Business Success and the Next Generation Talent Pipeline

Investing in Next Generation Talent can mean the difference between business success – and failure.

That’s one conclusion of a new study of CEO line-up changes and shareholder returns in 2,500 publicly-traded companies over a 10-year period.

The Booz & Co. research – released this week – revealed there was an average 2.1 percent rate of  CEOs being fired for poor company financial performance in the short term. Even leaders of companies in the bottom tenth of performance over a 2-year period faced less than a 6 percent probability of being shown the door.

The study said boards may hesitate to replace underperforming CEOs in part because of a weak pipeline of candidates ready to take the helm. At the same time, more than 20 percent of companies go outside their walls to hire their CEO – despite the fact that these “outsiders” tend to underperform someone promoted internally to the top spot.

That research echoes a conclusion of the book Good to Great by Jim Collins. Of 11 top-performing companies studied over a 15-year period, only one was led by outside CEOs – those who had been with the company less than 1 year before taking the lead role.

The recent Booz study on CEO performance concluded there was ample room for improvement in board oversight, succession planning – and development of top leadership talent.

nGenera’s research and client experience emphasizes that robust development becomes increasingly important the higher an employee moves up the ladder.

Our Re.sults report “Accelerating Executive Development” recommended that today’s leaders take an active role in developing potential successors. The study urged companies to build executive development programs around the next generation of skills and competencies that will be demanded of leaders.

The Next Generation of C-suite talent awaits. They are the Generation X and Generation Y employees. Our recent research on younger employees documents that they expect ongoing learning opportunities and varied assignments to ensure their development and employability security. Most don’t expect to have long tenures or executive suite roles in their current companies. Yet many are open to the prospect – if it seems possible in their organizations.

You can call it “organizational generativity” or just good business: planning ahead for passing the reins of leadership to the next generation.

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The Information Technology Perfect Storm

The concept of workforce planning has been a core Information Technology (IT) initiative for quite some time. For the most part, it is a mathematical or formulamatic exercise focused on predicted labor growth minus anticipated departures equals hiring needs. Oftentimes there are bells and whistles in the process: but if we are being candid, the above, for the most part, constitutes a workforce plan.

 

This calculation was easier to do over the last four years during the recession, but as you will see, the ability to create a meaningful workforce plan is becoming a very difficult challenge for IT managers.  The complexity is derived from the reality that as we move further into the new millennium, we are encountering a labor market “perfect storm.” This phenomenon can be attributed directly to the shifting demographics of both the domestic and global workforce, post-recession increase in enterprise growth opportunities, and diminishing levels of employee commitment. The storm becomes even more intensified due to the ever-increasing emphasis on globalization coupled with the demand that IT professionals be “innovative” while staying within budget.

 

To read the rest of this artilce, click here

 

 

 

 

 

 

Optimization of the Executive Coaching Experience

When you hear the words “a growth of over 2,000%” your first hope may very well be, “I wish that was my portfolio!”  No such luck!  Rather, this is the growth in the use of executive coaches since 1999. During that same time period, the overall corporate investment in executive development represented less than 1% of revenues.

 

The explosive growth in executive coaching begins to make sense when you consider the current status of executive development in corporate organizations. A recent study conducted by The Concours Group indicates that as the global recession has dissipated, companies are looking at new and innovative ways to develop their most valuable asset – their talent!  It is important to understand that The Concours Group research indicates that companies are focusing their primary attention on the top three levels of the organization.

 

A recent Economist cover story highlighted the emerging global shortfall of skilled talent. In addition, between 2010 and 2050 China, Japan, South Korea, Russia, Italy and Germany are among countries who will see their workforces shrink rather than grow. The realities of this situation are prevalent in many sectors of the economy, such as oil, utilities, and health care as well as critical positions necessary in all organizations, such as IT.

 

The proliferation of executive coaching is justified both by demand and effectiveness. The Corporate Leadership Council positions the use of external coaching as the single most effective developmental strategy for executives. Where formal training was ranked Number 5!

 

As executive coaching has grown in importance as a developmental strategy, so have concerns about how to measure the impact of the intervention.

 

 

 

 Rationale for Coaching

 

To optimize the intervention it is necessary to justify and position the coaching relationship. nGenera research indicates there are five rationales associated with the inception of a Coaching relationship supported by a dual desire: for the executive to acquire new skills while increasing their engagement.

 

The top two justifications are the most common. The first is to groom “high potentials” for current and future roles through knowledge and skills acquisition.  The second is to correct non-productive behaviors.

 

The next most prevalent rationale is for a senior executive to receive external advice on the caliber of their leadership bench strength.

 

There are two additional rationales found in executive coaching relationships. The first is to allow a senior executive to test an emerging strategic intent with a recognized Subject Matter Expert such as an academic or thought leader. The last rationale is to be fashionable! Although this seems odd, it does happen. Personally, we think buying a Hermes tie or scarf would be a less expensive solution!

 

  Avoiding the Pitfalls

 

To ensure the success of the coaching relationship, in the experience of nGenera there are a number of root causes of failure to be avoided.

 

The first area is when a manager is informed “You need a coach” without appropriate context. Nor do they participate in the selection of the coach. An added complexity is when the highest level of management is not involved in the Coaching program nor appraised of progress.

 

The next area of concern is that the relationship does not have pre-determined criteria for success. In this instance the relationship devolves into sessions that are primarily focused on “How is it going?” This phenomenon can become more problematic when the coach lacks the skills required for confronting the client when necessary.

 

The final area of concern is when there is no set timeframe for the relationship. When this exists, you can count on the relationship going on for an extended period – sometimes regardless of the value delivered!

 

To optimize the executive Coaching relationship we recommend five steps:

 

1)      Utilize coaching selectively and with those who will benefit the most – avoid the fashionable trap!

 

2)      Allow the coaching client to be involved in the process, if not the selection of the coach. Their comfort will contribute immeasurably to the success of the initiative.

 

3)      Set explicit expectations with the client and coach regarding desired outcomes and timeframes

 

4)      Ensure that senior management is involved with the executive coaching program and its progress

 

5)      Do not have the same coach for executives whom have any relationship, and/or organizational affiliation

 

The Human Capital Perfect Storm-The Necessity for Comprehensive Workforce Planning

The concept of workforce planning has been a core human resources capability for quite some time.  For the most part it is a mathematical or formulamatic exercise focused on predicted labor growth minus anticipated departures equals hiring needs.  Oftentimes there are bells and whistles in the process: but if we are being candid, the above for the most part constitutes a workforce plan.

 

This calculation was easier to do over the last four years during the recession, but as you will see the ability to create a meaningful workforce plan is becoming a very difficult challenge for human resource practitioners.

 

The complexity is derived from the reality that as we move further into the millennium we are encountering the human capital Perfect Storm for the following reasons:

  • The shifting demographics of both the domestic and global workforce;
  • The post-recession increase in enterprise growth opportunity;
  • The diminished and diminishing levels of employee commitment;
  • The intensified emphasis on globalization; and
  • The demand that the human resources function be “innovative” while controlling cost remains unabated.

 

Test Your Workforce Planning

 

Below are a set of numbers, all of which are relevant to human resources and workforce planning.

 

For those of you who like to read the last page of a book before the first page, I appreciate your forbearance, as I would encourage all of you to think about the number rather than skipping to the answer.

1)  5.0%

2)  55-65 years of age

3)  35-45 years of age

4)  -39%

5)  1,000 émigré’s

6)  600,000 vs. 75,000

7)  1 worker for every 3 retiree’s

8)  2 for the family and one for the country

 

A Commercial Break

 

As human resources practitioners are loath to take direction and in the hopes that no one skipped ahead, I thought it useful to insert a framework that helps reinforce the workforce planning concept.

 

 

The research, management consulting, and education firm,  NGenera, through its Research Driven Advisory services, has conducted extensive research on the phenomenon of shifting demographics and the implications for the emerging labor market.  This research led to the granting of the McKinsey Award for the Harvard Business Review article It Is Time to Retire Retirement and the recently published book Workforce Crisis.  

 

Based on this research,  NGenera holds the point of view (as illustrated in the above model) that workforce planning needs to be elevated from an activity or at best a sub-process to a core human resources process to insure enterprise competitive advantage.

 

Finally the Answers!

 

To reinforce the hypothesis that the workforce planning process is now essential, I would ask you to think about how many of the numbers, all of which have been in the HR or business press since April 2006, you actually knew.

 

1)  5.0% was the domestic unemployment rate in April.  To reinforce the emerging labor shortage as a concern, during the recession in the early 90’s the unemployment rate peaked at 9.7% vs. this recession at 6.4%.

2)  55-65 years of age is the fastest growing segment of the workforce.  This is at a time when most organizations perceive an incumbent at age 50 to be on the “back 9” of their career.  It is becoming commonplace for professionals to take early retirement to work full time at a different company or to start a business.

3)  35-45 years of age is the element of the workforce that is shrinking.  This presents challenges for retention, career progression, retirement benefits, and development to say nothing about hiring.

4)  -39% is the drop in computer science graduates since 2000.  This obviously has been influenced by the burst of the “tech bubble” but is still of concern.

5)  1,000 émigrés per month is the number of skilled workers who are leaving the United States, most to return to their home of origin.

6)  600,000 vs. 75,000 is the difference in near term engineering and computer science graduates between China/India and the US.

7)  1 worker for every 3 retirees is the prediction for Western Europe, which has a generous social benefit posture.

8)  2 for the family and 1 for the country is an advertisement on Australian TV that encourages larger families.   It is a manifestation that as a society there is concern about the shifting demographics.

 

These numbers should act as a not so gentle prod that it is now necessary to have a more generous interpretation of workforce planning and a plan!

 

 

The Elements of the “New” Workforce Plan

 

The core elements of the new workforce plan are focused on having the right person in the right job at the right time.

 

To do so it is necessary to expand the dimensions of the input to workforce plan creation to encompass at least the following elements.

  • A comprehensive enterprise demographic plan….develop scenarios based upon growth and penetration factors….complicate the current state exercise!
  • A breakdown of the population based on organization affiliation drivers vs. employee satisfaction – i.e., the same person who rates health care as good to excellent may not perceive it as a priority in terms of determinants of employee engagement.
  • Creation of as much flexibility in terms of employment arrangements-phase down, part-time, virtual, etc., without penalty in terms of career progression, benefits, etc.,.
  • Re-thought leadership development and career progression systems.  In China, 60 is young to be on the fast track.  In the US, with the fastest growing segment of the workforce being 55-65 and the second fastest being 65+, it is time to challenge the existing concepts of age.
  • Development of an employee brand that can be taken seriously and does not prompt comments about lack of sincerity.

 

The need for workforce planning is self-evident in the abstract.  The sense of urgency to expand the definition for planning and to actually create the approach should be equally self-evident.

 

 

Tom Casey is a Vice President and leader of the Human Capital practice with.  He can be contacted at tcasey@nGenera.com.

 

 

Speeding Up Talent Globe-Hopping

Globalization and the increasing pace of business are reshaping a key aspect of talent readiness: International assignments.

Since 2000, global assignments shorter than 1 year have nearly tripled – rising from 10% to 27% of assignments. That is one finding of the latest Global Relocation Trends Survey Report by GMAC Global Relocation Services, released in 2007. A 2006 survey by ORC Worldwide, TheMIGroup and Worldwide ERC found a similar trend: 60% of 530 multi-national employers surveyed reported an increased in short-term expatriate assignments lasting 3 to 12 months.

At the same time, U.S.-based companies are finding that a global presence can be a buffer against fluctuations in the domestic economy. Two examples are General Electric and IBM. GE reported that more than half of its revenue last year was generated outside the United States, and IBM’s non-U.S. business accounted for 63% of its 2007 revenue. That’s good news for employees’ 401(k) accounts as well for CEO bonuses and shareholder returns. Even middle-market companies are seizing these opportunities to tap new sources of revenue. In March, KPMG’s Global Enterprise Institute announced survey results showing that 58% of middle-market executives plan to expand their global presence within 5 years.

Yet global leadership isn’t created overnight. The groundwork must be laid well in advance.

There is a growing business case for making the investment in preparing candidates for short-term global assignments. Shorter postings mean less disruption to the employee’s work and family lives. A shorter global assignment is also less expensive and less complicated from a compensation and benefits perspective. The approach also benefits the talent pipeline. Companies can cycle a greater number of employees through shorter international assignments. A candidate being groomed for a global leadership role can take on two or three relatively brief assignments in the same amount of time that they previously would have spent in one location. All of this is consistent with the adaptability and agility that characterize Next Generation Enterprise organizations.

From a recruiting and retention perspective, the prospect of short international assignments within career path options holds tremendous appeal for the Generation Y or N-Gen employees – those under age 28. Our 2007 Re.sults report Project YE: Engaging Today’s Young Employees found that Generation Y employees scrutinize learning and development opportunities when choosing to join – or stay with – a company. They also want more frequent and shorter rotational opportunities. Our 2007 research report Harnessing the Global N-Gen Talent Pool noted that N-Gen is arguably the most relationship-driven generation in history. Providing suitable N-Gen employees with a short international assignment at the appropriate point in their career will help them build the kind of network they will need for a subsequent global leadership role.

In preparing candidates for global assignments, employers often focus primarily on selecting candidates and then addressing the tax implications and logistics of their assignments. What is often given short shrift is the process of “seeding” candidates. We see great value in integrating preparation approaches into performance, learning and talent processes.

Does your company currently do any of the following to prepare future short-term expatriates?

·        Create global awareness and networking opportunities: While the GMAC survey showed that 80% of companies surveyed offer their employees formal cross-cultural preparation for international assignments, only 21% of those companies made the training mandatory. Companies can hedge against that risk by creating global awareness early in candidates’ careers with learning programs and information. These offerings can whet employees’ appetites for self-directed development in this area.

·        Build global acumen into performance goals: Providing global awareness performance goals, development opportunities and feedback can initiate an employee’s journey toward a short-term global assignment. Assigning an employee to a global project is an effective way to help them build global contacts and expand their cultural horizons. This approach can also give a company an early indication of who is most suited for short-term global assignments.

·        Link global assignments to talent and succession planning: Including relevant global assignments in the talent management and succession planning processes is a way to ensure that earlier learning and development efforts bear fruit. Importantly, integrating the assignments into these processes can bring rigor to the approach and ensure that the international assignments are aligned with critical business objectives.

Starting these efforts early and providing an ongoing focus will help ensure that you are selecting the right candidates and maximizing your company’s investment in short-term global assignments.