Human Capital: Succession Planning and Management Is Critical	 
Driver of Organizational Transformation (01-OCT-03, GAO-04-127T).
                                                                 
Leading public organizations here and abroad recognize that a	 
more strategic approach to human capital management is essential 
for change initiatives that are intended to transform their	 
cultures. To that end, organizations are looking for ways to	 
identify and develop the leaders, managers, and workforce	 
necessary to face the array of challenges that will confront	 
government in the 21st century. The Subcommittee on Civil Service
and Agency Organization, House Committee on Government Reform,	 
requested GAO to identify how agencies in four			 
countries--Australia, Canada, New Zealand, and the United	 
Kingdom--are adopting a more strategic approach to managing the  
succession of senior executives and other public sector employees
with critical skills.						 
-------------------------Indexing Terms------------------------- 
REPORTNUM:   GAO-04-127T					        
    ACCNO:   A08636						        
  TITLE:     Human Capital: Succession Planning and Management Is     
Critical Driver of Organizational Transformation		 
     DATE:   10/01/2003 
  SUBJECT:   Best practices					 
	     Federal agencies					 
	     Federal employees					 
	     Foreign governments				 
	     Human resources utilization			 
	     Personnel management				 
	     Personnel recruiting				 
	     Strategic planning 				 
	     Australia						 
	     Canada						 
	     New Zealand					 
	     United Kingdom					 
	     Senior Executive Service				 

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GAO-04-127T

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
                                 Transformation

Statement of J. Christopher Mihm Director, Strategic Issues

GAO-04-127T

This is a work of the U.S. government and is not subject to copyright
protection in the United States. It may be reproduced and distributed in
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separately.

Highlights of GAO-04-127T, testimony before the Subcommittee on Civil
Service and Agency Organization, Committee on Government Reform, House of
Representatives

Leading public organizations here and abroad recognize that a more
strategic approach to human capital management is essential for change
initiatives that are intended to transform their cultures. To that end,
organizations are looking for ways to identify and develop the leaders,
managers, and workforce necessary to face the array of challenges that
will confront government in the 21st century.

The Subcommittee requested GAO to identify how agencies in four
countries-Australia, Canada, New Zealand, and the United Kingdom- are
adopting a more strategic approach to managing the succession of senior
executives and other public sector employees with critical skills. The
Subcommittee is releasing this report-Human Capital: Insights for U.S.
Agencies from Other Countries' Succession Planning and Management
Initiatives

(GAO-03-914)-at today's hearing.

October 1, 2003

HUMAN CAPITAL

Succession Planning and Management Is Critical Driver of Organizational
Transformation

As part of a reexamination of what the federal government should do, how
it should do it, and in some cases, who should be doing it, it is
important for federal agencies to focus not just on the present but also
on future trends and challenges. Succession planning and management can
help an organization become what it needs to be, rather than simply to
recreate the existing organization.

Leading organizations go beyond a succession planning approach that
focuses on simply replacing individuals and engage in broad, integrated
succession planning and management efforts that focus on strengthening
both current and future organizational capacity. As part of this broad
approach, these organizations identify, develop, and select successors who
are the right people, with the right skills, at the right time for
leadership and other key positions.

Governmental agencies around the world anticipate the need for leaders and
other key employees with the necessary competencies to successfully meet
the complex challenges of the 21st century. To this end, the experiences
of agencies in Australia, Canada, New Zealand, and the United Kingdom can
provide insights to federal agencies, many of which have yet to adopt
succession planning and management initiatives that adequately prepare
them for the future. Collectively, agencies in other countries implemented
the practices shown below.

Selected Practices Used by Agencies in Other Countries to Manage
Succession

o  Receive active support of top leadership.

o  Link to strategic planning.

o  	Identify talent from multiple organizational levels, early in careers,
or with critical skills.

o  Emphasize developmental assignments in addition to formal training.

o  	Address specific human capital challenges, such as diversity,
leadership capacity, and retention.

o  Facilitate broader transformation efforts.

www.gao.gov/cgi-bin/getrpt?GAO-04-127T.

To view the full product, including the scope and methodology, click on
the link above. For more information, contact J. Christopher Mihm at (202)
512-6806 or [email protected].

Madam Chairwoman and Members of the Subcommittee:

I am pleased to be here today to discuss the need for increased attention
on succession planning and management in the federal government. My main
point today is that the experiences of other countries can provide
insights to agencies here in the United States on how to engage in broad,
integrated succession planning and management efforts to identify and
develop the leaders, managers, and workforce necessary to meet the
challenges that will confront government in the 21st century. Chairwoman
Davis, today you are releasing a report that we prepared at your and
Senator Voinovich's request that shows specific practices that leading
public sector organizations abroad are implementing as part of their
integrated succession planning and management initiatives that focus on

1

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,

2

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 20073 and about 15
percent of the overall federal workforce will retire from 2001 to 2006.4

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

1 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 U.S. General Accounting Office, Results-Oriented Government: Shaping the
Government to Meet 21st Century Challenges, GAO-03-1168T (Washington,
D.C.: Sept. 17, 2003).

3 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).

4 U.S. General Accounting Office, High-Risk Series: Strategic Human
Capital Management, GAO-03-120 (Washington, D.C.: January 2003).

adequately prepare them for the future. In 1997, the National Academy of
Public Administration reported that of the 27 agencies responding to its
survey, 2 agencies had a succession planning program or process in place.
In a 1999 joint Office of Personnel Management (OPM) and Senior Executive
Association survey of the SES, more than 50 percent of all career members
said that their agencies did not have a formal succession planning program
for the SES, and almost 75 percent said that their agencies did not have
such a program for managers.

Succession planning and management is starting to receive increased
attention. Madam Chairwoman, at your request, GAO is to review how
selected U.S. federal agencies are managing their succession challenges.
In addition, the Office of Management and Budget revised Circular A-11 to
require that federal agencies' fiscal year 2005 annual performance plans
prepared under the Government Performance and Results Act identify
specific activities such as training, development, and staffing actions
that agencies plan to take to ensure leadership continuity. In addition,
as part of the administration's efforts to implement the President's
Management Agenda, the OPM set the goal that continuity of leadership and
knowledge is assured through succession planning and professional
development programs in 25 percent of all federal agencies by July 2004.

Today, I will briefly highlight the key practices for effective succession
planning and management we identified abroad that we encourage federal
agencies to consider as they revise or develop their own programs in this
area. As you know from testimonies by the Comptroller General, GAO has
several initiatives to strengthen its current and future organizational
capacity that are consistent with these practices. For example, we
implemented an Executive Candidate Development Program to prepare
candidates for assignment in the SES; hired senior-level individuals with
critical scientific, technical, and professional expertise; recruited and
hired diverse, high-caliber staff with needed skills and abilities; and
instituted a program that would allow select retirees to become reemployed
annuitants to facilitate the transfer of knowledge in critical areas and
allow for a smooth transfer of responsibilities, among other things.

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
organizationsSuccession 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
thatPractices agencies in Australia, Canada, New Zealand, and the United
Kingdom are

implementing that reflect this broader focus on building organizational
capacity. Collectively, these agencies' succession planning and management
initiatives demonstrated the following six practices.

1. Receive Active Support of Top Leadership. Effective succession planning
and management initiatives have the support and commitment of their
organizations' top leadership. In other governments and agencies, to
demonstrate its support of succession planning and management, top
leadership actively participates in the initiatives. For example, each
year the Secretary of the Cabinet, Ontario Public Service's (OPS) top
civil servant, convenes and actively participates in a 2-day succession
planning and management retreat with the heads of every government
ministry. At this retreat, they discuss the anticipated leadership needs
across the government as well as the individual status of about 200
high-potential executives who may be able to meet those needs over the
next year or two.

Top leadership also demonstrates its support of succession planning and
management when it regularly uses these programs to develop, place, and
promote individuals. The Royal Canadian Mounted Police's (RCMP) senior
executive committee regularly uses the agency's succession planning and
management programs when making decisions to develop, place, and promote
its top 500-600 employees, both officers and civilians. The RCMP's
executive committee, consisting of the agency's chief executive, the chief
human capital officer, and six other top officials, meets quarterly to
discuss the organization's succession needs and to make the specific
decisions concerning individual staff necessary to address those needs.

Lastly, top leaders demonstrate support by ensuring that their agency's
succession planning and management initiatives receive sufficient funding
and staff resources necessary to operate effectively and are maintained
over time. Such commitment is critical since these initiatives can be
expensive because of the emphasis they place on participant development.
For example, a senior human capital manager told us that the Chief
Executive of the Family Court of Australia (FCA) pledged to earmark funds
when he established a multiyear succession planning and management program
in 2002 despite predictions of possible budget cuts facing FCA. Similarly,
at Statistics Canada-the Canadian federal government's central statistics
agency-the Chief Statistician of Canada has set aside a percentage, in
this case over 3 percent, of the total agency budget to training and
development, thus making resources available for the operation of the
agency's four leadership and management development programs. According to
a human capital official, this strong

support has enabled the level of funding to remain fairly consistent over
the past 10 years.

2. Link to Strategic Planning. Leading organizations use succession
planning and management as a strategic planning tool that focuses on
current and future needs and develops pools of high-potential staff in
order to meet the organization's mission over the long term. Succession
planning and management initiatives focus on long-term goals, are closely
integrated with their strategic plans, and provide a broader perspective.

For example, Statistics Canada considers the human capital required to
achieve its strategic goals and objectives. During the 2001 strategic
planning process, the agency's planning committees received projections
showing that a majority of the senior executives then in place would
retire by 2010, and the number of qualified assistant directors in the
executive development pool was insufficient to replace them. In response,
the agency increased the size of the pool and introduced a development
program of training, rotation, and mentoring to expedite the development
of those already in the pool.

For RCMP, succession planning and management is an integral part of the
agency's multiyear human capital plan and directly supports its strategic
needs. It also provides the RCMP Commissioner and his executive committee
with an organizationwide picture of current and developing leadership
capacity across the organization's many functional and geographic lines.
To achieve this, RCMP constructed a "succession room"-a dedicated room
with a graphic representation of current and potential job positions for
the organization's top 500-600 employees covering its walls-where the
Commissioner and his top executives meet at least four times a year to
discuss succession planning and management for the entire organization.

3. Identify Talent from Multiple Organizational Levels, Early in Careers,
or with Critical Skills. Effective succession planning and management
initiatives identify high-performing employees from multiple levels in the
organization and still early in their careers. RCMP has three separate
development programs that identify and develop high-potential employees at
several organizational levels. For example, beginning at entry level, the
Full Potential Program reaches as far down as the front-line constable and
identifies and develops individuals, both civilians and officers, who
demonstrate the potential to take on a future management role. For more
experienced staff, RCMP's Officer Candidate Development Program identifies
and prepares individuals for increased leadership and managerial
responsibilities and to successfully compete for admission to

the officer candidate pool. Finally, RCMP's Senior Executive Development
Process helps to identify successors for the organization's senior
executive corps by selecting and developing promising officers for
potential promotion to the senior executive levels.

The United Kingdom's Fast Stream program targets high-potential
individuals early in their civil service careers as well as recent college
graduates. The program places participants in a series of jobs designed to
provide experiences, each of which is linked to strengthening specific
competencies required for admission to the Senior Civil Service. According
to a senior program official, program participants are typically promoted
quickly, attaining midlevel management in an average of 3.5 years, and the
Senior Civil Service in about 7 years after that.

In addition, leading organizations use succession planning and management
to identify and develop knowledge and skills that are critical in the
workplace. For example, Transport Canada estimated that 69 percent of its
safety and security regulatory employees, including inspectors, are
eligible for retirement by 2008. Faced with the urgent need to capture and
pass on the inspectors' expertise, judgment, and insights before they
retire, the agency embarked on a major knowledge management initiative in
1999 as part of its succession planning and management activities. To
assist this knowledge transfer effort, Transport Canada encouraged these
inspectors to use human capital flexibilities including preretirement
transitional leave, which allows employees to substantially reduce their
workweek without reducing pension and benefits payments. The Treasury
Board of Canada Secretariat, a federal central management agency, found
that besides providing easy access to highly specialized knowledge, this
initiative ensures a smooth transition of knowledge from incumbents to
successors.

4. Emphasize Developmental Assignments in Addition to Formal Training.
Leading succession planning and management initiatives emphasize
developmental or "stretch" assignments for high-potential employees in
addition to more formal training components. These developmental
assignments place staff in new roles or unfamiliar job environments in
order to strengthen skills and competencies and broaden their experience.
For example, in Canada's Accelerated Executive Development Program
(AEXDP), developmental assignments form the cornerstone of efforts to
prepare senior executives for top leadership roles in the public service.
These assignments help enhance executive competencies by having
participants perform work in areas that are unfamiliar or challenging to
them in any of a large number of agencies throughout the Canadian Public
Service. For example, a participant with a

background in policy could develop his or her managerial competencies
through an assignment to manage a direct service delivery program in a
different agency.

One challenge sometimes encountered with developmental assignments in
general is that executives and managers resist letting their
high-potential staff leave their current positions to move to another
organization. Agencies in other countries have developed several
approaches to respond to this challenge. For example, once individuals are
accepted into Canada's AEXDP, they are employees of, and paid by, the
Public Service Commission, a central agency. Officials affiliated with
AEXDP told us that not having to pay participants' salaries makes
executives more willing to allow talented staff to leave for developmental
assignments and fosters a governmentwide, rather than an agency-specific,
culture among the AEXDP participants.

5. Address Specific Human Capital Challenges, Such as Diversity,
Leadership Capacity, and Retention. Leading organizations stay alert to
human capital challenges and respond accordingly. Government agencies
around the world, including in the United States, are facing challenges in
the demographic makeup and diversity of their senior executives.

Achieve a More Diverse Workforce. Leading organizations recognize that
diversity can be an organizational strength that contributes to achieving
results. For example, the United Kingdom's Cabinet Office created
Pathways, a 2-year program that identifies and develops senior managers
from ethnic minorities who have the potential to reach the Senior Civil
Service within 3 to 5 years. This program is intended to achieve a
governmentwide goal to double (from 1.6 percent to 3.2 percent) the
representation of ethnic minorities in the Senior Civil Service by 2005.
Pathways provides executive coaching, skills training, and the chance for
participants to demonstrate their potential and talent through a variety
of developmental activities such as projects and short-term work
placements.

Maintain Leadership Capacity. Both at home and abroad, a large percentage
of senior executives will be eligible to retire over the next several
years. Canada is using AEXDP to address impending retirements of assistant
deputy ministers-one of the most senior executive-level positions in its
civil service. As of February 2003, for example, 76 percent of this group
are over 50, and approximately 75 percent are eligible to retire between
now and 2008. A recent independent evaluation of AEXDP by an outside
consulting firm found the program to be successful and

concluded that AEXDP participants are promoted in greater numbers than,
and at a significantly accelerated rate over, their nonprogram
counterparts.

Increase Retention of High-Potential Staff. Canada's Office of the Auditor
General (OAG) uses succession planning and management to provide an
incentive for high-potential employees to stay with the organization and
thus preserve future leadership capacity. Specifically, OAG identified
increased retention rates of talented employees as one of the goals of the
succession planning and management program it established in 2000. Over
the program's first 18 months, annualized turnover in OAG's high-potential
pool was 6.3 percent compared to 10.5 percent officewide. This official
told us that the retention of members of this high-potential pool was key
to OAG's efforts to develop future leaders.

6. Facilitate Broader Transformation Efforts. Effective succession
planning and management initiatives provide a potentially powerful tool
for fostering broader governmentwide or agencywide transformation by
selecting and developing leaders and managers who support and champion
change. For example, in 1999, the United Kingdom launched a wide-ranging
reform program known as Modernising Government, which focused on improving
the quality, coordination, and accessibility of the services government
offered to its citizens. Beginning in 2000, the United Kingdom's Cabinet
Office started on a process that continues today of restructuring the
content of its leadership and management development programs to reflect
this new emphasis on service delivery. For example, the Top Management
Programme supports senior executives in developing behavior and skills for
effective and responsive service delivery, and provides the opportunity to
discuss and receive expert guidance in topics, tools, and issues
associated with the delivery and reform agenda. These programs typically
focus on specific areas that have traditionally not been emphasized for
executives, such as partnerships with the private sector and risk
assessment and management.

Preparing future leaders who could help the organization successfully
adapt to recent changes in how it delivers services is one of the
objectives of the FCA's Leadership, Excellence, Achievement, Progression
program. Specifically, over the last few years FCA has placed an increased
emphasis on the needs of external stakeholders. This new emphasis is
reflected in the leadership capabilities FCA uses when selecting and
developing program participants. The program provides participants with a
combination of developmental assignments and formal training opportunities
that place an emphasis on areas such as project and people management,
leadership, and effective change management.

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 21st
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
have.

For future contacts regarding this testimony, please contact J.
Christopher

Contacts and 	Mihm or Lisa Shames on (202) 512-6806 or at [email protected]
and [email protected]. Individuals making key contributions to this
testimony

Acknowledgments included Peter J. Del Toro and Rebecka L. Derr.

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