Accelerating Leadership Development

How to Accelerate Leadership Readiness and Development In Uncertain Times HR Houston – Gulf Coast Symposium May 12, 2010 Presented by: JP Elliott PhD, Senior Consultant, Sibson Consulting Jennifer McCusker PhD, Director Global Talent Development & Retail HR, Oakley Inc. Copyright ©2010 by The Segal Group, Inc., parent of The Segal Company and its Sibson Consulting Division. All Rights Reserved

“A typical American office worker checks his email more than 50 times a day, sends or receives an instant message nearly 80 times a day and visits more than 40 different websites.” —Tim Shipman 1

The New Normal Change, Disruption and Transformation Current and Future Environment V olatility U ncertainty C omplexity A mbiguity 2 VUCA acronym originated by Institute for the Future

The New Normal Will Your Organization Survive or Thrive? Organizational capabilities required: V ision U nderstanding C larity A gility 3 VUCA acronym originated by Institute for the Future

The New Normal The Future of Work Three Critical Assumptions for the Future: Pace of change will accelerate Talent will become the single most important factor in driving competitive advantage Tomorrow’s skills & capabilities do not exist today 4

The New Normal—What are Your Challenges? Discuss what business challenges your Task organization is facing? How has this impacted the type of leaders you need? Outcome: In groups of three or four, discuss and answer the following questions: • What are the top 2-3 business challenges your organization is currently facing? • How have these challenges impacted the type of leaders your organization needs? 5

The Leadership Challenge Talent is plentiful, but leadership is in short supply Senior Executives view • While talent is seen as key enabler to growth, most organizations do not have talent as critical to future understanding of their needs: − The increasingly global competition and shortage of talent was identified by executives as the #1 business trend that would have a major effect on their companies over the next five years − 64% of companies identified “gaps in their leadership pipeline” as their top talent challenge − 68% of companies are unable to identify talent gaps within their organizations, with 49% unable to forecast talent gaps − Only 26% of companies say they have successors identified for the majority of the positions on their executive teams − Only 14% of companies are using metrics to analyze and track internal talent supply and demand and connect with performance data Developing talent is a • Aligning the talent strategy to the business strategy continues to be an two-way street opportunity for HR, while Line Managers need to take more ownership: − 58% of all line managers believe that the HR function lacks the ability to develop talent strategies in line with a company’s business objectives, though only 25% of HR professionals agreed with that statement − Only 24% of companies stated their “talent management strategy is completely aligned with the organization’s overarching business goals” − 52% of the respondents identified an insufficient commitment to developing talent on the part of line managers as a critical barrier to talent development − Only 50% of companies reported widespread use of development plans – only 8% stated that the development plans are high quality and effective − Only 28% and 42% of respondents stated that their executives/line managers would rate their “development planning” and “assessing leaders” as effective − Only 33% of managers are accountable to act on or follow-up on key talent building processes Sources: • Bersin & Associates; Talent Watch Research – Winter 2009, Talent Management Factbook 2009, Modern Approach to Workforce Planning 2008 • New Talent Management Network, State of Talent Management, 2010 • Talent Management Magazine, State of Industry Report 2010 • Making Talent A Strategic Priority, The McKinsey Quarterly, 2008 • The People Problem in Talent Management, The McKinsey Quarterly, 2006 6

Accelerating Leadership Development Align Leadership Strategy with Business Strategy Segment Key Leadership Roles Define Leadership Role Requirements Assess Leadership Gaps Design Leadership Development Plans Measure, Monitor, & Close Gaps 7

Align Leadership Strategy with Business Strategy Matching Leadership Needs to the Situation Key Questions: Sustaining Start-Up / High Growth Strategy Success Growth • What is our current business situation? Finding ways to take the Building structures, systems, BUSINESS STRATEGY business to the next level processes (sales, marketing, • How does this differ by and avoiding decisions that product development) that business unit, geography, could cause issues lead to revenue growth product line? • Where will we be in 1 – 3 years? Return On Asset Strategy Re-alignment Turnaround • What are the leadership Redirecting resources such Fast decision making and skills/competencies and as abandoning old product eliminating non-value added critical experiences that line and developing new products, resources, and or technologies often requires business units is required to will be required to be an changing organization ensure survival effective leader now and strategy, structure, and skills in the future? • What leaders have had experiences in each of Transactional Transformational the four quadrants? Change Change 8

Align Leadership Strategy with Business Strategy Proactive Talent Planning Business Talent Budget Objectives Planning Planning Execution “Doing the right thing is important, which is where strategy comes in. But doing that thing well—execution—is what sets companies apart.” —Jeffrey Pfeffer 9

Segment Key Leadership Roles Talent Management is no Longer Limited to “Top Talent” Key Questions: • Where will you focus your talent development Top investments? Management • What criteria will you use to prioritize levels or roles? Middle Entire Management • Where do you have current leadership gaps or surpluses? a ls Workforce ti • What roles are most critical to ten Frontline business and must have a pipeline? Po Management gh • What are the key skills and Hi capabilities for each workforce Employees segment? • Will these be the same or different in 1 – 3 years? Contingent Workforce Source: Adapted from McKinsey Workforce Pyramid 10

Talent Segmentation The Foundation of Leadership Development Segmentation enables you to understand and manage your workforce like a portfolio of assets. Impact Talent Segment Investments Over Time Roles that drive Strategic Critical to driving long-term competitive the strategy advantage, with specialized skills or knowledge Strengthen Core The “Engine of the Enterprise,” unique to the company and core to delivering Roles that on its products and/or services support Protect the strategy Requisite Cannot do without, but whose value could be delivered through alternative staffing strategies (other than full-time headcount) Streamline/ Outsource Roles Misaligned impacted by Talent whose skill sets no longer align the strategy with the company’s strategic direction Redeploy Segmentation strategically values talent and enables prioritization of talent needs and talent investments. 11

Define Leadership Role Requirements “Hub” for all Talent Management Decisions FOUR KEY ELEMENTS OF LEADER ROLE REQUIREMENTS Accountabilities identify the specific outcomes each role is expected to achieve relative to the strategy 2. Performance Metrics Responsibilities identify the primary tasks Derived from strategy, • Financial and activities each role is expected to critical tasks, and • Customers perform in order to achieve the outcomes organizational competencies • Markets expected of the role • People / Culture Performance Metrics are focused on 4. Critical Experiences Set measuring business outcomes, not activities; enable focus on achieving • Integration/Divestiture 1. • Cross-Business Exposure business impact and drive greater Key • Turn-around ownership for business impact Defined for Accountabilities each and Responsibilities Competencies identify the knowledge, executive skills, and abilities most critical to role 3. Critical Knowledge, Skills, and Abilities successfully fulfilling the accountabilities of (i.e., Competencies) the role; focus on those competencies that • Function/Technical differentiate superior performance • Interpersonal Critical Experience Sets identify the Common, practical definitions for • Business experiences that best prepare someone each executive role • Strategic to fulfill the requirements of the role • Required experiences • Desired experience • Targeted years of experience 12

Assess Leadership Gaps Leadership Assessments Multiple techniques should be used to generate robust and valid leadership assessments: • Multi-modal leadership assessments (e.g., assessment centers, 360 feedback, personality inventory, interviews) • Proprietary competency-based assessment tools (e.g., CCL Benchmarks) • Personality inventories (e.g., Hogan, MBTI) • 360 Degree Feedback • Informal feedback • External leadership assessment • Performance ratings / business results achieved 13

Assess Leadership Gaps Talent Review Sessions Introduces Common Thinking Provides Overview of Promotes Real Action about about Leadership Talent Leadership Talent Pool and Gaps Performance and Potential • Improves understanding of the • Links talent to strategy • Clarifies who owns talent current talent portfolio for critical roles • Highlights individual performance • Leads to better assignment and success and issues development decisions • Establishes common talent standards • Identifies gaps (functional, global, • Facilitates mobility across functions diversity, etc.) and divisions • Aligns assessments • Makes it easy to see if leaders are • Refines the messages to be • Brings together multiple viewpoints building their talent pool delivered on individuals • Identifies feeder roles and provides • Identifies individual contributors • Gives leaders a sense of fairness, an assessment of the talent pool in who have the interest and potential objectivity, and transparency these roles for movement into critical roles • Creates consistent data capture • Ensures that an adequate supply • Provides more breadth and depth and analytics on the pipeline of exists and that action plans are in of talent, ensuring that critical roles talent in feeder roles place to maintain a strong talent possess the range of capabilities pipeline identified in the role requirement The Talent Review calibrates assessments and planned actions. It includes succession planning and improves performance management. 14

Assess Leadership Gaps Succession Planning/Talent Review – Key Questions 1 1 Do we have enough high potential people in the function? 2 2 Is there a significant retention risk in the function? 3 3 What are the expectation gaps for each stage? 4 4 What are the performance issues at each stage? 5 5 Where should we import/export with other functions? 6 6 Where do we need to invest in development or new talent? 7 7 Do we agree on our assessments or need to recalibrate on some? 8 What is the strength of the successor pool for key leadership roles, and what 8 actions are necessary to improve the breadth and depth of the pool? 15

Assess Leadership Gaps Succession Planning/Talent Review Criteria Leader Metrics & Scope/Focus Decision Owners Process Assessment Development Standards Talent Reviews Critical positions CEO owns enterprise Corporate HR Customized role- Multi-modal Corporate leadership CEO reviews depth decisions designs and is the based requirements leadership institute develops and breadth of Critical positions and steward of the with competencies, assessments (e.g., programs leadership pipeline feeder roles CHRO owns process across the experience sets, and assessment centers, for positions annually enterprise decisions enterprise; talent is metrics 360 feedback, Customized Anyone with a reviewed across personality inventory, development Metrics are shared manager title or CHRO recommends enterprise Enterprise-wide interviews) programs based on quarterly with HR above and CEO approves leadership standards individual stakeholders on enterprise decisions Corporate HR for all leaders Proprietary assessment needs developmental Business unit/division designs the process competency-based progress and the leadership Senior Leadership and partners with Proprietary assessment tools Job rotation depth and breadth of owns decisions local HR to facilitate leadership (e.g., CCL pipeline Senior Leadership within functional area the process; talent is competency models Benchmarks) New job assignment (Proxy Officers) or business/division reviewed locally and or stretch role Business at the enterprise Enterprise-wide Personality Unit/Division leaders Business unit/division generic inventories (e.g., Special review quarterly data HR owns decisions Local HR adapts the competencies Hogan, MBTI) project/assignment with local HR process and line Business unit/division leadership facilitates 360 Degree External coaching Business and/or Line HR recommends and the process; talent is Feedback leaders reinforce and line leadership reviewed locally Mentoring monitor development approves decisions Informal feedback actions and progress against plan External leadership assessment There are many different approaches to succession and talent review 16

Assess Leadership Gaps Succession Planning/Talent Review Design Profiles Metrics & Scope/Focus Decision Owners Process Leader Standards Assessment Development Talent Reviews Critical positions CHRO owns Corporate HR Enterprise-wide Multi-modal Corporate leadership CEO reviews pipeline Business unit/division enterprise decisions designs the process leadership standards leadership institute develops annually leadership Senior Leadership and partners with for all leaders assessments (e.g., programs Business leaders Senior Leadership own decisions within local HR to facilitate Proprietary assessment centers, Job rotation review quarterly data (Proxy Officers) functional area or the process; talent is leadership 360 feedback, New job assignment with HR and monitor business/division reviewed locally and competency models personality inventory, or stretch role development actions at the enterprise interviews) Senior Leadership Corporate HR Customized role- Multi-modal Job rotation CEO reviews pipeline Business unit/division own decisions within designs and is the based requirements leadership New job assignment annually leadership and functional area or steward of the with competencies, assessments (e.g., or stretch role Business Unit feeder roles business/division process across the experience sets, and assessment centers, Mentoring leaders review Senior Leadership CEO and CHRO enterprise; top metrics 360 feedback, quarterly data (Proxy Officers) have ownership for leadership talent is personality inventory, Business and/or Line senior leadership reviewed across interviews) leaders reinforce and decisions enterprise monitor development Critical positions Division HR makes Corporate HR Customized role- Multi-modal Customized Business leaders Senior Leadership recommendations designs the process based requirements leadership Development programs review quarterly data (Proxy Officers) decisions and line and partners with with competencies, assessments (e.g., Job rotation with HR and monitor leadership approves business HR to experience sets, and assessment centers, New job assignment or development actions CEO and CHRO facilitate the process; metrics 360 feedback, stretch role Business and/or Line recommend and approve talent is reviewed personality inventory, Special leaders reinforce and decisions on senior locally and at the interviews) project/assignment monitor development leadership enterprise Anyone with a Senior Leadership Corporate HR Enterprise-wide Multi-modal Corporate leadership Business leaders manager title or own decisions within designs the process leadership standards leadership institute develops review annual data above functional area or and partners with for all leaders assessments (e.g., programs with HR and monitor business/division local HR to facilitate assessment centers, Job rotation development actions the process; talent is 360 feedback, New job assignment reviewed locally personality inventory, or stretch role interviews) Mentoring Source: Conference Board – Talent Management Conference (2008, 2009); Sibson Client Experience. 17

Design Leadership Development Plans Critical Learning Experiences 1. A New Assignment/New Perspective: Take on a new project assignment within your current department or role, and/or approaching 80% of your current role with a new outlook or perspective development should occur 2. Rotation: Take on a new project assignment in another department or on the job role. This may be part of a formal job rotation program and/or rotation outside of business with strategic partners or suppliers 3. Expanded Role: Expand the scope of your current role. This may include the enlargement of current tasks and responsibilities, or taking on additional extra-role duties such as committees or task forces 4. Mentor/Coach & Reverse Mentoring: Request the assignment of a formal or informal mentor or coach who provides personal and professional guidance based on similar experiences and situations 5. Training and Education: Participate in either a formal role-related training course (either in-house or off-site) or educational courses and 20% of programs offered by universities and institutes development should be 6. Self-Study: Initiate learning through outside channels, including formal training reading business and industry publications, attending professional conferences held by external vendors, and seeking other information from subject matter experts 18

Design Leadership Development Plans Talent Pools Key Assumptions Driving Talent Pools: • Frequent changes or flexibility to the business Top strategy, organizational structure or jobs Talent Pool Management responsibilities or reporting relationships – Middle & Frontline • People move vertically and horizontally Middle Management Management • Upward movement is not automatic • Impossible to plan future jobs – the a ls focus is on the next assignment ti Frontline ten Management • Training is integrated and Po gh focused skills that can be used Hi immediately Employees • People can turn down new assignments without leaving program Contingent Workforce Talent pools focus on developing and nurturing a cross-section of leaders versus just those few that have been identified as candidates for senior level roles 19

Design Leadership Development Plans Learnings From the Top Companies for Leaders “My main job was developing talent. I was a gardener providing water and other nourishment to our top 750 people. Of course, I had to pull out some weeds, too. — Jack Welch Source: “Top Companies for Leaders 2009” Fortune 20

Measure, Monitor & Close Leadership Gaps Quantitative & Qualitative Metrics Leadership Pathway and Pipeline Analytics 88 COO CEO F VP 1 VP 2 SVP 1 SVP 2 BAND/JOB FAMILY E Director 1 Director 2 VP 3 D Director 4 Director 3 Mgr 1 Mgr 2 C Mgr 3 Role 1 Role 3 B Role 2 A CC Role 1 Role 2 BB Role 3 AA CHURN ANALYSIS READINESS ANALYSIS PERFORMANCE AND POTENTIAL MATRIX 16 30% 14 25% Leader 1 6% 12 6 Leader 2 20% 5% 10 7 Leader 3 8 6 Leader 4 15% 12% POTENTIAL 3% 6 5 10% Leader 5 10% 9% 4 4 Leader 6 4 5% 9% 2 4 Leader 7 7% 2 3% 0 1 Leader 8 0% Director VP SVP Leader 9 Director VP SVP Ready for advancement POTENTIAL FIT ISSUES Leader 10 Turnover Transfer Retirement Ready Now Ready 6-12 Months Ready 12-24 Months PERFORMANCE 21

Developing Leaders—What are Your Challenges? Complete the Leadership Development Task Assessment and discuss the challenges your organization is facing in developing leaders? Outcome: In groups of three or four, discuss and answer the following questions: • What are the top 2-3 challenges your organization is currently facing in developing leaders? • How have you addressed these challenges? 22

Leadership Development Assessment 23

Accelerating Leadership Development Align Leadership Strategy with Business Strategy Segment Key Leadership Roles Define Leadership Role Requirements Assess Leadership Gaps Design Leadership Development Plans Measure, Monitor, & Close Gaps 24

“My favorite time to manage is during a bust. It brings more clarity about what your customers need and what your priorities should be.” —Sergey Brin, founder of Google 25

Follow-up Questions and Further Information 10880 Wilshire Boulevard Suite 850 Los Angeles, CA 90024 T 310.231.1700 www.sibson.com JP Elliott, PhD jelliott@sibson.com 26

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Accelerating Leadership Development

by JP Elliott, PhD

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