Succession Planning

Lessons from Yahoo: Enduring Organizations Manage Executive Succession

Posted on November 19, 2008. Filed under: Leadership Development, Succession Planning, Talent Management | Tags: , , , , |

This week we witnessed another vivid lesson in the value of executive succession: Jerry Yang steps down as the CEO of Yahoo!. Yang replaced Terry Semel, who spent years trying to build Yahoo! into a media company, only to see it lose market share to the more innovative, technology savvy Google. Yang presided over an indecisive decision not to merge with Microsoft, and watched the Yahoo! stock drop from $33 to around $11, effectively trimming billions of dollars off the company’s value.

Now we find that yes, in fact, Yang is a great visionary, but not a strong leader – his inability to change the consensus culture at Yahoo! and make rapid decisions (the Microsoft merger seemed pretty logical to me) are now considered out of favor. The board is looking for an internet-savvy leader who can make decisions, drive execution, and build alliances.

Companies do not have to go through this. In fact, Enduring Organizations®, companies that build brand value over decades of business cycles, rarely if ever go through such tremendous soul-searching to find CEOs. They build strong leadership models, capturing the essence of their business and talent strategy in a set of leadership capabilities. Then they identify high potential leaders throughout the company, using well understood approaches to succession management. And they develop leaders internally through a wide variety of approaches: developmental assignments, internal projects, executive coaching, external education, and 360 assessments.

Look at companies like GE, IBM, Procter & Gamble, Textron, McDonald’s, and Goldman Sachs. These companies have deep pipelines of leadership talent, always being developed and assessed for future top positions. When a change needs to be made, 90% of the time it can be made internally.

Sometimes, of course, a company loses its way and an outsider is needed: Lou Gerstner at IBM and Ron Williams at Aetna. But these situations are rare in these companies, they work hard to constantly re-evaluate their leadership needs and build new leaders as business cycles change. IBM, my alma mater, has completely changed its “profile of leadership” in the last 5 years to reflect the company’s new business model of global services, team based consulting, innovation, and expertise development.

In many ways companies like Yahoo! are still young, so these “old-fashioned” processes have not yet taken root. But that’s no excuse: if Yahoo! wants to become an Enduring Organization®, it’s high time they took the executive succession process seriously. It may be too late, time will tell.

Bersin & Associates defines an Enduring Organization® as one which develops long term business value over decades, through many business cycles, and through many transformations. These companies outperform their peers over consistent periods of time. Our research focuses on identifying the proven principles of enduring organizations to help younger companies embrace these proven approaches to managing talent.

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Talent Management Challenges in the Federal Government

Posted on August 3, 2008. Filed under: Enterprise Learning, Learning Programs, Succession Planning, Talent Management | Tags: , , , |

We have been doing a lot of research and work with the Federal Government in the area of talent management.  Let me share a few interesting findings.

The United States Federal government has more than 2,7 million employees, ranging in roles from secret service agents to financial analysts to IT specialists to scientists.   These people work in a variety of federal agencies, each of which have a strong and clear mission to provide security, services, or assistance to US citizens.

Talent Challenges in the Federal Government

Like corporate America, the Federal Government is going through rapid changes in its workforce.  As many as 60% of Federal workers are eligible to retire in the coming 10 years, yet the number of Federal positions increased by 33% in the last 3 years.  Today, more than ever, young people (25 years old and younger) are strongly considering Federal employment as a “stepping stone” in their careers (61% of young workers state they would consider working for the government as a first step in their career).  This is very different from 30 years ago, when most people entered public service as a way to “retire well.”

And, like corporate America, the Federal Government has a weak and further weakening leadership pipeline.  Demographics show a tremendous gap in mid to high-level leaders, and today only 41% of government employees are satisfied with the senior leaders in their agencies and only 14% have a “high degree of respect” for their senior leaders.  (Source:  the OPM Human Capital Survey, administered to 220,000 federal workers in 2006)

This adds up to a major challenge in talent management.  Unlike corporate America, the Federal Government has another challenge:  the true measure of “success” is often less obvious.  These agencies measure their success through service levels and attainment of critical goals.  So as a result, the Federal Government has a very difficult time aligning “performance” with compensation and promotion.  In fact, only 40% of employees believe that compensation and promotion is tied to performance and only 7% believe that compensation and promotion are directly and strongly linked to performance.

What Matters?

With tremendous needs for recruiting, career development, goal alignment, and improvement of the performance culture, one may ask “what really motivates workers in Federal Agencies?”  Well the research clearly shows that people who work for the government are motivated by very similar things to those in the corporate world:

What Creates Retention in Federal Workers (and % Satisfied in these Areas)

As this data shows, people are interested in recognition, job satisfaction, career development, work environment, quality of live, and inspiration.  These are very similar motivators to the things which drive high engagement and retention in the private sector.

Unfortunately, as this data (and other data) shows, employees do not feel that they have enough career mobility, fair opportunities, or leadership.  When compared against corporate organizations, the government falls short in the areas of career development, succession management, performance management, and employer brand.

Solutions

The Office of Personnel and Management (OPM) understands these issues.  While the solutions are not necessarily easy to implement, the Federal Government is well aware of the issues.  Many agencies (The NRC and NASA, for example) have implemented highly competitive talent management, career development, and recruiting programs to deal with these issues.

But many of the large agencies have highly diverse workforces:  combinations of technical, security, administrative, support, and service roles.  We are currently working on a project with the Department of Energy, for example, to build a new set of career models for the “21st Century Energy Demands” of the United States.  Such programs can go a long way to building an integrated solution.

The bottom line, of course, is that two things really matter in talent management:  leadership and integration.  Do the leaders of the organizations understand the “Business of Talent?”  And are the organizations integrated enough to take a wholistic view of talent from end to end? 

We are working hard on research and services with the Federal government in 2008 and 2009, call us or watch for more information on this important part of all of our lives.

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Globalized Talent Management: Pemex and Banamex

Posted on June 13, 2008. Filed under: Enterprise Learning, Performance Management, Succession Planning, Talent Management | Tags: , , , , , |

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On the Minds of HR and Learning Leaders

Posted on May 17, 2008. Filed under: Enterprise Learning, Organization & Governance, Performance Management, Succession Planning, Talent Management | Tags: , , , , , , , , , , , , , , , , , |

We recently completed our annual research conference and I had a wonderful opportuinty to meet and talk with 15 different HR and L&D executives in a special roundtable.   The theme of our research conference is The Business of Talent®, and as you will read, this theme comes through in almost every organization.  Talent management is a strategic business tool, not an HR initiative.

Commerce Bank and TD Bank:  Michelle Fetterman-Gaughan, vice-president and talent planning manager, discussed how her bank is going through a major merger with TD Bank – impacting 74,000 employees.  Commerce Bank developed a complete competency model for its commercial lending operation, which now must be merged and integrated into TD Bank’s competency models.  A key challenge ahead is the blending of corporate cultures and different competency models and systems.  Michele believes that Commerce Bank’s existing competency strategies will be extremely valuable during and after the merger, as new roles and responsibilities are defined.

Turner Broadcasting – Improving Competitiveness:  Michele Golden, vice president, talent management for Turner Broadcasting, discussed how this global media company faces intense competition in every market.  The company is putting together a three-year roadmap to create common processes, linkage of pay to performance, and new goal alignment systems to improve innovation and competitiveness.  She is collaborating with business leaders throughout the company to help craft these new integrated processes.

Aetna – Transition from Turnaround to Industry Leadership:  Deborah Kelly, head of Learning Services at Aetna, discussed how the company’s management-led turnaround was built on Aetna’s pioneering work in competency analysis, job analysis, and integrated management processes.  Now that Aetna is an industry leader, the challenge is how to take Aetna’s integrated talent management process and build processes and systems to foster innovation and leadership, not just execution.  Deb’s presentation is available to IMPACT attendees on the IMPACT 2008 Online community site

Verizon Wireless – Improving Talent Migration and Culture of Learning:  Lou Tedrick, Vice President of workforce development at Verizon Wireless, discusses how the company relies heavily on operational training and rapid development processes to keep its sales and service teams up to date on new products and services.  But as the company’s products continue to grow in volume and number, there is a need to drive learning down to the line manager level, simplifying the process and forcing individual managers to train workers on an informal basis.  In addition the company is now working to start migrating talent across the business entities to promote leadership development and deeper levels of succession management.

Boeing – Developing Technical Skills in the Manufacturing Workforce:  Ed Chang, senior project manager at Boeing, discussed how the average age of a Boeing manufacturing worker is 48 years old and as much as 15-20% of the workforce will retire in five to seven years.  One of his key objectives in attending the conference was to network with other attendees to identify best practices in building technical skills in newly hired workers.  The manufacturing skills required at Boeing take years to develop.  Ed’s challenge is to develop a wide variety of technical development programs to fill the anticipated gap.

Caterpillar – Global Model for People Management:  Fred Goh, director of strategic learning, Caterpillar University at Caterpillar discussed the company’s new integrated talent management model, which includes all elements of talent from recruiting to development to learning to diversity.  Caterpillar is building integrated career models throughout the company and using this new infrastructure to roll out Caterpillar’s new Global Manufacturing System.

Honeywell – Moving from Enterprise Learning to Integrated Talent Strategy:  Steven Teal, the former vice president and CLO of Honeywell, discussed how the company identified a tremendous gap in technical skills throughout its global defense and control businesses and realized that its enterprise learning function must migrate to an enterprise talent management function.  As he helped architect this new strategy, he realized that his existing role as CLO was no longer needed.  He helped the company define a new position, vice president of talent management, which will facilitate a more integrated approach to employee development, succession, and technical capability management.

Northshore Long Island Jewish Healthcare – Driving Performance through Leadership and Learning:  Kathy Gallo, senior vice president and CLO at Northshore LIJ, discussed how this well-known healthcare provider continues to be the largest and most profitable delivery operation in downstate New York.  Its talent development model, patterned after JetBlue’s flight training and GE’s leadership institute, provides deep levels of technical development for nurses and medical professionals, focuses heavily on leadership development and action learning, and focuses heavily on innovative learning techniques to drive the highest levels of patient care, employee retention, and performance.

Northrop Grumman – Retaining Talent in a Company of Acquisitions:  Kathy Thomas, vice president of learning and development for Northrop Grumman, described how this 120,000 employee organization operates as diverse business entities with loosely-federated model for employee development.  She described how the company uses a series of leadership councils to build consensus in its leadership development, executive succession management, and technical skills development across its broad and highly diversified businesses.

Yum! – Providing Consistent, Efficient, and Highly Focused Retail Training Worldwide:  Rob Lauber, vice president, YUM! University and global learning services, described how this one-million- employee powerhouse (Pizza Hut, KFC, Taco Bell, and other brands) is just now rolling out world-wide training systems and programs to provide consistent, sharable training programs in restaurant operations.  This complex implementation will give the company the ability to run brands independently yet provide tremendous sharing and efficiency in functional training, onboarding, food safety, and other important operational talent development needs.

Xerox – Implementing a New Strategy for Continuous Learning in Professional Services:  Gary Vastola, vice president, Xerox global services, discussed the implementation of a three-year plan to blend classroom, e-Learning, and Learning 2.0 tools to develop the knowledge and skills of Xerox services resources worldwide.  This operation will focus on promoting a continuous learning culture and has been incorporated into the overall Xerox global services strategy.

Aramark – Creating a Common Talent Scorecard among Broadly Distributed Operations:  Liviu Dedes, vice president of organizational effectiveness and development for Aramark, described how the company manages its widely distributed businesses in food service, prison operations, and other people-intensive businesses.  He discussed how he has instituted a standardized human capital scorecard across the corporation to facilitate operational reviews of talent, standardized processes, and global talent data to help his team implement focused programs to solve talent management problems throughout the company.

Wellpoint – Implementing an Integrated Talent Process and Performance-Driven Culture:  David Casey, vice president of talent management for Wellpoint, discussed how the company has been rebuilding itself after a major merger into a “leading innovator” culture by developing an integrated talent management strategy, centralized L&D strategy, and new process and systems strategy to drive leadership development, a performance-based culture, and faster response to talent gaps in the company.

The Business of Talent

These are only a few of the leaders who joined us this year at IMPACT 2008:  The Business of Talent®.  I was inspired and energized by the business focus and technical prowess of these leaders.  Enterprise learning and talent management is never easy and never a one-size-fits-all solution.  Each organization must use its skills in leadership, organizational development, and learning to build the right organization, processes, tools, and systems to drive business change.  Conference participants demonstrated that enduring organizations are “talent machines” – they focus on people first, and products and services second. 

We look forward to your comments.  And look for details on IMPACT 2009 coming soon.  We have even more planned for next year’s conference.

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Are you an Enduring Organization?

Posted on April 20, 2008. Filed under: Enterprise Learning, Learning Programs, Performance Management, Succession Planning, Talent Management | Tags: , , , , , , , |

As we continue to study best practices in the implementation of corporate learning and talent management, we find that high performing organizations fall into two categories:  those who endure and prosper over long periods of time (decades), and those who rapidly rise to prominence, then falter during a major business challenge, and often become acquired (or disappear).

The former are what we call “enduring organizations” – and they typically become iconic brands which provide tremendous returns to shareholders, employees, and customers.  (These are the types of companies that Warren Buffet likes to invest in.)  The latter are exciting companies to read about, but often disappear and become historic roadmarks in the highway of progress (one could call them “roman candles”).   Fast-growing, trend-setting companies (e.g. Google) set trends and create tremendous excitement, but they are not truly tested until they endure broad economic and business cycles.

Characteristics of Enduring Organizations

These enduring organizations have several things in common.  First, they have an uncanny ability to grow and prosper under a wide variety of economic and business conditions, and survive for many decades.  Second, they survive wrenching upheavals in their markets and somehow learn to reinvent themselves over time.  Third, they become iconic brands, which last long beyond their product lifecycles.  And fourth, they provide extraordinary returns to shareholders, employees, and customers.

An excellent example of such a company is IBM. IBM was founded in the early 1900s and originally built IBMrifles for the US military.  It turned into a “tabulating machine” company which developed systems for the US census, and then later developed the first mainframe computer.  IBM dominated the mainframe computing era for more than 20 years, reaching such market monopoly that the US Department of Justice forced the company to unbundle its services from its technologies. 

In the 1980s the computing industry shifted – from one of vertical integration (one company making the chips, computers, operating system, and application software) to one of horizontal integration (many compaines making chips, many companies making computers, many companies making operating systems, and many companies making application software).  IBM helped create this market by launching the IBM PC, the first open systems computer.  But the company suffered a painful transformation in its business as a result, almost being forced to split itself up into seperate companies. 

Demonstrating its ability to deal with change, IBM transformed itself again – and thanks to Lou Gerstner and Sam Palmisano (the current CEO), IBM re-emerged as the most trusted and profitable IT services and consulting company in the technology industry.

During this period of time, many innovative and well-run companies emerged, grew, and disappeared.  Tandem computers, Digital Equipment, Compaq, SiliconGraphics, and many more.  Somehow they never seemed to build the processes and staying power of IBM.

We can think of dozens of examples of companies that have created such enduring brands:  Caterpillar, UPS, GE, Procter and Gamble, Clorox, AIG, McDonald’s, Goldman Sachs, and many more.  If you take a “long term view” of stock market value, you will find that these enduring brands generate far greater returns over the longrun than many “high fliers.”

What makes thes Organizations Endure?

As we have studied these organizations, and their underlying business and talent processes, we have found that one of the most important things these organizations have in common is their ability to manage talent.  In a sense, these organizations have learned over time that they are not really “product” companies or “service companies” but rather they are “talent companies.”  They have built processes, systems, and strategies to hire, develop, manage, and coach people to build an adaptable, accountable, and value-driven organizations.

Enduring Organizations Adapt Well to Change

If you consider the biggest challenge most companies face, it is change.  Once you build a unique and value-oriented product or service, the biggest challenge you run into is the fact that the world never sits still.  Change occurs on a relentless and continuous basis:  competitors copy your product;  customers demand new capabilities;  the economy stalls or goes into a tailspin;  your market segments change and demographics shift;  and sometimes even bigger changes are taking place.  Today, for example, the environment has become a major driver of buyer behavior (more than 40% of US corporations consider the “green movement” as a fundamental threat or opportunity to their business).  Many of these changes are rapid and unpredictable.

The question we consider is not how to adapt to one of these changes in particular, but rather to learn how organizations create enduring strengths which enable them to adapt successfully.  My personal belief is that the ability to understand and adapt to change is one of the biggest strengths in these enduring organizations.  Many companies develop monopoly positions with their products and services, but they often find that these monopolies are attacked quickly. 

Consider Motorola in the cell phone industry.  Motorola invented the mobile phone, and hit a home run withMotorola the RAZR.  But the company has been unable to adapt to the relentless progress in this market, losing market share again and again to Nokia, Apple, Samsung, and other competitors.  Enduring organizations find ways to continuously move “up the value ladder” by changing their products, services, and strategies.

There are dozens of examples of such organizations:  consider UPS, which originally was a company that delivered messages via horseback.  It moved into automotive transportation, then global shipping, and now global business logistics — all with the same focus on business productivity and value.   UPS has a strong, end-to-end focus on hiring, developing, and managing the right talent.  They have well-developed, clear competency model for success and they reinforce it throughout their people processes.

What we find is this:  These companies do not define themselves by their products and services, but rather by their talent.  It is their “talent machine” that enables them to adapt their strategies, move up the value ladder, and execute well in the face of continuous and relentless change in their markets.

The Five Essential Elements

It’s not enough to say that these companies have “good people strategies” or “strong cultures.”  They actually have much more.

When we dissect what makes these companies endure, we have found five keys — each of which requires a strong focus on talent.  We call these five keys the “five essentials” – they are business essentials which are supported by strong talent management.   Your job as an HR professional is to understand how to implement these five essentials in unique and long-lasting ways.

As I prepare to present this information at our upcoming research conference (IMPACT 2008:  The Business of Talent®), let me briefly highlight them here.   We will be publishing more detail and examples in months to come:

  • Strategy:  The first essential is strategy.  Enduring organizations have developed strong and focused value-add strategies for their markets.  They clearly understand how they add value.  There are three core value add strategies in any market:  product innovation, customer intimacy, and low-cost production.  Enduring organizations select a strategy and stick with it – enhancing it over time.  They codify these strategies into their talent management processes:  who they hire, how they manage people, who they promote, and how people grow in the organization. 

    For example, in technology, one could argue that Apple is the product innovator, IBM is the customer intimacy company, and Dell is the low-cost producer.  Each must staff, manage, and incent people differently because of these different value strategies.  

  • Management:  The second essential is management.  Enduring organizations focus on alignment, transparency, accountability, and trust.  Management is all about making sure people know what to do every day — and that they have the tools and support to be successful.  Management must be tied directly to strategy, hiring the right people and incenting people to do things which support the strategy.  HR professionals can and must play a major role in building these management systems, and we have many examples of amazing management processes which drive these enduring organizations. 

    For example, our research shows that organizations which build strong, strategic competencies from which to manage their employees have almost 4X the return on the ability to build a high performance culture.  We also know that high performing companies in different industries manage people very differently (e.g. financial services companies focus much more heavily on service and quality;  technology companies focus much more heavily on innovation and engineering.)Your job in HR is to help the organization craft and implement its management process, and rigorously and extensively train and coach managers to use the process.  

  • Leadership:  Third, and perhaps most importantly today, enduring organizations have an amazing focus on leadership.  (The #1 issue on the minds of corporate leaders today is strengthening their leadership pipeline.)  Enduring organizations understand the core competencies of their leaders, they vigorously identify and build new leaders, and they move leaders throughout the business.  They know that only by hiring and developing excellent leaders can they build and develop excellent employees.  They understand the need for continuous focus on succession management, as both a tool for growth and a way to hedge against business risk.   

    Here our research clearly shows that organizations at level 4 in our leadership maturity model are generating almost 6-fold higher returns on business outcomes and bench-strength.  Unfortunatley fewer than 10% of organizations have reached this level today, but we see tremendous focus on improving this critical area and we are committed to helping others understand best-practices here. 
     

  • Learning:  The fourth essential element is learning.  Enduring organizations realize that organizational learning is a fundamental to success.  These companies spend 1.5-2.5X more on training per employee, and they focus on a wide variety of strategies to build organizational learning:  career development, coaching, mentoring, as well as strong skills development.  Most importantly they implement a “learning culture” which encourages risk-taking, innovation, and continuous improvement.

    An interesting example:  during the 10 years that I worked at IBM I was involved in the rollout of some of the biggest flops of the decade.  There was the IBM PC Junior, the RT-PC, the 9370 Minicomputer, and many more.  These products, often the results of years of R&D, were announced with flourish and fanfare.  When they failed, IBM was clearly disappointed.  But the leaders of these products were not fired or demoted — rather they were forced to “learn from these mistakes” and go on and make them better.  The PC Junior became the IBM Thinkpad.  The RTPC became the IBM RISC System/6000 and the SP2 supercomputer.  And the 9370 eventually re-emerged as a family of high powered mid-sized mainframes which are still in the market today.  This is an example of an organization that really learns.   

  • Systems:  Finally, enduring organizations build systems.  Systems (processes, not software systems) create scale, consistency, and provide information for decision-making.  These systems become the backbone of the organization and they create a focus on quality and continous improvement.My best example here is McDonald’s. One may believe that McDonald’s is a hamburger company, or perhaps a fast-food company.  But actually, if you truly understand how McDonald’s works, you would realize that this company is an amazing combination of systems.   More on this later.

We will be discussing these topics in detail at our upcoming research conference, and giving you examples of how enduring organizations implement these solutions for business value. 

The Role of HR and Talent Management

Today’s “talent management” is all about implementing these five elements.  Talent management is not an “HR strategy” – but rather it is a “business strategy.”   The talent processes and systems which HR managers implement (employment branding, recruiting, competency assessment, performance management, succession management, leadership development, career development, and on) directly support these five elements.  HR leaders are the architects and craftsmen of the systems and processes which create such enduring organizations.  Business leaders should think about “building a talent engine” in support of the organization’s goals, rather than just building products and selling them to customers.

Jack Welch, ex-CEO of GE, put it well.  He stated that the #2 most important person after the CEO is the VP of HR.  Why?  Because the VP of HR identifies and develops the pipeline of leaders which will run GE in a profitable and adaptable way.

Your job as an HR or L&D professional is to take your skills and expertise and apply it in these five areas, remembering that as you craft expert solutions, the implementation of these solutions will be performed by the business leaders, managers, and employees in your organization.  In a sense you are the “master carpenter” who builds a long-lasting house.  The house you are building will be inhabited by executives, managers, and employees – not only you – and you have been entrusted with a large part of its design.  And your role is dynamic:  you must monitor the house to make sure it is continually being enhanced and improved as needed.

This is what we call The Business of Talent®, and it is the focus of our research.  I hope these thoughts are helpful and welcome your feedback.

 

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Talent Management in Financial Services – Impact of the Slowdown

Posted on April 1, 2008. Filed under: Content Development, Enterprise Learning, HR Systems, Learning 2.0, Succession Planning, Talent Management | Tags: , , , , |

This week I had a call with five financial services clients to understand the impact of the economic slowdown on their learning, talent, and systems investments.  How are HR, talent strategies, and enterprise learning investments being affected by the credit crunch and slowdown in the US financial system? 

(The clients included companies in banking and insurance: TD Bank Financial Group, First Horizon National Corporation, BNY Mellon Asset Management, Manulife Financial, and Wachovia.)

I was encouraged to hear that none of these financial institutions is dramatically cutting its talent investments.  In fact, each of these executives told me that their top executives continue to understand the need to maintain investments in people as the business slows.  Most of these companies are, however,  reducing expenses, including a freeze on travel and cutting back on large meetings and conferences.  Some systems budgets are being pushed back.  But for all these companies, existing staff and program investments are continuing.

A common theme expressed by the group is that these cycles have happened before, and that in every case where strategic talent investments were cut, the impact was dramatically negative.  One executive mentioned that during the last slowdown, his company completely eliminated its leadership development program.  As a result of this decision, management problems, employee dissatisfaction, and retention problems quickly grew.  Today, four years later, the organization continues to rebuild the program.  His comment:  “We learned our lesson, and we will never do that again.”

Another trend to note is that technology investments continue.  In fact, every one of these companies told us that they are working harder than ever to advance and improve the impact of their existing HR and learning technologies.  Several of these organizations have large task forces in place (which include IT, HR, L&D, security, and compliance) to develop integrated strategies for online learning and workforce performance support.  (This is completely consistent with our latest research on e-learning, and will be a major topic for our IMPACT 2008:  The Business of Talent® Research Conference.) 

Bottom line:  Well run companies understand that business cycles are inevitable.  (The financial services industry, which suffers economic downturns as hard as any industry, is one of the most sophisticated industries in talent management.)  They have learned that talent and learning investments take years to develop, and these processes and systems create long term sustaining value. 

As one Senior VP of HR put it, “your job is to prevent problems before they occur” — implying that talent and learning programs must be built for the long term.  Even when business slows, the business must still hire, promote, and reward high performers.  These successful financial services firms are following this strategy.

For more information on this topic, please read  Five Talent Management Strategies for a Business Downturn, published in February.

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Wow. Performance Management Really Matters in Retail.

Posted on December 13, 2007. Filed under: Performance Management, Succession Planning | Tags: , , , , , , , , |

As we continue to study best-practices in talent management and talk with many organizations, we see more and more evidence that top-down goal alignment and transparency truly do drive business results. 

For example, we recently had an in-depth discussion with the Vice-President of HR at Bon-Ton Stores, a highly-successful mid-sized retailer which operates among the higher performing retailers in financial performance.  Bon-Ton has grown from 35 to 287 stores with more than $3.7 Billion in revenues in the last five years.  The company acquired several set of high-end stores from Saks and has integrated the merchandising, distribution, and retail operations with great success.

As we discussed the organization’s keys to success, the VP of HR told us that the CEO has always paid very close attention to the development of its people.  In fact, the company has developed a comprehensive, competency-based approach to recruiting, management, leadership development, and succession planning which is far more integrated than any other retailer we have spoken with. 

The company prides itself on transparency (the 16 core competencies are broadly available), goal alignment, and training.  Each year a set of “critical roles” are identified (there are 87 as of now), and succession plans are scrutinized for these positions.  (Research members can read more about Bon-Ton and its competency model in our research library.)

After this detailed discussion I went back to our High Impact Talent Management benchmarking database and reviewed our findings about retailers.  Some astounding facts came up:

Retail organizations with enterprise-wide performance management processes which are standardized and open (transparent) (approximately 21% of organizations in our database) are 47% more effective at delivering a high-performance culture than those without formal programs, and 71% more effective than those with no performance management processes at all.

All I can say is “wow.”   The retail industry is one of the most difficult of all to manage:  high turnover, rapid product cycles, and low margins.  Yet here, as in other industries, sound people-management processes really pay off.  When we refer to “transparency,” we refer to the process of clearly communicating company values, goals, and individual sales objectives across all employees, stores, districts, regions, and divisions.  This is what drives Bon-Ton’s success – and many other retailers as well.

If you have not yet figured out why performance management should be a transparent, organization-wide process, you should.  Read our High Impact Talent Management® research for more details.

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MetLife’s Multi-Generational Workforce

Posted on November 11, 2007. Filed under: Content Development, Enterprise Learning, Sourcing and Recruiting, Succession Planning, Talent Management, Talent Strategy |

I recently completed a meeting with 200 of the top HR executives at MetLife, one of the most successful and sustainable global insurance companies.  MetLife’s Vice-President of People, Deb Capolarello, is developing an integrated talent management strategy to help the organization integrate all its well-established HR processes into business solutions. 

One of the problems MetLife faces, a problem similar to most older global companies, is the rapid change in workforce demographics.  To give you a sense of the challenge, today at MetLife 14% of its workforce are Millenials (20’s) and 35% are Generation-Xers (late 20’s to early 30’s).  This transition is continuing to change quickly – with as many as 23% of the company’s employees eligible for retirement in 5 years and 40% in 10 years.

This workforce population is very common in large organizations today – HR must serve the needs of four generations:  Millenials, Generation X workers, Baby Boomers, and the Traditional or Silent Generation.  Organizations like MetLife are working hard to build learning and HR processes that appeal to these younger workers, including virtual workplaces, online community tools, flexible work hours, and career planning programs.  Most importantly of all, organizations must identify these talent profiles across the organization and create business-specific solutions – some organizations at MetLife are more than 80% young workers, and others are still dominated by older workers.

Bottom line .. the multi-generational workforce is changing much of what HR will do:  how learning is developed, how careers are managed, how managers coach employees, how employees interact with each other, and most of all, how HR and other internal systems are used.

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The Death of the Performance Appraisal – Redefining Performance Management

Posted on September 15, 2007. Filed under: HR Systems, Performance Management, Succession Planning |

Should we kill the performance appraisal process? 

Over the last few years as we have studied the market for performance management systems, we have talked with dozens of HR executives and managers about their performance management process.  In our discussions we find that organizations struggle mightily with the right way to craft the precise process which will best reflect their organization’s goals, culture, and desired management style.  Performance management systems, which support this process, often constrain or rush these decisions, forcing organizations to design a process around the system features and capabilities.

I believe the rapid growth of these systems is creating quite a stress on this market, and in fact we believe a major shift is taking place.  Performance management systems (you know the players) revolve around automating the seven core processes which companies use:  goal development, goal alignment, self-assessment, manager assessment, 360 assessment, competency development, and development planning.  But they don’t really help organizations decide how the process itself will work, which is ultimately the most important issue of all.

Consider what performance management is designed to do.  The principle of such a business process has three goals: 

  1. Employee evaluation:  First, to create standardized and equitable ratings and rankings to facilitate compensation decisions, promotions, succession planning, and the ability to coach people out of the business.
  2. Alignment:  Second, to create consistent goals which align employees with managers and business units and align these goals with the organization’s overall priorities.  These goals also help employees themselves stay focused.
  3. Coaching and development:  Third, and perhaps most importantly (which our research supports), this process enables managers and other employees to provide coaching and development in a structured process which can be supported by the L&D organization, leadership development, and other processes in the organization.

Which of these is the most important and how do you design a process that works?  We all know that most performance appraisals do not work – our research shows that onlye 35% of organizations have such an enteprise-wide process and among these fewer than 40% of employees find the process valuable and fewer than 45% of HR managers find the process valuable.  I cannot remember more than one performance appraisal in my entire career (30+ years) which was valuable.

Well one important fact to consider:  our High Impact Talent Management® research found that in fact the business process with the highest overall business impact is coaching.  Consider the following findings from this research (more than 800 large organizations participated):

  1. By far the highest-impact process in organizations is coaching.  Coaching generated a 150% greater return than performance assessment, for example, and almost a 200% greater return than “pay-for-performance” processes.  We will explain what this means below. 
  2. Developing high-value, unique, and job-aligned competencies which are maintained regularly was the second ranked high-impact process in performance management.  This process of identifying critical competencies and using these competencies to assess and improve performance clearly has very high value.
  3. Goal development and goal alignment formed the third highest impact process, supporting the need to gain agreement on work plans and align employees with organizational goals.
  4. The fourth highest-impact process in performance management was development planning – creating clear and consistent development plans (this was almost tied with goal development in fact).
  5. Performance assessment and linking compensation to performance ratings showed returns as well, but far below the other four above.

Unfortunately, most companies focus on the bottom of these – assessment and linkage to compensation.  Why?  Because this is a compliance-related issue and it is the “common wisdom.”  Well our research (and my opinion) shows that in fact the other four are far more important if you want the process to drive business impact.

 

Consider the following:  performance management is management.  It is not an annual process, it sets the stage for every management interaction which takes place in your organization.  Whatever process you design will reflect itself in the behaviors and activities of leaders, managers, and employees.

 

GE, for example, which popularized the concept of the 20/70/10 model, establishes strict rules to “fire the bottom 10%” in every workgroup.  This seems to work for GE, which is an enormous, highly decentralized conglomerate, but does it work for your company in your industry?  I would venture to say no.  What works for GE is likely not to work in your company, unless you are in a very similar business size, structure, and industry as GE.

 

Rather, our research clearly shows that there is new approach needed – rather than use the “competitive evaluation” model of performance management (where managers and employees are forced to rank and rate people), we find organizations are shifting to what we call the “coaching and development” model of performance management (where leaders and managers are trained to assess people against competencies, identify strengths and weaknesses, and take actions to improve performance).  We have written extensively about the concept of “manager as coach” – and I firmly believe this is by far the best model in nearly every organization I speak with.

 

How do you do this?  What does it mean?  Well we are developing an in-depth bulletin on this topic, but the main message now is that organizations should design a process which makes evaluation the “last” thing you do, not the “first.” 

 

Performance Management Models

Fig 1:  The Two Models for Performance Management

 

 

To look at some of the implementation strategies, consider the following.

Competitive Evaluation Model

Coaching and Development Model

Primary Focus Evaluation, ranking, and rating of individuals Alignment and improvement of individual performance
Assessment Focus Evaluation, Rating, and Ranking among Peers, using grids and numeric ratings Identification of Strengths and Weaknesses as an individual in a job, against known strategic competencies
Competencies Rarely used or used as a standard list for assessment of potential Used to assess strengths and weaknesses, assess potential, and create developmental activities, and built around unique organizational competencies
Goal of Performance Management To develop equitable ratings, reduce compensation expense, and differentiate high performers To improve overall workforce performance, increase effectiveness of individuals, improve organizational alignment, and increase engagement and retention
Benefits of this model Clear distinction between employees, ability to “weed out” low performers, ability to reduce compensation expense and focus dollars on high perfomers, ability to create a high performing culture and a meritocracy Improved overall performance and leadership, increased alignment and teamwork, more flexibility in the workforce, and likely improved employee engagement and retention
Potential downside of this approach May create unease and competition among employees, demands that managers be highly trained in assessment May leave out business driven goals and focus on business outcomes
Organizations that prefer this approach Heavy focus on bottom-line results, high-growth organizations with rapid expansion, turnaround situations where entitlement has created low levels of engagement Organizations going through transformation and change, organizations in highly competitive environments and tight labor markets, organizations which have suffered through multiple business cycles

 A final point on this topic.  Do not let the performance management system (whether it be Authoria, SuccessFactors, Halogen, or any other tool) drive your decisions about how you want managers to manage.  These systems are still in their early stages, and most of them were built to automate the forms and data entry part of performance management.  Only some of the newest systems (Taleo’s and Halogen’s show great promise in this regard) are able to facilitate and assist in the coaching and development process.

We look forward to hearing from you .. we have many case studies to support this research and we would love to hear about your experiences with performance management as an HR manager, a line manager, or an employee… please contact us at research@bersin.com .

 

 

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High Impact Talent Management: Top 22 High-Impact Processes

Posted on July 17, 2007. Filed under: Enterprise Learning, HR Systems, Leadership Development, Organization & Governance, Performance Management, Sourcing and Recruiting, Succession Planning, Talent Management, Talent Strategy, Workforce Planning |

The Top 22 Business Processes which Drive Business Impact


In 2007 we conducted one of the largest-ever studies of corporate talent management:  we interviewed and surveyed more than 750 corporations to gain an understanding of their business problems, their talent challenges, and their levels of maturity and sophistication in 62 different talent management processes.

This research was designed to do three things:  first, gain a clear understanding of how corporate talent management is defined;  second to understand the trends and directions in implementing these processes;  and third, most importantly, to see how talent management drives business results.

The research was extremely successful and also very enlightening.  Readers who would like to get a good understanding of the findings should read the executive summary

The full 300+ page report is available at www.bersin.com/hitm or by joining our research membership program.

The most interesting, and perhaps controversial part of the research, however is the following.  When we looked at the 62 different things which organizations can do to improve their talent processes (the list is available in the report), we found that there were 22 in particular which drove particularly high impact.  These “top 22” as we call them represent the “priority list” for HR executives, managers, and business leaders to consider when they decide they want to “do a better job of managing and developing talent.”   In other words, they tell you precisely where to focus.

When we looked at the final results, the findings were both obvious and subtle at the same time.  While many books and articles have been written about the value of various HR processes, we consider this list “modern,” “unbiased,” and “scientific.”  We have not applied any personal opinions to this list – it was generated from the research statistics and analysis.  (For a description of the methodology, please read the executive summary.)

Top 22 High Impact Talent Management Processes

Fig 1:  Top 22 High Impact Talent Management Processes

Here is the list.  Each process is clearly described, and color coded into process areas (performance management, sourcing & recruiting, workforce planning, competency management, learning & development, and leadership development).  Let me spend some time explaining some of the startling findings here:

1.  The #1 process organizations should focus on is coaching.  Coaching?  Is that really a talent management initiative?  Yes it is.  Organizations with strong coaching cultures, programs, and support structures develop much higher levels of engagement, leadership, flexibility, and performance.  For more details on coaching, read our article “Coaching, a new imperative for Leadership.”  This article explains why this process is so hard-hitting and what you can do to develop a better coaching program in your company.
2.  Workforce planning must become far more scientific and must identify skills gaps.  Skills-based workforce planning processes (#2 and #3) are critical today.  Most organizations have a workforce planning function, but it often consists of little more than a collection of headcount requirements for each business unit.  Organizations that succeed in today’s “tight talent” market must gain a deep understanding of their skills gaps.  They must understand these gaps among the “mission-critical” jobs first, and they must have visibility into the future of these gaps. 

One of our research clients embarked on a 9 month study of workforce skills gaps and factored in retirements, attrition, new project demands, and known demographic shifts only to find that in order to make their business plan for the next 5 years they needed to find 45,000 new engineers.  This startling finding led them to a whole series of initiatives to change their sourcing, internal career development, and job placement strategies – including moving job to people and not vice-versa.

3.  Competency management is now fundamental.  While we do not recommend that organizations try to build enterprise-wide models up front, this research (and much of our other research) shows clearly that competency management is the “currency” for talent processes and decisions.  Without a fundamental understanding of the “secret sauce” which makes your organization succeed, much of your talent decisions sit on quicksand.  Well-defined competencies help you set goals, appraise people, identify high-potentials, create development plans, identify leaders, and develop the leadership pipeline.  Seven of the top 22 processes fell into this area.

4.  Performance management is a heavy hitter.  But high-impact performance management is not what you think.  While annual appraisals are important, they are far less important than coaching, goal-setting, goal alignment, and development planning.  In fact, performance appraisal and linkage to compensation is less important than coaching, goal-setting, and development planning. 

Our research clearly shows the following:  performance management is “management.”  It takes place every day, not once or twice a year.  It describes the way that individuals interact with their immediate managers, their executives, and their work teams.  The appraisal is no more than a single point in this wide continuum of activities.  By the way, most mature organizations realize a simple fact:  all we really have in business is management.  Your company is not successful because of its products – it is successful because of its people.  How they are managed is the backbone of success.

5.   Sourcing and recruiting is becoming a science.  In today’s labor market it is harder and harder to meet hiring targets.  We estimate that over the next 15 years there will be more than 10 million jobs available than there are ready skilled people.  This means several things:  you have to do a far better job of targeting, sourcing, assessing, recruiting, and marketing to the right candidates.  Recruiting has moved from a “purchasing” function to a “sales and marketing” function.

Moreover, there are a wide variety of new tools now available to improve the efficiency and effectiveness of talent acquisition:  exciting new assessment systems, fine-grained job boards and sourcing sites, innovative university recruiting programs, and new competitive intelligence approaches.  In addition, the days of “career development” programs are back.  Organizations must now invest in training and development programs which take the “unrefined new hires” and move them into key positions throughout their career.  Most of the learning & development managers we speak with are rebuilding a wide variety of “talent development” programs to develop engineers, sales people, manufacturing managers, and executives.

6.  Finally, a surprising fact.  HR systems, for all their excitement, don’t add as much value as people think.  In fact, in our ranked list of 62 processes which drive impact. HR systems ranked in the mid 50s.  There are more than 50 more valuable things to focus on than the selection and implementation of an “applicant tracking system” or a “talent management suite.”

This is not to say that automation is not important – it is.  But take it for what it is – automation.  HR systems do not “create processes” – they automate processes which you must design.  A few interesting facts:  organizations that have automated performance management software are 14% more effective than those with paper processes.  But organizations with in-house developed systems are 9% more effective than those with vendor solutions.  Vendor software, then, actually reduces overall impact for the first 2-3 years.  Only after 2.4 years do vendor solutions “catch up” to internally developed systems.

What this illustrates is that software systems which automate well-designed, well-implemented processes (typically home-grown systems) add value.  Software systems which automate non-existing processes or poorly defined processes simply create overhead.  Do not fall into the trap of thinking that your talent management “strategy” is centered around buying software.  Your strategy should focus on implementing business-driven, carefully governed processes which focus in the 22 areas above.  Each of these 22 processes takes years to implement.  They require a close alignment with business managers.  They require careful investments in training and change management.  Software may facilitate these processes, but it does not create them.  Do not let the next big wave of software vendors convince you otherwise.

Bottom line:  we have clearly entered a “third wave” of HR – a time when HR can add strategic value by focusing on high-value roles, solving business-specific talent problems, and helping the organization adjust to the changing workforce.

 

Evolution of HR

 

Fig 2:  The Third Wave of HR

Focus your time on three things:  First, focus on the processes and people that matter to the business.  Find the 30% of your workforce which generates 70% of your organization’s value and spend your time there.  Second, work with your business leaders to design and implement processes that drive impact, with a careful focus on change management, governance, and monitoring and maintenance.  Third, automate as much as you can, but focus on automating processes which work – not using software to drive change.

We believe that if you follow the guidance from this research you will find talent management to be a transformational, exciting, business-changing experience.  As always, we welcome your feedback and comments on this article.

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