Succession Planning Keeps WellPoint Competitive

WellPoint's Human Resource System identifies key succession candidates, allowing it to quickly promote from within. Management builds on its strengths, and the company saves millions of dollars in recruiting and retention costs.

June 20, 2002
It was March 2001, and WellPoint Health Networks found itself in the sort ofsituation that triggers a rush of anxiety in even the most composed HRprofessional. The president of WellPoint’s large group operations, a key spotin the company’s management team, suddenly announced that he had been luredaway to join a competitor.

An unexpected leadership void in a key position could cause chaos, at leasttemporarily, at many companies. At WellPoint, a national health-care giantlocated in Thousand Oaks, California, the stakes were even higher. As a publiclytraded company, it couldn’t risk confusion that might rattle investors’confidence and have a disastrous effect on the company’s share price. ButWellPoint’s senior management and its HR staff didn’t panic. Instead, theyimmediately logged on to a Web-based corporate database designed to identifysuccessors for jobs throughout the organization and to track the development ofthe organization’s bench strength.

"Basically, if this or that executive was hit by a truck, who would take over?"

WellPoint executives did a search of the company’s Human Resource PlanningSystem, which contains detailed information on possible candidates for promotionwithin the company. The system includes performance evaluations, rundowns of thecandidates’ accomplishments at the company, self-ratings, and informationabout each person’s career goals. It also provides useful personal data, suchas whether a candidate is free to relocate to another part of the organization.

The company -- which serves the health-care needs of more than 50 millionmembers through its subsidiaries -- quickly identified a suitable candidate.Senior vice president Dave Helwig was offered the job, and he accepted. By thetime the former executive’s departure was announced a week later, Helwig wasat the helm, ready to take charge.

But that wasn’t all. One of the most disruptive aspects of a major internalpromotion can be the game of musical chairs that develops as lower-levelmanagers are shifted to fill the gap. HRPS handled that issue as well. Thesystem identified four other spots in the management chain that would have to befilled as a result of Helwig’s promotion, and provided viable candidates forthose jobs. The final result: five positions filled, all internally, withestimated savings of $1 million on what it would have cost to hire anexecutive-recruiting firm.

WellPoint’s HRPS enables the company to manage corporate succession with adegree of orderliness and efficiency that other companies might findunimaginable. The system allows executives and the HR team to identify andevaluate viable candidates for every management post in the company. It spotsand tracks the development of promising internal talent, and enables topmanagement to identify candidates throughout the corporation’s far-flunglocations. At the same time, it spots positions in areas where the company’sbench strength is thin, slots that might be filled most effectively byrecruiting outside talent.

WellPoint’s succession system is closely intertwined with itsemployee-evaluation program. Information from evaluations becomes a useful toolin managing succession. The company methodically works at preparing its pool offuture internal candidates for succession with a related training andcareer-development program that emphasizes strategic thinking and helps youngtalent get a taste of other jobs in the organization.

HRPS has helped the company to make the best use of management staff membersand has given employees opportunities for advancement that they might otherwisenot have had. "When we’ve been trying to fill a position on the West Coast,for example, the system has produced names of East Coast people that we mightotherwise not have thought of," says Barbara McNamara, vice president ofemployment and employee relations. "In other instances, we’ve initiallyassumed that we would have to fill a position from the outside. But before westarted discussions with search firms, we checked the HRP System, and suddenlywe saw that, wait, here’s a candidate that we’ve overlooked within thecompany."

The system also has produced tangible bottom-line benefits. When WellPointbegan measuring its company-wide internal-promotion rate for the first time in2000, it set an ambitious goal of filling 75 percent of management positionsfrom within. Thanks to the HRP System, however, the company managed to do evenbetter -- an unusually high 86 percent internal-promotion rate.

In 2001 alone, all 11 senior positions that became available were filled fromthe inside. The estimated savings on executive-search expenses: $550,000. Byimproving employees’ opportunities for promotion, the company has reduced itsturnover rate by 6 percent since 1997. The savings on recruitment and trainingexpenses: $21 million. And positions that once took executive recruiters 60 daysto fill are now typically filled internally in 35 days.

It’s probably no coincidence that, since the program began in 1997, Fortunemagazine has ranked WellPoint as the nation’s most admired health-carecompany. It received its highest score in management quality.

From a strategic standpoint, HRPS has proven particularly useful for acompany whose growth has included five major acquisitions in the past six years."If we need talent to take over," McNamara says, "we can go into thesystem and ask, ‘Who has been identified as the next officer for a [regionalsubsidiary]?’ The system will pull up a list of candidates and their profiles,and we can see who might be the best fit."

When WellPoint acquired Blue Cross-Blue Shield of Georgia in March 2001, forexample, company management decided that it wanted to get new local leadershipimmediately. HR used the system to identify a chief-executive candidate fromwithin the ranks. "We had her in place by the time the acquisition wasannounced," McNamara says.

How to create a tool for succession planning
WellPoint began focusing on corporate succession in 1997, when the company’sboard asked chairman and chief executive officer Leonard Schaeffer adisconcerting question: who was in line to replace key managers and executives?"Basically, if this or that executive was hit by a truck, who would take over?"says McNamara.

For answers, Schaeffer turned to WellPoint’s HR department.

The corporate board had been concerned chiefly about the top layer ofmanagement. But as the company’s HR team examined the issue, it realized therewas a broader, deeper need to track succession and talent development throughoutthe operation. Thus, WellPoint chose to include 600 managers and executives,spanning five levels of management within the organization, in its successionplanning.

Part of the planning was developing the equivalent of a football team’sdepth chart. HR set out to ascertain the company’s bench strength -- orweakness -- at each position, and to store information on the candidates foreventual promotion. At the start, the company simply drew up succession chartson paper. But WellPoint is a sprawling operation that continually acquires newsubsidiaries and often makes management changes in them. It soon became obviousthat more sophisticated tools were needed to manage the company’s successionplanning.

Today, WellPoint maintains a database program on a secure Internet site. "We’rea fairly diverse organization, with a lot of locations, so the Web works for us,"says Lisa Welker-Finney, director of executive education and supervisor of theHRPS. Eventually, once some technical issues are resolved, the database will berelocated to the corporate intranet.

But the choice of software and platform wasn’t as crucial as fine-tuningthe HRPS to match the company’s succession needs. HR professionals interviewedsenior management and board members extensively, and developed benchmarks bywhich to identify and evaluate the best candidates for promotion. But they alsothought about the broader range of benefits that they could bring to the companywith such planning, and how they would integrate the succession program intoother aspects of personnel management.

Intertwining the succession system with the job-evaluation process
In 2000, WellPoint began combining succession planning and performanceappraisals into one annual process. It begins each January, when HR asks each ofthe 600 participants in its succession plan to write a self-evaluation. Thedraft of that document is forwarded to an employee’s supervisor, who adds aperformance appraisal, a core-competency rating, and most important, anassessment of the employee’s potential for promotion. The promotion assessmentincludes the supervisor’s opinion about which positions an employee might besuited for and when the employee might be ready to make a move. It also includesthe supervisor’s views on who might be capable of replacing the employee, ifhe or she is promoted.

All that data is combined to create a profile -- a sort of online résumé --for each employee. In addition to the subjective evaluation data, the assessmentincludes information about an employee’s education, language skills,experience, and current job responsibilities. Then, HR prints all the individualprofiles and assembles them into both organizational and succession charts.

"It doesn’t mean that a person is guaranteed to get a particular slot,"Welker-Finney says. "Basically, we’re playing with what-if scenarios. Whatif I move a person to this position? What shifts does that cause elsewhere?"

The content of the profiles depends to a large degree on the immediatesupervisors’ subjective input. There’s a possibility that HR may get aninaccurate picture of an employee’s potential. WellPoint tries to offset suchbias by having senior management conduct "challenge sessions" forsupervisors in each business group. Participants discuss the profiles and arefree to disagree with the assessments -- or to identify other supervisors’employees as succession candidates for positions on their own staffs. "Thisprocess gives units an added chance to see the talent in other units,"Welker-Finney says. "And we push ourselves to do more with individualemployees, to work harder to move those people within the organization."

Developing high-potential candidates
The HRPS also makes it possible for WellPoint’s HR department to spot thin areas in its succession chart and to identify problem patterns. That, inturn, allows HR to develop initiatives to build bench strength in those areas.After the close of the 2000 planning cycle, for example, Welker-Finney concludedthat WellPoint in general needed stronger, better-prepared succession candidatesfor two levels of management. She proposed to top management that WellPointcreate a special development program to remedy the deficiency.

The result is a special training program for 24 managers and executives whohad been identified as "high-potential" candidates for upper-levelmanagement positions. One key component is the WellPoint Executive Experience,an intensive five-day seminar that utilizes business-case simulations.

Debbie Vaillancourt, a vice president in sales, has been a participant. "Inthe simulations, they purposely put you in a role you weren’t accustomed to. Iwas VP of finance, for example. It wasn’t always comfortable, but it helpedyou to grow and think about the company from a different angle. We’re so busyin our jobs here that it’s easy to not even notice the big picture. Thisprogram really emphasized strategic planning, which was great. Of all theclasses I’ve been to in the 12 years that I’ve been with the company, thiswas the most valuable one." The program required participants’ supervisorsto work with them on a long-range special project, which Vaillancourt sayshelped reinforce the strategic-thinking lessons of the seminar.

The high-potential development program is just one of the many ancillarybenefits of WellPoint’s dynamic approach to succession planning. "If you’reusing a database to identify potential candidates for jobs, you can use it notjust for promotions but to identify lateral opportunities for people,"Welker-Finney says. "And if you’re gathering information on potentialcandidates, you can also use it as a tool for assessing core competencies withinthe organization, for seeing where you need to focus your development andtraining resources. As we continue to develop the program, I think we’re justbeginning to see its benefits."

Workforce, April 2002, pp. 50-54 -- Subscribe Now!