Business Case for Succession

Management
Based on the Findings of the Corporate Leadership Councils
Succession and Leadership Research
CORPORATE LEADERSHIP COUNCIL
2009 Corporate Executive Board
2
Top Leaders Outperform Revenue and Profit Goals
and 80% more likely to outperform profit expectations
Leaders' Performance Against Revenue Goals by Leadership Skill Level
Source: Corporate Leadership Council Improving Business
Leader Effectiveness Survey, 2008.
Leaders with top leadership skills are 50% more likely to substantially
outperform revenue expectations than those with poor leadership skills . . .
Takeaway #1: Top
Leaders Outperform
Revenue Goals
Although long the domain
of HR and academics,
leadership quality has a
real, quantifiable impact
on the business.

The Councils research
finds that leaders with top
leadership skills
outperform revenue and
profit goals more often
than colleagues with poor
leadership skills.


Leadership is assessed
downward Leadership is
assessed by the business
leaders boss, not self-
assessment

Revenue and profit
performance is not
assessed by the rater -
Instead, the business leader
reports separately

Leaders' Performance Against Profit Goals by Leadership Skill Level
Validity Check
Number of
Leaders
Substantially
Outperforming
Revenue
Expectations
Number of
Leaders
Substantially
Outperforming
Profit
Expectations
2009 Corporate Executive Board
3
Organizations Are Not Prepared for Leadership Vacancies
Takeaway #2: Potential
Vacancies Lack Ready
Now Successors
Organizations face potential
leadership vacancies, which
can undermine trajectory
toward economic recovery.

A majority of potential
successors are not prepared
to assume their managers
role. In fact, nearly one-third
of leaders direct reports will
not be ready within the next
two years.
Only one-third of leaders strongly intend to stay at their organization, despite
growing recession . . .
Percentage of Potential Successors
. . . and less than 15% of business leaders direct reports are ready for
immediate transition into the next role
Percentage of Employees with High Intent to Stay with their Organization
Succession Readiness Among Leaders Direct Reports
Source: Corporate Leadership Council EVP Survey and
Improving Business Leader Effectiveness Survey, 2008.
2009 Corporate Executive Board
4
A Lack of Ownership among Leaders
Takeaway #3: Leaders do
not assume responsibility
for succession management
Leaders involvement in
succession management
improves achievement of
talent outcomes, such as
bench strength, employee
engagement, and
retention. Leaders who
effectively manage talent
are four times more
likely to have a ready-
now successor than
ineffective talent
managers.

Leaders participation in
succession management improves
talent outcomes . . .
. . . but only half of leaders intend
to take part in succession
planning
Maximum
Impact on
Talent
Outcomes
Impact of Business Leader Activities on Outcomes Percentage of Leaders Who Intend to Participate in
Succession Planning
Source: Corporate Leadership Council Improving Business
Leader Effectiveness Survey, 2008 and HR Business
Partner Effectiveness Survey, 2007.
2009 Corporate Executive Board
5
Line Managers Need HRs Support
Takeaway #4: HRs most
important work with the
line is succession
management
A majority of line
managers indicate that
their HR business
partners do not provide
effective succession
planning support for the
business.
Percentage of Line Managers Rating HR as Effective at
Succession Management Planning
Source: Corporate Leadership Council HR Business Partner
Effectiveness Survey, 2007.
HR can improve its support of the
business by performing critical talent
planning activities . . .
Maximum
Impact on HR-
Line Support
Effectiveness
. . . but HR is not providing the
succession management support that
line managers need to succeed
Maximum Impact of Strategic HR Activities on HRs
Ability to Support Line Businesses
2009 Corporate Executive Board
6
Takeaway #5: Succession
Management is defined
too narrowly
While most organizations
maintain replacement
plans for top positions,
their succession
management systems do
not prepare the
organizations leadership
pipeline for execution
against strategy.
Replacement Planning: Necessary, But Not Sufficient
Organizations often define succession management as replacement planning alone,
neglecting other relevant activities such as executive recruiting and retention
The Current Succession Planning Process
Identify Executive
Staffing Needs
Diagnose Executive
Staffing Gaps
Create an Executive
Staffing Plan
Questions Addressed
What are the executive staffing needs for the coming year?

What executive staffing gaps do we face?

What leadership skills do we need to recruit to fill the gap?

Questions Unanswered

What are the leadership implications of our strategic
decisions?

How ready is our leadership bench to execute on our
strategic priorities?

What talent management and organizational changes are
necessary to execute on strategic priorities?

2009 Corporate Executive Board
7
Takeaway #6: Manage four
critical succession risks
vacancy, readiness,
transition, and portfolio.
Succession management
systems must prepare for
potential leadership
vacancies, develop
successors for new roles,
guide new leaders into
and through the
organization, and align the
right talent with the right
objectives.
Succession Management Protects Against Four Risks
To ensure effective leadership succession, organizations must build a succession
system addressing four leadership risks

Sample Succession Management Risks and Imperatives
Vacancy Risk

Risk of critical
leadership
positions being vacant


Readiness Risk

Risk of
underdeveloped
successors


Transition Risk

Risk of poor
assimilation of
executive talent into
the organization


Portfolio Risk

Risk of poor
deployment of talent
against business
goals


Imperative #1
Safeguard Business
Critical Capabilities

Identify those capabilities
that are most critical to
business success,
prioritizing succession
risks
and interventions
accordingly.

Imperative #2
Accelerate Executive
Development

Provide executives
with development
experiences earlier in
their careers,
encourage cross-
organization talent
sharing, and manage
the risks of stretch
assignments

Imperative #4
Maximize Strategic
Talent Leverage

Base development and
succession decisions
on the evolving needs
of the company,
overcoming both
structural rigidity and
misalignment between
strategic priorities and
talent capabilities

Imperative #3
Overcome New Hire
Derailers

Understand executives
specific areas for
development, provide
feedback early and
frequently, and ensure
accountability for new
hires success