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What Matters?
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HUMAN RESOURCE EXECUTIVE, in its annual Forecast edition, reports on the results of a survey of HR leaders. Again, as we’ve seen time and time again over the past few years, the acquisition, development and retention of talent proved to be the most important concerns.
When asked if the participants felt that a talent shortage is underway 68% said yes with 22% saying that they weren’t sure. No wonder many companies are now focusing on solving the talent challenge. We again address some of these issues in this newsletter.
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Bob Gatti, President
Gatti & Associates |
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| How You Can Keep Your Top Talent From Leaving |
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The Problem
Retaining valuable employees is becoming more and more of an important issue for organizations. Nationwide, the labor pool is shrinking, baby boomers are beginning to retire, and younger employees are coming to the work world less committed to their organizations than employees of past generations.
Employee turnover is very expensive. The cost of hiring and training combined with the loss of productivity during the replacement period are often 150 percent or more of the employee’s salary.
The Research
Discovery Surveys, Inc. has surveyed more than 50,000 employees and has recently examined our database of the more than 300 items we track to answer the question: “What are the best predictors of whether employees intend to stay or leave their organization?”
The results may surprise you.
Is it how they feel about their pay? No
Is it how your benefits compare to those offered by other organizations? No
Is it their trust of management? No
Is it the level of cooperation with their coworkers? No
Is it the strength of the link between their pay and their job performance? No
Is it the recognition they receive from their supervisor for their good work? No
Table 1 below lists those items from our database with a relatively weak correlation to employee turnover intentions.
Table 1: Relatively Weak Predictors of Turnover Intentions1 |
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Rita B. Allen Associates, Gatti & Associates, and Northeastern University’s College of Business Administration hosted their 6th Annual Executive Breakfast Forum “Best Companies – Best Practices: Keeping the Competitive Edge” on November 7, 2007 at Northeastern University. The event was well attended by senior Human Resources and line executives.
The distinguished panel this year consisted of Ted MacLean, General Manager, Enterprise and Partner Group, Northeast US, Microsoft; Vicary Graham, Regional President, BNY Mellon Private Wealth Management; Balaji Purushothaman, Human Resources Director, Global Grooming Business Unit, Proctor & Gamble and Richard Daniels, Chief Operating Officer, Gatehouse Media New England. The moderator, Professor Leonard Glick, introduced key topics such as Talent Management, People Practices, Strategic Human Resources, and Impact of Generational Differences in the Workforce. The panel responded with information relevant to their organizations followed by a substantive Q&A period from the audience.
Talent management is a concern to all organizations in today’s competitive marketplace. Thirty million managers are retiring, workers’ expectations are changing and the average employee changes companies eight times. Microsoft, with 85,000 employees globally, filled 68% of their positions this year by creating a highly competitive environment, a culture of long-term engagement where employees can do their best work. This results in low attrition making the company attractive for external hires. Being consistent across the board, differentiating, coaching, mentoring for individuals, and getting necessary feedback are germane to employees’ positions and relevant to their skills. BNY Mellon’s program echoes Microsoft's best practices. The recent acquisition by Bank of New York provides a rich opportunity to start a career with significant access to senior management; they look at their top performers and give them what they need to excel. Procter & Gamble is reacting to this issue by focusing on the 95% of their hires which are internal. Also, 40% of their employees joined Procter & Gamble through acquisition and of major importance is how to integrate these people within the organization. Gatehouse Media New England recently surveyed their hiring managers and 62% are worried about shortfalls; Human Resources is responding to this with competitive hiring practices. All companies noted the impact of Generation Y on their organizations: they want more work life balance, feedback, and a chance for development. Suggestions for the new generation of employees: Be open to what they ask for but give them expectations and reward them if they are meeting commitments; don’t assume they are challenged; move them around based on aptitude and expose them to business; and provide mentoring and training opportunities.
It was agreed by all on the panel that great Human Resources professionals need to be real business partners, build credibility by learning the business they support, be engaged, proactive and part of the dialogue around strategic intent. To that end, P&G created a training program for Human Resources by asking management what they wanted. BNY Mellon wants Human Resources professionals who can make their process invisible, recognize how candidates will fit in with the business and culture, work with senior management and help them achieve goals. Microsoft wants Human Resources Professionals to be creative, present, counter-cultural, wearing a people hat at the table, working the same way the business does with no boundaries and thinking about how to make ways to make their managers more effective. Gatehouse Media wants Human Resources professional to be relentless, tough, and smart; helpful, kind and friendly is fine, but not enough.
The common theme shared by all executives on our panel was around the strategic imperative for strong and competitive people practices throughout all four industries represented. The panelists’ honest and reflective insights on all of these timely topics were appreciated by the audience. The Executive Forum was well-attended and once again a very successful event. The panelists provided valuable insight into key areas from each of these successful organizations. The session concluded with an active question and answer period, moderated by Len Glick, a Professor in the College of Business Administration at Northeastern University. Other participants from Northeastern University included the Dean of the College of Business Administration, Tom Moore, as well as David Abdow from the College of Business Administration, and Fred Hoskins from the Office of Corporate Partnerships. |
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The concept of succession planning has been around for a long time. Boards of public companies and the leadership of most private and not-for-profit organizations know that they need to identify who would step into the most crucial leadership positions in the organization if “someone got hit by a truck or won the lottery.” So, what’s all the noise about succession planning? Another example of consultants making things more complicated than they already are? Let’s take a brief look at this issue and understand why it is more complicated than it first appears.
Various studies indicate that although most companies have what they call a “succession plan” -- in fact, it is just a temporary replacement plan. Most executives and boards know that their plan does not identify or effectively develop key leadership that can sustain the organization over the long term. And this situation is potentially very damaging because the rate of failure and movement among executives in the top key positions of the company (e.g., CEO, CFO, COO, etc.) is higher than ever, according to most research on selection and placement. Why do we have this situation and what can an organization do about it?
Historically, the focus of succession planning has been what to do in an emergency and that remains the approach in many organizations today. Development of senior executives is often viewed as unnecessary (i.e., “they’re experienced – that’s why we hired them”). Frequently, Human Resources “manages” the process, but is rarely held accountable for the quality, development or availability of candidates for the top positions in the company. The succession plans are “tracked”, usually on an annual basis, but there is rarely a sustained commitment and follow-up on development needs.
Development is supposedly “good for everybody”; BUT rarely are development activities focused on the top of the house (e.g., the top ten or fifteen leaders). Most executives receive it on an ad hoc basis only. For example, if an executive is really inept interpersonally, the company will find him or her a coach. Most often, leadership development is designed for the mid-level to senior level of management, but even there it is sometimes ineffective in achieving its stated objectives and the top leaders are often just “observers” or “faculty”. Of course, there are always exceptions to the rule. One department might decide to focus more attention on this issue because of the particular concerns of a given executive, availability of mentors, demand from incumbents, etc. and that can make all the difference. However, what is needed is a consistent and disciplined corporate-level commitment to sustained leadership development.
Since internal development efforts often fail to produce adequate talent for the top of the house, it is not surprising that many organizations have become overly reliant on recruiting from the outside. This is costly for many different reasons, and as many companies can testify, is not often successful at the highest levels.
Succession planning in the past and often today also fails because of three inaccurate assumptions:
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That talented individuals have limited mobility (i.e., they are willing to stay with the company long enough for the incumbent to leave the role);
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That the desired competencies (skills, knowledge and behavior) remain static over time, rather than being influenced by changing business strategy; and
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That the company can heavily influence the career paths of its employees and that these are usually linear, predictable journeys.
None of these assumptions holds true any longer (if they ever did). Changing economic conditions, social attitudes, globalization and workforce demographics demand a new approach to succession planning – an approach that’s not simply about “filling the gap.”
To create “real” succession planning, start with some meaningful guiding principles.
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Establish a consensus among the board and the top executives on the business context in which leadership must be demonstrated. “What are the challenges we face today and in the future and what kind of leaders do we need for us to win?” This is a discussion about the people implications of the key business issues.
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Make the process collaborative and completely honest. Sometimes HR can facilitate this discussion, but in some situations an outside facilitator may be required because HR is understandably often “too close” to the incumbents. For example, if the current CFO is not equipped to face the challenges of the future and there is no one in Finance and Accounting who has been trained to meet these challenges either, there must be a candid discussion about acquiring new talent or finding it elsewhere in the organization.
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Assure a pool of key talent at the top. If there are five key positions in the company, it may be necessary to have fifteen people who are not just identified, but are really assessed and developed.
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Understand not only the competencies of the incumbents, but also their needs and career expectations. Often companies lose executives because they did not know that the individual was dissatisfied with certain existing arrangements that could have been altered, if only others had known. Look for on-the-job training as a means for development and don’t rely primarily on external executive development programs.
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Don’t assume that there are magic answers. Succession planning is about the assessment of risk, and, consequently, there is always the potential for a range of success or failure. Boards and CEOs must be willing to face and analyze these risks with a clear eye.
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Recognize that there is no ideal process. It must be tailored to the history and culture of the organization and based on your business strategy and requirements. What works at GE, the most talked about company when it comes to succession planning, is often not applicable in other environments.
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Measure the return on investment in succession planning. “Are we achieving our objectives in the stated time frame? Are we better prepared for the future?”
To increase the possibility that top leaders of a company will serve long and successfully, the board and the key executives must translate these guiding principles into a process that will assure that the organization has the right talent doing the right things to drive the current and future success of the company. No organization can achieve this outcome and succeed in the long term if it only plans for emergency replacements.
Steve Bookbinder is an independent consultant specializing in change management, measurement and workforce and leadership effectiveness. For many years, he was a senior partner at Towers Perrin and worked with a wide range of publicly traded, privately held and not-for-profit organizations. Prior to Towers Perrin, Steve was a college professor and a human resources professional. He is the author of several articles on people management and leadership issues and has been frequently quoted in national publications such as The Wall Street Journal and The New York Times. You can reach Steve at www.stevebookbinder.net
Copyright – Steve Bookbinder 2007 |
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"Convenient"
Human
Resources? |
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Imagine
this
scene:
long
car
trip,
kids
in
the
back,
stopping
only
to
fill
up
your
gas
tank
and
grab
enough
caffeine
to
keep
you
going
and
enough
snacks
to
keep
your
kids
happy.
Did
you
ever
wonder
what
it
takes
to
staff
and
manage
these
highway
convenience
store/gas
stations
24/7?
No?
Well,
we
didn’t
either.
But
we
recently
went
to
work
for
the
CEO
of
The
Pantry,
the
leading
chain
of
independently
operated
convenience
stores
in
the
southeastern
United
States,
and
one
of
the
largest
convenience
store
chains
in
the
country
with
revenues
of
approximately
$6B.
When
Peter
Sodini,
CEO
of
The
Pantry,
contacted
Judy
Banker,
EVP
&
Partner
at
Gatti
&
Associates,
he
informed
Judy
he
was
initiating
a
search
for
a VP
of
HR
and
wanted
to
learn
what
kind
of
services
Gatti
could
provide.
After
an
hour
of
discussion
about
the
history
and
current
needs
of
The
Pantry
and
the
focused
service
that
Gatti
&
Associates
might
provide,
Mr.
Sodini,
without
ever
having
met
Judy
or
anyone
at
Gatti,
and
despite
her
suggestion
to
him
to
“think
it
over,”
immediately
awarded
the
search
to
Gatti,
stating,
“I
can
tell
that
this
is
going
to
work,
so
why
waste
any
time?
I
never
second-guess
myself.”
Sodini
wanted
a
human
resources
leader
who
would
bring
best
practice
human
resources
strategy
and
service
delivery
to
its
1600
stores
and
its
highly
dispersed,
non-exempt
workforce,
and
who
would
provide
advice
and
counsel
to
him
as
he
continued
to
grow
the
company
through
an
aggressive
acquisition
strategy.
Just
when
we
thought
that
sounded
almost
“too
good
to
be
true,”
we
learned
that
The
Pantry
had
some
challenging
turnover
in
its
stores.
Never
one
to
turn
down
a
challenge,
Judy
partnered
with
Wende
Malster,
VP
of
Search
Services,
to
develop
a
strategy
to
find
a
leader
who
could
introduce
some
best
practice
initiatives
into
the
company
and
help
solve
the
turnover
issue.
Our
mission
was
to
find
world-class
HR
leaders
from
service-oriented
industries
nationwide.
Among
other
things,
we
needed
to
find
someone
who
understood
how
to
work
effectively
with
a
remote
workforce
across
a
broad
geography,
and
someone
who
could
formulate
a
comprehensive
human
resources
strategy
and
contribute
to
the
company’s
aggressive
growth
strategy
by
focusing
on
increased
communications
and
best-practice
hiring
and
retention
initiatives.
The
strong
stock
price,
the
profitability
of
the
company,
and
Mr.
Sodini’s
vision
were
the
great
pluses
in
this
search,
and
the
complexity
of
the
turnover
issue
would,
we
thought,
be
an
interesting
challenge
for
the
right
kind
of
HR
leader.
Our
search
efforts
resulted
in
the
presentation
of
five
candidates,
four
of
whom
came
out
of
retail/hospitality
organizations,
and
one
who
came
from
a
huge
global
technology
company.
We
knew
that
a
candidate
with
no
relevant
industry
background
was
a
long
shot,
but
our
prospect
was
unusually
talented,
and
we
convinced
our
client
to
meet
her.
Mr.
Sodini
reluctantly
scheduled
the
interview
and
then
made
up
his
mind
to
hire
her
after
an
intense
2
1/2
hour
conversation.
Melissa
Anderson
has
now
been
at
The
Pantry
for
several
months
and
both
she
and
Pete
are
very
happy
with
their
choices.
Melissa
is
building
a
human
resources
function
that
is
progressive,
practical,
and
effective
for
this
very
successful
company
and
Pete
has
the
coach,
confidante,
and
leader
he
wanted. |
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