Human Capital: Succession Planning and Management Is Critical Driver of Organizational Transformation
Published: 2003-10-01T00:00:00

Fast Facts:

Highlights:
section_title: Why GAO Did This Study
paragraphs: Leading public organizations here and abroad recognize that a more strategic approach to human capital management is essential for change initiatives that are intended to transform their cultures. To that end, organizations are looking for ways to identify and develop the leaders, managers, and workforce necessary to face the array of challenges that will confront government in the 21st century. The Subcommittee on Civil Service and Agency Organization, House Committee on Government Reform, requested GAO to identify how agencies in four countries--Australia, Canada, New Zealand, and the United Kingdom--are adopting a more strategic approach to managing the succession of senior executives and other public sector employees with critical skills.
section_title: What GAO Found
paragraphs: As part of a reexamination of what the federal government should do, how it should do it, and in some cases, who should be doing it, it is important for federal agencies to focus not just on the present but also on future trends and challenges. Succession planning and management can help an organization become what it needs to be, rather than simply to recreate the existing organization. Leading organizations go beyond a succession planning approach that focuses on simply replacing individuals and engage in broad, integrated succession planning and management efforts that focus on strengthening both current and future organizational capacity. As part of this broad approach, these organizations identify, develop, and select successors who are the right people, with the right skills, at the right time for leadership and other key positions. Governmental agencies around the world anticipate the need for leaders and other key employees with the necessary competencies to successfully meet the complex challenges of the 21st century. To this end, the experiences of agencies in Australia, Canada, New Zealand, and the United Kingdom can provide insights to federal agencies, many of which have yet to adopt succession planning and management initiatives that adequately prepare them for the future.

section_title: Letter
paragraphs: Leading public organizations here  and abroad recognize that a more  strategic approach to human  capital management is essential for  change initiatives that are intended  to transform their cultures.  To that  end, organizations are looking for  ways to identify and develop the  leaders, managers, and workforce  necessary to face the array of  challenges that will confront  government in the 21st  century.
As part of a reexamination of what the federal government should do, how it  should do it, and in some cases, who should be doing it, it is important for  federal agencies to focus not just on the present but also on future trends  and challenges.  Succession planning and management can help an  organization become what it needs to be, rather than simply to recreate the  existing organization.
Leading organizations go beyond a succession planning approach that  focuses on simply replacing individuals and engage in broad, integrated  succession planning and management efforts that focus on strengthening  both current and future organizational capacity.  As part of this broad  approach, these organizations identify, develop, and select successors who  are the right people, with the right skills, at the right time for leadership and  other key positions.
The Subcommittee requested GAO  to identify how agencies in four  countries—Australia, Canada, New  Zealand, and the United Kingdom—  are adopting a more strategic  approach to managing the  succession of senior executives  and other public sector employees  with critical skills.  The  Subcommittee is releasing this  report—Human Capital: Insights  for U.S. Agencies from Other  Countries’ Succession Planning  and Management Initiatives  (GAO-03-914)—at today’s hearing.
Governmental agencies around the world anticipate the need for leaders and  other key employees with the necessary competencies to successfully meet  the complex challenges of the 21st  century.  To this end, the experiences of  agencies in Australia, Canada, New Zealand, and the United Kingdom can  provide insights to federal agencies, many of which have yet to adopt  succession planning and management initiatives that adequately prepare  them for the future.  Collectively, agencies in other countries implemented  the practices shown below.
Selected Practices Used by Agencies in Other Countries to Manage Succession
Receive active support of top leadership.
Link to strategic planning.
Identify talent from multiple organizational levels, early in careers, or with  critical skills.
Emphasize developmental assignments in addition to formal training.
Address specific human capital challenges, such as diversity, leadership  capacity, and retention.
Facilitate broader transformation efforts. www.gao.gov/cgi-bin/getrpt?GAO-04-127T.
To view the full product, including the scope  and methodology, click on the link above.  For more information, contact J. Christopher  Mihm at (202) 512-6806 or mihmj@gao.gov.
Madam Chairwoman and Members of the Subcommittee:  I am pleased to be here today to discuss the need for increased attention  on succession planning and management in the federal government.  My  main point today is that the experiences of other countries can provide  insights to agencies here in the United States on how to engage in broad,  integrated succession planning and management efforts to identify and  develop the leaders, managers, and workforce necessary to meet the  challenges that will confront government in the 21st century.  Chairwoman  Davis, today you are releasing a report that we prepared at your and  Senator Voinovich’s request that shows specific practices that leading  public sector organizations abroad are implementing as part of their  integrated succession planning and management initiatives that focus on  strengthening both current and future organizational capacity.
We recently testified before your subcommittee that fundamental  questions need to be asked about what the federal government should do,  how it should do it, and in some cases, who should be doing it.  As federal agencies seek to transform their cultures in response to governance  challenges, it is important to focus not just on the present but also on  future trends and challenges.  As part of this reexamination, succession  planning and management can help the organization become what it needs  to be, rather than simply to recreate the existing organization.
Over the past several years, countries around the world have increasingly  come to recognize the challenges posed by succession.  For example,  Canada faces a public service workforce with about 80 percent of both its  executives and executive feeder groups eligible to retire by the end of the  decade.  In the United States, we project that more than half of all the  members of the Senior Executive Service (SES) employed by the  government in October 2000 will have left by October 2007 and about 15  percent of the overall federal workforce will retire from 2001 to 2006.
U.S. General Accounting Office, Human Capital: Insights for U.S. Agencies from Other Countries’  Succession Planning and Management Initiatives, GAO-03-914 (Washington, D.C.: Sept. 15, 2003). adequately prepare them for the future.  In 1997, the National Academy of  Public Administration reported that of the 27 agencies responding to its  survey, 2 agencies had a succession planning program or process in place.  In a 1999 joint Office of Personnel Management (OPM) and Senior  Executive Association survey of the SES, more than 50 percent of all  career members said that their agencies did not have a formal succession  planning program for the SES, and almost 75 percent said that their  agencies did not have such a program for managers.
Succession planning and management is starting to receive increased  attention.  Madam Chairwoman, at your request, GAO is to review how  selected U.S. federal agencies are managing their succession challenges.  In addition, the Office of Management and Budget revised Circular A-11 to  require that federal agencies’ fiscal year 2005 annual performance plans  prepared under the Government Performance and Results Act identify  specific activities such as training, development, and staffing actions that  agencies plan to take to ensure leadership continuity.  In addition, as part  of the administration’s efforts to implement the President’s Management  Agenda, the OPM set the goal that continuity of leadership and knowledge  is assured through succession planning and professional development  programs in 25 percent of all federal agencies by July 2004.
Today, I will briefly highlight the key practices for effective succession  planning and management we identified abroad that we encourage federal  agencies to consider as they revise or develop their own programs in this  area.  As you know from testimonies by the Comptroller General, GAO has  several initiatives to strengthen its current and future organizational  capacity that are consistent with these practices.  For example, we  implemented an Executive Candidate Development Program to prepare  candidates for assignment in the SES; hired senior-level individuals with  critical scientific, technical, and professional expertise; recruited and hired  diverse, high-caliber staff with needed skills and abilities; and instituted a  program that would allow select retirees to become reemployed annuitants  to facilitate the transfer of knowledge in critical areas and allow for a  smooth transfer of responsibilities, among other things.
subsections: section_title: Other Countries’ Succession Planning and Management Practices
paragraphs: Leading organizations engage in broad, integrated succession planning and  management efforts that focus on strengthening both current and future  organizational capacity.  As part of this approach, these organizations identify, develop, and select successors who are the right people, with the  right skills, at the right time for leadership and other key positions.  We  identified specific succession planning and management practices that agencies in Australia, Canada, New Zealand, and the United Kingdom are  implementing that reflect this broader focus on building organizational  capacity.  Collectively, these agencies’ succession planning and  management initiatives demonstrated the following six practices.  1. Receive Active Support of Top Leadership.  Effective succession  planning and management initiatives have the support and commitment of  their organizations’ top leadership.  In other governments and agencies, to  demonstrate its support of succession planning and management, top  leadership actively participates in the initiatives.  For example, each year  the Secretary of the Cabinet, Ontario Public Service’s (OPS) top civil  servant, convenes and actively participates in a 2-day succession planning  and management retreat with the heads of every government ministry.  At  this retreat, they discuss the anticipated leadership needs across the  government as well as the individual status of about 200 high-potential  executives who may be able to meet those needs over the next year or two.
Top leadership also demonstrates its support of succession planning and  management when it regularly uses these programs to develop, place, and  promote individuals.  The Royal Canadian Mounted Police’s (RCMP)  senior executive committee regularly uses the agency’s succession  planning and management programs when making decisions to develop,  place, and promote its top 500-600 employees, both officers and civilians.  The RCMP’s executive committee, consisting of the agency’s chief  executive, the chief human capital officer, and six other top officials,  meets quarterly to discuss the organization’s succession needs and to  make the specific decisions concerning individual staff necessary to  address those needs.
Lastly, top leaders demonstrate support by ensuring that their agency’s  succession planning and management initiatives receive sufficient funding  and staff resources necessary to operate effectively and are maintained  over time.  Such commitment is critical since these initiatives can be  expensive because of the emphasis they place on participant development.  For example, a senior human capital manager told us that the Chief  Executive of the Family Court of Australia (FCA) pledged to earmark  funds when he established a multiyear succession planning and  management program in 2002 despite predictions of possible budget cuts  facing FCA.  Similarly, at Statistics Canada—the Canadian federal  government’s central statistics agency—the Chief Statistician of Canada  has set aside a percentage, in this case over 3 percent, of the total agency  budget to training and development, thus making resources available for  the operation of the agency’s four leadership and management  development programs.  According to a human capital official, this strong  support has enabled the level of funding to remain fairly consistent over  the past 10 years.  2. Link to Strategic Planning.  Leading organizations use succession  planning and management as a strategic planning tool that focuses on  current and future needs and develops pools of high-potential staff in order  to meet the organization’s mission over the long term.  Succession  planning and management initiatives focus on long-term goals, are closely  integrated with their strategic plans, and provide a broader perspective.
For example, Statistics Canada considers the human capital required to  achieve its strategic goals and objectives.  During the 2001 strategic  planning process, the agency’s planning committees received projections  showing that a majority of the senior executives then in place would retire  by 2010, and the number of qualified assistant directors in the executive  development pool was insufficient to replace them.  In response, the  agency increased the size of the pool and introduced a development  program of training, rotation, and mentoring to expedite the development  of those already in the pool.
For RCMP, succession planning and management is an integral part of the  agency’s multiyear human capital plan and directly supports its strategic  needs.  It also provides the RCMP Commissioner and his executive  committee with an organizationwide picture of current and developing  leadership capacity across the organization’s many functional and  geographic lines.  To achieve this, RCMP constructed a “succession  room”—a dedicated room with a graphic representation of current and  potential job positions for the organization’s top 500-600 employees  covering its walls—where the Commissioner and his top executives meet  at least four times a year to discuss succession planning and management  for the entire organization.  3. Identify Talent from Multiple Organizational Levels, Early in  Careers, or with Critical Skills.  Effective succession planning and  management initiatives identify high-performing employees from multiple  levels in the organization and still early in their careers.  RCMP has three  separate development programs that identify and develop high-potential  employees at several organizational levels.  For example, beginning at  entry level, the Full Potential Program reaches as far down as the front-line  constable and identifies and develops individuals, both civilians and  officers, who demonstrate the potential to take on a future management  role.  For more experienced staff, RCMP’s Officer Candidate Development  Program identifies and prepares individuals for increased leadership and  managerial responsibilities and to successfully compete for admission to  the officer candidate pool.  Finally, RCMP’s Senior Executive Development  Process helps to identify successors for the organization’s senior executive  corps by selecting and developing promising officers for potential  promotion to the senior executive levels.
The United Kingdom’s Fast Stream program targets high-potential  individuals early in their civil service careers as well as recent college  graduates.  The program places participants in a series of jobs designed to  provide experiences, each of which is linked to strengthening specific  competencies required for admission to the Senior Civil Service.  According to a senior program official, program participants are typically  promoted quickly, attaining midlevel management in an average of 3.5  years, and the Senior Civil Service in about 7 years after that.
In addition, leading organizations use succession planning and  management to identify and develop knowledge and skills that are critical  in the workplace.  For example, Transport Canada estimated that 69  percent of its safety and security regulatory employees, including  inspectors, are eligible for retirement by 2008.  Faced with the urgent need  to capture and pass on the inspectors’ expertise, judgment, and insights  before they retire, the agency embarked on a major knowledge  management initiative in 1999 as part of its succession planning and  management activities.  To assist this knowledge transfer effort, Transport  Canada encouraged these inspectors to use human capital flexibilities  including preretirement transitional leave, which allows employees to  substantially reduce their workweek without reducing pension and  benefits payments.  The Treasury Board of Canada Secretariat, a federal  central management agency, found that besides providing easy access to  highly specialized knowledge, this initiative ensures a smooth transition of  knowledge from incumbents to successors.  4. Emphasize Developmental Assignments in Addition to Formal  Training.  Leading succession planning and management initiatives  emphasize developmental or “stretch” assignments for high-potential  employees in addition to more formal training components.  These  developmental assignments place staff in new roles or unfamiliar job  environments in order to strengthen skills and competencies and broaden  their experience.  For example, in Canada’s Accelerated Executive  Development Program (AEXDP), developmental assignments form the  cornerstone of efforts to prepare senior executives for top leadership roles  in the public service.  These assignments help enhance executive  competencies by having participants perform work in areas that are  unfamiliar or challenging to them in any of a large number of agencies  throughout the Canadian Public Service.  For example, a participant with a  background in policy could develop his or her managerial competencies  through an assignment to manage a direct service delivery program in a  different agency.
One challenge sometimes encountered with developmental assignments in  general is that executives and managers resist letting their high-potential  staff leave their current positions to move to another organization.  Agencies in other countries have developed several approaches to respond  to this challenge.  For example, once individuals are accepted into  Canada’s AEXDP, they are employees of, and paid by, the Public Service  Commission, a central agency.  Officials affiliated with AEXDP told us that  not having to pay participants’ salaries makes executives more willing to  allow talented staff to leave for developmental assignments and fosters a  governmentwide, rather than an agency-specific, culture among the  AEXDP participants.  5. Address Specific Human Capital Challenges, Such as Diversity,  Leadership Capacity, and Retention.  Leading organizations stay alert  to human capital challenges and respond accordingly.  Government  agencies around the world, including in the United States, are facing  challenges in the demographic makeup and diversity of their senior  executives.
Achieve a More Diverse Workforce.  Leading organizations recognize that  diversity can be an organizational strength that contributes to achieving  results.  For example, the United Kingdom’s Cabinet Office created  Pathways, a 2-year program that identifies and develops senior managers  from ethnic minorities who have the potential to reach the Senior Civil  Service within 3 to 5 years.  This program is intended to achieve a  governmentwide goal to double (from 1.6 percent to 3.2 percent) the  representation of ethnic minorities in the Senior Civil Service by 2005.  Pathways provides executive coaching, skills training, and the chance for  participants to demonstrate their potential and talent through a variety of  developmental activities such as projects and short-term work placements.
Maintain Leadership Capacity.  Both at home and abroad, a large  percentage of senior executives will be eligible to retire over the next  several years.  Canada is using AEXDP to address impending retirements  of assistant deputy ministers—one of the most senior executive-level  positions in its civil service.  As of February 2003, for example, 76 percent  of this group are over 50, and approximately 75 percent are eligible to  retire between now and 2008.  A recent independent evaluation of AEXDP  by an outside consulting firm found the program to be successful and  concluded that AEXDP participants are promoted in greater numbers than,  and at a significantly accelerated rate over, their nonprogram counterparts.
Increase Retention of High-Potential Staff.  Canada’s Office of the Auditor  General (OAG) uses succession planning and management to provide an  incentive for high-potential employees to stay with the organization and  thus preserve future leadership capacity.  Specifically, OAG identified  increased retention rates of talented employees as one of the goals of the  succession planning and management program it established in 2000.  Over  the program’s first 18 months, annualized turnover in OAG’s high-potential  pool was 6.3 percent compared to 10.5 percent officewide.  This official  told us that the retention of members of this high-potential pool was key to  OAG’s efforts to develop future leaders.  6. Facilitate Broader Transformation Efforts.  Effective succession  planning and management initiatives provide a potentially powerful tool  for fostering broader governmentwide or agencywide transformation by  selecting and developing leaders and managers who support and champion  change.  For example, in 1999, the United Kingdom launched a wide- ranging reform program known as Modernising Government, which  focused on improving the quality, coordination, and accessibility of the  services government offered to its citizens.  Beginning in 2000, the United  Kingdom’s Cabinet Office started on a process that continues today of  restructuring the content of its leadership and management development  programs to reflect this new emphasis on service delivery.  For example,  the Top Management Programme supports senior executives in developing  behavior and skills for effective and responsive service delivery, and  provides the opportunity to discuss and receive expert guidance in topics,  tools, and issues associated with the delivery and reform agenda.  These  programs typically focus on specific areas that have traditionally not been  emphasized for executives, such as partnerships with the private sector  and risk assessment and management.
Preparing future leaders who could help the organization successfully  adapt to recent changes in how it delivers services is one of the objectives  of the FCA’s Leadership, Excellence, Achievement, Progression program.  Specifically, over the last few years FCA has placed an increased emphasis  on the needs of external stakeholders.  This new emphasis is reflected in  the leadership capabilities FCA uses when selecting and developing  program participants.  The program provides participants with a  combination of developmental assignments and formal training  opportunities that place an emphasis on areas such as project and people  management, leadership, and effective change management.