CEOs Talk: Succession planning

Recognizing that long-term success depends on the quality of its leaders, some companies have become much more attuned to what talent is in the supply chain to stock the senior ranks: who looks good and who doesn’t; what is needed in the future; where to find it.

Canadian HR Reporter asked Canadian business leaders what succession planning looks like in their organizations. We wanted to know who is included in the plan, how they measure preparedness, address areas where they aren’t ready, and of course where does HR fit in.

They told us succession planning has become much more than a contingency plan to fill unexpectedly open positions. It’s an important part of big picture T&D plans and intricately linked to the corporate strategic plan.

In fact, it needs to be a top priority for CEOs. Soon after taking the seat in the chief executive office, a CEO should start thinking about who could and should one day sit around the senior management table, and perhaps even one day take over the president’s seat.

Because, as Kevin Francis of JetForm says, if leaders aren’t being trained, developed and promoted, “you’re a pretty lousy manager.”

Kevin Francis
President and CEO

The Ottawa-based business process solutions provider employs about 650 people and had sales in excess of $94 million last year.

Finding and developing the talent that will one day lead your company is one of the most important duties a CEO has, says Kevin Francis, CEO of Ottawa-based JetForm, an e-process solution provider.

“There is a lot of coaching and mentoring,” he says of the succession planning process at JetForm. “For the most part it is probably the biggest role a CEO has. That is the job to coach and the ability to hire, to develop and train and your ability to promote your people. If at the end of the day you can’t do that, I’d say you’re a pretty lousy manager.”

JetForm is in the process of overhauling its succession planning strategy.

“I’ve been in the organization for a year and I came here after my career (as CEO) at Xerox Canada so I came out of a culture that is steeped in succession planning,” says Francis.

JetForm’s approach to a formal succession planning process is shaped by three important dimensions, he says.

First, there is the reality that the company has to be able to fill all of its key positions to ensure that should they come open through surprise circumstances, the organization will continue to be well managed.

The second is the recognition that giving people development opportunities means they will be better prepared to do their jobs and the company in turn benefits from their growth. “Succession planning provides rich opportunities for people across the organization. The development of a rich set of experiences allows for a greater possibility to solve the challenges the company faces,” he says.

“Priority number three is to do (succession planning) in a way that is unmysterious. In ways that excite people,” he says. When somebody knows they are being developed for a position, they look forward to the development opportunity.

“It will apply to everybody on my top team. All of the vice-presidents and directors and all high-profile managers who have expressed a desire to move on to the director or vice-president level.”

High-profile managers have five characteristics. They have to have a high intellect, great personal skills, be introspective, bring intensity to their work and they also have to have a great deal of integrity. Altogether, candidates considered a part of the succession plan constitute about 10 per cent of the company.

The revised succession planning process will be done in a structured way with 17 leadership characteristics identified as the essential qualities for leaders.

“Part of this is really a gap analysis because you are defining the core competencies they have and obviously there is going to be a gap and that leads you to identify where they need to improve.”

After completing the gap analysis, the next step is to develop a plan to fill whatever gaps are identified.

JetForm uses external programs for development, as well as training internally. An important part of the JetForm succession planning process is ensuring people in the plan get a breadth of experience.

“I’m a very, very big fan of cross-functional mobility. Trying to move people across functions and around the organization.”

Somebody who needs to hone customer focus will be put in a position where she is spending more time with customers. And if somebody needs to get better at leading groups in a project setting, he could find themselves leading a task force.

“We work hand in glove in terms of how we deploy this and how we make sure that it happens in a timely fashion,” says Francis of his relationship with the HR department. “There is only one executive who owns the process and that is the CEO,” he says. “The buck stops with the CEO, but HR operationalizes and makes it all happen.”

The plan will be reviewed twice a year to make sure it still meets the needs of the company and the right steps are being taken. Twelve months is too long to wait. On the other hand, if it is done more than twice a year it becomes too bureaucratic and there probably isn’t enough change happening over three months to make it worthwhile reviewing the plan anyway, Francis says.

Patrick Daniel
President and CEO
Enbridge Inc.

Calgary-based Enbridge employs about 6,000 people internationally and delivers oil and gas throughout Canada and the United States.

Enbridge president and CEO Patrick Daniel knows from first-hand experience how the company’s succession planning system works. He joined the company in 1988, and moved up through the organization to become CEO at the start of this year.

While succession planning naturally serves as one of the cornerstones of Enbridge’s strategy to fill senior posts, Daniel points out that it can’t be the only answer.

“We take (succession planning) quite seriously, and I think it has paid real dividends around here,” he says. “We usually have good internal candidates for jobs because we do spend the time on development. It is our first preference to hire from within but we also recognize the importance of bringing people in from outside the company with an external perspective. We’ve done a very good job here of getting a good mix of people with long-term experience but we also have a number from outside that have some different views to kind of shake us up now and again.”

Enbridge has always done fairly well when it comes to bringing people up through the organization. But recently the company has been concentrating a little more on developing its future successors.

“In the latter years we have begun to focus more on the development aspects of that so that if we have people that are on the plan but not quite ready to be successors we look at what we have to do to develop them and move them along the ranks and to succeed in the organization.”

The succession plan at Enbridge reaches fairly deep into the company. “Basically it goes down to the surpervisor level,” says Daniel. “If a traditional organization would be staff, supervisor, manager, vice-president, president, if you assume a five-level model, we go down to the fourth level,” he explains.

“It is quite low down but we feel that it’s important fairly early on to start to develop the skills for development and for progression.”

Settling on the succession plan, the people involved and the development necessary, is the result of a process that begins, like the plan itself, quite low down in the organization, and funnels back up to the top. “It sort of tiers its way up through the organization,” he says.

“The discussions occur throughout various levels of the organization and it would be basically done by a supervisor in putting together plans indicating who he thinks the likely successors are. As we move it up the line we get to our most senior level, our group vice -presidents or our so called corporate leadership team.” That group then sits down with Daniel to do an overview of the senior two levels of the succession plan and review it so they get cross-functional input.

There is a formal annual review in September where they map out the succession plan. It is then presented to the board of directors at their November meeting.

But succession is something they talk about very regularly, says Daniel. “We also talk about it regularly over the year as we look at development opportunities for individuals and try to do it a little bit throughout the year rather than just do it in November and hang it on the wall. We put together development plans that are then followed up on by each manager along the way.”

As for the openness of the process, Enbridge, like other companies, recognizes that it is vitally important to tell people pegged for senior positions.

“There is a certain amount of transparency. What I mean by that is we identify people as what we call high potential, or ‘high pots,’ and we tell them we believe they have the potential to go further in the organization. There isn’t such transparency that we tell them who their competitors are but it is transparent from the point of view of talking to people that are in the succession plan.”

And when it is determined somebody needs to work on certain competencies, Enbridge has a number of approaches for development.

“It can be done through a combination of job rotation, off-the-job education or on-the-job education. For example we might choose to send people off to a management training courses like a Banff School of Advanced Management or to Ivey (University of Western Ontario) or Harvard. We’d use a program like that, or we would say this individual needs to spend some time in a field position so we should be looking within a year at rotating them off to a district manager position in Regina or maybe he needs an international assignment to develop the skills that we are looking for.”

It is a process Daniel himself is familiar with since he went through it himself.

“It was indicated that I was a high-potential successor in the organization and then coached along the way in terms of my development to make sure I have the experience and background that I need to go where I want to go in the organization.”

It is a process co-ordinated by the HR department, led by Bonnie DuPont, group vice-president, corporate resources, and HR acts as the sponsor for it, says Daniel. But ownership is a joint responsibility of the board, the CEO and the business unit heads. “There isn’t one identified owner, but certainly HR is considered the sponsor that looks after co-ordinating the process.” They oversee all of the development programs and the presentation to the board, for example.

But often it is the business unit heads that are most familiar with the job rotation opportunities or what development staff need. “So it is kind of a partnership between HR and the business unit heads.”

Jeffrey Wasserstein
President and General Manager
Schering Canada Inc.

Based in Montreal, pharmaceutical firm Schering Canada Inc., a subsidiary of Schering-Plough Corporation, has 620 employees.

Pharmaceutical company Schering Canada Inc. is switching to competency models and a more open, communicative style for its succession planning process. The company had been using a management inventory process, handed down from its corporate office in the U.S., that looked at senior executives only and was confidential.

The new competency models approach takes into consideration people’s performance in their current jobs as well as skill sets they have which might apply to jobs at the next level. Skill and personality are taken into consideration, because “it’s not always the case that the best players make the best coaches,” says Schering’s president and general manager, Jeffrey Wasserstein, and “it’s not always the case that a good sales rep would make a good product manager.”

In order to be hired by the firm in the first place, says Wasserstein, you’ve got to have a “certain air of professionalism. Someone who can deal with people with a high degree of schooling and experience in their jobs. We’re in a highly educated environment.”

With that as the baseline, competency models look at each person’s transferable skills including problem-solving and verbal and written communication. Then, the model examines hard skills (product and industry knowledge) and leadership skills.

He says the high-potential people at Schering have a few core competencies in common. They are knowledgeable in their fields and are able to understand the science. They are good problem-solvers and have good communication skills.

The high performers also “think big, but get it done,” he says. Both components — creativity and execution — are necessary in a superstar, says Wasserstein. “You can have the greatest plan in the world but if you don’t execute it, it doesn’t happen. But if you don’t dream the big dream you probably just get complacent. We look for people who exemplify both of those abilities.”

As the culture has evolved, the models likewise have evolved to become more open and inclusive of all levels, allowing for the sharing of information between Schering’s four operating businesses. Importantly, the company demonstrates a willingness to allow people to move up the ladder, and change departments.

“Six months ago, one of the product managers from the animal (health products) side crossed over and is now a product manager for the human-health side,” says Wasserstein. The succession plan also allows people to move from head office, into the field and vice-versa.

Schering’s succession plan includes a once-a-year, formal sit-down with HR, as well as continuous, ongoing discussions throughout the year.

“It’s something we talk about very frequently… any time you’re looking at your bonus structures, your benefits packages. The whole idea is to make sure your top performers are taken care of and continue to be highly motivated.”

During the formal session, HR sits with each member of the nine-person executive team to go through everyone in the organization, usually two or three levels down. Everyone in a key position is discussed: “is somebody ready to go to the next level, or even two levels up? Is he ready now, in two years, or longer than that?” Based on that information they make an individual assessment, which is rolled into the broader, corporate assessment.

Then, HR talks to each director about the other directors’ teams to ensure they know who is available in other business areas.

“We have people who do medical affairs studies and deal with physicians, and we make sure that the marketing units know who those people are and have an assessment of their strengths, so that when there is a product management opening they won’t only look at their own organization, but they’ll look across,” says Wasserstein.

Succession planning is crucial to the firm’s success because it keeps its superstars motivated, he says. “The biggest mistake we can make is to identify people as having high potential and then forget to tell them.” By helping people to continuously move up through the ranks, you’re reminding them that you have faith in them.

Without succession planning, he says, the company would soon grow stagnant. “In our industry, growth comes from new product introductions — it’s the same analysis for people. If you’re not continually bringing in new people and moving them along in your organization eventually it’s just going to stall out.”

How far and how fast people move up is dependent on both individual performance and the needs of the organization. “We just let things unfold that way. Unlike some other companies, we don’t have a set time frame and there’s no agreed-to end game of where you’re going to move to.”

While many executive positions will be filled internally, succession planning is slightly different for the president’s position. The last few presidents — including Wasserstein — have come from Schering subsidiaries in other countries. It’s a fairly good bet that’s where the next one will come from as well, but that decision will be made by Wasserstein’s three bosses.

J. Colin Dodds
Saint Mary’s University

Located in Halifax, Saint Mary’s University is one of the oldest English-speaking universities in the country and has a student body of 7,500 full-time and part-time students, and 860 staff.

Unlike succession planning in most business organizations, finding a new leader at Saint Mary’s University is an open and public competition.

That’s because succession planning takes on more of a recruitment emphasis, where possible successors are selected, or in some cases nominated, and are then put through a rigorous selection process.

It puts much of the responsibility for succession planning on the university’s board of governors. But it also gives other stakeholder groups a say in the process.

“We work more on a stakeholder, collegial model,” says Saint Mary’s University president J. Colin Dodds. “Of course we aren’t judged on stock prices, and we aren’t judged on profit. You have different constituency groups at the university level and when you say who’s going to be responsible for succession planning, it’s not like a corporation where the board and chairman of the board take on that job.”

At Saint Mary’s, succession planning for a new president is a year-long process that starts in the last year of an incumbent’s six-year contract. If the incumbent wishes to stay on he goes through a board committee review.

If the incumbent is not remaining in the position, the board puts together a search committee made up of up to 11 representatives from the board, including the vice-president of administration and vice-president of research and academics. The next step is to advertise the position nationally and locally. In some cases, the search committee will enlist the help of an executive search firm. But before the ads go out, the search committee also reviews competency models and updates the profile of the position, using information from what other Canadian universities are basing their models on. The committee will develop the criteria and then ask for input from various stakeholder groups, including local business, alumni, faculty and even the public at large.

“In our case, the university uses a very different model of management which tends to be more collegial. Deans for example have to work with department chairs, vice-president of academics has to work with the same and I have to work with the same people. So, we look for that input on these decisions,” says Dodds.

“The committee can literally send out thousands of letters seeking input as to what they think the position should be and about what the candidate should look like.”

From there, the committee produces a long-list of candidates that is made public. After a round of interviewing, that list is cut down to two or three candidates that may or may not be made public. These candidates are put through a rigorous selection process, including meetings with business community, faculty and a town hall meeting.

“(At these meetings) they are free to ask you anything they want. You can have anywhere from 150 to 170 people there asking you questions. You have to make a presentation and be prepared to take questions from the floor,” says Dodds.

“It’s recruiting but it certainly gives an opportunity for all the participants in the structure to have their say.”

Throughout the process, the incumbent has no formal say as to who will succeed him. Although board members may ask for an opinion informally, Dodds says it has very little impact.

“I would have no say in my successor. I might be asked my opinion informally but I have no official say, there is no formal mechanism to do that.”

In the end, the search committee will recommend a candidate to the board who will then make the final decision.

Things are a little less complicated if the incumbent wants to stay on after the end of a contract period. If the incumbent asks to have the contract renewed, the search committee will conduct a performance review and, depending on the outcome of the review, offer to renew the contract.

In Dodds case, he was nominated to succeed Kenneth Ozmon, who had headed the university for 21 years. But the same rules still applied. Holding the university’s second top job — vice-president of research and academics — worked in his favour but it was no guarantee he would actually succeed at taking over as president.

“Certainly there are instances where you’re looking at people within an organization and thinking ‘yes, this person could take over.’ I think every organization tends to do that but it’s certainly not formalized here and it certainly is no guarantee. And there was no grooming for me, other than the fact that I was number two at the university for nine years,” says Dodds.

In fact, as trends have shown, most Canadian universities rarely hire internally for their top leadership job, including the University of Toronto which hired from MIT and York University which hired from Wilfred Laurier University.

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