Best Practices of Succession Management and Employee Retention

Best Practices of Best Practices of Succession Management Succession Management and Employee Retentionand Employee Retention

The LGMA / GFOA ConferenceJune 2, 2005

Lori Maida, MA, CHRPLori Maida, MA, CHRP

Questions To Consider...Questions To Consider...

What % of your employees will retire in the next 5 years?

Questions To Consider...Questions To Consider...

What % of your employees are looking for other employment?

% of Employees Looking for % of Employees Looking for Other EmploymentOther Employment

Conference Board of Canada (2005) reports,

58%

of Canadian employees are open to move to other organizations

So…what are you planning So…what are you planning to do about it?to do about it?

Session ObjectivesSession Objectives

Briefly explore current trendsUnderstand succession management

versus succession planning – and the alignment to employee retention

Understand best practice processes and examine a few of the tools and methodologies being used

Discuss the roadblocks and benefits of implementation

Explore how to get started

Why the Interest in Why the Interest in Succession Planning and Succession Planning and Employee Retention?Employee Retention?

Numbers of people retiring and numbers of people entering workforce

Loss of organizational memory Skills shortages are acute Retention of talent Future of work – different needs for generations

of employees What else?

Trends and Forecasts*Trends and Forecasts*By 2008, more people will be leaving the

workforce than entering44% of workers aged 45-59 say they will

retire before 6510% of workers aged 50-59 who leave full

time jobs, move into part time within 2 years

1/3 of workers aged 50-59 who leave full time jobs, move back into full time

* Statistics Canada research

Trends and Forecasts*Trends and Forecasts*

72% of companies predict they’ll have an increasing number of leadership vacancies over the next 3-5 years

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 IssuesCurrent Economic Issues

Workplaces will lose high performers as economy strengthens

Currently, workplaces that understand future skills needed are having difficulty recruitingRecruitment strategies are strengthening

Retention of talent is increasingly becoming a “hot” issue

The Internal ChallengeThe 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 ChallengeThe External Challenge

The market place for good talent will be competitiveThe good people will be able to pick and choose their working environmentHow do we create an organization in where people want to stick around?

Who is responsible to Who is responsible to ensure you have the peopleensure you have the people

to get the job done?to get the job done?

Shift from Industrial Age to Shift from Industrial Age to Information AgeInformation Age

The Old WayHR is responsible for people managementWe provide good pay and benefitsRecruiting is like purchasingDevelopment happens in training

programsWe treat everyone the same

Source: “War for Talent”

Shift from Industrial Age to Shift from Industrial Age to Information Age Information Age The New WayAll managers are accountable for

strengthening their talent poolsWe shape our workplace, jobs, and strategy

to appeal to talented peopleRecruiting is like marketingWe fuel development through stretch jobs,

mentoring and coachingWe affirm our people, but invest differently

in A, B, and C players

Source: “War for Talent”

Questions To Reflect OnQuestions 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…One Approach…

It’s not just about havingIt’s not just about havingthe bodies.the bodies.

It’s about the It’s about the rightright bodies bodies doing the doing the rightright things. things.

Creating an organization of Creating an organization of which people want to be a part.which people want to be a part.

Retention:Retention:What keeps employees What keeps employees

happy?happy?

Current Retention TrendsCurrent Retention Trends

Towers Perrin (2002) Canadian study

59% are open to changing jobs11% 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 DriversTop 15 Retention DriversRetention 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 ResearchOther ResearchRetention 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 DataUnderstanding the Data

Employees are looking for job growth and learning opportunities, or they are looking for a new jobAre 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 Understanding the Data – Link to Recruitmentto 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 Link to Employee EngagementEngagement

Research shows positive correlation of engagement scores with:

Employee attraction and retention

Engagement scores also have a positive correlation with:

Customer satisfactionRevenue growth and shareholder returnsEmployee productivityEmployee attendance

What is Engagement?What is Engagement?

SaySay StayStay StriveStrive

Speak positively about the organization

to co-workers, potential employees

and customers.

Have an intense desire to be a member of the

organization.

Exert extra effort & are dedicated to doing the very

best job possible to contribute to the

organization’s business success.

EngagementEngagement

Calculating Employee Calculating Employee EngagementEngagement

I would, without hesitation, highly recommend this organization to a friend seeking employment. Given the opportunity, I tell others great things about working here.

It would take a lot to get me to leave this organization.I hardly ever think about leaving this organization to work somewhere else.

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.

SaySay

StayStay

StriveStrive

Scores from the following six questions are used to calculate the engagement score:

Succession Planning:Succession Planning:Helping you understand Helping you understand

whowho to focus on 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 The Traditional Approach to Succession PlanningSuccession Planning

Often highly politicalLittle thought given to what kind

of leaders required in the futureDone secretlyFocus on putting names in boxes

(“replacement”)Few conversations held

Results of This Approach to Results of This Approach to Succession PlanningSuccession Planning

Strategies become academic and administrative exercises. Change happens and rigid plans are not applicable – a waste of time and money

Little focus spent on the development of individuals

A Different Way to Think A Different Way to Think About Succession PlanningAbout Succession Planning

Succession management is a process of ensuring there are leaders and talent that can implement the organizational vision

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 Elements of an Effective Succession Management Succession Management Process*Process*

1.Individual Career

Planning andDevelopment

2.SuccessionPlanningAnalyses

3.Group Discussion

and Review

* The Gallup Organization

Succession ManagementSuccession Management

Focus on individual development strategically aligned to future vision

Leadership development can ensure that the potential identified through succession process is realized

Result is long-term leadership sustainability through attraction, retention and development of talent


A key strategic initiativeCannot be done in isolation to other

cultural and people oriented initiatives in the organization

More than just “putting names in boxes”


Focus on integrating many elements of organization development

High level steps need to be customized for each organization

“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 CompetenciesVision and Competencies

Alignment to vision and strategyBusiness plan for succession initiatives

Succession and leadership aligned to the vision, critical business issues/skill gaps

Executive commitmentDevelop leadership competenciesDevelop a succession management

roadmap

Need for a RoadmapNeed for a Roadmap

Implementing succession initiatives impacts culture

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 ProcessTalent Review Process

An interactive dialogue and discussion to support the performance and potential of talent in the organization

A process to look at key talent, open positions, promotions and leadership development

Discussion to support shared ownership of the talent pool and development opportunities


Robust Talent Review (“War for Talent”):Full day on-site for each divisionDiscuss quality of incumbentsReview individuals and the talent

strength of each unit, and discuss other issues such as retention or recruiting

Rigorous, candid and open debate


Robust Talent Review, continued:Drive to a distribution of ratingsSpecific action plans written and

followed up for each unitAs important and intense as the budget

process, with real accountability and a performance focus

Talent Review Roadmap Talent Review Roadmap QuestionsQuestions

How far down in the organization? What groups?

High potentials or everyone?Replacement or pool – or both?Assess on performance and potentialOther assessments required?Who will assess? Do they have the skills

to assess?

Pool versus Pool versus ReplacementReplacement

Identifying “bench weakness” (e.g. managers, technicians)

Assess individuals Develop as pool – stretch

assignments, leadership development

Track progress

Folio MapFolio Map

Potential

Performance

3.6

3.6

High Performance/ High Professional

New in Position/High Potential High Performance and Potential

5.0

5.0

Outplacement

Needs Improvement

Competent/ Capable

2.6

0

Identifying High Potentials

High

Low High

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Performance

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Our leadership “Talent Pool”

The “bar” is a ratingof 3.6 or above on potential

Must be at leastcompetent in eachof the Standards ofLeadership

3.6

1.0

5.03.61.0

Folio MapFolio Map

Permits participants to identify specific developmental actions for employees

Assists conversations regarding next steps

Shows progress from year to year

Critical Positions/People*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 ownershipMulti-level ownershipCEO

Reviews plan to monitor corporate future

President/Sr. VPReview functional plans & Develops Company level plan

Functional Area/Company ManagersIdentifies high potentials across area

Drafts succession plan

Manager Discussion with employee & functional manager re. development/succession

EmployeeCreate Development Plans & Performs Leadership Assessment

Succession Manageme

nt

Retention

??

File it away…File it away…

Start having conversations! Start having conversations!

Great Leaders Great Leaders Make A Make A

Great DifferenceGreat Difference

Leadership Effectiveness Leadership Effectiveness and Turnoverand Turnover

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Bottom 10% Middle 80% Top 10%

Leadership Effectiveness

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Leadership Effectiveness Leadership Effectiveness and Retentionand Retention

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Leadership Effectiveness Leadership Effectiveness and Customer Satisfactionand Customer Satisfaction

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Making Leadership Making Leadership Development WorkDevelopment Work Identify, inform and invest heavily in talent Use 360s to build on strengths Set extremely high expectations for your

leaders – and measure their results Make leadership development a long term

process and not an event Use the succession process as an

opportunity to develop and measure the leadership potential

Senior Management RoleSenior Management Role

Responsible for succession process Approve high potentials, individual

development, leadership development Determine success measures, next

steps and time frames Determine management

accountability Follow-up on actions

MeasuresMeasures

Define up front what you want to achieve in the broader scope

Then…once succession data gathered, define specific measures, timing and accountability. Measure regularly.

Track development of talent, and their progress, regularly over the long term. Assign accountability to managers for progress, assign mentors, reward

Possible Succession Possible Succession MeasuresMeasures By ___ 90% of development actions complete Increase movement of high potentials to other

areas of workplace Increase employee engagement/satisfaction By year 20xx, increase high potential leaders by

x% Over x years, increase high potential retention by

x% External measures - attract high potentials

Employee ConversationsEmployee Conversations

What needs to happenin these conversations?

Individual Development Individual Development PlanningPlanning

ActionsGoals and measuresFollow-up, follow-up, follow-up

More Best Practices More Best Practices (Hewitt)(Hewitt)

Senior management lead the chargeManiacal focus on the best talent

High potentials are carefully identifiedCompensation is highly differentiatedAssignments drive high potentials’ growthTracking progress is critical

ChallengesChallenges

TimeBuy-inLose sight of big picture –

administrative nightmareEmployee/manager conversationsCultural biasesResource 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 McKinsey (1999) studies link effective SM to increased ROI and annual return to shareholders

Keys to SuccessKeys to Success

Top management must buy-in and be active participants

Link succession efforts to needs and strategic objectives of the business

Minimize paperwork and bureaucracyMake succession and leadership

development a constant preoccupation


Identify high potential talent early – devise strategies to retain that talent

Recognize that effective succession management is not fast

Spend time to evaluate results and provide feedback to stakeholders


Ensure leaders have an opportunity to apply the skills they are learning

Ensure everyone is, and can be, responsible for their own development

Ensure effective role modeling of leadership excellence

Measure behaviour change

DiscussionDiscussion

Where should we start?

What will be easy?

What will we stumble over?

ResourcesResources

“War for Talent” – McKinsey & Co. “Leadership Pipeline” – Ram Charan “Grow Your Own Leaders” – W. Byham “Effective Succession Planning” – W. Rothwell “Love ‘Em or Lose ‘Em” – Kaye & Jordan-

Evans Centre for Creative Leadership – www.ccl.org Statistics Canada – www.statcan.ca/ “The Extraordinary Leader” – Zenger &

Folkman

Web: www.exceptionalleadership.com

E-Mail: [email protected]

Telephone: 604-899-4192

Toll free: 1-866-899-4182

Best Practices of Succession Management and Employee Retention

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