Case Study: Succession Planning

Identifying and Developing Leadership for Future Growth

Situation: A widely dispersed $2 billion construction company recognized the need to create a formal process for succession planning. The company had more than 6,500 employees at 15 different business locations (called Areas), and each Area had a high level of independence. Plans for future growth and the coming retirement of several key executives required the company to take seriously their succession planning, which to this point had been haphazard and, in some cases, based on cronyism.

Process: The CEO of the company engaged Myron Beard Executive Consulting (MBEC) to assist in the process of identifying, evaluating, and developing high-potential employees for new leadership positions within the company. MBEC led company executives in the following process:

The MBEC Difference

Through an extensive process of identifying, evaluating, and developing high-potential employees, MBEC helped this large organization create a formal process of succession planning. As a result, the company has maintained consistently good financial performance despite executive retirements and other business challenges.

1. Creating a Business Case: Although the company had a “gut feeling” that there was a looming crisis in leadership, the real need had to be more clearly defined. As a result, MBEC facilitated discussions with management to compare current and future business prospects with the talent required to lead these opportunities. In addition, these discussions identified key individuals facing retirement as well as those now in important positions who were underperforming. The company looked at the cost of not taking action in terms of both opportunities lost and potential underperformance. Through this scenario planning, it became obvious that the company faced critical shortages in leadership over the coming three to five years, and such shortages could have serious financial repercussions.
2. High-Potential Ownership: MBEC led the management team in deciding on answers to three preliminary questions:
   • Should this talent initiative be managed centrally or at the local level?
   • Should the company follow a slate approach (using an organizational chart) or a pool approach (identifying all of the high potentials regardless of where they might fit)?
   • To what degree should new leaders come from within, as opposed to going outside the company to find them?

   Without exception, management wanted any succession planning to focus on individuals within the company with a “grow-your-own” approach. Following rigorous discussion and debate, the company executives, with the counsel of MBEC, decided that the potential risk was so great that whomever was identified as a high-potential individual was “corporate property” and not “owned” by the Areas. In addition, it was determined that this would be a corporate initiative and not the purview of any particular Area or Area Manager, because the corporate level best understood the talent needs across the company. Furthermore, because of this logic, it was clear that a pool approach was more in keeping with the needs of the overall organization than an approach in which a particular high-potential person was “slated” for a single position. From the pool, individuals could be assigned to opportunities across the company and not just in their Areas. One benefit of this approach is that it dramatically increases the career path opportunities for individuals formerly confined to movement within their Areas.

3. Identifying High-Potential Candidates: The next step was for the company to develop a system for identifying high-potential candidates, either at the corporate level or at Area locations. As a first order of business, MBEC helped create a set of criteria for identifying these candidates. Borrowing from the success of leadership development at General Electric during the Jack Welch era, a 9-Box Matrix was employed, evaluating employees on both their performance and their potential to move up at least two levels over the next three years. The criteria developed were rigorous and conformed to both EEOC and ADA guidelines.At both Area and corporate levels, MBEC conducted a series of forums in which all salaried employees were discussed by management. The overall goal was to have transparency for all employees involved and, although the conversations in these forums were confidential, the themes that emerged were shared with employees. Prior to these forums, management had discussions with all employees who were to be reviewed to ensure that they were willing to be part of the process and giving them the option to opt-out (without negative consequences). Following these forums, each employee was given feedback on their perceived areas for development. Those employees identified as having the highest level of both performance and potential were invited to participate in the company’s high-potential leadership program.
4. Developing Talent for the Future: The company realized that having identified those individuals with the highest potential for leadership was a necessary, but not sufficient, step in developing leaders for future business prospects and opportunities. Through the many forums, MBEC identified the key leadership needs of this high-potential group and assisted the company’s training organization in creating a leadership training curriculum designed specifically for this group of talented future leaders. In addition to leadership classes, development included significant individual assessments to better understand their personalities and thinking styles and 360 assessments to understand their behaviors. The high-potential candidates were each assigned an internal mentor, and MBEC provided leadership coaching to prepare them for their next position. Individuals who were identified as having high potential became part of the succession pool—the first group from which candidates for new opportunities were drawn. As a result, the company went from not having a succession planning process to having one that was robust, structured, and dynamic.

Outcome: Succession planning is now part of the company’s culture. The 9-Box Matrix forums occur annually and have become a dynamic part of the company’s succession planning process. The company has been able to maintain consistent financial results in the face of tests such as the retirement of senior leaders, the redeployment of underperforming managers, and extraordinary business challenges. The succession process is now so well established that it is an unquestioned part of business planning. In addition, the leadership development program has become more targeted and focuses on those areas that leaders need to master to become truly effective.