Interpreting the Score

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If your score is lower than 19, then your organization is not well prepared to manage

the consequences of the trends as they may influence SP&M.

Improving, through just-in-time inventory methods, the time match between

the need for raw materials and their use in production so as to

reduce inventory holding costs

Reducing the time it takes to fill an order or ship a product from producer

to consumer

Speed is only likely to become more important in the future. That sensitivity

to speed is affecting human resources (HR) practices as well. Many companies

keep statistics to see how long it takes to do the following6:

Justify a position.

Recruit for and fill a vacancy.

Find talent to meet immediate needs or synchronize efforts.

Train people.

In a more stable era, it might have been acceptable to permit a long lead

time between the justification and filling of a position, or the selection of a

qualified person and the realization of full productivity from that worker following

training. But stable times are gone. Time is a resource easily wasted,

and people must be found and oriented so that they can become productive

as quickly as possible.

Trend 2: A Seller’s Market for Skills

Employers in the United States, as in many other parts of the world, have

traditionally taken workers for granted. Many managers still assume that, if

their organizations will only pay enough, they can always find the people they

need to fill any position. But that assumption is not always valid anymore.

There are several reasons why.

First, the U.S. population is aging.7 Fewer workers are entering at the bottom

of organizational pyramids because there are fewer workers of traditional

entry-level age. Those new workers have a work ethic and values different from

those of previous generations. Many prize a balance of work and personal life

that does not match the frenetic pace of many organizations today, where

number of work hours for the average manager are on the rise.8

Second, more people are reaching traditional retirement ages. Some authorities

contend that this will lead to a leadership shortage as senior managers,

traditionally the oldest age group, take advantage of generous retirement

plans.9 Other authorities, however, caution against assuming that people will

retire at traditional ages in the future, since retirement plans and other benefits

are less secure than they once were.10

Third, until recently the U.S. economy sustained a broad expansion for the

longest period in history. Many groups have benefited from this expansion.

While there may be evidence that the rich are getting richer and the poor are

getting poorer,11 it is also true that (at least at the time this book goes to press)

virtually anyone in America who wants a job can find one somewhere. This

means that workers can afford to be more selective about where they work,

which creates a seller’s market for skills.

In response, many U.S. organizations have instituted retention programs

to hold down turnover.12 That is ironic, considering that many organizations

in the 1990s implemented staff reduction plans through downsizings, layoffs,

employee buyouts, and early retirement programs in order to slash payroll

and benefit costs. But, while downsizings continue in the wake of rapid market

changes and corporate mergers, acquisitions, and takeovers, many decision-

makers in organizations are now looking for ways to attract and retain

talent. That is particularly true in information technology jobs, where a muchpublicized

labor shortage is thought to be a driver for future mergers and

acquisitions.

The change in attitude has spawned interest in ways to give people hope

for the future. An SP&M program is one such way, of course. A reinvented

career planning and development program is another, related way.

Trend 3: Reduced Loyalty Among Employers and Workers

There was a time when employees believed that they would get a job with one

company and stay with that company until retirement. A stable employment

record was considered an advantage during job interviews. Likewise, employers

often assumed that, when they extended a job offer, they were establishing

a long-term relationship with the worker. Even poor performers were toler-

ated, and sometimes moved out of the way and into harmless positions to

preserve workers’ feelings of trust and security with their employers.

This, of course, is no longer the case. One result of the downsizing of the

1990s was that employers changed the employment contract.13 As competitive

conditions became more fierce, organizational conditions became less stable.

No longer were employers making a long-term commitment to their employees.

A legacy of this change is that employees have become more interested in

short-term gains, especially in salaries, titles, development opportunities, and

benefits. They want immediate rewards for good performance, since they distrust

their employers’ abilities to reward them in the future for hard work

performed in the present.14 They have changed from showing a tolerance for

delayed gratification to demanding immediate gratification. This change in the

employment contract has profound implications for traditional SP&M practices.

Employees can no longer trust their employers to make good on promises

of future advancement. And, given that attitude, employers can no longer

count on high potentials or exemplary performers patiently performing for

long periods before receiving rewards, advancement, or professional development.

Speed is now as important in managing succession issues as it is in managing

other aspects of organizational practice. Managers must manage against a

backdrop with the possibility of losing valuable talent if they do not identify it

quickly and offer prompt rewards and development opportunities.15

Trend 4: The Importance of Intellectual Capital and Knowledge

Management

Intellectual capital can be understood, at least in one sense, as the collective

economic value of an organization’s workforce.16 The effective use of intellectual

capital is knowledge management.17 It is important to emphasize that, as

the speed of decision making increases in organizational environments and

operations, intellectual capital increases in value because it is essential for

customers to deal with workers who know how to serve them quickly and

effectively. This demands improved knowledge management of the workforce.

While land, capital, and information can be readily obtained from other

sources—and, on occasion, leased, outsourced, or purchased—the organization’s

workforce represents a key asset. Without people who know what the

organization does to serve its customers and how it does that, no organization

could continue to function. In one example I like to use with my students, I

ask them this question: What would a university be without its faculty, administrators,

staff, and students? The answer is that it would be nothing more than

assets ready for liquidation—land, buildings, equipment, and capital. Without

the people, there would be no way to achieve the mission of the university by

teaching, research, and service.

The same principle applies to business organizations. While traditional

managers may view people as a cost of doing business, thought leaders realize

that people represent the only asset that really matters in a competitive environment.

People dream up new products and services. People make the leap

from the results of basic research to the commercialization of applied research.

People come up with technological advancements and use those advancements

to achieve improved productivity and quality. People serve the customers,

make the products, ship them to consumers, bill them, deposit the

proceeds, and manage the organization’s resources. Without people, the competitive

game is lost. That is a lesson that is, unfortunately, too easy to forget

at a time when many people are awed by rapid technological advancement.

Of course, those impressive technological advancements are pointless unless

people make use of them.

The implications of intellectual capital and knowledge management are

important for SP&M. In a sense, succession planning and management is a

means to an end. It is a tool of knowledge management, a means of ensuring

that intellectual capital is properly serviced, retained, cultivated, and protected.

Trend 5: The Importance of Values and Competencies

People in organizations have high expectations of their leaders. These expectations

are unlikely to diminish in the future. People want leaders who can get

results and can, at the same time, model appropriate ethics. For these reasons,

values and competencies have emerged as crucial to success in organizations.

As a later chapter will define them, values can be understood to mean

deeply held beliefs. In the wake of high-profile scandals in the U.S. government,

in other governments such as those of Japan and China, and in many

businesses, values have emerged as a key issue of importance in organizational

settings. Many multinational companies, for instance, have tried to address

cultural differences by establishing core values honored internationally under

one corporate umbrella.18

Competencies, while having different definitions,19 have also emerged as

key to management decision making, human resource practice,20 and SP&M

programs. Values represent a moral dimension to the way leadership is exercised

and work is performed.21 Competencies can represent the distinguishing

features between high performers and average or below-average performers.

More flexible than work activities or tasks, competency models are the glue

that holds together a succession planning effort. The use of competency models

is a distinguishing characteristic between traditional and cutting-edge

SP&M programs. As work becomes more dynamic and divorced from the traditional

‘‘boxes’’ found on organization charts, there must still be a way to describe

what performance is expected. Competency models have the advantage

of providing that flexibility.

Trend 6: More Software to Support Succession

There is more software available to support SP&M, though it sometimes masquerades

under such alternative names as talent management, talent development,

or human capital software. That is both a blessing and a curse. It is a

blessing because, when well formulated and implemented, software permits

individuals and groups that are dispersed geographically to participate. Software

can facilitate decision making on competency identification, values

clarification, 360-degree assessment, individual development planning, identification

of developmental resources to help build competencies (and thereby

close developmental gaps), track individual progress (and thus encourage accountability),

and even measure individuals’ progress and the support provided

by immediate supervisors.

But it can be a curse because some people believe that, when they buy a

technology solution, they are also buying the solutions to their succession

problems. They think that the software will give them ready-made, off-theshelf,

one-size-fits-all competency models, 360-degree assessments, individual

development plans, tracking systems, and developmental methods. Of course,

that is not true. Technology is like an empty glass. HR practitioners and senior

managers cannot avoid the responsibility of filling the glass with corporateculture-

specific competencies, overseeing individual progress, providing realtime

mentoring and coaching, and offering much more than is embedded in

the technology. In short, technology can ease the work, but it will not remove

it. (Chapter 12 of this book describes unique issues associated with the application

of online technology to SP&M.)

Trend 7: The Growing Activism of the Board of Directors

Boards of directors are beginning to take a more active role in SP&M. The

evidence clearly points in that direction. One reason has been the Sarbanes-

Oxley Act of 2002. (See Exhibit 2-2.) A key effect of that act is to increase

board accountability in business operations. And, of course, finding qualified

successors for CEOs on down is an important issue that corporate boards must

perennially address.22

Trend 8: Growing Awareness of Similarities and Differences in

Succession Issues Globally

One size does not fit all—and that is as true of succession planning as it is of

anything else. Unfortunately, it is a lesson that some multinational corporations

(MNCs) have never learned. An all-too-common scenario is that the corporate

headquarters in Europe, the United States, or Japan will establish

succession planning guidelines and then roll them out worldwide, forgetting

Exhibit 2-2. The Sarbanes-Oxley Act of 2002

The Sarbanes-Oxley Act of 2002 has swept the corporate world, leading to widespread

change.1 Introduced in the wake of the spate of scandals that began with

Enron, the Sarbanes-Oxley Act does have an impact on succession issues. It has

prompted corporate boards of directors to take a more active role in succession

issues. It has also prohibited practices that were previously regarded as retention

strategies for key executives, such as permitting personal loans to executives or

allowing CEOs to remain in the room as corporate boards deliberate financial packages.

2 Sarbanes-Oxley has also put real teeth in corporate codes of conduct and

strengthened ethics programs in corporate settings. One indicator: ‘‘the ethics officer

association, a Waltham, Mass.–based organization for managers of ‘ethics,

compliance and business conduct programs,’ has seen membership jump more

than 25 percent since last year.’’3

Notes

1. Steven C. Hall, ‘‘Sarbanes Oxley Act of 2002,’’ Journal of Financial Service

Professionals 57:5 (2003), 14.

2. Dale Buss, ‘‘Corporate Compasses,’’ HR Magazine 49:6 (2004), 127–128,

130, 132; Robert J. Grossman, ‘‘HR on the Board,’’ HR Magazine 49:6 (2004),

56–63.

3. Buss, ‘‘Corporate Compasses,’’ p. 128.

that the world is a big place and national cultural differences do play a role in

effective succession planning practices. The result is that, whatever the approach,

it is only partly effective. An English-language-only literature search

uncovered articles about SP&M in Europe,23 the United States,24 Asia,25 the

Middle East,26 and New Zealand.27 As Hickey notes in writing of SP&M in

China, ‘‘a continued negligence of a systemic succession plan is seemingly

retarding the growth and career development of domestic employees to localize

the organization.’’28 The same could, unfortunately, be said of many other

locales around the world.

What are some of the problems that a global rollout may uncover? Here is

a list of some typical problems and their causes:

U.S. firms will generally prize individualists who can claim credit for

what they have done on their own. That is not true in other cultures, where a

willingness to ‘‘stick one’s head above the crowd may mean it is cut off.’’ In

short, allowances may have to be made for cultural differences in which individual

efforts are prized in those cultures where individualism is prized, while

an individual’s willingness and skill to influence groups may have to be identified

and rewarded in more collectivistic cultures where team efforts are prized.

Some European firms—and some firms in developing nations—will

prize ‘‘family heritage.’’ Ultimately, coming from the European tradition of

aristocracy, this principle means that ‘‘not all people are created equal.’’ Some

people, as George Orwell once noted in Animal Farm, are ‘‘more equal than

others’’ by virtue of birth family, socioeconomic status, schools attended, and

social networks developed from school and family connections. In short, it

means that one’s family may mean that one is destined to be a senior executive

no matter what corporate leaders in other nations may want because that is

just the way things are done locally.

If a universal approach will not work globally, then what approach will

work? The answer is that there is no simple answer. Goals may be established

at corporate headquarters. But, if the approach is to be effective, corporate

leaders should launch facilitated sessions that bring together regional leaders

to have input on the goals, hear about best practices in Western nations (which

may have the most advanced approaches), and (most importantly) discover

what results are to be achieved by those practices. Then the regional leaders

should engage in facilitated discussions where they can ‘‘invent’’ local approaches

that will ‘‘work’’ in their home cultures, and will comply with the

employment laws of each nation.

It is true that such an approach takes time, resources, patience, and hard

work. But in the long run, that approach has the advantage of leading to

‘‘global goals’’ but using ‘‘local approaches to achieve those goals.’’ It will

work.

The alternative is to do as many companies do and just ‘‘roll out something’’

from corporate headquarters. Local people will shake their heads in

wonderment, amazed that global corporate leaders know so little about the

broad differences in local cultures, local realities, and even local labor laws. It

just undermines the credibility of corporate leaders. As globalization exerts

increasing influence, these ‘‘one size fits all’’ approaches will be increasingly

out of step with good business practice. That is especially true when rapidly

advancing technology makes it possible to have videoconferenced and realtime

online discussions cross-culturally to facilitate ideas and approaches.

Trend 9: Growing Awareness of Similarities and Differences of

Succession Programs in Special Venues: Government, Nonprofit,

Education, and Small or Family Business

Just as one size of SP&M program may not fit all internationally, one approach

to SP&M will not work in all venues. While there are many similarities in effective

SP&M programs across business, government, and nonprofit sectors, there

are some important differences as well. The same is true in settings such as

educational institutions, small business, and family business.