Succession Planning Lessons from Leading Organizations

Succession Planning Lessons from Leading Organizations


Notes from the Field

For well over a decade as a consultant and professor studying talent management and succession planning practices, I’ve had the pleasure of working with dozens of organizations across industries and learning from the executives and leadership teams charged with developing the next generation of leadership talent. The volatility of today’s business environment provides a rich learning opportunity for identifying executive succession best practices, including talent acquisition, assessment, development, and retention. Across the many research projects and consulting engagements on succession planning and executive talent management, the single most important and foundational practice or strategy remains the talent assessment process. The quality and consistency of assessing leadership talent has emerged as a cornerstone capability that distinguishes organizations with exemplary performance outcomes (1). Remarkably, a consistent pattern of best practices or ‘lessons learned’ concerning talent assessment has emerged.
 

Lesson #1: Identify Strategic Talent Pools

In an environment of limited resources, notably time and attention from boards and executive teams charged with identifying and developing the next generation of leadership talent, a critical first step consists of clearly identifying the talent pools that are strategically aligned with the organization. For many organizations, these positions include C-suite and business unit leadership roles—CEO, COO, CFO, CMO, CIO, and CHRO. This practice is consistent with leading companies across industries for aligning human capital practices with business strategy. This practice ensures that resources devoted to succession management activities are strongly aligned with the talent pools that have the greatest strategic impact.
 

Lesson #2: Conduct Rigorous Annual Talent Reviews

For best practice organizations, annual talent review sessions are executed with the same rigor and discipline as other important administrative processes such as strategic planning, budgeting, and performance reviews. This best practice is particularly critical for organizations that are facing massive transitions in executive-level positions. At Sutter Health, a 24-hospital health system in Northern California, the annual talent review is a standardized, data-driven process across its business units (hospitals) and management levels. The entire organization’s leadership talent is reviewed sequentially, beginning at the business unit level (hospital) and proceeding through the organization’s regions and system office (corporate headquarters). Importantly, the goal of the talent review process is not replacement planning—the identification of the most likely direct report to replace an incumbent leader—but to cultivate strong succession plans for strategically critical positions and create a central, searchable repository of leadership talent. Highly effective talent reviews are full-day sessions facilitated by HR professionals (or external consultants) in which management teams assess their direct reports, calibrate ratings across team members, and discuss personalized development plans for employees rated as high potentials and high performers. The deeper that talent review sessions are conducted throughout the organization, such as including director- and manager-level leaders as well as C-suite executives and Vice Presidents, the better the long-term outcomes of the process.
 

Lesson #3: Utilize Formal Assessment Tools

A critical lesson learned for many organizations that have initiated annual talent review processes, and subsequently seen them resisted by top management teams, is the importance of using formal assessment tools. Unfortunately, the most common talent assessment practice is the informal judgement of executives or executive teams of their direct reports’ ‘potential’. Failure to use validated, formal assessments tools when assessing leadership talent can inadvertently contribute to talent review discussions that become politicized and characterized by talent-hoarding. Worse yet, management teams are often left with the impression that the talent assessment process is imprecise, subjective, and generally not worth their investment of time.

While best practice organizations utilize a range of formal assessment tools to support the review process, two such instruments are central for the process: validated high-potential leader assessment and nine-box tools. Nine-box tools allow management teams to collective plot employees across (a) job performance and (b) leadership potential. Internal HR professionals or external consultants work collaboratively with top leadership teams to clearly define each dimension of the 9-box grid and the career development implications for employees falling within each box. For example, employees in the upper-right box at Sutter Health are deemed exceptional performers with immediate potential for higher levels. As such, the developmental focus for these employees centers on leadership development activities (Leadership Academy participants, LEAN project, addition of new functions to current position) that will facilitate a two-level promotion within two to three years. For best practice organizations, a robust 9-box grid is supported by utilizing a validated assessment of leadership potential. Rather than assessing potential with simple categories (e.g., ‘high potential’, ‘solid performer’, etc.) and the rater errors and biases that accompany such approaches, highly effective talent reviews utilize validated leadership potential assessments that measure the traits and leadership competencies aligned with performance in future leadership roles.
 

Lesson #4: Link Assessment Results to Developmental Experiences

Companies with highly effective talent assessment practices ensure that the annual talent review sessions balance the discussions of assessment results with thoughtful consideration of leadership and career development opportunities. While the facilitated debate that calibrates the nine-box high potential ratings is critical, the corresponding discussion of developmental assignments, training, and other job experiences is invaluable. In partnership with HR professionals or consultants, management teams must be armed with a range of developmental experiences that are strongly aligned with the strategic initiatives of the organization. For many best practice companies, an internal leadership development program or academy represents an ideal development opportunity for high potential leadership talent. Job rotations or temporary job transfers, LEAN projects, company-wide task forces, and specialized courses or training programs represent additional developmental experiences that should be considered as part of talent review discussions.
 

Lesson #5: Stagger Annual Performance Reviews and Talent Review Processes

A more subtle but nonetheless impactful lesson learned from working with best practice organizations is the timing of talent review processes. Companies with exemplary talent assessment practices avoid the challenges associated with asking leadership teams to simultaneously assess their direct reports’ job performance and leadership potential. Not only does this practice risk diluting the talent assessment discussion given time pressures, but the incidence of rater errors and cognitive biases is much greater. The key lesson learned is to conduct talent assessment activities several months after completing annual performance reviews so that talent review sessions remain focused on discussion of the leadership skills, capabilities, and experiences demanded by future roles.
 

Evidence-based Investment in Talent Assessment

What is the evidence that talent assessment best practices drive superior performance outcomes? My most recent national benchmarking study of talent management and succession planning practices offers compelling evidence of the impact of talent assessment practices (2). Organizations that conduct talent assessment best practices report a leadership benchstrength metric of 45.7%, which is the percentage of critical leadership positions with at least one ‘ready now’ successor, compared to just 7.7% for organizations with little or no focus on talent assessment. Along a similar vein, the internal/external executive placement rate for best practice organizations is 67.7%, indicating that greater than two of every three open executive position (VP or higher) is sourced by internal candidates. By comparison, organizations with minimal emphasis on talent assessment practices report an internal/external executive replacement ratio of only 21%. Given the high costs of executive search activities, as well as impact of excessive external hires on employee morale and productivity, the benefits of highly developed talent assessment activities easily exceed the investment. For Sutter Health, the investment in a best-in-class talent assessment process has realized clear performance outcomes. For 2016, the health system achieved a 79% internal/external executive placement ratio while six of seven hospital CEO positions were filled with internal talent. Overall, the quality and consistency of the talent assessment process, specifically concerning leadership talent, remains a cornerstone capability that clearly distinguishes high-performance organizations.


  1. Kevin S. Groves (2017). Winning Strategies: Building a Sustainable Leadership Pipeline through Talent Management & Succession Planning. Bozeman, MT: Second River Healthcare Press. [URL]
  2. Kevin S. Groves (2015). “Impact of Talent Management Practices on Financial, Workforce, and Value-Based Purchasing Metrics”. Pepperdine University & Groves Consulting Group. Accessed on August 1, 2015 at [URL].
Kevin Groves