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International
Journal of Succession management
Manpower
22,8
systems and human resource
outcomes
736 Tung-Chun Huang
Received February 1999 Institute of Human Resource Management, National Central University,
Revised April 2000 Chungli City, Taiwan
Accepted February 2001
Keywords Succession planning, Human resource management, Career development, Morale
Abstract Succession planning concerns the selection of talented employees to replace senior
managers who leave the firm because of retirement, reassignment, or other reasons. Effective
succession planning emphasizes minimizing disruption and dislocation arising from such
personnel changes, with a view to implementing business strategy and achieving organizational
goals in a smooth and continuous manner. Although succession planning is an essential
requirement for the long-term development and success of business enterprises, previous studies
have rarely investigated the empirical relationship between succession programs and human
resource outcomes. This study employs empirical data collected from business firms in Taiwan to
address that question.

International Journal of Manpower,
Vol. 22 No. 8, 2001, pp. 736-747.
# MCB University Press, 0143-7720
Introduction
Succession planning involves selecting from pools of promising candidates
those employees best suited to fill higher-level management positions in
business firms. As a first step in the process, a projection of future needs for
senior managers is made. Next, planners try to assess which short-listed
employees are most likely to be successful in the positions that are expected to
open up. Finally, a specific plan is formulated to ensure that potential
successors develop the core competencies needed to advance the strategic
interests of the organization (Carretta, 1992). Succession planning may be
simply defined as the plan a company makes to fill its most important
executive position. However, a more comprehensive definition of succession
planning is the process of ensuring a suitable supply for current and future key
jobs successors, so that the career of individuals can be managed to optimize
the organization's needs and the individuals' aspirations (Dessler, 2000).
Succession plans are a vital informational input into day-to-day decision
making in business organizations. They are also an important tool for
developing the management executives who will implement the firm's business
strategy and achieve its organizational objectives. Firms that fail to treat their
succession plans as living documents risk losing their continuity and the
opportunity to revitalize their organizations (Getty, 1993). In addition,
successful succession management can lower employee turnover rates,
improve staff morale, and place the most qualified candidates in key positions
(Johnson et al., 1994).
Many studies (Burdett, 1993; Goldstein, 1992; McConnell, 1996; McElwain,
1991; Pattan, 1986) describe the essentials of ``successful'' or ``strategic''
succession planning but present no supporting empirical evidence. Others Succession
(Cooke, 1995; Kesner, 1989; Leibman et al., 1996; Bobbin, 1996) instruct us on management
procedures for implementing a sophisticated succession program, while only a systems
few examine the relationship between executive succession programs and
organizational performance (Miller, 1993; Tushman and Rosenkopf, 1996) and
the effects of succession systems on corporate performance (Friedman, 1986).
Equally rare are studies investigating the effects of succession planning on 737
human resource (HR) outcomes, although Carretta (1992) and Sahl (1992) have
done some work in this area.
One factor complicating analysis of the effects of succession planning on HR
outcomes is the great variability of planning practices across firms. A plan may
be extremely simple, providing for only the development of backups and
potential successors to the most senior-level managers. At the other extreme it
may be very formal, including documented rules and procedures for
managerial succession at all levels of the organization (McConnell, 1996). This
leads us to ask, Do more sophisticated succession programs tend to produce
more favorable HR outcomes than less sophisticated ones? The present study
attempts to provide an answer to this question.

Literature review
The degree of sophistication of succession planning systems
There is a great deal of variation across business firms in the process of
succession planning. A plan may be very simple, providing only for the
development of backups and potential successors to the most senior level of
management. Or it may be very formal, with documented rules and procedures
for managerial succession at all levels of the organization (McConnell, 1996).
Sahl (1987) divided succession-planning programs into five levels, based on the
degree of skill or sophistication involved. At the most basic level, the chief
executive merely asks for the name of the subordinate best suited to serve as
his or her backup. At the next level up, the process is supplemented by the
provision of appraisal data on the performance of potential candidates for
succession. At the third level, the successors' career goals and potential for
growth are incorporated into the plan. The fourth level involves a management-
development plan for those identified as potential successors. At the optimal
level, all of the steps previously outlined are taken to ensure a smooth
succession transition for all management jobs in the firm. Therefore, here I
mean that a sophisticated succession planning system is a formal program
with documented rules and procedures for managerial succession at all levels
of the organization.
Scholars generally agree that a sophisticated succession plan should contain
a number of critical components. These include a statement of strategic vision;
a planning database (Pattan, 1986); candid and open channels of
communication (Shulman, 1991); support from the management staff
(Nahorney, 1992); a systematic way of identifying candidates and rewarding
managers for promoting their best employees (McElwain, 1991); and
International participation, feedback and action (Getty, 1993). Payne (1999) raised five steps
Journal of to construct a solid succession plan. They are:
Manpower (1) set clear and relevant objectives;
22,8 (2) prepare a summary of business plan;
(3) compare objectives to the current situation;
738 (4) develop potential solutions; and
(5) assemble team of advisers to implement the plan.
In an empirical study, Friedman (1986) characterizes the succession systems
according to seven dimensions. They are:
(1) formalization;
(2) control systems;
(3) resource allocation;
(4) information systems;
(5) political criteria;
(6) technical criteria; and
(7) staff role.
He suggested that a succession system will be more successful, if it is highly
formalized, has a system of checks and balances, has sufficient resources, has
extensive information, uses competence rather than political criteria for
selection, and has credible staff. Previous literatures seem to suggest that
organizations may all have a succession plan but that these vary in their degree
of sophistication.

Succession planning systems and organizational performance

There is abundant evidence (Carretta, 1992; Gutteridge et al., 1993; Pattan,
1986; Sahl, 1992; Walker, 1998; Wallum, 1993) that companies with a formal
succession plan for their top managerial posts enjoy a higher return on
investment (ROI) than those that do not have one. Carretta (1992) finds that the
advantage is even greater for firms that adopt plans covering the managers
two tiers below the top. And in a case study conducted in 1992, Sahl concluded
that Scott Paper Company was able to turn itself around only after
implementing an effective succession planning system and introducing
management development programs. Sahl (1992) points out that as a result of
these measures, Scott increased plant-manufacturing output by 35 per cent and
reduced product defects to only a fraction of 1 per cent of total production.
According to Pattan (1986), strategic management-succession plans enable
firms to specify managerial functions and performance standards, ensure
continuity in management practices, identify outstanding candidates for senior
management posts, and satisfy the aspiration of employees for career
advancement. Through the planning process, succession plans guide actions to
enhance the quality of the leadership talent pool relative to business Succession
requirements. It is believed that succession planning can build a competitive management
advantage through the superior development of their leadership talent (Walker, systems
1998).
Johnson et al. (1994) suggest that by implementing a succession program
firms can lower turnover rates, improve staff morale, and promote the most
highly qualified employees to key positions. In addition, the outcomes of 739
human resources may differ not only between firms that do and do not adopt
succession plans but also between firms that adopt more sophisticated
programs and those that adopt less sophisticated ones. Formal succession
planning programs such as those in place at 3M can make the identification of
high-potential employees and replacement candidates a more egalitarian
procedure (Gutteridge et al., 1993). Wallum (1993, p. 44) conducted a survey and
concluded that succession planning ``helped organization with internal
resourcing; reduced attrition of high-fliers; allowed for more realistic
counselling and planning; and prepared candidates in advance for senior
appointments''.
McConnell (1996) and Sahl (1987) found that firms carry out succession
plans with varying degrees of skill or sophistication. Sahl (1987), classifying
plans by level of sophistication, suggests that firms could avoid the turmoil and
confusion that surround the departure of top managers by implementing an
optimal succession plan (i.e. one embodying the highest level of sophistication).
He further argued that by adopting a comprehensive, well-designed succession
plan a firm could strengthen its human-resource function and more effectively
tap the full potential of its human resources.
Friedman (1986) found that high- and low-performance firms managed their
succession systems in different ways. He further suggested that involvement of
the chief executive officer (CEO), human resource review, an accountable
succession system, a credible succession staff, provision for executive
development, and an effective flow of information between the HR department
and other divisions of the firm are critical to the success of succession systems.
These findings imply a positive relationship between the degree of
sophistication in succession planning and organizational performance.
However, most of them are case studies or are not methodologically rigorous.
Therefore, the research objective of this study is to carefully investigate
whether or not, and to what extent, sophistication of succession systems is
related to human resource outcomes.

Data sources and variable measurement

Data sources
Employing survey data obtained from Taiwanese firms, this study seeks to
determine whether those local firms with a more sophisticated succession plan
have achieved more favorable HR outcomes than that with a less sophisticated
one. A total of 945 US-owned and 1,562 Japanese-owned firms on file in the
electronic data bank of the Council of Investment, Ministry of Economic
International Affairs, served as populations for this study. In accordance with the principle
Journal of of ``ten draws one'', 100 American-owned and 150 Japanese-owned firms were
Manpower randomly selected from these populations as samples for analysis. A total of
1,500 local Taiwanese firms on file in the Commonwealth Magazine data bank
22,8 served as a third population. Four hundred of these local businesses were
randomly chosen from this population to serve as a third sample. The local
740 firms thus selected significantly outnumbered the foreign ones, reflecting the
fact that foreign companies account for only about 10 per cent of all business
enterprises in Taiwan.
A questionnaire in Chinese was sent to the HR manager of each firm that
elected to participate in this study. Altogether, 166 firms completed and mailed
back the questionnaires that had been sent to them, generating an effective
response rate of 25.5 per cent across all categories of national ownership for
this study. The response rate for American-owned, Japanese-owned, and
Taiwanese firms is 28 per cent, 23 per cent and 26 per cent respectively. A
comparison of the response rate across investor nationality showed no
significant difference.
Of the firms constituting the effective sample, 66.9 per cent were
manufacturers and the remainders were service firms. In ascending order of
scale, 30.7 per cent of the firms had a workforce of less than 300 employees, 37.3
per cent had between 300 and 1,000, and 31.9 per cent had more than 1,000. The
representative business firm had been in operation for 24 years. By nationality
of capital source, 62.7 per cent of the respondents were Taiwanese firms, 16.9
per cent were American-owned, and 20.5 per cent were Japanese.

The measurement of sophistication of succession planning systems

Employing survey data obtained from Taiwanese firms, this study seeks to
determine whether those local firms with a more sophisticated succession plan
have achieved more favorable HR outcomes than those with a less
sophisticated one. A firm that employs any type of formal rules or procedures
in arranging for managerial succession is regarded as having a succession
plan. Like Friedman (1986), Pattan (1986), and McElwain (1991), this study
employs ten items to measure the sophistication of succession systems:
(1) The extent to which the prescribed rules and procedures of succession
and executive development are formalized.
(2) The extent to which departments and staff are assigned specific
responsibility for succession planning.
(3) The extent to which auditing and follow-up are pursued in the executive
or HR review process.
(4) The extent to which higher-level management becomes involved in the
succession process.
(5) The extent to which department heads are evaluated and compensated
for their efforts to develop subordinates.
 (6) The extent to which a firm compiles data on employees and job positions Succession
for the purposes of succession and development. management
(7) The extent to which selection for promotion is based on personal systems
relationships and network ties.
(8) The extent to which selection for promotion is based on past
performance, range of experience, and ability. 741
(9) The extent to which members of the succession-planning staffs are
viewed as credible and competent in performing their job.
(10) The amount of time that the CEO devotes to managing succession
issues.
A Likert scale (ranging from a low of 1 to a high of 5) is used to evaluate firm
performance on the ten items, with the average score of each firm representing
the level of sophistication it has attained in succession planning. The higher a
firm's score the more sophisticated and well developed its succession system is,
and vice versa. The result shows that the value of Cronbach Alpha for those ten
items is 0. The bivariate correlation coefficients between total and individual
items range from 0.31 to 0.77. All of the correlation coefficients are statistically
significant at p < 0.01.

The measurement of human resource outcomes

According to Bratton and Gold (1999), high employee commitment to
organizational goals is one important facet of human resource outcomes.
Therefore, in this study, respondents were asked to compare the performance
of their firms with that of competitors, according to the following five human
resource outcomes indicators:
(1) Staff morale in our company compares favorably with that of our
competitors.
(2) Our organizational climate compares favorably with that of our
competitors.
(3) Our staff turnover rate compares favorably with that of our competitors.
(4) Our organizational commitment compares favorably with that of our
competitors.
(5) Job satisfaction in our company compares favorably with that of our
competitors.
A Likert scale (ranging from a strongly disagree of 1 to a strongly agree of 5) is
also used to evaluate HR effectiveness on the five items. The average score for
these indicators measures the firm's HR effectiveness, with a higher average
score representing a higher level of HR performance. The value of Cronbach's
Alpha for those five items is 0.861, which indicates a high internal consistency
for the construct of HR outcome. The bivariate correlation coefficients between
International total and individual items range from 0.64 to 0.90. All of the correlation
Journal of coefficients are statistically significant at p < 0.01.
Manpower
Control variables
22,8 A number of organizational characteristics were selected as control variables.
These include size of the firm, national source of capital, and background of the
742 CEO. Although McConnell (1996) suggested that succession planning is a
valuable management tool for hierarchical business organizations of all sizes,
large firms are more likely than small ones to set up a formal department and
assign personnel for handling matters relating to succession planning. For this
reason, I expect that firm size will have a significant impact on the degree of
sophistication of the succession program.
The national source of a firm's capital also has a bearing on the
implementation of succession plans. Since succession planning is a new
management tool that was initially developed abroad, the subsidiaries of
American-owned firms operating in Taiwan can be expected to employ this
tool more frequently than local firms do. In addition, firm age and industrial
sector are also employed as control variables in this study.

Result and discussion

When asked whether they had established a succession plan, 108 of the 166
firms sampled, or approximately 65 per cent, responded in the affirmative.
Twelve firms, approximately 7.0 per cent of the total number surveyed, had no
plan at present but indicated that they would adopt one within five years. This
provides a sharp contrast with the USA, where 93 per cent of the firms queried
by the Conference Board had already adopted a formal succession plan (Flynn,
1995). The comparison also suggests that succession planning has not caught
on as extensively among business firms in Taiwan as it has in Western society,
where it is considered essential for managerial continuity and the enhancement
of employee careers.
This study employed two steps to analyze the relationship between the
succession programs and human resources outcomes. First, I test whether the
adoption of a succession plan improves a firm's HR performance. The HR
outcomes indicator is regressed on a dummy variable representing the presence
or absence of a succession plan (controlling for organizational scale, firm age,
and industrial sector); the statistical relationship between the dependent and
independent variable is not significantly different from zero. Thus there is no
empirical support for the hypothesis that Taiwanese firms that adopt a
succession program achieve HR outcomes superior to those that do not.
One reason why our findings fail to support the arguments of Pattan (1986)
and Johnson et al. (1994) may be that business firms in Taiwan, fearful that they
will fall behind the competition if they do not employ the latest management
tools, have adopted succession plans in a helter-skelter manner without first
attaining a thorough understanding of the methods and techniques involved in
such planning. On the other hand, HR managers at these firms may be well
versed in the techniques of succession planning but may find their hands tied by Succession
top-echelon or line managers who fail to support, or actually oppose, succession management
programs. Therefore, in attempting to assess the relationship between systems
succession planning and HR performance, we should look beyond the mere
existence of a succession program and attempt to determine what type of
program is in place and the manner in which it is being implemented.
With this in mind, a regression equation was employed to measure the 743
effects on HR performance of succession plans ranked according to various
degrees of sophistication. The correlation coefficients of all the measures
including the control variables are presented in Table I. Controlling for the
influence of organizational scale, firm age, investor's nationality, and industrial
sector, this regression analysis detected a significant relationship between the
degree of sophistication in succession planning and HR effectiveness (see Table
II). Specifically, for every increase of one point in level of sophistication there
was an increase of 0.356 in the HR outcome indicator. These results support the
hypothesis that the degree of sophistication in management planning is
systematically related to HR effectiveness. Tests of the two hypotheses
described above have quite specific implications. First, if it is to succeed, a
succession plan must be implemented carefully, with sufficient attention
devoted to design, commitment of top-level management, staff credibility, and
resource allocation. Second, adopting a succession plan solely for the purpose
of decoration (e.g. so that a firm can demonstrate that it is as up to date as its
competitors) is probably worse than having no plan at all.
Besides the regression result, further matters of interest are which
characteristics of succession systems are closely associated with the
achievement of more favorable HR outcomes. Therefore, this study also
examined the correlations between the individual items and the dependent

Mean
Variables (standard deviation) 1 2 3 4 5 6

1. Sophistication of 3.59 (0.50) ±

succession plan
2. Number of employees 6.25 (1.53) 0.079 ±
(natural log)
3. Firm age 3.95 (0.75) ±0.120 0.357** ±
(natural log)
4. Industry dummy 0.67 (0.47) 0.089 0.068 0.041 ±
(manufacturing = 0,
service = 1)
5. Investor's nationality 0.17 (0.38) 0.202* ±0.084 ±0.117 0.009 ±
(American-owned =
1, else = 0) Table I.
6. Human resource 3.57 (0.65) 0.301** 0.007 ±0.120 ±0.051 0.135 ± Correlation coefficients
outcome for independent,
control, and dependent
Notes: * p < 0.05; ** p < 0.01 variables
International Model 1 Model 2
Journal of Variables Beta t-value Beta t-value
Manpower
Constant 14.357** 5.868**
22,8 Sophistication of succession plan ± ± 0.290 3.059**
Number of employees (natural log) 0.067 0.802 ±0.134 ±1.372
Firm age (natural log) ±0.127 ±1.521 ±0.109 ±1.115
744 Industry dummy
(manufacturing = 0, service = 1) ±0.052 ±0.670 ±0.103 ±1.124
Investor's nationality
(American-owned = 1, else = 0) 0.127 1.624 0.087 0.901
Table II. R2 0.035 0.152
Results of regression F 1.480 3.670**
analysis on human
resource outcome Note: ** p < 0.01

variable (human resource outcome). I found that the extent to which

department heads are evaluated on and compensated for their efforts to
develop their subordinates shows the highest correlation with HR outcomes
(see Table III). This result points to the importance of introducing a control

Mean Correlation
(standard with HR
Item deviation) performance

1. Extent to which department heads are evaluated on and 3.69 (0.89) 0.284**
compensated for efforts to develop their subordinates
2. Extent to which selection for promotion is based on 2.92 (0.99) 0.254**
personal relationships and network ties (inverse
correlation)
3. Extent to which succession staffs is seen as credible and 3.37 (0.79) 0.242*
competent
4. Extent to which auditing and follow-up are pursued in the 3.51 (0.98) 0.228*
executive or human-resource review process
5. Extent to which data are gathered from relevant sources 3.66 (0.91) 0.222*
on people and positions in reference to succession and
development issues
6. Extent to which prescribed rules and procedures of 3.80 (0.99) 0.214*
succession and executive development are formalized
7. Extent to which higher-level management becomes 4.06 (0.68) 0.139
involved in the succession process
8. Extent to which departments and staff are assigned 3.84 (0.95) 0.112
Table III. specific responsibility for succession planning
Partial correlation 9. Amount of time that the CEO devotes to managing 2.90 (0.81) 0.050
between succession- succession issues
plan characteristics and 10. Extent to which selection for promotion is based on past 4.18 (0.65) ±0.030
human resource performance, range of experiences, and ability
outcome, controlling for Average score for the ten items 3.59 (0.50) 0.309**
firm size, firm age, and
industrial sector Notes: * p < 0.05; ** p < 0.01
system in succession planning, one which gets line managers involved in Succession
efforts to develop a cadre of talented managers. It moreover supports the management
strategic HRM argument that line managers should be encouraged to play the systems
role of HR managers, taking full responsibility for the effective development of
their subordinates (Huang, 1998).
The second highest level of correlation is found to exist between HR
performance and the extent to which selection decisions are based on personal 745
relationships and network ties. However, this correlation is an inverse one (the
sign preceding the coefficient is negative), implying that the less selection for
succession depends on political criteria the more favorable will be the HR
performance outcome. In this regard it should be noted that the term ``black
box'' has often been used as a metaphor to describe people-management
practices in some Taiwanese business firms, implying that pay increases,
performance evaluation, and promotion decisions in such firms often depend
more on whom one knows than on what one knows. This situation has led to
deep dissatisfaction among employees; weakening their commitment to their
employers and often inducing the most talented workers to jump ship and look
for work elsewhere.
The credibility and reputation of succession planning staff also shows high
correlation with HR performance, providing evidence of the important role
played by HR personnel. A credible and knowledgeable HR specialist can do
much to smooth the succession process in business firms. Such a person must
be fully aware of the needs, abilities, and aspirations of employees
demonstrating leadership potential, and of the mission and strategy of the firm
and its direction of development. He or she must also be able to match the
expectations of individual employees with organizational demands, and to
reconcile the conflicts that will inevitably arise between the two. As Friedman
(1986, p. 211) has said of succession planners, ``They must do the background
work, facilitating, coordinating, but not leading''.
Frequency of review, extent of data collection, and the formalization of rules
and procedures are three other characteristics of succession planning that are
highly related to HR outcomes. These elements of succession planning must be
given sufficient emphasis in order to position succession as a meaningful and
ongoing dimension of managing change and complexity (Burdett, 1993) and to
accommodate to change in the global arena of modern business (McElwain,
1991).

Concluding remarks
Succession planning is a valuable tool used by business firms to develop
talented employees to implement their strategies and achieve their
organizational objectives. Succession plans, it is argued, are essential to the
success and long-term development of business organizations.
Unlike earlier research, which is largely descriptive and normative in nature,
this study has attempted to empirically investigate the relationship between
succession planning and the HR outcomes of firms. The results indicate no
International significant difference in HR performance between firms that have adopted a
Journal of succession program and those that have not. However, there is a significant
Manpower relationship between the level of sophistication with which succession plans
are carried out and HR outcomes. The implication here is that by adopting a
22,8
succession plan a firm does not automatically improve its HR performance; that
to be successful, succession planners must devote considerable attention to
746 design, commitment of top-level managers, the credibility of planning staff, and
effective resource allocation.
Further analysis shows a strong correlation between certain characteristics
of succession plans and HR performance. Specifically, there are strong positive
correlations between such features as line-manager involvement, non-political
succession criteria, the credibility of succession-planning staff, review and
feedback, effective information systems, and degree of formalization on the one
hand, and HR performance on the other. However, a caveat appears to be in
order here: namely, simple correlation measures in cross-sectional approach
only the strength of mutual variation (direct or inverse) between variables and
in no way implies a cause-and-effect relationship or direction of causality.
Another limitation is that this study uses single informant to report
organizational level constructs and both the dependent and independent
variables. To attempt to establish clear lines of causality between HR outcomes
and the features of succession plans would require a research effort far
exceeding the scope and capacity of this study.
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