SUCCESSION PLANNING AND IDENTIFYING HIGH POTENTIAL TALENT. Focus on the Middle East: Amanda Hofmann, American Express Graduate Research Assistant

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1 SUCCESSION PLANNING AND IDENTIFYING HIGH POTENTIAL TALENT Focus on the Middle East: Amanda Hofmann, American Express Graduate Research Assistant Focus on the Middle East High potential identification and succession planning management practices in the Middle East range from well-established to in-development. Multinational organizations operating in the region tend to use established, globally-consistent HIPO and SPM systems, with some latitude for regional customization. HR professionals currently working for multinational organizations in the region described in interviews: the standard practices of setting criteria for HIPO identification, identifying employees early in their careers, exposing employees to different aspects of business operations, providing targeted training to aid in development of specific skills and utilizing assessment centers to evaluate readiness for advancement. HSBC and Saudi Aramco are two companies in the region who are widely regarded as leaders in HIPO and SPM practices. HSBC HSBC, a multinational financial organization with significant operations in the Middle East, utilizes global international processes for assessment, leadership development, performance and career management. Local offices, however, are given the latitude to adapt these processes, within limits, to their own resource capabilities and cultural requirements. HSBC uses a talent pool system to track and manage the careers of high potentials within the organization, who are defined as having the capability to reach the senior executive level in three to five years and to move into top management positions over the longer-term. Employees in these talent pools are initially placed in assignments within their region or line of business. As these employees develop, they are given the opportunity to fill positions that cross boundaries. The most outstanding employees in these talent pools, as recognized by their managers, are then placed into a centrally-administered group talent pool, which provides a structured set of experiences that lead to a deep understanding of all aspects of the business, as well as the cultural environments in which HSBC operates. In order to reach the highest levels of management, HSBC employees must work in at least two very different cultural environments (Ready & Conger, 2007). Saudi Aramco Saudi Aramco, a Saudi Arabian-based global petroleum enterprise, has been a pioneer in HIPO and SPM practices in the region. Employees who have been identified as high potential receive the best on-the-job assignments, development training, consideration for internships and are sometimes selected to receive sponsorship for graduate programs, after completion of which they return to employment at Saudi Aramco. Additionally, the company utilizes high school math and science scores to identify promising high school students for employment. Saudi Aramco conducts assessment center evaluations at three transitions in a promising employee s career: individual contributor to first line supervisor; supervisor of other supervisors to department head and department head to executive. Targeted and future-oriented competencies are evaluated in these assessment centers, including global perspective and business acumen. The company believes the assessment centers are invaluable in that they move beyond the traditional 1 Page

2 one data point offered by performance management to two or three assessment center points of data within a single career. Saudi Aramco is also taking steps to address the challenges of its aging workforce and the tendency of many managerial employees to be clustered around a narrow age range. In response to this, many business lines have set a target percentage of high potential employees that must be 36 years old or younger, in order to mitigate against the risk of mass retirements in a short window of time. Additionally, Saudi Aramco has developed a new program called Leadership Preview Process that is designed to allow pre-supervisor level employees to understand A Day in the Life of a Supervisor and, at the same time, to allow the company to better understand the motivations of this new generation of employees. Trends and Challenges Locally-based companies that have not historically utilized HIPO and SPM practices are increasingly recognizing the importance of such programs and are taking action to develop and implement these systems. The level of interest in these initiatives has moved from minor to major over the past five years; evidence of this includes the high number of workshops and conferences devoted to the topics. Key drivers of this building level of interest include the current talent shortage that many companies are facing, as well as an increasing number of public offerings. Raising capital through public offerings requires companies to be more transparent in managing their business and makes succession planning for key positions more important (Kothari, 2008). Companies operating in the Middle East face some unique challenges in developing and implementing HIPO and SPM systems. The lack of an adequate supply of local nationals to fill positions makes it difficult for organizations to achieve the critical first step of having a bench of talent. Additionally, given the historically transient nature of the region and the high concentration of expatriates, there is a significant risk that this bench of talent may leave the organization before moving into the senior positions for which it is being groomed. As Cappelli (2008), notes, A deep bench of talent has become an expensive inventory that can walk out the door. Middle Eastern culture also presents unique challenges to succession planning, especially in the case of planning for senior-level positions. At these levels, decisions are frequently made based on factors that extend beyond typical succession planning tools. Interview sources report that more insight is needed at this level and the information provided and skills built by assessment centers and training are not adequate. This may be especially true in family-owned companies, which comprise as much as 90 percent of the enterprises in the Middle East. In these companies, it can be very difficult and sensitive to determine which family members will be chosen to assume leadership roles. This lack of effective succession planning may be one of the key reasons that few family-owned enterprises in the region survive beyond the third generation of ownership. Some family-owned companies, however, are taking steps to address this challenge. Saudi German Hospital Groups has created a process by which any family member can enter into the succession planning process at any time, at which point he or she will be required to undergo psychometric and leadership tests in order to be considered for managerial positions in the future. In order to continue advancing in the company, further testing and training are required. Saudi German Hospital Groups hopes that formalizing the succession planning process will ensure that capable 2 Page

3 successors will be in place to sustain the family-owned enterprise for many future generations (Kothari, 2008). For the complete discussion of this issue and annotated bibliography, download the original 2006 report Succession Planning and Identifying High Potential Talent from the CAHRS website» 3 Page

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