pwc succession planning final

8/12/2019 PWC Succession Planning Final

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The Crisis in Federal GovernmentSuccession PlanningWhats Being Done About It*

*connectedthinking


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The Crisis in Federal Government Succession Planning

Executive Summary

Without strong leaders, there are nostrong nations. Although this hasbeen true since time immemorial,never in recent history has the needfor outstanding government leadersbeen more acute than it is today. Inthe midst of global political uncertaintyand threats to national security,the US government urgently needsleaders who think creatively, strategizeeffectively and respond with speedand competence to high-pressuresituations.

But if its current talent developmentpractices do not change quickly, thegovernment will soon boast few suchleaders. Federal agencies successionplanning, which relies on traditionaltraining methods, is barely adequateto do the job. The gap between thosein senior executive positions and thoseprepared to move into them is wideningby the day. And just as the federalgovernment is beginning to recognize

the problem, it is running into newdemographic and workforce challengesthat make the leadership crisis all themore challenging.

The statistics show that currentsuccession planning activities will yieldtoo few leaders, much too slowly,as one senior government executivestated. By some estimates, up to 70percent of the Senior Executive Serviceis currently eligible to retire. While agingthins the ranks of senior executives,

other forces have contracted the poolof those available to take over the reins.Changes in the federal pension systemin the 1980s have made it easier forexecutives to leave senior positions,while downsizing during the 1990sdecreased the federal workforce byhalf a million workers, depriving thegovernment of access to some of thebest and the brightest. Therefore, thesuccession planning debate is not onlyabout the numbers; the quality and

state of readiness of those who willtake over leadership is also at issue.If there is a crisis in human capital,succession planning for leadershiproles is ground zero.

Responding to this crisis,PricewaterhouseCoopers FederalPractice, along with the EconomistIntelligence Unit (EIU), undertook thiswhite paper to assess the state ofsuccession planning within the federalgovernment, survey best practices and

identify areas for improvement.

A number of agencies have takenaction to upgrade their successionplanning practices and unblock theleadership pipeline. Two agenciesthat have made signicant progressare the National Aeronautics andSpace Administration (NASA) and theGovernment Accountability Ofce(GAO). Others, such as the Departmentof Defense, the Department of Health


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and Human Services and the InternalRevenue Service, have launched majorprojects to improve their successionplanning practices.

The record is mixed acrossgovernment, however. Our researchshows that while many agencieshave made progress in planning,considerable work remains to be donein implementing programs that willprovide the agencies with the depthof leadership talent they need to ll

vacating positions and equip them totrain these leaders to meet the rapidlyevolving demands of the 21st century.

It also became evident through ourresearch that a piecemeal approach tosuccession planning is unlikely to beeffective. Worthwhile programs suchas accelerated leadership identicationat the senior manager level are

unsustainable if proper attention is notpaid to the pipeline of talent currentlylling those ranks. Such approachescan address short-term needs but tendto divert decision-makers attentionfrom the critical task at handbuildinga sustainable talent identication,development and retention processthat accounts for the demands of anevolving federal workforce. In fact,one of the key ndings was that for anumber of critical jobs (such as CFOsand CIOs), succession planning has to

be considered on a government-widebasis.

There is much however that can andmust be done at the agency level.

As part of well crafted successionplanning and leadership developmentprograms, innovative practices such as

job rotation, leadership developmentthrough coaching, mentoring,

action learning, and next-generationbehavioral performance evaluationmust all be considered. All of thesepractices, and other methods ofidentication and tracking of leaders,will be required to increase the speedwith which government agenciesdevelop talent and close the wideningleadership gap.

On the bright side, many agenciesalready have some of the tools theyneed to succeed. The challenge

though is putting these and otherinnovative tools to use in a structuredmanner to build an enduring leadershipsuccession program. This paperhighlights some of the best practiceswe have identied and some of thefundamental recommendations fordoing just that.

Executive Summary


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Identify leadership talentearly and cultivate it.


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Succession Planning Dened

Succession planning is the processof planning for the development andplacement of people in senior executivepositions. It deals with the art andscience of planning for the replacementof top executives when they depart the culmination of a process to identifyleadership talent early and cultivateit through training, action learning,mentoring, job rotation, and high-potential development programs. It isa process sustained by performanceevaluation systems that track and

evaluate senior leaders to prepareagencies to ll vacancies when theyoccur. As Figure 1 makes clear, the goalof succession planning is to establish,maintain and nurture the entirepipeline of leadership talent. Box A,The Succession Planning Toolbox, (onpage 25) lists the essential techniquesneeded to keep talent owing smoothlythrough the pipeline.

Support for Talent

Executive Talent Pipeline Characteristics

Source: PricewaterhouseCoopers LLP

LeadershipModel

Roles andPositions

Broad andSpecialized

Training

Coaching,Mentoring,

andBehavioralFeedback

Initial/ Entry Level

Sourcesof Talent

L e a d e r s h i p T a l e n

t P i p e l i n e

P o w e r e d b y T e a m

a n d I n d i v i d u a l P e r f o r m a n c e

t o M i s s i o n

GovernmenExecutive

Roles

Inter-GovernmentSources of

Talent

Non-GovernmentSources of

Talent

Figure 1


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Unavoidable Demographic Changes

Lawmakers are well aware of workforceplanning challenges. In June of 2005,the Government Accountability Ofce,acting at the request of Congressionalleaders, released the report Selected

Agencies Have Opportunities toEnhance Existing Succession Planningand Management Efforts. The reporthighlighted the great distance thatagencies still must travel before theycan claim succession planning systemscomparable to those already commonamong leading organizations in the

private sector.

In a series of related hearings, Senateand House committees 1 identiedpotentially devastating structuralthreats to the federal governmentshuman resources base. Overall, thehearings convey a potential crisis thathas been narrowly averted so far butthat now requires urgent attention.

The matter is even more pressingbecause demographic trends arenot on the governments side. As aresult of the governments expansionin the 1970s, a large cohort of senior

managers who entered service at thattime have already reachedor willsoon reachretirement age. Thesebaby boomers have already begun toretire, but many more will retire over thenext ten years. By some estimates, upto 70 percent of the Senior ExecutiveService (SES) is currently eligible toretire. 2 At NASA, for example, the ratioof employees under the age of 30 tothose over 60 dropped from 2:1 in 1993to 1:3 in 2002. 3 In addition, shifts in thefederal pension system that occurred

in the 1980s have made it easier thanever for executives to leave seniorpositions, although a soft US economyfor executive job expansion during theyears 2001-2004 has forestalled suchan exodus to a certain extent.

Yet another challenge to the systemwas the dramatic drop in the size ofthe federal workforce during the 1990sas a result of efforts to downsizegovernment and the military afterthe end of the Cold War. Over thecourse of the decade, the number offederal employees declined by almost500,000. In addition to retirement,

the demographic trends showgovernment agency workforces withincreasing employment of persons withLatino/Hispanic and Asian heritage.However, there are few Latino or Asianemployees in leadership positions andfew tracked for growth in the leadershippipeline. Along with this growth at theentry and early career grades is theformation of a gap in the leadershipdevelopment pipeline representativeof persons with such heritage. Thisdemographic trend has also been

seen in similar or greater magnitude inmany private organizations. Like theretirement waterfall, this demographictrend has inspired a call to actionto accelerate the development ofleaders from these growing employeepopulations.

In the words of Senator George Voinovich (R-Ohio), We do havea human capital crisis. Theres noquestion about it. He adds thatsubstantial change is critical ifwe are to achieve real and lastingimprovements in governmentoperations.

1 Specically the Senate Subcommittee on Oversight of Government Management, the Federal Workforce and the District of Columbia which is asubcommittee of the Senate Committee on Homeland Security and Government Affairs as well as the House Subcommittee on Civil Service and AgencyOrganization which is a subcommittee of the House Committee on Government Reform.

2 Senior Executive Service: Retirement Trends Underscore the Importance of Succession Planning , Brieng Report to the Chairman Subcommittee on CivilService Committee on Government Reform House of Representatives, United States General Accounting Ofce, May 2000. (GAO/GGD-00-113BR)

3 NASA Strategic Human Capital Plan , NASA Ofce of Human Capital Management, August 2002


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The Unique Challenges of Government

This level of change is very difcult forfederal agencies to achieve becausethey have distinctive leadership needs.Even if senior executives are available,they may not have the appropriateskills. As Thomas Jefferson said aboutgovernment hiring, No duty theExecutive had to perform was so tryingas to put the right man in the rightplace. In addition to demographic andstructural obstacles, the governmentfaces a series of other fundamentalobstacles to effective succession

planning:

While government service hasregained prestige in recent years,surveys show lingering distrust ofand lack of interest in pursuing acareer in government among thepopulation at large. These attitudesreduce the available supply of newentrants and leaders in government,among people who will chooseother professions. 4

Top government executives are paidmuch less than their private-sectorcounterparts, making hiring from theprivate sector problematic at seniorlevels. Other employment practices,including limited relocation benets,are barriers to entry for attractingtalent from other sources.

Government regulations makehiring, promotion and ring in thepublic sector far more difcultthan in the private sector, limitingexibility in succession planning.

A lengthy career path with manylong tenure roles creates a wellqualied, but too small, populationof leaders in the slow path to theSenior Executive Service. The longpath to the top also establishes apool of top leadership talent with asignicantly limited number of yearsbefore retirement eligibility than amore rapid and streamlined careerpath would create.

Given these and other challenges,new methods are needed to addressthe leadership development andsuccession planning challenges of thefuture. Despite its many differences,the private sector offers importantlessons and inexpensive but effectiveleadership development practicessuch as mentoring, executive rotationand action learningthat governmentagencies can easily and rapidly adoptinto a well-structured successionplanning effort.

4 NPR-Kaiser-Kennedy School Poll Attitudes Toward Government , survey of 1557 respondents 18 years of age and older, conducted May 26-June 25, 2000.


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Human Capital and the Law

One factor making it easier foragencies to respond more quickly toleadership development challenges isthe new interest in succession planningpermeates the federal government.Thanks in large measure to theleadership of Senator Voinovich (R-OH) and Senator Daniel Akaka (D- HI),as well as Congressman Tom Davis(R-VA) and Congresswoman JoannDavis (R- VA), the issue has achieved ahigher prole. Congress has taken upthe call by passing important enabling

legislation to address human capitalissues (see Appendix A).

The Presidents Management Agenda. The White House hasresponded to the challenge with aPresidential mandate to improvesuccession planning across the board.In 2001, the Bush Administration

released the Presidents Management Agenda (PMA), outlining ve categoriesof management action, includingthe alignment of human capital withstrategic goals. This agenda wasbuilt on initiatives from previousadministrations, such as the 1993Government Performance andReporting Act (GPRA), which requiresagencies to report on performanceannually. However, the PMA alsorequires agencies for the rst time toreport on the processes they are using

to meet GPRA goals. This level ofrequired detail has led to guidance onreporting and standards from the Ofceof Personnel Management (OPM) ona variety of Human Capital activities,including Succession Planning.

OPMs Human Capital Framework. With respect to the goal of aligning

human capital with strategic goals,OPM has developed the HumanCapital Assessment and AccountabilityFramework (HCAAF), described in

Appendix B. Under this framework,the 24 federal agencies that havechief nancial ofcers (CFOs) are nowrated annually on their human capitalperformance using an ExecutiveManagement Scorecard. In addition,the PMA requires that the 24 agencieswith CFOs name a chief humanresources ofcer, or CHRO. Of six

major areas covered by the reportingprocess, the third, Knowledge andLeadership Development, includessuccession planning as a major goal.(See Box B, Making the Grade.)The CHRO within each agency oftenwears multiple hatsthat is, he orshe is generally a senior ofcial withexisting responsibilities in other


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agency functions such as nanceor procurement, and has addedhuman resources accountabilityresponsibilities, such as a Deputy

Assistant Secretary for Management(or Human Resources). CHROs meetannually, and one subcommittee haspioneered a variety of initiatives to driveimprovements in succession planningacross the government. (See BoxC, Succession Planning at the Inter-

Agency Level.)

In March 2006, OPM held its AnnualWorkforce Conference, with the theme:Transformation for Results. Duringthe conference, numerous speakers,including OPM Commissioner LindaSpringer, identied succession planningas one of the top three imperative tasksfor agencies to undertake, and for ChiefHuman Capital Ofcers and their teams

to steward. Internal Revenue ServiceCommissioner Mark Everson alsospoke at the OPM Conference aboutthe efforts at IRS during 2005 to betterunderstand its pipeline of talent, and amajor initiative in 2006 to address thegaps in leadership talent development.

Leadership at the GAO. A fewagencies have beneted from seniorexecutives who made human resourcesissues a top priority. An outstandingexample of this phenomenon is the

tenure of David Walker, ComptrollerGeneral of the United States,and leader of the Government

Accountability Ofce (GAO). Sincearriving at the GAO, Walker has madehuman capital a key item on hisagenda.

An unusual amount of legislation hashelped agencies by providing new toolsto improve human resource practices.Many of these are designed to cutthrough red tape and give managersin the public sector some degree ofexibility. Legislation ranges frombroad-based initiatives affecting alllevels of government to rules tailoredfor particular agencies such as NASAand the GAO. A number of agencieshave taken advantage of the legislativeand oversight climate. Some have

made positive advances by enhancingexisting programs or by developingnew ones. Here is a sample of thoseemerging practices.


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Examples of Emerging Practices Among Government Agencies

Using existing resources is one of thefastest ways to respond quickly tothe challenge of succession planning.

A highly effective tactic to identifypotential leaders is to make use ofthe many leadership developmentprograms that the government hasin place. While these programs varyin size and effectiveness, if managedproperly and held to a high standard,they can be superb ways to nurturesenior talent.

High-potential programs. Thegovernment has traditionally groomedfuture leaders through high-potentialprograms, which a number of agencieshave expanded or upgraded in recentyears.

At NASA , the Executive PotentialProgram, formerly known as theProfessional Development Program,enables 25 to 50 leaders a year (theprecise number depends on funding),all at the GS-13 to GS-15 levels (senioradministrative grades), to undergospecialized training and development.The program is competitive. Selectedapplicants enter NASAs successionplanning process. After engaging in two

development assignments, they areexpected to take on higher or broaderresponsibilities within six months oftheir return to their facility.

Program elements include leadershipworkshops, briengs, coaching,feedback and training. Participants arerequired to work on a cross-center,agency-wide project selected by NASAleadership. According to the agency,the Executive Potential Program is astrategic human capital succession

planning tool. For this reason,candidates are selected by the samepeople who manage NASA centersto ensure that upon completing theprogram, candidates are assigned thepromised responsibilities.

Another agency committed to high-potential programs is the Department ofCommerce (DOC). Its Senior ExecutiveService Candidate DevelopmentProgram (SES CDP) includes 35senior managers at the GS-14 andGS-15 levels and their equivalent. Foremployees a notch down in grade, theExecutive Leadership DevelopmentProgram has slots for about 35 leadersat the GS-13 and GS-14 levels and

their equivalent. For middle-levelmanagers, at the GS-9, GS-11, andGS-12 levels and their equivalent,the Aspiring Leaders DevelopmentProgram trains 30 employees.

Individual DOC bureaus also targethigh-potential employees. TheNational Oceanic and Atmospheric

Administration (NOAA) LeadershipDevelopment Program has trained over60 employees at the GS-13, GS-14,and GS-15 levels and their equivalent

over the past three years, according tothe DOC.Many of these programs include astrong training component eitherat universities run by the agenciesthemselves or at the Federal ExecutiveInstitute. The Census Bureau CorporateUniversity offers a certicate inleadership through the University ofMaryland. Since 2002, a group of12 people have graduated from thisprogram. The US Patent & TrademarkOfce offers programs leading toincreasing prociency as a supervisorypatent examiner, special programsexaminer, or quality assurancespecialist. Over 70 employees havecompleted these training opportunities.


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1The Crisis in Federal Government Succession Planning

Another example is the Departmentof Labor , which launched what it callsthe MBA Fellows program in 2002.The agency considers this two-yearprogram one of its major successiondevelopment initiatives. The programincludes rotational assignments,mentoring and promotionalopportunities for successful graduates.

One criticism that might be leveledagainst a program that provides high-potential employees with a valuable

credential is that these employeesmight turn around and leave the agencyfor higher-paying jobs. But evidenceshows that may not necessarily bethe case. In scal year 2004, the DOLfound that 89 percent of its MBAFellows were still on board two yearsinto the program. The DOLs three-year retention goal is 75 percent.The agency also runs a ManagementDevelopment Program (MDP) and anSES development program. In privateindustry, the loss of some highlyregarded talent can actually become apositive story in the talent marketplace.Such companies are known as netexporters of talent, and therebyenhance their status as employers

through the continued success ofalumni.

Finally, the Internal Revenue Service worked with PwC to assess itsentire executive pool, identify high-potential candidates, and compareits succession planning practices tothose in the private sector. (See CaseExample: IRS Executive Assessmentsfor more details.)

Some agencies have teamed up to

develop high-potential employees.For example, the Ofce FederalProcurement Policy , the Departmentof Defense and the General Services

Administration have begun an initiativeto train acquisition personnel. Byproviding similar training across theagencies, OMB hopes to establisha set of best practices for efcientacquisition and procurement across thegovernment.

Workforce reshaping. Within thefederal government, it is quite commonfor the skill base among employees tofall out of alignment with the agencysneeds. Workforce reshaping to solvethis misalignment has emerged as

an important element of successionplanning, with early retirement as aprimary tool.

In recent years, Congress has made iteasier for agencies to offer employeesthe option of early retirement. TheFederal Workforce Improvement Act ,signed into law in 2002, has expandedthe tools available for reshaping theworkforce. Prior to the Act, agenciescould offer Voluntary Early Retirement

Authority (VERA) only if they needed to

downsize their workforce. Moreover,they had to secure individual statutoryauthority to offer employees VoluntarySeparation Incentive Payments (VSIP).The Act now permits agencies touse the VERA authority to reshapetheir workforces. They may also seekpermission from the OPM to offer VSIPpayments to employees.

Interest in early retirement has beenhigh. According to testimony by MartaPerez, OPM associate director forhuman capital leadership and meritsystem accountability, in scal year2004, Forty agencies requested andreceived from OPM Voluntary EarlyRetirement Authority and/or Voluntary


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PwC has a methodology for maximizingsuccession planning efforts anddriving the kinds of tangible resultsthat can be achieved through thedevelopment of a leadership talentpipeline. The approach has six keyelements, each with both strategic andtactical components, and all of whichare critical to successfully developingleaders for top positions.

1. Understand the Current State ofthe Pipeline Without knowing where

you are, it is impossible to knowwhere to go. Assessing the inventoryof the present talent pipeline beginsthe succession planning process.The best inventories rst dene thecharacteristics and experiencesrequired of leaders in the desiredstate. The present cadre of talent canthen be compared to the prole ofa leader in the desired state of theorganization. Sophisticated modelsclassify the criteria into tangibleexperiences and accomplishmentsrequired for, and presumably predictiveof, future success.

This rst element should alwaysinvolve top leadership in the evaluationof existing talent in the pipeline, butarriving at the evaluation should alsobe by a consensus building, multi-rater process. That is, the evaluation ofindividuals for their potential to achievelarger roles must be done by personsother than the usual performanceevaluators, including leaders from otherchains of command in the agency, orexternal evaluators. This will ensurethat critical and non-political eyes

review each talent pipeline member.This initial step also helps the agencystrategically dene the size andnature of the leadership pipeline andthe number of critical roles for whichplanning needs to occur. Often, thisstep claries which roles the agencymust plan to ll from within, andwhich roles can potentially be lledthrough other means, such as externalrecruitment.

The results of the inventory areexpressed in both quantitativeand qualitative terms. Among thequantitative metrics are: total size of the pool of present

leaders and those expressinginterest in initial or larger leadershiproles,

the total number of individualsidentied as potential candidatesfor larger roles,

the ratio of identied candidatessuccessfully evaluated as potentially

able to ll critical roles to thenumber of critical roles,

the racial and national origin(diversity) characteristics of thecurrent pipeline,

the percentage of persons in thepipeline eligible for retirement,

the average time to retirementeligibility of the present pipeline,

the education level of persons in thepipeline,

the percentage of pipeline membersexpressing interest in largermanagement and leadership roles.

What Government Agencies Need to Do


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Qualitative metrics can include: the number of recipients of specialawards and recognition in thepipeline

the aggregate rating of theentire pipeline on the leadershipcharacteristics required in thefuture state of the organization,

the number of persons in thepipeline who have worked in morethan one government agency, orwho have work experience in otherindustries before their present

government role, the feedback of employees

concerning the leadershipeffectiveness of present pipelinemembers (both at the individual andaggregate level),

the number and percentage ofindividuals leaving the agency inrecent years who have achievedsignicant success and promotionelsewhere (inside and outside ofgovernment).

2. Understand the Process ofLeadership Development With theinventory of the leadership talentpipeline evaluated, both quantitativelyand qualitatively, the nature and stateof the current process for developing

leaders can be evaluated. This keyelement claries the state of the tools,processes, and methods (herein calledactivities) for development. Thiscan range from examining training todocumenting the traditional careerpaths and experiences that correlate tosuccessful growth into leadership roles.With the leadership talent inventory inhand, the gaps and redundancies in theleadership development process oftenbecome much more obvious and canbe claried more rapidly.

There are two primary process reviews:a qualitative examination of thevarious means by which leadershipcharacteristics are enhanced andfostered (training courses, assignments,coaching, mentoring, action learning,e-learning, etc.), and a quantitativeexamination of the efcacy andthroughput of training.

The qualitative examinationincludes listening to those whohave experienced the leadershipdevelopment tools and their sponsoringmanagers, evaluating the differencein competency gain or lack of gainfollowing the experience of theleadership tool, and the evidence of

improved leadership as a result of theleadership development activity.

The quantitative examination shouldinclude the throughput of leadershipdevelopment activity as preparationfor key roles. The metric captures thenumber of leadership roles lled in ayear from all sources and calculatesthe percentage of persons prepared forthose roles through the recommendedleadership development activities.

Also examined are the percentage

of persons placed into leadershiproles following required training andtheir record of performance followingthe training compared to those notreceiving training. In all these metrics,the goal is to seek information thatwill lead to more effective leadershipdevelopment activities and will informthe budget process about adjustingspending toward and away fromactivities on this basis.

3. Know How to Fill the Pipeline Sources of candidates, both internaland external to the agency, form theinitial and intermediate pools of talentfrom which leaders emerge. Certainleadership characteristics are harderto teach in adults than others or are



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more difcult, and therefore moreexpensive, to develop. Among theseare conceptual skills, tolerance for risk,and sensitivity to the needs of others.The selection processes for lling theleadership pipeline must go beyondcredentials and testing to the evaluationof leadership characteristics.Knowing how to ll the pipelinebegins by examining the sourcesof candidates, both internal andexternal. It is also important to knowthe source of candidates at each

level a decision is made concerningmembership or promotion within theagency. This examination beginswith a longitudinal design to followindividuals from different sources andpoints of entry to their current roles andperformance levels. While all sourcesof candidates at all levels can betracked, the examination should focuson understanding gaps in candidatepools for important leadership roles,or where a large number of leadershiproles are lled externally or are difcultto ll (long posting to job ll times).Gaps, or thin spots, appear in thepipeline as a lack of candidates or fewcandidates for open or soon to be openleadership roles. By understandingthe sources of candidates, and their

career progression, actions can betaken to ll the pipeline through otheror faster means, while not signicantlycompromising important experiencesand learning.

4. Track the Talent within the Pipeline The current state of the pipeline isa moment-in-time understanding ofthe present and near-term leadershiptalent within the organization. Becausecareers and individuals are dynamic,continual tracking of the pipeline is

required. A number of monitoringmethods are available, all of which areeffective, and based more on the cultureand leadership style of organizationsthan any real difference in results.

Some organizations, particularly largeones and those with cultures thatemphasize the importance of tangibleevidence in decision making, utilizetalent rooms. Within these physicallocations, various displays of theorganization and its leadership cadreare visible to those allowed access.The displays include open leadershippositions, candidate slates for key

jobs, and listings of persons with highpotential for leadership or special skills.The talent rooms become a place

where conversations and meetingsare conducted about key talent, withall of the necessary data at hand andon-display. The talent room becomesa exible tool to discuss options forreorganization and redeployment of keytalent to address new strategic directionor shorter-term initiatives and crises.

Other organizations, particularly thosesavvy in the use of technology andthose that already handle data exiblyand easily in a compartmentalized

fashion, create virtual talent rooms. Inthese cases, any location, includinga desktop computer, can become alocation for a display of key talent forthe same purposes as in a physicaltalent room.

Still, other organizations have frequentplanned discussions of talent throughorganized reviews. In these cases,a series of meetings are held, oftenacross a number of organization levelsand at various locations. This highlyhands-on process is akin to periodicand frequent reviews of operationalperformance or nancial status andforecasts already in-place for manyagencies. While often more timeconsuming, these reviews can be more

Because careers and individuals aredynamic, continual tracking of the pipelineis required.


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ad hoc in nature, feel less centralized,and create a greater sense of exiblecollaboration between managementand the organizational units.

Whichever of these tracking methodsis used, the establishment andmaintenance of an accurate databaseabout individuals and their talent isrequired. Some factors to consider inestablishing the technology to supporttracking the pipeline include theagencys abilities to:

store and retrieve individualinformation longitudinally,

capture qualitative information, add information about an individual

from their prior experience inanother government agency oroutside the government,

capture ratings of performance andcompetence, and

track when information was added,by whom, and for what purpose,

ensure security of and access rightsto the data.

While a number of software solutionsare available for purchase andinstallation, even home grown

systems can work to meet short-termneeds. Smaller agencies in particularcan benet from not having to waitfor larger or more comprehensivetechnology solutions.

5. Use the Talent Pipeline Data All ofthe effort in the previous four elementsis without purpose if the key elementof using the talent pipeline inventoryand information is not tackled. Asurprising number of organizations failto connect the processes of selection

and promotion, assignment to key roles,discernment of talent differences, andlong-term development of individualsto the talent pipeline. This last stepcannot be underestimated. From ourexperience at PwC, we know that someof the steps agencies, and indeed allsorts of organizations, must take tofulll the efforts of developing leadersinclude:

Creating Promotion and LeadershipDevelopment Committees Whileindividual managers may haveresponsibility for lling mostindividual contributor roles, eachorganization needs to decideat what level managerial and

leadership positions will bereviewed and by whom. In effect,accountability for the successfullling of some or all leadership rolesbecomes the dual responsibility ofthe local hiring manager and thecommittee. These membership andpromotion committees should havea diverse and inclusive membershipthemselves, and must have theability to convene virtually andrapidly to discuss open positions,key organization changes, and the

talent to fulll important roles. Filling Leadership Roles from

Candidates in the Pipeline Whileopen postings and self-nominationshould remain in place as anempowering and self-determiningmethod of consideration, candidatesidentied in the talent pipeline byagency management should beadded to leadership slates to ensurethe best quality candidates areconsidered. This step needs to besquared with hiring and promotionregulations, but seeking thebroadest and most talented pool oftalent for each leadership openingis about raising standards ofexcellence and making the process



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of promotion more transparent. Providing Feedback to Individuals The common answer to allnon-successful candidates, sothe recruiters quip goes, is tosay, you came in second. Thiscannot be the answer to individualcandidates for leadership roles,nor can it be the answer to thosetrying to understand their status inthe leadership pipeline. The levelof candor and openness will varyacross organizational cultures, and

will mature in agencies over time.For all organizations however, itis about providing more feedbackand more information to individualsabout their standing in theorganization, and to the organizationabout the state of the talent pipeline.

Getting Senior Leaders Involved inRecruiting Nothing speaks moreto the importance of an activity thanthe personal involvement of leaders.When working to add talent fromoutside, the presence of the leadersperspectives and their sense ofurgency can do wonders to attracttalent and raise the level of qualityrequired of incoming talent.

Some additional factors to make thiskey element into a working elementare tracking the percentage of pipelinecandidates selected, comparing thesuccess rate as evidenced by actualperformance of pipeline candidates tothose not identied in the pipeline, theregularity of briengs and updates tosenior management about the inventoryof talent in the pipeline, and changes inthe development and training approachto address skills gaps.

6. Add a Leadership Position and FocusResources to Support the Pipeline Too often, leadership developmentlacks the focus that other organization-wide initiatives possess. A CIO willname a new head of key technologyimplementation, or a CFO may namea special cost reduction leader.Government organizations have beenslow to identify a central steward ofthe leadership talent pipeline. Thisorganization structure has been highlysuccessful in the private sector incompanies that have come to realizethe importance of the leadershippipeline to their future and continuedsuccess. Many government agencies

have only recently (within the last 5years) named a Chief Human CapitalOfcer (CHCO), much less identieda Leadership Talent steward. Such arole, reporting to the CHCO, allows theorganization to bring together the other5 elements of this complex and multi-generational process in an accountable,rather than merely reporting orientedfashion.

This role does not replace traditionalroles focused on leadership training,

external recruitment of managersand leaders, and performancemanagement. It unies the stewardshipof these often separate processes. Thisis an opportunity to structurally movein rapid fashion based on the learningof large private organizations whichlearned this lesson over many years.


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Effective successionplanning initiativesare still emergingat federal agencies


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Conclusion

Effective succession planning initiativesare still emerging at federal agencies.The good news is that Congressionaloversight, combined with newlegislatively mandated tools andunprecedented White House attention,have created an environment whereimproving the state of successionplanning is now widely recognized as acritical national challenge.

While progress remains uneven, ourresearch indicates that to improve

succession planning, agencies mustaccomplish the following: Understand the current state of the

leadership pipeline Understand the process of

leadership development in theiragency

Know how to ll the leadershippipeline with high quality candidates

Rigorously track the talent within thepipeline

Use the talent pipeline data tomake promotion, development, anddeployment decisions

Add talent under the Chief HumanCapital Ofcer to support theleadership talent pipeline

Many government agencies havebegun to implement meaningfulsystems of performance evaluation,aided by the use of improvedinformation technology. They fallshort, however, in aligning training,

development, and other human capitalpractices with strategic organizationalgoals. It remains to be seen howwell they perform with regard toimplementing job rotation, mentoring,and a whole variety of leadershipdevelopment acceleration tools.

In the future, the successful federalagencies and departments will bethose that recognize the importance of

talent as a performance differentiator.The quality of individuals, particularlyleaders will determine how wellagencies achieve their goals. Liketheir corporate counterparts, seniorgovernment executives will nd itessential to establish a business-oriented and systematic leadershiptalent review process that appliesthe same rigor expected of anynancial review process. And, likeother investments in the future, thereturns on the additional effort and

spending of an accelerated leadershipdevelopment timeline can be identiedand measured. But time is runningout. Succession planning can nolonger be a back-burner project. It is apressing issue that demands immediateattention from senior governmentleaders and lawmakers.


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The ability to recruit outside theorganization is a key element of high-performance succession planning. Nomatter how good an organizationspeople, the ability to reach outside tosecure a special skill or to replace aretiring executive is vital to aligningtalent with strategy and operationalrequirements. In the case of NASA,where 60 percent of employeesare scientists or engineers, outsiderecruitment was, until recently,extremely difcult because of hiring

rigidities and a perceived compensationgap vis--vis academia and privatecompanies. NASAs problem wasfurther compounded by a skillsimbalance caused by a long periodof downsizing at a time of rapidtechnological change.

As an agency required to push theenvelope in science and technologywhile executing massive projects atthe same time, NASA faces a uniqueset of challenges. It has to work with

a variety of private contractors andsuccessfully manage huge projectsthat bring together internal and externalexperts. From a human resourcesstandpoint, the agency needs to recruitand attract a highly educated andtechnology-adept corps of managers,scientists and engineers; keep them inclose contact with private counterpartsat leading contractors; and see thatthese managers are kept up-to-date ona variety of scientic and technologicaladvances.

When NASA initially began to exploreupgrading and modernizing its humanresource framework, it recognized thata variety of groups and people had astake in the outcome. Working withstakeholders and legislators, NASAofcials helped author the National

Aeronautics and Space AdministrationWorkforce Flexibility Act of 2003. Thebill called for stakeholders to developa workforce plan to be approved bythe OPM and submitted to Congress.

A Legislation Implementation Teamwas formed, including representativesof NASA centers and unionrepresentatives from the AmericanFederation of Government Employees(AFGE) and the International Federationof Professional and Technical Engineers(IFPTE).

The resulting workforce plan wasdeveloped, approved, and madeavailable for NASAs use in July 2004.

Among the many specic changes

authorized, the legislation includedprovisions allowing the agency to dothe following:

Award recruitment, redesignation,or relocation bonuses not to exceed100 percent of an employeesannual salary over the term of theservice period (up to four years)and not to exceed 50 percent of anemployee's salary at the beginningof the service period if the positionaddresses a critical need

Case Example: Workforce Flexibility at NASA


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Pay retention bonuses over aspecied service period up to 50percent of an employee's annualsalary if the employee's positionaddresses a critical need

Offer prospective federal employeesreimbursement for moving andrelocation expenses, a benetavailable to current federalemployees

Adjust (with the approval of theOPM) the base pay for employeesat any rate within the GS salary

range for the position based onthe superior qualications of theindividual and the needs of NASA.

This newfound exibility has enabledNASA to make a wide variety ofsuccessful hires. The following aresome examples.

A NASA center was in need of anengineer essential to the agencysReturn to Flight program. Theposition required a high level of

expertise in aerospace engineeringand safety engineering. In thisinstance, an out-of-state candidatewas found, but was unwilling torelocate at his own expense. Usingits newly minted exibility, NASAwas able to recruit the engineerby offering enhanced travel andrelocation benets.

At one of its facilities in a high-costarea of the country, NASA wasexperiencing difculty recruitingskilled individuals because of

the perceived compensation gapbetween the public and privatesectors. The workplace exibilityplan allowed NASA to lure a skilledengineer from elsewhere in thecountry with an attractive relocationpackage.

Has this new exibility in successionplanning helped prepare NASA for thefuture? According to those who havestudied the NASA story, includingChristopher Mihm of the GAO and

Marta Perez at the OPM, the programhas been an overwhelming success.Perez explains that NASA was therst agency to meet all standards,and hence, achieve a green score onthe PMAs criteria for human capitalmanagement. In testimony beforeCongress, she stated that the agencyhas a human capital strategy thatis aligned with its mission, goals,and organizational objectives, [and]that is integrated with its strategicand performance plans, and budget

plans. Most importantly, NASA iscontinuously assessing and improvingthe way they manage their workforce.NASAs leadership is accountable forthe effective management of people,including building a diverse, results-oriented, high-performing workforce.


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Case Example: IRS Executive Assessments

One of the practices businessorganizations often use is a team-widereview of their pool of executives thatexamines the pools alignment withthe current and future needs of theorganization. In some organizations,such reviews go well beyond theexecutive ranks to become anorganizational capability review for allprofessional employees.

To bring in such best practices fromoutside the organization, the Internal

Revenue Service in late 2004 issueda request for proposal to obtain acontractor to provide an independent,unbiased perspective on the agencysleadership pipeline and to compareIRS executive assessment practiceswith external benchmarks. As part ofthe process, more than 100 currentIRS executives were evaluated usingmethods identical to private sectortalent reviews. Each executive receiveda report and personal review of his or

her leadership skills. Using the IRSLeadership Competency Model as aframework, and identifying the topve and bottom three competenciesfor each executive, the talent reviewindicated areas for development andways to leverage strengths. In addition,the aggregate leadership team wascompared to similar entities at otherlarge organizations.

From this process, the IRS gleanedmany qualitative and quantitative

insights, including 14 key ndingsrelated to succession planning and thedevelopment of leaders. The agencyfound that its existing process ofidentifying and delivering leadershiptalent to the executive level was ve toseven years slower than that of bestpractice companies. This nding hasled the IRS to accelerate its leadershipdevelopment practices through earlyidentication of leadership talent andmanagement of its career paths.

Additionally, hiring executives fromoutside the agency and governmentwas discovered to be a highly positiveway to inject leadership talent into thepipeline. But the review showed thatlack of assimilation and acculturationreduced the near-term productivityand effectiveness of such hires. As aresult, the IRS will be addressing thisneed as it advances its successionplanning process. In FY2006, the IRShas added succession planning toits key corporate goals, on which it

reports to the IRS Commissioner on amonthly basis. The initiative in FY2006includes a comprehensive, externalreview of the leadership developmentprocess from front-line manager toSES-level, a redesign of the ExecutiveDevelopment process (includingleadership assimilation), the pilotingof Leadership Talent Reviews, andadditional executive assessments.


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Box A - The Succession Planning ToolboxIn its most narrow sense, the term succession planningmeans planning for the succession of executives. Butin its broader sense, the term refers to a fully integratedapproach to obtaining, developing, and retaining executivetalent. Succession planning should encompass the entirepersonnel pipeline from the entry to the senior executivelevel. At each stage of the pipeline, different techniquesare needed. Key tools in the succession planning toolboxinclude the following:

Strategic Alignment. The best laid personnel plans will not

achieve organizational objectives if they are misalignedwith an agencys mission and strategy. A thoroughstrategic alignment process should be in place to insurethat personnel practices are in line with strategy.

Recruitment. Effective succession planning beginswith effective recruitment both at the entry and seniorlevels. This means aligning recruitment with agencyneeds, reaching out to qualied talent and, in somecases, fashioning creative strategies to attract desirablecandidates. To secure the talent they need, agencies mustincreasingly look outside the organization. Developinga strong package of hiring incentives is therefore also

advisable in order to recruit the most qualied candidates.

Training. Training at all levels is vital to building a highquality workforce and essential to cultivating seniorexecutive talent. This can take the form of specializedtraining as well as general management training. Someforms of training can also serve as rewards to incentmanagers to achieve their full potential.

Coaching and Mentoring. Coaching and mentoringare increasingly recognized as critical elements ofeffective succession planning. No longer the exceptionin organizations, these practices are becoming the rule.Strong mentoring programs should include monitoringmechanisms to insure that participants are fully engaged.

Such programs also have desirable and positive impactson the development of women and under-representedminority talent.

Job Rotation. While not as widely used in the federalgovernment as in the private sector, job rotation isnonetheless a valuable way to expose executives tonew challenges and stimulate leadership capacity. It isimportant to insure that after completing each new job thatthe executive has a place to return.

Performance Evaluation. What is not measured is typically

not done. Therefore, measuring performance is animportant way to stimulate performance improvement.Many organizations are moving toward 360 degreeevaluation systems as a way to enhance the evaluationsystem.

Behavioral Feedback. Even beyond mandated annualperformance reviews, it is advisable to create mechanismsand an environment that promote feedback on behavior.Feedback can be informal or formal.

Position Mapping. Companies should clearly identifycandidates in line for succession for each essential

position and examine the strengths and weaknesses ofeach. Where bench strength is weak, organizations shouldlook to identify candidates before they are actually needed.

Separation Planning. At times, organizations may be calledupon to reduce levels of personnel or move out peoplewith inappropriate skills to make way for people whoseskills match current and future needs in what is known asworkforce shaping. To achieve this, agencies should havean effective separating planning system in place.

Different organizations may need to use different tools atdifferent times but having all of them available is vital toeffective succession planning.


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Box B - Making the GradeOne of the key drivers of improvements in successionplanning practices is the Ofce of Personnel Management(OPM) Human Capital Scorecard, which rates agencieson their annual progress in achieving human capital goals.To obtain a grade of green, yellow or red for each goal,agencies must answer a battery of questions. (Greenmeans an agency has met all the standards for success;yellow, mixed results; and red, unsatisfactory.)

For succession planning, a key question is Does theagency ensure continuity of leadership through succession

planning and executive development? According toOPM, a good answer should be, A formal successionplanning management program is in place that includes areview of current and emerging leadership needs in lightof strategic and program planning, identies sources ofkey position talent and provides for assessing, developingand managing the identied talent. In addition to runninga program, the agency should also have identied keypositions and high-potential employees and has a formalSES Candidate Development Program or other method ofdeveloping the next generation of leaders.

The scorecard process is not an antagonistic one,explains Marta Perez, associate director for human capitalleadership and merit system accountability at the OPMwith responsibility for administering part of the PresidentsManagement Agenda. According to Perez, OPM ofcialsmeet with agency counterparts throughout the year tohelp them make progress in achieving goals. Ultimately,the agency itself suggests a grade of green, yellow orred. By the time the grade is given, however, both sidesare usually in agreement about the agencys progress.Grades are based on improvement, not on absolute levelof attainment, and even high-performing agencies must

demonstrate continuous improvement. The chart belowshows that agencies have made signicant progress in thepast four years, but that much remains to be done. As ofthird-quarter 2005, only 11 out of 26 agencies had met allthe success criteria.

Perez is condent about the scorecards ability to driveperformance. We have the tools we need, she says. Thetrick is now to put them to use.

Case Example: IRS Executive Assessments


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Box C - Succession Planning at the Inter-Agency LevelOne of the rst acts of the Council of Chief Human CapitalOfcers (CHCOs), upon its creation as a forum for CHCOsto exchange ideas in November 2002, was to create acommittee for succession planning. Since its inception,the councils Leadership and Succession PlanningSubcommittee has served as a forum for CHCOs to shareinsights into succession planning. The committee alsohas access to the councils secretariat and is able to callupon the knowledge of the executive director of the CHCOCouncil, Mike Dovilla.

In the early months of its existence, the committeecommissioned a study of best practices in succession

planning across the federal government. While the reportis internal and has not been released to the public, it hasidentied a variety of areas for collective work. In theirquarterly meetings, members of the Committee have anopportunity to share ideas on how to raise the overall levelof succession planning efforts within the government.

The CHCO Council is only one way that the OPM isworking to coordinate activity across agencies. TheOPM has also established a cross-agency FederalCandidate Development Program (Fed CDP), a 14-monthmanagement development program for SES and future

SES managers.

FY 2001 FY 2002 FY 2003 FY 2004 FY 2005Year End Year End Year End Year End 3Q

Green 0 0 0 8 11Yellow 3 4 12 15 14Red 22 21 14 3 1

Strategic Management Human CapitalPMA Status Summary Score FY 2001-FY 2005

Source: Office of Personnel Management


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Appendix A: Legislative Milestones in Human Capital Planning

In recent years a urry of legislationhas been passed that practitioners sayhas given them new tools with whichto tackle human resources issues.Important legislative milestones includethe following:

Defense workforce reshapingauthorities included in the NationalDefense Authorization Act for FiscalYears 2001 and 2002.

Portions of S. 2651, the FederalWorkforce Improvement Act of 2002

in the Homeland Security Act of 2002.

S. 129, Federal Workforce Flexibility Act of 2003. This bill, signedinto law on October 30, 2004,allowed federal agencies to userecruitment, relocation and retentionbonuses more strategically to helpgovernment compete for seniortalent; reformed the annual leaveaccrual policy for new mid-careeremployees; and required agenciesto align training with performanceand strategic goals.

S. 610, National Aeronautics andSpace Administration WorkforceFlexibility Act of 2003, signed into

law on February 24, 2004. Thisbill provided NASA with extensivenew exibility to recruit and retain atechnologically savvy workforce.

S. 765, Presidential AppointmentsImprovement Act of 2003 portionsenacted in the National IntelligenceReform Act of 2004 . This bill wasintended to improve the lengthyand frequently criticized Presidential

appointments process. S. 768, Senior Executive Service

Reform Act of 2003 portionsenacted in the National Defense

Authorization Act for Fiscal Year 2004.

S. 926, Federal Employee StudentLoan Assistance Act.

S. 1683, Federal Law EnforcementPay and Benefits Parity Act of 2003.This bill requires OPM to reviewpay practices among different lawenforcement branches with thegoal of bringing pay and benetsthat currently diverge widely acrossservices into equitable alignment.

S. 1522 (H.R.2751), GAO HumanCapital Reform Act of 2003. Thisbill provided the GAO with newpersonnel exibility.

S. 2409, to provide for continued

health benets coverage, enactedas part of the National Defense

Authorization Act for Fiscal Year 2005.

FBI personnel reforms and reformsto the security clearance process aspart of National Intelligence Reform

Act of 2004.


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Appendix B: Succession Planning and the Human Capital Assessment and Accountability Framework

As part of their annual evaluation underthe Human Capital Assessment and Accountability Framework, agenciesare required to answer the three-part question below on leadershipand knowledge management (whichencompasses succession planning).To help answer the question, theyare provided the elements of a Yesanswer and suggested performanceindicators.

Question on leadership and

knowledge management a) Do agency leaders and managers

effectively manage people, ensurecontinuity of leadership, andsustain a learning environment thatdrives continuous improvement inperformance?

b) Does the organization identifyleadership competencies, establishobjectives and strategies to addressthem, and dene performanceexpectations?

c Does the agency ensurecontinuity of leadership throughsuccession planning and executivedevelopment?

Elements of Yes The agency conducts ongoingworkforce analysis to identify currentand future leadership needs. Thisanalysis includes the size of the

workforce, deployment across theorganization, and the competenciesneeded for the agency to succeed.

A formal succession planningmanagement program is in placethat includes a review of current andemerging leadership needs in lightof strategic and program planning,identies sources of key positiontalent, and provides for assessing,developing and managing the identiedtalent. The agency conducts regularassessments of its leadership policies.

It has identied key positions and high-potential employees, and has a formalSES Candidate Development Programor other method of developing the nextgeneration of leaders.

Suggested Performance Indicators Workforce study and analysis on

leadership are conducted. Formal succession planning or

talent management program is inplace and its impact is measured.

Written leadership developmentstrategy is tied to workforce analysisand strategic plan.

Documented leadershipcompetencies are tied to theExecutive Core Qualications.

Documented and communicatedleadership skill training programincludes all levels of supervisors,managers, and potential leaders.

A system exists to assess leadershipcompetencies (e.g., identicationof high-potential candidates forcandidate development programs oridentication of development needsto be incorporated into individualdevelopment plans).

Individual development plans forleaders and managers includeformal and informal training.

Leadership development programusage and impact are measured andanalyzed.

Policy and methodology formanaging high-potential employeesare documented.

Measures of success aredocumented and tracked.

Percentage of women and minoritiesin career ladders (GS 5-7-9 orsimilar) is tracked and assessed.

Analysis of workforce demographics(including SES) helps informsuccession plans. Analysis includesdata such as average grade/age/ length of service, distribution of theworkforce (by series, grade, gender,race/national origin, supervisorystatus), turnover rates, andretirement eligibility.


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Acknowledgements

PwC prides itself on the concept of Connected Thinking. For this paper we drewsupport and expertise from PwC staff with varied experience and knowledge fromaround our rm. A core group of PwC staff worked diligently to help produce thispublication. These team members include:

Succession Planningsubject champions

Carter PatePwC Managing [email protected]

Peter RaymondPwC [email protected]

Karen VanderLindePwC [email protected]

Monica OldhamPwC [email protected]

Succession Planningproject team

Matthew LibertyPwCProject Director

Cristina AmpilPwCContent Review

Michael MoynihanEconomist Intelligence UnitWriter

Dan ArmstrongEconomist Intelligence UnitSenior Editor

Nigel HollowayEconomist Intelligence UnitProject Director

Chris TeplerPwCDesign and Production

2006 PricewaterhouseCoopers LLP. All rights reserved. PricewaterhouseCoopers refers to PricewaterhouseCoopers LLP (a Delaware limited liability partnership) or,as the context requires, the PricewaterhouseCoopers global network or other member rms of the network, each of which is a separate and independent legal entity.*connectedthinking is a trademark of PricewaterhouseCoopers LLP (US).


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