Best Practices of Succession Management and Employee Retention

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

On an average,

58%
Of employees are open to move to other organizations

Sowhat are you planning to do about it?

Session Objectives
Briefly explore current trends Understand 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

Succession planning
Succession planning is: The process of ensuring a suitable supply of successors for current and future senior or key jobs arising from business strategy, so that the careers of individuals can be planned and managed to optimize the organisations needs and the individuals aspirations.

Why the Interest in Succession Planning and 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*

more people will be leaving the workforce than entering % of workers aged 45-59 say they will retire before 65 10% 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

Trends and Forecasts*

72% of companies predict theyll 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 Issues

Workplaces will lose high performers as economy strengthens Currently, workplaces that understand future skills needed are having difficulty recruiting
Recruitment strategies are strengthening

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 HR is responsible for people management We provide good pay and benefits Recruiting is like purchasing Development happens in training programs We treat everyone the same
Source: War for Talent

Shift from Industrial Age to Information Age

The New Way
All managers are accountable for strengthening their talent pools We shape our workplace, jobs, and strategy to appeal to talented people Recruiting is like marketing We fuel development through stretch jobs, mentoring and coaching 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

Its not just about having the bodies. Its about the right bodies doing the right things.

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

You may not necessarily want to keep every employee in the company. How do you choose who and what to focus on?

Retention: What keeps employees happy?

Current Retention Trends

Towers Perrin (2002) study 59% are open to changing jobs
11% actively looking 45% passively looking

To retain me, youve got to help me advance, keep the good people, and provide competitive pay.

Top 15 Retention Drivers

Retention Items
1. 2. Exciting work & challenge Career Growth, Learning & Development

%
48.4 42.6

3.
4. 5. 6. 7. 8. 9. 10. 11. 12. 13. 14. 15.

Working with great people & relationships

Fair pay Supportive management/great boss Being recognized, valued & respected Benefits Meaningful work, making a difference & contribution Pride in organization, its mission & product Great work environment / culture Flexibility Autonomy, creativity and a sense of control Job security & stability Location Diverse, changing work assignments

41.8
31.8 25.1 23.0 22.0 17.0 16.5 16.0 13.6 12.6 10.5 10.3 7.7

Source: Career Systems International, 2005

Other Research
Retention Items
1. 2. Career growth, learning and development Exciting work and challenge

3.
4. 5. 6. 7. 8. 9. 10. 11. 12. 13. 14. 15.

Meaningful work, making a difference and a contribution

Great people Being part of a team Good boss Recognition for work well done Fun on the job Autonomy, sense of control over work Flexibility for example, in work hours and dress code Fair pay and benefits Inspiring leadership Pride in organization, its mission and quality of product Great work environment 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

Hewitt and other organizations have conducted numerous studies over the last ten years to assess this relationship between engagement and business results and have found the following:
There is a significant link between employee engagement, customer loyalty, and profitability Engaged employees are twice as likely to be advocates of the company,its products, and services Engaged employees are more likely to stay with the company.

What is Engagement?
There is a proven correlation between engagement and retention.
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.

Strive
Exert extra effort & are dedicated to doing the very best job possible to contribute to the organizations business success.

Engagement
Simply stated - if you are engaged you Speak positively Have an intense desire to stay Exert extra effort for our success

Calculating Employee Engagement

If a high percentage of employees are positive on these six statements, this will feel like a great place to work.

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. 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.

Say

Stay

Strive

What keeps employees happy and keeps them with an organization is influenced by all interactions they have within the organization. Retention, therefore, is part of the larger organizational system.

Succession Planning: Helping you understand who to focus on

How do you know who to focus on? Who are the people who most influence organizational success? Who are the people who have the skills or POTENTIAL TO DEVELOP THE SKILLS that the org. will need next year, or 2 or 3 years from now? A succession planning or succession management process can help to answer these questions.

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

Succession planning helps to identify top talent within the organization. But With this approach, forms were often completed, put in a
binder and placed on a shelf.

Often highly political Little thought given to what kind of leaders required in the future Done secretly Focus on putting names in boxes (replacement) Few conversations held

Results of This Approach to Succession 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 About 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 Succession Management Process*

3. Group Discussion and Review 1. Individual Career Planning and Development

2. Succession Planning Analyses

* The Gallup Organization

Succession 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

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

Succession Management
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)

Challenge is not the model its what goes on in the organization during implementation. Bumps up against other elements culture, performance, having conversations, and, change ORG. TALENT REVIEW assess both current performance and leadership potential. Key here is ability to have meaningful conversations some organizations start with replacement SP and move to SM (integration of LD) laterbut there still needs to be assessment on current performance and future Leadership. Some try pilots in one department the first year, or key levels only. Need to determine

Vision and Competencies

Alignment to vision and strategy
Business plan for succession initiatives

Succession and leadership aligned to the vision, critical business issues/skill gaps Executive commitment Develop leadership competencies Develop a succession management roadmap

Need 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 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

Talent Review Process

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

Talent Review Process

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

Talent Review Roadmap Questions

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

Pool versus Replacement

Identifying bench weakness (e.g. managers, technicians) Assess individuals Develop as pool stretch assignments, leadership development Track progress

Folio Map
5.0
New in Position/High Potential High Performance and Potential

3.6 Competent/ Capable Potential 2.6

Needs Improvement

High Performance/ High Professional

Outplacement

3.6 Performance

5.0

Identifying High Potentials

1.0 High 3.6 5.0

Low

J JJ J J J J J J J J J JJ J J JJ JJ J J J J JJ JJ J J J J J J J JJ J J

J J

J J J J J J J
3.6

Our leadership Talent Pool 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

Performance

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

Critical Positions/People*
Ensure replacements for these 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

take the information gathered through succession management and translate it to retention?

File it away

Start having conversations!

Talk to those people youve identified as having potential. Are they happy? What do they need? Think about the lists of employee retention items and ask questions about those items. Make sure they know how valued they are! Data from exit interviews consistently reveals that employees who leave organizations did not know how valued they were. Often, they had no idea they were viewed as being in succession for a more responsible role.

This is where investing in developing leaders at all levels in the organization can really help. Managers need help having these types of conversations. They need to develop coaching and mentoring skills to ensure successful development of their team.

Great Leaders Make A Great Difference

Leadership Effectiveness and Turnover

Turnover Percent
22 20 18 16 14 12 10 8 Bottom 10% 19

14

9 Middle 80% Top 10%

Leadership Effectiveness

good leaders produce good results for their organizations. In fact, good leaders are more effective than bad leaders in almost every dimension, including improving productivity, employee retention, enhancing customer service, and creating high levels of employee commitment. These next few slides show the impact of the best and worst leaders on achieving bottom-line results. On the X axis we have leadership effectiveness shown in percentiles.

Leadership Effectiveness and Retention

90 80 70 60 50 40 30 20 10 0

Intention to Stay with Company (% )

79 51

19

Bottom 10%

Middle 80%

Top 10%

Leadership Effectiveness

Leadership Effectiveness and Customer Satisfaction

100
Ratings of Customer Satisfaction (%)

82 80 60 40 21 20 0 Bottom 10% Middle 80% Top 10% 50

Leadership Effectiveness

Making Leadership Development 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 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

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

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

Specific measures can include: Decrease turnover of high potentials Increase movement of high potentials to other areas of company Decrease spending on ? Training Leadership development ROI Decrease recruitment costs Develop lower performers to higher level or terminate low performers by. Measure productivity Change reward systems to attract and retain high performers -

Employee Conversations

What needs to happen in these conversations? No promises, honest, frequent

Individual Development Planning

Actions Goals and measures Follow-up, follow-up, follow-up

More Best Practices (Hewitt)

Senior management lead the charge Maniacal focus on the best talent
High potentials are carefully identified Compensation is highly differentiated Assignments drive high potentials growth Tracking progress is critical

Challenges
Time Buy-in Lose sight of big picture administrative nightmare Employee/manager conversations Cultural biases 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 McKinsey (1999) studies link effective SM to increased ROI and annual return to shareholders

Keys 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 bureaucracy Make succession and leadership development a constant preoccupation

Keys to Success
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

Keys to Success
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

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

Resources
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 & JordanEvans Centre for Creative Leadership www.ccl.org Statistics Canada www.statcan.ca/ The Extraordinary Leader Zenger & Folkman