2003 Corporate Executive Board

55

Balancing Short-Term Business Risk with Long-Term

Development Benefit

Practice #4: Non-Obvious Development

Moves
Founded in Paris, France, Schlumberger Limited (NYSE: SLB) is a global
oilfield and information services company with major activities in the
energy industry. The company employs people of more than 140
nationalities working in 100 countries.
In 2002 Schlumberger employed 78,500 people around the world and had
revenues of $13.5 billion.

Description
As part of the succession planning process, Schlumberger identifies non-obvious cross-business
development move opportunities for a selected group of rising high-performing leaders and actively
manages the risks of such moves to the business and to the individual.

Goals
The objective is to accelerate the development of leaders early in their careers to prepare high-potential
individuals for senior leadership positions with global multi-business responsibilities. By moving
leaders across different business segments, Schlumberger aims at developing leaders capable of
realizing new cross-business opportunities.

Key Differentiating Features

Three key features differentiate this approach from standard practice:
First, by initiating frequent global stretch moves for leaders early in their careers, Schlumberger
finds that it can minimize the risk of leaders failing later in their careers when the cost to the business
of stretch role failures is high.
Second, knowing that line managers often are reluctant to take risks by placing high potentials in
cross-business stretch opportunities, Schlumbergers HR department manages the risk of each non-
obvious move by understanding individual risk factors and taking steps to strengthen the team around
the non-obvious move.
Third, in the few cases of failures in non-obvious moves, HR engages managers in a discussion of the
reasons for the lack of success to understand what can be done to avoid similar failures in the future.

Result
Twenty-five percent of job moves within the top three management levels in 2002 were non-obvious
stretch moves. Schlumberger experiences direct net gains from the non-obvious moves through
improved retention, increased performance, sharing of best practices across the enterprise, and the
capture of cross-business growth opportunities.

Please note that the CEB program names referenced

in this document have changed since the time of publication.
 2003 Corporate Executive Board

56 High-Impact Succession Management

Practice Driver
The immediate risk associated with placing leaders in stretch positions for development often leads organizations to
overvalue the potential short-term costs to the business of developing leaders (e.g., more leaders failing) and
undervalue the more intangible, but potentially more damaging, long-term costs to the business of not having leaders
capable of realizing future business opportunities.

Misassessing the Risk of Development

Fearful of the high cost of executive failure, managers tend
to avoid the risks of cross-organizational stretch moves
Responses to the Risks of Cross-Organizational Stretch Moves

Cross-Organizational Stretch Moves

Potential Costs of Avoiding Potential Costs of Engaging in

Cross-Organizational Stretch Moves: Cross-Organizational Stretch Moves:

Lack of leaders with enterprise-wide Increased business risks

experience Higher rate of leaders failing
Inability to realize cross-organizational Lack of specialized knowledge in leadership
business opportunities positions
Limited enterprise-wide succession options Leaders burning out from over-stretch
Increased HIPO attrition

Source: Schlumberger Limited; Corporate Leadership Council research.

Please note that the CEB program names referenced

in this document have changed since the time of publication.
 2003 Corporate Executive Board

Practice #4: Non-Obvious Development Moves 57

Practice Driver (Continued)

Organizations that avoid the short-term hazards of placing leaders in stretch positions run the risk in the long term
that they will lack leaders capable of realizing future business opportunities. Schlumberger finds it crucial to
systematically encourage business unit managers to take calculated risks in placing leaders in cross-organizational
stretch moves to ensure a future pipeline of enterprise-wide leaders.

Short-Term Risks for Long-Term Benefits

While obvious moves might Schlumberger believes that non-obvious
present fewer risks to the moves are critical for building leaders
business in the short term capable of realizing long-term business goals
Risk Versus Benefits of Obvious Moves Risk Versus Benefits of Non-Obvious Moves

Cost to the Development

Business Benefit

Development
Benefit

Cost to the
Business

Time Time

Long-term cost to the business Long-term gains to the

from underdevelopment of leaders. business enabled by leaders
with enterprise-wide skills.

The Real Risk

Non-obvious moves are not the real riskputting people in positions of
global responsibilities without preparation is the real risk.
Pierre Bismuth, VP, HR
Schlumberger

Source: Schlumberger Limited; Corporate Leadership Council research.

Please note that the CEB program names referenced

in this document have changed since the time of publication.
 2003 Corporate Executive Board

58 High-Impact Succession Management

Practice in Summary
Schlumberger develops a succession planning process focused on identifying higher-risk, non-obvious development
moves for high-potential leaders. Once leaders are moved into non-obvious roles, Schlumberger takes a series of steps
to mitigate the risk to the business and continuously seeks to improve future movement decisions by learning from
failed development moves.

(Non) Obvious Development Benefits

Schlumberger develops a succession management process that systematically promotes
non-obvious move opportunities and mitigates the risk to the business of such moves
1 2 3
Identify HIPO Successors Promote and Identify Non- Balance Long-Term
Early in Their Careers Obvious Development and Short-Term
Move Opportunities Benefits and Risks

Development Move
Decision Rules
; ;
Global ; ;
Talent Pool ; ;

4
Potential Gains from Non-Obvious Development Moves Support Individuals
in Non-Obvious
Development Moves

Realization of
New Cross- Risk
Business
Assessment
Opportunities

Transfer of
Best Practices
Total
Dollar Total $
Value 5
Improved Analyze Stretch Errors to
Performance
Improve Future Risk Taking

Increased
HIPO
Retention

Source: Schlumberger Limited; Corporate Leadership Council research.

Please note that the CEB program names referenced

in this document have changed since the time of publication.
 2003 Corporate Executive Board

Practice #4: Non-Obvious Development Moves 59

Step #1: Identify High-Potential Successors Early in Their Careers

Schlumberger identifies high-potential individuals early in their careers for inclusion in the Global Talent Pool and
creates frequent cross-organizational and global development opportunities for them. Also acknowledging the high
value to the business of specialist skills, Schlumberger offers high-potential leaders with rare skill sets an alternate
career path within the Expert Talent Pool. Development moves for experts focus on building depth in their field and
typically are within the same business unit or function.

Starting Early
To minimize the risk of stretch move failures later in leaders careers, Schlumberger
identifies young, high-potential talent and tags them for inclusion in a global talent pool
Schlumbergers HIPO Reservoir

Annual HIPO Schlumberger, Ltd.

Identification Process 78,500 employees
Minimum three years tenure
High performer
High potential HIPO Reservoir
9 Percent of Exempt Population
(4,300 in 2002)

Global Talent Pool (50 Percent) Expert Talent Pool (50 Percent)

Hard-to-get
Name: Eva Vasquz 68 percent under age 35 Name: Larry Roth
Entry-level to senior functional skills
Position: Integrated Position: Geophysicist,
Talent executivelevel staff Premier expert in
Project Management Oil Field Services
Profile Global development function
Location: Jakarta, Location: Paris,
Indonesia move every 23 years France
High tenure within
one function

Candidates for Non-Obvious Development Moves Functional Expert Path

Development
Strategy

Benefits of Early Stretch Moves

Few personal constraints Fewer ties to single function or business unit

Higher adaptability Lower cost to business of failure

Note: Sample talent pool individuals are for illustrative purposes only. Source: Schlumberger Limited; Corporate Leadership Council research.
Photos: PhotoDisc/Getty Images.

Please note that the CEB program names referenced

in this document have changed since the time of publication.
 2003 Corporate Executive Board

60 High-Impact Succession Management

Step #2: Promote and Identify Non-Obvious Development Move Opportunities

Schlumberger realizes that business unit managers often default to placing less-risky candidates in leadership
positions, thereby limiting enterprise-wide development opportunities for high-potential leaders. To change this
behavior, Schlumbergers CEO emphasizes the importance of early development moves and holds business unit
leaders accountable for offering non-obvious move opportunities in each EVPs annual performance review.

A Focus on the Real Risk

Schlumberger challenges the companys leaders to identify
non-obvious development moves for rising executives
Schlumbergers Leadership Development Strategy CEOs Non-Obvious Moves Challenge

Leadership Strategy
Memo from: CEO

1. Short-term risks in developing leaders should To: EVPs

be systematically encouraged
Consider non-obvious move
2. A culture of risk-taking has to be driven from opportunitiesmeaning cross-
the top of the organization
enterprise stretch movesfor
3. Risk-taking early in careers minimizes the risk executives within the Global
of development moves later in careers Talent Pool

and ensures senior managers are taking the appropriate amount of risk
in offering non-obvious moves at the annual performance review
Annual Performance Review

VP of HR
CEO Challenge
Has the EVP offered a sufficient
number of non-obvious development
experiences in the past year?
EVP CEO

The Safe Hands Problem

Our experience with development is that managers often default to the less risky moves, resulting in
narrowly developed leaders. We cant use a succession plan built around non-risky moves. To realize
potential business opportunities, we need to take risks in developing enterprise-wide leaders.
Pierre Bismuth, VP, HR
Schlumberger

Source: Schlumberger Limited; Corporate Leadership Council research.

Please note that the CEB program names referenced

in this document have changed since the time of publication.
 2003 Corporate Executive Board

Practice #4: Non-Obvious Development Moves 61

Step #2: Promote and Identify Non-Obvious Development Move Opportunities (Continued)
As part of business unit succession plans, managers nominate at least three successor candidates for each leadership
position. These ready in the future candidates are then considered for non-obvious move opportunities as
vacancies appear in other business units. Schlumberger characterizes developmental stretch moves across business
units where the business risk is deemed manageable as non-obvious moves.

Going Against Gut Feel

Business unit leaders evaluate a variety of movement options
based on their benefits and risks to the organization
Development Move RiskReturn Analysis

Obvious Moves
High Non-Obvious Moves

Direct vertical Cross-business or cross-geography move

move within same Developmental stretch move
function Manageable risk to business
Move of ready Long-Term
now successor Business Medium
into business- Benefit
troubled position Excessive Risk Moves
Move into a role Cross-business move into business-
with limited challenged position
development Developmental over-stretch move
benefit ! Excessive, non-manageable risk to
Low
Low Medium High business

Short-Term Business Risk

and develop succession plans which provide candidates for non-obvious moves
Succession Plan, Oil Field Services

Ready in the Future

Non-Obvious Move Position Ready Now Ready in the Future Successor
Discussion Items Characteristics
Director, Drilling and
VP of HR Non-obvious move Measurement, Ann King Have been identified as
opportunities Recruiter, Drilling and high potential
for ready in the Measurement, France,
VP, Drilling Are considered for
future candidates Young Lee non-obvious move
and
Business benefits Measurement Manager, Drilling and opportunities when
CEO EVP
Measurement, Africa, vacancies appear in
Business risks
Lisa Gil other BUs
Chain of moves
Manager, Seismic, U.S.,
Are lacking experience
Tom Smith
and exposure in function
or business

Source: Schlumberger Limited; Corporate Leadership Council research.

Please note that the CEB program names referenced

in this document have changed since the time of publication.
 2003 Corporate Executive Board

62 High-Impact Succession Management

Step #2: Promote and Identify Non-Obvious Development Move Opportunities (Continued)
To ensure a constant commitment to the development of high-potential leaders, the HR department works
systematically to surface non-obvious move opportunities. Every time a vacancy occurs, HR creates a list of both
obvious and non-obvious candidates for the position and actively works with the hiring manager to promote non-
obvious development moves for their rising executives.

The Role of Human Resources

HR systematically challenges business unit leaders
to consider non-obvious move opportunities

Actions for Identifying and Filling Schlumbergers

Non-Obvious Move Opportunities Hiring Rules

1
Identify Non-Obvious Opportunities
Job Profile Hiring executives cannot unilaterally
Hiring executive notifies HR about Location
Seniority place own preferred candidate into a
vacancy and submits profile of EXI T

Technical Skills vacancyHR creates a list of job

ideal candidate. Language Needs
candidates.

2
Surface Non-Obvious Candidates Candidate List
for Position Obvious HR systematically considers non-
Lane King SLB
People obvious move opportunities
HR generates short list of three to five
Non-Obvious when generating the short list of
obvious and non-obvious candidates for Joe Smith
candidates for the vacancy.
the vacancy.

3
Evaluate Level of Non-Obvious Risk While the hiring executive makes
Candidate Career Profile
HR and the hiring executive select the Current position the final choice of preferred
Location
best candidate by balancing short-term Performance date
Strengths and weaknesses
candidate, HR serves as an
business risks with long-term Career aspirations
Mobility advocate for the non-obvious
development needs. succession moves.

4
Support Individual in Non-Obvious Hiring manager and HR must
Assignments minimize the risk to the business
HR works with the hiring manager to and individual of non-obvious moves
create an adequate level of support by constantly mentoring and
around the non-obvious move. supporting the non-obvious move.

Source: Schlumberger Limited; Corporate Leadership Council research.

Please note that the CEB program names referenced

in this document have changed since the time of publication.
 2003 Corporate Executive Board

Practice #4: Non-Obvious Development Moves 63

Step #3: Balance Long-Term and Short-Term Benefits and Risks

Realizing that most managers are reluctant to take the risks required to develop leaders, line managers are forced to
consider a series of decision rules by which they can obtain a more balanced view of both the benefits and the risks
to the business of each non-obvious move. Through this exercise, Schlumberger identifies instances where the short-
term risk of a non-obvious move may be too high or the long-term benefit may be too low.

A Delicate Balance
Schlumberger evaluates obvious and non-obvious succession
options in terms of specific risks and benefits to the business
Decision Rules for Evaluating Benefits and Risks to the Business

Benefit Considerations Risk Considerations

New skill set needed to develop new product or customer segment? Struggling business?
Opportunity to introduce new customer network to business? Need for stability in role?
Identified cross-enterprise business opportunity? Credibility with client in question?
Gains from cross-organizational best-practice sharing? High importance of developed informal networks?
Other gains resulting from broader skills and experiences among Critical need for specialized knowledge?
senior team?

The Swap The Safe Bet

1 1
Recognizing that VP, Data Recognizing a client
two often-siloed Management VP, Seismic
credibility problem in ?
businesses have a business unit
open positions

Ella Foster, Manager, David Shaw,

Data Management Manager, Seismic

2 2
Rationale for Decision
Schlumberger VP, Data
Schlumberger
Previous incumbent failed in
chooses non- Management VP, Seismic opts for an obvious
successor, but one who position and has created
obvious moves and
credibility problem
switches the two has the most to learn
business leaders from the role. Position is critical to turning
David Shaw,
troubled business around
Ella Foster, Manager,
Data Management Manager, Seismic

Characteristics of Positions Off Limits

3 for Non-Obvious Moves
to support Rationale for Decision
Isolated business area with few cross-business opportunities
cross-training and Cross-organizational move brings
collaboration. Existing plans to divest business
needed knowledge into position to
realize new cross-organizational Troubled business; need for stability
business opportunity

Source: Schlumberger Limited; Corporate Leadership Council research.

Please note that the CEB program names referenced

in this document have changed since the time of publication.
 2003 Corporate Executive Board

64 High-Impact Succession Management

Step #4: Support Individuals in Non-Obvious Development Moves

Schlumbergers HR department actively manages the risk of each non-obvious move by analyzing potential
derailment factors as well as taking steps to strengthen the team around the individual who has made the non-obvious
move. HR also sets up interviews between the hiring manager and past non-obvious move participants, as well as with
other managers of individuals in non-obvious moves, in order to increase line manager comfort levels with non-
obvious moves.

Building a Safety Net

Schlumberger takes steps before the assignment to
evaluate the individual risk factors of stretch roles
HRs Individual Risk Evaluation Position-Based Risk Assessment

Hire Profiles of
A World Within
Assessment Past Moves Past Holders of Position
Current Telephone
Name
Position Extension
Rob Crist SVP, Sales x4567
?
Jan Miller Director x4123
?
Potential Risk Factors Matt Reif Manager x4890
?
Avoids conflict
Micromanagement
tendency
Weak communicator

Hiring Past Position

Manager Holder
Profiles of Individual Performance
Constraints Assessment

and strengthens the team around the role to support the individual
Team Strength Risk Mitigation

1 Strengthen 2 Delegate High-Risk 3 Use Internal Training

Direct Reports Responsibilities and Coaching

Non-Obvious Placement Non-Obvious Placement

Safe
Hands

Source: Schlumberger Limited; Corporate Leadership Council research.

Please note that the CEB program names referenced

in this document have changed since the time of publication.
 2003 Corporate Executive Board

Practice #4: Non-Obvious Development Moves 65

Step #5: Analyze Stretch Errors to Improve Future Risk Taking

Once a non-obvious move takes place, HR holds regular roundtable sessions with the direct reports of the non-obvious
move to identify early signs of derailment. In the few cases of failure, HR facilitates a roundtable session with leaders
from the business unit to force a discussion around the reasons for the failure and to understand what can be done to
prevent similar problems in the future.

Learning from Failures

Once a successor moves to a non-obvious position, HR continuously monitors the
assignment for early warning signs of derailment or burnout in the position
HRs Direct Reports Roundtable Session Executive Performance

Direct Report to Direct Report to

Non-Obvious Non-Obvious
Placement Placement

HR Manager Executive
Performance

Potential Signs of Stretch Failure

Low team spirit among direct reports
No response to business challenges brought up by direct reports 2000 2001 2002
Direct reports have only vague understanding of future goals

and, if failure occurs, HR conducts a senior executive

roundtable to document lessons learned
Lessons Learned Roundtable
Sample
Agenda Failed Executive in Follow-Up Actions
Non-Obvious Move
1. What happened? Improve assessment of
individual potential risk
2. Why did it happen? Corporate CEO factors
3. Could failure have been prevented? Head HR
Reevaluate risk
4. What actions can we take to prevent threshold of non-
similar derailments in the future? obvious moves
BU Head HR BU Head Strengthen support
team around non-
obvious moves

Source: Schlumberger Limited; Corporate Leadership Council research.

Please note that the CEB program names referenced

in this document have changed since the time of publication.
 2003 Corporate Executive Board

66 High-Impact Succession Management

Results
Schlumberger finds that the short-term risk of continuously promoting stretch opportunities for leaders is far
outweighed by the benefits of better executive development and the opportunity to realize new cross-enterprise
business opportunities. By promoting stretch moves of high-potential leaders early in their careers, Schlumberger is
not only able to retain a greater number of high-potentials but also to continue development stretch moves for leaders
later in their career at minimal risk.

Power of the Non-Obvious

By promoting a higher degree of risk in moving leaders, Schlumberger has achieved
stronger and more successful enterprise-wide development of executives
Percentage of Moves Within Top Three Percentage of Non-Obvious Moves
Levels That Are Non-Obvious with Successful Performance Outcomes
2002 2002

Non-Obvious Unsuccessful
Moves
10%
25%

75% 90%
Obvious
Moves
Successful

and increased the retention rate of high-potential employees

HIPO Retention Rate
19992001

97.4%
96.4%
95.3%

1999 2000 2001

Source: Schlumberger Limited; Corporate Leadership Council research.

Please note that the CEB program names referenced

in this document have changed since the time of publication.
 2003 Corporate Executive Board

Practice #4: Non-Obvious Development Moves 67

Results (Continued)
Through the non-obvious moves, Schlumberger also experiences direct gains from best-practice sharing and new
business opportunities realized between existing business units. Schlumberger also recognizes that the non-obvious
moves through the years have been an important factor in establishing a highly diverse top management team.

Realizing Non-Obvious Business Opportunities

Schlumberger has achieved high returns on non-obvious moves and continues
to realize new business opportunities outside traditional business areas
Gains from Non-Obvious Development Moves Schlumberger Integrated Project Revenue*
In Billions of U.S. Dollars

$1.8
$1.4
Best-Practice
Transfer
$0.9
Total $0.7
Dollar Total
$0.6
Performance
Value Immediate
Improvement
Gains

2001 2002 2003 2004 2005

Higher
Retention
* Estimate of committed Source: Gould, Andrew, Schlumberger
and probable projects. Investor and Analyst
Presentation, 3 March 2003.

Creating Global Leadership Capabilities

Schlumbergers human resources policy Nationality of Top 50 Managers
[is to] create leaders from all countries and
Latin
businesses where we work. Today, the America
spread of nationalities of our top managers North America
matches the geographic distribution of our Africa 13% 24%
oil field business. 9%
27% 16%
Andrew Gould, CEO Europe
11% Asia
Investor and Analyst Presentation and CIS
3 March 2003 Middle
East

Source: Schlumberger Limited; Corporate Leadership Council research.

Please note that the CEB program names referenced

in this document have changed since the time of publication.
 2003 Corporate Executive Board

68 High-Impact Succession Management

Council Assessment:
Non-Obvious Development Moves
Caveat
Initial rollout requires a high level of commitment and communication from the senior
executive team as to the company-wide priority placed on cross-organizational stretch moves
for leader development.

Implementation Tips
Stretch Role SupportTo protect both the business and individual from stretch move
failures, HR must play an active role in supporting individuals in cross-organizational stretch
roles by identifying potential derailment factors and offering necessary support in the role.
Development AccountabilityTo overcome line manager reluctance to take necessary risks
in offering cross-business stretch moves, Council research suggests that organizations must
actively hold line managers accountable for offering stretch move opportunities in
connection with annual performance reviews or succession planning sessions.
Employee CommunicationCompanies must ensure that employees as well as managers
properly understand that non-obvious moves are a critical part of the career path for high-
potential individuals with enterprise-wide ambitions. Equally, global enterprises must ensure
that high-potential employees understand that non-obvious moves must include frequent
stretch opportunities in different geographies.

Note to the Membership

Members interested in information about Schlumbergers HR services are invited to contact
the company directly. Contact information follows below.
Miles Warner
Schlumberger, HR Services
4 Triton Square
Regents Place
London NW1 3 HG
United Kingdom
Telephone: (44)-20-7830-7956 or (44)-7733-310677

Please note that the CEB program names referenced

in this document have changed since the time of publication.