Best Practices of Succession Management and Employee Retention

Best Practices of Succession Management and Employee Retention The LGMA / GFOA Conference June 2, 2005 Lori Maida, MA, CHRP

Questions To Consider. . . What % of your employees will retire in the next 5 years?

Questions To Consider. . . What % of your employees are looking for other employment?

% of Employees Looking for Other Employment Conference Board of Canada (2005) reports, 58% of Canadian employees are open to move to other organizations

So…what are you planning to do about it?

Session Objectives Ø Briefly explore current trends Ø Understand succession management versus succession planning – and the alignment to employee retention Ø Understand best practice processes and examine a few of the tools and methodologies being used Ø Discuss the roadblocks and benefits of implementation Ø Explore how to get started

Why the Interest in Succession Planning and Employee Retention? Ø Numbers of people retiring and numbers of people entering workforce Ø Loss of organizational memory Ø Skills shortages are acute Ø Retention of talent Ø Future of work – different needs for generations of employees Ø What else?

Trends and Forecasts* Ø By 2008, more people will be leaving the workforce than entering Ø 44% of workers aged 45 -59 say they will retire before 65 Ø 10% of workers aged 50 -59 who leave full time jobs, move into part time within 2 years Ø 1/3 of workers aged 50 -59 who leave full time jobs, move back into full time * Statistics Canada research

Trends and Forecasts* Ø 72% of companies predict they’ll have an increasing number of leadership vacancies over the next 3 -5 years Ø 76% of those same companies are “less than confident” in their abilities to adequately staff these positions * Corporate Leadership Council research (reported by The Gallup Organization)

Current Economic Issues Ø Workplaces will lose high performers as economy strengthens Ø Currently, workplaces that understand future skills needed are having difficulty recruiting ØRecruitment strategies are strengthening Ø Retention of talent is increasingly becoming a “hot” issue

The Internal Challenge Who is going to do the work? What knowledge are we about to lose? What skills will we lose? What traditions will change? Is this good?

The External Challenge The market place for good talent will be competitive The good people will be able to pick and choose their working environment How do we create an organization in where people want to stick around?

Who is responsible to ensure you have the people to get the job done?

Shift from Industrial Age to Information Age The Old Way Ø HR is responsible for people management Ø We provide good pay and benefits Ø Recruiting is like purchasing Ø Development happens in training programs Ø We treat everyone the same Source: “War for Talent”

Shift from Industrial Age to Information Age The New Way Ø All managers are accountable for strengthening their talent pools Ø We shape our workplace, jobs, and strategy to appeal to talented people Ø Recruiting is like marketing Ø We fuel development through stretch jobs, mentoring and coaching Ø We affirm our people, but invest differently in A, B, and C players Source: “War for Talent”

Questions To Reflect On If the dam bursts today, what is the impact to your organization? How would you replace the people, knowledge, lost productivity?

One Approach…

It’s not just about having the bodies. It’s about the right bodies doing the right things. Creating an organization of which people want to be a part.

Retention: What keeps employees happy?

Current Retention Trends Towers Perrin (2002) Canadian study 59% are open to changing jobs 11% actively looking 45% passively looking “To retain me, you’ve got to help me advance, keep the good people, and provide competitive pay…. ”

Top 15 Retention Drivers Retention Items % 1. Exciting work & challenge 48. 4 2. Career Growth, Learning & Development 42. 6 3. Working with great people & relationships 41. 8 4. Fair pay 31. 8 5. Supportive management/great boss 25. 1 6. Being recognized, valued & respected 23. 0 7. Benefits 22. 0 8. Meaningful work, making a difference & contribution 17. 0 9. Pride in organization, its mission & product 16. 5 10. Great work environment / culture 16. 0 11. Flexibility 13. 6 12. Autonomy, creativity and a sense of control 12. 6 13. Job security & stability 10. 5 14. Location 10. 3 15. Diverse, changing work assignments 7. 7 Source: Career Systems International, 2005

Other Research Retention Items 1. Career growth, learning and development 2. Exciting work and challenge 3. Meaningful work, making a difference and a contribution 4. Great people 5. Being part of a team 6. Good boss 7. Recognition for work well done 8. Fun on the job 9. Autonomy, sense of control over work 10. Flexibility – for example, in work hours and dress code 11. Fair pay and benefits 12. Inspiring leadership 13. Pride in organization, its mission and quality of product 14. Great work environment 15. Location Source: Love ‘Em or Lose ‘Em, 1999

Understanding the Data Employees are looking for job growth and learning opportunities, or they are looking for a new job Are you offering the items on these lists to your employees? As managers in your organization, how many of these items do you believe are within your control?

Understanding the Data – Link to Recruitment Attraction is part of retention, so this information also informs recruitment practices Employees will be attracted to organizations that have well-developed mentoring programs, career development initiatives, and job enrichment opportunities

Link to Employee Engagement Research shows positive correlation of engagement scores with: Employee attraction and retention Engagement scores also have a positive correlation with: Customer satisfaction Revenue growth and shareholder returns Employee productivity Employee attendance

What is Engagement? Say Speak positively about the organization to co-workers, potential employees and customers. Stay Have an intense desire to be a member of the organization. Engagement Strive Exert extra effort & are dedicated to doing the very best job possible to contribute to the organization’s business success.

Calculating Employee Engagement Scores from the following six questions are used to calculate the engagement score: I would, without hesitation, highly recommend this organization to a friend seeking employment. Given the opportunity, I tell others great things about working here. Say It would take a lot to get me to leave this organization. I hardly ever think about leaving this organization to work somewhere else. Stay This organization inspires me to do my best work every day. This organization motivates me to do more than is normally required to complete my work. Strive

Succession Planning: Helping you understand who to focus on

Quick Poll… Who has: No succession planning in place? Succession planning in place, but not sure it is, or will be, successful? A successful succession planning initiative?

The Traditional Approach to Succession Planning Ø Often highly political Ø Little thought given to what kind of leaders required in the future Ø Done secretly Ø Focus on putting names in boxes (“replacement”) Ø Few conversations held

Results of This Approach to Succession Planning Ø Strategies become academic and administrative exercises. Change happens and rigid plans are not applicable – a waste of time and money Ø Little focus spent on the development of individuals

A Different Way to Think About Succession Planning Ø Succession management is a process of ensuring there are leaders and talent that can implement the organizational vision Ø It requires the systematic identification of those individuals who have the potential to turn the vision of the organization into reality

Elements of an Effective Succession Management Process* 3. Group Discussion and Review 1. Individual Career Planning and Development 2. Succession Planning Analyses * The Gallup Organization

Succession Management Ø Focus on individual development strategically aligned to future vision Ø Leadership development can ensure that the potential identified through succession process is realized Ø Result is long-term leadership sustainability through attraction, retention and development of talent

Succession Management Ø A key strategic initiative Ø Cannot be done in isolation to other cultural and people oriented initiatives in the organization Ø More than just “putting names in boxes”

Succession Management Ø Focus on integrating many elements of organization development Ø High level steps need to be customized for each organization Ø “Leadership Pool” approach is gaining in popularity (identifying all potential employees vs. positional replacements)

“There are no recipes or formulae, no checklists or advice that describe “reality”. There is only what we create through our engagement with others and with events. ” (Margaret Wheatley, “Leadership and the New Science”)

Vision and Competencies Ø Alignment to vision and strategy ØBusiness plan for succession initiatives Ø Succession and leadership aligned to the vision, critical business issues/skill gaps Ø Executive commitment Ø Develop leadership competencies Ø Develop a succession management roadmap

Need for a Roadmap Ø Implementing succession initiatives impacts culture Ø A roadmap shows how to get there “Without a roadmap, the likelihood is that you will focus too much attention on details and miss the ‘big picture’. ” (William Rothwell)

Talent Review Process Ø An interactive dialogue and discussion to support the performance and potential of talent in the organization Ø A process to look at key talent, open positions, promotions and leadership development Ø Discussion to support shared ownership of the talent pool and development opportunities

Talent Review Process Robust Talent Review (“War for Talent”): Ø Full day on-site for each division Ø Discuss quality of incumbents Ø Review individuals and the talent strength of each unit, and discuss other issues such as retention or recruiting Ø Rigorous, candid and open debate

Talent Review Process Robust Talent Review, continued: Ø Drive to a distribution of ratings Ø Specific action plans written and followed up for each unit Ø As important and intense as the budget process, with real accountability and a performance focus

Talent Review Roadmap Questions Ø How far down in the organization? What groups? Ø High potentials or everyone? Ø Replacement or pool – or both? Ø Assess on performance and potential Ø Other assessments required? Ø Who will assess? Do they have the skills to assess?

Pool versus Replacement Ø Identifying “bench weakness” (e. g. managers, technicians) Ø Assess individuals Ø Develop as pool – stretch assignments, leadership development Ø Track progress

Folio Map 5. 0 New in Position/High Potential High Performance and Potential 3. 6 Competent/ Capable Potenti 2. 6 al High Performance/ High Professional Needs Improvement Outplacemen t 0 3. 6 Performanc e 5. 0

Identifying High Potentials Potential 1. 0 High 3. 6 J J J 5. 0 JJ J J J JJ J J J J J JJ J J Low Our leadership “Talent Pool” J Performance 3. 6 The “bar” is a rating of 3. 6 or above on potential Must be at least competent in each of the Standards of Leadership 1. 0 High

Folio Map Ø Permits participants to identify specific developmental actions for employees Ø Assists conversations regarding next steps Ø Shows progress from year to year

Critical Positions/People* Critical Position – A critical position in the organization that is imperative to running the business. Key strategic importance to have back fill. Critical Person – A critical person in the organization which would result in a significant adverse impact on the business if the person left. * Johnson & Johnson definitions

Example Multi-level ownership CEO Reviews plan to monitor corporate future President/Sr. VP Review functional plans & Develops Company level plan Functional Area/Company Managers Identifies high potentials across area Drafts succession plan Manager Discussion with employee & functional manager re. development/succession Employee Create Development Plans & Performs Leadership Assessment

Succession Management ? ? Retention

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Great Leaders Make A Great Difference

Leadership Effectiveness and Turnover

Leadership Effectiveness and Retention

Leadership Effectiveness and Customer Satisfaction

Making Leadership Development Work Ø Identify, inform and invest heavily in talent Ø Use 360 s to build on strengths Ø Set extremely high expectations for your leaders – and measure their results Ø Make leadership development a long term process and not an event Ø Use the succession process as an opportunity to develop and measure the leadership potential

Senior Management Role Ø Responsible for succession process Ø Approve high potentials, individual development, leadership development Ø Determine success measures, next steps and time frames Ø Determine management accountability Ø Follow-up on actions

Measures Ø Define up front what you want to achieve in the broader scope Ø Then…once succession data gathered, define specific measures, timing and accountability. Measure regularly. Ø Track development of talent, and their progress, regularly over the long term. Assign accountability to managers for progress, assign mentors, reward

Possible Succession Measures Ø By ___ 90% of development actions complete Ø Increase movement of high potentials to other areas of workplace Ø Increase employee engagement/satisfaction Ø By year 20 xx, increase high potential leaders by x% Ø Over x years, increase high potential retention by x% Ø External measures - attract high potentials

Employee Conversations What needs to happen in these conversations?

Individual Development Planning Ø Actions Ø Goals and measures Ø Follow-up, follow-up

More Best Practices (Hewitt) Ø Senior management lead the charge Ø Maniacal focus on the best talent ØHigh potentials are carefully identified ØCompensation is highly differentiated ØAssignments drive high potentials’ growth ØTracking progress is critical

Challenges Ø Time Ø Buy-in Ø Lose sight of big picture – administrative nightmare Ø Employee/manager conversations Ø Cultural biases Ø Resource issues that arise

Results of Implementing Succession Management A high-performance culture that continuously attracts and retains the right people Strong leaders who can develop others Mentors that can provide a legacy A culture of openness and focus

Results of Implementing Succession Management No “unspoken agenda” concerning individuals’ aspirations and potential Investor confidence – Hay (1988) and Mc. Kinsey (1999) studies link effective SM to increased ROI and annual return to shareholders

Keys to Success Ø Top management must buy-in and be active participants Ø Link succession efforts to needs and strategic objectives of the business Ø Minimize paperwork and bureaucracy Ø Make succession and leadership development a constant preoccupation

Keys to Success Ø Identify high potential talent early – devise strategies to retain that talent Ø Recognize that effective succession management is not fast Ø Spend time to evaluate results and provide feedback to stakeholders

Keys to Success Ø Ensure leaders have an opportunity to apply the skills they are learning Ø Ensure everyone is, and can be, responsible for their own development Ø Ensure effective role modeling of leadership excellence Ø Measure behaviour change

Discussion Where should we start? What will be easy? What will we stumble over?

Resources Ø “War for Talent” – Mc. Kinsey & Co. Ø “Leadership Pipeline” – Ram Charan Ø “Grow Your Own Leaders” – W. Byham Ø “Effective Succession Planning” – W. Rothwell Ø “Love ‘Em or Lose ‘Em” – Kaye & Jordan. Evans Ø Centre for Creative Leadership – www. ccl. org Ø Statistics Canada – www. statcan. ca/ Ø “The Extraordinary Leader” – Zenger & Folkman

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