implications associated with
successor type (follower, contender,
outsider), postsuccession senior
executive turnover and departing
CEO tenure. The study proposes
and tests a model of the performance
consequences of CEO succession in
which the effects of postsuccession
senior executive turnover on firm
performance are moderated by
successor type and where departing
CEO tenure has a direct effect
on firm performance. Successor
types are categorized as follows:
(a) follower successors who are
inside executives promoted to CEO
following ordinary retirements of
their predecessors; (b) contender
successors who are inside executives
promoted to CEO after the
dismissal of their predecessors;
and (c) outsider successors who
are brought in when there is a
lack of a suitable successor within
the firm. The hypothesized model
was tested using data from 228
CEO successions, demonstrating
that the type of insider succession
matters when predicting firm
performance. Contender successions
were positively associated with
postsuccession operational
performance (return on assets),
whereas outsider successions
were negatively associated with
postsuccession firm performance.
Senior executive turnover after a
contender succession was positively
associated with firm performance
(moderator hypothesis supported),
and there was an inverted U-shaped
relationship between departing
CEO tenure and postsuccession
firm performance. Managerial
implications are discussed in terms of
top management team restructuring
following contender and outside
successions and the importance
of boards of directors to carefully
manage CEO tenure. Both overly
long and unduly short CEO tenures
were demonstrated to be directly
harmful to postsuccession firm
performance.
Shen, W., & Cannella, A. A.,
Jr. (2002). Power dynamics
within top management and
their impacts on CEO dismissal
followed by inside succession.
Academy of Management Journal,
45, 1195-1205.
Based on a power perspective,
this longitudinal study examines
the antecedents of CEO dismissal
followed by inside succession.
The focus was not on “ordinary”
successions due to retirement,
but on a subset of inside CEO
successions due to power contests
within top management groups in
which the CEO is dismissed and has
no influence over the selection of the
successor. Evidence from a sample of
387 large U.S. corporations showed
that 38 out of 65 dismissed CEOs
(58 percent) were succeeded by
insiders and that a comparison of the
results shows that the antecedents
of CEO dismissal followed by
insider succession and those of
CEO dismissal followed by outsider
succession differ. Specifically, the
results suggest that non-CEO senior
executives often play an important
role in CEO dismissal and the
subsequent appointment of an
inside successor. One implication
of these findings is that outside
directors need to monitor closely
the power dynamics within top
management and ensure that there
is healthy competition that does
not undermine individual or firm
performance.
Zajac, E. J. (1990). CEO
selection, succession,
compensation and firm
performance: A theoretical
integration and empirical analysis.
Strategic Management Journal,
11(3), 217-230.
At issue in this study is whether
there are factors relating to
CEO selection, succession and
compensation that are linked to
firm performance. This was the
first study to take an agency theory
perspective (examining principal-
agency relationships) to these issues,
especially with regard to information
asymmetry. It was hypothesized that
hiring an outsider CEO will be, on
average, a worse decision in terms
of firm performance than to hire an
insider CEO, given that information
asymmetry between a board and a
CEO candidate is greater with an
external candidate. The study also
directly assessed the implications
Develop�ng leadersh�p talent 4�
4� Develop�ng leadersh�p talent
of having a specific successor in
place through succession planning.
Both hypotheses were strongly
supported using a sample of
591 CEOs from the largest U.S.
corporations in 1987 as compiled
by Forbes and Fortune magazines.
The practical implications for
strategic management concerns the
identification of specific, interrelated
factors that can potentially influence
the behaviors of top-level managers.
Zhang, Y., & Rajagopalan, N.
(2004). When the known devil
is better than an unknown
god: An empirical study of the
antecedents and consequences of
relay CEO succession. Academy of
Management Journal, 47, 483-
500.
Relay successions occur when an
incumbent CEO works with a
designated heir and “passes the
baton” to that heir apparent.
Nonrelay inside succession occurs
when the successor CEO is
appointed from within the firm
but was not the predecessor’s heir
apparent. The authors argue that
this is an important distinction from
the perspective of organizational
learning and adaptation. Data on
204 CEO successions between 1993
and 1998 in U.S. manufacturing
firms showed that the likelihood
of relay succession was negatively
related to the number of internal
candidates and positively related to
presuccession firm performance.
Relay successions were found to be
associated with better postsuccession
firm performance, especially under
conditions of lower levels of firm
performance prior to the succession
and when there were higher levels
of strategic and industry instability.
Outside successions did not differ
significantly from nonrelay inside
successions in terms of subsequent
firm performance, which is contrary
to conventional wisdom that outside
CEOs are better equipped to turn
around firm performance.
CoMPetenCy Modeling
Bartram, D. (2005). The great
eight competencies: A criterion-
centric approach to validation.
Journal of Applied Psychology,
90(6), 1185-1203.
Results are presented from a meta-
analysis of 29 validation studies
of the “Great Eight” competency
factors of (1) leading and deciding;
(2) supporting and cooperating;
(3) interacting and presenting;
(4) analyzing and interpreting;
(5) creating and conceptualizing;
(6) organizing and executing;
(7) adapting and coping; and (8)
enterprising and performing. The
author defines competencies as sets
of behaviors that are instrumental
in the delivery of desired results
or outcomes. The article provides
an in-depth review of each of the
Great Eight and their respective
subdimensions. The purpose
of this exercise is to promote a
criterion-based approach to test
validation. Although that topic is
less central to the present focus on
succession planning and leadership
development, the point is made that
adopting the Great Eight or a similar
criterion classification model would
contribute to being better able to
identify those areas in which people
would benefit most from learning
opportunities and development
experiences. From this perspective,
the value to leadership development
is clear.
Hollenbeck, G. P., McCall, M.
W., Jr., & Silzer, R. F. (2006).
Leadership competency models.
Leadership Quarterly, 17, 398-413.
This article summarizes a series
of “theoretical letters” between
Hollenbeck/McCall and Silzer on
the value of leadership competency
models. Hollenbeck/McCall
argue that the assumptions
behind competency models are
a problem, especially in terms of
their leader-centric focus. They
also question whether any single
set of competencies can adequately
describe effective leaders. Silzer
responds with an overview of why
he believes competency models are
helpful, including (a) summarizing
the experience and insight of
seasoned leaders; (b) specifying a
range of useful leader behaviors;
(c) providing a tool that individuals
can use for their self-development;
and (d) outlining a leadership
framework that can be used to
select, develop and understand
leadership effectiveness. In the
next set of letters, Hollenbeck/
McCall argue that competencies
have distracted researchers and
practitioners from a focus on results
because they are so person-oriented
in terms of personal behaviors and
personal characteristics that getting
things done is overlooked. In a
very provocative conclusion, they
claim that this “has been devastating
to HR to the point that some
Develop�ng leadersh�p talent 43
authors have even suggested that
HR be disbanded, and outsourcing
of HR functions has become
commonplace” (p. 408). The final
letter from Silzer summarizes in
what areas the authors agree (e.g.,
desiring a more comprehensive
approach to leadership effectiveness),
where they disagree (e.g., overall
value of competency models, nature
of leadership competencies and
the assumptions of competency
models) and what directions
should be taken in the future (e.g.,
a model of leadership situations,
leadership outcomes and interactions
between competencies, situations
and outcomes). This leaves us
with a better understanding of
the sources of controversy with
leadership competency models and
a more balanced perspective on
their purported advantages and
disadvantages.
Martineau, J., Laskow, G.,
Moye, L., & Phillips, D.
(2005). Creating synergy and
difference in development: One
organization’s competencies for
three organizational levels. In
R. B. Kaiser (Ed.), Filling the
leadership pipeline (pp. 85-110).
Greensboro, NC: Center for
Creative Leadership.
This chapter presents a case study
description of the steps that the
Central Intelligence Agency (CIA)
took in transforming its approach
to leadership by developing a set of
competencies that were tailored to
the organization across three unique
levels of management. Although
in many ways the CIA is a very
different type of organization, many
of the challenges it faces are much
like any other large organization—in
particular, how to lead a bureaucratic
organization in a turbulent global
environment that requires flexibility
and adaptability. The first step in the
process was to conduct a leadership
needs assessment (with help from
specialists at the Center for Creative
Leadership). The chapter explains in
detail the Leadership Development
Impact Assessment that was used for
the needs assessment and how this
process was integral for developing
a levels-of-mastery framework
that in turn was used in building
the competency models for the
three levels of CIA management
(supervisor, middle management and
executive). The resulting multi-level
competency framework became the
foundation for the CIA Leadership
Academy, which, the authors argue,
has been helpful in producing highly
effective leaders throughout the
three levels of the CIA.
Schippmann, J. S., Ash, R. A.,
Battista, M., Carr, L., Eyde, L.
D., Hesketh, B., et al. (2000).
The practice of competency
modeling. Personnel Psychology, 53,
703-740.
Because the competency modeling
trend has been confusing to HR
researchers, practitioners and
consumers of HR-related services,
the Job Analysis and Competency
Modeling Task Force (Society
of Industrial and Organizational
Psychology) conducted a two-year
investigation into the antecedents
of competency modeling and
examined the current range of
practice. This article is a summary
of the findings of the task force.
The article compares the practices
of job analysis and competency
modeling, identifies the strengths
and weakness of each approach,
and makes recommendations for
how to leverage the strengths
of one approach to overcome
weaknesses in the other. Some of
the topics that are addressed include
an examination of the various
meanings that have been proposed
for defining a competency, how
competency modeling and job
analysis differ, what the consumer
appeal of competencies is, and what
might be the future of competency
modeling. This is a comprehensive
and rigorously conducted
examination of the phenomenon
of competency modeling and is
highly recommended as background
reading for any HR professional
or scholar who desires a greater
understanding of the state of the
field of competency modeling.
leadersHiP develoPMent
Byrne, J.-A. C., & Rees, R. T.
(2006). The successful leadership
development program: How to build
it and how to keep it going. San
Francisco, CA: Pfeiffer.
This is where to start if you have
absolutely no idea how to design or
implement a leadership development
initiative. The book is very clearly
written, although overly simplistic
in its content. There are numerous
flowcharts and algorithms to guide
the reader through various stages
44 Develop�ng leadersh�p talent
and decision points in the program
development process. The various
chapters are devoted to topics
such as identifying the guiding
principles of a program; building
the foundation of philosophy,
conceptual framework and
operational strategy; developing a
leadership competency model and
designing a diagnostic inventory
for those competencies; developing
a return on investment model;
developing individual learning plans
and learning modules; getting senior
level buy-in; and developing an
implementation strategy. What the
book provides in breadth it lacks in
depth. For example, much of the
content in each chapter is presented
in bullet points. This improves
accessibility, but it glosses over the
complexities associated with many
of the issues. It also ignores the
controversy regarding leadership
competency models (see the section
on competency modeling) and
blindly assumes that is the way to
go, ignoring that trying to predict
what will be required of leaders
five or 10 years in the future is a
very difficult task. In short, the
book is best used as a primer to
leadership development and would
likely be most helpful to those HR
professionals just getting into the
field of leadership development.
Charan, R., Drotter, S., & Noel,
J. (2001). The leadership pipeline:
How to build the leadership-powered
company. San Francisco: Jossey-
Bass.
This book is about growing your
own leaders. As organizations
choose (or are forced to choose) to
make their leaders rather than to buy
them (i.e., relying on headhunters
for external recruitment), this book
offers a valuable perspective in terms
of examining and understanding
the longitudinal career implications
of the leadership pipeline. The
first part of the book focuses on
six key transitions that constitute
developmental milestones for
leaders. The six transitions are: (1)
from managing yourself to managing
others; (2) from managing others
to managing managers; (3) from
managing managers to functional
managing; (4) from functional
managing to business managing;
(5) from business managing to
group managing; and (6) from
group managing to enterprise
managing. An important part of the
authors’ message is that the values
and focus of the leader change at
each transition point. A major part
of development is moving away
from what had made someone a
successful leader at an earlier career
stage to what is needed at the new
transition. The second part of the
book elaborates on how to diagnose
leader development and adjustment
and how to help leaders make
better developmental progress. The
longitudinal perspective of this book
is especially welcomed. It also helps
to illuminate the challenges leaders
face at various stages of their careers
and discusses how to better prepare
them to make successful transitions
as they move up the pipeline.
Conger, J. A., & Fulmer, R.
M. (2003). Developing your
leadership pipeline. Harvard
Business Review, 81(12), 56-64.
The focus of this article is on
aligning succession planning with
leadership development. Succession
planning needs to be more than an
annual update of a list of leadership
candidates. It needs to ensure that
there is a deep pipeline of developed
or developing leaders who are
prepared to successfully handle
more responsible leadership roles.
The authors present five rules for
setting up an effective succession
management system (succession
planning + leadership development).
Rule 1 is to focus on development.
Succession management is a system
oriented toward developmental
activities and not a list of high-
potential employees. Rule 2 is to
identify linchpin positions.—identify
and focus on those jobs that are
essential to the long-term health of
the organization. Rule 3 is to make
it transparent. Rather then shrouded
in secrecy, let people know exactly
where they stand in the succession
system. Rule 4 is to measure progress
regularly—move away from a
replacement mindset to one that
evaluates the ongoing development
of candidates for linchpin jobs. Rule
5 is to keep it flexible. Succession
systems need to be refined and
adjusted based on feedback from line
executives and participants. Overall,
effective succession management
requires a culture that encourages
honesty and risk taking.
Develop�ng leadersh�p talent 45
Day, D. V. (2000). Leadership
development: A review in context.
Leadership Quarterly, 11, 581-613.
A distinction is drawn between
leader development and leadership
development. Much of what is
done with regard to leadership
development is really about
developing individual leaders. Leader
development focuses on developing
individual-level knowledge, skills
and abilities (i.e., human capital).
Leadership development is less about
the individual and more about the
connections, commitments and
reciprocal obligations that develop
between people (i.e., social capital).
Leader development is based on a
traditional, individualistic notion
of leadership. It is leader-centric.
Leadership development has its
origins in a more contemporary,
relational model of leadership that
assumes that leadership is a function
of the social resources that are
embedded in relationships. The
practice and research literatures
are reviewed regarding the non-
classroom approaches to both leader
and leadership development. The
focus is on those practices that
embed learning and development
in the context of ongoing work
rather than taking people away from
their work to learn and develop.
The reviewed practices include
360-degree feedback, executive
coaching, mentoring, networking,
job assignments and action
learning. Some of these practices
emphasize human capital (i.e.,
leader) development, and others
focus mainly on social capital (i.e.,
leadership) development, whereas
only action learning targets both.
The point is not to choose between
leader and leadership development
but to work on linking the two in a
more systemic manner.
Dvir, T., Eden, D., Avolio, B.
J., & Shamir, B. (2002). Impact
of transformational leadership
on follower development and
performance: A field experiment.
Academy of Management Journal,
45, 735-744.
A longitudinal, randomized field
experiment was conducted to test
the effects of transformational
leadership as enhanced through
training on follower development
and performance. The sample
consisted of 54 leaders form the
Israel Defence Forces, 90 direct
reports (followers) and 724 indirect
followers (once removed from a
direct reporting relationship). The
leaders in the experimental condition
received transformational leadership
training, whereas the control
group leaders received eclectic
leadership training. The results
indicated that leaders receiving the
transformational leadership training
had more of a positive effect on
direct followers’ development
(i.e., self-efficacy, independent and
critical thinking and motivation)
and indirect followers’ performance
(i.e., weapons test performance and
obstacle course performance). From
these findings, the authors conclude
that enhancing transformational
leadership through training can
augment the development of human
resources and their performance
across a variety of organizational
contexts.
Gardner, W. L., & Avolio, B.
J. (Eds.). (2005). Authentic
leadership development: Getting
to the root of positive forms
of leadership [Special issue].
Leadership Quarterly, 16(3).
The special issue resulted from the
inaugural summit hosted by the
Gallup Leadership Institute at the
University of Nebraska-Lincoln in
2004. It includes an introduction by
B. J. Avolio and W. L. Gardner that
provides the conceptual foundation
to the nascent field of authentic
leadership theory, the relevance
of authenticity to leadership, the
roots of authentic leadership in
positive psychology and positive
organizational scholarship, and
promising directions for future
research.
• W. L. Gardner, B. J. Avolio,
F. Luthans, D. R. May and
F. Walumba [“Can you see
the real me?” A self-based
model of authentic leader
and follower development,
pp. 343-372] emphasize
the developmental processes
of leader and follower self-
awareness and self-regulation.
Positive modeling is viewed as a
primary means whereby leaders
develop authentic followers.
Outcomes of authentic leader-
follower relationships are
thought to include heightened
levels of follower trust in the
leader, engagement, workplace
well-being and sustainable
performance.
46 Develop�ng leadersh�p talent
• R. Ilies, F. P. Moregeson and
J. D. Nahrgang [Authentic
leadership and eudaemonic well-
being: Understanding leader-
follower outcomes, pp. 373-394]
examine the Aristotelian concept
of eudaemonia, which is the view
of human happiness that assesses
the goodness of life based on
living in a manner that actively
expresses excellence of character
or virtue. From this they develop
a multi-component model of
authentic leadership and discuss
the antecedents of authentic
leadership as well as its outcomes
for both leaders and followers.
• B. Shamir and G. Eilam [“What’s
your story?” A life-stories
approach to authentic leadership
development, pp. 395-417]
argue that authentic leadership
stems from the self-relevant
meanings the leader attaches to
life experiences. These meanings
are captured in the leader’s life
story.
• R. T. Sparrowe [Authentic
leadership and the narrative
self, pp. 419-439] presents
an alternative perspective on
authentic leadership that is
based on the framework of
the narrative self. From this
perspective, authenticity is not
achieved by self-awareness of
one’s core values or purpose.
Instead, authenticity emerges
from the narrative process in
which others play an essential
and constructive role in the
self. Implications are discussed
for research and the practice of
ethical leadership.
• S. Michie and J. Gooty [Values,
emotions, and authenticity: Will
the real leader please stand up?
pp. 441-457] incorporate current
theory from the emotion and
positive psychology literatures
to present an alternative role
of emotions in leadership. In
particular, it is argued that
frequent experiences of positive
other-directed emotions are
an important part of authentic
leadership.
• A. Eagly [Achieving relational
authenticity in leadership:
Does gender matter? pp. 459-
474] argues that achieving
relational authenticity requires
that followers grant leaders the
legitimacy to promote a set of
values. Evidence is presented
suggesting that obtaining this
legitimacy is more difficult for
female than for male leaders.
• C.D. Cooper, T. A. Scandura
and C. A. Schriesheim [Looking
forward but learning from our
past: Potential challenges to
developing authentic leadership
theory and authentic leaders, pp.
475-493] caution that it may be
premature to focus on designing
interventions to develop
authentic leadership before
additional work is conducted to
define, measure and research the
construct.
Giber, D., Carter, L., &
Goldsmith, M. (Eds.). (1999).
Linkage, Inc.’s best practices in
leadership development handbook.
Lexington, MA: Linkage Press.
The book opens with a brief
introduction by Warren Bennis;
however, the bulk of the content is
devoted to leadership development
case studies from 15 different
organizations, including Abbott
Laboratories, AlliedSignal, BP
Amoco, Colgate-Palmolive,
Gundersen Lutheran Hospital and
Motorola. Each case begins with
a mission statement description
of the initiative. Although the
content categories differ by case,
many include a brief overview
of the respective organization, a
section on building the business
case for leadership development, a
description of the actual leadership
development process and the
methodology of and insights gleaned
from program evaluation. There is
a brief conclusions section devoted
to presenting survey results on
leadership development trends and
findings, including the (a) most
important competitive and strategic
business challenges (globalization,
improving productivity and
competition); (b) most common
leadership competencies (builds
teamwork, understands the business
and thinks conceptually); (c) key
features of leadership development
(action learning, 360-degree
feedback and exposure to senior
executives); (d) critical factors
that most affect the success of the
leadership development initiative
(support and involvement of senior
management, continuous evaluation
Develop�ng leadersh�p talent 47
and linking leadership development
with strategic plan); and (e)
evaluation methods used (reactions,
behavioral transfer, results and
learning in order of prevalence from
most to least).
Kaplan, R. E., & Kaiser,
R. B. (2003). Developing
versatile leadership. MIT Sloan
Management Review, 44(4), 19-26.
The core idea in this paper is that
leaders often develop in ways
that result in a lack of balance. In
particular, leaders have the natural
tendency to overdevelop one set
of strengths at the expense of its
counterweight. For example, at one
end might be forceful leadership
and at the other is enabling
leadership. Either extreme is a
vice such as being insensitive and
callous (forceful to the extreme) or
overly accommodating (enabling
to its extreme). But more moderate
positions are virtues such as taking
stands and making tough calls or
listening to others’ opinions and
ideas. The absence of imbalance is
versatility in which an effective leader
can draw from virtuous aspects of
each approach that best fit with
the situation at hand. Leaders can
develop themselves by strengthening
the weak side and moderating the
overused side.
McCall, M. W., Jr., & Hollenbeck,
G. P. (2007). Getting leader
development right: Competence
not competencies. In J. A. Conger
& R. E. Riggio (Eds.), The practice
of leadership: Developing the next
generation of leaders (pp. 87-106).
San Francisco, CA: Jossey-Bass.
The authors boldly state that leader
development is not working. It
is not working because the HR
community has been star-struck
by competencies and has forgotten
about results. Instead of developing
leadership competency models
that support leader development
programs, here is what the authors
argue organizations should be
doing:
• Identify challenges, not
competencies.
• Identify experiences, not
programs.
• Identify people who can make
the most of available experiences.
• Create the means for getting
people into the experiences they
need.
• Help people learn from the
experiences they have.
In achieving these re-focused goals,
the importance of developmentally
oriented leaders and the use of
executive coaching will become
increasingly important over time.
McCauley, C. D., & Van Velsor,
E. (Eds.). (2004). The Center for
Creative Leadership handbook of
leadership development (2nd ed.).
San Francisco, CA: Jossey-Bass.
The mission of the Center for
Creative Leadership (CCL) is to
advance the understanding, practice
and development of leadership for
the benefit of society worldwide.
In pursuing this mission over
the previous three decades, CCL
faculty members have worked
with hundreds of thousands of
managers and executives across a
broad array of organizations. The
second edition of CCL’s handbook
of leadership development makes
available much of the knowledge
gleaned from this work. It is not a
research-based perspective in most
cases (although research is one of
CCL’s core areas), but rather it
brings together and presents in one
volume the practical knowledge that
has been gained regarding leadership
development. It does not provide a
comprehensive review of leadership
theories nor is it exhaustive in its
coverage of all methods of leader
and leadership development.
Instead, it focuses on those areas
in which CCL has considerable
experience and expertise. The 15
chapters that comprise the book
are organized into three parts: (1)
individual leader development (e.g.,
feedback, coaching, developmental
relationships, job assignments,
evaluating impact); (2) leader
development in context (e.g.,
leader development across gender
and race, cross-cultural issues,
developing global leadership and a
lifelong development perspective);
4� Develop�ng leadersh�p talent
and (3) leadership development
(e.g., organizational capacity for
leadership and exploration for
development). A CD-ROM library
of 15 papers authored by CCL
faculty and researchers accompany
the handbook.
Mirvis, P., & Gunning, L. T.
(2006). Creating a community of
leaders. Organizational Dynamics,
35(1), 69-82.
This article provides a description
of the community building efforts
at Unilever Foods Asia (the second
author was then its president).
The goal of the company’s
developmental initiative was to
build the capacity of the entire
leadership body to work together
as a community of leaders. The
method for doing this was through
enabling the learning journeys of the
individual while also building a sense
of collective identity—“us.” Actual
journeys of up to a week were taken
to places in India, China and Sri
Lanka, where participants engaged
with indigenous people, took part in
self-reflection and used storytelling
to share with others one’s life history
and lessons of experience. Rather
than focus on building specific,
traditional leadership skills as part
of the development initiative, this
approach had more to do with
building meaning and perspective
as well as community. As noted
by Gunning, people want to live
meaningful lives, live in service and
care for others, have the freedom
and opportunity to be creative, and
grow and be part of an organization
that allows them to contribute
to something bigger and more
important than what they could
do on their own. In short, the
approach discussed by the authors is
at the same time a very radical and
worthwhile approach to leadership
development.
O’Connor, P. M. G., & Day, D.
V. (2007). Shifting the emphasis
of leadership development:
From “me” to “all of us”. In
J. A. Conger & R. E. Riggio
(Eds.), The practice of leadership:
Developing the next generation of
leaders (pp. 64-86). San Francisco,
CA: Jossey-Bass.
The role of identity in the
leadership development process is
examined. The chapter explores
how action learning supported two
organizations’ efforts to address
complex challenges in part by
developing collective leadership
identities. The focus was deliberately
altered from developing “me”
as a leader (individual identity)
to developing the leadership in
“all of us” (collective identity).
The practices that supported the
development of collective identities
included creating alignment with
organizational identity, building
collective self-concepts and
developing systemic social networks.
In doing so, the participants in the
action-learning initiatives produced
outcomes of tangible benefit to
their respective organizations
in the form of competitive and
innovative strategies, work
processes and tools. Case study
evidence is presented from two very
different organizations. One case
organization was a medium-sized
faith-based health care system with
a strong service-focused culture,
and the other was a very large
quasi-governmental service agency
with a strong operations-focused
culture. Through the use of action
learning, broader leadership capacity
was developed in both of these
organizations.
Schriesheim, C. A. (2003).
Why leadership research is
generally irrelevant for leadership
development. In S. E. Murphy &
R. E. Riggio (Eds.), The future of
leadership development (pp. 181-
197). Mahwah, NJ: Erlbaum.
This chapter highlights the scientist-
practitioner gap when it comes to
leadership development. The author
discusses the core reasons he believes
leadership research is irrelevant
for the development of managers
and leaders in work organizations.
Specifically, six reasons for the gap
between what leadership researchers
provide and what HR professionals
need are identified: (1) differences
in language (abstract versus action-
oriented); (2) differences in goals/
objectives (statistical significance
versus results); (3) lack of validity and
irrelevance of validity for practice; (4)
excessive intricacies in our theories;
(5) assumed leader competence; and
(6) assumed leader motivation and
commitment. The chapter concludes
with suggestion on how to narrow
the research-practice in each of the
six identified areas.
Develop�ng leadersh�p talent 49
FeedbaCk and exeCutive
CoaCHing
Church, A. H. (1997). Managerial
self-awareness in high performing
individuals and organizations.
Journal of Applied Psychology,
82(2), 281-292.
Many approaches to leader
development focus on enhancing
individual self-awareness. But what
does self-awareness mean? It was
operationalized in this study as
congruence between self and direct
reports’ behavioral ratings. These
ratings were examined for 134
high-performing and 470 average-
performing managers across four
databases. Results indicated that
the high-performing managers
were significantly more self-aware
(i.e., had a smaller discrepancy
between self ratings and direct
report ratings) as compared with
the average performers. In addition,
the construct of self-monitoring
personality was found to converge
with managerial self-awareness.
Overall, these results underscore
the apparent importance of a leader
understanding the impact of his or
her behavior on others, especially
direct reports. These results also
suggest that enhancing managerial
self-awareness is a worthwhile focus
of leader development efforts.
Feldman, D. C., & Lankau, M.
J. (2005). Executive coaching:
A review and agenda for future
research. Journal of Management,
31(6), 829-848.
Executive coaching has become
very popular, and its use as a
developmental intervention for
managers has increased dramatically
over the previous decade. It is
defined by the use of the following:
(a) one-on-one counseling about
work-related issues; (b) 360-
degree feedback as a starting point
to diagnose executive strengths
and developmental weaknesses;
and (c) the overarching purpose
of improving leadership and
performance effectiveness in
the executive’s current position.
The present review examines the
construct of executive coaching and
whether professional training, client
characteristics and types of coaching
are related to the effectiveness
of coaches. One of the current
dilemmas is that executive coaching
is an unregulated field. Anyone can
label him- or herself an executive
coach. There is no consistency in
the background of coaches and
no systematic relationship with
coaching effectiveness. Most of
the clients are senior- to mid-level
managers who have performed well
in the past but are struggling at
present and those who have been
targeted for advancement to an
executive level but are missing some
specific skills. Although practitioner
articles far outnumber rigorous
empirical studies of the outcomes
associated with executive coaching,
the available data suggest that
coaching can enhance executive
learning, self-awareness and certain
leadership behaviors regardless of
the particular coaching approach
(psychodynamic, behaviorist,
person-centered, cognitive therapy
or systems-oriented). The authors
conclude with suggestions for a
future research agenda.
Peterson, D. B. (1996). Executive
coaching at work: The art of
one-on-one change. Consulting
Psychology Journal: Practice and
Research, 48(2), 78-86.
The author at the time of
publication was the vice president
and head of Individual Coaching
Services at Personnel Decisions
International (PDI). This article is
from a special issue on executive
coaching, defined as the process of
equipping people with the tools,
knowledge and opportunities they
need to develop and become more
effective. It outlines five research-
based strategies that guide one-
on-one coaching at PDI. These
strategies include (a) forging a
partnership such that you build
trust and understanding so people
want to work with you; (b) inspiring
commitment to build insight and
motivation so people focus their
energy on goals that matter; (c)
growing skills and building new
competencies to make sure that
people know how to do what is
required; (d) promoting persistence
to build stamina and discipline to
make sure learning lasts on the job;
and (e) shaping the environment
in such a way that it builds
organizational support to reward
learning and remove barriers. The
article concludes with a case study of
a typical coaching participant as well
as five tips for coaches based on the
coaching experience of the author.
50 Develop�ng leadersh�p talent
Smither, J. W., London, M.,
Flautt, R., Vargas, Y., & Kuchine,
I. (2003). Can working with
an executive coach improve
multisource feedback ratings over
time? A quasi-experimental field
study. Personnel Psychology, 56,
23-44.
The focus of this study was on
whether working with an executive
coach as part of a multisource
feedback program was more effective
in terms of process and outcomes
compared with not working with
a coach. Participants were 1,361
senior managers who received
multisource feedback, with 404 of
them working with a coach to review
their feedback and set goals. One
year later, 1,202 senior managers, or
88% of the original sample, received
multisource feedback from another
survey. Results indicated that those
senior managers who worked with
an executive coach were more likely
than other managers to set specific
rather than vague goals and solicit
ideas for improvement from their
supervisors. The managers who
were coached also improved more
than other managers in terms of the
ratings provided by direct reports
and supervisors. The effect size for
this difference was small, which
raises some questions about the
utility and return on investment of
executive coaching.
Smither, J. W., London, M.,
& Reilly, R. R. (2005). Does
performance improve following
multisource feedback? A
theoretical model, meta-analysis,
and review of empirical findings.
Personnel Psychology, 58, 33-66.
The core issue in this study was
whether and to what extent
recipients improve their performance
after receiving multisource
feedback. A meta-analysis of 24
longitudinal feedback studies was
conducted indicating generally small
improvements in direct report,
peer and supervisor ratings over
time. A theoretical model is then
presented suggesting that some
feedback recipients would be more
likely to improve than others. It is
hypothesized that performance is
most likely to improve when (a)
feedback confirms that changes
are necessary; (b) recipients have
a positive attitude about feedback
in general; (c) recipients perceive a
need to change their behavior; (d)
they react positively to the specific
feedback; (e) they believe change
is possible; (f) they set appropriate
goals to regulate their behavior;
and (g) recipients take action
that lead to skill and performance
improvements. HR professionals are
reminded that not all employees will
benefit equally from multisource
feedback. Providing a realistic
preview of the feedback system to
potential recipients might be one
means of improving the long-term
effectiveness of the system.
Ting, S., & Scisco, P. (Eds.).
(2006). The CCL handbook of
coaching: A guide for the leader
coach. San Francisco, CA: Jossey-
Bass.
The Center for Creative Leadership
(CCL) has been involved with
coaching leaders for over 30 years.
This edited handbook is based
on CCL’s philosophy of leader
development and its experience in
the practice of leadership coaching.
Much like the CCL handbook
of leadership development, this
is not a research-based volume.
Instead, the various chapters that
are authored by faculty members
and coaches reflect the experience
and expertise in coaching that has
been gathered across the decades of
coaching practice. The handbook
is organized into five sections. Part
one elaborates on the foundations
of coaching, including the editors’
view of coaching for development
and a framework for leadership
development coaching. Part two
addresses coaching for special
populations such as women leaders,
senior leaders, coaching across
cultures, leaders of color. Part three
examines coaching for specific
leadership challenges and capacities
such as emotional competence,
change and transition, physical well-
being. Part four deals with different
coaching techniques such as artful
coaching, solution-focused coaching,
constructive-development coaching.
Part five addresses extending the
coaching practice in terms of
blended coaching, coaching teams
and creating a coaching culture. The
handbook also includes a CD-ROM
library of 25 CCL publications on
Develop�ng leadersh�p talent 5�
topics such as enhancing 360-degree
feedback for senior executives,
coaching for action, preparing
for development and using your
executive coach.
Mentoring and
develoPMental
relationsHiPs
Allen, T. D., Eby, L. T., Poteet,
M. L., Lentz, E., & Lima, L.
(2004). Career benefits associated
with mentoring for protégés: A
meta-analysis. Journal of Applied
Psychology, 89, 127-136.
A total of 43 studies were reviewed
using meta-analytic procedures to
determine the overall career benefits
of mentoring for the protégé.
Comparisons between mentored and
non-mentored protégés were made
on objective (e.g., compensation)
and subjective (career satisfaction)
outcomes. Results suggested positive
career effects of mentoring on
protégé compensation, promotions,
career satisfaction and commitment,
expectations for advancement, and
job satisfaction. No differences
were reported for intention to
stay. Although there were positive
effects of mentoring on the career
outcomes of the protégé, the effect
sizes for the objective outcomes
(compensation and promotion) were
small. Although there were generally
positive career effects associated
with mentoring, no evidence was
presented that mentoring enhances
the development of protégés as
leaders. Thus, the results are still
out as to whether mentoring is an
effective leadership development
intervention. Insufficient number of
studies have been published on that
relationship to include in the present
meta-analysis.
Lankau, M. J., & Scandura, T.
A. (2002). An investigation of
personal learning in mentoring
relationships: Content,
antecedents, and consequences.
Academy of Management Journal,
45, 779-790.
The focus of this study was on
learning in the workplace, especially
in terms of the antecedents and
consequences of learning in the
context of mentoring relationships.
A measure of personal learning was
developed and tested. Aspects of
personal learning were found to
mediate the relationships between
mentoring and organizational
consequences of role ambiguity
and job satisfaction; however, no
evidence was found to support the
hypothesis that personal learning
mediates the relationships between
mentoring functions and turnover
intentions. As organizations seek to
become more efficient and effective
learning entities, these results
suggest that mentoring relationships
can play a role in this process by
enabling individual employees to
enhance their personal learning.
Ragins, B. R., Cotton, J. L., &
Miller, J. S. (2000). Marginal
mentoring: The effects of type of
mentor, quality of relationship,
and program design on work
and career attitudes. Academy of
Management Journal, 43, 1177-
1194.
Not all mentoring relationships
are created equally. Like other
work relationships, mentoring
relationships fall along a continuum
of effective to ineffective, functional
to dysfunctional. The present
authors distinguish between “good
mentors,” “bad mentors” and “good
enough mentors,” who have value
albeit limited. This latter group
is termed marginal mentors. A
national sample of 1,162 employees
was surveyed to determine the
relationship between job and career
attitudes and the presence of a
mentor, type of mentor (formal or
informal), the perceived quality of
the mentoring relationship, and the
perceived effectiveness and design
of a formal mentoring program.
Results suggested that satisfaction
with a mentoring relationship was a
more important predictor of protégé
attitudes than the other factors. One
implication of these findings is that
senior leaders should be developed
to be effective mentors and not
leave this important leadership
component to chance. It has been
said that one of the most important
jobs of a leader is to develop other
leaders. Good mentoring is one way
to help with that leader development
mandate.
5� Develop�ng leadersh�p talent
sHared leadersHiP
Hiller, N. J., Day, D. V., &
Vance, R. J. (2006). Collective
enactment of leadership roles and
team effectiveness: A field study.
Leadership Quarterly, 17, 387-397.
The focus of this study was on
shared or collective leadership
in autonomous work teams. In
particular, the central research
questions concerned the extent
to which collective leadership was
enacted in a state department of
transportation road maintenance
teams (N = 45) and its correlation
with performance. A 25-item
measure of collective leadership
was developed and tested. Items
measured responses to the frequency
that team members shared in
(a) planning and organizing; (b)
problem solving; (c) support and
consideration; and (d) development
and mentoring. Confirmatory factor
analyses supported the four-factor
structure for the collective leadership
instrument. Results from a series
of hierarchical regression analyses
showed significant and positive
relations between scores on the
collective leadership instrument and
the ratings of team performance
provided by an external supervisor.
The implications of these results
include the possibility that leadership
in blue-collar teams need not be the
domain of a single leader. Leadership
can be enacted collectively and
informally by team members. In
addition, collective leadership was
shown to be positively related to
team effectiveness. Thus, efforts
devoted to developing collective
leadership can be directed to even
the lowest levels of organizations.
A key consideration is developing
the capabilities of blue-collar team
members to participate as informal
leaders of their teams.
Klein, K. J., Ziegert, J. C.,
Knight, A. P., & Xiao, Y. (2006).
Dynamic delegation: Shared,
hierarchical and deindividualized
leadership in extreme action
teams. Administrative Science
Quarterly, 51, 590-621.
This qualitative field study examined
the leadership of extreme action
teams, defined as teams in which
highly skilled members cooperate
to perform urgent, unpredictable,
interdependent tasks with life-
and-death consequences. These
teams also must cope with frequent
changes in team composition and
ongoing training and development
of novice members. The researchers
interviewed team members of
medical trauma resuscitation teams
(attending surgeons, surgical
fellows, nurses and residents) and
observed teams as they performed
their emergency response duties.
At the core of this system is what
the researchers term “dynamic
delegation,” whereby senior leaders
(e.g., attending physicians) engage in
rapid and repeated delegation (and
withdrawal) of the active leadership
role to more junior members of
the team. This is described as a
type of leadership dance in which
the three senior leaders (attending,
fellow, resident) step forward or
back in response to the patient’s
changing condition and to the
actions, competence and confidence
of others in the leadership hierarchy.
In doing so, the trauma resuscitation
team is able to uphold and protect
its two key values: quality of patient
treatment (i.e., reliability) and
training and development of more
novice members (i.e., capacity
building). The findings from this
study illustrate the dynamic nature
of leadership processes in extreme
teams and how ongoing delegation
can be used to serve the ultimate
goal of ensuring high-quality
patient care while also developing
the technical skills and leadership
capabilities of more junior team
members.
Pearce, C. L. (2004). The
future of leadership: Combining
vertical and shared leadership
to transform knowledge work.
Academy of Management Executive,
18(1), 47-57.
Traditional hierarchical approaches
to leadership can be effective, but
the situations in which those forms
of leadership will be successful are
becoming less common. Especially
in areas termed knowledge
work—areas requiring significant
investment in and voluntary
contribution of intellectual capital
by skilled professionals—there has
been a trend toward team-based
leadership. One reason for this is
that it is becoming increasingly
more difficult for any one person
to be an expert on all of the various
aspects of the work or to handle
the significant leadership challenges
associated with knowledge work.
The author outlines conditions
under which shared leadership is
more appropriate, including tasks
Develop�ng leadersh�p talent 53
that are highly interdependent,
require a great deal of creativity and
are highly complex. In addressing
how to develop shared leadership,
the role of the vertical leaders, as
well as the role of organizational
systems, is examined. The formal
leader can contribute to developing
shared leadership through team
design, boundary management
and support of shared leadership.
Organizational systems that facilitate
shared leadership include training
and development systems, reward
systems and organizational culture.
In conclusion, the author points
out that shared leadership is not a
panacea for organizations. The issue
is not one of either vertical (i.e.,
traditional) or shared leadership but
rather (a) when leadership is most
appropriately shared; (b) how one
develops shared leadership; and (c)
how to best use both vertical and
shared leadership to leverage the
capabilities of knowledge workers.
Pearce, C. L., & Conger, J. A.
(Eds.). (2003). Shared leadership:
Reframing the hows and whys of
leadership. Thousand Oaks, CA:
SAGE.
This edited volume provides a
comprehensive overview of the
issues and advances in shared
leadership. The book begins with
an examination of the historical
underpinnings of shared leadership
showing that the concept has
slowly evolved since the 1920s and
the work of Mary Parker Follett.
The challenge to its more rapid
advancement is the prevailing leader-
centric mindset that leadership must
always stem from the actions and
behaviors of an individual leader.
One possible reason for the broader
acceptance of shared leadership
today is that the challenges faced
by organizations cannot be solved
by any individual leader—at least
not all the time. After setting the
foundation for the evolution of
shared leadership and why it is
needed more than ever today, the
book addresses additional issues that
are organized into four sections:
(1) conceptual models of shared
leadership; (2) methodological issues
in the study of shared leadership;
(3) studies of shared leadership in
applied settings; and (4) critiques
of shared leadership theory. In
conclusion, the limits and liabilities
of shared leadership are discussed.
These include a lack of knowledge,
skills and abilities in the team; lack
of goal alignment between team
members and between the team and
the organization; lack of time to
develop shared leadership; and a lack
of receptivity to shared leadership.
As noted by the editors, the field of
shared leadership holds remarkable
opportunities for researchers and
HR practitioners, and this volume
offers a state-of-the-art treatment of
this quickly emerging field.
the shrm Foundation is a 501(c)(3) non-profit organizational affiliate of the society
for human resource management (shrm). Founded in 1966, the shrm Foundation
maximizes the impact of the hr profession on organizational decision-making and
performance by promoting innovation, education, research and the use of research-
based knowledge. the shrm Foundation is governed by a volunteer board of directors
comprising distinguished hr academic and practice leaders. contributions to the shrm
Foundation are tax-deductible. online at www.shrm.org/foundation.
SUCCESSION PLANNING and
TOOLKIT
April 2015
LEADERSHIP DEVELOPMENT
CONTENTS
2
Succession planning 3
What is succession planning?
Succession planning process
Leadership development 4
What is leadership development?
Leadership Development Action Plan
Identifying candidates for leadership development
Training formats
360° assessments
Future Ready Leadership Program 7
What is the Future Ready Leadership Program
Selection for the Future Ready Leadership Program
Leadership competencies at Oxford County 8
What is a core competency?
What is a leadership competency?
Why a leadership competency model for Oxford County?
Figure and tables
Figure 1 – Leadership competencies at Oxford County 8
Figure 2 – Core competencies at Oxford County 10
Table 1 – Competencies across leadership levels 11
Form A – Succession planning tool
Form B – Leadership development action plan
Form C – Attachment to performance management form
Form D – Future Ready Leadership Program selection form
1.
Where do we go from here? 13
• Support the organization’s ability to achieve its community, corporate, departmental and divisional
strategic goals and priorities; and,
• Ensure the continued e�ective performance of the organization by planning and supporting the
development and replacement of key people and positions over time.
The Succession Planning and Leadership Development Toolkit is a key component of the “Our People, Our
Strength” plan – the guiding strategy for shaping the County into a workplace that recruits and retains high
quality employees. This toolkit will provide employees with the resources to plan for the future and to
shape their own development initiatives. It links directly to the key actions within the “Our People, Our
Strength” plan, speci�cally the pillars of Employee Engagement, Talent Management and E�ective Leaders.
The primary focus and purpose of Oxford County’s Succession Planning and Leadership Development
strategy is to:
Succession planning and leadership development are aligned with the performance management process
and the annual business planning and budget setting process. This ensures adequate resources are
included, in a timely way, for related learning and development. Oxford County is committed to promotion
from within whenever possible.
It is important to note that while learning and development are employer supported, they are not always
County funded. It is also important to note that �lling of all vacancies is completed in a fair and equitable
manner, and in accordance with our Recruitment Policy 5.03.
De�nitions
Emerging leader: An employee who has expressed an interest in and has demonstrated potential to
�ll a future leadership vacancy.
Key position: Generally, a position for which one or more of the following apply:
• A leadership position
• A position that is critical to the planning and delivery of the County’s services and programs
• A position that is challenging to �ll
• A position that requires unique and/or special technical knowledge and/or experience and/or
professional skills
SMT: Senior Management Team
EMT: Extended Management Team
INTRODUCTION 2.
What is succcession planning?
Succession planning is a process led by SMT to continuously plan for, support and measure the
development progress of leaders and emerging leaders. More speci�cally, it identi�es:
1. Potential position vacancies, recruitment and sta�ng needs, and challenges in the near
future (i.e.,�ve-year time frame); and
2. Employees who have expressed interest in and demonstrated potential to �ll future
leadership vacancies.
Oxford County is committed to succession planning as part of its corporate culture. This allows the County
to:
• Retain and develop intellectual and knowledge capabilities of County sta� by capturing
critical job and historical knowledge from departing employees and imparting it to potential
future replacements through development programs.
• Retain and attract high calibre employees by encouraging and supporting their individual
career development.
• Support business continuity in key positions by creating back-up capacity for these positions
and by having the right people available for the right jobs at the right time.
• Ensure the alignment between the career goals of individual employees and the goals of the
organization.
• Be proactive in relation to potential future labour shortages of quali�ed external candidates.
Succession planning process
Succession planning unfolds in two ways:
1. On an annual basis, each director will identify key positions that may be at risk of vacancy within the
next 3-5 years by using the Succession Planning Tool (Form A).
2. Each supervisor, manager, and/or director will also discuss with sta� during the annual performance
management process employees’ interest in and potential for future leadership roles.
With this information, directors can then assess their needs and work with employees to develop
and implement plans to successfully manage future gaps.
SUCCESSION PLANNING 3.
What is leadership development?
Leadership development refers to actions that enhance the leadership skills and abilities within both
individuals and organizations. It also identi�es, assesses and develops employee knowledge, skills and
abilities.
Leadership development requires the participation and contribution of managers and their employees to
establish development goals/objectives and active learning plans. At Oxford County, leadership
development also enables us to meet current and future sta�ng needs of the organization by:
1. Identifying employees who are both interested in and demonstrate short and/or long-term
potential for succession into key positions; and
2. Ensuring that employees have appropriate and structural learning, development and training
opportunities to ful�ll their potential.
Leadership Development Action Plan
The Leadership Development Action Plan (Form B) is a document that is created to formalize employee
interest in, and plans for, developing leadership competencies. This form can be completed as part of the
annual performance management process or at any other suitable time during the year.
There are potentially two types of employees that could enter into a Leadership Development Action Plan:
1. Employees currently in a leadership role (EMT, SMT); or
2. Employees who do not currently �ll a leadership position, but who have expressed an interest
in and have demonstrated potential to �ll future leadership vacancies (emerging leaders).
When preparing a Leadership Development Action Plan, employees should consider the County’s
established Core and Leadership Competencies (Figures 1 & 2) as a framework for their own
development.
Employees who are actively engaged in a Leadership Development Action Plan are not guaranteed to �ll
future vacancies within the organization. The procedure for �lling vacancies is completed in a fair and
equitable manner in accordance with Recruitment Policy 5.03.
LEADERSHIP DEVELOPMENT 4.
LEADERSHIP DEVELOPMENT 5.
Identifying candidates for leadership development
Identifying candidates for leadership development is a two-fold process. It is primarily initiated by the
employee through conversations with their supervisor, although it may also be initiated based on
observations of a supervisor, manager, and/or director.
The annual performance management process includes a formal opportunity for these discussions
(Form C). With the support of their director, manager and supervisor, interested employees will complete
the Leadership Development Action Plan (Form B), and may also complete a 360° assessment. A copy of
both forms will be forwarded to Human Resources to be �led in the employee’s personnel �le.
Training formats
Employees who are actively engaged in a Leadership Development Action Plan will have three options in
the delivery of their training. Training formats are intended to be used in combination.
1. Experiential: Learning from on-the-job challenging experiences
Examples:
• On-the-job short-term assignments
• Major or special projects
2. Relational: The ability to learn from other people
Examples:
• Coaching (Coaching model to be developed)
• Mentoring (Mentoring model to be developed)
3. Formal Training: Classroom environment
Examples:
• Lecture, seminar, workshops, or other third-party external training programs
• Group discussions
• Live webinars or video conferences
• E-Learning
• Post-secondary courses or programs
LEADERSHIP DEVELOPMENT 6.
360° assessments
The 360° assessment is a process through which employees receive con�dential, anonymous feedback
from a variety of individuals which may include co-workers, supervisors, direct reports (if applicable) and
others that may work closely with the employee.
Individuals selected to complete a 360°assessment for an employee will �ll out an anonymous question-
naire asking questions covering a range of required leadership competencies. The assessment will provide
insights into how others perceive them and will give the employee an opportunity to further develop
behaviours and skills that enable them to excel at their job. Initially, the 360° assessment will be completed
by current leaders (SMT and EMT).
FUTURE READY LEADERSHIP PROGRAM 7.
Future Ready Leadership Program
The Future Ready Leadership Program is facilitated by an external provider who specializes in leadership
development and has customized the program to the organization. Leadership development sessions are
held monthly over a period of time. The program provides current and emerging leaders with critical
thinking skills and required behaviours that �t with the County’s organizational leadership competencies.
Each session brings new learnings and insights that can be put into practice after each session.
Selection for the Future Ready Leadership Program
Interested candidates will complete a selection form (Form D) with the support of their supervisor, man-
ager, and director. SMT and Human Resources will screen applicants and make �nal decisions based on
skills and competency gaps, succession planning needs, vacancies and available space in the program.
Whether they are selected or not selected, candidates will be informed regarding the rationale for the
decision.
Before the start of the program, all participants will complete a 360°assessment to become better aware of
their areas of strength and any performance gaps, thereby focusing their development as needed.
LEADERSHIP COMPETENCIES AT OXFORD COUNTY 8.
Competencies are skills and behaviours that contribute to superior performance. Oxford County has
identi�ed two sets of competencies: core competencies and leadership competencies.
What is a Leadership Competency?
Leadership competencies are the skills and behaviours that contribute to superior performance in
leadership roles. The table below represents the competencies that Oxford County has identi�ed as being
necessary for success as a leader in the organization.
Fig. 1 – Leadership competencies at Oxford County
• Fosters open communication; listens to others; speaks e�ectively; and
prepares written communications so that messages are clearly understood
• Acts to in�uence others in order to have a speci�c impact or e�ect
• Responds appropriately to the concerns of others
E�ective
Communication
• Demonstrates initiative and resourcefulness to get things done
• Provides clear direction and expectations
• Acts to ensure others perform in accordance with expectations and goals
• Motivates others to achieve expected performance goals
• Provides quality service to clients and stakeholders
Performance
Management
• Understands the structure and culture of the organization and is able to
accomplish results through the most e�ective channels
• Manages e�ectively within the County systems, operational policies and the
public service environment
Project/Process
Management
• Works to continually understand, engage in and implement organizational
changes and technologies that improve processes, practices and outcomes
• Is �exible and adaptable in meeting the changing demands of clients,
stakeholders and the public
Change
Management
LEADERSHIP COMPETENCIES AT OXFORD COUNTY 9.
Why a leadership competency model for Oxford County?
By using this approach to leadership, Oxford County can better identify and develop current and emerging
leaders and ultimately promote more e�ective leadership, as the expectations of the organization are
clearly de�ned.
The Leadership Competency Framework (Table 1) provides the behavioural examples that illustrate how
employees successfully exhibit particular leadership skills and behaviours on the job.
These examples are called behavioural anchors. They must be based on speci�c, observable behaviours
and day-to-day performance, not isolated incidents. Behavioural anchors articulate speci�c actions that
have the most direct impact on successful performance and are invaluable in gauging how e�ectively a
leadership competency is being demonstrated. They will give you a clear expectation of what behaviours
are required for each level.
Range of leadership competency levels
Leadership competencies are developed across a range of three levels:
1. Emerging Leader
2. Leader
3. Champion
The descriptions provided in Table 1 include the behaviour expectations for each competency, at each
level.
It is understood that if you are, for example, at the champion level, you will demonstrate the behaviours for
the levels below your own as well.
What is a core competency?
The competencies that Oxford County has identi�ed as being most in�uential for our organization and are
based on the Core Values in our Strategic Plan, which are equally important when planning leadership
development actions. For more details and information regarding the core competencies, refer to the
Competency Framework Handbook.
CORE COMPETENCIES AT OXFORD COUNTY 10.
Fig. 2 – Core Competencies at Oxford County
• Advises and plans based on analysis and trends, and understands how these link
to the responsibilities, capabilities, and potential of the organization
• Scans an ever-changing complex environment in anticipation of emerging crises
and opportunities
• Develop well-informed advice and strategies that are sensitive to the various
needs of multiple stakeholders and partners, re�ect the strategic direction of
municipal government, and position the County for success
Strategic
Thinking
• Displays the ability to think outside the box in order to develop creative and new
solutions that meets current and future needs of the County
Fostering
Innovation
• Gives superior service to both internal and external customers
• Places the customer at the centre of strategic and operational planning
• Actively participates as a supportive team member
Service Excellence
& Team Work
• Takes personal ownership and responsibility for the quality and timeliness of
work commitments
• Follows organizational guidelines, professional standards, regulations and
principles
• Demonstrates reliability and integrity on a daily basis
Accountability
& Integrity
LEADERSHIP COMPETENCIES AT OXFORD COUNTY 11.
Table 1 – Competencies across leadership levels
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al
cu
la
te
d
r
is
ks
to
im
p
ro
ve
s
er
vi
ce
s
an
d
a
ch
ie
ve
g
o
al
s
•
C
o
ac
h
es
e
m
p
lo
ye
es
a
n
d
m
o
ti
va
te
s
p
eo
p
le
to
a
ch
ie
ve
q
u
al
it
y
re
su
lt
s
•
A
d
d
re
ss
es
p
er
fo
rm
an
ce
s
in
a
t
im
el
y
w
ay
a
n
d
a
ct
to
im
p
ro
ve
p
er
fo
rm
an
ce
P
ER
FO
R
M
A
N
C
E
M
A
N
A
G
EM
EN
T
•
D
em
o
n
st
ra
te
s
in
it
ia
ti
ve
a
n
d
re
so
u
rc
ef
u
ln
es
s
to
g
et
t
h
in
g
s
d
o
n
e
•
Pr
o
vi
d
es
c
le
ar
d
ir
ec
ti
o
n
a
n
d
ex
p
ec
ta
ti
o
n
s
•
A
ct
s
to
e
n
su
re
o
th
er
s
p
er
fo
rm
in
ac
co
rd
an
ce
w
it
h
c
le
ar
•
M
o
ti
va
te
s
o
th
er
s
to
a
ch
ie
ve
ex
p
ec
te
d
p
er
fo
rm
an
ce
g
o
al
s
•
Pr
o
vi
d
es
q
u
al
it
y
se
rv
ic
e
to
c
lie
n
ts
an
d
s
ta
ke
h
o
ld
er
s
•
Se
ts
a
ch
ie
va
b
le
d
ep
ar
tm
en
ta
l a
n
d
o
rg
an
iz
at
io
n
al
g
o
al
s
an
d
p
ri
o
ri
ti
es
•
En
su
re
s
ad
eq
u
at
e
re
so
u
rc
es
a
re
d
ir
ec
te
d
to
m
ee
t
st
at
ed
g
o
al
s
an
d
p
ri
o
ri
ti
es
•
B
al
an
ce
s
im
m
ed
ia
te
n
ee
d
s
an
d
lo
n
g
er
ra
n
g
e
p
ri
o
ri
ti
es
•
Ex
ec
u
te
s
o
rg
an
iz
at
io
n
al
b
u
si
n
es
s
p
la
n
to
a
ch
ie
ve
re
su
lt
s
. . . . . . . . . . . . .
LEADERSHIP COMPETENCIES AT OXFORD COUNTY 12.
Table 1 – Competencies across leadership levels … continued
EM
ER
G
IN
G
L
EA
D
ER
LE
A
D
ER
C
H
A
M
P
IO
N
. . . . . . . . . . . . .
•
R
es
p
o
n
d
s
e�
ec
ti
ve
ly
to
u
n
fo
re
se
en
p
ro
b
le
m
s
•
D
em
o
n
st
ra
te
s
a
th
o
ro
u
g
h
u
n
d
er
st
an
d
in
g
o
f s
tr
u
c t
u
re
s
an
d
p
ro
ce
ss
es
w
it
h
in
o
w
n
w
o
rk
g
ro
u
p
•
D
ev
el
o
p
s
an
d
u
se
s
in
fo
rm
al
re
la
ti
o
n
sh
ip
s
b
ey
o
n
d
o
w
n
w
o
rk
g
ro
u
p
to
g
et
t
h
in
g
s
d
o
n
e
(i.
e.
,
kn
o
w
s
w
h
o
to
a
sk
fo
r w
h
at
)
•
En
su
re
s
q
u
al
it
y
an
d
q
u
an
ti
ty
st
an
d
ar
d
s
ar
e
m
et
•
R
ec
o
g
n
iz
es
a
n
d
u
se
s
co
rp
o
ra
te
cu
lt
u
re
, C
o
u
n
ty
p
ro
ce
ss
es
a
n
d
u
n
d
er
ly
in
g
k
n
o
w
le
d
g
e
to
p
ro
d
u
ce
b
es
t
re
su
lt
s
•
C
o
n
tr
ib
u
te
s
to
t
h
e
cr
ea
ti
o
n
, r
ev
is
io
n
o
r i
m
p
ro
ve
m
en
t
o
f C
o
u
n
ty
p
o
lic
y
an
d
p
ra
ct
ic
es
•
D
e�
n
es
o
u
tc
o
m
es
a
n
d
e
xp
ec
ta
ti
o
n
s
b
as
ed
o
n
c
u
st
o
m
er
re
q
u
ir
em
en
ts
•
W
it
h
s
ta
�
, d
ev
el
o
p
s
a
w
o
rk
p
la
n
w
it
h
ta
sk
s,
t
im
ef
ra
m
es
, m
ile
st
o
n
es
,
re
so
u
rc
es
, a
n
d
d
ep
en
d
en
ci
es
P
R
O
JE
C
T
M
A
N
A
G
EM
EN
T/
P
R
O
C
ES
S
M
A
N
A
G
EM
EN
T
•
U
n
d
er
st
an
d
s
th
e
st
ru
ct
u
re
a
n
d
cu
lt
u
re
o
f t
h
e
o
rg
an
iz
at
io
n
a
n
d
is
ab
le
to
a
cc
o
m
p
lis
h
re
su
lt
s
th
ro
u
g
h
th
e
m
o
st
e
�
ec
ti
ve
c
h
an
n
el
•
M
an
ag
es
e
�
ec
ti
ve
ly
w
it
h
in
t
h
e
C
o
u
n
ty
s
ys
te
m
s,
o
p
er
at
io
n
al
p
o
lic
ie
s,
a
n
d
t
h
e
p
u
b
lic
s
er
vi
ce
en
vi
ro
n
m
en
t
•
D
em
o
n
st
ra
te
s
an
in
-d
ep
th
k
n
o
w
le
d
g
e
an
d
u
n
d
er
st
an
d
in
g
o
f b
u
si
n
es
s
p
la
n
n
in
g
a
cc
o
u
n
ta
b
ili
ty
p
ra
ct
ic
es
a
n
d
m
an
ag
em
en
t
sy
st
em
s
•
R
ep
re
se
n
ts
O
xf
o
rd
C
o
u
n
ty
a
t
m
u
n
ic
ip
al
le
ve
l o
n
t
as
k
fo
rc
es
a
n
d
le
ar
n
s
to
p
ro
vi
d
e
p
er
sp
ec
ti
ve
s
o
n
p
ro
g
ra
m
in
it
ia
ti
ve
s
an
d
p
ro
ce
ss
es
•
Se
ts
d
ea
d
lin
es
in
a
w
ay
t
h
at
g
et
s
c o
m
m
it
m
en
t
fr
o
m
a
ll
p
ar
ti
es
in
vo
lv
ed
•
En
su
re
s
su
p
p
o
rt
fo
r p
ro
je
ct
s
an
d
im
p
le
m
en
ts
o
rg
an
iz
at
io
n
al
g
o
al
s
an
d
st
ra
te
g
ic
o
b
je
ct
iv
es
. . . . . . . . . . . . .
. . . . . . . . . . . . .
•
U
n
d
er
st
an
d
s
ch
an
g
e
m
an
ag
em
en
t
•
U
n
d
er
st
an
d
s
th
e
ch
an
g
in
g
n
ee
d
s
o
f
cl
ie
n
ts
, s
ta
ke
h
o
ld
er
s
an
d
t
h
e
p
u
b
lic
•
Fa
ci
lit
at
es
t
h
e
im
p
le
m
en
ta
ti
o
n
a
n
d
ac
ce
p
ta
n
ce
o
f c
h
an
g
e
w
it
h
in
t
h
e
w
o
rk
p
la
ce
•
A
d
d
re
ss
es
c
h
an
g
e
re
si
st
an
ce
a
n
d
sh
o
w
s
em
p
at
h
y
w
it
h
p
eo
p
le
w
h
o
fe
el
a
lo
ss
a
s
a
re
su
lt
o
f c
h
an
g
e
•
A
b
le
to
c
o
m
m
u
n
ic
at
e
th
e
vi
si
o
n
fo
r a
ch
an
g
e
to
t
h
o
se
a
�
ec
te
d
.
A
ct
iv
el
y
in
vo
lv
es
o
th
er
s
in
t
h
e
p
ro
ce
ss
•
H
el
p
s
o
th
er
s
to
s
u
cc
es
sf
u
lly
m
an
ag
e
o
rg
an
iz
at
io
n
al
c
h
an
g
e
•
Fa
ci
lit
at
es
g
ro
u
p
s
o
r t
ea
m
s
th
ro
u
g
h
th
e
p
ro
b
le
m
-s
o
lv
in
g
a
n
d
cr
ea
ti
ve
-t
h
in
ki
n
g
p
ro
ce
ss
es
, l
ea
d
in
g
to
t
h
e
d
ev
el
o
p
m
en
t
an
d
im
p
le
m
en
ta
ti
o
n
o
f n
ew
a
p
p
ro
ac
h
es
,
sy
st
em
s,
s
tr
u
ct
u
re
s,
a
n
d
m
et
h
o
d
s
•
D
ev
el
o
p
s,
p
la
n
s,
a
n
d
fo
llo
w
s
th
ro
u
g
h
o
n
c
h
an
g
e
in
it
ia
ti
ve
s
C
H
A
N
G
E
M
A
N
A
G
EM
EN
T
•
W
o
rk
s
to
c
o
n
ti
n
u
al
ly
u
n
d
er
st
an
d
,
en
g
ag
e
in
a
n
d
im
p
le
m
en
t
o
rg
an
iz
at
io
n
al
c
h
an
g
es
a
n
d
te
ch
n
o
lo
g
ie
s
th
at
im
p
ro
ve
p
ro
ce
ss
es
, p
ra
ct
ic
es
a
n
d
o
u
tc
o
m
es
•
Is
�
ex
ib
le
a
n
d
a
d
ap
ta
b
le
in
m
ee
ti
n
g
th
e
ch
an
g
in
g
d
em
an
d
s
o
f c
lie
n
ts
,
st
ak
eh
o
ld
er
s
an
d
t
h
e
p
u
b
lic
•
C
re
at
es
a
c
u
lt
u
re
t
h
at
s
u
p
p
o
rt
ch
al
le
n
g
in
g
t
h
e
st
at
u
s
q
u
o
a
n
d
w
h
er
e
ch
an
g
e
is
e
xp
ec
te
d
a
n
d
s
u
p
p
o
rt
ed
•
Ta
ke
s
ac
ti
o
n
to
a
lig
n
t
h
e
o
rg
an
iz
at
io
n
(p
eo
p
le
, p
ro
ce
ss
es
, s
tr
u
ct
u
re
,
te
ch
n
o
lo
g
y)
w
it
h
p
la
n
n
ed
c
h
an
g
es
•
D
em
o
n
st
ra
te
s
su
p
p
o
rt
fo
r
o
rg
an
iz
at
io
n
al
c
h
an
g
es
n
ee
d
ed
to
im
p
ro
ve
t
h
e
o
rg
an
iz
at
io
n
‘s
e�
ec
ti
ve
n
es
s
•
A
ct
s
as
a
c
h
am
p
io
n
fo
r c
h
an
g
e
. . . . . . . . . . . . .
WHERE DO WE GO FROM HERE? 13.
. . . . . . . . . . . . .
For more information contact:
Human Resources
519-539-0015, ext. 3914 | 1-800-755-0394
[email protected]
Oxford County
Released April 2015
By implementing the Succession Planning and Leadership Development Toolkit, the County of Oxford will be
better able to predict future vacancies and challenges and respond strategically to those needs. This toolkit
attract, retain and develop high quality employees.
Department: ____________________
Date: ____________________
Form A: Succession Planning Tool
Use this tool to assist in the identification of potential position vacancies, recruitment and staffing needs, and challenges in the near future.
Position (Job Title) Current Incumbent
Expected
Date of
Vacancy
Key Competencies Required Additional Information
Tips to Remember when using this tool:
• Be sure to consider all positions, especially key positions as defined in this toolkit
• Seek input from managers and supervisors within your department
Form B: Leadership Development Action Plan
Employee Name:
Department:
Position:
Supervisor:
Introduction: How to Use This Form
A Leadership Development Action Plan is a way to build key leadership qualities and
competencies in current leaders and potential future leaders.
The Leadership Development Action Plan focuses on building and following up on employee
competencies specifically related to leadership. Competencies are defined as baseline
leadership qualities and leadership level skills.
The Leadership Development Action Plan is used to map specific activities and time frames
toward employee skills and performance development, with the goal of moving into a leadership
or new leadership role. The creation of the plan is both a collaborative effort and two-way
commitment between employee and supervisor. Both should retain an up-to-date copy of the
document, which should be revisited as often as necessary.
Employees should consider:
• How to perform existing responsibilities more effectively.
• Aligning their career goals with their leadership development objectives.
• Gaps identified in their leadership 360 assessments (if applicable).
• Competencies required at different levels of the spectrum for both the Core and
Leadership competencies (as identified in the Succession Planning and Leadership
Development Toolkit and the Competency Framework Handbook).
Supervisors should consider:
• Performance evaluations offered by employees, their mentors, and direct supervisors.
• Pinpointing competency gaps within the employee’s skill set as identified by the 360
assessment (if applicable).
• The employee’s career aspirations.
• Leveraging the employee’s strengths for development towards the most suitable
leadership positions.
Action Plan
To be completed by the employee and supervisor.
The tables below help identify methods to fill the competency gaps and achieve the leadership
development goals by building a concrete action plan. Think about training sessions, coaching,
mentorship, project resourcing, external opportunities, etc. as different ways a quality or
competency can be developed.
Competencies: (see the Succession Planning and Leadership Development Toolkit and
Competency Framework Handbook for detailed information)
Leadership Competencies Core Competencies
Effective Communication Strategic Thinking
Performance Management Fostering Innovation
Project Management Service Excellence & Teamwork
Change Management Accountability & Integrity
Leadership Development Goals and/or
Competencies to be Developed (consider your
360 Assessment Report if applicable)
Examples:
Move into a management position
Move into a Senior Management position
Improve my project management skills
Strengthen my presentation skills
Formal Training (approx. 10% of development)
Target Competency Competency Development Method
Timeline for
Completion
Measurement
of
Achievement
Estimated
Cost
Example:
Effective
Communication
Toastmasters Training
Course
Dec. 30,
2015
Demonstrated
participation in
meetings.
$300.00
Total Estimated Course Costs:_______________
Contextual on the Job learning (approx. 70% of development)
Target Competency Competency Development Method
Timeline for
Completion
Measurement of
Achievement
Example:
Effective Communication
Present at department
meetings.
October 30,
2014
Personal comfort
increased.
Positive
presentation
reviews from staff.
Relational learning (approx. 20% of development)
Name of Mentor/ Coach Timing of meetings
Measurement of
Achievement
Example: Joe Boss
Once a month Demonstrated participation in meetings.
Leadership Development Action Plan Agreement
The employee and director/manager/supervisor will sign off on the Leadership
Development Action Plan once the plan is finalized. A signed copy will be forwarded to
Human Resources for filing in the employee’s personnel file.
The employee and supervisor named below agree to the leadership development activities and
time frames named above in pursuit of the employee’s target development capabilities.
Completion of the activities named above within the specific time frames will be tracked on at
least a bi-annual basis and be reflected in the employee’s performance evaluations.
_________________________________________ ________________________________
Employee Signature Date
_________________________________________ ________________________________
Supervisor Signature Date
_________________________________________ ________________________________
Department Director Signature Date
Leadership Development Progress Tool
It is suggested that the supervisor and the employee review progress and record as necessary.
Review Date: June 12 2015
Competency Progress
Ex. Effective Communication
Have met with mentor monthly for 6 months. Not meeting for 2
months due to scheduling conflicts. Will meet again in
September 2015
Ex. Change management, project
management
Future Reader Leadership Program. Have completed 360
assessment and selection form. Awaiting notification of
accepted or not accepted into the program
Review Date:______________
Competency Progress
Review Date:______________
Competency Progress
Review Date:______________
Competency Progress
Form C: Performance Management and Leadership Development
(Attach to the Performance Appraisal Form)
SECTION 8 – CAREER GOALS AND OBJECTIVES
1. Career goals:
Where do you see yourself in 3 -5 years?
Where do you see yourself in 5-10 years?
2. What areas do you need to develop in order to meet these goals?
3. How can the County support you in meeting these goals?
If interested in formalizing your leadership development goals, please refer to the Leadership
Development Action Plan for additional tools and planning resources.
Form D: Future Ready Leadership Program Selection Form
Introduction: How to Use This Form
The Future Ready Leadership Program Selection Form represents an indication of an
employee’s interest and commitment to developing their leadership skills and abilities. All
employees interested in attending the Future Ready Leadership Program will be required to
complete this form. Completion of the form does not guarantee admission into the program as a
selection process will occur, following the deadline for submission. The Future Ready
Leadership Program is intended for full time permanent employees who have been with the
County for a minimum of one year.
Prior to completing this form, please refer to the current Program Information sheet for more
details about the program including dates and course information.
Employee Name:
Department:
Position:
Supervisor:
Employees should consider:
Aligning their career goals with their leadership development objectives.
Formal learning identified in their Leadership Development Action Plan (if applicable).
Competencies required at different levels of the spectrum for both the Core and Leadership
competencies (as identified in the Succession Planning and Leadership Development
Toolkit and the Competency Framework Handbook).
Supervisors should consider:
The employee’s career aspirations and future potential.
Leveraging the employee’s strengths for development towards the most suitable leadership
positions.
Support of organizational values
Importance of retention/risk of leaving
Please complete the following questions:
What are your short and long term career goals?
Please summarize how you have demonstrated Oxford County’s leadership
competencies through your work-related or volunteer experiences.
What tools, resources, or training have you utilized or attended in an effort to advance
your leadership skills (ie. Leadership Development Action Plan, external training)?
What motivates you to want to be selected for the Future Ready Leadership Program?
How do you see applying what you will learn during the Future Ready Leadership
Program to your current and potential future roles?
Any other comments that you would like to add:
Any comments from supervisor/manager/director:
Employee Signature:__________________________________ Date: _______________
Manager/Supervisor Signature:_________________________ Date:________________
Director Signature: __________________________________ Date: _______________
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FORM A Succession Planning Tool 20150413df
Form B Leadership Development Action Plan 20150602
Introduction: How to Use This Form
Action Plan
Leadership Development Action Plan Agreement
Leadership Development Progress Tool
FORM C Attachment to Performance Management Form
Form D Future Ready Leadership Program Selection Form 20150413
Introduction: How to Use This Form
Form D Future Ready Leadership Program Selection Form 05052016.pdf
Introduction: How to Use This Form
Form D Future Ready Leadership Program Selection Form 05052016.pdf
Introduction: How to Use This Form
Position Job TitleRow1:
Current IncumbentRow1:
Expected Date of VacancyRow1:
Key Competencies RequiredRow1:
Additional InformationRow1:
Position Job TitleRow2:
Current IncumbentRow2:
Expected Date of VacancyRow2:
Key Competencies RequiredRow2:
Additional InformationRow2:
Position Job TitleRow3:
Current IncumbentRow3:
Expected Date of VacancyRow3:
Key Competencies RequiredRow3:
Additional InformationRow3:
Position Job TitleRow4:
Current IncumbentRow4:
Expected Date of VacancyRow4:
Key Competencies RequiredRow4:
Additional InformationRow4:
Department:
Examples Move into a management position Move into a Senior Management position Improve my project management skills Strengthen my presentation skillsLeadership Development Goals andor Competencies to be Developed consider your 360 Assessment Report if applicable:
Examples Move into a management position Move into a Senior Management position Improve my project management skills Strengthen my presentation skillsLeadership Development Goals andor Competencies to be Developed consider your 360 Assessment Report if applicable_2:
Examples Move into a management position Move into a Senior Management position Improve my project management skills Strengthen my presentation skillsLeadership Development Goals andor Competencies to be Developed consider your 360 Assessment Report if applicable_3:
Examples Move into a management position Move into a Senior Management position Improve my project management skills Strengthen my presentation skillsLeadership Development Goals andor Competencies to be Developed consider your 360 Assessment Report if applicable_4:
Example Effective CommunicationRow1:
Present at department meetingsRow1:
October 30 2014Row1:
Personal comfort increased Positive presentation reviews from staffRow1:
Example Effective CommunicationRow2:
Present at department meetingsRow2:
October 30 2014Row2:
Personal comfort increased Positive presentation reviews from staffRow2:
Example Effective CommunicationRow3:
Present at department meetingsRow3:
October 30 2014Row3:
Personal comfort increased Positive presentation reviews from staffRow3:
Example Joe BossRow1:
Once a monthRow1:
Demonstrated participation in meetingsRow1:
Example Effective CommunicationRow1_2:
Toastmasters Training CourseRow1:
Dec 30 2015Row1:
Demonstrated participation in meetingsRow1_2:
30000Row1:
Example Effective CommunicationRow2_2:
Toastmasters Training CourseRow2:
Dec 30 2015Row2:
Demonstrated participation in meetingsRow2:
30000Row2:
Example Effective CommunicationRow3_2:
Toastmasters Training CourseRow3:
Dec 30 2015Row3:
Demonstrated participation in meetingsRow3:
30000Row3:
Total Estimated Course Costs:
Date:
Review Date June 12 2015:
Competency:
Progress:
undefined:
Review Date:
CompetencyRow1:
ProgressRow1:
CompetencyRow2:
ProgressRow2:
CompetencyRow3:
ProgressRow3:
undefined_2:
Review Date_2:
CompetencyRow1_2:
ProgressRow1_2:
CompetencyRow2_2:
ProgressRow2_2:
CompetencyRow3_2:
ProgressRow3_2:
undefined_3:
Review Date_3:
CompetencyRow1_3:
ProgressRow1_3:
CompetencyRow2_3:
ProgressRow2_3:
CompetencyRow3_3:
ProgressRow3_3:
Where do you see yourself in 3 5 years:
Where do you see yourself in 510 years:
What areas do you need to develop in order to meet these goals:
How can the County support you in meeting these goals:
Employee Name:
Position:
Supervisor:
Check Box1: Off
Check Box2: Off
Check Box3: Off
Check Box4: Off
Check Box5: Off
Check Box6: Off
Check Box7: Off
What are your short and long term career goals:
Please summarize how you have demonstrated Oxford Countys leadership competencies through your workrelated or volunteer experiences:
What tools resources or training have you utilized or attended in an effort to advance your leadership skills ie Leadership Development Action Plan external training:
What motivates you to want to be selected for the Future Ready Leadership Program:
How do you see applying what you will learn during the Future Ready Leadership Program to your current and potential future roles:
Any other comments that you would like to add:
Any comments from supervisormanagerdirector:
Date_2:
Date_3:
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