Evolve Your Organization: Strategic Succession Planning Brent Pederson, Hay Group 1.306.359.0181, brent.pederson@haygroup.com Tues, Oct 27, 2015 2:45-3:45 (60 min) Agenda & Timeframes Topic Timeframe 1 Why Succession Matters 2:45-2:55 (10) 2 Traditional vs Progressive Approaches 2:55-3:05 (10) 3 The Process: 3 Phases 3:05-3:20 (15) 4 Big Succession Questions & Discussion 3:20-3:35 (15) 5 Assessing & Developing Talent 3:35-3:45 (10) 2 Hay Group: Quick Facts & Figures 88 2600 Top 50 #1 Offices in 47 countries Employees worldwide Global Consulting Firm Leadership Development 3 1
1. Why Succession Matters Why Succession Matters to a Board of Directors Disney Dissidents Slam Board For Handling of CEO Search The Hollywood Reporter.com Charles Schwab CEO Transition Ends With All the Grace of an 18-Car Pileup BusinessWeek Online After Years of Speculation, AIG s Greenberg Announces What Amounts to a Succession Plan Forbes.com Succession Woes Continue to Dog Coca-Cola BusinessWeek Online Lessons From McDonald s Tragedy: Always Have a Succession Plan In 9-11, over 400 corporate vice-presidents lost their lives Wall Street Journal Online 5 Why Succession Matters to CEOs and Senior Leaders Over 50% of companies have no replacement plans in place for key positions other than CEO Canadian Chief HR Office Survey on CEO Succession Only one in five CEO s confident that current approaches to talent management can deliver leaders the business requires Hay Group/Human Resources Magazine (UK) Survey 41% of business owners want to exit their business in the next 5 years. Are you ready? CFIB Report 81% of global companies rate succession as #1 future human capital challenge Hay Group/SHRM Survey 90% organizations worldwide have succession management as top corporate priority Corporate Leadership Council Report 6 2
Why Succession Matters to HR 1. Every year people get 1 year older (simple demographics). 2. Pensions plan returns have been impacted by economic cycles yet people can/will only put off retirement for so long. 3. Societal & medical advances allow people to live (and work) healthier for longer. 4. Do we have the right people, at the right time, with the right skills, in the right locations? 5. Creating opportunities for emerging leaders to retain them. 6. Knowledge transition from current to emerging talent. 7 Why Succession Matters To Shareholders 35% of institutional investors valuation attributable to non-financial measures Management Capability: Capability of management team are leaders appropriately prepared for key positions? Attracting and Retaining Talent: Does company have talent to deliver against current/ future business plans? 35% Likelihood of Strategy to Create Value Strategy Execution Innovativeness and Ability to Adapt Brand Reputation Source: Mavrinac & Siesfeld, Measuring Intangible Investments 8 In the past, the supply of potential leaders exceeded the demand not today Then: Supply of experienced leaders > Demand for experienced leaders Now: Supply of experienced leaders < Demand for experienced leaders 9 3
Succession planning is critical to the sustainability of an organization. Why Succession Matters: Strategic Drivers 1. Fundamental accountability of senior leadership 2. Regulatory requirement 3. Deliverable to Board of Directors 4. Pending retirements and aging workforce 5. War for talent 6. Focus on building (vs buying) talent 7. Aligned with strategic measures (ex: Engagement, Leadership Development) 8. Supports effective movement and development of staff 9. Very vulnerable to key person loss 11 2. Traditional vs Progressive Approaches 4
Traditional vs Progressive Approaches Traditional Succession Plans Often resemble a hockey draft High emphasis on face time and who is popular and well known Lack criteria 9 box grids mapping performance and potential Emphasize potential (people) but potential for what (job)? Focus overly on supply via pools of people Overly complex and die under their own weight Tends to be a paper activity Leading Practices Simple Yet Powerful Time Efficient Practical Sustainable Balances Supply and Demand Easily Scaled Out Further 13 Succession Planning: Benefits in 7 Areas Outcomes of improved talent management Talent Aligned to the Business: The organization has a plan for top talent that is responsive to current needs and risks, and also anticipates the future needs of the business. Mission Critical Roles Identified: Mission critical roles are filled by the best individuals for that role and for the business. Depth of Talent Pool Defined: Senior leaders understand the depth of the talent pool and the associated strengths and risks. Future Leaders Targeted: Potential leaders of the organization are identified and are ready to step into leadership roles when called upon. Risk Clearly Appraised: Senior leaders understand the risks and benefits associated with a possible hire, move or promotion. Leaders Successfully Transitioned: Talented people are positioned for success and their risk of failure both personal and organizational is minimized. Talent ROI Measured: The organization understands the value of its investment in top talent. 14 Succession Planning: Aligning Business, Work, People Business Context Strategy, business model, structure and culture the environment in which work gets done Jobs in context of the business, and implications for role requirements Work Roles Talent People The capacity of people in relation to role demands 15 5
Two sides to the succession management equation Demand + Supply Ability to identify risks/benefits of talent moves Helps answer the question, Potential, for what? 16 3. The Process: 3 Phases Purpose Ø To support the sustainability of the organization by proactively identifying leadership talent 18 6
The Process: 3 Phases Phase 1: Mobilize & Identify Key Positions (3 hours) Phase 2: Talent Review (8 hours) Phase 3: Measures & Governance (3 hours) Phase 1 Definition & Purpose Leading Practices Overview of Phases Project Plan Identify Key Positions Orientation to Tracking Tool Homework: Propose Talent (8 hours) Phase 2 Executive Roundtable Discussion to Review Talent Discussion: Key Succession Questions Role-Based Risk Assessment Identify Measures Phase 3 Confirm Measures Discussion: Key Succession Questions Establish Governance & Maintenance Processes Integration Points Going Forward: Develop Talent 19 Titles Don t Mean Much: Consider 3 CIOs Advisory Roles Collaborative Roles Operational Roles Levels of Work Strategic Operational Global Enterprise Leadership Enterprise Leadership Strategy Formation Strategic Alignment Strategic Implementation Tactical Implementation Behaviours required: client (internal) focus team contribution/work conceptualizing fit In a Research Lab Behaviours required: partnering influencing networking In a Manufacturing Business Behaviours required: results oriented strategic perspective leading change In a High-Tech Business 20 Avoiding Talent Snaps: Managing Stretch & Risk Role Profile Advisory Matrix Delivery Complexity of Strategic Challenges Low Medium High Current Role Legend Black Starting Point Green Low Risk Yellow Moderate Risk Red Significant Risk Example 1 21 7
4. Big Succession Questions & Discussion Big Succession Questions 1 2 3 4 5 6 7 To tell or not to tell? Recruitment: Does succession impose on the recruitment process? Diversity: Does diversity impose on the succession plan? Are guarantees offered by the org? Expected from the person? How do we build fences around our top talent? Who do we develop? How do we develop them? 23 5. Assessing & Developing Talent 8
Leadership Development Natural extension of the succession planning process The ink will barely be dry on your succession plan when you will find yourself asking, What should we do to develop & retain these people? Benefits of a leadership development strategy Retention of top talent Development for leaders Feedback for leaders on leadership Information to supplement the succession process 25 Leadership Development Strategies: 5 Common Approaches 1. Shopping Catalog we offer stuff, people can take whatever they want 2. Coaching Focus leaders work with coaches to develop and implement individual development plans 3. Corporate Approach pick a topic and go hard on that topic that year (2015=Coaching & Feedback, 2016=Teams, 2017=Leading Change, etc.) 4. Leadership Assessments have leaders complete an assessment tool(s), attend a workshop to debrief results and develop action plans, re-assess 12-18 months later 5. Formal Leadership Development Program (LDP) take a cross section of leaders (current, emerging, succession, non-succession), step them through a structured experience over a 12 month period (2-3 assessment tools, 3-4 core content modules on various topics, a series of coaching sessions, corporate recognition) most common approach 26 On Development Most organizations choose to develop their whole management team, while throwing extra development at names mentioned in the succession plan. 27 9
The Science of Leadership How Leaders Drive Results Competencies Leadership Styles 70% Employee Engagement 30% Results Balanced Scorecards / Dashboards 28 Manager Competency Portfolio (MCP) Model 29 The 6 Leadership Styles 30 10
Talent Dashboard Sample A Behavioural competencie s Technical competencie s John Smith E=mc 2 ü Ability Performance Education Experience Overall 80 100% 60 80% 40 60% 60 80% At target Above target in some areas Below target 31 Talent Dashboard Sample B 32 Succession planning is critical to the sustainability of an organization. 11
3 Key Messages 1 Succession Planning: Highly Strategic for HR 2 Keep the Process Simple and Sustainable 3 Leadership Development is the Natural Extension 34 Succession Planning: How Can We Help? 1. Implementing A Succession Plan 2. Auditing Your Existing Approach 3. Enhancing Your Existing Approach 4. Leadership Assessments 5. Leadership Development 35 Questions 12