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Succession Management

Date or subtitle Iowa Bankers Association

Annual Convention September 2015

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Session Highlights

● Getting the People Thing Right

● Talent Management and Succession

Management

● Succession Management Processes

● Key Tools

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“If we don’t get the people thing right,

we lose. It’s the most important

thing in all our businesses.”

– Jack Welch, Former CEO, General Electric (GE)

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Capital Adequacy

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Human Capital

•Well capitalized?

•Adequately capitalized?

•Under-capitalized?

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Managing the Human Capital Portfolio

Managing the Risks:

• Vacancy Risk – Risk of critical leadership positions

being vacant

• Readiness Risk – Risk of underdeveloped

successors

• Transition Risk – Risk of poor assimilation of

executive talent

• Portfolio Risk – Risk of poor deployment of talent

against business goals

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Workshop Exercise

What do you know about your

Human Capital Portfolio?

Human Capital Portfolio Risks

Vacancy Risk

Readiness Risk

Transition Risk

Portfolio Risk

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Why Now?

Competitive Changes

• Economic rebound – more opportunity

• Human capital as a differentiator

Labor Market Changes

• Demographic trends

• More dynamic labor markets

Organizational Changes

• New organizational structure

• New focus on leadership and governance

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CEO Age and Bank Sale Correlation

Is this also a causation?

Data reflects medians

Source: SNL Financial and KBW Corporate Finance

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The Changing Work Force

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The Swing: 2010 to 2020

Work Force Demographics: 2010 and 2020*

Boomers

X’ers

Millennials

NextGen

Traditionals

Boomers

X’ers

Millennials

*Projected data

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“People aren’t a company’s

most important asset . . .

. . . the RIGHT people are.”

- Jim Collins, Good to Great

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The Link to Business Strategy

Business

Strategy and

Drivers

Human Capital

Strategy

Talent Strategy

Identify Talent

• Formal Assessment

• Internal Screening

• Performance

Reviews/Promotions

Develop Talent

• On the job/Off the job

• Job Assignments

• Coaching and Mentoring

Progress Talent

• Organization Structure

• Performance Management/

Rewards

• Career Paths

Business strategy and

drivers determine

“talent for what?”

Strategy is future

focused: What we have

today may not be what

we need in the future.

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Succession Management

An integrated set of proactive processes

within the overall talent management system that identifies and prepares successors for key

roles needed to deliver the business strategy.

Processes include:

● Talent Assessment

● Succession Planning

● Development Planning

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Three Simplified Steps

1. ID what you need and don’t need in critical

roles.

2. Assess talent you have and don’t have and

risks.

3. Develop and/or invest toward success!

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Succession Management Cycle

SUCCESSION ASSESSMENT Talent Pool Assessment

-Incumbents

-Known Successors

-Unknown Talent

Succession Readiness -Gaps

-Risks

STRATEGIC PLAN Goals

Mission-Critical Roles/Functions

SUCCESSION PRIORITIES (3 yrs.)

Mission-Critical Roles

Key Talent

SUCCESSION PLAN (1-3 yrs.)

Goals, Objectives, and

Measurements

Action Plans

Budgeting

IMPLEMENTATION Performance Against Plan

Development Outcomes

PLANNING TEAM /PROCESS

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The Role of CEO and Human Resources

This is a top-down process that needs to be owned

and led by the CEO. Partnering closely with human

resources and senior leadership, the CEO ensures

the Bank is taking a long-term review regarding the

development and management of its talent to

support the strategic direction today and into the

future.

HR serves an integral role in ensuring the necessary

processes and tools are in place to ensure accurate

data collection and accountability.

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Execute the Plan

● Demonstrate intentionality, commitment, and

sustainability

● Ensure effective talent management to achieve

strategic goals today and into the future

● Prepare the Bank and individuals for change by

developing critical competencies

● Promote continuity of organizational culture

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The people . . .

in the seats . . .

for the time.

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Focus First on the Most Critical

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What Are Mission-Critical Roles?

Critical to strategic goals

Key leadership and functional expertise

Defined by:

• Key Responsibilities – WHAT is to be

accomplished

• Competencies – HOW work gets done

(knowledge, skills, and abilities)

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Mission-Critical Roles: Identification

Identifying mission-critical

roles in the organization

Goal Rationale

Identify which jobs are

mission-critical

Less than 15% of jobs

Top players should be

in mission-critical roles

Strategy executed by

mission-critical roles

Top performers impact

the bottom line

Don’t want “B/C” players

in strategic roles

Mission-Critical Roles refers to positions that are

essential to the achievement of long-term strategic

business priorities through their strategic impact

and/or contribution of unique capabilities.

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Mission-Critical Roles: Characteristics

Has direct impact on the bank’s culture, strategic

success, and profitability

Having significantly more top talent in these roles

would enhance the success of the bank’s business

model

Usually less than 15% of an organization’s

positions qualify

Not determined by hierarchy but rather impact

High variability in performance across incumbents

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Two Distinct Components

1. Mission-Critical Positions

2. Mission-Critical Talent

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Assess Talent

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Talent Assessment

Dimensions of Talent:

Performance – Delivering on goals, results, and

accountabilities

Potential – The ability to adapt to and “fit” into

increasingly complex roles and environments:

- Personal and professional motivation

- Intellectual curiosity

- Innovation and insight

- Engagement

- Determination

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Performance: Track Record of Success

Most recent performance review ratings

Feedback from others – 360 feedback

Stretch goals and contributions

Questions to ask:

Does this person have a proven track record for

accomplishing impressive results?

Are any potential inconsistencies “derailers”?

Are they already performing at the next level?

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Assessing Potential

It is multifaceted

Prioritize most important facets to evaluate

Values

Competencies

It is always a judgment call

Minimize subjectivity through comprehensive

involvement

The more evidential experience, the better your

judgment will be

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Questions to Consider Potential

How do unexpected changes affect this person’s

performance?

How does this person respond to obstacles?

Does this person inspire others and lead through

persuasion and influence?

Does this person have initiative and seek additional

responsibility?

Does this person continually offer solutions and new

ideas?

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Talent Assessment The Talent Assessment Matrix

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ARC Model

For purposes of focusing on succession

management:

• “A” – Accelerate development; test potential

• “R” – Retain and motivate; continue to grow

• “C” – Coach or change; improve performance

Remember: All positions and all employees are

important to the organization!

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Plan Forward

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The process of identifying potential

successors and the knowledge, skills,

and abilities needed to successfully

perform a role.

Succession Planning

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Replacement Planning vs. Succession Planning

Replacement Planning Succession Planning

Reactive Proactive

Risk Management Talent Management

Replacing/Substituting Renewing/Energizing

Unstructured Approach Organized Alignment

Exclusive Inclusive

Rigid Flexible

Source: Grow Your Own Leaders Authors: Byham, Smith, and Paese

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Components of a Succession Plan

1. Organizational Summary of key issues and

risks

2. Current Organization Chart (Mission-Critical

Positions)

3. Current Job Description(s) Key responsibilities and accountabilities

Competencies needed for success

Qualifications

4. Readiness Chart(s)

5. Profile(s) of potential successors

6. Development Plans for potential successors

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Succession Readiness

Five Stages of Readiness:

• Interim

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Readiness Level Chart

SUCCESSION PLANNING READINESS CHART

Position Title:

Position Key Competencies:

Current Incumbent:

Evaluator:

Candidate Name

Current Position Title

Current Department

Readiness Level

Strengths

Development Needs Interim

Ready Now

2-3 Years

3-5 Years

Long Shot

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Readiness Level Chart

SUCCESSION PLANNING READINESS CHART

Position Title: Commercial Banking Manager

Position Key Competencies: Results Focused, Problem Solving/Analytical Thinking, Leadership, Delegation

Current Incumbent: Jerry Blue

Evaluator: Janet Jones

Candidate Name Current Position Title

Current Department

Readiness Level

Competency Strengths

Competency Development

Needs Interim

Ready Now

2-3 Years

3-5 Years

Long Shot

Jane Doe Commercial Banking

X Results Focused Coaching/Performance, Leadership, Delegation

Jim Brown Commercial Banking

X Leadership Initiated Delegation, Results Focused

Sally Snow Market President X Problem Solving, Initiative, Results Focused

Coaching/Performance Management, Leadership, Delegation

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Composite of Succession Readiness (aka Portfolio Risk)

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Invest for Success

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Develop Talent

Important part of Succession Management

Most often overlooked or underinvested

Training AND Development

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Best Practices

• The right training at the right time for the

right person

• Development plans for all employees, specifically

high performers and hard-to-replace talent

• Align the performance management

process/system

• Coach for performance (including leadership)

• Formal performance appraisal one to two per year

• Informal checkpoints up to 12 per year

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Where Leaders Learn

Challenging Assignments

• Increase in scope of responsibilities, job rotation,

responsibility for creating change

Developmental Relationships

• Bosses and superiors, difficult people, non-work guides

(community leaders), mentor or coach

Adverse Situation

• Crises, mistakes, career setbacks, ethical dilemmas

Coursework and Training

• Self-initiated, employer-arranged

Personal Experiences

42 Center for Creative Leadership, Handbook of Leadership Development, pg. 68-80

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Summary

Your Human Capital Strategy should

unequivocally support your strategic plan

Manage risk of not fulfilling strategic plan

Identify your mission-critical roles

Assess your talent portfolio

• Manage readiness risk with “tests” not guesses

• Identify what you have to divest and reinvest

• Develop the rest to their best

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Cheryl Thomas Director,

Strategic Advisory Services

cthomas@wipfli.com

414.259.6729

www.wipfli.com

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