Overhaul your age-old pipeline process and your leaders will start looking a lot more different.
By: Laura Clydesdale, Jeff Rosenthal, Molly Rosen, and Andrea Robb
It took a national reckoning and many years of minimal progress for boards and executive teams to finally take a hard look around the room, only to find out what they already knew: They still have a long way to go before achieving leadership diversity.
While many of these executive teams are vowing to tackle the problem, most struggle to find an approach that can significantly change the makeup of their leaders. Messages of intent are a start, but many of those messages don’t get to the issue’s root, so they lose credibility. Our minds are “stubborn beasts,” according to Iris Bohnet, a professor of public policy and behavioral economist at Harvard University and the author of What Works, via the Harvard Business Review. Her research proves good-faith diversity efforts don’t work.
So … what does?
The Big Problem With Succession Planning
Some committed companies are increasing diversity in the c-suite through hiring. That’s another good start. However, this is an opportune moment to solve a long-standing problem with a durable solution: a revamped succession planning process that reduces subjectivity and widens the aperture of potential successors for leadership roles.
How can “remodeling” succession planning move the diversity needle? First, it can rewire how companies think about who fits the bill for critical roles. “When an organization lacks diversity, it’s not the employees who need fixing—it’s the business systems,” Joan C. Williams, Professor of Law and UC Hastings Foundation Chair and Director of the Center for Worklife Law, writes in the Harvard Business Review.
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Our traditional succession processes have narrowed, rather than broadened, candidate pools by focusing on “check-the-box” qualities. These include a standard set of “right” steps on their career path, close relationships with senior leaders, or a direct manager’s “gut feel” to nominate successor candidates for roles. Unfortunately, these attributes have created what the New York Times journalist Kara Swisher calls “mirrortocracies” (rather than meritocracies), or the phenomenon of selecting new leaders because they look and sound like those who came before them.
Our recent research of 45 Fortune 1000 companies across the country confirms that the succession processes of the past have produced woefully inadequate results:
- Only 16 percent of companies agreed they have a robust pipeline of candidates for roles included in succession.
- A sparse 9 percent agreed their leadership pipelines are diverse.
- Only 14 percent said they have objective processes to evaluate and select successors for open roles, including leaders with non-traditional backgrounds.
Similarly, only 14 percent of leaders surveyed by Deloitte say their companies do succession planning well. And in McKinsey and Company and LeanIn’s 2021 Women in the Workplace study, researchers said, for “the sixth year in a row, women continued to lose ground at the first step up to manager.”
The report calls this the “broken rung” where hiring efforts tend to be better at being egalitarian at entry-level. However, the gender gap then considerably widens when moving up the corporate ladder. Companies promoted only 85 women to manager for every 100 men. Women of color have an even steeper hill to climb. Organizations promoted only 58 Black women and 71 Latinas, respectively.
These dismal findings reflect what we see on the ground every day for all social groups, not just women, where the bottom layers of corporate America look a lot more diverse than the top layers. Worse, 2020 caused a serious backslide in progress, particularly for women, demanding a concentrated intervention by corporate America to right the ship.
When you take a step back and look objectively, it becomes apparent that traditional succession planning hasn’t just been reinforcing the DEI problem. It’s been exacerbating it.
Why You Need to Improve Your Process
Diversifying your corporate leadership teams isn’t only the right thing to do—it’s better for your business, period. Consider the evidence:
- A Boston Consulting Group study shows diverse management teams make 19 percent more revenue due to increased innovation.
- A recent McKinsey study reveals companies in the top quartile for racial and ethnic diversity are 35 percent more likely to have financial returns above their respective national industry medians.
- A study from Bersin by Deloitte says diverse companies have 2.3 times higher cash flow per employee over three years than non-diverse companies do.
- E&Y reports “Socially responsible investing continues to prove to be a promising avenue for growth, with nearly all investors (88 percent) taking into account ESG when making investment decisions.”
In a recent study from Edelman, 77 percent of the American public says it’s vital that companies play a role in creating racial equality to keep or earn both their trust and their dollars.
Put Succession Planning 2.0 to Work
So, how does a company revamp its succession planning process to move from talk to action or from gut feel to unbiased decision making? We now know that the methods and systems “under the hood” of succession planning need rewiring to produce different outcomes. No amount of training can unwind the flawed decision-making we all are prone to in important leadership selection. Research suggests unconscious bias training only works if coupled with de-biased talent programs, including hiring, performance, promotion, and succession planning.
Here, then, are four steps that lead to improved succession planning.
Succession planning step #1: Reorient to a role-based approach.
One major shortcoming of traditional succession planning has been confusing it with the talent review process. We’ve found that leading companies distinguish between talent reviews (individual-driven, done for large populations) and succession reviews (role-driven, done for critical role slates of successor candidates). Leading companies do them both, but separately. Unfortunately, in most cases, companies confuse the traditional talent review for succession planning, which involves a group of leaders subjectively evaluating the performance and potential of successors, often assigning them numbers in a 9-box grid.
The problem? These talent reviews don’t connect to the reality of filling critical roles when they open. Plus, well-documented issues exist in defining “potential,” which limits underrepresented employees from being seen as leadership material. As one study concludes, “Faulty approaches to identifying potential typically take three forms: leaving it to intuition, giving undue weight to experience, or equating potential with current performance. These approaches not only result in weaker overall talent throughout the organization, but they particularly disadvantage diverse talent.”
By driving succession planning with a role-based approach, organizations can measure whether they considered appropriately diverse slates for each role. A role-based approach is like the process of executive recruiting, but with internal candidates. It enables companies to populate internal candidate pools based on more comprehensive and nuanced data, resulting in a broader slate of successors suited to a specific role rather than a general list with overall ‘potential.’
Succession planning step #2: Revise promotion criteria.
Another crucial change needed is to expand the requirements for leadership and make it less rigid and traditional. For example, companies often emphasize a “checklist” that diverse leaders might not have access to: experiences, promotions achieved, relationships built, schools attended. Instead, companies should emphasize more predictive qualities like learning agility, a track record of success (even if in non-traditional environments), grit, resilience, collaboration, and other core factors that better determine success in the position.
Resilience, in particular, has become a core factor in an organization’s ability to compete and is now a well-documented leadership element often overlooked in traditional leadership selection processes. As Stanford professor Shelley J. Correll writes in the Harvard Business Review, “Challenge your hidden preferences by asking what are the mindsets, skills, and diverse experiences that actually lead your team to success.”
These newly defined criteria will not only elevate significantly more candidates with the traits most relevant to solid leadership, but will also identify more diverse candidates. This will ensure that conventional candidates who look and act like most leaders who came before them aren’t the only ones considered.
Case in point: One large services client we work with has a promotional system in place that uses leadership level as criteria. Leaders in the most senior categories are potential successors for other roles at that level. However, leaders one level more junior aren’t eligible until they reach that more senior level. So, they put an artificial barrier on the pipeline of leaders for potential promotion, narrowing the candidate pool and cutting off strong-performing candidates from moving up into these roles.
Succession planning step #3: Be a thermostat, not a thermometer.
We’ve all heard the heroic leader myth that “smart people will figure it out.” Too often, leaders are left to their own devices to sink or swim in new roles. Typically, organizations overemphasize the identification of successors and underemphasize their development. We also see internal successors receive less support in a new position than those selected from the outside, reinforcing the myth that someone from outside of the organization with more experience will succeed in leader roles. The data suggests otherwise.
Lack of support is especially crucial for diverse leaders, where studies show even feedback can be biased, such as men getting more actionable feedback than women. Development helps level the playing field to ensure there are more qualified candidates on the slate; however, only focusing on the general development of underrepresented leaders perpetuates the notion that they need more help than traditional candidates for a leadership role. Often overlooked is that diverse leaders lack support systems and mentorship from other leaders. Therefore, these diverse leaders can benefit from strategic development of capabilities, such as an increased consideration for rotational programs or strategic project teams, carefully selected networks, and career guidance.
Instead of simply monitoring readiness like a thermometer, we should use succession planning more like a thermostat. How? A thermometer tells the temperature; a thermostat adjusts it. When there’s little integration between identified successor pools and development efforts, too many companies find they’re simply monitoring their leaders’ readiness and noting that their demographic makeup is the same year after year after year.
Here’s what one VP of Learning and Development for a major e-commerce company tells us:
“We spend a lot of time putting people into boxes to plan for succession. But at the end of the day, it’s coaching and development that will make the difference. We should spend more time on this versus putting labels on people. Boards like labels and pat themselves on the back for the process. So what? The key is to develop these leaders.”
By integrating succession planning and leadership development, each successor has a clear, focused, and active development plan to prepare them for a future role or grouping of roles. Unfortunately, a surprising number of companies miss the step of intentionally weaving together these two initiatives, partly because of different teams handling succession planning and executive development. And instead of dismissing diverse candidates for experience gaps in their backgrounds, we should give them broader consideration for succeeding despite the obstacles and offer accelerated development to compete with peers who have historically had access to more opportunities.
Succession planning step #4: Set goals and measure.
Harvard Kennedy School Professor Iris Bohnet writes this in the Harvard Business Review:
“I’m a bit on a mission to convince corporations, NGOs, and government agencies to bring the same rigor they apply to their financial decision-making and marketing strategies to their people management. Marketers have been…measuring what works and what doesn’t. HR departments should do the same.”
The good news is that we’re seeing some progress. Companies are beginning to set and measure meaningful goals, and importantly, they’re tying executive compensation to those goals. For example, Nike just announced five-year diversity and inclusion targets along with climate and ethical manufacturing goals. This announcement follows closely on the heels of similar moves by Chipotle, Starbucks, and McDonald’s.
In addition, to foster corporate accountability, Glassdoor recently announced a sixth workplace factor rating, which will “empower employees to rate how satisfied they are with diversity and inclusion at their current or former company, based on a 5-point scale.” The rating will also allow “U.S.-based employees and job seekers to voluntarily and anonymously share their demographic information to help others determine whether a company is actually delivering on its diversity and inclusion commitments.” The bottom line is that if you aren’t measuring, someone else will.
Recent times have taught us the inevitability of unpredictability and have highlighted the stark need for social change. We can tackle both issues with a better succession planning process that yields robust and diverse leadership pipelines. A robust pipeline improves business resiliency during turbulent times by mitigating the risk of leaving key leadership roles unfilled and provides the business continuity plan that boards and shareholders require. A diverse pipeline helps resiliency by ensuring different voices are in the room, which will help address complexity and change. These diverse perspectives are often more closely aligned with their employee and customer base.
Diversity is more than an important social issue; it’s also a business issue. Leaders with varied experiences in different industries and people who have overcome overwhelming odds to succeed are often the leaders today’s business world needs. The case is straightforward that intentional and modern succession planning can create more diverse and qualified leadership pipelines, accelerating company growth. It’s time to overhaul this age-old process, moving it from a source of frustration to an engine of transformation.
Laura Clydesdale, Jeff Rosenthal, Molly Rosen, and Andrea Robb are from ProjectNext Leadership, a consulting firm focused on succession planning and leadership development for leaders in high impact roles.
Laura is a ProjectNext Leadership Senior Associate. She has appeared in the Washington Post, Chicago Tribune, Girls Leadership, and Toronto Star. Leveraging her background in finance and manufacturing at GE and Gap, Inc., she helps organizations redesign processes that minimize unconscious bias and improve diversity at all levels of the corporate pipeline.
Jeff is Co-CEO of ProjectNext Leadership. He formerly ran the succession planning practice at Deloitte Consulting, and previously was CEO of the executive education business at the Berkeley-Haas School of Business.
Molly is Co-CEO of ProjectNext Leadership. She is Founder of Waymark Leadership and former Vice President of leadership consulting firm BlessingWhite. She is a frequent speaker and writer on women’s leadership.
Andrea is a ProjectNext Leadership Senior Associate and former VP of Talent, Culture and Diversity at Autodesk. She was head of Talent Design and Operations at Airbnb, and head of People and Organizational Development at LucasFilm.