Based on insights and some "hard lessons" gleaned from procuring and implementing the solutions of over 20 HR Technology vendors as a global HRIS practitioner, and then moving over to the solution provider side in various executive roles, I would urge all companies evaluating HR technology vendors to ask the 5 questions below. I will explain the thinking behind each of these in subsequent blog posts.
(1) Can you provide some data on how you've executed in recent years against your product roadmap?
(2) How do you define the word 'solution'?
(3) What are the various ways that you specifically ensure customer success?
(4) Which of your product capabilities would you say are "truly game-changing" if any, and can you provide examples of customers that have experienced this type of business impact?
(5) How do you deal with a situation where a large and strategic customer requests product changes or enhancements that would likely not be applicable to -- or leveraged by -- many other customers?
Steve Goldberg
June 2012
Sunday, June 3, 2012
Tuesday, May 8, 2012
Strategic Planning: Staying Ahead of the Curve
In the 1980’s, when the words “Talent Management” were mostly heard in the offices of Hollywood agents, very few people could have predicted that Talent Management solutions would become the basis of a multi-billion dollar industry with around a dozen publicly traded companies.
The Talent Management domain itself has now evolved from largely disconnected “strategic HR” processes into well-recognized best practices for achieving Integrated Talent Management. Coinciding with that evolution, we’ve also seen increasing levels of sophistication propel the process called Workforce Planning into the realm of Strategic Workforce Planning.
Ten years ago, Workforce Planning was generally viewed as a cyclical or “as needed” exercise many large companies went through to figure out what type of skills were needed where in the organization, and how many people with necessary skill sets were required. This set of activities was rarely viewed as a core HR business process for two reasons: the lack of formalization and sophistication around the activities; and the absence of what best—or even common—industry practices looked like.
Even as recently as five years ago, only the most forward-thinking organizations were identifying a process owner for whatever ‘Workforce Planning’ was deemed to entail. Fast forward to today, and there are at least four networking groups on LinkedIn that connect workforce planning professionals with a total of 8,000 members between them.
Despite this emergence of Workforce Planning as a core HR or Talent Management business process, and the universal recognition of its associated business benefits, effectiveness at Workforce Planning continues to elude many organizations. This should be no surprise. After all, forecasting anything that has many moving parts, unknowns and factors outside one’s control is a very arduous task. Moreover, HR departments, where ownership of Workforce Planning commonly resides, are taxed with just keeping up with current business. Further compounding the challenge, highly engaging and sophisticated tools for enabling Workforce Planning and modeling have only recently become available.
There is perhaps another interesting dynamic operating here that makes Workforce Planning success fairly elusive. It seems modern day Workforce Planning or Strategic Workforce Planning is now rich enough in complexity and depth to now be appropriately “unpacked” into separate sub-processes—each of which may have more relevance to the organization than the traditionally defined ‘Workforce Planning’ which tends to focus on very long term plans.
An example of one of those sub-processes that is earning more attention in Talent Management circles is Organizational Planning, largely because Organizational Planning aims to translate business strategy into near-term structural plans; and long-term workforce plans into specific actions. The Organizational Planning process is an important and necessary complement to the long term forecasting process, and has a higher impact on near term results.
According to the newly-released HCI report “Creating a Better Plan: Connecting Business Strategy, Structure and Talent,” strategic planners were 31% more prepared for the recent economic recession than those organizations that did not have an effective organizational plan (what the study calls “Reluctant Planners”). It also found large gaps between organizations that were strategic planners vs. reluctant planners when it came to employee engagement, profitability, and the agility needed to pursue new business opportunities. The HCI study concluded that “Organizations that master these disciplines are simply more agile, and thus more able to quickly transform and adapt when faced with any major change.”
As the Talent Management landscape and business climate overall continue to forge ahead amid lots of uncertainty, an organizations’ ability to adapt to change quickly and efficiently is not an option. Having a strategic plan in place – including a corresponding strategic workforce plan—enables organizations to not only weather upcoming storms, but also prepare for organizational growth while providing increasingly demanded transparency.
Steve Goldberg
May 2012
The Talent Management domain itself has now evolved from largely disconnected “strategic HR” processes into well-recognized best practices for achieving Integrated Talent Management. Coinciding with that evolution, we’ve also seen increasing levels of sophistication propel the process called Workforce Planning into the realm of Strategic Workforce Planning.
Ten years ago, Workforce Planning was generally viewed as a cyclical or “as needed” exercise many large companies went through to figure out what type of skills were needed where in the organization, and how many people with necessary skill sets were required. This set of activities was rarely viewed as a core HR business process for two reasons: the lack of formalization and sophistication around the activities; and the absence of what best—or even common—industry practices looked like.
Even as recently as five years ago, only the most forward-thinking organizations were identifying a process owner for whatever ‘Workforce Planning’ was deemed to entail. Fast forward to today, and there are at least four networking groups on LinkedIn that connect workforce planning professionals with a total of 8,000 members between them.
Despite this emergence of Workforce Planning as a core HR or Talent Management business process, and the universal recognition of its associated business benefits, effectiveness at Workforce Planning continues to elude many organizations. This should be no surprise. After all, forecasting anything that has many moving parts, unknowns and factors outside one’s control is a very arduous task. Moreover, HR departments, where ownership of Workforce Planning commonly resides, are taxed with just keeping up with current business. Further compounding the challenge, highly engaging and sophisticated tools for enabling Workforce Planning and modeling have only recently become available.
There is perhaps another interesting dynamic operating here that makes Workforce Planning success fairly elusive. It seems modern day Workforce Planning or Strategic Workforce Planning is now rich enough in complexity and depth to now be appropriately “unpacked” into separate sub-processes—each of which may have more relevance to the organization than the traditionally defined ‘Workforce Planning’ which tends to focus on very long term plans.
An example of one of those sub-processes that is earning more attention in Talent Management circles is Organizational Planning, largely because Organizational Planning aims to translate business strategy into near-term structural plans; and long-term workforce plans into specific actions. The Organizational Planning process is an important and necessary complement to the long term forecasting process, and has a higher impact on near term results.
According to the newly-released HCI report “Creating a Better Plan: Connecting Business Strategy, Structure and Talent,” strategic planners were 31% more prepared for the recent economic recession than those organizations that did not have an effective organizational plan (what the study calls “Reluctant Planners”). It also found large gaps between organizations that were strategic planners vs. reluctant planners when it came to employee engagement, profitability, and the agility needed to pursue new business opportunities. The HCI study concluded that “Organizations that master these disciplines are simply more agile, and thus more able to quickly transform and adapt when faced with any major change.”
As the Talent Management landscape and business climate overall continue to forge ahead amid lots of uncertainty, an organizations’ ability to adapt to change quickly and efficiently is not an option. Having a strategic plan in place – including a corresponding strategic workforce plan—enables organizations to not only weather upcoming storms, but also prepare for organizational growth while providing increasingly demanded transparency.
Steve Goldberg
May 2012
Sunday, April 15, 2012
A Dozen “Value-Inhibitors” to be AVOIDED in the “HR-M&A” Arena
Based on experiences leading the HR aspects of numerous high-profile M&A’s (e.g., Swiss Bank Corp’s acquisition and integration of SG Warburg and Dillon Read, Simon & Schuster’s acquisition of Macmillan Publishing, over 50 smaller acquisitions within Wayne Huizenga’s portfolio of companies, etc.), here are a dozen potential value-inhibitors that should be given focused attention during pre and post-closing due diligence and subsequent business integration --- so that they are clearly avoided.
For a working definition, let’s view HR-M&A as a set of formal, well-developed processes and tools for proactively managing the people-related risks and opportunities inherent in M&A transactions. These human capital risks and opportunities are now universally viewed as the major determinants in whether M&A deals succeed, under-perform or outright fail in the eyes of leadership and shareholders.
During due diligence / before business integration phase
1. Not being quick to lock-in key employees / value contributors … and all the attendant replacement costs as a result; also not properly incenting employees with key knowledge or customer relationships to stay for at least a transition period
2. Only doing basic due diligence on key employees being considered for significant roles … ideally, advanced human capital due diligence should include assessing degree of commitment, cultural fit, potential retention risk, personal integrity yellow flags, possibly exaggerated career accomplishments and impacts, etc.
3. Unrealistic commitments or pronouncements that “nothing will change”
4. Inadequate reserves and provisions for HR-related risks that were not discovered or improperly evaluated; e.g., Comp and Benefits-related risks
5. Inadequate or ineffective financial accounting for (likely underestimated) integration costs
During integration planning and execution
6. Not being quick about combining talent acquisition / recruiting pipelines as well as succession planning efforts ... and combining them using the same success profile criteria
7. Funding redundant or non-integrated organizational units, HR systems and processes, etc.
8. Making decisions on which HR technology platforms to retain or phase-out based on (a) comparative investments made to-date or (b) how “rooted” the systems are due to multiple integrations with other corporate systems … as opposed to which platforms are being leveraged more and driving value-creation, or are more aligned with business plans and priorities of the emerging entity
9. Productivity dips and/or customer service downturns due to unclear communications about job security, compensation and other “me” issues
10. Productivity dips and/or customer service downturns due to lack of speed and efficiency in the integration process
11. Continuation of incompatible HR policies and plans between the two organizations
12. Selection of inappropriate levels of employee benefits for the industry and/or desired culture
Steven Goldberg
April 2012
For a working definition, let’s view HR-M&A as a set of formal, well-developed processes and tools for proactively managing the people-related risks and opportunities inherent in M&A transactions. These human capital risks and opportunities are now universally viewed as the major determinants in whether M&A deals succeed, under-perform or outright fail in the eyes of leadership and shareholders.
During due diligence / before business integration phase
1. Not being quick to lock-in key employees / value contributors … and all the attendant replacement costs as a result; also not properly incenting employees with key knowledge or customer relationships to stay for at least a transition period
2. Only doing basic due diligence on key employees being considered for significant roles … ideally, advanced human capital due diligence should include assessing degree of commitment, cultural fit, potential retention risk, personal integrity yellow flags, possibly exaggerated career accomplishments and impacts, etc.
3. Unrealistic commitments or pronouncements that “nothing will change”
4. Inadequate reserves and provisions for HR-related risks that were not discovered or improperly evaluated; e.g., Comp and Benefits-related risks
5. Inadequate or ineffective financial accounting for (likely underestimated) integration costs
During integration planning and execution
6. Not being quick about combining talent acquisition / recruiting pipelines as well as succession planning efforts ... and combining them using the same success profile criteria
7. Funding redundant or non-integrated organizational units, HR systems and processes, etc.
8. Making decisions on which HR technology platforms to retain or phase-out based on (a) comparative investments made to-date or (b) how “rooted” the systems are due to multiple integrations with other corporate systems … as opposed to which platforms are being leveraged more and driving value-creation, or are more aligned with business plans and priorities of the emerging entity
9. Productivity dips and/or customer service downturns due to unclear communications about job security, compensation and other “me” issues
10. Productivity dips and/or customer service downturns due to lack of speed and efficiency in the integration process
11. Continuation of incompatible HR policies and plans between the two organizations
12. Selection of inappropriate levels of employee benefits for the industry and/or desired culture
Steven Goldberg
April 2012
Tuesday, March 27, 2012
Digitization, Commoditization and Aggressive Land-Grabbing … 3 Cautionary Dynamics Observed in the HR Solutions & Services Arena
As a global buyer/practitioner and implementer of leading-edge HR solutions and services in the 80’s and 90’s, I had an opportunity to observe some interesting dynamics around which elements typically led to successful initiatives and sustained customer satisfaction. Then, as a global HR solutions and services vendor executive and advisor during the last decade, I had a further opportunity to validate some of those observations made on the other side of the desk – or, in some cases, rethink them.
I’ve written articles in the past about a concept called Total Realized Value (“TRV”), a metric I created which highlighted dependencies or inhibitors to achieving maximum business value from an HR solution/service implementation. A “TRV” model assessed the degree to which those factors were present. I’ve also blogged about key aspects of HR technology initiatives which should never be short-changed.
http://hrtechtruth.blogspot.com/2010/05/20-things-you-should-never-short-change.html
Obviously, a customer’s unique business context always plays a significant if not primary role in that customer’s ultimate success and satisfaction with a solution and its providing vendor. For example: Are there concurrent initiatives in-progress which compete for the same project resources? Has an optimal talent management and HR service delivery strategy been clearly defined and implemented before investing in new technology and/or services to help achieve that strategy? Is change management (planning and execution) a core and foundational component within the HR initiative’s rollout?
In this blog post, I’m highlighting 3 dynamics observed in the HR solutions and services arena over many years and from very different vantage points … dynamics which seem to have some correlation with customer success and satisfaction.
1. Digitization of key HR information is not the total answer – and can create a false sense of being the answer.
As one example, let’s look at the background checking / employment screening industry …
Background checking based solely upon accessing public databases (i.e., digitized information) can potentially result in major issues in terms of timeliness, completeness, and accuracy of the information. As an example, the criminal arrest and court records in a vendor’s database may not go back far enough, and most vendors update these records monthly at best. As a result, a job applicant’s most recent criminal offenses are the least likely to come up in a database search used for employment screening purposes. Criminal database searches should therefore indicate to a background checking associate or researcher where else to look, what potentially conflicting information to reconcile and resolve, etc.
Case in point: A state audit in Texas revealed that while Texas law requires courts and prosecutors to submit criminal arrest information to the state within 30 days of receiving it, prosecutors and courts were failing to submit disposition records on about one of every four arrests. So in considering something as seemingly straightforward as a background check service provider -- or perhaps moving upstream in business value to a consulting/advisory firm offering more Advanced Due Diligence services (e.g., on key executives, potential suppliers or business partners, M&A targets, etc.), the first “success / satisfaction dynamic” that I want to underscore is the following:
Over-reliance on digitized information to the point of eliminating human factors such as judgment, critical thinking and customer advocacy is, VERY simply put, a bad idea.
2. Increased commoditization within an HR solutions / services market niche should be a yellow flag to customer buyers.
Let’s once again use the background checking / employment screening industry and how it has evolved to showcase how commoditization creates both benefits, but also risks for customer buyers. When major sources of differentiation get blurred to the point of viewing the services provided in an industry as equal or comparable … thereby making ‘price’ and ‘size or perceived stability’ the major grounds on which to select vendor partners, market commoditization has clearly taken place.
The major benefit to customers in a commoditized services market is clearly lower prices, not immediately, but eventually. The forces resulting in lower prices are arguably twofold: downward price pressure from both customers and vendor competitors; but also the changes vendors have to make to remain profitable with lower prices. Those changes are where increased business risk and lower satisfaction for customers potentially arises.
Three of the major changes solutions / services providers make to remain profitable amid downward price pressures – changes which are very inter-related:
(a) Automate as much as possible relative to providing information
(b) Reduce the number of people involved in service delivery (i.e., convert to a lower-touch delivery model), and
(c) Standardize solutions and services to the maximum extent possible
So, the second “success / satisfaction” dynamic: Over-reliance on automation, lower-touch service delivery models and standardized solution concepts (‘one size fits all’ solutions which may not allow for different customer needs) is, VERY simply put, a bad idea. One other point that ties together these first two observations: “If it can be totally digitized, it can usually be totally commoditized.”
3. The third success / satisfaction dynamic is another caution for buyers and implementers of HR solutions and services: Beware of HR solution / service providers that show signs of an “aggressive land-grab” growth strategy.
While this dynamic is also readily observed in the same industry discussed above – or any other industry experiencing major vendor consolidation, the HR Outsourcing industry will be used to illustrate this point. Arguably the poster child for the way the HRO industry learned from some of its mistakes was the Convergys HRO business called Convergys Employee Care. For the unfamiliar … consider this startling sequence of events:
At the end of 2005, Convergys Employee Care secured the largest HR Outsourcing contract in the world when they signed DuPont to a 13-year multi-process HRO deal worth in excess of $1 billion over the life of the contract. DuPont was added to Convergys’ already impressive portfolio of private and public sector clients, effectively catapulting Convergys Employee Care to the #1 spot among HRO providers. Only 3 ½ years later, Convergys sold its entire HRO business to Northgate Arinso for only $100 million!
So, what happened?
What happened was perhaps the convergence of the first two dynamics discussed above --- coupled with what many people feel was a vendor’s attempt to “aggressively land-grab” as much market share as possible, as fast as possible. The annals of “aggressive market share land-grabbing” across most industries tells us that this strategy is usually achieved by such means as:
(a) Major pricing incentives … which inevitably results in the vendor scaling back on more personalized service delivery (e.g., to employees and managers using that service);
(b) M&A on steroids … which typically leads to disparate and/or redundant systems and operations being maintained for many months or even years – often creating dissatisfied customers and major inefficiencies; and/or
(c) Offering services/solutions which are not yet ready for prime time; i.e., “flying the plane while it’s still being built”
The fallout for Convergys’ HRO customers from their “aggressive market share land-grabbing” efforts included poor adoption / low usage of newly defined HR business processes and systems managed by Convergys. The new processes, systems and self-service-centric operating models (augmented by offshore HR Service Center reps) were designed to significantly reduce HR admin costs for customers, so this vision was clearly not fully realized.
So as a concluding question … Is it always very risky to partner with an HR vendor in aggressive (market share) land-grabbing mode, operating within an increasingly commoditized industry … a provider that relies almost exclusively on digitized information access over human involvement with customers? Based on dynamics generally observed in the employment screening and/or HR Outsourcing domains: Not always -- just usually.
Steve Goldberg
HR Technology & Transformation Advisor
March 2012
I’ve written articles in the past about a concept called Total Realized Value (“TRV”), a metric I created which highlighted dependencies or inhibitors to achieving maximum business value from an HR solution/service implementation. A “TRV” model assessed the degree to which those factors were present. I’ve also blogged about key aspects of HR technology initiatives which should never be short-changed.
http://hrtechtruth.blogspot.com/2010/05/20-things-you-should-never-short-change.html
Obviously, a customer’s unique business context always plays a significant if not primary role in that customer’s ultimate success and satisfaction with a solution and its providing vendor. For example: Are there concurrent initiatives in-progress which compete for the same project resources? Has an optimal talent management and HR service delivery strategy been clearly defined and implemented before investing in new technology and/or services to help achieve that strategy? Is change management (planning and execution) a core and foundational component within the HR initiative’s rollout?
In this blog post, I’m highlighting 3 dynamics observed in the HR solutions and services arena over many years and from very different vantage points … dynamics which seem to have some correlation with customer success and satisfaction.
1. Digitization of key HR information is not the total answer – and can create a false sense of being the answer.
As one example, let’s look at the background checking / employment screening industry …
Background checking based solely upon accessing public databases (i.e., digitized information) can potentially result in major issues in terms of timeliness, completeness, and accuracy of the information. As an example, the criminal arrest and court records in a vendor’s database may not go back far enough, and most vendors update these records monthly at best. As a result, a job applicant’s most recent criminal offenses are the least likely to come up in a database search used for employment screening purposes. Criminal database searches should therefore indicate to a background checking associate or researcher where else to look, what potentially conflicting information to reconcile and resolve, etc.
Case in point: A state audit in Texas revealed that while Texas law requires courts and prosecutors to submit criminal arrest information to the state within 30 days of receiving it, prosecutors and courts were failing to submit disposition records on about one of every four arrests. So in considering something as seemingly straightforward as a background check service provider -- or perhaps moving upstream in business value to a consulting/advisory firm offering more Advanced Due Diligence services (e.g., on key executives, potential suppliers or business partners, M&A targets, etc.), the first “success / satisfaction dynamic” that I want to underscore is the following:
Over-reliance on digitized information to the point of eliminating human factors such as judgment, critical thinking and customer advocacy is, VERY simply put, a bad idea.
2. Increased commoditization within an HR solutions / services market niche should be a yellow flag to customer buyers.
Let’s once again use the background checking / employment screening industry and how it has evolved to showcase how commoditization creates both benefits, but also risks for customer buyers. When major sources of differentiation get blurred to the point of viewing the services provided in an industry as equal or comparable … thereby making ‘price’ and ‘size or perceived stability’ the major grounds on which to select vendor partners, market commoditization has clearly taken place.
The major benefit to customers in a commoditized services market is clearly lower prices, not immediately, but eventually. The forces resulting in lower prices are arguably twofold: downward price pressure from both customers and vendor competitors; but also the changes vendors have to make to remain profitable with lower prices. Those changes are where increased business risk and lower satisfaction for customers potentially arises.
Three of the major changes solutions / services providers make to remain profitable amid downward price pressures – changes which are very inter-related:
(a) Automate as much as possible relative to providing information
(b) Reduce the number of people involved in service delivery (i.e., convert to a lower-touch delivery model), and
(c) Standardize solutions and services to the maximum extent possible
So, the second “success / satisfaction” dynamic: Over-reliance on automation, lower-touch service delivery models and standardized solution concepts (‘one size fits all’ solutions which may not allow for different customer needs) is, VERY simply put, a bad idea. One other point that ties together these first two observations: “If it can be totally digitized, it can usually be totally commoditized.”
3. The third success / satisfaction dynamic is another caution for buyers and implementers of HR solutions and services: Beware of HR solution / service providers that show signs of an “aggressive land-grab” growth strategy.
While this dynamic is also readily observed in the same industry discussed above – or any other industry experiencing major vendor consolidation, the HR Outsourcing industry will be used to illustrate this point. Arguably the poster child for the way the HRO industry learned from some of its mistakes was the Convergys HRO business called Convergys Employee Care. For the unfamiliar … consider this startling sequence of events:
At the end of 2005, Convergys Employee Care secured the largest HR Outsourcing contract in the world when they signed DuPont to a 13-year multi-process HRO deal worth in excess of $1 billion over the life of the contract. DuPont was added to Convergys’ already impressive portfolio of private and public sector clients, effectively catapulting Convergys Employee Care to the #1 spot among HRO providers. Only 3 ½ years later, Convergys sold its entire HRO business to Northgate Arinso for only $100 million!
So, what happened?
What happened was perhaps the convergence of the first two dynamics discussed above --- coupled with what many people feel was a vendor’s attempt to “aggressively land-grab” as much market share as possible, as fast as possible. The annals of “aggressive market share land-grabbing” across most industries tells us that this strategy is usually achieved by such means as:
(a) Major pricing incentives … which inevitably results in the vendor scaling back on more personalized service delivery (e.g., to employees and managers using that service);
(b) M&A on steroids … which typically leads to disparate and/or redundant systems and operations being maintained for many months or even years – often creating dissatisfied customers and major inefficiencies; and/or
(c) Offering services/solutions which are not yet ready for prime time; i.e., “flying the plane while it’s still being built”
The fallout for Convergys’ HRO customers from their “aggressive market share land-grabbing” efforts included poor adoption / low usage of newly defined HR business processes and systems managed by Convergys. The new processes, systems and self-service-centric operating models (augmented by offshore HR Service Center reps) were designed to significantly reduce HR admin costs for customers, so this vision was clearly not fully realized.
So as a concluding question … Is it always very risky to partner with an HR vendor in aggressive (market share) land-grabbing mode, operating within an increasingly commoditized industry … a provider that relies almost exclusively on digitized information access over human involvement with customers? Based on dynamics generally observed in the employment screening and/or HR Outsourcing domains: Not always -- just usually.
Steve Goldberg
HR Technology & Transformation Advisor
March 2012
Tuesday, January 17, 2012
Succession Planning (or Succession Management) – Missing the opportunity so far?
Being very effective at Succession Planning seems to be more elusive than excelling at any other Talent Management function or process. This is somewhat counter-intuitive given that the other major Talent Management activities – Workforce Planning, Recruiting, Performance Management, Learning and Development, and Total Rewards Management all have major elements in common with Succession Planning.
Citing just two examples to illustrate the previous point -- Recruiting, like Succession Planning, should ideally involve external talent pipeline-building and talent relationship management being practiced ahead of specific resourcing demands. Even Total Rewards Management as a process has similarities with Succession Planning in that both might require a re-evaluation of current practices (against market / industry practices) when there are talent retention issues or attraction challenges in critical roles.
The fact that effective Succession Planning has been shown to materially drive business results and competitive advantage -- coupled with how few organizations claim they practice SP broadly and effectively -- highlights what appears to be a huge missed opportunity to-date for many organizations. Here’s the data …
Missing the opportunity (so far):
- A 2010 study by ASTD and i4cp showed that only 14% of respondents to their survey described their succession planning efforts as effective to a “high” or “very high” extent.
- An analysis of the FTSE 100 (largest co’s on London stock exchange) conducted by global Leadership Risk Management firm Talent Intelligence (November, 2010) found that:
> only 2% of the FTSE 100 stated that key leadership roles were being actively identified and benchmarked against the external market
> only 10% had identified the roles critical to the success of their organization or that had a major impact should a key individual leave
> while 49% of organizations developed individuals internally for succession purposes, this was typically driven by employee-centered training and development purposes as opposed to leadership risk management reasons
> up to 79% of the FTSE 100 rely on internal succession planning alone to replace the most critical roles in the business
- More than half of companies cannot immediately name a successor to their CEO should the need arise, according to a 2010 survey of 140 CEO’s conducted by Heidrick & Struggles and Rock Center for Corporate Governance at Stanford University. Other very telling findings from this study included:
> a full 39% of respondents cited that they have "zero" viable internal candidates
> the majority of firms or 65% have not asked internal candidates whether they would even want the CEO job if offered to them
> on average, boards spend only 2 hours a year on CEO succession planning
- And finally, according to executives participating in a July 2011 Canadian Financial Executives Research Foundation study, only 40% of Canadian private companies surveyed had a clear business ownership succession plan in place.
The opportunity being missed:
In the words of John J. Barry, leader of PwC's Center for Board Governance which advises audit committees and boards of directors: “Proactively approaching management succession can generate real benefits, as effective succession planning typically helps to reduce recruiting costs (e.g., exec search fees), establish stability, promote top talent, and enable quick response to unplanned leadership vacancies.”
It is almost universally believed that a well developed succession planning process promotes higher retention rates across-the-board, likely due to employees and leaders recognizing that time, attention and skill development investments are being made in them.
As for two real-life examples from hugely successful enterprises:
Apple has basically been able to seamlessly transition to new leadership and continued success after Steve Jobs’ passing as their succession plans were put in-place well before his health declined. Jobs in-fact wrote in his resignation letter …“As far as my successor goes, I strongly recommend that we execute our succession plan and name Tim Cook as CEO of Apple.”
Additionally, McDonald's is credited with having a succession plan that served them well when two of their CEOs died in the course of a single year. “And yet, the company proceeded without a hitch" stated Charles M. Elson, director of the John L. Weinberg Center for Corporate Governance at the University of Delaware.
And very interestingly noted, with respect to Succession Planning technology … Bersin & Associates’ “High Impact HR Study” in 2010 of over 1,200 HR practitioners revealed that – as an “HR System application area” … Succession Planning drives a higher degree of “HR Department impact” than Compensation, Learning, Performance or Recruiting based on rankings by the respondents.
So what are the underlying reasons or impediments to effective Succession Planning?
Well, let’s start with a terminology / labeling nuance …Succession Planning is much more aptly referred to as Succession Management. The reason -- while Succession Planning has historically looked within internal talent pools to find successor candidates, Succession Management looks at both internal and external talent pools – and ideally in an integrated fashion. Moreover, you likely have a flawed process if you think of succession in terms of just planning.
Other characteristics of a flawed process in this arena include having the same “high potential” individuals in a number of different succession pools; or not reflecting changes in business strategy, context or culture by appropriately re-confirming the most viable successor candidates; or just doing Succession Management at periodic intervals.
And not to leave out what is perhaps the most prevalent and success-limiting mistake found in Succession Management frameworks across the globe ... using a lens of “successor candidates have to be ready now.”
Steve Goldberg
January 2012
Citing just two examples to illustrate the previous point -- Recruiting, like Succession Planning, should ideally involve external talent pipeline-building and talent relationship management being practiced ahead of specific resourcing demands. Even Total Rewards Management as a process has similarities with Succession Planning in that both might require a re-evaluation of current practices (against market / industry practices) when there are talent retention issues or attraction challenges in critical roles.
The fact that effective Succession Planning has been shown to materially drive business results and competitive advantage -- coupled with how few organizations claim they practice SP broadly and effectively -- highlights what appears to be a huge missed opportunity to-date for many organizations. Here’s the data …
Missing the opportunity (so far):
- A 2010 study by ASTD and i4cp showed that only 14% of respondents to their survey described their succession planning efforts as effective to a “high” or “very high” extent.
- An analysis of the FTSE 100 (largest co’s on London stock exchange) conducted by global Leadership Risk Management firm Talent Intelligence (November, 2010) found that:
> only 2% of the FTSE 100 stated that key leadership roles were being actively identified and benchmarked against the external market
> only 10% had identified the roles critical to the success of their organization or that had a major impact should a key individual leave
> while 49% of organizations developed individuals internally for succession purposes, this was typically driven by employee-centered training and development purposes as opposed to leadership risk management reasons
> up to 79% of the FTSE 100 rely on internal succession planning alone to replace the most critical roles in the business
- More than half of companies cannot immediately name a successor to their CEO should the need arise, according to a 2010 survey of 140 CEO’s conducted by Heidrick & Struggles and Rock Center for Corporate Governance at Stanford University. Other very telling findings from this study included:
> a full 39% of respondents cited that they have "zero" viable internal candidates
> the majority of firms or 65% have not asked internal candidates whether they would even want the CEO job if offered to them
> on average, boards spend only 2 hours a year on CEO succession planning
- And finally, according to executives participating in a July 2011 Canadian Financial Executives Research Foundation study, only 40% of Canadian private companies surveyed had a clear business ownership succession plan in place.
The opportunity being missed:
In the words of John J. Barry, leader of PwC's Center for Board Governance which advises audit committees and boards of directors: “Proactively approaching management succession can generate real benefits, as effective succession planning typically helps to reduce recruiting costs (e.g., exec search fees), establish stability, promote top talent, and enable quick response to unplanned leadership vacancies.”
It is almost universally believed that a well developed succession planning process promotes higher retention rates across-the-board, likely due to employees and leaders recognizing that time, attention and skill development investments are being made in them.
As for two real-life examples from hugely successful enterprises:
Apple has basically been able to seamlessly transition to new leadership and continued success after Steve Jobs’ passing as their succession plans were put in-place well before his health declined. Jobs in-fact wrote in his resignation letter …“As far as my successor goes, I strongly recommend that we execute our succession plan and name Tim Cook as CEO of Apple.”
Additionally, McDonald's is credited with having a succession plan that served them well when two of their CEOs died in the course of a single year. “And yet, the company proceeded without a hitch" stated Charles M. Elson, director of the John L. Weinberg Center for Corporate Governance at the University of Delaware.
And very interestingly noted, with respect to Succession Planning technology … Bersin & Associates’ “High Impact HR Study” in 2010 of over 1,200 HR practitioners revealed that – as an “HR System application area” … Succession Planning drives a higher degree of “HR Department impact” than Compensation, Learning, Performance or Recruiting based on rankings by the respondents.
So what are the underlying reasons or impediments to effective Succession Planning?
Well, let’s start with a terminology / labeling nuance …Succession Planning is much more aptly referred to as Succession Management. The reason -- while Succession Planning has historically looked within internal talent pools to find successor candidates, Succession Management looks at both internal and external talent pools – and ideally in an integrated fashion. Moreover, you likely have a flawed process if you think of succession in terms of just planning.
Other characteristics of a flawed process in this arena include having the same “high potential” individuals in a number of different succession pools; or not reflecting changes in business strategy, context or culture by appropriately re-confirming the most viable successor candidates; or just doing Succession Management at periodic intervals.
And not to leave out what is perhaps the most prevalent and success-limiting mistake found in Succession Management frameworks across the globe ... using a lens of “successor candidates have to be ready now.”
Steve Goldberg
January 2012
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