Reviewing publicly traded companies, the study’s findings also revealed that companies are redefining the CEO role—separating it from the Chairman of the Board and often moving the former CEO into the Chair position. One advantage to such an arrangement is the deep knowledge the Chair can offer the current CEO. The disadvantage is the increased pressure on the CEO to perform well or risk being replaced.

Therein lies the main trends Booz & Company identifies: “… convergence and compression contribute to a high global churn rate among the world’s top CEOs. In 2009, CEO succession on a worldwide basis remained steady at the relatively high level of 14.3 percent, a level at which CEO turnover appears to have plateaued during the past five years” (Favaro et al 3).

Turnover and Succession Planning

Turnover occurs for a variety of reasons: corporate acquisition, dismissal, or planned departure. The study notes that the majority of turnover in North America (71%) and Japan (84%) were planned events; CEOs chose to leave or retire. The study also indicates that companies look for CEOs with previous executive experience that can offer stability and proven leadership. With such high percentages of executives willingly leaving office, the question of successful replacement arises. The answer to that question is succession planning.

While succession planning helps cultivate leadership, it can also reduce the amount of time new CEOs have to set the corporate agenda and achieve organizational change; the average time in office dropped from 8.1 to 6.3 years from 2000 to 2009 (Favaro et al 7).

If a CEO’s performance does not achieve desired results on time, a replacement is already in training. That training requires time and careful cultivation. A CEO must understand the company—its potential for growth and possible pitfalls. A CEO must build trust in order to guide the company. Trust requires time and strong relationships, so more often than not replacements come from within the company.

Strategic Alignment in Succession Planning

The study by Booz & Company provides evidence of the trends we’ve observed at Insight Strategic Concepts. Successful succession planning requires strategic alignment. “This alignment requires looking forward to the future requirements of key positions within your organization more than the past requirements. As markets rapidly change, the strategic positioning and purpose of roles and their alignment to one other to achieve strategic success requires playing out the possible scenarios, multiple strategies and overlapping requirements that identify the organizational design required to compete for the future. Most organizations do not take the time to create strategic scenarios for the future and they hire at the spur of the moment based on short-term needs versus those that await in the months ahead. This leaves organizations with a misalignment of talent and inability to make decisions in times of change and uncertainty. Taking time to create a vision and the people required to make it happen is invaluable in creating the greatest asset you can build in your organization – your people.”

How does your organization approach succession planning?

Reference

Favaro, Ken, Per-Ola Karlsson, and Gary L. Neilson. “A Decade of Convergence and Compression.” Strategy & Business Summer 2010: 2-15. http://www.booz.com/media/uploads/BoozCo-CEO-Succession-2010.pdf

Now, even five years later after Miller’s article, as Insight Strategic Concepts® helps clients align business strategy with talent management, they see first-hand how HR’s increased attention to strategic planning moves an organization forward. As HR continues to rise to the strategic challenges of keeping employees focused on the right roles for organizational success based on establishing specific and strategic key performance indicators, executives are realizing the necessity of effective people management as part of their competitive advantage.

“That is where a talent management system plays a pivotal role,” says Shelley Moore, President of Insight Strategic Concepts. In fact, Moore’s approach to strategic HR led her to develop BLOOM®, a web-based performance management system geared toward small- to mid-sized businesses.

“Miller’s article notes that large organizations are more likely than small- to mid-sized businesses to have a strategic plan,” she says. “While the results do indicate that—at least in 2006—Insight sees that changing and smaller organizations are forced to become more long-term focused in every aspect of their businesses. That is why we created BLOOM, and that is why we price it so affordably.”

BLOOM enables executives and HR to communicate business objectives, goals, initiatives and tasks across the organization. Each employee sees how his/her role contributes to the organization’s success, and each manager and executive can monitor strategic progress and status.

“Tools like this,” says Moore, “are what move HR into a solid position to focus on strategy and ensure that human resources is about much more than overseeing payroll and benefits packages—it is about the human element of human resources.”

Insight Strategic Concepts, makers of BLOOM, together with Reach360 back office solutions will again partner to provide an opportunity for area businesses people to learn from the experts.

“Product cost” is probably the most cherished sacred cow in industry. It is also the most damaging concept.

The idea is that as long as the selling price is higher than the cost of the product/service, the company is making money by producing and selling that product/service.

If that is really the case, why is it that for almost any company that loses money the reality is that for everyone of its product/services the selling price is higher than the product/service cost?

On March 24th at 8:00 AM at Elcona, Reach 360 and Insight Strategic Concepts offer you the opportunity to hear world renowned speaker Dr. Donn J. Novotny outline and explore the theory that the standard practice of cost accounting is actually Enemy #1 of Productivity.

Get more information & RSVP

The Seven Components of Talent Management

Talent management includes seven components that, when implemented strategically, combine to keep an organization on the leading edge.

Strategic Employee Planning. Developing your organizational goals and strategic plan is the first step. Next you must think about how to reach your goals and implement the plan. More specifically, you must identify the key roles and personnel who will get you there. You may already have the positions and people in place, or you may need to adjust the current structure to fill the gaps.

Talent Acquisition and Retention. Bringing new talent into your organization is important, yet equally so is recognizing and cultivating talent you already have in-house. Hiring from within your organization is more cost-effective, so when you’re working at talent pooling, remember to look internally as well as externally.

Performance Management. Aligning the right person with the right role is the heart of performance management. Its ultimate goal is to ensure that roles align with business strategy to achieve goals. It enables you to ensure that you’re aligning a talented employee with a role that suits them, develops goals for success, supports their development, and moves the organization forward.

Learning and Motivating. Semantics become important here, because learning is more than training. Learning is the acquisition of information and skills, which yields knowledge and experience. Implement learning programs that include activities and tasks that support the organization’s culture and initiatives. When employees see how their growth impacts the organization, they’ll see just how valuable their role is.

Compensation. Alignment remains the important concept. Aligning your strategic goals with incentives means recognizing employees, rewarding contributions to success, and acknowledging their value to the organization.

Career Development. This ties back to the talent retention component and the notion that hiring from within is not only an option, but often preferable. Nurture potential leaders by providing professional development tools that can advance their career.

Succession Planning. Knowing the talent within your organization is a start. Knowing the key roles essential to its success is equally vital. Which roles are critical to success? Who currently fills those roles? What happens when those positions become available? Having a plan in place means that the decisions are already made, and that the organization will continue to run smoothly if a key position must be filled quickly.

BLOOM’s Role in Talent Management

At Insight Strategic Concepts we regularly work with clients to align business strategy and talent management. BLOOM® is one way we do that. It’s a simple performance management system that provides the metrics and information managers and executives needs to make smart decisions and to keep the company moving forward.

Not All Positions Warrant Talent Pooling

Talent pooling enables you to establish a clear profile and clear expectations so that you can explore possible candidates for key positions, future positions, and positions that are often replicated in the organization.

When you’re keeping a shortlist of candidates, it’s worth the time and effort only for key positions—those that play a pivotal role in your organization’s management and strategy. It’s also important to keep in mind that the talent pool will be relatively small—and that the candidates may come from inside or outside your organization.

Five Tips for Talent Pooling

Keep an eye out. The best time to find talent is now—not when an opening is imminent or already open. When you meet someone with strong potential for fitting into your organization, engage them and keep in touch.

Align business objectives with roles. We’ve been saying it all along, and we’ll say it again: strategically aligning your organizational goals with employee expectations is the best way to ensure success. Use assessment tools to profile candidates and help assure their talents meet the needs of the organization.

Put your best foot forward. Even when you’re not actively recruiting, your interactions and presence online, in print, and in the community matter. Make sure that your website and other marketing materials sell your organization not just to your prospective and existing customers, but to prospective (and existing) employees, too.

Involve the whole organization. Explain the talent pooling philosophy to the organization and give your top performers the opportunity to recommend people they know who might be a fit. This is a great way to keep your culture intact.

Understand the progression of career paths for all key roles. The best way to anticipate the timing which candidates will be needed is to understand how employees are progressing through various career paths within the organization that connect roles as stepping stone opportunities within the organization. As long as people understand the expectations to develop and grow, there are always opportunities to shift people around in related roles and introduce new people to the organization.

Employees aren’t children with fragile egos, or if they are highly sensitive, then you need to determine whether they are the types of employees that you want to develop and manage. Employees need and deserve direct, adult feedback about their performance. They need to know how to adapt and improve, otherwise they’ll fail and eventually the organization will fail to meet its objectives, too.

Take a Systematic Approach with a Simple Performance Management System

A performance management system like BLOOM® aligns your business objectives with employee goals. It enables employees and managers to keep track of goals and performance, and it enables HR to identify top performers as well as employees who are at or below average.

The system is just part of the equation.

Obviously, you need a performance review process that addresses the right areas, which includes transparency and accountability. We touched on transparency in a September post about performance management and on accountability in several recent posts. These directly relate to treating employees as adults.

Transparency about the review process communicates a sense of trust. When you’re open about expectations, rewards, and consequences managers and employees start on the same page and are empowered to make them happen (or to take issues to HR if expectations aren’t being met).

Transparency about performance—letting an employee know their value to the organization—communicates a sense of commitment. If the employee is a top performer, let them know that they have potential and that the company will support their continued growth and will continue to have expectations. When employees know what’s expected and what rewards and opportunities do (or don’t) exist they’re empowered with knowledge to make choices about their career rather than left to guess what might be possible.

The bottom line is that achieving strategic alignment means everyone has to pull their own weight. That means employees must meet role requirements and development goals; managers must provide consistent, honest feedback; HR must support employees and managers through regular check-ins and training opportunities, and the organization must be prepared to reward top performers.

What have been effective methods for giving honest feedback that have worked for you?

Potential Pitfalls of Self-Assessments

Most employees will stay within or close to their comfort zones. They’ll use self-assessments to justify their conduct rather than change their behaviors. That’s understandable, because the thought of change can generate fear, anxiety, and insecurities—feelings that are uncomfortable. So, out of self-protection, people will stick with the status quo. They won’t change because their self-perception is skewed.

Self-perceptions can mislead managers, too, biasing them into giving higher scores if an employee has a higher self-perception than the current reality.

Comparing Self- with Peer-Assessments

In a 360 review process, peers evaluate each others’ performance. Throw a self-assessment into the mix, and you have a recipe that could separate rather than mix. Why? Rarely are self-assessments inline with the results peer evaluations. That differential—that gap—is one that the employee may subconsciously try to close because they want to be perceived as they perceive themselves.

One Page Talent Management further identifies these problems with self-assessments. They:

• Can wound an employee’s self-esteem, possibly causing them to further resist change
• Can lead the employee and manager to change the “wrong” behaviors—those that may need attention but that will have little impact on performance
• Focus on what was or is rather than what will be in the future.

Here’s What Managers Should Do

In addition to incorporating self-assessments into 360 reviews, which alone can potentially present a situation where a manager may try to avoid conflict that results from perception gaps, make sure managers can truly help an employee understand their performance based on others’ experiences and observations. The review should focus on the peer and  manager’s feedback, and the employee can then use self-assessment as a benchmark and reality check about their development gaps.

Have you ever tried a new diet or committed to a New Year’s resolution only to lose momentum a week or two in? Have you asked a friend to check in on your progress or—even better—to join you? That’s a form of peer coaching that helps with accountability, and it’s just as applicable in the office as in the gym.

The point of this type of relationship is professional growth, and while it may not be easy to open up to peers at first it will ultimately lead to feedback that employees can incorporate (or not) into their professional development plans and behaviors. As the coaching relationships continue, employees will develop closer ties and become advocates for each other. They’ll engage more readily.

Without this feedback people will withdraw and withhold, which are unhealthy behaviors for achieving growth and for courage to develop. As a result there will be passive-aggressive tendencies and lack of satisfaction with work.

Share Your Experience

Have you implemented peer coaching in your organization? What advice can you offer other leaders considering such a feedback mechanism?

If you follow our blog then you already know that we agree with much of what Marc Effron and Miriam Ort have to say in their book One Page Talent Management. The “must-do’s” in their chapter on talent reviews and succession planning is right on: managers must communicate results of a review with the employee, and they must follow up on action items.

The performance review process carries import only if it’s value is communicated from the top down. That makes it the leader’s responsibility to support the process, advocating for both the employees and the managers so that everyone understands the role reviews play in assessing the organization’s health. Employees need to know what to expect—what they should expect the manager to address in a review—and managers need to know that unmet expectations have consequences.

Expectations don’t end when the review concludes. In fact the work is just beginning because reviews should yield a concrete list of next steps in the employee’s professional development. That list goes to HR, who is then equipped with the knowledge of what a manager should be helping the employee achieve. Managers must follow up on the review to make sure the employee is moving forward, and HR should keep an eye on the manager, too, to make sure that follow-up is happening.

Monitor & Track Progress with Simple Talent Management Software

The easiest way to keep track of the review—the schedule, the results, and the progress—is to use a performance management system like BLOOM. When you complete a review, BLOOM automatically schedules the next one. It enables the employee, the manager, and HR to refer to performance expectations at any time and enables mangers and HR to log performance notes between reviews so that the employee gets frequent feedback rather than having to wait for a formal review.

The best way to understand BLOOM’s simplicity is to experience it for yourself. We’re happy to schedule a demo, or you can take a look at our screencasts (We suggest the screencast titled“Meet BLOOM” if you’ve never seen it in action.)