Succession Management

1. Succession Management HR Pastime or Critical Business Strategy Enabler

2. Why Does Succession Planning Matter? “An organization is nothing more than the collective capacity of its people to create value.” Lou Gerstner former CEO of IBM • Largest potential gains in revenue and profits for business leaders came from building bench strength when looking at a variety of talent outcomes* *CLC Talent Management Effectiveness Survey: Corporate Leadership Council Research

3. What Does Your Succession Management Say About You? • According to Marshall Goldsmith, on average, the executives he meets give their succession planning process a grade of C+ and they give their execution of succession plans a grade of D • How are you doing?

4. Who Does it Well? And Who Has Opportunity?

5. What Prevents Us from Doing a Good Job at Succession Planning? • Time • To plan • To develop • To fill open positions with the right people • To think further down the road • Getting Feedback and Buy-In from Others • It is Hard • Requires tough and direct conversations • Not Defining the Business Case

6. Best Practice Elements Succession Planning is an Ongoing Process

7. Start with Business Strategy and Develop Business Case • Business Strategy feeds into talent strategy • Identify the External Trends in your Business Environment • Define your Business Strategy • How do you compete? • What do you do better than the competition? • Can you do this without the right people? • What is needed now and what will be needed in the future? • What kind of culture is needed to drive success? • Feeds into the Talent Needed

8. Executive Commitment and Ownership • Executive Commitment and Accountability - Reinforcement • After Sarbanes-Oxley, Boards have become more involved with succession management • Leadership Responsibility should start with CEO • Talent Expectations for leaders and managers • Hold ongoing reviews, consider talent management results as part of bonus plan or performance management ratings

9. Critical Positions

10. Identification of Critical Positions • Identify Critical Positions

11. Identification of Critical Positions Tool Complete the table for each job using a scale from 1 (low) to 5 (high) Highest Total Score = Most Critical

12. Exercise to Help ID Critical Positions • List 3 or 4 most important sources of competitive advantage for your company – examples: • Identify relative importance by allocating 100 points among them where no two sources of competitive advantage can have equal weighting • Using this list helps you identify core, technical capabilities/positions • Innovation • Quality • Branding • On-time Delivery • Cost • Distribution • First to Market • Relationships • Service Michigan Ross School of Business Executive Education

13. Defining Positions – Another Approach Source: “The Differentiated Workforce Transforming Talent into Strategic Impact” Adapted from “A Players” or “A ‘Positions’? The Strategic Logic of Workforce Management,” Harvard Business Review, December 2005

14. Assessment of Talent

15. 9 Box Assessment Grid – Performance and Potential • Develop Competency and Assessment Model

16. Company Example - Lisa

17. Example from Hy-Vee • Hy-Vee • Culture – how it drives • Position Identification • Internal vs. External • Candidate Development and Assessment • Hy-Vee University • Identification of Potential candidates • Etc…… • Mentors • Diversification tool

18. Company Example - Diane

19. Started with Business Strategy and Business Case • Business Strategy feeds into talent strategy • Reviewed External Environment, Trends and Current Performance • Redefined the Business Strategy and what Cultural Capabilities we needed to succeed • Analyzed the # of Director Level and Above Positions that we Hired Externally the Prior Year • Reviewed Current Number of Open Director and Above Positions • Calculated the Cost of Turnover • Search agency costs • Relocation costs • Lost productivity/revenue from open positions

20. Gained Leadership Commitment • ID of Critical Positions • Executive Commitment and Accountability - Reinforcement

21. Developed Competency and Assessment Models • Develop Competency and Assessment Model • Understanding of company’s cultural capabilities • Consideration of motivation, ability and engagement • Performance and Potential • Definition of competencies and derailers • Defined promotability and retention risk assessments

22. Considerations in Talent Assessments

23. Considerations in Talent Assessments • Motivation • Extent in which an employee wants: • Prestige and recognition in the organization • Advancement and influence • Financial rewards • Work-life balance • Overall job enjoyment Motivation • Resources • Employee career goals in SAP Talent Profile • Regular development conversations

24. Considerations in Talent Assessments • Ability • A combination of characteristics and learned skills to carry out day-to-day work: • Mental and cognitive ability • Emotional intelligence • Interpersonal skills • Functional and technical skills • Resources • Employee competency self-assessment in Skills Profile • Performance history

25. Considerations in Talent Assessments • Engagement • Includes four elements of commitment: • Emotional commitment to the organization • Rational commitment – a belief that staying with organization is in the employee’s self-interest • Discretionary effort • Intent or desire to stay • Resources • Regular performance and development discussions Engagement

26. Promotability Assessment & Next Position Promotability Scale: Highly promotable (HP): Seen as having the ability and motivation to be promoted two levels within five years. Include in succession planning. Promotable within 2 (P2): Seen as having the ability and motivation to be promoted one level within two years. Include in succession planning. Promotable within 5 (P5): Seen has having the ability and motivation to be promoted one level within 5 years. Include in succession planning. Lateral Development (LD): Consider for lateral move within the next 12 months to broaden experience base and potentially enhance long-term promotability. Include in succession planning. Well Placed (WP): Continue development in current role based on employee’s expertise and motivation. At risk: Not meeting current performance expectations; may be due to poor job fit or poor performance.

27. Employee’s Talent Information – their “voice”

28. Comparing Employees’ Talent Information

29. View Employee’s Skills Profile

30. Assessments:Competencies, Derailers, Promotability, Retention Risk

31. Derailers Assessment Possible Ratings:

32. Leadership Competencies Assessment Possible Ratings:

33. Promotability Assessment Required – Indicate Next Position

34. Retention Risk Assessment Possible Ratings:

35. Planning and Development • Talent Development, Acquisition and Planning • Talent development plans put into place for • Internal successors listed for critical positions • Individuals identified as promotable/lateral development • Talent acquisition plans put into place to diversify existing capabilities and fill in gaps • Action plans put into place for individuals “At Risk” as assessed • “Stay” discussions initiated where retention risks identified • Leaders and managers accountable for owning in partnership with HR • Tools to use throughout the year • Review action plans

36. Development Planning & Investments • Talent Development and Planning • Consider experiences needed • Manage large groups of people • Make significant decisions • Work on cross functional teams • Work in customer/client facing role • Launch new business, initiatives or programs • Assign a mentor – inside or outside the company • Strong P&L knowledge • Consider knowledge/credentials needed • Create accountability for success in new roles (internal and external hires) • 360 assessment tool

37. Metrics that Matter • Metrics that Matter

38. Examples of Metrics • Metrics that Matter • Percentage of externally sourced successors versus internally sourced • Total number of internal succession candidates considered for open positions • Critical turnover - % of high potential employees leaving is higher than average or low potential employees • Time to fill critical positions • Cost of external hires versus internal promotions/development • What questions are you trying to answer or what decisions are you trying to make?

39. Tool – Checklist

40. Manage Ongoing Process • Manage Ongoing Process and Plans • Manage vacancy risk – focus succession efforts by translating business strategy into talent strategy • Manage readiness risk by providing needed development experiences and enabling movement across the organization • Manage transition risk by understanding derailers, manage expectations and create accountability for success in roles • Manage portfolio risk by effectively aligning and deploying talent against evolving business priorities 2006 Corporate Executive Board

41. Manage Ongoing Process – Feedback Tool

42. Manage Ongoing Process – Tool

43. Starts with Business Strategy

44. Lessons we Learned – Ongoing Journey • In Real Time, how do we keep this front of mind versus quick fix solutions when openings occur? • Not just an HR responsibility • Calibration – does it sound easy? It’s not! • Assessment Tools • Employee Ownership • How and what should you communicate? • How do you build breadth at the entry to mid level roles? • What about positions that aren’t critical? • Generational differences and expectations

45. Things to take away…How to apply • Define your culture and business needs • Use your company’s culture – don’t force it • What is your process today? • Can – should you develop internal candidates? • Do you have senior leadership enthusiastic support and accountability? • Discussions are crucial for success – amongst leaders, with employees, etc. • Model Succession • Evaluate • Plan • Review • Evaluate