Succession

Matters
Effective succession
management planning.

Part one of the Succession Matters series.

 About the study.
A global survey was commissioned by
Korn Ferry and conducted by Hanover Research
during August and September 2014. The survey
covered 54 countries globally and companies
ranging in size from 500 to 50,000+ employees.

It generated more than 1,000 responses from

business leaders at the following levels:
C-suite (41%)
VP/SVP/EVP (42%)
Director (11%)
Other (6%)

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Introduction.
For organizations to succeed, they need to identify, develop, and
support the leaders that will drive their future strategy. Effective
succession management is therefore essential for continued
organizational success.

But what do executives around the world really think about their
succession initiatives? Do they have a view on what best practices
should be? What do they consider to be the benefits of and the
barriers to successful succession management?

Korn Ferry commissioned a global research project on succession

management. The results raise some significant concerns over the
risks businesses are taking, while at the same time presenting real
opportunities for learning and change.

Key findings include:

Dissatisfaction with the status quo.

Only 1/3 of those surveyed reported they are satisfied with
the outcomes of their succession program.

Too much talent bought, not built.

Most agreed that a 2:1 ratio of build vs. buy is preferred,
but the majority still end up going outside more often than
they would like to obtain the talent they need.

Succession planning does not go deep enough.

Organizations need to look at the complete leadership
pipeline to create a sustainable, consistent flow of leaders.

This is the first in a series of reports that discuss the results of the
research and implications of the findings. Our goal is to provide
you with tangible, proven advice on the succession management
processes and talent strategies required to ensure your business
has the future leaders it needs.

RJ Heckman
President,
Leadership and Talent Consulting

February 2015

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 The alarming state of
succession today.
There is a markedly high level of dissatisfaction with the

32%
current state of succession.

But according to Jim Peters, Senior Vice President, Senior

Partner, and Global Lead for Succession Management at Korn
dissatisfied Ferry, this should not come as a surprise, Unfortunately, we
hear this all the time. Despite all the investment organizations
have made in succession management in the last 20
years, there remains a disconnect between the succession
management plan and business strategy.

Joy Hazucha, Global Vice President for the Korn Ferry Institute,
agrees, One-third of the study respondents report that
ready candidates who are promoted are not producing good
results consistently. Why? Because of the disconnect from the
business strategy. It suggests a lack of an effective plan.

Without the right people in the right places, organizations

Almost 1 in 3 of will falter and risk becoming irrelevant in a fast-changing
respondents were
marketplace. Strong leadership has proven to be critical
either dissatisfied
or extremely to executing strategy and the ability to maintain sustained
dissatisfied with leadership is the linchpin for navigating an unpredictable
recent succession business climate.
management
outcomes. Yet it is also one of the most difficult aspects of talent
management to get right.

The answer, Peters believes, is a solid succession management

plan that is designed to meet the changing needs of the
business and not one static process that produces generic
leaders.

This view is echoed by RJ Heckman, President of Leadership

and Talent Consulting at Korn Ferry, The companies that win
are those that strategically align the succession management
plan with the direction of the business. They identify
candidates who can change quickly and have the learning
agility to move as the target moves for the businesss success.

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Whats at risk?
The cost of
Failed promotions and hires can result in exorbitant costs to the disengagement runs
organization due to significant losses in productivity, impact on into billions in dollars.
morale, negative impressions, and disengagement. To reap the full benefits
The top three risks identified by survey respondents are: of any succession
management program,
Losing ready now internal candidates.
diversity and inclusion
Alienating potential successors. need to be firmly on
Naming an ill-fit successor. the agenda.

These are closely followed by: Oris Stuart

Poor employee morale.

High employee turnover.

Competitive decline.

This all goes to show that a good succession management plan

is absolutely key from a future success standpoint, says Chuck
Feltz, Senior Partner and President of Global Products Group
at Korn Ferry. You can perhaps get by without one in the short
term, but in the longer term, if youre going to perpetuate and
grow that success, its absolutely essential.

However, while those organizations surveyed recognize the

dangers of not getting succession management right, more than
half feel their organizations are not addressing the risks theyve
identified.

Its not just the business that is being put at risk but individuals as
well. If you select a high-potential leader whos a great performer
in her current role, send her and her family to China, and two years
later she fails because she wasnt a good fit for the role, youve
hurt a promising career and a family, states Peters.

What drives
succession
management? To meet future strategic initiatives

Respondents rated
To mitigate business risk of too few
the following as key ready now candidates
factors, and weighted
them according to To attract and retain high quality
candidates
their importance.
To address external pressure (CEO
or board is placing more emphasis 14% 37% 28%
on succession management)

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 Build or buy: how are you
sourcing your leaders?
While executives believe promoting from within is by far the most desirable option, most end
up looking outside for key hires.

According to our findings, organizations emphatically favor build (developing within) over
buy (hiring outside). Yet when sourcing leadership talent, almost half of respondents said
they were more dependent on outside hires than internal promotions.

So what is the right mix of build vs. buy?

There are clearly many advantages to internal promotion. It ensures a deep, thorough
understanding of the organization, allowing business intelligence to be passed along to the
next leader. It enables companies to build the skillsets and leadership styles that meet their
precise needs. It also helps with attraction and retention by demonstrating that the
organization is committed to growing leaders.

However, there are situations where organizations have to rely on external hires, for example in
the case of start-ups, emerging industries, or if the organization is experiencing rapid growth.
There are also some unique benefits to sourcing candidates outside the business.

Peters adds, You never want to select all your candidates from internal pools as that cuts you
off from fresh perspectives and new thinking. Each organization is different and you want to
find a good balance that meets your needs.

When looking to fill open leadership positions, what do you consider the ideal mix of build (develop
within) vs. buy (hire outside)?

BUILD

BUY
33%

67%

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How far down does succession
need to go?
In succession management, you need to look at the
complete leadership pipeline, all the way from the senior The Seven CEOs report,
executive level deep into the organization, advises Peters. published by Korn Ferry
A succession management plan will look different for lower in 2014, found that
levels of leadership, but you will find incredibly valuable talent organizations typically
there that you can groom and invest in to secure perpetual have seven potential
successors.
CEOs currently within
But as Hazucha points out, There is considerable evidence their organization (and
in the survey findings that companies are not reaching far also seven layers of
enough down or starting soon enough in identifying potential potential leadership for
candidates to create a supply of ready leaders. other critical roles).

Which of the following levels within your organization are included

in your succession management program?

Top-level (senior)
executives

SVP/VP

Directors

Mid-level managers

First-line leaders

Skilled professionals

0% 20% 40% 60% 80% 100%

For Peters, the fact that only 13% include skilled professionals,
often referred to as high-professional leaders, in their
succession management programs is particularly surprising.
High-professional leaders are those with skills and expertise
that are essential to the success of the business. While
they may traditionally have been overlooked for leadership
advancement, they have in recent years, according to Peters,
become mission critical.

Stu Crandell, Senior Vice President of Global Offerings

at Korn Ferry and the Korn Ferry Institute, agrees, These
high professionals need to see a viable career path in your
organization, because they bring very specialized expertise
to the table that you cannot do without.

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 What are potential leaders
being prepared for?
Most organizations are failing to match potential leadership
NO. OF POTENTIAL candidates with specific roles.
candidates A general pool of high-potential talent can be a rich asset within
IDENTIFIED FOR a company, as long as candidates are matched to specific roles
key roles and developed accordingly. Two-thirds of survey respondents,
in most companies: however, say they have identified key company roles for less
LESS THAN than 10% of their potential leadership candidates.

10% As Crandell notes, How can you ever be ready now if you dont
know what you are supposed to be ready for? The disconnect
keeps people in a perpetual state of development no-mans-land.

Which of the following best describes the percentage of potential

leadership candidates identified for key roles at your company?

40%
34%
32%
30%

20%
13%
11%
9%
10%

1%
0%
0% 1% 5% 6% 10% 11% 51% 16% 20% More than 20%
(n=1,009)

Define your path to succession.

Succession management encompasses the entire leadership pipeline, from the senior
executive level to deep within the organization and across functions.
Succession planning takes into account the second or third generation of individuals who
could replace the C-suite, with some development actions.
Replacement planning is a formal or informal understanding of who would take over a CEO
or C-suite executives role in the event of a crisis.

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So what does effective succession
management look like?
Given the dissatisfaction reported in our findings, what then
is the approach of those organizations who offer successful
succession management programs?

Organizations with the most mature talent management

practices tend to:

Have a succession management program that goes

deeper than the top levels.

Define what talent is needed to support their

business strategy.

Accurately identify leadership potential.

Provide holistic development opportunities.

Check for promotion readiness, with targeted

development to fill gaps.

Offer transition support when a leader is promoted.

Effective succession management ensures minimal disruption

when vacancies occur, a consistent transfer of mindshare, and
continuity of leadership culture.

It also creates the conditions for intentional strategic change

and mitigates the risk of loss during unexpected crisis or
sudden absence of leadership.

Ignite your workforce.

The lack of diversity within senior executive teams is a critical issue for many CEOs and CHROs
globally.
As Oris Stuart, Senior Partner, Workforce, Performance, Inclusion and Diversity, at Korn
Ferry explains, The right performance environment and organizational culture need to be in
place so that employees of all backgrounds, experiences, and other diversity dimensions can
advance and contribute at the highest possible level.
Korn Ferrys Workforce Performance, Inclusion and Diversity solutions can help
organizations drive employee engagement so that they can benefit from a diverse mix of
talent.

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 The secret to getting
succession right: have a plan.
Developing and maintaining an effective succession management
Your talent review. plan begins with knowing what type of leaders you need in
One of the most effective specific roles to achieve your organizational strategy.
succession planning tools This requires an organization to:
is a talent review. However,
many processes do not Agree on strategic direction. Discussions about future
include the systemic and business leaders will stall if everyone on the board has
holistic approach needed a different perspective on the future of the business.
to gain a complete, clear,
and actionable view of Describe the types of leaders you need. What kind of
talent. people will be able to execute your strategy over the
next five years?
Your talent review should:
The next step is to:
Accurately assess
long-term potential. Create a coherent, formal process for evaluating internal
Identify mission critical and external talent. This is essential in identifying all those
competencies. elements that are needed to drive business strategy.

Incorporate The benefit of an effective succession management plan is that

development plans it provides you with a common language for talent, potential,
through strategic job development, and expectations.
assignments, targeted
learning experiences, It also provides key intelligence on:
coaching, and
Your most critical roles.
mentoring.
The business impact of vacancies.
The Korn Ferry Talent
Review uses a Performance The traits and drivers of your people.
and Potential Matrix,
Talking Talent sessions Where the talent gaps are.
to discuss succession
This succession insight is key to helping you identify, develop, and
considerations and
successfully promote a steady pipeline of ready now leaders.
decisions, and Talking
Development sessions to
create development plans.

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What does ready now
actually mean?
Having a steady stream of global ready now leaders is the
ultimate goal of any succession management plan. However, Leadership qualities.
our findings reveal that half of respondents do not feel that To succeed in leadership
their organization has a sufficient ready now talent pipeline. roles, individuals must be:
Developing leaders who can be officially deemed ready now Accurately identified
takes consistency, accountability, and a systemic approach. as high-potential
This can be difficult for organizations that do not have an candidates.
effective succession management plan and lack a clear
Aligned to future
picture of the current state of their talents true readiness.
positions.
It is common for such organizations to struggle with leaders
Developed specifically
who have been on the succession chart for years and whose
to be successful in those
development lags as a result. Likewise, when a position opens,
roles.
it can often go to a candidate who is not on the succession
chart, creating disruption not only to the business but to Evaluated for readiness
teams, culture, and morale. and given further
targeted development
For Steve Newhall, Senior Partner at Korn Ferry, developing
to close gaps.
ready now leaders requires organizations to articulate more
carefully what is needed to succeed, by evaluating gaps and Deemed ready now
holding regular talent reviews. The approach many companies once those gaps have
take, he explains, is to say this leader will be ready in x been closed.
amount of time. But it is far more effective to say this leader
will be ready when x has occurred, for example, when he
or she has managed a full P&L.

Please indicate how strongly you agree or disagree with the following statements.

Ready now candidates who get promoted

consistently produce good business results

Leadership candidates who are rated ready

now are the ones that are routinely promoted
to fill key vacancies within our company

Our company currently has a solid pipeline of

leadership candidates who we would consider
ready now
(n=982)

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 Take a holistic approach.
Performance, engagement, and culture are all driven by
a deep understanding of people. The Korn Ferry Four
Dimensions of Leadership and Talent provides a complete
picture of the individual qualities that drive performance
and engagement, and forms the basis for all our solutions.

This comprehensive framework, anchored by research on

talent at all levels, addresses the foundations of human
behavior: Traits, Drivers, Experiences, and Competencies.

It is used in multiple ways to:

Establish and augment profiles that define success

for specific roles.

Identify gaps between the leaders you have and the

leaders you need.

Pinpoint key qualities to select and promote against,

and target development.

More accurately identify high performers.

Take the guesswork out of your most important

talent decisions.

Competencies Experiences
Skills and behaviors required for Assignments or roles that prepare a
success that can be observed. person for future opportunities.

FOR EXAMPLE FOR EXAMPLE

Decision quality, strategic mindset, Functional experiences,
global perspective and business international assignments,
insight. turnarounds and fix-its.

WHAT YOU DO

WHO YOU ARE

Traits Drivers
Inclinations, aptitudes and natural Values and interests that influence a
tendencies a person leans toward, persons career path, motivation
including personality traits and and engagement.
intellectual capacity.

FOR EXAMPLE FOR EXAMPLE

Assertiveness, risk taking, Power, status, autonomy and
confidence and aptitude for logic challenge.
and reasoning.

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Conclusion and
recommendations.
An effective succession management plan is critical for any
organization. Its a way of ensuring you have the right talent in the
right place at the right time to activate, drive, and execute your
business strategy.

As you evaluate your organizations current state of succession

management, we recommend that your organization follows this
three step process:

1. What leadership talent do you need?

Organizations need to align their talent and business
1
What
strategies so that they can accurately pinpoint those leadership
key skill requirements. talent do you
need?
Questions to consider:
What is the success profile for business critical roles? 3 2
What
Does leadership development focus on the right skills? How
do you close leadership
Is the person being prepared for the challenges of a the gaps? talent do you
have?
different role?

2. What leadership talent do you have?

Awareness of the talent gaps will enable organizations to
assess and identify their current and future capabilities.
Questions to consider:
Are you engaging in conversations with your leaders about
their career options?
Do they actually want to be considered for promotion? We cant stress enough
Have leaders been identified for specific roles? Has their how important it is to
readiness been assessed? get succession right.
It is the lifeblood of
3. How do you close the gaps?
an organization and
Execute your talent management strategy and start to fill
there is no reason that
key leadership roles.
organizations cant plan
Questions to consider:
a successful program
Are ready now leaders being kept engaged with robust
that produces the
development experiences?
leaders they need.
When the time comes for promotion, is there support
for the leaders transition? Jim Peters
Is development being targeted to fill any gaps?

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 It is also important to remember that the succession process is a
means to an end.

At the end of the day, what really matters to the CEO and board
of directors is not the succession process itself, explains Crandell.
Its ensuring that succession produces the leaders they need to
take the business where they want it to go.

Up next:
Identifying the right
candidates in your
succession management
program.

A robust planning procedure will prepare you for the next

phase of succession management.
In the second report of the Succession Matters series,
we look at the risks and cost implications of talent
misidentification and the reasons behind succession
management failure.

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 Succession Matters

ONLY of skilled professionals

NO. OF POTENTIAL
candidates
13%
are included in
succession programs. IDENTIFIED FOR
key roles
in most companies:
LESS THAN

10%
RISKS OF FAILED
PROMOTIONS/HIRES:
MISSED OPPORTUNITY
LOST TALENT
Less than 1 in 4
LOW MORALE companies believe they have
a "ready now" talent pipeline.
COMPETITIVE DECLINE

EXORBITANT COSTS

SUCCESSION PROGRAM SATISFACTION: The companies that win are

those that strategically align
32% dissatisfied the succession management
plan with the direction of
Almost 1/3 of respondents were either the business.
dissatisfied or extremely dissatisfied with RJ Heckman, President of Leadership
recent succession management outcomes. and Talent Consulting at Korn Ferry

Build vs. Buy:

Yet... 62%
ALMOST

50% D O NO T
are more dependent INCLUDE MANAGERS
Ideal mix on outside hires than IN SUCCESSION PROGRAMS
internal promotions.

Effective succession management planning. kornferry.com/successionmatters

Part one of the Succession Matters series. #successionmatters
About Korn Ferry
At Korn Ferry, we design, build, attract and ignite talent. Since
our inception, clients have trusted us to help recruit world-class
leadership. Today, we are a single source for leadership and talent
consulting services to empower businesses and leaders to reach
their goals. Our solutions range from executive recruitment
and leadership development programs, to enterprise learning,
succession planning and recruitment process outsourcing (RPO).

About The Korn Ferry Institute

The Korn Ferry Institute, our research and analytics arm, was
established to share intelligence and expert points of view on talent
and leadership. Through studies, books and a quarterly magazine,
Briefings, we aim to increase understanding of how strategic talent
decisions contribute to competitive advantage, growth and success.

If youd like to find out more, please visit Korn Ferry at

www.kornferry.com or www.kornferryinstitute.com
for articles, research and insights.

kornferry.com/successionmatters
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