1. Best Practices of Succession Management and Employee Retention
The LGMA / GFOA Conference
June 2, 2005
Lori Maida, MA, CHRP

2. What % of your employees will retire in the next 5 years?
Questions To Consider...
What % of your employees will retire in the next 5 years?
Ask for a response by a show of hands. Of those who know, how many will lose 20%? 30%? 40?

3. What % of your employees are looking for other employment?
Questions To Consider...
What % of your employees are looking for other employment?
Pause and ask people to hazard a guess.

4. % of Employees Looking for Other Employment
Conference Board of Canada (2005) reports,
58%
of Canadian employees are open to move to other organizations

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

6. 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

7. 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?

8. Trends and Forecasts*
By 2008, more people will be leaving the workforce than entering
44% of workers aged say they will retire before 65
10% of workers aged who leave full time jobs, move into part time within 2 years
1/3 of workers aged who leave full time jobs, move back into full time
* Statistics Canada research

9. 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)

10. 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

11. 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?

12. 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?

13. Who is responsible to ensure you have the people to get the job done?

14. 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”

15. 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”
Check for understanding of A, B and C players.

16. 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?
What to do???

17. One Approach…

18. These are some of the different faces of frustration…

19. It’s not just about having the bodies
It’s not just about having the bodies. It’s 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?

20. Retention: What keeps employees happy?
Here’s the “what”.

21. Current Retention Trends
Towers Perrin (2002) Canadian study
59% are open to changing jobs
11% actively looking
45% passively looking
“To retain me, you’ve got to help me advance, keep the good people, and provide competitive pay….”

22. Top 15 Retention Drivers Retention 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
Survey conducted by Career Systems International and published in Training & Development magazine, April 2005.
7,600 respondents to the survey
Interesting to note that the top 3 replies are the same today as they were at the peak of the tight labor market in 2000
Source: Career Systems International, 2005

23. Other Research Retention 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
90% of respondent listed at least one of the first 3 items among the top 3 or 4 reasons they stayed.
Source: Love ‘Em or Lose ‘Em, 1999

24. 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?

25. 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

26. 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.

27. Have an intense desire to be a member of the organization.
What is Engagement?
Say
Stay
Strive
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.
We hear a lot these days about engagement. There is a proven correlation between engagement and retention.
One way of measuring engagement is through a survey developed and administered by Hewitt Associates for Report on Business magazine.
At a high level here is how engagement is defined.
Simply stated - if you are engaged you
Speak positively…
Have an intense desire to stay…
Exert extra effort for our success…
Engagement

28. Calculating Employee Engagement
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.
Scores from the following six questions are used to calculate the engagement score:
Say
If a high percentage of employees are positive on these six statements, this will feel like a great place to work.
Stay
Strive

29. 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.

30. Succession Planning: Helping you understand who to focus on
Now we’re going to move into the “who”. 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 you’ll need next year, or 2 or 3 years from now? A succession planning or succession management process can help you to answer these questions.

31. 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?
Ask for a show of hands.

32. The Traditional Approach to Succession Planning
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
Succession planning helps to identify top talent within your organization.
With this approach, forms were often completed, put in a binder and placed on a shelf.

33. 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

34. 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

35. Elements of an Effective Succession Management Process*
* The Gallup Organization

36. 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

37. 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”

38. 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)

39. “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”)

40. Challenge is not the model – it’s 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
NOTE: some organizations start with replacement SP and move to SM (integration of LD) later…but 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

41. 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

42. 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)

43. 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

44. 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

45. 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

46. 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?

48. Pool versus Replacement
Identifying “bench weakness” (e.g. managers, technicians)
Assess individuals
Develop as pool – stretch assignments, leadership development
Track progress

49. Folio Map 5.0 3.6 Potential 2.6 3.6 5.0 Performance
New in Position/High Potential
High Performance and Potential
3.6
Competent/ Capable
High Performance/ High Professional
Potential
2.6
Needs Improvement
Outplacement
3.6
5.0
Performance

50. Identifying High Potentials
1.0
3.6
5.0
High J
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 J J J J J J J J J J J J J J J J
Potential J J J J
3.6 J J J J J J J
J&J example J J J J J J J J J J J J J J J J J J J J J J
1.0
Low
High
Performance

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

52. 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
Ensure replacements for these positions/people

53. Example Multi-level ownership

54. Succession Management??
Retention
So, how do you take the information gathered through succession management and translate it to retention?

55. File it away…
You can file it away…

56. Start having conversations!
Talk to those people you’ve 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.

57. Great Leaders Make A Great Difference

58. Leadership Effectiveness and Turnover
Research reported in the book, The Extraordinary Leader, by Zenger and Folkman (2002). Conclusive evidence that 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.

59. Leadership Effectiveness and Retention

60. Leadership Effectiveness and Customer Satisfaction

61. 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

62. 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

63. Measures 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

64. 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 -
Broad scope measures
By ? Year increase high potential leaders by __
Over ? Years, increase high potential retention by __
Leadership skills in management group will increase…
Decrease turnover
Known as best company – attract high potentials

65. Employee Conversations
What needs to happen in these conversations?
No promises, honest, frequent

66. Individual Development Planning
Actions
Goals and measures
Follow-up, follow-up, follow-up

67. 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

68. Challenges Time Buy-in
Lose sight of big picture – administrative nightmare
Employee/manager conversations
Cultural biases
Resource issues that arise

69. 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

70. 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

71. 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

72. 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

73. 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

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

75. 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 & Jordan-Evans
Centre for Creative Leadership –
Statistics Canada –
“The Extraordinary Leader” – Zenger & Folkman

76. E-Mail: info@exceptionalleadership.com
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