“Taking the LEADERSHIP LEAP”: developing an “EXECUTIVE PIPELINE” for India’s Future | Ivey Business Jounal

” This article expands the argument and details the shortcomings in Indian management practices. The authors propose how the generation of business leaders who have powered India’s growth these last 20 years or so, can ensure the development of the next generation of leaders “. 

TALENT AT THE TOP : 

Though the leadership deficit in Indian business is widely recognized, few companies have successfully addressed it. That’s because the requisite solutions, including the development of a strong leadership pipeline, require immediate and focused efforts by Indian companies.

This challenge manifests itself on three levels. First, there is a quantity deficit: Many Indian companies simply find it difficult to fill all their available positions with qualified applicants. Second, an experience deficit exacerbates the problem: Today’s senior and middle managers have not had sufficiently broad or well-developed careers. Finally, the talent war adds complexity: Competition over high-quality executive talent is intensifying, and companies are willing to pay top dollar for the right people. Conversations with our clients suggest that these three gaps pose the most significant challenges to the future growth of their companies.

THE QUANTITY DEFICIT : 

Employers’ difficulty with filling vacancies is sector agnostic. In the 2012 Manpower Talent Shortage Survey, a global survey of employers, 48 percent of the respondents based in India reported difficulty finding qualified candidates for their managerial positions. Nearly 17 percent reported a lack of any candidates for these positions, qualified or not.

Although talent shortages are seen among all skilled workers, the gaps at the middle and senior management levels relate to both the number of candidates and the skills they offer. Given the current state of leadership development at Indian companies, and with continued economic growth in mind, our estimates suggest that the top management deficit may range between 10 and 18 percent over the next five to 10 years. This gap leads to delays in readying growth opportunities, and can also put existing business operations at risk.

Because of the lack of qualified successors, senior leaders are not retiring when they should. Instead of developing and executing a clear succession plan, executives have become more comfortable extending their tenure, lacking confidence that the next level of management is up to the task of leading. But executives cannot stay in their roles forever, as much as they might think they need to do so. Even as boards continue to prolong their tenure, many chief executives are aging past the point at which they can postpone retirement. Without a forward-looking plan, companies may find themselves foundering.

“People have been so focused on growth that they have not invested in developing the next rung [of the leadership ladder],” said one senior human resources (HR) manager from a large private-sector conglomerate. “There is a strong circle of top leadership in our businesses, but no tag team.”

Until now, businesses that are closely aligned with the public sector have been less affected by this problem; the large workforce, grown through the ranks, has so far shielded state-run companies. But as a public-sector bank CEO noted, “The pressure is beginning to mount.” He added that this was a serious problem for the company: “More than 30 percent of our senior and middle managers will retire in the next three years. This will leave a large numerical and capabilities gap.”

THE EXPERIENCE DEFICIT : 

The experience deficit plays out differently across different sectors of the economy and at different levels of leadership. In the rapidly growing New Economy industries in particular, such as those driven by digitization, too few people have been working long enough for them to have developed a leader’s perspective. For example, the telecom boom over the past decade has resulted in a flurry of flourishing mobile phone brands in the country. But each of these firms has had to draw upon its existing pool of players to build its senior team. The growth of that talent pool has not kept pace with the growth of the brands. Moreover, most Indian companies today lack an effective in-house leadership development program. Although they rely on young leaders to take on senior positions, they fail to provide those leaders with on-the-job guidance and mentoring, which is necessary to prepare them for greater responsibility.

Thus, many young, inexperienced managers have found themselves launched into senior positions without having had enough training in the complexities of strategy or managing people. As one regional sales head for a mobile handset company put it: “Eight to 10 years ago, there were only three to four handset brands in the country. Today, there are over 60. Relatively younger managers have had to step up to take on top roles in these companies.”

Old Economy industries are also affected by this challenge. Although there may be highly experienced leaders at the top, they are struggling to find experienced middle managers, let alone senior managers, to take their place once they retire.

As one chief human resources officer for a large private-sector conglomerate put it, “We have many technical [or] functional experts but have not invested in helping them make the transition to top positions.” Without that investment, and the development of a strong leadership pipeline that produces new batches of top talent, Indian companies are vulnerable to the next major challenge: the talent war.

THE TALENT WAR : 

As they struggle with the quantity and experience deficits, human resources departments have had to rely on external hiring to build their teams. The demand for capable leaders continues to rise, and the competition for them has intensified. This has led to an accelerating talent war among companies. Those companies that invest in a leadership pipeline are aware that a rival company could hire the senior managers they cultivate at any time. “We have gone the ‘buy’ route [hiring seasoned senior leaders from outside],” said a senior HR manager at a major Indian conglomerate. “We have infused external talent to support our growth.”

The professionalization of family-run businesses, the continued entry of global corporations into India, and the emergence of new sectors are further fueling this race for talent. “We have been hiring aggressively at entry levels to build our talent pipeline,” said the chief operating officer of a public-sector bank. “However, we see an attrition [rate] of around 25 to 30 percent among these new hires. Once trained, they are picked up by private-sector banks at significantly higher salaries.”

But there are other ways to develop and nurture top talent—ways that breed loyalty and provide incentives to young leaders not to jump at the first outside offer they receive. Determining what is causing the leadership deficit will go a long way toward not only retaining more versatile employees, but also decreasing the need to rely on them in the first place.

UNDERSTANDING THE ROOT CAUSES : 

The leadership challenges that Indian companies face have three underlying causes. The first two—Indian demographics and the booming Indian economy—are well known. The third, India’s prevailing technological mind-set, is less obvious to many people, but may provide more leverage for change. Each of the three is worth a brief explanation.

1. Demographics : 

It is no secret that India is a young nation. The country’s relative youth—its median age is 26—is one of the driving forces behind its growth, and an oft-cited reason for its emergence as an economic superpower. Given that around 65 percent of India’s 1.2 billion people are between 15 and 64 years old, and that 30 percent of the population is younger than 15, India will continue to be a young nation for several more decades. The opportunities presented to Indian companies by that young demographic, as both a consumer class and a workforce, are immense. But there is also a massive downside. India’s workforce remains overwhelmingly in need of more skills to match the growing workplace requirements. The conundrum presents itself as follows: As Indian companies continue to expand, they must rely on less-experienced leaders who require more development and training, which is often not a current priority.

2. The booming economy : 

The country’s unique demographics—coupled with the economic reforms of 1991 and an overall surge in globalization—have produced a remarkable decade for corporate India, one of rapid expansion and exponential growth. The pace of that growth has, as discussed, placed significant demand on the short supply of talent across junior, middle, and senior levels. “The economy is growing at a faster pace than the rate [at] which our leadership is aging,” said the CEO of one large private-sector financial-services company. Without robust internal leadership development programs, many companies will be left to costly external recruitment.

3. A technological mind-set : 

The first two underlying causes—India’s young demographics and booming economy—are obvious contributors to the current leadership deficit. Perhaps that’s why few Indian companies have systematically addressed this challenge; they perceive that they have no power over the root causes, and they wouldn’t want to change them even if they could. But the more subtle third cause – the technological mindset — also signals where executives can exert the most power.

Historically, Indian business leaders have focused on developing technology rather than people. In the same way that the country’s demographic and economic strengths offered Indian companies great advantages in expansion but led to gaps in the leadership pipeline, those companies’ emphasis on technical excellence and rapid growth came at the expense of employee development. As a senior manager at a large Indian conglomerate put it, “We have quality technical experts, but can’t convert them into business leaders.

BUILDING LEADERS FROM THE BOTTOM-UP : 

Building from the bottom up means making talent management—identifying, nurturing, and elevating high-potential employees—a key component of HR strategy. This involves FIVE main steps :

1.      Invest in senior management effectiveness – 

Creating an effective senior team begins with setting clear objectives, selecting the right people, defining clear roles for team members, and promoting productive interaction and dialogue among members. The stronger the team at the top, the more confident the rest of the company, customers, and stakeholders can be of its strategy.

How to make top management more effective : 

  • Encourage collective decision making at the top to mitigate the risks of overlooking certain issues and to ensure that a well-informed choice is made. 
  • Create forums for discussion in order to align the overall strategy among top management. 
  • Define the big-picture responsibilities of top managers, in addition to their segment duties. 
  • Assign executive coaches who have business experience and an appreciation for the company’s specific context to work closely with top managers and provide advice on issues related to their individual leadership style, development, and performance. 

2.      Set up feeder roles and successor pools among the next tier of leaders under the top team – 

Multiple feeder roles for each key position in an organization must be identified. Feeder roles are the next line of roles in the same division as a critical role; these can be set up to ensure employees develop the required competencies. Management must then identify potential successors from across these feeder roles and create a pool of ideal candidates. Potential successors should have the opportunity to take on a variety of feeder roles to prepare them to embrace broader responsibilities at the next level, resulting in a well-rounded next generation of upper management.

How to develop feeder roles and successor pools: 

Set up feeder roles to under-gird critical positions wherein the departure of an incumbent can cause business disruption. This may mostly involve senior leadership positions, but can also include critical middle management positions.

  • Identify at least TWO successors for each critical role, selected from those occupying feeder roles or with relevant job experience. 
  • Select successors based on consistent performance, future potential, long-term cultural fit, and commitment to the organization. 
  • Provide members of the successor pools with individual development plans, close involvement by a top leader through mentoring or coaching, and short-term leadership roles, building readiness for leadership within a 12-to-36-month time frame. 

3.      Manage the technical ladder – 

Although it is important to develop business leaders, it is equally vital to develop technical leaders. Companies should adopt parallel leadership tracks that allow high-potential technical staff members to rise to a level of leadership in their chosen technical field without being forced to take on significant people responsibilities.

How to develop a technical leadership pipeline : 

Identify key technical positions on the basis of their importance to business continuity and how they add value.

  • Establish a separate technical leadership pipeline for these positions. 
  • Define technical career ladders separate from those of general management. Allow these highly skilled specialists to flourish in aspirational career paths that do not require them to take managerial positions with people-oriented responsibilities. 
  • Look for candidates on the technical career ladder with managerial potential. Provide them with short-term job rotations—perhaps supplemented with external training—so they may gain the basic skills that are mandatory for senior roles. 

4.      Identify and promote high-potential employees – 

As we’ve said, the lack of a leadership pipeline is not a uniquely Indian phenomenon. But it is a uniquely Indian problem to have so much raw talent available, with such a huge proportion of it undeveloped.

Talent management systems need to be redesigned to focus on potential as much as on performance. Objective measures must be put in place to gauge leadership potential. Top performers must be identified as “high potential” only if they also have great managerial or technical leadership potential.

How to develop high-potential employees : 

  • Identify employees who have the potential to take on roles that are two to three levels above their current role—not just the next higher role. 
  • Don’t mistake performance as a proxy for potential; performance ratings reflect an individual’s ability to deliver on expectations from their current role and not the potential to take on greater responsibilities. 
  • Rate high-potential employees on the basis of whether they display the ability, mobility, engagement, and aspiration needed to take on more senior roles. 

5.      Build quality cadres at the junior level – 

The cadre level is an ocean from which future leaders will emerge, so special attention needs to be given to it. First, the organization must determine the optimal mix of cadres recruited directly from universities and entry-level hires from the job market. Within the former, the organization must carefully select which undergraduate and postgraduate schools it plans to hire from and the initiatives taken at those schools to promote the company.

How to develop a quality cadre pool : 

  • Select technical and management institutes in line with the company’s skill expectations and compensation levels. 
  • Ensure that there are sufficient on-campus initiatives to promote the organization as a desirable recruiter. 
  • Evaluate the success of campus recruiting over a few years in terms of attrition rate and quality of employees; add and drop recruitment campuses according to the results. 
  • Institutionalize a standout summer internship program as a default route to full-time hires; many companies make the mistake of not taking summer internships seriously enough, and interns do not get the right kind of assignments and oversight. As a result, companies lose the important opportunity to conduct an extended “interview process” to evaluate candidates. 

In this article, we’ve presented the talent shortfall as corporate India’s greatest challenge—more difficult to master than growth, expansion, technological advancement, or business strategy. But talent is also the country’s greatest opportunity. As more Indian companies compete on a global scale, as their external ambition grows, senior executives will be drawn to think more effectively about people. India has one distinctive cultural asset in this regard: It has a tradition of taking the long view. People need time and discipline if they are to develop, and if Indian companies are willing to apply that long-term outlook, they may be able to leap past other nations’ companies in their approach to human capital.

Before the country’s Top Business Leaders retire, they should devote their full attention on the care and development of people coming up behind them. That will allow them to retire with confidence, knowing that they are leaving their business in good hands not just immediately, but long into the future. By building the right, integrated capabilities, and instituting a holistic leadership development program, they can ensure strong leadership for generations to come.

 

“Bridging the Gap” between “Marketing & Sales” |by: Carlos Nouche | Chief Outsiders

 

Many companies today grapple with a misalignment between marketing, sales, and the executive staff.

This can cause a case of the “mis”- missteps and mis-communication, which lead to lower productivity and, ultimately, lower profits. According to a 2010 report by Aberdeen Research, companies who are “best-in-class” at aligning marketing and sales had 20% average growth in annual revenue as opposed to a 4% decline in “laggard” organizations. It is important for CEOs to lead the charge in aligning marketing and sales (critical aspects in any business) to develop momentum that feeds upon itself and moves your organization forward.

Marketing Challenge:

Marketing teams struggle today to maximize marketing dollars spent on lead generation, product positioning, analyst relations, and sales materials. Often these marketing resources are not targeted to reaching the ultimate buyer nor do they use a common framework that allows for sales to take immediate action in the field.

Sales Challenge: 

Sales teams struggle to grow revenues by customer, by representative and by product line.  Often they lack the connection to marketing to pull out key customer success stories and to loop back to marketing key customer data related to wins and losses.

Bridge

The Solution: 

Most successful companies implement a common framework and process so that marketing is better able to deliver actionable material to the field and sales is better able to react to customer demands and in turn deliver must have customer data back to marketing. This common framework and process should permeate from executive staff to front line customer facing organizations, positioning company strengths in terms of what they mean to the end customer and the impact those strengths have on the customer’s bottom line. This process loop results in a snowball impact that can shift company momentum into overdrive.

The Call to Action: 

Are your marketing and sales teams on the same page? Lack of alignment between marketing and sales can hurt the performance of your company, but you can overcome this challenge and get your teams in sync by implementing some key strategies that include:

  1. Aligning teams to maximize time, resources and budgets
  2. Developing a common language from the field sales force to marketing to the executive staff to allow for move effective and efficient communication around our company value proposition
  3. Making sure that marketing is involved in playing a strategic role within the executive staff to become a change agent
  4. Connecting marketing to the revenue line of the company
  5. Measuring the success of sales campaigns, leads, average deal size, sales by product offering, by vertical, etc.

Whatever framework you develop it must be aligned to the buying process that decision makers go through in making major purchasing decisions. Once your organization understands the key ingredients of the decision process – marketing and sales can start working together to craft messaging around a better understanding of customer challenges and how your products and services are able to uniquely address these challenges and deliver real results.

When marketing and sales work well together companies experience improvement in key performance metrics including shorter sales cycles, decreased market entry costs and lower cost of sales. 

Thus, bridging the gap between marketing and sales can really help your company move the needle toward business results that show up in the bottom-line. 

The “REAL Death of a Salesman”: Why the 20th-Century Revenue Model Is Dead |by: Rick McPartlin | VISTAGE

It’s 1949, and Willy Loman is ahead of his time, showing the rest of us that things are changing and we’d better take notice.

“ The man who makes an appearance in the business world, the man who creates personal interest, is the man who gets ahead. Be liked and you will never want.” – Arthur Miller, Death of a Salesman, Act 1. 

Like many of us, Willy wanted to maintain that golden age of the golden-tongued salesperson who could “ make an appearance,” tell a story, buy a lunch, make a promise — and sign a deal.

Too many sales and marketing people don’t want to be managed, measured, coached or taught. They know what they know and it has always worked, and if it fails now, they convince themselves that it’s the product, the boss, the times, other people, or an uneven playing field that’s at fault.

Historically, leadership was happy to believe that sales and marketing was a combination of art, the golden tongue and a robust rolodex. If they could hire the right artist, things would be great, since the product sells itself anyway.

Sometime between Willy’s day and today, it became clear to leadership that if there wasn’t enough sales growth, you could fix it with a new compensation model, a bigger marketing budget or better training. And if those didn’t work, it must be the wrong people, or the people just weren’t trying hard enough. Next, the solution was to tighten things up with software and process. A new marketing program backed up by a new CRM would make those people play golf less and sell more.

If you’re thinking it can’t be this hard to get the revenue process migrated from Willy’s world to something reflecting the sophistication of today’s business world, you would be right. The truth is that, until now, fixing the “Revenue Generation” process just wasn’t a high priority. Until the 21st Century, it was about fulfilling product demand, and if you could build more products at a reasonable price, the channel would take it, and the buyers would buy it.

The 21st century truly marks the “ Death of a Salesman,” OR at least the “ Death of a Sales Process ” — the mold of Willy Loman.

No longer can Sales & Marketing functions be separated from the rest of the company. Shared goals, metrics, processes and execution must span the organization to compete.

For every deal, there is someone in the world that can seriously compete, and with the Internet, the buyer can find everyone. The new competitors started with scarce resources and have maintained their focus on cost and go-to-market. To win, the businesses in North America who are organized to fulfill will have to learn how to reduce cost and grow revenue at the same time.

In the 21st century, the buyer is truly king! The buyer can easily use Google to almost instantly learn virtually everything about the competition, pricing, products, ethics, leadership, commitment to Green, and other experiences. To the dismay of many companies, new buyers want different experiences than the boomers did, and they vote with their money.

Today’s winners will still sell and market, but it may look like Amazon OR an Apple Store or the Salesperson who is an expert in applying the product to the customer’s business OR personal life.

In this century, what’s certain is that the “ Revenue Generation ” process is a company-wide Go-to-Market process focused on customer experience.

This new revenue process will be made up of a revenue strategy, metrics, constant feedback, go-to-market skills, transparency, and aligned execution to determine who wins.

This science of “ Revenue Generation ” changes how companies plan and execute, just like Six Sigma and Lean changed manufacturing 30 years ago.

The discipline to execute this science requires THREE elements :

  1. An executable Revenue Strategy,
  2. An intentional investment in “ Revenue Generation ” structure, and
  3. Aligned sales and marketing execution.

As companies implement these THREE elements of revenue science, they will shed the “ Cost of Chaos,” which releases the Top-Line to grow effortlessly.

As the 20th century becomes a memory and the 21st century puts its brand on all of us, take these FOUR steps :

  1. Say farewell to Willy and let him and the business model he embraced RIP.
  2. Change your focus from tactical sales and marketing to strategic “Revenue Generation” and the three elements of Revenue Science.
  3. Remove the “Cost of Chaos” and invest the (up to 20 percent) increased cash flow it gives you back in the business.
  4. Make cost management and growing profitable revenue ONE strategy — and don’t rest until you make that work.

“Consumption by choice”: Nielsen India’s research |by: Anita Sharan | Hindustan Times

Nielsen India’s research indicates that of the first time shoppers – growing at 15 % annually – coming to modern retail, TWO in FIVE spend more than they had planned. This breed now buys 35 % of its fast moving consumer goods (FMCG) from modern trade. ONE in THREE are from “SEC C “.

Side by side are the “SEC E ” consumers – recent migrants from rural India to cities – who don’t necessarily hold formal sector jobs but who have seen a relative income explosion in the past two years.

Nielsen calls them the “Low Income Value Explorers” who, like every other income segment, are aspirational.

Adrian Terron, executive director, Retail & Shopper practice, Nielsen India, said, “SEC E, incomes have doubled or even tripled from their rural levels. Since their quality of life is low, these consumers spend on entertainment or infrequent indulgences. They have satellite TV at their shanties; they may also own a small car such as a Wagon R or Alto – bought on EMI’s – besides a two-wheeler.”

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Since brands are offering even their premium products in smaller packaging – such as premium shampoos in sachets – these consumers are accessing better products. Terron said featurisation of the economy segment is, in fact, a big trend. “Take automobiles. What was earlier offered as premium value-added features is now loaded into economy segment cars.”

Amitabh Mall, partner and director, consumer and retail practice, The Boston Consulting Group (BCG), said that consumers have been spending more over the last FIVE years.

“Since the number of households is not going up but consumption is, purchase baskets are obviously expanding. We track modern retail sales and have observed a growth in the number of bills as well as the average transaction values.”

BCG’s projected income pyramid over a 10-year period till 2020 indicates a narrowing at the bottom and a thickening in the middle. “Ultimately, this pyramid will look more diamond shaped,” Mall said.

He pointed to the increased consumer spending on “services” too… including Air-travel; Salons, Spa’s & Fitness Centres / Health-Club membership’s; and Eating-out , at fancier places.

“Experiences are changing as exposures increase. In 1990, two million people had travelled abroad. In 2010, this number was 12 million.”

Pinakiranjan Mishra, partner and India leader, retail & consumer practice, EY India, said that there is a noticeable trend even among premium brands creating entry price points to draw in more consumers.

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“Brands such as Mango and Zara offer some products at entry price points to attract aspirational consumers who otherwise wouldn’t walk in. Once you are in, it is likely you will upgrade. However, even at the premium end, consumers are seeking a value equation.”

Ketan Desai, MD, Integer, a shopper marketing agency, pointed to a dual consumer trend: “While deals are seeing them bulk buying on many products for longer period of time, consumers are also upgrading to higher end buys that add to better image expressions.”

Santosh Desai, MD, Future Brands, added that with consumers, it’s more a squeeze of caution and restraint than spending ability currently.

“Overall, consumers are still in a ‘ more mindset ’ rather than a ‘ less mindset ’. They still want a sense of progress. A powerful device to communicate progress is consumption.”

However, Terron said, more than bargain hunting, consumers are indulging in ‘ Fashionable Frugality’…

“ Earlier, it was about pride in the most expensive buy. Now, because everybody can afford more, I will look to get the same thing at a better deal – a Vero Moda outfit, for example, through a monsoon sale OR a loyalty-scheme. Getting a good deal earns me the conversational and street-smart currency.”

Should you invest in “Sales-Training for your Health Club Staff ?” |by: Jim Thomas |CYBEX

 

Health Club ” Sales – Training “ is a must for any fitness facility wishing to secure a competitive advantage in their marketplace. This has always been important, but it’s even more important “now” than ever. 

The ability to sell memberships, personal training, etc. is fundamental to success in the fitness business and the full effort of the sales team is essential. The health club sales team brings in the revenue that writes the check of everybody in the gym from the administrative staff to the cleaning crew to the owner.  Unless a health club can generate membership sales there is no revenue and there is no business.

The only thing worse than training your health club membership sales staff and having them leave….is NOT training your membership staff and having them stay.

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Here are some thoughts why Health-Clubs & Gyms should consider ” Investing in regular Sales Training ” :

  • Improve membership sales & productivity:  Just a 10% increase in the membership sales of one membership rep would offer a quick return on investment (ROI).
  • Gain a competitive advantage over other health clubs: Many fitness facilities do not properly train their membership sales team. Health clubs and gyms that train and invest in their employees are also strengthening their own competitive position. A competitive advantage could mean the difference between success, survival or disappearance. New sales ideas and strategies learned from a proven health club sales training program give your fitness facility a strong advantage against other gyms in your area…even a slight advantage can make all the difference in that next membership sale.
  • Increase employee satisfaction and staff retention: Everybody wants to feel good in their jobs. Health club sales training develops the abilities of membership sales personnel and encourages them to use their natural talents and abilities in the membership sales process. This helps to establish better relationships with guests and members.
  • Confident membership sales staff : Confidence is a must when it comes to health club sales. A confident membership sales rep feels good about what they do, speaks with authority about the fitness facilities services and products and transfers the same confidence to guests and members. This confidence is crucial in making membership sales and in getting guests and members to join your health club.
  • New creative ideas and inspiration: Implementing the new ideas and strategies learned in health club sales training makes selling memberships more exciting and simplifies the process. Working in fitness sales should be fun as well as providing an exciting daily challenge and opportunity. The idea is to create an atmosphere that allows a motivated person to act. Health Club sales training will help to do this.
  • Motivated membership sales team: Membership sales reps are always more motivated when they can see a positive outcome as a result of their actions. This combination of confidence and motivation is a very powerful mixture in any health club situation.

Health club membership sales reps that have the motivation and confidence in themselves will sign up new members who are not only satisfied members but members who will also refer their friends.  We all know that there is no better way of marketing your health club than word of mouth advertising. We instinctively have more confidence in a fitness facility when it has been recommended by somebody we know. This is particularly the case where the health club we are selling is a more expensive one.

” For those of you competing against Lower – Priced Competition, this can be the difference-maker “…. 

NOW, GO GET SOME HEALTH-CLUB SALES TRAINING !!  

“Fighting Corporate Hubris”: FOUR Steps of the “Perpetuity Principle”|by:Hans-Paul Bürkner | BCG

Massive corporate fraud, the dot-com bubble, the worst economic crisis since the 1930s—these events have undermined many companies and leaders over the past 15 years. As CEOs begin to absorb the lessons of this turbulent period, they should be careful not to overlook one significant contributory factor: hubris, the pride that comes before a fall.

In a corporate setting, “Hubris” can take many forms, such as :

  • Creating grandiose strategies that find their way into glossy brochures, new advertising campaigns, and rhetorical conference speeches—but never get implemented
  • Launching high-profile moves into new, exciting, international markets in a costly and flamboyant way—but failing to create competitive advantage
  • Pursuing big mergers and acquisitions that deliver scale, bold headlines, and large bonuses for the management team—but no long-term value
  • Completing dubious financial transactions that undermine transparency—and serve only to show that the company isn’t addressing the fundamentals of business

Time and again, these activities have led companies to overextend themselves, to falter, and—all too often—to fail. CEOs should guard against them at all costs.

Hubris and Its Nemesis: The Perpetuity Principle – 

The CEO and the executive committee play a critical role in the fight against hubris. They do, by their conduct, set the boundaries and norms of behavior for the rest of the company. Today, the best managers follow what we call the perpetuity principle, serving as stewards of their companies and, by doing so, developing profitable, sustainable, and trusted businesses. They focus on results, ensure that substance triumphs over style, and champion a true humility—one that prioritizes ethical behavior, respect for others, modesty, and diligence. To adhere to this principle, CEOs should take the following steps.

1. Renew the focus on delivering long-term value. It is all too easy to shrug off a sluggish performance as evidence that the market misunderstands the company’s terrific work or to point to a great quarter or two as a reason for ignoring any deterioration in the business fundamentals. But before castigating critics or declaring victory, the prudent leader should take a long, hard look in the mirror: knowing what creates value—and what destroys value—for customers, shareholders, and other stakeholders are core competencies of the CEO.

On a routine basis, the CEO and his or her team should embark on an unsentimental, even ruthless, review of the company’s portfolio to identify any under-performing business units or decline in the key drivers of value, such as market share, gross margin, and pricing power.

At the same time, they should pursue strategies to deliver top-line growth. But they must be wary of tempting proposals for fast-tracking growth—such as buying and selling businesses—just to please the markets. Though such strategies have their place, big splashy acquisitions that promise much but turn out to be poorly thought-out, badly executed, and deeply damaging to the long-term health of the company occur all too often. In fact, according to BCG analysis across all industries, more than half of all public-to-public deals between 1988 and 2010 actually destroyed shareholder value.

Ultimately, a company will thrive only if it offers differentiated products or services to its customers and delivers them well. Leaders should never forget this—no matter how much pressure they feel from the financial markets.

2. Foster an open and questioning culture, and encourage the company’s major decision makers to challenge conventional wisdom. Of course, this is not easy to do; for CEOs, encouraging others to question their carefully worked plans can be an uncomfortable process. But cultivating an environment in which executives feel free to articulate their views without fear of retribution is necessary—and usually the company is stronger for it.

There are a number of ways to foster an unfettered dialogue. The most effective is when a CEO initiates the discussion by challenging the existing business model. Another is to conduct an exercise in which one group of executives takes a contrarian view, playing devil’s advocate.

A third approach is to develop a series of scenarios, or mental “boxes,” that give members of the executive board a chance to gain a fresh perspective on their strategic plan. This is not some tired recommendation to engage in scenario planning or to think outside the box. Rather, it is an exhortation to think in newboxes—to question everything, to think the unthinkable.

Whether or not these new scenarios are plausible is beside the point. What’s important is that each box be sufficiently provocative to enable the CEO and the executive team to test the merits of their preferred approaches in different boxes and, in doing so, to break out of a tunneled managerial perspective.

As well as creating new visions of the future, CEOs must address, in a very practical sense, the way they manage and organize work. All too often, a CEO orders a reorganization of the company that, despite the best of intentions, leads only to a costly and over-complicated proliferation of structures, processes, and systems. This is why what we call “smart simplicity”—minimizing structures, processes, and systems while maximizing leadership, cooperation, and engagement—is so important. It avoids the illusion of superficial change, which actually inhibits real transformation, and forces leaders instead to consider some key questions: Are we really going to change what happens, what we do, and the way we work together?

3. Develop a role as stewards of the company, guiding it toward a prosperous future with a respected place in society. Companies play an important role in society, and their leaders can be significant local, national, and international citizens. CEOs, therefore, should be conscious of their role in the community, set an example through their behavior, and strive both to do well and to do good, today and for tomorrow. A narrow focus on short-term profitability, coupled with excessive bonus payments for top management, undermines the very existence of a company—especially during a time of austerity in the West and widening gaps in wealth around the world.

To set the best example, CEOs should ask themselves this question: “Is my compensation in line with performance?” If the answer is no—then that’s a problem. Certainly the best-performing executives should be well compensated. But those who have poorly served—or even defrauded—their shareholders, customers, and local communities should face negative consequences rather than be rewarded with golden handshakes.

CEOs should also ask themselves, “Is my company making an appropriate contribution to society ? ” With the rising importance of citizenship, trust, sustainability, and reputation, leaders cannot fixate solely and selfishly on the company. They have a role in shaping a more resilient and responsible future for society at large.

Companies can contribute to the well-being of local communities through their products and services, job creation, education, and skills training. They should also pay an appropriate level of corporate tax. Of course, it is the duty of each company to take every legal step to minimize its tax burden. But going too far risks a serious backlash—not least from consumers and especially at a time of large government deficits, which are partly due to tax evasion and poor collection. This risk holds equally true when it comes to labor laws, environmental regulations, and quality standards.

4. Ensure a regular change of leadership. CEOs should conduct a periodic shake-up of those around them, including their loyal lieutenants. It is lonely at the top—and never more so than when reshuffling the executive pack. But this is a task that CEOs must not shirk: they cannot afford to surround themselves with a cadre of people who stop challenging the status quo (now that they are the status quo), who put career before company, and who stay silent when they should speak out.

In general, CEOs themselves should have time-limited tenures, too. No one is above the company, not even its highest officer. In my experience, most CEOs, in the true spirit of a steward, should step aside after no more than ten years. Now, some leaders may read this and think that a decade in the top job is the kind of corporate eternity they can only dream about. The fact is, however, that some companies are nominally led by people who no longer actually lead.

So why deprive the company of a top leader who has built up a wealth of experience? The answer is straightforward: Over time, it gets progressively more difficult to bring about necessary change. Of course, it is not hard to point to the exceptions that prove the rule—the extraordinary CEOs who defy the years and continue to generate value over decades. But, too often, long-serving CEOs are wedded to ways of doing things that quickly become outmoded in today’s fast-changing and volatile world. And while success can certainly breed success, it can also breed complacency and failure.

Knowing when to hang up one’s boots is notoriously difficult, whether in business, politics, or sport. The most successful leaders, wary of destroying the legacy they have built, understand that they should never think they are indispensable.

The CEO’s Core Task : Putting the “Execute” Back into “Executive”…

Over the past two decades, too many CEOs lost focus: to use the language of sport, they took their eyes off the ball. Today they have a second chance.

The essential purpose of a company is to deliver value to its customers and profits to its shareholders on a sustainable basis—and this means that the organization needs to be a good citizen in the communities where it does business. So the task of the CEO, as the leader of the company, is to make this happen, to get things done, to execute—hence the name, “chief executive officer.”

” To be truly successful in a game-changing way : CEOs must adhere to the “Perpetuity Principle”, leading from the front and engaging in a relentless fight against corporate hubris—whether this manifests itself as greed, self-promotion, or ducking the hard realities of the world “.

“KKR raises $6B in largest Asia fund” |by:Reuters |VC Circle

” The Asian II Fund follows the $4 billion Asia fund, it raised in 2007 and a $1 billion China Growth Fund in 2010″.

A record $6 billion Asia fund announced by US private equity firm KKR & Co on Wednesday will be deployed at a time when an economic slowdown and emerging market sell-off has knocked the overall value of Asia Pacific corporations to historic lows.

While the market volatility should offer KKR opportunities to buy low, the record of the private equity industry in Asia shows that investing in the region is not as easy as it seems.

Regulatory hurdles, cultural obstacles and wild market swings have forced global buyout firms to swallow smaller investment returns than they hoped, with the exception of a few home run deals.

But KKR, a storied firm that pioneered the leveraged buyout back in 1976, has managed to find success in Asia even after arriving later than rivals.

The firm has invested and exited China Modern Dairy Holdings Ltd, Singapore tech firm Unisteel, Japanese recruitment firm Intelligence, and remains invested in South Korea beer and baiju spirit maker Oriental Brewery.

That success has encouraged investors to return to KKR’s second Asia-focused fund in droves, despite companies across the region facing a shortage of available money amid concerns of credit tightening.

“In private equity, you can make a lot of money in horrible macro environments,” said Doug Coulter, head of private equity for Asia Pacific at LGT Capital, which allocates money to private equity funds. He was speaking at a Hong Kong Venture Capital Association event last month.

Most private equity portfolios have a few investments that may prove to be more difficult than expected. For KKR, the stake it purchased in Chinese investment bank CICC looks to be under pressure. The bank, once China’s top investment bank, has steadily lost market share since the KKR deal, hit by tough competition and a steep slowdown in Chinese stock issuance.

Patchy Performance :

The MSCI Asia Ex-Japan index is trading at 1.4 times book value, 25.4 per cent below its 10-year median value, according to data from Thomson Reuters Datastream. The index’s price to earnings ratio is also at historic lows. (To see a graphic click link.reuters.com/nej59t)

Investors who allocate money to private equity firms were quick to commit to the last round of Asia private equity funds raised in 2006 and 2007, though the patchy performance of that era has left the investors, known in the industry as limited partners, more selective.

Thus the low prices on offer have not translated to an easy fund-raising climate.

TPG Capital, which started raising a $5 billion fund around the same time as KKR, is still on the road raising money, and is expected to close short of its target, according to people familiar with the matter.

Carlyle is also still in the process of raising a $3.5 billion fund that will be its fourth for the region, sources have previously told Reuters. The third fund, closed in 2010, was $2.55 billion.

KKR’s ability to raise a large fund relatively quickly was due in part to the performance of its first Asia fund, according to private equity investors who spoke to Reuters.

The California Public Employees’ Retirement System, the largest US pension fund better known as CalPERS, has invested $237.5 million in cash into KKR’s first Asia fund, according to the CalPERS website, after committing $275 million to it in 2007. So far, CalPERS’ net internal rate of return on the fund stands at 13.5 per cent, CalPERS says.

By comparison, CalPERS has invested $314.2 million in cash into TPG Asia’s fund V, after committing to $375 million that same year. So far, the pension fund has earned a net internal rate of return (IRR) of 0.3 per cent, according to the website.

KKR is ahead of peers in Asia, though Affinity Equity Partners – an Asia focused private equity firm — earned CalPERS a 16.5 per cent net IRR on a $125 million investment into the 2007 Affinity Asia Pacific Fund III.

The wind appears to be at the back of KKR’s Asia team in the current financial climate, as a drop in initial public offerings and bond volumes across the region means corporations have fewer options when it comes to raising cash.

“There are so many more interesting transactions you can do today in the environment we’re in because there are challenges,” said Derek Sulger, founding partner of China focused private equity firm Lunar Capital Management, also speaking at the HKVCA event.

The per ception of Asia’s growing investment opportunities has kept money flowing to the buyout industry, with 22 per cent of the global total of private equity funds being raised as Asia-focused, compared to 21 per cent as Europe-focused, according to data provider Preqin.

Asia II :

KKR has been actively scouting real estate investments in China, according to banking sources. Those investments could be made from the firm’s global real estate fund, or its second Asia buyouts fund.

KKR has also developed a credit lending strategy in India, which it hopes to extend to other countries across Asia, although the firm cannot lend from the new Asia buyouts fund.

Lending directly allows KKR to develop relationships with companies which can lead to buyout opportunities further down the road, according to a source familiar with the strategy.

KKR was founded in 1976 by two cousins, Henry Kravis and George Roberts, and Jerry Kohlberg, after they worked together at Bear Stearns. Kohlberg left the partnership early on, but the firm went on to pioneer the business of buying a company on borrowed money, restructuring it in certain cases, and selling it later for more than the cash invested.

KKR, which went public in 2011, was immortalized in the book and movie “Barbarians at the Gates”, which chronicled the takeover battle for US conglomerate RJR Nabisco.

The Asian II Fund follows the $4 billion Asia fund it raised in 2007 and a $1 billion China Growth Fund in 2010, KKR said in a statement. The New York firm says it has invested more than $5 billion in Asia since 2005, with its regional portfolio of 30 companies employing around 100,000 people.

KKR has invested in tech, consumer and financial businesses across China, Singapore and South Korea since it started its first Asia office in Hong Kong in 2007, led by Korean-American Joseph Bae, who remains in charge.

“Madness & Delicate Art” of Exercising Power in Negotiating |By:Marwan Sinaceur |INSEAD

” Unpredictability can be an asset in making people do what you want as a leader and a negotiator”….

In October, 1969, the Nixon White House indicated to the Soviets that the “madman was loose” as the U.S. military ostentatiously flew bombers packed with thermonuclear weapons near the Soviet border for three consecutive days.

It was part of the then-president’s “Madman” strategy, designed to make the leaders of other countries, especially the Soviet Union, think that the American president was quite literally emotionally unstable and disjointed. Senior U.S. officials, such as Secretary of State Henry Kissinger, not only portrayed Nixon as irrational and volatile to his Soviet counterparts, but made them think that Nixon was totally unpredictable. The sudden decision to bring the bombers home reinforced the “madman’s” unpredictable nature and baffled the Soviets.

It was a dangerous tactic, designed to manipulate the Soviets. Yet, history – or at least Kissinger’s historical reminiscences – proves it worked. Specifically, the Nixon administration believed their tactics opened the door to arms control deals of the early 1970s.

Although many historians have theorised that such inconsistency gave politicians and heads of state the upper hand in dealing with other leaders, whether they would work in the cooler analytical business world has been unclear. Until now. The advantages of being “unpredictable” or “emotionally inconsistent” in business negotiations are tested in a paper by INSEAD Assistant Professor of Organisational Behaviour, Marwan Sinaceur.

“ We found through three different methods that when you alternate between anger and another emotion over time, you were more likely to extract concessions from the recipient than when you expressed anger consistently,” said Sinaceur in an interview on his paper “The advantages of being unpredictable: How emotional inconsistency extracts concessions in negotiation” published in the Journal of Experimental Social Psychology.  Blowing hot and cold over time is an effective negotiation strategy.

Don’t get mad…

“This is a novel finding because most of the research on emotional tactics in negotiations had found that when you expressed anger, you were likely to get ahead or likely to extract concessions from the other because you are perceived as tougher and more likely to walk away. So the counter-intuition of this finding is that to some extent by your expressing less anger overall… you can get more from your recipient than if you were to express anger consistently.  Importantly, you also are perceived as a nicer person.”

Sinaceur proved his findings in three different experiments, ranging from face-to-face to computer simulated negotiations and scenarios. Across all studies, recipients of alternating emotions (such as your going from positive to negative, then to positive again) felt less control over the outcome.

“This means if you express emotional inconsistency to me, I’m going to perceive you as more unpredictable.  As a result, I’ll feel less control and uncertain about your next move.  By me feeling less control, I’m going to think ‘look, I’d better make further concessions because the counterpart seems to be very unpredictable and if I want to increase the likelihood of getting the deal and resolve this uncertainty, I have an excuse to give in,’” Sinaceur said. “Usually people don’t like uncertainty, so when the recipient sees that you are behaving in an unpredictable way, they feel that they’re not in control of what is happening in the negotiation.”

Manage impressions over time:

Being emotionally inconsistent can therefore yield concessions from your opponent and give you the upper hand. But how should you apply the aura of mystery to your negotiation? Sinaceur says one shouldn’t start with expressing anger from the beginning of the negotiations.

“There is a difference between expressing anger, then happiness then anger then happiness versus expressing happiness then anger, then happiness then anger. We found that the latter strategy is more effective in making others comply.  Overall, it is better to start expressing happiness earlier in the negotiation so that you create positive impressions first.  Then, but only then, you can express dissatisfaction when the discussion about the issues gets real and tough.  Do not shoot too early.  Do not start with anger!,” he said. “Clearly, if you express happiness and positiveness at the beginning of a negotiation people are going to feel less threatened and, eventually, they’ll disclose more information to you. Start nice, make people trust you first, make people talk and confide in you before you get tougher.  That’s critical “Express anger only later in the negotiation, in fact only at the very end of the negotiations.  And do so parsimoniously.  The less anger you express, the more impactful it will be!  If you express anger late and with parsimony, people are more likely to infer that you’re expressing anger because there is a specific issue at hand and you’re not happy about this or that. It’s not because you are a jerk or you are chronically moody as may be inferred if you were to get angry from the beginning of the negotiation.  Finally, even when you express anger at the very end, you can do so in a non-aggressive way by not directly accusing or blaming your counterpart.  Express your dissatisfaction with the issue at hand rather than getting angry and humiliating the other person.  So express dissatisfaction at the issue; do not blame your counterpart.  You can even express dissatisfaction with a positive spin,” Sinaceur added.

A taste of your own medicine:

So for recipients of unpredictable negotiations, how can you protect yourself from the advances of the “madman/woman”? Sinaceur has some tips.

“So now the question is, if people act unpredictably towards you and you’re going to feel less control and feel more uncertain, how can you manage that? A first tip is to take a break away from the negotiation so you’re not facing or talking with your partner anymore,” he said. This will help you literally cool down and step back from the situation. Secondly, Sinaceur advises to think back to your original objectives and targets of the negotiation. Make sure you set your targets before beginning. Thirdly, Sinaceur advises keeping in mind that your opponent could be putting on a show with their emotions to leverage concessions. This is easier said than done.

“ Much research suggests that we overestimate our ability to detect whether somebody is faking his/her emotions or not, so keeping in mind that we may not read another’s emotions accurately is beneficial. If somebody expresses anger, it may be strategic: they may not really be feeling angry.

Also, somebody expressing anger might in fact be in a weak position. Perhaps the angry expresser is just worried about something.  So trying to keep calm and not wanting to close things right away will help you deal with the situation. Buy time to think and investigate before you react.  Don’t feel pressurised to react right away to another’s moves. Sometimes the best reaction toward another’s aggressive moves is to keep still without your speaking your mind. You can defuse the other’s aggression by non-verbally acting in a way that shows (e.g., keeping silent, smiling) that you’re not impressed,” Sinaceur said.

“Becoming a Better Judge of People” |by: Anthony K. Tjan |HBR

In business and in life, the most critical choices we make relate to people. Yet being a good judge of people is difficult. How do we get better at sizing up first impressions, at avoiding hiring mistakes, at correctly picking (and not missing) rising stars?

The easy thing to do is focus on extrinsic markers — academic scores, net worth, social status, job titles. Social media has allowed us to add new layers of extrinsic scoring: How many friends do they have on Facebook? Who do we know in common through LinkedIn? How many Twitter followers do they have?

But such extrinsic credentials and markers only tell one part of a person’s story. They are necessary, but not sufficient. What they miss are the “softer” and more nuanced intrinsic that are far more defining of a person’s character. You can teach skills; character and attitude, not so much.

Judging on extrinsic and skill-based factors is a relatively objective and straightforward exercise. Gauging softer traits such as will or attitude is much, much harder, and takes one-on-one contact, attentive listening, and careful observation. That’s why it’s important to approach a job interview more as an attitudinal audition than a question-and-answer period around skills.

Over the years, I have been collecting and reflecting upon questions that have helped me improve my people judgment, especially around personality and attitude.

Here are TEN key questions to help you better understand the intrinsic “why” & “how” behind a person:

1. What is the talk-to-listen ratio? You want people who are self-confident and not afraid to express their views, but if the talk-to-listen ratio is anything north of 60%, you want to ask why. Is it because this person is self-important and not interested in learning from others — or just because he is nervous and rambling?

2. Is this an energy-giver or -taker? There is a certain breed of people who just carry with them and unfortunately spread a negative energy. You know who they are. Alternatively, there are those who consistently carry and share a positivity and optimism towards life. There is a Chinese proverb that says that the best way to get energy is to give it. Energy-givers are compassionate, generous and the type of people with whom you immediately want to spend time.

3. Is this person likely to “act” or “react” to a task? Some people immediately go into defensive, critical mode when given a new task. Others jump right into action and problem-solving mode. For most jobs, it’s the second kind you want.

4. Does this person feel authentic or obsequious? There is nothing flattering about false praise, or people trying too hard to impress. Really good people don’t feel the need to “suck up.” Those who can just be themselves are more pleasant to work with.

5. What’s the spouse like? One of my business partners gave me a great tip for interviewing a super important hire — go out with their spouse, partner, or closest friend. We are known by the company we keep.

6. How does this person treat someone she doesn’t know? At the other end of the spectrum, observe how a person treats someone she barely knows. This is what I call a “taxi driver or server test.” Does the person have the openness and yes, kindness, to have a real conversation with a waiter at a restaurant or the driver of a taxi? Does she ignore them or treat them rudely?

7 Is there an element of struggle in the person’s history? History matters. In our research for the book, Heart, Smarts, Guts, and Luck (Harvard Business Review Press, 2012), my co-authors and I found that around two-thirds of people who were “Guts-dominant” — those who had the desire to initiate and the ability to persevere so crucial in entrepreneurial ventures — had some financial hardship or other challenges in their formative years. Early failures and hardships shape one’s character as much or more than early successes.

8. What has this person been reading? Reading gives depth, helps one understand one’s history, frames ideas, sparks new thoughts and nuances to existing perspectives, and keeps you apprised of current events. It’s a generalization, but the more interesting people I have met tend to read a lot — it’s a mark of intellectual curiosity.

9. Would you ever want to go on a long car ride with this person? This is a variant of the “airport test.” Years ago at my first job, I was told about the thought-experiment of asking if you were stuck at an airport with a candidate, how would you really feel? In a similar fashion, is this the type of person with whom you could imagine going on a cross-country drive?

10. Do you believe that this person is self-aware? My colleagues and I believe the most important pre-requisite to great leadership is self-awareness. Does this person have an intellectual honesty about who he is and his strengths and weaknesses? Does she have a desire to learn and take appropriate actions based on that awareness? It is usually a more difficult question to answer than the rest — but look for humility, and congruence between what the person thinks, says, and does.

Ask these TEN questions about someone, or even a subset of them, and you’ll be on a path to being a better judge of people…

“Succession Management”: A Model that Helps Recruit & Retain High Performers |by: Terina Allen |

” Succession Management”  is a forward-thinking process whereby all the succession planning efforts are administered and measured while allowing for adjustments that ensure ongoing alignment with achieving strategic outcomes.  When a leader wants to fortify her human capital management initiatives and develop high performers who will ensure goal achievement, she develops a succession plan and then executes and manages this plan for success !

Just as with a good strategy (where strategic planning had to move beyond the planning process to implementation and measurement) succession planning needs to move beyond the planning stages, which is where it remains within most organizations.  After you have embarked on the planning and have a real commitment to fill gaps in development, respond to retirements, engage different generational groups and recruit and retain high performers, you are getting into real succession management.

  • Succession planning – is about getting the right people, with the right competencies, in the right place, at the right time.  It is focused more on the “people” side of the equation.
  • Succession management – is about creating and ensuring the right positions exist within the organization to advance organizational strategy and accomplish goals.  It is focused more on the “relative value” that each “position” brings to the organization and applies processes and allocates resources to determine what positions are necessary for organizational success.  Only after this has been done is there a determination made regarding what people are best to fill those positions.

Succession Management: A Model that Helps Recruit and Retain High Performers

By applying the succession planning and management model, a leader is focused on advancing and elevating high performers – but only to the extent that these high performers will elevate and advance short and long-term organizational goals.  Succession is about ensuring organizational success at its core.  While employees will benefit from the process, it should not be done to the detriment of organizational success in areas of service, culture, performance, profits, etc.

When following the model (detailed below) the leader is compelled to ask herself the following questions regarding every position she determines to be critical enough to need a succession plan:

1.      What value is expected to be demonstrated by the position and the person who fills it?

2.      What value does the position create for the organization ?

3.      How (specifically) does the position generate this value ?

” Where Value = Sum Total of Benefits – Costs” 

Now here are the specifics on the Succession Planning & Management Model:

What is it ?

Succession planning refers to the process of analyzing and forecasting current and future staffing needs and systematically identifying, assessing, and developing employee talent to meet those needs.  It involves proactively planning for and accepting our own limits and considers and accounts for staff transitions and institutional knowledge through retirements, terminations, voluntary resignations, and deaths.

Components of Workforce and Succession Planning/Management :

1.  Organizational Strategy, Support, and Structure –

  • Senior management is involved – is it organizational or department wide?
  • Current leaders complete succession planning training (to gain understanding of these components)
  • Linked to the organizational strategy; Determine key positions, skills, and competencies
  • HR Availability Forecasting is an element of the planning process
  • Linked to training and management development programs
  • Linked to performance management and career planning
  • Indirect or direct succession planning accountability via performance appraisals
  • Linked to equal employment opportunity factors
  • Process must be transparent, merit-based, and consistent

2.  Candidate Identification and Selection –

  • All of management is responsible to discuss career goals and aspirations with candidates
  • Management is interested in ensuring the best fit with talents and positions
  • The objective is to identify, assess, and develop employee talent and hire externally as needed
  • Candidates are evaluated against established and emerging skills and competencies
  • Candidates are identified and recommended by all levels of management
  • Candidates are identified by his/her performance management data
  • Candidates can self identify as interested in increased responsibility positions
  • Multi-rater instruments and assessment centers are utilized
  • Ability testing, simulations, role plays, or other evaluation tools are used

3.  Employee and Leadership Development –

  • Gap analysis is conducted (for skills and competencies); Results are used to determine training and development needs and opportunities
  • Establish employee and leadership development plans for potential successors
  • Potential successors are offered developmental opportunities (stretch assignments, reading materials, job shadowing, etc.)
  • Potential successors are enrolled in training programs that align with learning and development plans
  • Candidates are matched with a mentor or coach for support and guidance
  • Comprehensive development processes will prepare potential successors for emerging new skill requirements

4.  Evaluation –

Design processes to evaluate and improve the succession management system:

  • Track turnover rates, especially for mission critical positions
  • Track length of time to fill positions (via internal and external pools)
  • Track employee participation rates
  • Mentors and supervisor feedback
  • Participants’ post-program performance
  • Post-program participant promotion rate

Why do it ?

It should be done because a major loss of leadership and institutional knowledge can undermine organizational credibility and sabotage our future.  Also, it helps to strengthen operational capacity and close leadership gaps.  Workforce planning demonstrates a long-term commitment to the organization and provides for institutional continuity and sustainability long after those who initiate and manage the plan have gone.  The organization benefits by ensuring that the right people, with the right competencies are in the right place at the right time.  Additionally,

  • it ensures continuity of leadership.
  • it forces the organization to assess its talent pool.
  • it provides for a systematic employee development process.
  • it has been shown to improve organizational performance and employee satisfaction.
  • it is proven to increase employee retention for high-quality employees.
  • it improves overall effectiveness by minimizing turnover and reducing transition issues.
  • it attempts to meet the needs of the organization as well as the individual employees.

Institutions that plan and execute solutions to workforce and succession dilemmas are better prepared and able to respond to the unexpected, retain high-quality employees, fill gaps in development, address foreshadowing retirements, and respond to generational needs. Here is a proven model of where to put your attention.