Human Capital: Succession Planning and Management Is Critical Driver of Organizational Transformation

Published by the Government Accountability Office on 2003-10-01.

Below is a raw (and likely hideous) rendition of the original report. (PDF)

                             United States General Accounting Office

GAO                          Testimony
                             Before the Subcommittee on Civil Service and Agency Organization,
                             Committee on Government Reform,
                             House of Representatives

For Release on Delivery
Expected 2 p.m. EDT
Wednesday, October 1, 2003   HUMAN CAPITAL
                             Succession Planning and
                             Management Is Critical
                             Driver of Organizational
                             Statement of J. Christopher Mihm
                             Director, Strategic Issues


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                                                October 1, 2003

                                                HUMAN CAPITAL

                                                Succession Planning and Management Is
Highlights of GAO-04-127T, testimony before     Critical Driver of Organizational
the Subcommittee on Civil Service and
Agency Organization, Committee on               Transformation
Government Reform, House of

Leading public organizations here               As part of a reexamination of what the federal government should do, how it
and abroad recognize that a more                should do it, and in some cases, who should be doing it, it is important for
strategic approach to human                     federal agencies to focus not just on the present but also on future trends
capital management is essential for             and challenges. Succession planning and management can help an
change initiatives that are intended            organization become what it needs to be, rather than simply to recreate the
to transform their cultures. To that
                                                existing organization.
end, organizations are looking for
ways to identify and develop the                Leading organizations go beyond a succession planning approach that
leaders, managers, and workforce                focuses on simply replacing individuals and engage in broad, integrated
necessary to face the array of                  succession planning and management efforts that focus on strengthening
challenges that will confront                   both current and future organizational capacity. As part of this broad
government in the 21st century.
                                                approach, these organizations identify, develop, and select successors who
                                                are the right people, with the right skills, at the right time for leadership and
The Subcommittee requested GAO
to identify how agencies in four                other key positions.
countries—Australia, Canada, New                Governmental agencies around the world anticipate the need for leaders and
Zealand, and the United Kingdom—                other key employees with the necessary competencies to successfully meet
are adopting a more strategic                                                    st
                                                the complex challenges of the 21 century. To this end, the experiences of
approach to managing the                        agencies in Australia, Canada, New Zealand, and the United Kingdom can
succession of senior executives
and other public sector employees
                                                provide insights to federal agencies, many of which have yet to adopt
with critical skills. The                       succession planning and management initiatives that adequately prepare
Subcommittee is releasing this                  them for the future. Collectively, agencies in other countries implemented
report—Human Capital: Insights                  the practices shown below.
for U.S. Agencies from Other
Countries’ Succession Planning
and Management Initiatives                      Selected Practices Used by Agencies in Other Countries to Manage Succession
(GAO-03-914)—at today’s hearing.
                                                  • 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.


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 21 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.

Despite such challenges, many federal agencies in the United States have
yet to adopt succession planning and management initiatives that

 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).
2                                                                                                  st
 U.S. General Accounting Office, Results-Oriented Government: Shaping the Government to Meet 21
Century Challenges, GAO-03-1168T (Washington, D.C.: Sept. 17, 2003).
 U.S. General Accounting Office, Senior Executive Service: Retirement Trends Underscore the
Importance of Succession Planning, GAO/GGD-00-113BR (Washington, D.C.: May 12, 2000).
 U.S. General Accounting Office, High-Risk Series: Strategic Human Capital Management, GAO-03-
120 (Washington, D.C.: January 2003).

Page 1                                                                              GAO-04-127T
                      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.

                      Leading organizations engage in broad, integrated succession planning and
Other Countries’      management efforts that focus on strengthening both current and future
                      organizational capacity. As part of this approach, these organizations
Succession Planning   identify, develop, and select successors who are the right people, with the
and Management        right skills, at the right time for leadership and other key positions. We
                      identified specific succession planning and management practices that
Practices             agencies in Australia, Canada, New Zealand, and the United Kingdom are

                      Page 2                                                             GAO-04-127T
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

Page 3                                                           GAO-04-127T
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

Page 4                                                           GAO-04-127T
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

Page 5                                                           GAO-04-127T
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

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

Page 6                                                           GAO-04-127T
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.

Page 7                                                           GAO-04-127T
                  In summary, Madam Chairwoman, as 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 21 century, they are choosing succession planning and management
                  initiatives that go beyond simply replacing individuals in order to recreate
                  the existing organization, to initiatives that strategically position the
                  organization for the future. While there is no one right way for
                  organizations to manage the succession of their leaders and other key
                  employees, the experiences of agencies in these four countries provide
                  insights into how other governments are adopting succession practices
                  that protect and enhance organizational capacity. While governments’ and
                  agencies’ initiatives reflect their individual organizational structures,
                  cultures, and priorities, these practices can guide executive branch
                  agencies in the United States as they develop their own succession
                  planning and management initiatives in order to ensure that federal
                  agencies have the human capital capacity necessary to achieve their
                  organizational goals and effectively deliver results now and in the future.

                  Chairwoman Davis and Members of the Subcommittee, this concludes my
                  prepared statement. I would be pleased to answer any questions you may

                  For future contacts regarding this testimony, please contact J. Christopher
Contacts and 	    Mihm or Lisa Shames on (202) 512-6806 or at mihmj@gao.gov and
                  shamesl@gao.gov. Individuals making key contributions to this testimony
Acknowledgments   included Peter J. Del Toro and Rebecka L. Derr.


                  Page 8                                                           GAO-04-127T