Integrating Performance Management and Successor Management

This newsletter aims to assist HR professionals striving for business success and leaders seeking more effective organizational management by sharing my experiences.

This time, I’d like to discuss the integration of performance management and successor management. As I’ve mentioned in previous editions, I view performance management as a system designed to facilitate achieving the year’s goals. On the other hand, I define successor management as a system for building a talent pipeline that ensures the organization achieves ongoing business success over the medium to long term. I believe that executing performance management and successor management within the same process, rather than separately, is more effective and efficient.

In the following sections, I will delve deeper into this topic, focusing on key components such as:

• Defining roles based on long-term goals and strategy
• Identifying successor candidates
• Determining development areas
• Creating development plans
• Setting annual targets
• Conducting continuous reviews and development
• Annual review and reidentification of successor candidates

Defining Roles Based on Long-Term Goals and Strategy

The first step is defining roles based on long-term goals and strategy. “Long-term goals” are more specific timelines and objectives derived from the organization’s “reason to exist.” These are often articulated as visions or medium-to-long-term objectives. Depending on the business environment and organization, these goals typically outline the desired state 3–5 years into the future. To achieve these goals, it’s necessary to clarify “where to play” and “how to win,” which form the foundation of the organization’s strategy. A strategy specifies the areas in which the business operates and the methods for achieving business success in those areas.

Organizational structures are then created to execute the strategy, and the expected roles for each position are defined. The level of specificity depends on the organization’s philosophy and resource availability. Often, this process includes a top position and those reporting directly to it. It may also encompass other critical positions essential for realizing the strategy. Defined roles typically include expected outcomes, authority, required knowledge, skills, and experience.

Identifying Successor Candidates

The next step is identifying successor candidates. Based on organizational criteria, potential successors for defined positions are identified. Many organizations use a two-axis model of performance and potential. For me, performance is a prerequisite; candidates must meet or exceed expectations in their current roles before being considered for the next position.

Potential varies by organization but can be assessed in terms of readiness, which includes perspective and knowledge/skills. Perspective reflects a candidate's ability to view and act from the standpoint and scope of the key role. For example, if the key role is the top position in the organization, it is the degree to which the person views things and speaks and acts from the perspective of the top position in the organization. It is also the degree to which they view, speak, and act within the scope of responsibility of that top position.

As a specific example, a sales leader may currently speak and act from a sales perspective, which fulfills their current role but does not demonstrate readiness for a top leadership position. On the other hand, if they incorporate broader organizational functions and stakeholders' considerations, their readiness for the top role increases.

Determining a high or low level of preparedness in terms of perspective depends on the degree of coverage and frequency. In the previous example of the role of the head of the organization, the greater the percentage of the sales leader's behaviors that cover the position and scope expected by the role of the head, and the greater the frequency of the behaviors from the role of the head, the greater the degree of readiness for the role of the head in terms of perspective.

Knowledge and skills represent the extent to which candidates have acquired and applied the knowledge and skills required for the role based on long-term goals and strategy.

While both are critical, perspectives take precedence during the identification process, as knowledge and skills can be more effectively developed later.

It’s also crucial to distinguish between identifying successors based on existing long-term goals and strategy versus looking beyond them. For existing long-term goals and strategy, the organization's "why," "what," "where," and "how" are clearly defined. Based on this, key roles are also embodied.

On the other hand, in the case of perspectives beyond the existing long-term goals and strategy, they are virtually non-existent. In this case, it is necessary to create new long-term goals and strategy. This is especially important when the head of the organization is considering passing the torch to the next generation rather than continuing in that role. For example, if a person in a current top organizational role is thinking of carrying on with next generation after fulfilling the current five-year plan, it is important to identify people who can create new long-term goals and strategy, not assuming the current long-term goals and strategy, but considering the business environment after five years (ten years at the shortest) and who can lead the members of the organization.

Determining Development Areas

The next step is to determine the development area. For each of the candidates identified in the “Identifying Successor Candidates” section, you determine the areas that need to be developed in the role. In doing so, the initial definition of the role is helpful. You identify gaps between the candidate's current knowledge, skills, and experience and those required for the role. For example, in the case of the sales leader mentioned earlier, this includes learning the perspectives of non-sales positions and other stakeholders.

In the case of the next generation of current long-term goals and strategy, this includes a better understanding of the business environment five years from now and beyond.

In addition to comprehensively identifying all gaps, prioritization is crucial. The focus should be on areas where bridging the gap will most significantly enhance performance in the role.

Creating Development Plans

The next step is to create a develop plan. You think about what kinds of things you can do to develop the development area and fill in the gaps. In doing so, you consider three points: training to understand the knowledge and skills required, assignments to practice what they have learned in training, and feedback from others to help them learn more quickly and with higher quality.

For example, you consider the ability to create long-term goals and strategy based on the business environment in five years and beyond. First, training will need to be provided on how to understand the business environment in the next five years and beyond, and how to create long-term goals and strategy based on that understanding.

Assignments will create the following long-term goals and strategy. It is conceivable that the candidates may perform this work as a full-time task, or the candidates may perform this work while taking on other responsibilities. This area will depend on the situation of the organization.

A mentor or coach will be assigned to obtain feedback from others. As a mentor, the appropriate person would be someone with whom the candidate can feel comfortable discussing the challenges they face in carrying out the assignment to create the next long-term goals and strategy, and who has extensive knowledge in the field. The coach is responsible for the candidate's acquisition of these knowledge and skills. Usually, the line manager is responsible for this. They teach, ask questions, and take care of motivation, depending on the needs of that candidate.

Setting Annual Targets

The next process is the “setting annual targets”. In this step, performance management and successor management intersect. Assignments are determined based on a development plan created from the perspective of Successor Management. Depending on the plan, the candidate may be assigned a role that is different from their existing role. The target will be defined as what is to be accomplished with that assignment.

For example, in the previous case of “create the next long-term goals and strategy”, the target could be “by month X, you will create long-term goals and strategy through year XX and align with key stakeholders”. Of course, targets for the results required for the current grade will be also clearly set.

Continuous Review and Development

After that, it is “continuous review and development”. Here, as in normal performance management, you will continuously review and develop the development area to ensure that the targets set are achieved.

The candidate will actually attend the training sessions set in the development plan. The course content will be used to achieve the target. In addition to thinking for themselves, they consult with their mentors on a number of issues that come up while working on their targets. They will also talk regularly with the coach to share the progress of mastery and clarify actions to be taken to develop and acquire the development area.

Annual Review and Reidentification of Successor Candidates

The final section is “annual review and re-identification of successor candidates. At the end of the fiscal year, you look back on the year and check the status of target achievement and mastery of the development area. Throughout the year, they will talk with their mentors and coaches about the knowledge and skills they need to acquire and the progress they have made in achieving the targets they have set, and each time they identify and implement the necessary actions, ideally at the end of the year they will be able to confirm that they have acquired the knowledge and skills and that the targets have been achieved.

As the year is reflected upon and the degree of readiness as a successor candidate increases and the candidate is re-identified as a stronger candidate, the loop will turn at a higher level of identifying other development areas in the role. Then, when they are sufficiently prepared for the role, they will actually take on the role.

Closing Remarks

This edition has focused on integrating performance management with successor management. Thank you for reading. These insights are based on my experiences and perspectives, and I hope they provide valuable hints for many of you.

If you’d like to revisit previous editions, click here.

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How do you approach performance management and successor management?