Developing leaders with 2020 vision: companies can develop deep, enduring bench strength by combining succession planning and leadership development to create a long-term process for managing the talent roster.

The recent tragic death and swift replacement of McDonald's Corp. Chairman and Chief Executive Jim Catalupo has been cited as an event that "could become a textbook case on solid succession planning" by Carol Hymowitz and Joann S. Lubin, writing in The Wall Street Journal. Just hours after Catalupo's demise, directors announced that Charlie Bell, the president and chief operating officer, would take over as CEO. Few companies are as prepared--not only for such an unexpected change-in-command, but even for one given more lead time. Much has to do with proper advance preparation and planning.

Consider the succession woes at these well-known companies:

-- M. Douglas Ivester, The Coca-Cola Co.'s longtime CFO and second-in-command to CEO Roberto Goizueta, served only two-and-a-half years as CEO following Goizueta's death, when he was forced to resign due largely to a perceived insensitivity in dealing with people and external relations. Coca-Cola recently named a retired executive, E. Neville Isdell, as its new CEO after electing to replace chairman and CEO Douglas Daft.

-- Mattel Inc.'s Jill Barad had an impressive track record in marketing that catapulted her into the top job--but didn't give her insight into the financial and strategic aspects of running this large global corporation.

-- The Walt Disney Co.'s board of directors and shareholders are currently expressing concern that their once "golden-boy" CEO, Michael Eisner, has stayed too long at the helm and has largely failed to develop adequate bench strength for succession.

These talented leaders failed, in part, because although each was accomplished in at least one management area, none had mastered more general competencies such as designing and managing acquisitions, building consensus, public relations or supporting multiple constituencies. And, they are not alone. The problem is not just that the shoes of the former chief are too big, but that leadership development and succession planning, as traditionally conceived and executed--when it is in process--is often too narrow and hidebound to uncover and correct skill gaps that can derail even the most promising young executives.

Why should a firm appoint a CEO or CFO without a vision for its long-term future? What could be more vital to a firm's long-term health than the choice and cultivation of its future leaders? And yet, while companies maintain meticulous lists of potential successors who could step into the shoes of a key executive, an alarming number of newly appointed leaders fail spectacularly by using skills and perspectives that were ideal for their old jobs but not appropriate for their new assignment. These are but a few of the leadership succession issues facing today's organizations.

Author research into the factors that contribute to a leader's success or failure indicates that certain companies do succeed in developing deep and enduring bench strength by approaching development and succession planning as more than the mechanical process of updating a list or sending managers off to a university short course.

Indeed, they've combined two practices--succession planning and leadership development--to create a long-term process for managing the talent roster across their organizations. These two practices often reside in separate functional silos, but they are natural allies because they share a vital and fundamental goal: getting the right skills in the right place.

Developing for the Future

Succession management should be part of a flexible system oriented toward developmental activities, not a rigid list of high-potential employees and the slots they might fill. By aligning succession planning and leadership development, you get the best of both: attention to the skills required for senior management positions, along with an educational system that can help managers develop those skills.

Best-practice firms focus their developmental activities on the skills needed for success in the future rather than those that have worked in the past. They often tie developmental activities to change in strategy so that the educational/developmental activities are part of implementing strategy.

This broad perspective on development might have helped Coca-Cola and Mattel. Ivester was given the top job at Coca-Cola largely as a reward for his financial savvy and years of loyalty to Goizueta and the company, but not enough attention was paid to how his particular skills might apply to the broader role. And, while Barad had grown Mattel's Barbie brand nearly tenfold in less than a decade, her controlling management style and lack of experience in finance, strategy and her handling of Wall Street--essential capabilities for any CEO--proved to be her downfall. Early intervention might have exposed her limitations and provided an opportunity to develop these skills, and would, perhaps, have kept her career on track. Robert Eckert, who followed Barad as CEO at Mattel, now links succession directly to development efforts.

And, it's not just about training. Leadership development, as traditionally practiced, focuses on one-off educational events. But research at both the Center for Creative Leadership and Duke Corporate Education has found that, after their educational experiences, participants typically are energized and enthusiastic, only to be stifled by the reality of corporate life when they get back on the job.

It's far more effective to pair classroom training with real-life exposure to a variety of jobs and bosses, such as using techniques like job rotation, special assignments, including establishing a regional office in a new country, and "action learning," which pulls together a group of high-potential employees to study and make recommendations on a pressing topic, such as whether to enter a new geographical area or experiment with a new business model.

By using their high potential managers in solving an important business challenge, firms can reduce the need for bringing in traditional management consultants and can embed the broad view and problem-solving expertise in the firm rather than helping educate the consultant's MBAs, who go on to apply that experience with other clients.

Eli Lilly and Co. has a bi-annual action-learning program that brings together potential leaders, selected by line managers and the human resources department, to focus on a strategic business issue chosen by the CEO. Eighteen employees identified as having at least executive-director potential, representing a mix of functions and regions, participate in a six-week session in which they meet with subject matter experts, best-practice organizations, customers and thought leaders, then analyze what they've learned.

In 2000, one such team was charged with developing an e-business strategy as a new avenue of growth--an issue that was a pressing concern at the time. The group interviewed more than 150 people over five weeks, and in the final week developed a set of recommendations to present to senior managers, who took their ideas quite seriously. For example, the group recommended naming an e-executive and providing a certain level of funding to the initiative. Without hesitation, the CEO responded: "We will appoint an e-executive within two weeks, and he or she will report to me ... appropriate funding will be made available," he said, and he followed through on those promises.

Recently, Saudi Armco's CEO Abdallah S. Jum'ah asked a group of 20 high-potential executives to help gain better corporate-wide alignment around the firm's strategy imperatives. After a five-day educational session, where experienced consultants provided input about other transformation efforts and coaching on leading change, the participates worked over a two-month period to interview 15 senior executives, collect survey data from 868 other managers and review best practices in eight global firms before coming back together for another four days to polish their recommendations and presentations to three of the firm's top executives.

Several of their recommendations were approved immediately, and further analysis is being conducted on others. More importantly, their efforts have created a much greater awareness of and alignment behind the strategic directions of the firm.

Action-learning programs such as these serve a dual purpose: they provide developmental experiences for employees--who are forced to look beyond functional silos to solve major strategic problems and thus learn something of what it takes to be a general manager; and they result in a useful work product for the company. Such programs have increased in importance because many companies--in downsizing and creating economies of scale--have eliminated a number of the roles that used to be prime training grounds for top management.

At one time, The Dow Chemical Co. had 60 country managers. These roles served as excellent opportunities for developing general management skills. When the company consolidated into 30 global businesses, Dow gained important economies of scale, but reduced the number of developmental opportunities by half.

One way to provide general management experience in this environment is to launch small joint ventures or internal enterprises. Managers can also make lateral moves across functions and business units. For example, one of Dow's global business-unit heads served as president of operations in the Asia-Pacific region to gain a cross-functional perspective. And a future leader in the research organization was named vice president for purchasing to broaden her expertise.

Opportunities like these should be incorporated into individuals' development plans. Lilly's Group Development Review (GDR) is a periodic, in-depth review of the 500 highest-potential individuals, involving input from past and present supervisors. In a facilitated 90-minute discussion, the group identifies the next steps the employee should take, gathering input from others in the organization, if necessary. The immediate supervisor then shares a summary of the results with the employee, who, with the supervisor, is responsible for incorporating the feedback into his or her development plan.

The keys to successful succession management and leadership development include hard-nosed acuity in assessing both the current and potential ability along with an assessment of performance for key managers. After this assessment, accuracy in diagnosing the developmental needs of people (and the organization) and tying developmental activities to the emerging strategic focus of the firm is essential for the organization to compete effectively. Developmental efforts with acuity and a future focus can produce leaders with a forward-looking vision centered on the year 2020--a time frame that all senior executives ought to be considering.

Robert M. Fulmer is a Distinguished Visiting Professor at Pepperdine University and Academic Director at Duke Corporate Education. Jay A. Conger is a Professor at the London Business School and a Senior Research Scientist at the Center for Effective Organizations at the University of Southern California. Both are co-authors of Growing Your Company's Leaders (Amacom, 2004) and the Harvard Business Review article, "Developing Your Leadership Pipeline."