SUCCESSION PLANNING: Building Your Talent Bench

1. SUCCESSION PLANNING:Building Your Talent Bench

2. Succession: It’s History What did the Pope, King Henry the VIII and the Godfather have in common?

3. The Talent Crisis • What is the Age Bubble?

4. % change in pop. by age group 2000-2010

5. Recent Research Data • Factors that impact your need to develop your talent bench • Corporate officers reported (40%) that company growth was limited because they didn’t have the right talent. • Corporate officers reported (75%) that their company is chronically short of leadership talent. • Within next 5 years, average company will lose 30% of its executive staff . • Failure rates are high (40-50%) when executive talent is hired from outside. • Two-thirds of employees have low to moderate confidence in their companies’ top executives; three-fifths of executives say the same.

6. Recent Research Data Factors that impact your need to develop your talent bench (continued) • Employees say company leadership is a key contributor to job satisfaction, commitment and intent to stay; especially true for top talent. • Recent surveys state that employees value most the leadership qualities of honesty and integrity. • Only 1% of companies rate their succession management plans as excellent; two-thirds rate them as fair or worse. ─McKinsey, The War for Talent, Right’s People Brand Research Report, DDI Exec. Dev. & Succession Management

7. Factors You May Need to Consider • Increased retirements; company demographics • Attrition; promotions; transfers • Market pressures requiring better/different players • Fit issues; changing skill sets (“the man for all seasons?”) • M&A’s; accumulative RIF impact in mid management levels • Weak employment brand; poor retention practices for top talent • Increased board pressures, (e.g. Sarbanes-Oxley Act)

8. Ask your CEO these top questions • Have you lost high potential talent because they didn’t know they were on the list? • If your executive team “got run over by a bus,” would their replacements be able to step right in and be productive? • Is anyone on the “top floors” or in the Boardroom worried about the status of your “talent bench?” • What lost opportunity costs has your organization incurred because it took a long time to replace a key leader?

9. Key discussion questions … • How does someone in your organization get selected to be a potential successor? • Do you have leadership development and talent management processes in place to grow successors? • If your organization has succession criteria, is it past focused or future oriented? • If you have a succession planning process, is it grounded in your business strategy? • Would your selection/promotion practices pass a “drop in” legal challenge?

10. Common Flaws • Talent planning and placement efforts are not linked to business strategy. • Succession planning and talent assignment by default - react only when a position becomes open. • Line mangers ignore the “talent pool,” relying instead on their own knowledge/comfort with candidates. • Lack of ownership by the “top floors;” Succession planning and key assignment of talent is perceived as a human resources issue.

11. Common Flaws, con’t. • Entitlement culture rather than criteria-based promotion process; Halo effect for “chosen ones.” • Lack of objective discussions; Limited data points to make good decisions. • No formal process to keep track of candidates. • No leadership/career development process to grow your own talent.

12. What is Succession Planning? A deliberate and systematic effort by an organization to ensure leadership continuity in key positions, retain and develop intellectual and knowledge capital for the future, and encourage individual advancement.

13. Reactive Form of Risk Management Substituting Narrow Approach Restricted Pro-Active Planned Future Development Renewing Organized Alignment Flexible Replacement vs. Succession

14. Driven by an annual bureaucratic HR procedure Entitlement focus – good old boy payback system - decided in secret “The list” and identified development actions, but no accountability for development Driven by current and future business needs Successors determined by an open process with multiple inputs and factors Development plans, development discussions and coaching with both candidate, sponsors and others held accountable for progress and monitoring Traditional vs. Future

15. Assumes targeted people will be ready when needed. Little, if any feedback Hindered by paper process that needs to be updated Heirs apparent in line for specific positions Actively involves candidates in development discussion. Regular, developmental feedback Aided by on-line assessment and regularly updated talent bank; scales to meet the masses A fluid pool of qualified leaders to be tapped as needed for the next level Traditional vs. Future

16. Reasons for Succession Planning Here are a couple – -- ( can you think of others … ?) • Help individuals realize their career plans within the organization • Tap the potential for intellectual capitol in the organization

17. Reasons for a Succession Planning Program • Provide increased opportunities for “high potential” workers • Identify “replacement needs” as a means of targeting necessary training, and employee development • Increase the talent pool of promotable employees • Contribute to implementing the organization’s strategic business plans

18. Reasons, con’t. • Help individuals realize their career plans within the organization • Tap the potential for intellectual capitol in the organization • Encourage the advancement of diverse groups • Improve employee’s ability to respond to changing environmental demands • Improve employee morale • Cope with effects of voluntary separation programs

19. Assessment Questionnaire • Complete the following Assessment Questionnaire to determine how well your organization is presently conducting Succession Planning. • Share the assessment with your organization, use it as a starting point to determine the need for your approach.

20. Critical Considerations for a Successful Succession Process Let’s discuss….. Examples: • Common values on the why’s and how’s are communicated. • True commitment to only the best people getting nominated. • Focused on future strategy and emerging business needs. Others?

21. Critical Considerations for a Successful Succession Process • Common values on the why’s and how’s are communicated. • True commitment to only the best people getting nominated. • Focused on future strategy and emerging business needs. • Accurate research information on retirement and attrition. • Good communication between line and HR on promotions and transfers. • Senior level commitment, involvement and ownership; alignment with key stakeholders. • Horizontal and vertical communication at appropriate levels

22. Critical Considerations, con’t. • Key criteria understood; competency identification and validation; “Leadership Profiles” for targeted positions. • 360, multi-rater and other objective assessments and methods. • Feedback rich process; development culture. • Fluid in design; pools high potentials for possible next jobs. • Established committees to oversee the review and placement process. • Rigorous talent review team process includes individual, manager and/or sponsor, objective sources and organization. • Promotions evaluated against the succession candidate pool.

23. Critical Considerations, con’t. • Aligned/linked with other practices of talent development and performance management throughout the organization. • Relevant development opportunities and assignments. • Executive coaching for key players or those in accelerated roles. • Accessible e-based talent bank to manage candidate data, assignment and relocation needs, and identify ready candidates. • Built with checks and balances; diversity and legal considerations. • Defined outcomes and ongoing review process to measure effectiveness.

24. Sample: Succession Planning Process • Phase I: Review Business Issues • What is your organization’s mission and vision? What are your organizational values? • What competencies are necessary in your employees to support current and future mission, vision and values? Why link succession with strategy?

25. Manager and Self Evaluations Decision-Making Matrix Executive Profiles & Organization Chart Dev. plans focus on both strengths And dev.areas Org.Strategic Initiatives, Mission Vision & Values Determine Competencies For Leadership Identify Key Leadership Candidates & Assess Against Competencies Determine Gap between Actual Performance & Behaviors vs. Required Competencies Assess Organizational Risks and Develop Strategies Monitor & Track Employee’s Performance Process Design Process Management Process Implementation Overview of Process and Tools

26. Functional and Leadership Competencies

27. POSITION HISTORY • 2002-Present, Fairbanks Capital Corp., Controller • 1998-2002, Independent Consultant • 1990-1998, Household International Inc. • V.P. Specialty Finance • CFO • Deputy Controller • EDUCATION • Northwestern University, Kellogg School of Mgmt., M.S. • Purdue University, B.S. • STRENGTHS • Strategy and Planning • Budget Management • Good Judgment • Good communication/interpersonal skills • Driven to improvement and success • DEVELOPMENT AREAS • Development of treasury/technical skills • Working effectively across departmental lines to accomplish goals • Build knowledge of FCC and servicing operations • Training and development of staff Sample, Sally Controller Date of Hire: 1/7/2002 Talent Code: Solid Citizen Performer Potential Positions: Chief Financial Officer Key

28. Results: Talent Summary by Competency Leadership competencies Functional competencies Management of Budget Market Knowledge Integration and Balance Strategy and Planning Technology & Business Methods Adaptability Cross-Boundary Perspective Organizationa Alignment Developing Self & Others Drive for Results Communication and Influence This graphical representation indicates how the high potential group scored on each competency. It is compiled so that the competencies are listed from left to right in the order in which there is the greatest need for development according to our data collection. It is most useful for looking at the talent needs of the group (rows do not represent an individual's scores in this grid). - Exceeds Standards - At Standard - Needs Development

29. Decision Making Matrix Performance Potential

30. Decision Making Matrix Performance Potential

31. Results: Talent Summary by Individual Functional Competencies Leadership Competencies This graphical representation is a comparison of each individual’s performance by competency (each row on the vertical axis represents an individual's score). - Exceeds Standards - At Standard - Needs Development

32. Lessons Learned • It is an ongoing process where the players will change continuously • In smaller less stable organizations, the organizational direction may also change • Competencies need to be constantly monitored to ensure they are measuring what you want to measure

33. Refining the Program • Prepare a program action plan • Communicate the action plan • Conduct Succession Plng. meetings • Training on Succession Plng. • Counsel managers to deal with Succession Plng. issues affecting them and work areas

34. Goal: Build a Development Culture “The strategic objectives of the company lead to assessment of talent to determine future staffing needs and bench strength, which in turn determine development needs and actions.” ─ “Promoting A Development Culture,” Right Management Consultants, Peggy Simonsen