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RTS Realtime Systems

High Potential (HIPO) Employee Development Program The RTS HIPO program is designed to accelerate and facilitate the career development of high potential employees to management positions and str engthen the market position of RTS in a fast changing business environment. Reason for implementing a HIPO program at RTS Realt ime Systems: In the new business reality, the marketplace is characterized by high competition and globalization, making HIPO programs more important now than ever. Upon consideration of the turbulent business climate, along with the nontrivial replacement costs of company-generated talent, a case can be made for efficiently identifying and developing the firm's high-potential employees to ensure that those who best know the business, technology, and operations are making the critical decisions. RTS needs to actively select and prepare high potential employees to manage the complex environments we are facing. Decisions about who will be the key contributors of the company’s success in the future need to be made as early as possible and specialized career development will follow to ensure the best and brightest quickly rise to the top. HIPO programs are most often characterized by a fast rate of lateral movement through various roles in the firm, a carefully monitored career, and an elite but usually secretive status. As future leaders of their firms, HIPOs move quickly into new positions, receive special coaching and mentoring, and are expected to deliver superior performance. Impact of HIPO programs on today’s business world: Just as competitive advantage can be achieved by a fast-to-market product strategy, competitive advantage can also be created with our ability to develop leadership talent efficiently. A pressing need exists to decrease the time required to identify leadership needs, assess current or find new talent, and develop high performers. By efficiently developing HIPOs' leadership competencies in hopes of creating a savvy top management team, we can improve our responsiveness to an increasingly complex business environment in the financial market place. Some real world scenarios outline the reasons for the implementation of HIPO programs in today’s business environment and the positive impact of a well planned and managed job rotation principle to develop HIPO’s in our organization. Because of concerns about the shortage of executive-caliber talent at McDonnell-Douglas, rotational programs were a significant part of an overall plan designed to identify HIPOs and help their careers quickly progress. At PepsiCo, tolerating mediocrity in employee performance demoralized their top performers and encouraged the company to expedite the early identification of HIPOs to develop top management talent. In each case, the corporation aggressively selected HIPO talent and groomed them through a series of challenging rotational assignments. Consider Edgar Woolward, Jr's ascent to the top spot as CEO at Du Pont, which took him through 20 different jobs in 32 years. Similar "muscle-building" programs, designed to ensure that the best and brightest move to the top, have occurred at firms such as Greyhound Financial Corporation, IBM, Hewlett-Packard, Marriott, and AT&T, to name just a few.

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As RTS is an organization that promotes the importance of a promotion-from-within strategy and is convinced about the need to develop top management talent, the business case for a HIPO program are fairly apparent. Nevertheless, if the decision will be made to implement the HIPO program our managers have to be very explicit in defining the program’s objectives. Assessing the need for a HIPO program: Following questions need to be answered by RTS top management in order to reach a consensus on the implementation of such a program

- Why do we need a HIPO program? - How will it support our business strategy and improve our competitive advantage? - How will it help us fulfill our leadership needs for the future? - How will it benefit the organization, the HIPOs, and the rest of the employees

The general concern is the strategic benefit of implementing a HIPO program. If there is no clear sense of how the program will support the company’s business strategy, the program design will be misguided. Therefore the involvement of a variety of key people in this process will ensure the unified purpose of the HIPO program and consequently its success. Design of a HIPO program within RTS After identifying the need for a HIPO program and evaluating the high-level objectives, we will enter into the more complex step of program design. This step is composed of five key decision points: Identifying the criteria for HIPO selection, determining a communication strategy, deciding whether to disclose HIPO status, determining the timing of HIPO identification, and creating a program evaluation mechanism. General aspects that are normally used as HIPO selection criteria are the following

- level of education, university where advanced degree(s) were obtained, and grades - previous work experience (industry knowledge and management experience) - assessment center performance - performance in the organization (using standard performance evaluations by supervisors or

subordinates); - supervisory assessment of leadership potential (qualitative or quantitative assessments).

From subject related publications you learn that most companies rely heavily on the use of direct supervisors to identify HIPO talent based on actual job performance, rather than using a list of attributes or assessments of future potential. Such a performance-based approach, which incorporates several objective sources in the evaluation, should help generate valid assessments and enhance employee perceptions of fairness. This approach, in turn, should increase our confidence in the HIPO candidates who we will select and avoid the self-fulfilling prophecy explanation for HIPO status. A rework of the employee review and assessment will be required to achieve the best possible results during the HIPO selection process. Determine a communication strategy RTS must decide whether the goals of the HIPO program are to be communicated, to whom the communication is necessary and what the content of the message will be. The lack of understanding of the program is very often a major barrier to the line managers’ ownership of their HIPO program. In communicating the goals of a HIPO program, we have to make it clear that all employees will be involved in the selection of high-potential candidates. A team-based atmosphere will be created in which other employees participate in identifying high-performing individuals through manager and subordinate input in the evaluation process.

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Decide whether to disclose the HIPO status From subject related publications you learn that informing HIPOs of their status has been a difficult issue for firms to handle, and no easy solutions are readily apparent. Most firms report that they prefer to maintain a secretive status for HIPOs. There are some documented benefits for informing HIPOs of their status. In Fresina's study (Anthony J Fresina & Associates -Executive Knowledge Works), the major positive effects included:

- enhanced retention (69 percent); - improved productivity (57 percent); - improved relationship with the boss (42 percent); and - positive impact on the firm (37 percent). Moreover, in an era characterized by self-management

efforts, informing HIPOs of their status could allow them to become involved in personal career planning.

Such benefits may be more easily reaped when the company culture supports open communication. As RTS is currently working on a more open internal & external communication the recommendation is not to disclose the HIPO status during the early stages of the program. Once we have achieve our goal to establish an open communication and company culture the disclosure of the HIPO status should be revisited. Determine the timing of HIPO identification In general companies identify HIPO talent after three to eight years. As the need for top management talent in RTS Realtime Systems is readily apparent it seems to be necessary that the identification should be done as soon as possible and guideline should be set of five to six years of actual work experience. This argument can be validated by the high staff turnover and loss of senior management that RTS went through the past 18 month and also by the fast changing market conditions in our industry that we rapidly need to adjust to. Create a program evaluation mechanism Implementing an appropriate evaluation mechanism to track the success of the HIPO program is necessary in order to ensure that we are meeting the corporate objectives. We will need to specify:

- What criteria will be used to monitor and evaluate program effectiveness in terms of benefits for the firm productivity and employee retention and for HIPOs and other employees?

- How often the HIPO program will be evaluated - Who or what group will oversee the ongoing implementation, evaluation and modification of the

HIPO program A regular feedback mechanism needs to be established which will help to ensure that the desired outcomes of the HIPO program outlined in the needs assessment phase are achieved.

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Suggestions on the implementation and the Managemen t of the HIPO program at RTS The necessary lateral moves for HIPOs through the various business units within RTS need to be determined. These lateral moves or job rotations will be critical for HIPO development and advancement. In a flat organizational structure like the one at RTS Realtime Systems they are also coincident with corporate opportunities. The business units we divide RTS in are

- Sales/Account Management - Support/Product Management - QA - Development - Controlling/Finance - Human Resources - Legal

The business units sales, support, QA and development can be defined as an intra-functional move. The other business units are considered inter-functional or cross-functional moves. Interfunctional moves, or cross-functional assignments, provide experience in a functional area that does not represent the employee's primary area of expertise.

Each type of lateral move should be used in HIPO career management to serve one of two purposes:

- to enhance subject-specific knowledge, or to increase the breadth of knowledge -

Intra-functional moves should be used when trying to deepen a HIPO's understanding of a certain business unit or function. Cross-functional moves will help the HIPO to develop a breadth of knowledge about the company's mission, products, and culture.

Given the need for a broad understanding of RTS, interfunctional moves have to be used strategically because they provide a vast array of corporate experience and can better prepare HIPOs for a top management position. In case it is not possible to realize a strategically important interfunctional move external training courses that will deliver the respective knowledge should he offered by the RTS.

Appropriate mix of experiences

RTS is currently in a strong maturation and growth process with our strategic goal being clearly set in this area. Due to this fact and the dynamically changing environment of our business a more complex strategy making process will be required from our future top managers. For HIPOs within RTS it will be especially desirable to achieve as many functional experiences as possible. These assignments include exposure to the international arena as well as sales, finance, human resources work but also in depth knowledge on the software support, development and QA process. International experience is especially critical for those aspiring to top management positions so that they can better understand foreign markets, how to motivate foreign workers, and how to form alliances abroad.

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Identify the critical skills to develop The two managerial competencies that are considered to be the most important in today’s fast changing business world, are

- the ability of leaders to articulate a strategic vision - the unique ability to enact a beneficial company-environment relationship

In order for RTS to become the recognized industry leader that provides innovative trading solutions to elite financial institutions, we need to put our trust in the hands of managers and leaders that can execute our ambitious business plan and who strive to make all people around them better as well. Regardless of the specific competencies identified, it is important that managers understand how job rotation (in addition to other human resource subsystems) facilitates the development of such critical skills. In the past many businesses have reported that lateral moves mainly helped developing interpersonal and leadership skills which were considered the most important skills to be developed. Recent studies have shown that employees perceived job rotation as improving business skills -- knowledge of business issues, of other functions, and of how the firm operates -- more than administrative skills, such as leadership and communication. Nevertheless, an important implication from these findings for RTS Realtime Systems is that we must ensure the actual skills being developed by lateral moves are those that are being targeted by our organization. Length and timing of lateral assignments When developing the HIPO program at RTS timing and duration of the lateral moves will be an extremely important factor for the success of the program.

No research so far has examined or recommended a specific length of time HIPOs should spend in their rotational assignments. These durations have to be specifically fine tuned on the requirements of our business field. It is important to keep in mind that we have to ultimately focus on the quality of the HIPOs' work experiences, not just the quantity of assignments they rotate through.

As an example, at McDonnell-Douglas (at least prior to the recent merger with Boeing), HIPOs change responsibilities every three years; at PepsiCo, it is about every year. These companies certainly deal with a lot more complex operations and internal set up than we do at RTS. This example should just outline that the durations even between these giant can vary significantly. HIPO programs can also be designed to run for a specific amount of time in total. However we decide to desgin our program these parameters need to be determined before the start of the program and the RTS top management needs to be aware of all of these cornerstones of our HIPO program.

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Meaning of a HIPO program for RTS Realtime Systems The concept of broad based lateral moves throughout RTS, along with the right mix of functional and international experience, are crucial for learning the knowledge and skills essential for future leadership talent. Creating mentoring opportunities for subject matter experts and top level managers within RTS will be useful within the HIPO support mechanisms and a high motivational factor for senior staff and managers. Mentors provide necessary guidance and counsel to support HIPOs in their career progression, enhance their understanding of our company culture and politics, and provide direction for how to best maneuver within the organization. Most important during the HIPO process, managers assigned with the supervision of the program must work to strike a balance between meeting the individuals' career needs and achieving long-term corporate objectives. All of this forms a very ambitious and demanding plan. Of course, there is no guarantee of success at this point but if carefully and properly designed and managed the HIPO program for developing the employees with the highest potential can go a long way toward creating the best possible leadership -- and future – RTS Realtime System can produce. This can be the foundation for reaching our goal to fulfill our vision „...to become the recognized industry leader providing innovative trading solutions to elite financial institutions. “ And „...tripling sales with double the staff by 2012 . “