Case Study

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PRAISE FOR BEST PRACTICES IN TALENT MANAGEMENT

“Many times when one reads about best practices from other organizations, the writing misses a critical and necessary foundation required for the content to be meaningful and relevant. In this book, Carter and Goldsmith bring a valuable contribution and that is to ask their readers to step back and consider their own context fi rst and then determine how any of these outstanding talent management actions can make a difference in their particular organization. By culling for the principles behind the choices made, the stories revealed in these outstanding cases, the reader gains insight and practical advice.”

-Teresa Roche, vice president and chief learning offi cer Agilent Technologies

“This century, talent management will contribute to shareholder value creation more than any other organizational discipline. However, it remains an elusive concept. This book brings value to any CEO or HR leader by providing specifi c examples of effective talent management.”

-Geoff Smart, CEO of ghSMART, and co-author of the New York Times bestseller Who: The A Method for Hiring.

“Good story-telling is part art and part science. Louis Carter knows that and he shows this knowledge by his ability to gather an array of critical stories about organizations who have heeded the wake-up call to take action in the critical arena of talent management. My hat is off to the Best Practice Institute—this book lives up to its name!”

-Beverly Kaye, Founder/CEO: Career Systems International, co-author, Love ‘Em or Lose ‘Em: Getting Good People to Stay

“As a long-standing business philosopher, I look for depth, foundations, root causes, and lasting answers; for that, facts, information, experiences and testing—and a solid data base—are essential. The compendium I needed I found here—and so will you!”

-Peter Koestenbaum

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About This Book The purpose of this best practices handbook is to provide you with the most current and necessary elements and practical “how-to” advice on how to implement a best practice tal- ent management program within your organization. The handbook was created to provide you with a current 21st century snapshot of the world of talent management today. It serves as a learning ground for organization and social systems of all sizes and types to begin attracting, retaining, and motivating top talent through more employee- and customer- centered programs that emphasize consensus building; self-, group, organizational, and one-on-one awareness and effective communication; clear connections to overall business objectives; and quantifi able business results. Contributing organizations in this book are widely recognized as among the best in organization change and leadership development today. They provide invaluable lessons in succeeding during crisis or growth modes and economies. As best practice organizational champions, they share many similar attributes, including openness to learning and collaboration, humility, innovation and creativity, integ- rity, a high regard for people’s needs and perspectives, and a passion for change. Most of all, these are the organizations that have invested in human capital, the most important asset inside of organizations today. And these are the organizations that have spent on average $1M on talent management, an average of $2M over the course of their programs, with an average rate of return on investment of over $5M.

Within the forthcoming chapters, you will learn from our world’s best organizations in various industries and sizes:

Key elements of leading successful, results-driven talent management; Tools, models, instruments, and strategies for leading talent management; Practical “how-to” approaches to diagnosing, assessing, designing, implementing,

coaching, following-up on, and evaluating talent management; and Critical Success Factors and Critical Failure Factors, among others.

Within each case study in this book, you will learn how to:

1. Analyze the need for the specifi c talent management program; 2. Build a business case for talent management; 3. Identify the audience for the program; 4. Design the program; 5. Implement the design for the program; and 6. Evaluate the effectiveness of the program.

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BEST PRACTICES IN TALENT

MANAGEMENT How the World’s Leading

Corporations Manage, Develop, and Retain

Top Talent

M A R S H A L L G O L D S M I T H A N D L O U I S C A RT E R , E D I T O R S

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Copyright © 2010 by John Wiley & Sons, Inc. All Rights Reserved.

Published by Pfeiffer An Imprint of Wiley 989 Market Street, San Francisco, CA 94103-1741 www.Pfeiffer.com

No part of this publication may be reproduced, stored in a retrieval system, or transmitted in any form or by any means, electronic, mechanical, photocopying, recording, scanning, or otherwise, except as permitted under Section 107 or 108 of the 1976 United States Copyright Act, without either the prior written permission of the publisher, or authorization through payment of the appropriate per-copy fee to the Copyright Clearance Center, Inc., 222 Rosewood Drive, Danvers, MA 01923, 978-750-8400, fax 978-646-8600, or on the Web at www.copyright.com. Requests to the publisher for permission should be addressed to the Permissions Department, John Wiley & Sons, Inc., 111 River Street, Hoboken, NJ 07030, 201-748-6011, fax 201-748-6008, or online at http://www.wiley.com/go/permissions.

Limit of Liability/Disclaimer of Warranty: While the publisher and author have used their best efforts in preparing this book, they make no representations or warranties with respect to the accuracy or completeness of the contents of this book and specifi cally disclaim any implied warranties of merchantability or fi tness for a particular purpose. No warranty may be created or extended by sales representatives or written sales materials. The advice and strategies contained herein may not be suitable for your situation. You should consult with a professional where appropriate. Neither the publisher nor author shall be liable for any loss of profi t or any other commercial damages, including but not limited to special, incidental, consequential, or other damages.

Readers should be aware that Internet websites offered as citations and/or sources for further information may have changed or disappeared between the time this was written and when it is read.

For additional copies/bulk purchases of this book in the U.S. please contact 800-274-4434.

Pfeiffer books and products are available through most bookstores. To contact Pfeiffer directly call our Customer Care Department within the U.S. at 800-274-4434, outside the U.S. at 317-572-3985, or fax 317-572-4002, or visit www.pfeiffer.com.

Pfeiffer also publishes its books in a variety of electronic formats. Some content that appears in print may not be available in electronic books.

Library of Congress Cataloging-in-Publication Data Best practices in talent management: how the world’s leading corporations manage, develop, and retain top talent / Marshall Goldsmith and Louis Carter, editors. p. cm. Includes bibliographical references and index. ISBN 978-0-470-49961-0 (cloth) 1. Executives—Training of. 2. Executive ability. 3. Leadership. 4. Employee retention. I. Goldsmith, Marshall. II. Carter, Louis. HD30.4.B483 2010 658.4'07124—dc22

2009036634

Acquiring Editor: Matthew Davis Director of Development: Kathleen Dolan Davies Production Editor: Dawn Kilgore Editor: Rebecca Taff Editorial Assistant: Lindsay Morton Manufacturing Supervisor: Becky Morgan

Printed in the United States of America Printing 10 9 8 7 6 5 4 3 2 1

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For Crissy

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CONTENTS Introduction, by Louis Carter xiii

Acknowledgments xxvii

How to Use This Book xxix

CHAPTER ONE: AVON PRODUCTS, INC., BY MARC EFFRON 1 Introduction 2

A Success-Driven Challenge 2

The Turnaround 3

The Talent Challenge 3

Execute on the “What,” Differentiate with “How” 4

From Opaque to Transparent 5

From Complex to Simple 7

From Egalitarian to Differentiated 10

From Episodic to Disciplined 11

From Emotional to Factual 12

From Meaningless to Consequential 13

The Results of a Talent Turnaround 14

Measuring the Talent Turnaround’s Success 15

CHAPTER TWO: BANK OF AMERICA, BY BRIAN FISHEL AND JAY CONGER 17

Introduction 18

Leadership Development Activities for Executive Leaders 21

Lessons for Designing On-Boarding for Executive Leaders 32

CHAPTER THREE: CORNING INCORPORATED, BY RICHARD A. O’LEARY, GARY JUSELA, AND HEATH N. TOPPER 36

Introduction 37

vii

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viii Contents

The Business Case for the Accelerated Development of Corning Program Managers 40

The Design Flow: Two Weeks of Experiential Learning with an Interim Period of Coaching and Mentoring 48

Outcomes and Next Steps for Growing the Talent Pipeline of Program Leaders 56

Next Steps 57

CHAPTER FOUR: CUSTOMER AND ENTERPRISE SERVICES (CES) DIVISION, BY MICHAEL SCHECTER, JOHN PARKER,

AND JUDY ZAUCHA 60

Business Background and Challenges 61

The Roots of the CES Transformation: Leadership and Process 62

Diagnosing and Designing the Whole System Transformation: The Leadership Alignment Event 68

Implementing the Whole System Transformation: The Waves 71

Supporting and Reinforcing the Whole System Transformation 77

Evaluation of the CES Whole System Transformation 82

CHAPTER FIVE: ECOLAB, INC., BY ROBERT C. BARNETT, MICHAEL L. MEYER, SARAH J. MURPHY, AND SUSAN

M. METCALF 84

Introduction 85

Company Background 85

Ecolab’s 2002–2007 Strategic Plan 85

Culture Is Critical 87

Ecolab’s Talent Management Philosophy 88

The Ecolab Talent Pipeline 90

The Importance of Individual Development 90

Introducing the Talent Pipeline Model at Ecolab 95

Supporting Successful Implementation 95

Keeping the Pipeline Full 98

Results 100

Conclusion 101

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Contents ix

CHAPTER SIX: GE MONEY AMERICAS, BY TAMMY GRISHAM AND D. ZACHARY MISKO 103

Introduction 104

Company Background and Environment 104

The Challenge and Approach 105

The Technology 106

Strategy for Sourcing 108

LEAN Methodologies 111

Expansion 113

Conclusion 114

CHAPTER SEVEN: INTERNAL REVENUE SERVICE, BY SUSAN CLAYTON, VICTORIA BAUGH, AND MATHEW J. FERRERO 115

Introduction 116

Company Background and Current Leadership Environment 116

The 21st Century IRS 118

Leadership Succession Planning—The Challenges 121

LSR Website and Infrastructure 126

Results 128

Indicators of Success 131

Evaluation 132

Next Steps 133

Conclusion 134

CHAPTER EIGHT: KAISER PERMANENTE COLORADO REGION, BY MARGARET TURNER 136

Introduction 137

Design 140

Process 142

Implementation 150

Support and Reinforce 152

Evaluation 153

Next Steps 153

Conclusion 154

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x Contents

CHAPTER NINE: MCDONALD’S, BY JAMES INTAGLIATA AND NEAL KULICK 155

Context for Global Talent Management Initiatives 156

Evolution of the Talent Management System: Key Initiatives and Enhancements 159

Overall Summary 175

CHAPTER TEN: MICROSOFT CORPORATION, BY SHANNON WALLIS, BRIAN O. UNDERHILL, AND CARTER MCNAMARA 177

Introduction 178

What Led Microsoft SMSG to Make the Change 179

Expo Leaders Building Leaders—The New High-Potential Development Experience 179

The Process of Redesigning the High-Potential Development Experience 189

Coaching as a Primary Development Component for HiPo Development in SMSG 191

Learning Circles as a Primary Development Component for HiPo Development in SMSG 199

Conclusion 206

CHAPTER ELEVEN: MURRAY & ROBERTS LIMITED, BY ZELIA SOARES 208

Introduction 209

Design and Alignment 214

Implementation 220

Evaluation 223

Summary 224

CHAPTER TWELVE: PORTER NOVELLI, BY GREG WALDRON 225 Introduction 226

Program Implementation 231

Performance Management System Development 236

Evaluation 239

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Contents xi

CHAPTER THIRTEEN: SOUTHERN COMPANY, BY JIM GREENE 241 Introduction 242

Background 242

Initial Improvements 243

The Leadership Action Council 246

Competency Model 247

Leadership Assessment 248

Succession Planning 249

Leadership Database 254

Development Activities 254

Evaluation and Lessons Learned 256

CHAPTER FOURTEEN: WHIRLPOOL CORPORATION, BY KRISTEN WEIRICK 258

Introduction 259

The Business Challenge 259

Design and Approach 260

Evaluation 265

Next Steps 266

Summary 269

Conclusion 271

Epilogue, by William J. Rothwell 288

Index 295

About Best Practice Institute 303

About the Editors 305

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xiii

INTRODUCTION

LOUIS CARTER

The assets of an enterprise can perhaps be divided into two parts: its people, and every- thing else. While some may measure the value of a company by its real estate, sales, inventories, supply chains, accounts receivable, brand recognition, and the thousands of other pieces that when assembled create an organization ’ s physical and market pres- ence, it may also be said quite simply that a company consists of the human beings who use technology to improve the lives of their fellow citizens.

A dictionary defi nition of “ talent ” is people who possess a special aptitude or fac- ulty. There is in this defi nition the whiff of creativity, of thinking outside the box, of a unique ability to solve a problem. Today ’ s intensely competitive marketplace tolerates no automatons or robotic time - card - punchers who dutifully perform the same task year after year and hope to retire with a gold watch. Companies large and small — both the mom - and - pop corner store and the global Fortune 500 leviathan — must be nimble, creative, and ready to abandon the old reliable methods when challenged by new para- digms. The performance of a task by rote inevitably leads to decline and irrelevance; talent is what infuses the human experience with dynamism and creativity.

In recognition of the importance of human assets to an enterprise, a subject now given stark new importance with the global economic crisis that began in 2008, The Best Practice Institute surveyed a range of enterprises in order to identify leaders in human resource management, and specifi cally those that had initiated transformative efforts to strengthen organizational leadership. We looked for organizations that had responded to either external or internal challenges — or a combination of both — and successfully created programs that brought out the very best in their existing talent, and helped to recruit and train new talent from outside.

For this book, The Best Practice Institute carefully selected fourteen dynamic enterprises that have succeeded in implementing talent enhancement programs — although to be fair, to call them “ programs ” is not entirely accurate, as they are in real- ity vital strategic components integrated into the companies ’ core operating values. For what we found was that, to be effective, change must happen in the very guts and mus- cles and bones of a corporate body, and not be a mere cosmetic applied to the visible exterior. The enterprises presented here responded to inevitable evolutionary forces

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xiv Introduction

with carefully considered and emphatically administered strategies that not only made a difference to the short - term success of the company but provided a compass setting in the direction of future growth and vigorous health. Indeed, it can be said that a crisis — even such as we are experiencing in the close of the fi rst decade of the 21st century — provides an opportunity for the type of reinvention, renewal, and revolutionary progress that is not likely to be undertaken during more comfortable, less interesting times.

The enterprises we surveyed represent a wide spectrum of industries. They include fi nancial giants in banking and government revenue collection and global leaders in fast food, marketing communications, technology, industrial construction, insurance, and consumer products. Every case was unique, and every solution grew out of each company ’ s strategy for growth. And while it is understood that solutions devised by one company cannot be grafted onto another, it is expected that the diagnostic pro- cesses and values embraced by these fourteen success stories may prove to be an inspi- ration and guide for any enterprise seeking to strengthen its most valuable asset — its talent.

THE ENTERPRISES

In this book we present fourteen organizations that, for a variety of reasons, embarked on a program of self - examination and renewal that focused on enhancing the value of their talent. The companies are varied — indeed, one is a U.S. government agency and one is a not - for - profi t health plan — and each was faced with a unique set of circum- stances that made change necessary. Each made the evolutionary step and, like the cat- erpillar that metamorphoses into a butterfl y, emerged with the same DNA but somehow permanently altered and more able to thrive in a harsh environment. The fourteen companies are listed in Table I.1 .

Avon Products, Inc., is a $ 10 billion consumer products company that for over one hundred years has promoted the economic empowerment of women around the globe. Bank of America is one of the world ’ s largest fi nancial institutions, serving individual consumers, small and middle market businesses, and large corporations with a full range of banking, investing, asset management, and other fi nancial and risk - management products and services. The company serves more than fi fty - nine million consumer and small business relationships in 150 countries.

Drawing on more than 150 years of innovation, Corning is a world leader in spe- cialty glass and ceramics, creating and manufacturing sophisticated components that enable high - technology systems. Ecolab, with more than $ 6 billion in sales, is a global leader in cleaning, sanitizing, food safety, and infection control products and services. General Electric (GE) is a global infrastructure, fi nance, and media company produc- ing a wide range of products from everyday light bulbs to fuel cell technology, to cleaner, more effi cient jet engines. The subject of our survey is GE Money Americas, the consumer fi nance brand for GE Consumer Finance worldwide, with more than $ 163 billion in assets.

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Introduction xv

TABLE I.1. List of Best Practice Corporations in Talent Management

Company or Division Industry Total Employees

Parent Company Revenues ( $ US)

Avon Consumer goods 42,000 $ 10 billion

Bank of America Banking 243,000 $ 119 billion *

CES Division Insurance 38,000 $ 36 billion

Corning Incorporated Technology 27,000 $ 5.95 billion

Ecolab Industrial products 26,050 $ 6.14 billion

GE Money Americas Consumer fi nance 323,000 $ 182.52 billion

Internal Revenue Service U.S. government agency 79,000 $ 2.7 trillion

Kaiser Permanente

Colorado

Health plan 5,400 * * $ 1.9 billion * *

McDonald ’ s Food service 400,000 $ 23.52 billion

Microsoft SMSG Software 91,000 $ 60.42 billion

Murray & Roberts Construction 33,466 $ 18.2 billion

Porter Novelli Marketing communications 70,000 $ 12.6 billion

Southern Company Electric utility 26,742 $ 15.35 billion

Whirlpool Consumer goods 70,000 $ 18.91 billion

* 2007 * * Colorado only

The Internal Revenue Service was established in 1862 by President Abraham Lincoln and helps Americans “ understand and meet their tax responsibilities. ” The IRS has 79,000 full - time employees and in 2007 received $ 2.7 trillion in tax receipts. Our Fortune 100 insurance company includes our subject, the Customer and Enter- prise Services division (CES), which encompasses accounting, call centers, inspec- tions, and even one of the country ’ s largest printing shops.

Founded in 1945, Kaiser Permanente is the nation ’ s largest not - for - profi t health plan, serving 8.6 million members, with headquarters in Oakland, California. In this book we focus on Kaiser Permanente Colorado, which has more than 5,400 employees

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xvi Introduction

and 2006 revenues of $ 1.9 billion. McDonald ’ s operates or franchises more than 30,000 restaurants in 119 countries, and directly employs 47,500 people with a total of 400,000, including franchisees. Microsoft is the worldwide leader in software, ser- vices, and solutions that help people and businesses realize their full potential; the Sales Marketing and Services Group (SMSG) employs more than 45,000 people and is responsible for Microsoft sales, marketing, and service initiatives; customer and partner programs; and product support and consulting services worldwide.

South Africa ’ s leading engineering, contracting, and construction services com- pany, Murray & Roberts, has 34,000 employees across fi ve continents. Porter Novelli, a wholly owned subsidiary of Omnicom Group Incorporated, is one of the world ’ s top ten public relations companies with offi ces in fi fty - four countries.

With nearly 4.4 million customers and more than 42,000 megawatts of generating capacity, Atlanta - based Southern Company is the premier energy company serving the Southeast. Whirlpool Corporation is a leader of the $ 100 billion global home appliance industry. With a presence in nearly every country around the world, Whirlpool manufac- tures appliances across all major categories, including fabric care, cooking, refrigeration, dishwashers, countertop appliances, garage organization, and water fi ltration.

THE BEST PRACTICE INSTITUTE SIX - PHASE SYSTEM TO TALENT MANAGEMENT

As the result of years of research and fi rst - hand involvement with hundreds of top companies, The Best Practice Institute has developed a six - phase system to talent management that brings together lessons and strategies from the most successful case studies:

1. Business diagnosis

2. Assessment

3. Program design

4. Implementation

5. On - the - job support

6. Evaluation

Phase One: Business Diagnosis—The Catalysts for Change During periods of smooth sailing — growing markets, new products, rising revenues — it is not unusual for companies to take their talent for granted. The human resources offi ce may be unconcerned about turnover and employee satisfaction. The CEO may cast a satisfi ed eye on his or her realm and pronounce it good. The board may assume that management has everything under control. Golf is played on Mondays.

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Introduction xvii

But sooner or later the system breaks down, is inadequate for growth, or is threat- ened by an external force. The metrics and practices that were acceptable suddenly look fl awed. Profi ts slump. Employee turnover soars. Markets constrict. Board mem- bers start attending meetings.

The fourteen organizations presented here were each faced with a moment of reckoning: at a point in their development when it became clear that painful change was necessary. Each of them turned attention to the question of talent management, and each followed a process of diagnosis, assessment, program design, implementa- tion, on - the - job support, and evaluation. Each was able to transform its talent man- agement and make the company healthier, more competitive, and better able to fulfi ll its mission. And in every case, the process began with a rigorous, unfl inching diagnosis.

Internal Realignment Some of our case studies responded to the perception that the organization itself had become lethargic or was following inappropriate strategies. John Bader, vice president of the Insurance CES division, sensed a qualitative problem with the system ’ s six thousand employees at fourteen locations around the world. Managers were locked into a 19th - century mindset: people were managed like com- modities; innovation was nonexistent; growth was stagnant. The customer was some- one to be tolerated, not thrilled.

It is a corporate axiom that when hiring executive talent, 60 percent should be pro- moted from within the organization, and 40 percent on - boarded from outside. This ratio provides a mix of institutional loyalty and experience and new approaches and viewpoints. At Kaiser Permanente, the National Organization realized that 65 percent of its executives were recruited externally, indicating that the organization was not focusing on leadership succession management and that it needed to build an internal pipeline of leaders.

The opposite situation existed at Southern Company. The electric utility, with over 26,000 employees, had traditionally followed a strategy of hiring at the entry level and promoting from within. In 2003, the average age of its executives was fi fty - two — and at Southern Company, employees are eligible to retire at age fi fty. The company faced a shortage of executives as the retirement wave approached, and embarked on a study to determine how to most effectively produce a sustainable supply of quality leaders.

Capacity Matches Growth At Avon, Inc., CEO Andrea Jung faced a different prob- lem: the company ’ s growth had outpaced organizational capacity. In 2005 the com- pany had achieved a 10 percent annual growth rate and operated in more than forty countries worldwide. But as Avon entered 2006, revenues fl attened and operating prof- its declined. Jung and her team realized that, in order to move forward, the company had to be restructured. After reviewing the company ’ s talent practices, the Talent Man- agement Group identifi ed weaknesses including opacity, excessive complexity, a lack of quantitative measurements, and inconsistency.

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xviii Introduction

Over the past decade, Bank of America has achieved spectacular growth both organically and through acquisitions. As a result, the company must annually recruit and hire and train a signifi cant number of executives. Typically, industry fi gures sug- gest that 40 percent of senior managers hired from the outside fail within their fi rst eighteen months on the job (Watkins, 2003). This rate was unacceptable to Bank of America, and the leadership development group needed to quickly and effectively devise strategies to on - board executive leaders from acquired banks.

At Whirlpool, the growth, size, and scale of the company, along with a more demanding consumer marketplace and competition for talent, prompted the company to build a defi ned set of leadership competencies and put into place an effective talent management system.

In 2001, Ecolab ’ s executive team committed to an aggressive growth goal—they intended to increase revenues at a 15 percent annual growth rate for fi ve years, and by 2007 more than double the company ’ s size. However, they recognized that they did not have the number of qualifi ed leaders required to effectively run an organization twice its current size. The lack of leadership talent and bench strength was identifi ed as a primary constraint to its success.

Building Talent Resources for the Future Corning bases its long - term success on its ability to nurture and grow both talent and technology over the long term — twenty - fi ve and even fi fty years. In today ’ s competitive environment, CEO Jamie Houghton realized that the company had to step up the pace of innovation, moving from a target of one to two breakthroughs per decade to two to four breakthroughs.

The Internal Revenue Service has a bigger boss than most other companies: the U.S. Congress. With the passing of the Revenue Reform Act of 1998, the IRS under- went a restructuring and modernization that left it with a shortage of qualifi ed employ- ees. In 2001 Commissioner Charles Rossotti directed a review of IRS leadership competencies, and in 2008 Commissioner Douglas Schulman created the “ Workforce of Tomorrow ” task force to prepare the IRS for the next fi fteen years.

Beginning in 2004, leading global marketing communications company Porter Novelli undertook a fundamental strategic assessment to position itself for growth during the next fi ve years. The senior management group identifi ed the need to restruc- ture human resources management to refl ect the company ’ s client - centric focus and encourage employee engagement with the company ’ s vision.

Creating Consistent Internal Systems With more than 45,000 employees, Micro- soft ’ s SMSG division had a high - potential development program in each of its thirteen geographical areas. The programs were not aligned to Microsoft ’ s Leadership Career Model and there were no consistent criteria for defi ning high - potentials, making lat- eral movement diffi cult.

Similarly, at Murray & Roberts, with operations spread over Southern Africa, the Middle East, Southeast Asia, Australasia, and North America, talent management processes and practices were not formalized or even were nonexistent. There was no codifi ed succession plan or centralized talent inventory.

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Introduction xix

At McDonald ’ s, systems existed for evaluating manager performance, but there was no control over validity. Management discovered there was chronic rating infl a- tion for both annual performance (amazingly, 98 percent of managers were rated either “ Outstanding ” or “ Excellent ” ) and potential (78 percent of managers were rated as having the potential to advance in the business at least one level), rendering the system useless and creating a false sense of entitlement.

Toward an Effi cient Hiring System Sometimes the process of on - boarding is ineffi - cient and expensive. At GE Money Americas, recruiters realized that the high volume of job applicants was not being managed effi ciently: there were too few outlets for applicants to apply, narrow reporting capabilities, unclear processes, the cost per hire was an unacceptable $ 8,000 each, and the time to fi ll a position often exceeded three months.

Phase Two: Assessment The fourteen companies in this book were faced with a wide variety of challenges, both internal and external, and the assessment strategies were unique to each enter- prise. Different groups — the CEO, human resources, a task force — took the lead in driving change. In some organizations the focus on change was narrow and involved a select group of potential high - performers; at other organizations the determination was made that the effort had to be company - wide.

It must be pointed out that there is a difference between evaluating talent — seeing which employees show up on time and do their jobs and hit their numbers — and invest- ing in talent, which requires a much more proactive effort to identify, train, and pre- pare talent for the future.

Not everyone can be a leader; that ’ s just a fact of life. But surely every person who draws a salary or punches a time card at a company needs to be committed and inspired and empowered to be creative. The kid who gets his fi rst job in the mailroom could work his or her way up the ladder to be CEO — it has happened before and it will hap- pen again. In an ideal world, every employee would receive training appropriate to his or her aspirations and capabilities.

Our fourteen enterprises, having made the decision to evaluate and/or invest in talent, took varied approaches to the scope of the process and the number of participants.

At one end of the spectrum, the Insurance CES ’ s John Bader initially included the division ’ s core leadership team (CLT) in the fi rst “ wave ” of leadership alignment ses- sions. The results were so positive that the CLT committed to transforming the entire system — all six thousand employees in fourteen locations around the world. They cre- ated a series of waves that included 1,200 employees in groups of three hundred to fi ve hundred, and then a massive one - day event with everyone else.

At the Internal Revenue Service, the Workforce of Tomorrow (WoT) Task Force was charged with restructuring human resource policies and practices that would affect the entire 79,000 - member workforce. Murray & Roberts ’ s Leadership Pipeline was

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xx Introduction

created to be accessible to any manager in the company, as were the pipelines at Porter Novelli, Whirlpool, and Southern Company, where succession plans for the top sixty-fi ve positions across the company were formulated.

Ecolab, which also adopted the Leadership Pipeline philosophy, presented an ini- tial launch at an annual meeting where approximately 1,100 key leaders in the com- pany were introduced to the Talent Pipeline in small - group, face - to - face meetings. McDonald ’ s fi ve - part initiative reaches every staff position, with additional invest- ments for executives.

Bank of America ’ s on - boarding program was primarily focused on executives who came to the company from outside, and in the past seven years has tested its approaches on fi ve hundred internal and external hires.

Many companies, however, chose to invest only in identifi ed potential leaders. At Avon, a key plank in the company ’ s approach was to place a few “ big bets ” on a small number of leaders. With limited funds to spend, Avon followed research that sug- gested the top 5 to 10 percent of a workforce population was capable of advanced leadership. The company ’ s investment in its highest potential leaders was fi ve to ten times what could be invested in an average performer. The investment included train- ing, coaching, and incentive compensation.

Perhaps because they were seeking program managers with highly specialized technical skills, Corning ’ s two - week Leadership Fundamentals for Program Managers program involved thirty - three incumbent participants. Similarly, Kaiser Permanente, which focused its talent development efforts on building an in internal pipeline to reduce the number of external hires, identifi ed approximately fi fty - fi ve incumbents in its fi rst review process. Microsoft ’ s SMSG division targeted less than 4 percent of its population — still, more than 1,600 individuals — for its ExPo Leaders Building Lead- ers program. At Hewlett - Packard, the executive development process is aimed at understanding the quality, strengths and development needs of the talent at the vice presidential level worldwide.

Phase Three: Program Design Once the problem was identifi ed and scope of the solution determined, the next step for our fourteen companies was to design the program. In some cases, the solution involved a specifi c program limited to a set number of individuals; in other cases the transformation was company - wide and affected everyone who drew a salary. In most cases the CEO was personally invested, giving the program the authority of the high- est offi ce and energizing the executive layers below. Some efforts were designed and executed wholly in - house, while in other cases outside consultants were brought in to either provide an objective viewpoint or supply specialized expertise. The choice made by our fourteen companies to create a comprehensive plan is in alignment with the results of the Best Practice Institute ’ s recent Talent Management Survey, in which we surveyed forty - fi ve leading companies and found that well over half (60 percent) had a formal talent management plan in place.

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Introduction xxi

Here are a few highlights of the fourteen companies ’ program designs:

Avon Products

CEO Andrea Jung and the Talent Management Group (TM) built their talent prac- tices on two guiding principles: execute on the “ what ” and differentiate on the “ how. ”

Moved from a regional to a matrix structure; cut management layers; made a sig- nifi cant investment in management talent.

Bank of America

CEO Ken Lewis personally spearheaded BOA ’ s executive development strategy.

Created a New Executive Orientation Program with coaching and support.

Corning

Created a boot camp immersion experience for potential program managers.

The Corning Management Committee chartered a task team to design a pipeline for program leaders.

Ecolab

Human Resources formulated key areas and ways through which Ecolab would establish and maintain its competitive advantage—the fi ve key business drivers. These included Talent Development, Leadership, Relationships, Innovation, and Delivering Results.

HR established the Ecolab Talent Council, composed of the ten most senior Eco- lab executives including the CEO, and representing all key business lines, geogra- phies, and critical functions.

GE Money Americas

With the assistance of a human resources consultant, created a centralized staffi ng process and a dedicated team.

Applied the Lean approach to the staffi ng process to create effi ciencies and cut costs.

Insurance CES Division

Hired consultants to review CES ’ s structure and fi nances and another set of con- sultants to perform an assessment survey.

Got the ball rolling with a no - holds - barred leadership conference.

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xxii Introduction

Internal Revenue Service

Developed a competency model with twenty - one leadership competencies.

In collaboration with a consultant, developed the Leadership Succession Review (LSR).

Kaiser Permanente Colorado

Restructured in collaboration with the Kaiser Permanente National Organization.

Designed a series of programs including the Peer Network, Leadership Edge, Experience Management, and Executive Coaching.

McDonald ’ s

Top management asked Human Resources to redesign the performance develop- ment system in order to place a stronger focus on accountability for results, increase performance differentiation, and enhance openness to change and innovation.

Microsoft SMSG

Formed a new program, ExPo Leaders Building Leaders (ExPo stands for Excep- tional Potential), drawing on the Corporate Leadership Council ’ s 2005 study “ Realizing the Full Potential of Rising Talent. ”

Murray & Roberts

A project team was assembled consisting of line managers, HR practitioners, and a consultant. The project team reported to the executive in the Offi ce of the Group CE.

Porter Novelli

Hired a chief talent offi cer to work with the executive management group.

Implemented a Leadership Pipeline program with results - based role defi nitions.

In a series of staff interviews, Porter Novelli grappled with the question of defi n- ing leadership and management. These concepts were regarded as critically impor- tant, but participants stated that neither was well - articulated or easily measured. A client - centered strategy was a key success factor, as was creative thinking.

Southern Company

The CEO initiated an in - depth review of the company ’ s leadership development and succession processes.

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Introduction xxiii

Chartered a group of executives as the Leadership Action Council, serving as a steering committee for leadership development.

Whirlpool

Chairman David Whitman and the executive committee spearheaded development of the Whirlpool Leadership Model.

Who says that corporations have no loyalty to their executives? The results of the Best Practice Institute ’ s recent Talent Management Survey found that fully 36.5 percent of corporate respondents were focused on developing talent internally; 59.7 percent were developing both internal and external talent; and only 3.8 percent were focused exclusively on acquiring external talent.

Phase Four: Implementation The implementations refl ect the goals of the respective organizations, the challenges faced, and the scope of the restructuring.

At Bank of America, which has focused on improving the quality of external hires, outside recruiters must understand the bank ’ s culture and leadership requirements, and consequently Human Resources devotes a great deal of attention to its partnerships with executive search fi rms. Once a candidate is presented to the bank, interviews with the candidate are conducted by one of the bank ’ s Leadership Development Offi cers (LD Partner) to assess compatibility. Stakeholders, including a leadership develop- ment offi cer (LD), interview candidates; but a complete picture is formed when the LD in turn interviews the interviewers. This 360 - degree approach provides a sense of how well the candidate — who may have enjoyed a successful career at another bank- ing institution — will fi t into Bank of America ’ s culture and work environment.

GE Money Americas, also concerned with the quality of outside hires, centralized and restructured the application process. The company introduced the Lean Principle, 5S, as the foundation for all improvements focused on Kaizen opportunities.

The Internal Revenue Service created the Leadership Succession Review process, which provides a highly structured and disciplined approach for each IRS Business Unit to prepare qualifi ed leaders. Kaiser Permanente Colorado created the Executive Leadership Program, which provides participants with an opportunity to evaluate and strengthen their leadership approach and skills. Whirlpool initiated the Master Asses- sor Program, which trains both human resources staff and line managers with frequent hiring needs to identify and evaluate potential leaders.

At Microsoft SMSG, a foundation of the ExPo program is regular interaction between high - potentials and current leaders, in order to build the capability of future leaders and also to give senior leaders greater accountability. Executives demonstrate engagement by conducting ongoing reviews, acting as mentors and coaches, and even accompanying high - potentials on business trips. At Murray & Roberts, managers and subordinates sign a performance contract and development plan that charts a course for success.

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xxiv Introduction

At some companies, travel is involved. Insurance CES held a series of leadership retreats, initially with executives but expanded to include all six thousand employees. Corning created “ Boot Camp for Program Managers, ” a two - week program held at the stately old home and newly transformed company conference center of the former CEO Jamie Houghton.

Phase Five: On - the - Job Support Diagnosing the challenge, assessing the effort, designing the program, and implement- ing the program are critical steps to organizational transformation. Committed manag- ers know, however, that the lessons learned in program participation must be carried through to the daily grind of business. They must be proven in the fi eld and must trans- late into measurable results. For this next phase to succeed, companies must support their talent as they put their new confi dence and insights into practice.

At Bank of America, new hires are paired with peer coaches (a fellow executive) and a senior advisor at the same level or above. To facilitate a close relationship between the new executive and his or her team, a New Leader - Team Integration ses- sion takes place within the fi rst thirty to sixty days of an assignment.

Kaiser Permanente Colorado includes 360 - degree feedback, BarOn EQ - i 360 - degree feedback, Meyers - Briggs Type Indicator (MBTI), and Insights Assessment. Each potential leader is assigned a case manager who works with him or her on a per- sonal development plan. The Leadership Edge Program has an alumni group that con- tinues to work with the executive team on business solutions.

Follow - up remedial workshops were instituted by Porter Novelli, and in 2007 a performance management workshop focused on skills in creating SMART goals and cascading goals from manager to subordinates in a work team.

At Southern Company, job assignments, developmental moves, and special assign- ments are the primary methods for developing high - potential individuals. An educa- tional experience for cross - system high - potential managers who are ready to move into offi cer roles is being created by Human Resources.

Phase Six: Evaluation Within a company the need for leadership development may exist, but is there an agreed - on standard that will serve as a benchmark or threshold for promotion? Evaluat- ing an existing manager can sometimes be as simple as measuring quarterly revenues. For some companies, a restructured talent development strategy means identifying, hir- ing, and retaining individuals who have executive qualities that are aligned with exist- ing metrics: work history, project success, skill sets. But in other cases choosing potential leaders for future advancement not unlike consulting the Oracle of Delphi. How do you predict an executive ’ s performance at a new position that is vastly more complex than the previous job? As part of the talent restructuring process, more than a few organizations went back to the drawing board to create a new defi nition of

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Introduction xxv

leadership, one that cut across the existing talent pool and reshaped the company ’ s most fundamental talent characteristics. And, if such a defi nition could include meth- ods of measurement, so much the better. Today, we can see what the results have been.

The Internal Revenue Service, perhaps not surprisingly, uses a table with numeric scores. On the Leadership Competency Targets by Leadership Level table, candidates are scored 1 through 4 in categories that include Adaptability, Customer Focus, Con- tinual Learning, and Political Savvy. Varying target levels are designated, depending on organizational rank. An executive, for example, should score a “ 4 ” in Business Acumen, while a regular employee needs to score only a “ 1 ” in the same category. In addition, a matrix is used to rank individuals according to their readiness to assume leadership positions.

Kaiser Permanente uses a Model of Potential, a set of assessments that factors Performance, Abilities, and Predictors of Potential to provide a score of Promotability. At Kaiser, it ’ s important that an executive candidate has the ability to be mobile, and there ’ s a survey tool that gathers information related to a candidate ’ s aspirations, tech- nical skills, and profi ciency at VP - level behaviors.

McDonald ’ s initiated fi ve programs, including a set of Talent Reviews, ensuring that the president and lead staff offi cer of each geographical division are responsible and accountable for addressing the leadership talent needs in their area and are doing so within the framework of the template.

Murray & Roberts adopted the Leadership Pipeline philosophy and moved away from a numeric system to a qualitative approach, which requires managers to apply a thinking model supported by evidence, as opposed to manipulating and arguing about numbers. Performance is defi ned through a set of symbolic circles that are fi lled in by lines representing performance dimensions. The more snugly the lines fi t into the cir- cle, the higher the probability of success in leadership.

How do we measure overall program success? Is there a bottom - line indicator that tells us that our investment has paid off and our talent is optimized? Many of our com- panies reported quantitative and qualitative measures of program success:

At Insurance CES, the wave seminar events produced higher customer satisfac- tion, increased engagement by customers and employees, and millions of dollars saved over and above the cost of the program.

Avon reported faster movement of talent into key markets and accelerated devel- opment of leaders. There was also a rise in revenue to $ 11 billion in 2009 from $ 8 billion in 2005, despite 10 percent fewer Associates.

Since 2005, Kaiser Permanente Colorado has identifi ed thirteen high - potential leaders, of whom 60 percent have been either promoted or given expanded roles.

Murray & Roberts reports benefi ts including job clarity, identifi cation of succes- sors, improved feedback, and cross - company appointments.

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xxvi Introduction

Porter Novelli, after instituting the Leadership Pipeline, experienced a decline in turnover of 24 percent from 2005 to 2006, and in 2006 and 2007 reported zero turnover of identifi ed high - potential managers.

Whirlpool Corporation ’ s Quality of Hire Metrics indicate that that the Master Assessor Program has had a positive impact on the quality of hires, who perform at high levels and exhibit high levels of job satisfaction.

CONCLUSION

We have seen from our fourteen success stories that when an organization reaches a crossroads in talent management, a consistent and comprehensive approach can pro- vide both a measurable benefi t and assurance of long - term growth. Each solution must organically grow from the unique circumstances of a particular moment in time and set of circumstances. While each case is different, valuable lessons can be learned from these examples because together they provide a template showing how to diag- nose, assess, and address the challenges that face every organization today. Their com- monality lies in the dedication and imagination of the talent that drives every successful enterprise.

As we move into the post - great recession era, challenges will arise that do not have the comfort of familiarity. Solutions must be crafted with integrity, honesty, and an appreciation for the best qualities of the people who every day try to do the very best they can for themselves, their companies, and their communities.

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xxvii

ACKNOWLEDGMENTS Best Practice Institute Team Contributors

BPI Editorial Team

Louis Carter, CEO Marc Effron, Avon

Samantha Francart, Assistant Jay Conger, Bank of America

Dr. William Rothwell Brian Fishel, Bank of America

John Bader, CES Division Gary Jusela, Corning

Mike Schechter, CES Division

Richard O’Leary, Corning

Heath Topper, Corning

Bob Barnett, Ecolabs

Zachary Misko, General Electric

David Krieg, Internal Revenue Service

Margaret Turner, Kaiser Permanente

James Intagliata, McDonald’s

Neal Kulick, McDonald’s

Shannon Wallis, Microsoft

Brian Underhill, Microsoft

Zelia Soares, Murray & Roberts

Greg Waldron, Porter Novelli

Jim Greene, Southern Company

Kristen Weirick, Whirlpool

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xxix

HOW TO USE THIS BOOK PRACTICAL APPLICATION

This book contains step-by-step approaches, tools, instruments, models, and practices for implementing top talent management programs into your organization. The com- ponents of this book can be practically leveraged within your work environment to enable a top talent management initiative. The exhibits, forms, and instruments at the back of each chapter may be used within the classroom or by your organization development team and/or learners.

BENCHMARKING, APPLICATION, AND CUSTOMIZATION OF TALENT DEVELOPMENT/MANAGEMENT INTO YOUR ORGANIZATION OR CLIENT ORGANIZATION

The case studies, tools, and research within this book are ideal for managers, execu- tives and consultants who are implementing or managing a talent program, inside of a current talent management program, or are currently seeking a job from one of the organizations in this book. Students of advanced degree courses in management, organization development and behavior, and/or social/organizational psychology should also take notice of this book, as it contains critical information that is useful for your practicum and internship work. This book can be used by any senior vice president, vice president, director, or program manager who is in charge of leader- ship development and change for his/her organization. Teams of managers—project manager, program managers, HR/OD designers, or other program designers and trainers—should use the case studies in this book as starting points and benchmarks for the success of the organization’s initiatives.

This book contains a series of distinct case studies with various corporate needs and objectives. It is your job as the reader to begin the process of diagnosing your company’s unique organizational objectives.

When applying and learning from the case studies and research in this book, ask yourself, your team, and each other the following questions:

What is our context today?

What do we/I want to accomplish? Why?

What am I most passionate about leading talent management in? Why?

What are the issue(s) and concerns we are challenged with?

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Are we asking the right questions?

Who are the right stakeholders?

What approaches have worked in the past before? Why?

What approaches have failed before? Why?

For more information on Best Practice Institute’s benchmark research and execu- tive boards on the most current talent management topics, contact BPI directly on our toll free number at: (800) 718-4274 or via e-mail at: [email protected]. Please visit us online at https://www.bpiworld.com and https://www.bestpracticeinstitute.org.

If you would like to connect with any expert, practitioner, or author in this book, please e-mail us at [email protected]. All contributors/authors in this book are listed/known experts within the Best Practice Institute community.

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xxx How to use this book

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1

CHAPTER

1 AVON PRODUCTS, INC.

MARC EFFRON

A leadership development and talent turnaround system designed for executives that leverage 360 - degree feedback, a leadership skill/competency model, and indi- vidual development planning.

Introduction

A Success - Driven Challenge

The Turnaround

The Talent Challenge

Execute on the “ What, ” Differentiate with “ How ”

From Opaque to Transparent

The Avon 360

Broad - Based Transparency

From Complex to Simple

Performance Management

Engagement Survey

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2 Best Practices in Talent Management

From Egalitarian to Differentiated

Communication to Leadership Teams

A Few Big Bets

Tools and Processes

From Episodic to Disciplined

From Emotional to Factual

From Meaningless to Consequential

The Results of a Talent Turnaround

Measuring the Talent Turnaround ’ s Success

INTRODUCTION

In early 2006, Avon Products, Inc., a global consumer products company focused on the economic empowerment of women around the world, began the most radical restructuring process in its 120 - year history. Driving this effort was the belief that Avon could sustain its historically strong fi nancial performance while building the foundation for a larger, more globally integrated organization. The proposed changes would affect every aspect of the organization and would demand an approach to fi nd- ing, building, and engaging talent that differed from anything tried before.

A SUCCESS - DRIVEN CHALLENGE

Avon Products is a 122 - year-old company originally founded by David H. McConnell — a door - to - door book seller who distributed free samples of perfume as an incentive to his customers. He soon discovered that customers were more interested in samples of his rose oil perfumes than in his books and so, in 1886, he founded the California Perfume Company. Renamed Avon Products in 1939, the organization steadily grew to become a leader in the direct selling of cosmetics, fragrances, and skin care products.

By 2005, Avon was an $8 billion company that had achieved a 10 percent cumula- tive annual growth rate (CAGR) in revenue and a 25 percent CAGR in operating profi t from 2000 through 2004. A global company, Avon operated in more than forty coun- tries and received more than 70 percent of its earnings from outside the United States. By all typical fi nancial metrics, Avon was a very successful company.

However, as the company entered 2006 it found itself challenged by fl attening revenues and declining operating profi ts. While the situation had many contributing causes, one underlying issue was that Avon had grown faster than portions of its infra- structure and talent could support. As with many growing organizations, the struc- tures, people, and processes that were right for a $5 billion company weren ’ t necessarily a good fi t for a $10 billion company.

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Avon Products, Inc. 3

THE TURNAROUND

Faced with these challenges, CEO Andrea Jung and her executive team launched a fundamental restructuring of the organization in January 2006. Some of the larger changes announced included:

Moving from a Regional to a Matrix Structure: Geographic regions that had operated with signifi cant latitude were now matrixed with global business func- tions, including Marketing and Supply Chain.

Delayering : A systematic, six - month process was started to take the organization from fi fteen layers of management to eight, including a compensation and benefi t reduction of up to 25 percent.

Signifi cant Investment in Executive Talent: Of the CEO ’ s fourteen direct reports, six key roles were replaced externally from 2004 to 2006, including the CFO, head of North America, head of Latin America, and the leaders of Human Resources, Marketing, and Strategy. Five of her other direct reports were in new roles.

New Capabilities Were Created: A major effort to source Brand Management, Marketing Analytics, and Supply Chain capabilities was launched, which brought hundreds of new leaders into Avon.

THE TALENT CHALLENGE

As the turnaround was launched, numerous gaps existed in Avon ’ s existing talent and in its ability to identify and produce talent. While some of those gaps were due to missing or poorly functioning talent processes, an underlying weakness seemed to lie in the overall approach to managing talent and talent practices.

After reviewing Avon ’ s existing talent practices, the talent management group (TM) identifi ed six overriding weaknesses that hurt their effectiveness. They found that existing talent practices were

Opaque: Neither managers nor Associates knew how existing talent practices (that is, performance management, succession planning) worked or what they were intended to do. To the average employee, these processes were a black box.

Egalitarian: While the Avon culture reinforced treating every Associate well, this behavior had morphed into treating every Associate in the same way. High performers weren ’ t enjoying a fundamentally different work experience and low performers weren ’ t being managed effectively.

Complex: The performance management form was ten pages long, and the suc- cession planning process required a full - time employee just to manage the data and assemble thick black binders of information for twice - yearly reviews.

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4 Best Practices in Talent Management

Complexity existed without commensurate value, and the effectiveness rate of the talent practices was low.

Episodic: Employee surveys, talent reviews, development planning, and succes- sion planning, when done at all, were done at a frequency determined by individ- ual managers around the world.

Emotional: Decisions on talent movement, promotions, and other key talent activities were often infl uenced as much by individual knowledge and emotion as by objective facts.

Meaningless: No talent practice had “ teeth. ” HR couldn ’ t answer the most basic question a manager might ask about talent practices — “ What will happen to me if I don ’ t do this? ”

EXECUTE ON THE “ WHAT, ” DIFFERENTIATE WITH “ HOW ”

Our TM group found ourselves in a diffi cult situation. Fundamental changes were needed in every talent practice, and the practices had to be changed and implemented in time to support the turnaround. This meant that the practices had to be quick to build, easy to use, and, most of all, effective.

Taking our guidance from the Top Companies for Leaders study (Effron, Greenslade, & Salob, 2005) and the philosophies of executive coach Marshall Gold- smith (2006), we decided to build our talent practices with two key guiding principles.

1. Execute on the “ what. ” The Top Companies for Leaders study found that sim- ple, well - executed talent practices dominated at companies that consistently pro- duced great earnings and great leaders. We similarly believed that fundamental talent practices (that is, performance management or succession planning) would deliver the expected results if they were consistently and fl awlessly executed. We decided to build talent practices that were easy to implement and a talent management structure that would ensure they were consistently and fl awlessly implemented. More importantly, we decided to . . .

2. Differentiate on “ how. ” While disciplined execution could create a strong foun- dation for success, the six adjectives that described Avon ’ s current processes were largely responsible for their failure. We drew inspiration from Marshall Goldsmith ’ s revolutionary recreation of the executive coaching process. He had taken a staid, academic/therapy model for improving leaders and turned it into a simple but powerful process that was proven effective in changing leaders ’ behaviors.

With those two guiding principles in place, we began a 180 - degree transformation of Avon ’ s talent practices.

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Avon Products, Inc. 5

FROM OPAQUE TO TRANSPARENT

One of the most simple and powerful changes was to bring as much transparency as possible to every talent practice. TM designed new practices and redesigned existing ones using total transparency as the starting point. Transparency was only removed when confi dentiality concerns outweighed the benefi ts of sharing information. The change in Avon ’ s 360 assessment process was a telling example.

The Avon 360 Avon ’ s 360 - degree assessment process was hardly a model of transparency when the turnaround began. When the new TM leader arrived at Avon, he asked for copies of each VP ’ s 360 - degree assessment, with the goal of better understanding any common behavioral strengths and weaknesses. He was told by the 360 administrator in his group that he was not allowed to see them. The TM leader explained that his intent wasn ’ t to take any action on an individual VP, simply to learn more about his clients. He was again told “ no ” — that confi dentiality prevented their disclosure.

While the administrator was correct in withholding the information (the partici- pants had been promised 100 percent confi dentiality), the fact that the most critical behavioral information about top leaders was not visible to the TM leader (or anyone else) had to change. A new, much simpler 360 was designed and implemented that explicitly stated that proper managerial and leadership behaviors were critical for a leader ’ s success at Avon. Citing that level of importance, the disclosure to all partici- pants and respondents stated that the 360 information could be shown to the partici- pant ’ s manager, HR leader, regional talent leader, and anyone else the Avon ’ s HR team decided was critical to the participant ’ s development. It also stated that the behavioral information could be considered when making decisions about talent moves, includ- ing promotions or project assignments.

Helping to make this transition to transparency easier, the new 360 assessment and report differed from typical tools that rate the participant on profi ciency in various areas. The Avon 360 borrowed heavily from the “ feed - forward ” principles of Marshall Goldsmith 1 and showed the participant which behaviors participants wanted to see more of, or less of, going forward. Without the potential stigma of having others seeing you rated as a “ bad ” manager, openly sharing 360 fi ndings quickly evaporated as an issue.

Broad - Based Transparency Transparency was woven into every talent process or program in a variety of ways. Examples would include:

Career Development Plans: To provide Associates with more transparency about how to succeed at Avon, the HR team developed “ The Deal. ” The Deal was a sim- ple description of what was required to have a successful career at Avon, and what parts the Associate and Avon needed to play (see Figure 1.1 ). The Deal made clear

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6 Best Practices in Talent Management

FIGURE 1.1. Talent Investment Matrix

Pe rf

o rm

an ce

O ve

r Ti

m e

H ig

h 20

% M

id 60

% Lo

w 20

%

Potential

24+ months 50%

1 level in 2 years 30%

2 levels in 6 years 20%

Compensation targets: • Base 50th, Bonus 40th

Development investment: • Average Hi Po Program: No Global Move: No Special Projects: Consider

Compensation targets: • Base 50th, Bonus 40th

Development investment: • Average Hi Po Program: No Global Move: No Special Projects: No

Compensation targets: • Base 50th, Bonus -- NONE Development investment: • None without TM approval Hi Po Program: No Global Move: No Special Projects: No

Compensation targets: • Base 60th, Bonus 60th

Development investment: • 2x average Hi Po Program: Consider Global Move: Yes Special Projects: Yes

Compensation targets: • Base 50th, Bonus 50th

Development investment: • Average Hi Po Program: No Global Move: Consider Special Projects: Yes

Compensation targets: • Base 50th, Bonus 50th

Development investment: • .75x average Hi Po Program: No Global Move: No Special Projects: No

Compensation targets: • Base 60th, Bonus 90th

Development investment: • 5x average Hi Po Program: Yes Global Move: Yes Special Projects: Yes

Compensation targets: • Base 50th, Bonus 75th

Development investment: • 2x average Hi Po Program: Consider Global Move: Yes Special Projects: Yes

Compensation targets: • Base 50th, Bonus 75th

Development investment: • 1.5x average Hi Po Program: No Global Move: No Special Projects: Yes

that every Associate had to deliver results, display proper leadership behaviors, know our unique business, and take advantage of development experiences if they hoped to move forward in the organization.

Development Courses: Avon acknowledged the unspoken but obvious fact about participating in leadership or functional training courses — of course you ’ re being observed! We believed it was important for participants to understand that we were investing in their future and that monitoring that investment was critical. The larger investment that we made, the more explicitly we made the disclosure. For our Accelerated Development Process (a two - year high - potential development process offered to the top 10 percent of VPs), we let them know that they were now “ on Broadway. ” The lights would be hotter and the critics would be less for- giving. They knew that we would help each of them to be a great actor, but that their successes and failures would be more public and have greater consequences.

Performance Reviews: Switching from a 3 - point scale to a 5 - point scale pro- vided additional clarity to participants about their actual progress, as did clarify- ing the scale defi nitions. Associates were informed about what performance

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Avon Products, Inc. 7

conversations their managers should be having with them and when. The recom- mended distribution of ratings across the scale was widely communicated.

FROM COMPLEX TO SIMPLE

One of the most important changes made in Avon ’ s talent practices was the radical sim- plifi cation of every process. We believed that traditional talent processes would work (that is, grow better talent, faster) if they were effectively executed. However, we under- stood from our experience and a plethora of research (Hunter, Schmidt, & Judiesch, 1990) that most talent practices were very complex without that complexity adding any signifi cant value. This level of complexity caused managers to avoid using those tools, and so talent wasn ’ t grown at the pace or quality that companies required.

We committed ourselves to radically simplifying every talent process and ensur- ing that any complexity in those processes was balanced by an equal amount of value (as perceived by managers). Making this work was easier than we had anticipated. As the TM team designed each process, we would start literally with a blank sheet of paper and an open mind. We would set aside our hard - earned knowledge about the “ right ” way to design these processes and instead ask ourselves these questions:

1. What is the fundamental business benefi t that this talent process is trying to achieve?

2. What is the simplest possible way to achieve that benefi t?

3. Can we add value to the process that would make it easier for managers to make smarter people decisions?

Using just those three questions, it was amazing how many steps and “ bells and whistles ” fell away from the existing processes. The two examples below provide helpful illustration.

Performance Management Aligning Associates with the turnaround goals of the business and ensuring they were fairly evaluated was at the foundation of the business turnaround. As we entered the turnaround, the company had a complex ten - page performance management form with understandably low participation rates. Many Associates had not had a performance review in three, four, or even fi ve years. It would have been impossible to align Asso- ciates with the vital few turnaround goals using that tool and process.

The business benefi t: We stated that the fundamental benefi t of performance goals and reviews is that they aligned Associates with business goals and caused Associates to work toward those goals with the expectation of fair rewards.

The simplest path: It seemed obvious that the simplest way of achieving the busi- ness goal was simply to have managers tell their Associates what their goals were. It was simple and the value to managers outweighed any complexity. After taking

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8 Best Practices in Talent Management

that very small step forward, we literally advanced at the same pace, taking incre- mentally small steps forward in the design process. At each step, we would ask ourselves, does this step add more value to managers than it does complexity? As long as it did, we added the additional design element. When that complexity/value curve started to level (see Figure 1.2 ), we very carefully weighed adding any addi- tional elements. And, when we couldn ’ t justify that adding another unit of com- plexity would add another unit of value, we stopped.

What went away as the design process progressed? Just a few examples would include:

Goal labels (highly valued, star performer, etc.), which added no value (in fact blurred transparency!) but did add complexity.

Individual rating of goals, which implied a false precision in the benefi t of each goal and encouraged Associates to game the system.

Behavioral ratings, which were replaced with a focus on behaviors that would help achieve the current goals.

The output was a one - page form with spaces for listing the goal, the metric, and the outcome. A maximum of four goals was allowed. Two behaviors that supported achievement of the current goal could be listed but were not for- mally rated. As a result, participation reached nearly 100 percent, and line managers actually thanked the talent team for creating a simple perform- ance management process!

Adding Additional Value: In this process, we didn ’ t fi nd opportunities to add more value than was achieved through simplifi cation alone.

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FIGURE 1.2. The Avon Deal (Example)

Grow Avon

Achieve Results for Our Representatives

Provide Clear Performance

Expectations; Let You Know Where

You Stand

Develop Through

Experiences

Take on Critical Career Experiences

Provide the Right Assignments and

Experiences

Know Avon

Understand Direct Selling

Provide Training and Exposure

Lead Avon

Lead Our Associates

Provide Feedback on Your

Leadership Skills

Your Role

Avon’s Role

Working Together to Help You Create a Great Career at Avon

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Avon Products, Inc. 9

Engagement Survey When the turnaround began, no global process for understanding or acting on Associ- ate engagement issues existed. Select regions or departments made efforts of varying effectiveness, but there was no integrated focus on consistent measurement and improvement of engagement. In designing the engagement survey process, we applied the same three questions:

The business benefi t: We accepted the substantial research that showed a corre- lation (and some that showed causation) between increasing engagement and increasing various business metrics. In addition, we felt that the ability to measure managers ’ effectiveness through engagement levels and changes would provide an opportunity for driving accountability around this issue. As with performance management, we knew that managers would use this tool if we could make it sim- ple and, ideally, if we could show that it would allow them to more effectively manage their teams.

The simple path: There were two goals established around simplicity. One goal was to understand as much of what drove engagement as possible, while asking the least number of questions. The second goal was to write the questions as sim- ply as possible, so that if managers needed to improve the score on a question, their options for action would be relatively obvious. The fi nal version of the sur- vey had forty - fi ve questions, which explained 68 percent of the variance in engagement. The questions were quite simple, which had some value in itself, but their true value was multiplied tenfold by the actions described below.

Adding additional value: We were confi dent that, if managers took the “ right ” actions to improve their engagement results, not only would the next year ’ s scores increase, but the business would benefi t from the incremental improvement. The challenge was to determine and simply communicate to the manager what the “ right ” actions were. Working with our external survey provider, we devel- oped a statistical equation model (SEM) that became the “ engine ” to produce those answers. The SEM allowed us to understand the power of each engagement dimension (for example, Immediate Manager, Empowerment, Senior Manage- ment) to increase engagement, and to express that power in an easy-to-understand statement.

For example, we could determine that the relationship between the Immediate Manager dimension and overall engagement was 2:1. This meant that for every two percentage points a manager could increase his or her Immediate Manager dimension score, the overall engagement result would increase by one percentage point. Even better, this model allowed us to tell every manager receiving a report the specifi c three or four questions that were the key drivers of engagement for his or her group .

No longer would managers mistakenly look at the top - ten or bottom - ten questions to guess at which issues needed attention. We could tell them exactly where to focus their

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10 Best Practices in Talent Management

efforts. The list of these questions on page fi ve of the survey report essentially reduced a manager ’ s effort to understand his or her survey results to just reading one page.

FROM EGALITARIAN TO DIFFERENTIATED

A critical step in supporting Avon ’ s turnaround was determining the quality of talent we had across the business — an outcome made much easier with transparent processes and conversations. Once we understood our talent inventory, we made a broad and explicit shift to differentiate our investment in talent. While we would still invest in the development of every Associate, we would more effectively match the level of that investment with the expected return. We also differentiated leaders ’ experiences to ensure that our highest potential leaders were very engaged, very challenged, and very tied to our company.

We made the shift to differentiation in a number of ways, including:

Communication to Leadership Teams At the start of the turnaround process, presentations were made to each of the regional leadership teams to explain the shift in talent philosophy. The chart below (see Figure 1.3 ) helped to emphasize that we were serious about differentiation, could be relatively specifi c about what it meant and how we planned to apply it. Showing the differentiation on our new Performance and Potential matrix also let leaders know that accurately assessing talent on this tool was critical to our making the right talent investments.

FIGURE 1.3. The Value/Complexity Curve

Continue

Caution

Stop

Effort /Complexity Added

V al

ue A

dd ed

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Avon Products, Inc. 11

A Few Big Bets A key plank in our philosophy was that we believed in placing a “ few big bets ” on a small number of leaders. This approach was informed by the research showing the vastly superior performance of the top 5 to 10 percent of a specifi c population and by the belief that fl awless execution of well - known high - potential development tactics would rapidly accelerate development. 2 With limited funds to spend, we needed to make a decision about what talent bets would truly pay off.

Our monetary investment in our highest - potential leaders was fi ve to ten times what we would invest in an average performer. This investment would include train- ing, coaching, and incentive compensation, but we also invested the highly valuable time of our CEO, executive team, and board members. Our highest - potential leaders would often have an audience with these executives on a regular basis.

Tools and Processes Our new talent review process and performance review process also emphasized our differentiation philosophy. Our new 5 - point performance scale came with a recom- mended distribution that assumed 15 percent of our leaders would fail to meet some of their goals during the year. We believed that if goals were set at an appropriately chal- lenging level, this was a very reasonable expectation. As a consequence, we saw mar- ginal performers, who typically could have limped along for years with an average rating, receive the appropriate attention to either improve their performance or move out of the business.

Our performance and potential grid (3 by 3) also had recommended distributions, but we found over time that the grid defi nitions actually better served our differentia- tion goals. After initially rating leaders as having higher potential (the ability to move a certain number of levels over a certain period of time), over time, managers saw that the movement they predicted didn ’ t occur and those with more potential to move became a smaller, more differentiated group. We also asked managers to “ stack rank ” Box 6, which contained average performers who were not likely to move a level in the next twenty - four months. This process helped to differentiate “ solid average ” perform- ers from those who were probably below average and possibly blocking others ’ career movement.

FROM EPISODIC TO DISCIPLINED

As with many companies, Avon had plenty of well intentioned but very busy managers. Processes like talent reviews, which were administratively complex and diffi cult to understand, were not going to inspire the typical manager to reorder her priority list. By greatly simplifying these processes, we had removed one barrier to effectiveness, but we hadn ’ t actually moved the process forward. We still needed to build organizational

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12 Best Practices in Talent Management

discipline around the execution of these simple new processes. We did that in a number of ways:

Consistent global tools and processes: Many parts of the organization had cre- ated their own tools for activities like performance management or individual development. The corporate talent management function was not empowered to push for global consistency, and consequently there was not a common approach to build Avon talent. This changed with a shift to global consistency that was championed by the SVP HR. While all talent practices would now be designed by the corporate TM group, each still had to be vetted with the HR leaders of each geographic region and functional discipline. As a fi nal part of the design process, adjustments were made to tools and processes to ensure they met needs around the world.

Adding talent management structure globally: We created the role of “ regional talent management leader, ” a manager - or director - level role responsible for the local implementation of the global processes. Five of these positions were cre- ated — one in each key geographic region — and the improved process discipline can be credited to them and their HR leaders. Regular meetings and calls between regional leaders and the corporate TM group helped ensure great dialogue and consistent improvements in the processes.

A committed CEO: Our CEO, Andrea Jung, showed herself to be a tremendous supporter of effective talent processes. Both through her role modeling (conduct- ing performance reviews and setting clear goals for her team) and instilling process discipline (she held formal talent review meetings with each direct report and an executive committee talent calibration meeting twice each year), she signaled that these processes had value.

This new level of discipline was an incredibly strong lever in our ability to assess and develop our talent. By holding talent processes every six months, we were able to drive transparency around talent issues on a regular basis and instill accountability to take action on issues before the next cycle.

FROM EMOTIONAL TO FACTUAL

Avon was a company with genuine, heart - felt concern for its Associates and an organi- zation in which strong relationships were built over a lifetime of employment. As the organization grew, a leader ’ s personal knowledge of other Associates ’ performance or development needs often served as a key factor in determining talent movement. While in many cases a leader ’ s individual knowledge was relatively accurate, it ’ s likely that a more calibrated point of view or additional quantitative facts may have allowed a richer discussion or more confi dence in decision making.

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Avon Products, Inc. 13

The TM team worked to inject more fact - based decision making into talent dis- cussions. Some of those facts were qualitative and others quantitative, but as a whole, they allowed a more complete discussion of an individual ’ s performance and potential.

Qualitative facts added: Additional qualitative facts were found everywhere from talent reviews to leadership and functional courses. In talent reviews, cali- bration discussions were added at each level so that individual managers could justify individual potential ratings to their peers. Those ratings might also be reviewed an additional time at the next level. Regional talent management leaders would facilitate many of those meetings to help leaders have complete and honest discussions, helping to ensure that the qualitative data was accurate. Additional qualitative data was also added from a leader ’ s participation in leadership or func- tional development programs. Senior line managers would sponsor those pro- grams, frequently attending the entire one - , two - , or three - week process. Those managers would then bring rich observations to the talent discussions about an individual ’ s performance in those classes.

Quantitative facts added: Two of the new tools discussed above, the 360 and the engagement survey, provided quantitative facts that helped Avon assess talent. Progress against engagement goals or individual behavior improvement (or lack of it) was often a key indicator of readiness for additional development.

FROM MEANINGLESS TO CONSEQUENTIAL

Injecting managerial accountability for talent practices was a key factor in their effec- tiveness. Prior to the turnaround, accountability for those practices did not exist, with some managers taking personal responsibility to implement them and others doing very little. In creating the new talent practices, we tried to inject accountability into each one, answering that critical question, “ Why should I do this ” ?

Monetary accountability: Varying a leader ’ s pay for successfully or unsuccess- fully managing talent is a dream of many HR and compensation leaders. We chose to use that lever in a very targeted way when we applied it to engagement survey improvement. The executive team believed that the survey provided a strong enough measure of a manager ’ s focus on people issues that they could be held accountable for its improvement. The executive committee established year - over - year improvement in engagement scores as a goal in every VP ’ s performance plan.

Associate - led accountability: To encourage the timely completion of the perfor- mance management process steps, we empowered Associates to hold their manag- ers accountable. A memo was sent to every Associate at the beginning of each

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14 Best Practices in Talent Management

year informing them of the specifi c action steps and corresponding dates their managers should be taking to set goals. A similar note was sent for mid - year and end - of - year reviews. The notes asked the Associates to let their local HR leaders know if those steps weren ’ t occurring.

CEO - led accountability: Every six months each executive team member would meet to present his or her talent review to the CEO. Actions promised at the last meeting were reviewed and progress noted. Leaders knew that promises were being tracked and reviewed, and that progress would need to be shown at the next meeting.

While accountability was applied in many different ways, the common outcome was that leaders understood that focusing on talent during the turnaround (and after) mattered, and that they were responsible for getting it done.

The progress made on talent issues was helped by the various factors discussed above, from a committed CEO and SVP HR to the urgency of a turnaround to the dra- matic change in talent practices. But it would not have been possible without the desire of every manager at Avon to do the right thing. We started with a culture that valued every Associate, and we channeled that positive spirit using sound processes and unfl inching discipline. We didn ’ t delude ourselves into thinking that those talent changes would have been possible without the Avon culture.

THE RESULTS OF A TALENT TURNAROUND

We described the six weaknesses in Avon ’ s talent practices at the beginning of this chapter. Over the initial turnaround period (twelve to eighteen months), we moved those talent processes:

From opaque to transparent: Leaders now know what ’ s required to be success- ful, how we ’ ll measure that, how we ’ ll help them, and the consequences of higher and lower performance. They know their performance ratings, their potential rat- ings, and how they can change each of those.

From egalitarian to differentiated: We actively differentiated levels of Avon tal- ent and provided each level with the appropriate experience. Our highest - potential leaders understand how we feel about them, and they see a commensurate invest- ment. Our lower - performing leaders get the attention they need.

From complex to simple: Managers now do the right thing for their Associates both because we ’ ve lowered the barriers we previously built and because we ’ ve helped them with value - added tools and information.

From episodic to disciplined: Processes now happen on schedule and consis- tently around the world.

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Avon Products, Inc. 15

From emotional to factual: Talent decisions are made with an additional layer of qualitative and quantitative information drawn from across many different leader experiences.

From meaningless to consequential: Leaders know that they must build talent the Avon way for both their short - and long - term success.

MEASURING THE TALENT TURNAROUND ’ S SUCCESS

The specifi c talent practices we targeted have seen signifi cant improvements in effec- tiveness. Ratings of Immediate Manager (including items such as clear goal setting, frequent feedback, and development planning) have increased up to 17 percent, with directors and vice presidents giving their immediate managers nearly a 90 percent approval rating. The ratings of “ people effectiveness ” (which captures many HR and talent practices) increased up to 16 percent, including strong gains on questions related to dealing appropriately with low performers and holding leaders accountable for their results.

More transparency has allowed faster movement of talent into key markets. Sim- pler processes have allowed us to accelerate the development of leaders. Holding lead- ers accountable for their behaviors has improved the work experience for Associates around the world.

While these changes were hard - fought and we believe created much more effec- tive processes, a more important set of metrics exists. Avon has achieved all of its expense savings goals since the start of the turnaround and has recently reinforced its commitments to even greater expense reductions. Even with this lower cost base and 10 percent fewer Associates, Avon has grown from revenues of $ 8B in 2005 to nearly $ 11B in projected 2009 revenues while delivering strong single - digit earnings growth.

We can ’ t say with certainty that our new talent practices contributed to either those cost savings or our revenue increases. We are confi dent, however, that the talent practices now in place will deliver better leaders, faster, to help Avon meet its business goals.

REFERENCES Effron, M., Greenslade, S., & Salob, M. (2005, September). Growing great leaders: Does it really matter? Human

Resource Planning Journal, 28(3), 18 – 23.

Goldsmith, M. (2006). Try feed forward instead of feedback. In M. Goldsmith & L. Lyons, Coaching for Leader- ship (pp. 45 – 49). San Francisco: Pfeiffer.

Hunter, J.E., Schmidt, F.L., & Judiesch, M.K. (1990). Individual differences in output variability as a function of job complexity. Journal of Applied Psychology, 75 (1), 28 – 42.

Jones, C. (1986). Programming productivity . New York: McGraw - Hill.

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16 Best Practices in Talent Management

Marc Effron helps companies build better talent, faster. As a talent management leader, Effron has worked for, and consulted to, some of the world’s largest and most successful companies, including Bank of America, Citigroup, Philips Electronics, Reliance Industries (India), and Alcoa. He applies a simplicity-based approach to building leaders, which emphasizes transparency and managerial accountability. Effron’s recent experience includes serving as vice president, Global Talent Manage- ment, for Avon Products and as the global practice leader for Leadership Consulting at Hewitt Associates. At Hewitt, Effron created the Top Companies for Leaders study, which is now an annual cover story in Fortune magazine. He was also senior vice pres- ident, leadership development, at Bank of America and held other corporate and con- sulting positions. Effron’s latest book is One Page Talent Management: How to Build Better Leaders, Faster (Harvard Business Press, 2010) with co-author Miriam Ort. He has co-authored two books on leadership, written chapters in eight edited books, and is a frequent speaker at industry events. He is the founder of the New Talent Manage- ment Network, the world’s largest organization for talent management professionals.

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17

CHAPTER

2 BANK OF AMERICA

BRIAN FISHEL AND JAY CONGER

A comprehensive, multi - phased executive on - boarding program that leverages multiple sources of feedback, coaching, and leadership and cultural competencies.

Introduction

Company Background

The Leadership Dilemma

The Need for On - Boarding Interventions at the Executive Leadership Level

Leadership Development Activities for Executive Leaders

The Design Assumptions Underlying the Bank of America ’ s Executive On - Boarding Process

The Bank of America ’ s Executive On - Boarding Program: Phases and Interventions

Lessons for Designing On - Boarding for Executive Leaders

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18 Best Practices in Talent Management

INTRODUCTION

The Bank of America is the fi rst true national retail banking brand in the United States. Over the last two decades, the bank has grown dramatically, primarily through acquisi- tions. It began as the small regional North Carolina National Bank and has become one of the largest companies in the world. As a fi nancial institution, it serves individual consumers, small - and middle - market businesses, and large corporations with a full range of banking, investing, asset management, and other fi nancial and risk - management products and services. Following the acquisition of Merrill Lynch on January 1, 2009, Bank of America is among the world ’ s leading wealth management companies and is a global leader in corporate and investment banking and trading across a broad range of asset classes serving corporations, governments, institutions, and individuals around the world. The company serves clients in more than 150 countries.

In this chapter, we will describe the Bank of America ’ s executive on - boarding programs. Through a multi - phased approach supported by comprehensive feedback and coaching mechanisms, the bank ’ s programs have proven highly effective at both pre - empting leadership failures and for accelerating the knowledge and relationships necessary to step into an executive role. Our insights are drawn from an in - depth case analysis of these on - boarding programs at the Bank of America.

Company Background The Bank of America example is one of the most comprehensive approaches to execu- tive on - boarding in the fi eld today. It also has a proven track record of seven years with successful results. For example, the Bank of America hired 196 externally hired execu- tives between 2001 and May 2008 and had experienced twenty - four terminations — a new hire turnover rate of approximately 12 percent. This compares to estimates as high as 40 percent turnover in large corporations (Watkins, 2003). The Bank of America has tested its approaches out on a very large sample of on - boarded executives — over fi ve hundred internal and external over the last seven years. Over the last decade, the Bank of America has been actively involved in acquisitions as well as organic growth. As a result, the organization must annually on - board a signifi cant number of executives — both externally and internally sourced. This demand has created many opportunities to learn about the effi cacy of various executive on - boarding interventions.

In addition, the Bank of America ’ s on - boarding program is expressly designed to help new executives learn to be facile at navigating the bank ’ s large matrixed organi- zation as well as building and leveraging networks of relationships for career success and for implementing company initiatives. These same demands are common in most large corporations today. We feel that this particular case holds lessons that readers in a wide range of organizations will therefore fi nd useful.

The Leadership Dilemma The fi rst - time executive leader faces three dilemmas as he or she steps into a new role. In a brief period of time, the leader must gain mastery over a complex and demanding role.

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Bank of America 19

The learning demands are often the most pronounced in a manager ’ s career. Second, expectations are high. It is assumed that the incoming executive already has the season- ing to lead in the new situation. After all, most executives have already spent years in managerial roles beforehand. As a result, there is little developmental feedback for those at the top of organizations. These two challenges produce the third dilemma. The proba- bility of the incoming executive ’ s derailment is high. Complex new role demands com- bined with a lack of developmental support can produce a “ perfect storm ” in terms of failure on the job.

As can easily be imagined, the price of leadership failures in the executive ranks is very costly for any organization. Beyond the direct costs of on - the - job development, severance, and recruitment, there are more signifi cant costs to the organization, such as stalled organizational initiatives, loss of business knowledge, damage to customer and staff relationships, dampened employee morale, and lost opportunities. In addi- tion, there are the costs of recruiting a replacement as well as the replacement ’ s time in gaining mastery of the job and setting his or her own agenda. Given these high costs, there is a tremendous need for developmental interventions that place an emphasis on pre - empting failures in senior leadership roles.

While some organizations have developed formal on - boarding interventions, the typical approach tends to be quite limited in scope and does little to effectively on - board an executive leader. Most are simple orientation programs offering an oppor- tunity to network with the CEO and the executive team. They may also provide some form of overview of the corporation, its fi nancials, and its activities. A handful of orga- nizations such as General Electric and Toyota do have more sophisticated on - boarding programs at the executive and general manager level (Fulmer & Conger, 2003), but such programs are very rare in the corporate world. Instead interventions to pre - empt leadership derailments tend to be dependent on performance appraisals and talent management practices. The underlying premise is that failures at the executive level can best be avoided through continuous formal performance feedback to a man- ager and through the careful selection of jobs and bosses over the life span of a manag- er ’ s career (McCall, 1988). While we share this view, we also believe that developmental interventions focused solely on the transition to the executive role are a necessity. Companies such as General Electric and PepsiCo have long designed their leadership education programs around career transitions, especially at executive levels (Conger & Benjamin, 1999). In other words, a comprehensive on - boarding program at the executive level has an essential place in any organization ’ s portfolio of leadership development initiatives.

The Need for On - Boarding Interventions at the Executive Leadership Level The transition from line management to an executive role is a signifi cant jump in terms of scale and complexity of the job. Executives operate at the boundary between their organization and the external environment, whereas most managers are more

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20 Best Practices in Talent Management

organizationally and functionally oriented. Executives must also formulate company - wide strategies and play a critical role in their implementation — roles which they played to a far lesser degree prior to their executive appointments. Their decisions around staffi ng, rewards, measurement systems, and culture create a context that shapes the strategic choices made by managers and specialists throughout the organization.

The executive role comes with enormous visibility and accountability. It is extremely demanding with little time for learning on the job. At the same time, devel- opmental feedback and coaching for executives tend to be minimal. There are the occasional opportunities for formal coaching and executive education programs. But beyond these interventions, there is usually little else. In conclusion, for many manag- ers, the promotion to an executive leadership role will be the steepest jump in their career history, and paradoxically the one with the least amount of transition support.

The limited developmental support is a result of several factors. First, it is assumed by most organizations that their senior - most talent is well seasoned, given the many years of managerial experiences required for entry into the executive suite. Yet posi- tions in functional line management roles are rarely broad enough to provide suffi cient preparatory experience.

Second, the promotion itself and the many years of prior management experience can produce an often misplaced self - confi dence in new executives that they are up to the task. This sense of self - assurance may discourage new executives from seeking out developmental feedback and from being more proactive in self - refl ection and learn- ing. There is a natural desire to appear in charge — in other words, to be seen as an effective leader immediately. Seeking coaching and feedback would dispel this impres- sion, and therefore executives may be hesitant to seek either.

Third, in the executive suite, the environment is also more politicized. Peers at the executive level are often competitors jousting for the top roles. As a result, developmen- tal support and feedback from colleagues tend to be far more diffi cult to obtain. In addi- tion, many CEOs do not see coaching their executives as an essential part of their role. So the new executive ’ s superior may provide limited or no developmental guidance.

All of these forces coalesce to increase the probability of leadership derailments at the senior - most levels of organizations. The problem is even more extreme for organi- zations when outsiders are hired into executive jobs. As noted earlier, one estimate is that 40 percent of senior managers hired from the outside fail within their fi rst eighteen months in the role (Watkins, 2003). Given the above discussion, it is easy to see why a developmentally oriented program to help transition managers into execu- tive leadership roles might not only be helpful but essential. But what exactly should be the aim of such interventions and how best to design them?

Ideally, a well - designed on - boarding intervention can and should achieve three outcomes. The fi rst is to minimize the possibility of derailment on the job. By acceler- ating the new executive ’ s understanding of the role demands and by providing support through constructive feedback, coaching, and follow - up, a well - designed program can and should preempt failures. The second outcome is to accelerate the performance results of the new leader. For example, research suggests that a senior - level manager

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Bank of America 21

requires an average of 6.2 months to reach a break - even point — the moment at which the new leader ’ s contribution to the organization exceeds the costs of bringing him or her on board and he or she has acquired a critical base of insight into the job (Watkins, 2003). Effective on - boarding interventions should shorten this cycle of learning by accelerating the development of a network of critical relationships, clarifying leader- ship and performance expectations, and facilitating the formulation of more realistic short - and medium - term performance objectives.

A third outcome for on - boarding interventions concerns organizations that are aggressively pursuing acquisitions or experiencing high growth rates. In both cases, they must grapple with socializing an infl ux of outside senior managers. An effective on - boarding intervention should facilitate a far smoother integration and socializa- tion experience for these incoming executives. It accomplishes this by helping them to rapidly acquire an understanding of the business environment, socializing them into the organization ’ s culture and politics, building a network of critical relationships, and familiarizing them with the operating dynamics of the executive team. In the sections to follow, readers will see how the Bank of America on - boarding programs success- fully achieves these outcomes.

LEADERSHIP DEVELOPMENT ACTIVITIES FOR EXECUTIVE LEADERS

The impetus for the Bank of America ’ s interest in executive on - boarding is a product of its own corporate history. Over the last two decades, the bank has experienced dramatic growth through acquisitions. It began as a small regional North Carolina bank (North Carolina National Bank) and has grown into one of the largest companies in the world. As a result of this history of aggressive acquisitions, it discovered a need to more effectively on - board executive leaders from acquired companies and to quickly assimilate them into the Bank of America ’ s standards and expectations for performance. The organization ’ s leadership development group was very familiar with the research on executive derailment, which showed high failure rates for executives who were on - boarded into acquiring companies. In response, the bank developed on - boarding interventions. Over time, these programs have been expanded to the organization ’ s internal executive promotions to ensure that these individuals will succeed as well as feel that they were receiving attention equal to the outsiders.

It is important to note, however, that executive on - boarding is only one of several processes that the Bank of America deploys for the leadership development of its senior talent. While we explore this one activity in depth in this chapter, the bank ’ s success with leadership talent is a product of its multi - faceted approach to development at the executive level, along with Mr. Lewis ’ and his executive leadership team ’ s unwavering support for leadership development. The latter is a critical driver of the bank ’ s success in this area. As illustrated in Figure 2.1 , the range of the bank ’ s executive leadership development activities is extensive and includes selection, on - boarding, performance

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22 Best Practices in Talent Management

management, processes to upgrade executive talent, developmental experiences, and compensation.

A critical factor is that the executive development strategy is championed by the bank ’ s CEO Ken Lewis. In overview fashion, Figure 2.1 highlights the core dimen- sions of executive development at the bank. In addition, Lewis meets every summer with his top executives to review the organizational health and development strategies of each business. In two - to three - hour sessions with each executive, Lewis probes the people, fi nancial, and operational issues that will drive growth over the next twenty - four months, with the majority of time spent discussing the key leaders, critical leader- ship roles necessary to achieving the company ’ s growth targets, and organizational structure. These meetings are personal in nature, with no presentation decks or thick books outlining HR procedures. But they are rigorous. Business leaders come to the sessions with a concise document (the goal being three pages or fewer to ensure sim- plicity) that describes strengths and weaknesses in their units ’ leadership talent pipe- lines, given business challenges and goals. During these conversations, executives make specifi c commitments regarding current or potential leaders — identifying the next assignment, special projects, promotions, and the like. Lewis follows up with his executives in his quarterly business reviews to ensure that they have fulfi lled their commitments. With this active commitment at the very top of the organization, leaders throughout the Bank of America sense that leadership development is a critical activ- ity for the company. As a result, it is a widely held belief that leadership talent directly

FIGURE 2.1. Executive Development at Bank of America

Compensation Programs

Coaching Development Planning Development Programs

Recruiting/Staffing

**On-Boarding and Integration**

• Interview Guides

Performance Management

360� Feedback • The “How”

• Job Specs

Pay for their performance

Get the right people in

critical roles

Talent Management

Attract, Retain, Develop Great Leaders

Manage their performance

Continually upgrade

them

Grow and develop them

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Bank of America 23

affects the performance of the bank. This belief sets up a mandate for the organization — to hire and keep great leadership talent.

Finally, the organizational culture promoted by Lewis is one that encourages can- dor, trust, teamwork, and accountability at all levels in the organization, especially at the executive level. The company has a deep comfort with differentiating individual performance (based on what is achieved as well as on how these achievements are attained). There is also a belief that today ’ s top performers are not necessarily tomor- row ’ s — that even the best leaders can fall behind or derail. As a result, the corporate culture is one in which the truth is more highly valued than politeness or tolerance for average or poor performance. These beliefs drive what and how the Bank of America builds and measures leadership success, whether it is in programs, performance man- agement, or selection. This overarching environment is critical to the success of the bank ’ s executive on - boarding program. One cannot understand the on - boarding proc- ess without fi rst appreciating the bank ’ s commitment to leadership and high performance.

The Design Assumptions Underlying the Bank of America ’ s Executive On - Boarding Process Underpinning the Bank of America ’ s on - boarding interventions is a set of fundamental assumptions that have shaped its design features. These assumptions are the product of “ lessons learned ” from earlier experiences with on - boarding interventions and experi- ments. The baseline assumption is that successful on - boarding occurs over time — spe- cifi cally during the executive ’ s fi rst twelve to eighteen months on the job. Thus, any on - boarding process must be supported by multiple interventions instead of a single event, say at entry into the executive role. Interventions must occur at intervals over the executive ’ s fi rst year to eighteen months, rather than solely within the fi rst few months into the job. To be effective, on - boarding must also be supported by multiple resources, especially in terms of stakeholder resources. To engage solely the new executive ’ s superior (the hiring executive) is not suffi cient to ensure a successful on - boarding experience. Instead the fullest possible spectrum of stakeholders must be involved in the new executive ’ s selection, entry, and on - boarding. Finally, interven- tions are completely dependent on the quality of the interaction between the executive and his or her stakeholders. A purely paperwork - driven or bureaucratic process will not produce optimum results. The approach must therefore focus on the quality of dia- logue and interaction, rather than on documentation and formal processes.

These assumptions have directly shaped the on - boarding interventions that the Bank of America deploys. For example, the bank ’ s program is designed around multi- ple phases. Different kinds of interventions occur in each phase. It engages the new executive ’ s many stakeholders in a simple, transparent process, with the aim of achiev- ing a broad range of outcomes. Dialogue and feedback are at the core of all of the vari- ous interventions. In the discussion that follows, we will examine how these design assumptions play out in each of the major phases of the on - boarding process.

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24 Best Practices in Talent Management

The Bank of America ’ s Executive On - Boarding Program: Phases and Interventions The on - boarding experience spans four core phases — selection of the new executive, initial entry into the executive role, a mid - point phase of 100 to 130 days on the job, and a fi nal review phase at the end of the fi rst year. We will examine each of these phases, its central activities, and its goals.

Selection Phase The fi rst element of a successful on - boarding process is the selection process itself. While expertise and experience are the overriding criterion, there are additional dimensions when it comes to selection at the Bank of America: leadership ability and cultural fi t. If the new executive is lacking leadership and interpersonal skills and cultural sensitivity, he or she will have a much higher probability of derail- ing. To ensure this does not happen, the human resources function at the Bank of America devotes a great deal of attention to its partnerships with executive search fi rms. Recruiters must understand the bank ’ s culture and leadership requirements when hired to conduct an executive - level search. In addition, a leadership develop- ment offi cer from HR ( “ LD partner ” in the bank ’ s terminology) will often interview the candidate to assess cultural fi t with bank, value to the team, and leadership approach. This information is meant to complement data from other potential stake- holders who are interviewing the candidate about his or her expertise and experience. The LD partner will solicit responses to the following types of questions from all the interviewers:

1. “ Would you personally trust your career to this person [the candidate]? ”

2. ” Do you see yourself learning from him or her? ”

3. “ Is this person capable of putting enterprise objectives ahead of his or her own goals and working well across lines of business and constituents? ”

4. “ Would this person complement the direct team that he or she would be a part of? ”

5. “ Would this person be able to accept, process, and apply candid coaching and feedback in order to continuously improve? ”

6. “ Does he or she have the drive and passion to be part of a winning team? ”

7. “ Can you see this person leading from and living the company ’ s core values? Would he or she fi t our culture? ”

8. “ Does this person have the potential to assume more responsibility in the future? ”

Answers to these questions provide insights into the candidate ’ s potential for a fi t or misfi t with the bank ’ s culture and for his or her credibility as a leader. If the candi- date is hired, the answers to these and other interview questions are then provided to the individual upon his or her arrival into the job. The sources of feedback, however, remain anonymous.

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Bank of America 25

Job design is another essential part of the selection process. A clear and calibrated job specifi cation is spelled out and supported by stakeholders before a search begins. Critical stakeholders will be interviewed by the LD and/or HR partners about what is required in the job, as well as other dimensions that are not critical but helpful for the candidate to possess. This selection process is designed so that the hiring executive does not make a blind selection — say hiring someone with a similar style to his or her own. The multi - stakeholder involvement also ensures that the hiring executive has a clear sense of the demands of the job from the perspectives of the widest range of stakeholders.

Critical to this phase is the role of the LD partner. This individual acts as a “ chief talent offi cer ” during the hiring process and on - boarding process of each new execu- tive. Usually with ten to fi fteen years of experience, they normally possess a leader- ship development and/or organization development background. Most have deep experience in hiring and developing executives. As a result, these LD partners have a strong degree of credibility in the eyes of the new executive and his or her stakehold- ers. The LD partners ’ responsibilities are broad. They essentially “ own ” the execu- tives ’ on - boarding process from beginning to end.

Entry Phase Following hiring, the new executive ’ s initial few weeks on the job are critical ones. During this time, he or she must accomplish four outcomes: (1) develop business acumen specifi c to the new role, (2) learn the organizational culture, (3) master the role ’ s leadership demands, and (4) build critical organizational relationships.

From the standpoint of business acumen, the new executive must be able to effi - ciently and quickly learn customer and fi nancial information specifi c to the new role. In turn, he or she must set realistic goals and objectives based on this information. On the cultural dimension, he or she must acquire an understanding of the written and unwritten norms of behavior within the organization. From the standpoint of leader- ship demands, new executives must be able to rapidly determine the organization ’ s expectations of them as well as establish leadership expectations within their teams. Finally, it is imperative that the new executive be able to identify and build relation- ships with key organizational stakeholders.

To meet these demands, three major categories of interventions are used: (1) tools and processes, (2) orientation forums, and (3) coaching and support. Tools and proc- esses include an on - boarding plan and new leader/team and new leader/peer integra- tion processes. Orientation forums include a general new employee orientation and a new executive orientation program. For coaching and support, there are three primary providers: the hiring executive, an HR generalist, and the LD partner. Each of these interventions is described below.

During the fi rst week on the job, the LD partner prepares the on - boarding plan for the executive. This early engagement with the LD partner ensures that from the very start the LD partner will be viewed as a critical resource for the newly appointed exec- utive. The integration plan itself has two primary outcomes. One is to provide the new

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26 Best Practices in Talent Management

leaders with basic yet critical information about the business they will soon be lead- ing. They are given an overview of their units ’ fi nancials, the units ’ business plans, key initiatives, assessments of their teams ’ leadership talent, and other important back- ground information such as biographies of key managers, customer surveys, and recent presentations on key issues in the units. The second outcome is to have the executives defi ne successes for their fi rst ninety days on the job. They must identify these along three dimensions: fi nancial, leadership, and organizational. The plan also explores early obstacles the executives are likely to face in terms of people, processes, and technology. The new executives must look at their own developmental issues and how they can best address these. At this time, the executives are given the names of their peer coaches (fellow executives) and senior advisors (typically at the same level or above). The peer coaches are resources for “ insider ” information. They will have ben- efi ted from having their own peer coaches in the past, and therefore see the importance of their role. To accelerate the relationship between executives and peer coaches, the LD partners will often try to fi nd some common ground in backgrounds, such as attending the same college or experience in similar industries or companies. Consider- ation is also given to those who are known internally to be good coaches and who will be candid with the new executives. The senior advisors provide the new executives with mentoring around their careers. In contrast to the peer coaches, the advisors have a broader view of the organization, given their seniority. Often these are people with whom the new executives may need to undertake extensive near - term projects. They often are chosen from outside the lines of business as the newly hired individuals, as projects at the executive level often require cross - company partnerships.

In the fi rst one to three weeks, further planning is used to identify emerging chal- lenges in the new role, people - related issues, key relationships that must be built, and ongoing management processes that need to be established. This planning is captured in the New Leader - Team Integration Session — a critical experience in the entry phase. The objective of this process is to facilitate an effective working relationship between the new leader and his or her team. The process creates an opportunity for both the leader and the team to establish open channels of communication, exchange views, and become more acquainted with their respective operating styles and expectations. When this planning process is done well, it can dramatically shorten the time required for the new executive to become effective on the job.

The New Leader - Team Integration Session ideally occurs within the fi rst thirty to sixty days of the new assignment. The process involves three steps, all of which are facilitated by the LD partner (sometimes and often in partnership with an HR partner). In the fi rst step, the LD partner meets with the new executive leader prior to the inte- gration session. The LD partner provides the new executive with an overview of the integration session ’ s objectives and mechanics, identifi es the executive ’ s own objec- tives for the session, and selects the questions that will be used to create a mutually benefi cial dialogue between the executive and his or her new team. In addition, the LD partner gauges the new leader ’ s interests and concerns. Questions to solicit this infor- mation for the new executive include:

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Bank of America 27

1. “ What do you need to know about your team? ”

2. “ What don ’ t you know about your team? ”

3. “ What are your concerns? ”

4. “ What things are most important to you as a leader? ”

5. “ What does the team need to know about your expectations and operating style? ”

6. “ How can the team best support you in your transition into the new role? ”

7. “ What key messages would you like to send to the team? ”

Following this meeting with the executive, the LD partner meets with the new leader ’ s team — either individually or preferably and more often as a group — without the new leader. The purpose of this second step is to develop a preliminary under- standing of the group ’ s issues and concerns. Typically, the LD partner will solicit this information using questions such as the following:

1. “ What do you already know about the new executive? ”

2. “ What don ’ t you know, but would like to know? ”

3. “ What advice do you have for the new executive that will help him or her be even more effective? ”

4. “ What questions do you have for the new executive? ”

5. “ What are your concerns about him or her becoming the leader of the team? ”

6. “ What major obstacles are you encountering as a team? What opportunities exist? ”

7. “ What is going well that you would like to keep? What is not going well that you would like to change? ”

8. “ What do you need from the new executive to allow us to be even more effective? ”

Following these two preliminary meetings for data - gathering, the New Leader - Team Integration Session is conducted over a half - day period. After describing the meeting objectives and ground rules, the team goes off without the executive to gather responses to their new superior ’ s “ questions to the team. ” In the meantime, the new leader is debriefed on the group ’ s interview responses, and he or she prepares responses to these for the team. The team and the leader then meet together for two hours of dia- logue. The environment is a non - threatening one. The LD partner begins by reviewing the group ’ s overall messages to the leader. For example, an insight might emerge that direct reports are interpreting certain of their superior ’ s behavior in a negative light. The leader comments on the team ’ s responses as well as communicates his or her key

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28 Best Practices in Talent Management

messages to the team and how he or she plans to address the feedback. Facilitated by the LD partner, both the leader and the team establish formal commitments to one another and identify future issues to be addressed. For example, the new executive may commit to a new behavior or set of actions or a clearer vision. The leader might shift his or her management practices so that more time is spent on addressing future issues.

In addition to the New Leader - Team Integration Session, there is also a New Peer Integration Session, which is also held within the fi rst thirty to sixty days of the new executive ’ s arrival. This session creates an opportunity for the executive to network with new peers, to seek advice and guidance on on - boarding, to learn about norms, and to obtain general support. It also allows the individual ’ s peers to learn about their new colleague ’ s background, operating style, and priorities and to build an initial working relationship. Similar in design to the New Leader - Team Integration Session, it involves three stages. First, the LD partner meets with the new executive to describe the process, select discussion questions, and explore special issues and concerns. Typical interview questions for the preparation phase include:

1. “ What would you like your new peers to know about you? ”

2. “ What would you like to know about your new peers? ”

3. “ Provide a summary of your personal and work history that others might not know. ”

4. “ What are you interested in outside of work? ”

5. “ How can your new peers support you as you transition into the executive team? ”

The LD partner then meets with the executive ’ s new peers and solicits responses to the following questions:

1. “ What advice do you have for your new peer? ”

2. “ How would you describe the team ’ s written and unwritten rules? ”

3. “ What would you like your new peer to know about the team? ”

4. “ The things that make a person successful on this team include . . . . ”

5. “ The things that can derail a person on this team include . . . . ”

6. “ The things that help a person integrate well into this company include. . . . ”

7. “ What can you tell your new peer about each team member ’ s operating style? ”

In addition to responses to these questions, the LD partner also gathers from mem- bers of the peer team information on their areas of competence for which they might serve as a resource to the new executive, their interests outside of work, and the names

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Bank of America 29

of their spouses and children. This data is recorded on index cards for the new executive.

The integration session is broken into three parts. There is a short overview, a set- ting of objectives, and an introduction of the team and the new peer. This is followed by the peer team and the new peer gathering responses to each other ’ s questions in separate rooms. Each side ’ s responses are recorded on fl ip charts. The team and their new peer then gather together in a conference room. Facilitated by the LD partner, there is sharing of the responses and dialogue. Basically, the session enables transpar- ency and partnering — both cornerstones of success in the Bank of America ’ s culture. It drives joint ownership for success as well, and, like the New Team Integration Ses- sion, it facilitates the acceleration of relationships with peers — individually and collectively.

Earlier, we had mentioned that orientation programs were a component of the entry phase. Within the fi rst week on the job, the new leader attends a welcome orien- tation (providing an overview of the Bank ’ s business, history, culture, values), which is run on every Monday for all new employees. Leaders then meet with their LD part- ners to discuss the on - boarding plan. Within the leaders ’ fi rst few months, they are automatically registered to attend the New Executive Orientation Program. This pro- gram is sponsored directly by the CEO. Its purpose is for the executive to network with other new executives as well as the CEO and with his executive team as well as other executives previously hired into the bank from the outside. The program itself is one - and - a - half days long. On the fi rst day of the program, there is an informal panel with executives who have been hired into the bank within the last two years. The panel of executives shares their own on - boarding experiences. They explain their experi- ences, what the new executives can expect, their personal “ lessons learned. ” This is followed by presentations by the CEO and top executives, who cover topics such as the corporate values and culture, leadership philosophies and expectations, company strategy and fi nances, as well as other key business units ’ growth strategies and key enterprise initiatives. A social networking event then follows hosted by Ken Lewis and his direct reports. This orientation provides the new executives with insights into the business, the bank ’ s culture, Ken ’ s expectations for leaders, and how executives can derail. Beyond the information provided in the orientation, a parallel goal is to create a cohort identity for the new executives. This is important, as they will likely need to work with one another on key projects or business initiatives in the future. The cohort also provides the new executives with a safe haven or resource group to ask questions and to help navigate the complexities of the bank.

Mid - Point Phase (100 to 130 days): Three to four months into their new assign- ments, the executives take part in the Key Stakeholder Check - In Session. This inter- vention involves receiving written and verbal feedback from a select list of their key stakeholders. The experience is designed to accelerate the development of effective working relationships between the new leaders and the stakeholders, who now share

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30 Best Practices in Talent Management

responsibility for the new leaders ’ success. It also aids in helping the newly hired executives understand the feedback and coaching culture that is unique to Bank of America ’ s rich feedback environment. It is essentially a process for the new leaders to seek and receive early feedback regarding how their stakeholders view the leaders ’ on - boarding process, operating style, leadership approach, and cultural fi t. It can uncover whether there are potential disconnects between others ’ perceptions and the leaders ’ actual intentions. It can also further clarify the expectations of key stakeholders. Most importantly, it can be used to allow the executives to make early adjustments in their approaches and in turn avoid their own potential derailment. Like the earlier integra- tion sessions, it also gives voice to the stakeholders. They can take advantage of a proc- ess that permits them to surface potentially sensitive issues or concerns in an anonymous manner. They can share organizational insights that are not readily appar- ent to the new leaders. They can also communicate special needs to their new leaders.

In terms of its timing, the bank discovered (using a six sigma process and tools) that stakeholder reviews held close to a new leader ’ s entry were not effective. The executive did not always have suffi cient self-confi dence to respond positively to the feedback received from stakeholders. Similarly, staff did not possess well - formed opinions of their superiors or peers before the three - month timeframe. They may not have seen enough of a particular behavior to determine whether it was a pattern or not. On the other hand, within three to four months, patterns in the executive ’ s behavior become quite clear. With a timeframe within 130 days, it was harder for new execu- tives to discount feedback that was more critical of their approach. They could not claim that their behavior was simply due to a one - time event. That said, delaying feed- back to the executive until the six - month mark or later created a serious dilemma. By that point, the executive ’ s behavior may become typecast. After six months in the job, it was very diffi cult for the executive to escape the label. For this reason, the feedback occurs ideally by the 130 - day milestone.

The process behind the Key Stakeholder Check - In involves an initial planning ses- sion with the new leader and the LD partner in which they review and revise the ques- tions that will be used to solicit insights. For example, the LD partner will identify specifi c areas in which the leader would like to receive feedback and from whom. The LD partner then contacts the leader ’ s key stakeholders to conduct an anonymous fi fteen - to thirty - minute interview with each stakeholder. Beyond the questions identifi ed by the new leader, there are additional questions to stakeholders. These often include:

1. “ What are your initial impressions of your new leader ’ s strengths? ”

2. “ What are the potential landmines/obstacles that he or she may come up against? ”

3. ” What advice would you give to the new leader to be even more effective and to accelerate performance in the role? ”

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Bank of America 31

4. “ What one to three things do you specifi cally need from this individual? ”

5. “ To increase effectiveness, what does this individual need to (1) continue doing, (2) stop doing, and (3) start doing? ”

The LD partner then organizes the interview responses, identifi es themes, and records specifi c verbatim comments from specifi c stakeholders. They then meet with the new leader and share the interview results. In the review session, the executive constructs an action plan to address specifi c feedback items and prepares for a discus- sion with their boss. With their superior, they review the action plan and the overall on - boarding experience overall. The LD partner and the leader hold follow - up meet- ings to evaluate progress on the action plan and for further coaching. Sometimes these discussions will uncover a problem that even the individual ’ s boss was unaware of. It is worth noting that the boss is not one of the people the LD partner interviews for this very reason.

This comprehensive check - in process brings great clarity to identifying the new leader ’ s strengths but also highlights development needs and problem areas. For example, new executives might learn that they possess strong interpersonal skills and are perceived as highly competent and action - oriented. On the other hand, the same executives might learn that they still need to build stronger connections with key lead- ers and learn various business strategies and initiatives at a more granular level. They also may receive feedback that they must spend more time on developing a clearer business vision and communicating to their team. Staff might wish more one - on - one time with the executive. Out of the action planning process, concrete steps will be identifi ed that this executive must undertake over the coming months to build on the identifi ed strengths and address the problem areas.

The Final Phase (one to one and a half years) Typically twelve to eighteen months after their stakeholder reviews, the new executives will receive a 360 - degree feedback assessment, which provides the leaders with feedback on their leadership competen- cies (see Figure 2.2 for the Bank of America ’ s leadership competencies). The timing is designed so that the executives have had an opportunity to make signifi cant progress on the development areas identifi ed in their stakeholder reviews. They now also have had complete performance cycles under their belts. If executives are successful, their improvements will show up in the 360 feedback data. The tool itself is designed around the bank ’ s leadership model as well as common derailing behaviors. When leaders receive their 360 feedback, they will again sit down with their LD partners to review it, compare it to stakeholder feedback, and use the outputs to further shape their devel- opment plans and actions. This process also triggers another more formal develop- ment discussion between the individual executive and his or her boss. The 360 feedback is used along with other data and feedback mechanisms as input into the individual ’ s performance ratings and reviews.

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32 Best Practices in Talent Management

LESSONS FOR DESIGNING ON - BOARDING FOR EXECUTIVE LEADERS

Sooner or later in their fi rst year in the executive role, most leaders will face some type of major stumbling block. An executive on - boarding process can and should provide the support and feedback that will assist executives in successfully address- ing hurdles. The most effective programs also act as early warning systems that allow the executive and the organization to preempt the possibility of derailment. As we have noted, the process must be supported by multiple interventions that occur at intervals over the executive ’ s fi rst year rather than solely at the moment of entry into the job. It must also proactively engage the new executive ’ s multiple stakeholders from the moment of selection to the end of the on - boarding cycle. Effective engage- ment is completely dependent on the quality of interaction between the new execu- tives and their full range of stakeholders. In addition, stakeholders must feel a high degree of ownership in the process itself, which increases their ownership in the executives ’ success.

In assessing how well your own organization on - boards its senior most talent, there are several critical questions to ask. Does your organization treat on - boarding

A. Demonstrate deep and broad business acumen B. Create competitive and innovative business plans C. Build customer/ client-driven environment D. Institutionalize error free quality processes E. Excel at risk/ reward trade-off

• Failing to deliver results • Betraying trust • Resisting change

• Being exclusive vs. inclusive • Failing to take a stand • Over leading and under managing

I. Grow the Business

II. Lead People to Perform

TO GET RESULTS, LEADERS SIMULTANEOUSLY…

LIVE OUR VALUES…

WHILE NOT EXHIBITING DERAILING BEHAVIORS…

Winning – Leadership – Inclusive Meritocracy – Doing the Right Thing – Trusting and Teamwork

III. Drive Execution IV. Sustain Intensity and Optimism

A. Align enterprise capabilities B. Recruit and grow great talent C. Inspire commitment and followership D. Communicate crisply and candidly

A. Instill management focus and discipline B. Build partnerships to achieve swift adoption C. Demonstrate sound judgement and act with speed

A. Constantly raise the bar B. Display personal courage C. Continuously learn and adapt

FIGURE 2.2. Bank of America’s Senior Leadership Model

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Bank of America 33

as a one - time orientation event or as a longitudinal process? What is the breadth of interventions it employs from integration tools to coaches to formal feedback? Does it proactively engage all the new executive ’ s stakeholders in a candid process that generates constructive feedback and clarifi es expectations? Does the process deploy interventions at regular intervals throughout the fi rst year for the new executive? Are these “ toll gates ” built around critical learning and feedback windows or are they more arbitrary or shaped by the corporate calendar? Are the interventions in time to gather critical and valid feedback for the new executive so that he or she can con- structively respond and maintain credibility?

While such programs have traditionally been geared to external executive hires, internally promoted executives can benefi t as greatly from formal on - boarding. While the internal hire may understand the corporate culture well, the role demands of executive leadership are as great for the internal hire as the external one. So it is useful to ask whether your organization treats its insider promotions differently. Does the organization assume they do not need on - boarding support? What are patterns in how insider promotions fail? What might be done to assist insiders in a more proactive and constructive manner in their own on - boarding experiences?

In the case of the Bank of America, their use of LD partners and the various dia- logue and feedback - based integration experiences allow the new executives to obtain rich, candid, and ongoing information on their progress over the fi rst year. What vehicles if any does your organization provide to new executives to rapidly gain constructive feedback on their leadership approaches and performance? What sup- port does your organization provide in helping the executives to act on that information?

For on - boarding to be effective, a number of individuals need to “ own ” the new leader ’ s success. In this regard, one of the more important lessons from the Bank of America example is the pivotal role of the LD and HR partner. This individual in essence owns the executive ’ s success from the moment of selection to the end of his or her fi rst year on the job. Their job is to make certain the executives successfully on - board. In addition, they engage the new executives ’ superior, several peers, and the subordinates in the ownership process. Therefore some questions to ask about your own organization ’ s process include: Does your organization have individuals who are dedicated to ensuring the success of new executives? Are they infl uential at all stages of the executives ’ on - boarding experience? Ideally, there are multiple own- ers such as peers and senior advisors. What ways, if any, does your organization engage the peers and superiors of the new executives in supporting their successful on - boarding?

As we noted at the beginning of this chapter, an effective on - boarding process does not exist in a vacuum. It is highly dependent on a supportive culture. As we close this chapter, it is important to assess more broadly your organization ’ s commitment to talent management. Questions to ask would include: How deeply committed are your CEO and senior team to leadership development? Does the fi rm have a clear talent strategy? Does the culture encourage individuals to learn and adapt? Is it a culture in

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34 Best Practices in Talent Management

which candid constructive feedback is available and rewarded? What are the breadth and depth of your organization ’ s talent management and development interventions? Are they supported by well - aligned rewards, performance feedback processes, useful metrics, and the culture?

REFERENCES Conger, J., & Benjamin, B. (1999). Building leaders: How successful companies develop the next generation .

San Francisco: Jossey - Bass.

Conger, J., & Fulmer, B. (2004). Growing your company ’ s leaders: How great organizations use succession man- agement to sustain competitive advantage . New York: AMACOM.

McCall, M. (1988). High fl yers: Developing the next generation of leaders . Boston: Harvard Business School Press.

Watkins, M. (2003). The fi rst 90 days: Critical success strategies for new leaders at all levels . Boston: Harvard Business School Press.

Brian Fishel has over twenty years of broad human resources experience across vari- ous industries. He has specifi c expertise in global talent management, executive development, executive assessment and coaching, learning, staffi ng, and employee relations. He currently heads Bank of America ’ s Enterprise Learning and Talent Man- agement group, as well as leadership development efforts for the Consumer and Retail Bank and Risk Management Divisions. He has been with Bank of America since 1999 and has held various senior - level leadership and organization develop- ment and learning roles at the enterprise level as well as faced off directly with most of the company ’ s major lines of business and functional disciplines. Prior to Bank of America, Mr. Fishel held various senior - level organization development and human resource generalist roles focused on The Coca - Cola Company ’ s international opera- tions and previous to that Pizza Hut, at the time a subsidiary of PepsiCo. He is a fre- quent national speaker on the topics of talent management and leadership and executive development. He is a member of the Conference Board ’ s Learning and Organizational Performance committee and a founding board member of The Best Practices Institute. He holds bachelor ’ s and master ’ s degrees in education, both from Miami University of Ohio.

Jay Conger is the Henry Kravis Chaired Professor of Leadership at Claremont McKenna College in California and a visiting professor at the London Business School. He is one of the world ’ s experts on leadership. In recognition of his extensive work with companies, BusinessWeek named him the best business school professor to teach leadership and one of the top fi ve management education teachers worldwide. Author of over one hundred articles and book chapters and fourteen books, he researches lead- ership, organizational change, boards of directors, and the training and development of leaders and managers. He is one of a handful of authors who have published multiple articles in the Harvard Business Review . His most recent books include Boardroom

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Bank of America 35

Realities (2009), The Practice of Leadership (2007), Growing Your Company ’ s Leaders (2003), Shared Leadership (2002), Corporate Boards: New Strategies for Adding Value at the Top (2001), The Leader ’ s Change Handbook (1999), Building Leaders (1999), and Winning ‘ Em Over: A New Model for Management in the Age of Persua- sion (1998). As an executive educator and management consultant, he has worked with over three hundred companies during his career.

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36

CHAPTER

3 CORNING

INCORPORATED CREATING THE NEXT GENERATION OF INNOVATION LEADERS

RICHARD A. O ’ LEARY, GARY JUSELA, AND HEATH N. TOPPER

Introduction

Navigating the Storms

The Art and Science of Innovation

Five - Stage Model of Innovation Process

A Mandate for Cultivating Effective Program Leadership

The Business Case for the Accelerated Development of Corning Program Managers

Engaging Internal Experts to Shape the Design for the Innovation Leadership Program

Voice of the Customer — Key Themes

Convening Wisdom — Foundational Design Team to Set Direction, Purpose, and Core Content

The Design Flow: Two Weeks of Experiential Learning with an Interim Period of Coaching and Mentoring

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Corning Incorporated 37

Week One — Running a Program

Interim Period — Leadership Connections

Week Two — Launching a Business

Outcomes and Next Steps for Growing the Talent Pipeline of Program Leaders

Next Steps

INTRODUCTION

Corning has established a leadership position in glass and ceramics based on a com- mitment and ability to out - innovate the competition. The company has had a devotion to R & D investment and the delivery of value through applied science since its very origins 157 years ago. In the past decade the company has come to appear as some- thing of an anomaly within Corporate America, given the continued devotion to invest- ing at least 10 percent of annual revenue into fundamental research and development. Many comparison companies have pursued a game of fi nancial engineering. Most competitor companies have off - shored critical competencies in both product develop- ment and manufacturing, which has created short - term wins and prosperity for senior leadership at the sacrifi ce of long - term viability in sustaining a product pipeline and wealth creation for a broad domestic workforce. These companies have diverted avail- able capital into stock repurchase programs as well as internal remuneration schemes rather than investment in organic growth.

Corning leadership has built a strategy for the future founded on distinctive value creation through internally owned innovation. While the practice of applied science is not new to the company, the senior leadership has become more sophisticated in the practice of innovation and they have accelerated their objectives for new product development. The new mantra is to expand from a target of one to two breakthroughs per decade to a much more aggressive two to four. Companion with this objective is the company ’ s acknowledgement that this goal can only be achieved through a dedi- cated investment in new leadership development, both through attracting talent with new domain expertise from outside and systematically broadening the capabilities of high - potential internal talent. Our objective in this chapter is to identify both the fun- damental assumptions underlying innovation at Corning and the internal process for grooming the requisite talent to enable achievement of the top - level strategy.

Navigating the Storms Corning, comparable to other companies with a long history of endurance, has experi- enced waves of success punctuated by market turns and the demand for learning, adap- tation, and strategic agility. As the company laid claim to the new path of talent management of innovation leaders, Corning had recently found a new stride, having

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38 Best Practices in Talent Management

emerged from a market meltdown in telecommunications. In the early to middle part of the past decade, Corning saw a decline in telecommunications revenue of nearly 67 percent and a decline of shareholder value of close to 99 percent. Jamie Houghton was re - recruited to take the helm as CEO, and his task became that of radically restructuring the enterprise through a reduction in force, spinning off of non - essential businesses to generate needed cash, and reinvesting in and repositioning product development across sectors whose potential had been far from realized and mostly sharply underestimated. In his own humble way, Houghton characterized his role as merely that of “ cheerlead- ing ” the rest of the team, although in reality his impact was both profoundly strategic and inspiring of the values that have given the company enduring sustainability.

In their story about the innovation history of Corning, Bowen and Purrington (2008) identifi ed the company ’ s essential turbulence navigation skills. The foundation begins with a combination of both fi nancial strength (assuring that the company always has more cash than debt) and patiently nurturing the investment of capital in the future of product development. The creation of successful keystone components often requires an investment in internal learning that may run to decades before yielding meaningful rates of return and profi tability.

A key lesson out of the telecommunications market meltdown was the importance of diversifi cation of technology development. The company resisted strong external guidance to shut down all development outside of telecom support. While the diversi- fi cation had not been suffi cient to stave off a near disastrous disintegration of the com- pany, there was marginally suffi cient diversity to give the company the necessary toehold to recreate itself. Within fi ve years, Display Technology established itself as the new growth engine for the company, supplanting the role formerly held by the fi ber business and optical networking. This lesson has once again come to the fore within the context of the 2009 economic crisis, as further diversifi cation is required to create balance against assaults on the automotive and consumer electronics markets and the consequent reduction in demand for Corning ’ s keystone components in these sectors.

Deeply understanding the needs and business models of customers is a fourth dimension of economic navigation. With respect to the telecom sector, Corning did not recognize the magnitude of the overbuilding in which the collection of customers engaged and the extent to which this put the viability of many of these companies fatally at risk. The ability to navigate successfully in multiple technologies required identifying a fi nite set of acutely wise customers who were technology leaders within their respective domains. Customers are not created equally in their ability to accu- rately characterize their needs and the real opportunities inherent within their markets. The telecom meltdown was an archetypal example of excessive exuberance precipitat- ing a catastrophic market collapse. Engaging customers and reading the markets effec- tively are critical skills not only to navigating broad turbulence but also to shepherding new programs from the laboratory to scalable production and commercial success.

Finally, Corning has demonstrated a core set of values that distinguish the com- pany primarily through a deep and long - term commitment to employees, especially

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Corning Incorporated 39

the internal talent pool of scientists, technologists, market specialists, and developers of manufacturing processes. Where many companies have come to treat the workforce as expendable, Corning premises its long - term success on the ability to nurture and grow both people and technology over periods of twenty - fi ve to forty years. Embed- ded within the company is a deep DNA of beliefs in the criticality of integrity, perfor- mance, innovation, and the sanctity of the individual. It is the development and consistent practice of these navigational skills that provide both the durability of the company over its extended history and the ability to guide discrete technologies through the fi ve stages of innovation to a successful launch.

The Art and Science of Innovation Innovation is the lifeblood for the enterprise to secure a sustainable future. The contin- uous funding of R & D is a cornerstone for innovation success. Yet Corning ’ s ability to win in the game of innovation is premised not simply on a fi nancial commitment, but on the creation of the requisite internal culture and the reservoir of multidisciplinary talent to foster new product development. Innovation is not simply a task of research but is a function of creative problem solving and “ imagineering ” rooted in a deep capacity for extracting wisdom and learning from relevant audiences. Wendell Weeks, the current Corning CEO, has characterized program management as a “ truth discov- ery ” process. This implies that the innovation leaders must set the charge to ensure that they and their teams conduct an inquiry into the nature of reality and question every assumption underlying the program.

Five - Stage Model of Innovation Process Corning has been devoted to both total quality management and high performance over the last three decades. Under the leadership of Tom MacAvoy, former president and vice chairman of the company, innovation was brought under the spotlight of quality improvement and was refi ned and systematized as a set of custom disciplines. But unlike companies that tend to over - defi ne the steps of new product development in minute detail, Corning was committed to creating a fl exible framework. The intent of the new innovation process was to provide an ordered structure to invention that could be applied using common sense and thoughtful judgment based on a cultivated understanding of the technical, market, and manufacturing nuances of a given product. The model was formalized as a set of reliable tools that could be accessed both through the Internet and through a classroom curriculum and ancillary physical materials. While the fi ve - stage model as depicted in Figure 3.1 has an appearance of linearity, it is in fact intended as a guide to be used in an iterative fashion based on the fl uid process of learning across an array of dynamic social and technical networks and through a parallel process of inte- grating the commercial, technical, and manufacturing functions. Programs will fre- quently function simultaneously in more than one stage and just as frequently reverse course along the way to retreat to an earlier stage to refi ne or rework prior understand- ings before forging ahead to scale program development. See Figure 3.1 .

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40 Best Practices in Talent Management

A Mandate for Cultivating Effective Program Leadership While the fi ve - stage model provided the quality and process framework for successful innovation and new value creation, the model and tools did not provide suffi cient sup- port to cultivate the needed program leadership. The Corning Management Committee chartered the task team to pursue their draft plan for building the pipeline of program leaders both through effective career and performance management and through the design and deployment of a new program for high potential program and functional leaders that was initially conceived to be a “ Boot Camp for Program Managers. ”

Corning ’ s ongoing recipe for innovation could only be realized through the initia- tive of effective, committed, and inspiring leaders. The company management was clear that no given product line or business division could singularly guarantee the sustained profi tability of the company. Program managers would continue to have the primary role within the company for assuring the effective adaptation to market oppor- tunities and the creation of new value streams.

THE BUSINESS CASE FOR THE ACCELERATED DEVELOPMENT OF CORNING PROGRAM MANAGERS

In early 2007, Joe Miller, the chief technology offi cer, detailed a proposal for doubling the rate of productive innovation. The pipeline was and is full of a number of promis- ing technologies that require wise stewardship to enhance successful implementation. Mark Newhouse, senior vice president, had just completed a review of innovation suc- cesses and failures across the past thirty years within Corning. Some common themes

FIGURE 3.1. Five - Stage Innovation Model © Corning Incorporated

I. Build

Knowledge

Evaluate Opportunity

Evaluate Concept

Confirm Concept

Confirm Profitability

Concept

Plan

Development

Plan

Profitability

Plan

Commercialize

Plan

II. Determine Feasibility

III. Test

Practicality

IV. Prove

Profitability

V. Manage Life Cycle

Life Cycle

Plan

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Corning Incorporated 41

emerged and were addressed in the formation of a “ Strategic Growth Organization ” designed to shepherd new opportunities that did not fi t within an existing business. In addition, a corporate technology council and a strategy and growth council were formed to provide broad oversight and guidance to new innovative ideas moving through the pipeline. The pace of learning was addressed by an initiative driven by Charlie Craig and Bruce Kirk, science and technology executives, to revitalize the innovation model. This effort resulted in the development and deployment of innova- tion black belts to support the increased tempo of R & D.

These foundational steps led directly to the focus on leadership. The research done by Mark Newhouse, Deb Mills, David Charlton, and others within Science and Tech- nology suggested that a new type of leader would be needed who might be different from those found within existing business leadership.

After a long and diffi cult journey of dialogue and discovery, the role of an innova- tion program manager was formed with the support of a detailed voice of the customer and validation of the role with senior management. Given the ideal, Corning tested the model of program manager competencies against existing project managers, managers of large initiatives within Corning, and general managers of company business divisions.

The two champions of this work, Peter Volanakis, president and COO of Corning, and Joe Miller, chief technology offi cer, charged Rick O ’ Leary, then director of human resources for the Technology Community, to work with human resource leadership, Charlie Craig, and a small team of internal and external resources to test whether there could be a way to design a set of experiences to develop a program to address the needs of emerging program managers. Corning reached out to Gary Jusela, who had led a similar intervention with The Boeing Company and was a deep expert in learning design, to partner in the creation of a boot - camp type of immersion experience for those who had the potential to become program managers.

Engaging Internal Experts to Shape the Design for the Innovation Leadership Program The effort to groom the future cadre of program leaders began as a collaboration among Rick O ’ Leary, Charlie Craig, and Gary Jusela. The initial work scoped out the defi nition of the role of program managers within the company and addressed both the current state of the art for grooming the required talent and the important areas of opportunity for strengthening this critical resource pool. This analysis identifi ed career rotation, talent and performance management processes, and the design and creation of the needed communities of practice to shepherd development of both functional and program management practitioners. A tailored curriculum was viewed as an important component of program talent development but would only account for, at most, 10 percent of the career growth process.

Existing leadership curricula within the company primarily addressed project management rather than full program leadership. As part of the early planning, the task team created a differentiation of the project versus program roles as described in Figure 3.2 .

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42 Best Practices in Talent Management

Based on a review with the Management Committee of the current state, vision, and next steps in talent development of program leaders, the task team was given the go - ahead to gain insight, ownership, and guidance from a diverse focal group of inter- nal leaders serving as the voice of the customer. This panel then provided a foundation for initiating the detailed design process to create a robust learning intervention.

Voice of the Customer — Key Themes The interviews with the host of infl uential community members provided a good foun- dation of understanding as preparation for the work with the multi - functional design team. The major themes included the following:

How Do You See the Role of Program Managers Within the Company?

Program managers need to know when to fi rm up the program and structure and when to keep things loose — boundary management is a critical skill set; you need to know when to keep on pushing for innovation and when to lock down on a path to develop a product.

Program managers are innovation managers; their role is beyond technology; it encompasses technology, marketing, and manufacturing.

Program management is really the advanced course in leadership; it is a great training ground for general management.

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FIGURE 3.2. Critical Activities Attributes: Project/Program Manager © Corning Incorporated

Critical Activities

Stage gate management

Quality, cost, schedule management

People performance management

Boundary-spanning among technology, commercial, and manufacturing organizations

Supplier/partner management/engagement

Deep knowledge of complete business model and leveraging resources across company

Effectively managing manufacturing launch

Broad awareness of global reach of business

Continuous improvement mindset

Broad-scale stakeholder engagement and resource management

Develop understanding of market and customers, create demand

Project Management

Program Management

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Corning Incorporated 43

You have to be able to deal with messiness and ambiguity and make many deci- sions with insuffi cient information.

You have to start the conversation on the manufacturing process already in Stages I and II, because 80 to 85 percent of the manufacturing cost is locked in by early Stage III.

What Are the Key Program Management Success Factors?

You need to understand both the market and the technical domain as well as the internal Corning culture with respect to integrity and how we make decisions.

You need to be able to set up a well - composed steering committee with key lead- ers who can help you access the needed resources.

You must be effective in engaging with customers; you have to be able to win them over even when many things are up in the air, such as during Stage II; you have to be confi dent even in the face of doubts, and you need to sort out who the customer decision - makers are and connect with them.

You need to understand where value comes from when you do something new, and then you must capture a meaningful amount of that; this requires that you know how the industry works and also that you be prepared to walk away from a deal if necessary.

Understand the innovation process — you have to be smart to use it well, with con- sistency yet fl exibility; it forces you to include the voice of technology, commer- cial, and manufacturing at every stage.

Internally within the company you have to be ruthlessly honest about what you are doing and where you have made mistakes.

What Are the Most Common Ways That Program Managers Get into Trouble?

Inability to articulate the business proposition.

Inability to scale from a small project to the bigger picture; you need to have a grasp of scaling, pacing, and letting go if you are to follow the growth curve.

Failing to manage the inevitable confl icts among the technical, commercial, and manufacturing communities, especially balancing between the technical commu- nity that wants clarity to come late and the manufacturing community that wants clarity to come as early as possible.

What Will Be Especially Important to Address in the New Development Program for Program Managers?

Understanding the emergent nature of new - new programs (that is, new technol- ogy addressing a new market), you have to create your tool set as you go; there is

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44 Best Practices in Talent Management

a lot of uncertainty and ambiguity; you need an extra measure of creativity and entrepreneurship.

Learn how to sniff out the truth about the program as you proceed.

Address the criticality of appropriate domain expertise; you can ’ t groom people for that; you have to hire the right external players.

You have to learn how to work outside of your comfort zone and have a broad feedback clock cycle dealing with both near - term and longer - term issues; help people develop good judgment quickly.

Focus on having tough conversations; learn how to address what went wrong openly.

These themes were reviewed in the gathering of the design team as a way to begin to build a broad shared database of critical information for setting the direction for the new curriculum.

Convening Wisdom — Foundational Design Team to Set Direction, Purpose, and Core Content In order to build a framework for learning that would have the right aim and deep internal ownership, the core designers met with the program sponsors, Peter Volanakis and Joe Miller, as well as with the head of human resources, Christy Pambianchi, to identify a balanced set of participants to serve as a seasoned design group. Our objec- tive was to gather a team who collectively had experience across all of the stages of the innovation process and who among them could speak to the technical, commercial, and engineering/manufacturing dimensions of new product development. The assem- bled group met all of these criteria, as well as covering a broad set of international experience and product programs addressing either new technology and new markets or a variation of new technology in existing markets or existing technology in new markets.

The process for creating the plan began with the initial formation of the design circle through in - depth personal introductions that brought both the spirit and the experience base of each participant into the context of the team. Following the build- ing of the team, the conveners shared the model of D ata — P urpose — P lan — E valuate ( DPPE ) as a reliable method for building the learning structure. Within the group, we built the database through the sharing of all members ’ personal stories, reviewing the themes that emerged from the Voice of the Customer interviews, and engaging in col- lective inquiry and dialogue about the nature of innovation and new product develop- ment as practiced within Corning.

Purpose: The team was able to coalesce around four high - level themes that would need to be addressed in the learning event. These included:

1. Managing the transitions in moving through the innovation Stages I to III.

2. Building the value proposition/business case for the program.

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Corning Incorporated 45

3. Navigating corporate politics/understanding governance.

4. Providing effective leadership and managing the multiple challenges within the context of good moments and bad.

These topics were examined further and gave us a sense of the richness that could be explored in preparing the participants for effective leadership of new product devel- opment. Part of the learning would need to address the internal model of innovation, and another part would be heavily dependent on effective engagement and negotiation with customers with respect to value creation and the sharing of the benefi ts of new technology between Corning and these lead customers. The design team also discussed in considerable depth the role of internal governance structures, including the Program Steering Committee, the Corporate Technology Council, and the Growth and Strategy Council. And fi nally full consideration was given to the leadership requirements to be successful as a program manager, including realistic optimism, how to deal with the “ dark nights of the soul ” that occur, how to manage risk, and how to select, build, and engage a multifunctional team.

This discussion of what had to be covered in the curriculum was ultimately dis- tilled into a focused and lean statement of purpose. One of the design members declared that what we were creating was a learning vehicle that recognized that new product programs were effectively the engines for growth for Corning. The course title was settled on as “ Leadership Fundamentals for Program Managers, ” and the purpose statement was agreed as follows:

Leadership Fundamentals for Program Managers Purpose: Prepare program managers (and supporting staff) who can move programs effi ciently through the development phases as indicated by:

More effi cient use of critical resources

Higher hit rate

Pacing to meet market needs

Killing things that need to be killed earlier

Capturing our fair share of the value

This statement came to serve as the North Star for the further refi nement of the program and the build - out of the learning architecture. Before this initial design meet- ing was concluded, we succeeded in identifying an abundance of content detail from which to construct a series of modules and an overall system for individual and collec- tive engagement.

Plan — Executive Development as Catalyst for Change: The design deliberations enabled the team to achieve an understanding of the difference we would need to make to not only create a cadre of future leaders for new product development, but to strengthen the innovation process and the inner workings of the company. The team clarifi ed that innovation inevitably required a smart balance of structure and fl uidity,

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46 Best Practices in Talent Management

that there was no simple cookbook or recipe to follow mechanistically toward a prod- uct or program goal. If the learning process was to be as powerful as possible, the design would have to engage the participants in a thoughtful interrogation of reality as well as in a deep exploration of what the company did particularly well and what aspects of internal practice had to be improved to better harness technology in the ser- vice of both the market and business needs.

The conversations started in the design meeting and then continued in the follow- ing months with different members of this group and an expanding circle of subject - matter experts and executive presenters. Along the way the process yielded several important components that would have to come to life within the design. Jim Nagel, the business development director and vice president of Corning Environmental Tech- nologies, brought our attention to the Schrello questions associated with building a business case and evaluating a program ’ s viability. He also pointed us to the concept of “ judgment calls ” as elaborated by Noel Tichy and Warren Bennis in an article within the Harvard Business Review.

The Schrello questions — Is it real? Can we win? Is it worth it? — provide the basis for determining and defending whether a program can justify its existence. Mark Beck, vice president and general manager of Corning Life Sciences, used the slide shown in Figure 3.3 to illustrate the process of internal interrogation and scrutiny that a program is repeatedly subjected to as it evolves through the stage gate model. Answering the questions posed requires incisive analysis along the lines of technol- ogy, commercial/market reception, and the manufacturing process. Yet there is rarely available an analysis so defi nitive as to yield perfectly defi ned outcomes delivered on an exact timetable. Program management is a process requiring fi nesse, judgment, and approximations of target timing. Hitting the window of opportunity on time is continu- ously an aspiration, but rarely a precise achievement.

Capturing both strategic control within a product domain and sustainable compet- itive advantage requires a blend of cognition with respect to the playing fi eld and action in the midst of uncertainty based on the exercise of educated yet imperfect judgment. Our task as learning designers was to make these dilemmas real in a power- ful true - to - life format and engage the participants in an inquiry without simple or obvious answers. A signifi cant objective in our work was to help the students cultivate a thoughtful point of view about the reality within which they would be working in leading new product programs. See Figure 3.3 .

Questions must be addressed not only to establish a clear business case and value proposition but also to assess progress through the innovation process. The expectation was articulated that the participants in the new program should have completed prereq- uisite training in Project Management and the Basics of Corning Innovation. More- over, there was the hope that members of the class should have had signifi cant assignments in two of the three major program disciplines, that is, technology, com- mercial development, and engineering/manufacturing. At a foundational level, Corn- ing team members learn the vocabulary of innovation through their career experiences, combined with specifi c classroom training. In the advanced course, the objective would be to strengthen the players ’ judgment about how to use the innovation process.

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Corning Incorporated 47

Effective innovation requires discernment with regard to which questions to attend to and which to ignore, depending on the technology, market, or manufacturing process at a given point, and how to engage deeply in truth discovery to differentiate solid ground from false assumptions. The executive faculty would organize their material to share both the wisdom of experience and unanswered questions in search of new knowledge. Perhaps what was most captivating about the role of program manage- ment was the simple fact that the role and task were (and are) simultaneously enor- mously creative and bursting with opportunities for learning, experimentation, and risk taking. Corning is not only committed to the strategic imperative of bringing new products to market but equally to continuously improving every aspect of the innova- tion process, starting from the fi rst germ of a technical idea all the way to the full - scale build - up of supply chains, manufacturing partnerships, product sales, and distribution and customer service. The Leadership Fundamentals for Program Managers would serve as a platform to address both building the pipeline of innovation talent and strengthening the organization ’ s understanding and capability of delivering new prod- uct value.

Senior l eadership e ngagement and s ponsorship. A key aspect of this approach is the understanding and commitment that the course would be taught primarily by inter- nal senior leaders, including management committee members when appropriate; these included the CEO, the president and COO, and the chief technology offi cer. Two examples of leveraging the talent and wisdom of leadership are the following:

Peter Volanakis wanted to ensure that potential program managers knew what suc- cess would look like, in addition to the competencies and fundamental knowledge

FIGURE 3.3. Building a Business Case © Corning Incorporated

Is it real?

Is the market real? • Is there a need / desire for our product? • Can / • Is the ce? • Is the • Is the • Can the • Will the

• What • Is the • How w • Do we ess? • What • Do we es? • What

• What t time? • What • What tner) • Will the • Will the ge our core technologies? • Does this of our growth strategy? • What is the basis of our strategic control?

Is the product real?

Can the product be competitive?

Can the business be competitive?

What is the risk/ return?

Does it fit our strategy?

Can we win?

Is it worth

it?

These questions we developed from

audits of over 50 failed projects.

These are the most common responses

to the question:

“What questions, properly answered,

might have prevented failure?”

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48 Best Practices in Talent Management

required. He chose to give a fi reside chat as his contribution to the program. Things he would like in a program manager, in addition to being “ really smart, ” included “ telling the truth, getting out there, listening, rolling up sleeves and getting involved, staying the course, reducing complexity, resolving ambiguity where possible, and demonstrating courage and emotional resilience. ” This led to a sharing session of his own journey as a program manager and ended with friendly advice to a prospective program leader, “ Be a chief detective, balance data with judgment, level with stakeholders, build a tight team, be there for your team, get to the customer, focus on the relationship and value proposition, identify the competition, and, above all, demand personal leadership of yourself and others. ”

Wendell Weeks signed up to lead the discussion on “ game changers ” that helped shape specifi c programs within Corning, and he identifi ed some core principles con- tributing to competitive success. He spoke to the truth - discovery process within inno- vation and noted that the program manager is the creative director shaping the convergence of technology, manufacturing, and commercialization. He also encour- aged leaders to embrace the tensions of the program manager role. In Wendell ’ s view, winning program leaders make leadership personal and themselves accountable, fi nd experts who can help, listen to customers, confront reality, stay open to new possibili- ties, and, above all, lead others into new program territory with confi dence and yet full awareness that not all programs will succeed.

The design was sculpted through a series of conversations with senior leaders and experts and integrating the important learning objectives into leaders ’ presentations, case study documents, and learning team assignments. At each stage of program devel- opment, the key leaders were briefed, asked for their perspectives and commitment, and leveraged for their ideas and contributions to message development and delivery. The result was a course that had a committed leadership cadre, available and willing to serve this important initiative critical to Corning ’ s success.

THE DESIGN FLOW: TWO WEEKS OF EXPERIENTIAL LEARNING WITH AN INTERIM PERIOD OF COACHING AND MENTORING

Out of the treasure chest of the purpose statement and the plethora of potential design elements, the structure of Leadership Fundamentals for Program Managers emerged. A smaller group of designers, both internal and external to the company, settled on a framework that would encapsulate the inquiry and content to address the North Star purpose statement and provide a living experience — a learning laboratory — to explore both the possibilities of individual development and the opportunities for improving innovation within Corning. The design would be composed of two discrete weeks, each with a focus on a segment of the Stage Gate Model. Week One would take on the origins of a program and explore the intentional evolution and development focusing primarily on ideas moving from mid - Stage II up through the end of Stage III. This would cover the heart of program development with all of the richness and intensity of

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Corning Incorporated 49

the interplay among the commercial, technical, and manufacturing aspects of product development. This is a period of high uncertainty and risk in which there is a maxi- mum of alternative paths. While Week One would have the character of “ Running a Program, ” Week Two would have the overarching theme of managing the transition from running a program to “ Launching a Business. ” This second week would address the large - scale ramp - up of the new product organization, addressing capital invest- ment in manufacturing, globalization, market development, and managing the knife - edge tension between converging on a given product defi nition and market plan, versus diverging and staying open to new learning and insight with respect to technical, com- mercial, and manufacturing options.

Week One — Running a Program Each day was given a theme, and the days together fl owed through a simulation of real program development built around two case studies. The community came together on a Sunday at the stately old home and newly transformed company conference center of the former CEO Jamie Houghton. From the beginning, the design connected the participants to each other through the power of their personal histories and the choices they had faced in their careers and their lives. They came together from around the world, representing some ten different countries and even more different businesses from across the company. Each had seen new product development from the ground up, although some had been through the process many more times and in greater depth than others. All came from the cadre of managers who were viewed as promising pros- pects for providing bold program leadership for the future. The learning design would seek to create the opportunity for the participants to learn from each other as much as they would gain insight from topic experts brought in to share their perspectives with the group. The framework for this fi rst week is captured in the schematic in Figure 3.4 .

In order to bring the concept of program management to life, participants were assigned to one of two case studies, and in each instance the one with which they had a minimum of prior exposure or experience. The fi rst case came out of the Environ- mental Technologies Division. This case was that of the Light Duty Diesel Filter, a product designed initially for a passenger car product with the launch customer being Volkswagen and the vehicle engineering center partner being based in Germany. This was a product that fell within an existing line of business, but one that required signifi - cant new technical development and the solidifi cation of a completely new manufac- turing process. The new material to be used in this fi lter had to be selected from among multiple options with divergent preferences expressed between the Corning team and the lead customer. This material and the fully formed fi lter would have to be produced at scale for a product line that was rapidly closing in on its production launch with pro- jected volumes of millions of vehicles.

The second case study came out of the Life Sciences Division within Corning, the Epic System. This product would address a new market and would require entirely

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50 Best Practices in Talent Management

new technology to be developed within the company and also in conjunction with external design partners. The product was intended to make a signifi cant contribution to shortening the cycle and improving the accuracy of new drug discovery and devel- opment within the pharmaceutical industry. This new market domain would require the importation of new players and new knowledge to the company and the pursuit of rapidly evolving technologies and customer interests. The case study, as well as the real - life program, were rife with complexity and challenged everyone involved with a highly diffi cult sense - making innovation task. There was nothing simple about any aspect of the technology, the market, or the building of the prototype products.

Both the core design team and an external design partner, Newry Corporation, working in conjunction with the Corning leaders responsible for these respective pro- grams, shaped the case materials. By design, the learning teams received the relevant information piecemeal to have them engage with the content associated with these development efforts at a pace and sequence consistent with reality. Concrete learning objectives were developed for each day of the overall program design and each ele- ment of the case - study simulations. The design was built in a way that posed decision dilemmas and critical choice points facing the program team, without spelling out the actual path selected by the real teams. In both real - life programs, choices were made that led down blind alleys in some instances and opened up positive possibilities in others. The learning intent was not to display the one right path through the technical, commercial, and manufacturing minefi elds, but rather to educate the participants in how to marshal evidence and create the needed database to make educated decisions

FIGURE 3.4. Program Snapshot — Week One © Corning Incorporated

Monday, April 7 Tuesday, April 8 Wednesday, April 9 Thursday, April 10 Friday, April 11Sunday, April 6

Day 1 Forming the Team

• Beginnings—Stage 1 (Case Teams) • “Thinking About Programs —Defining the Territory” M. Newhouse and J. Steiner • Taking Charge in Stage 2 (Case Teams)

• Program Intro—R. O’Leary/C. Pambianchi • Program purpose and agenda—G. Jusela • Team formation • ”Picking Programs and Making Them Work”—D. Morse • Social time

• ”Building the Value Proposition—Managing for Strategic Control” D. Charlton • ”Early Stage Manufacturing” Process Leaders • Late Stage 2 Considerations (Case Teams) • Physical Activity

• “Building the Technology Organization Within the Program” JP Mazeau • Engaging the Customer at Stage 2 to define and create Value Panel with Program Business Leaders • Stage 2 Customer Engagement (Case Teams)

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Endings

Day 3 Engaging the

Customer/Creating Value

Day 4 Managing

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Day 5 Managing Complexity in a Growing Program

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• Prelimary Value Proposition Presentation (Case Teams) Business Leader Panel • Personal/Team Resilience—The Corporate Athlete

• Stage 3 Customer Panel • ”Manufacturing Transition: Moving from Making Some to Making Many” M. Giroux • Managing Stage 3 Production and Customer and Team Dynamics (Case Teams)

• Personal/Team Resilience—The Corporate Athlete • “Game Changers and Competitive Resilience...Stage 3” W. Weeks • Managing Through Game Changers (Case Teams)

• “Program Governance— Managing Promises, Expectations, and Stakeholder Relationships” P. Schneider • Value Proposition Working Session (Case Teams)

• Leadership Learnings: On Becoming a Program Manager • Discovering Our Strengths • Closing Round: Personal and Group Reflections on the Week • Adjourn for the Interim Period

• Dinner and Conversation with D. Morse and R. Henderson (MIT): “Innovation: A Process of Creative Tension”

• Dinner and Fireside Conversation with P. Volanakis: “Personal Resilience in a Program Environment— Surviving Success or Failure”

• “Building the Value Proposition/Business Case” M. Beck/ T. Hinman • Diagnosing Stage 2 Realities—Commercial/ Technical/Adv. Engineering • Preliminary Value Proposition (Case Teams)

• Dinner and Panel Discussion with M. Lauroesch, R. Snyder, L. Beall: “Managing Technology and Risk: IP Protection”

• Dinner and Conversation with Business Leader: “Engaging the Customer and Negotiating Value” • Late Night with Case Teams— Preparation of Preliminary Value Proposition Presentation

• Value Proposition Working Session (Case Teams) • Value Proposition Team Presentation to Corning Executive Panel (M. Beck, T. Hinman, JP Mazeau, L. McRae, S. Miller, M. McClusky)

• Dinner and Conversation with J. Miller and D. Morse: “The Program as an Engine of Growth”

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Corning Incorporated 51

and defend and make a value proposition to customers and a defensible business case to Corning management.

With the thread of the two case studies running through the program, content pieces were introduced to create both the needed knowledge base from which to explore new product creation and to pose the dilemmas that would need to be addressed in these simulations and in future new business undertakings. Senior executive pre- senters were invited to share with the group important principles for managing their legs of the knowledge base and to open up territory within their respective domains that were fair game for new insights and continuous improvement. By design, the pre- senters were invited to set the stage for high - level inquiry into the innovation process and the discovery of new truths and value - adding insights.

In order to create an appropriate level of performance anxiety and tension, the par- ticipants were also asked to develop and make real presentations connected to the tran- sition of their respect programs from Stage II to Stage III and from Stage III to Stage IV. The recipients of these respective presentations to be made on Day 4 and Day 6 in Week One were high - level executives within the company who themselves served on real governing bodies at either the division or the corporate level. These panels were directed to make the theater of these presentations as realistic as possible while supporting the primary objectives of creating a great learning experience with regard to developing and defending a well - composed value proposition and business case for a new product.

Parallel to the journey through the fi rst three phases of a program ’ s life, this fi rst week provided a vehicle for exploring the personal leadership required in the naviga- tion of new product development and the practices that would support personal resil- ience in the face of seemingly insurmountable obstacles, challenges, and ambiguities. Specifi c presented content as well as introspection and personal planning addressed the self - management disciplines that would enable the participants to maintain their sense of well - being in the face of all forms of adversity. Before concluding the week, each person was asked to refl ect on his or her understanding of the program leadership role and to identify his or her own primary targets for learning and development in the interim period in advance of Week Two.

Interim Period — Leadership Connections During the interim period between Week One and Week Two, the participants were each connected with a Corning executive as a mentor through the process called “ Leadership Connections. ” This component engaged participants in a 360 - degree assessment and provided them with three one - on - one coaching sessions with a member of Corning ’ s senior management. The purpose of this component was to enhance each participant ’ s classroom learning experience by providing specifi c feedback that focused on key individual development needs related to program management core competencies. In addition, the coaching sessions provided partici- pants with an additional opportunity to have access to senior - level management to grow their networks throughout the organization.

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52 Best Practices in Talent Management

Assessment Process: Prior to Week One, participants completed a 360 - degree assessment that measured their capability against sixteen core leadership competen- cies specifi c to program management at Corning (see Program Manager Competency Model, Figure 3.5 ). Each participant selected up to seven feedback providers, includ- ing their managers, peers, direct reports, and themselves. The assessment was web - based and administered by a third - party company.

Once collected, the feedback was aggregated into a personal competency profi le. Each profi le contained an overview of the competency model, along with competency defi nitions; a guide to help the participants interpret the feedback; and their actual results. Also, the profi le highlighted where the participant had hidden strengths or blind spots, along with written comments offered by the feedback providers.

The competency profi les were treated as confi dential and were only viewed by one member of the facilitation team and the participant. Once the profi les were com- pleted, a facilitation team member met with each participant to review his or her respective profi le. This session typically took about an hour, and the purpose was to assist them in identifying areas of development that they were interested in working on with the coach to whom they would be assigned.

Coaching Framework: The facilitation team administered a process to pair par- ticipants with coaches based on the development areas that they selected and their functional growth opportunities within the business. The coaches were generally members of Corning ’ s Management Group (CMG), which consists of the two hundred most - senior managers within the organization. The goal was to pair participants with coaches who were known to be subject - matter experts with depth in the area that the

FIGURE 3.5. Program Manager Competency Model © Corning Incorporated

Create Vision and Strategy

• Managing Vision and Purpose • Strategic Agility • Creativity • Managerial Courage

• Organizational Agility • Priority Setting

• Motivating Others • Compassion • Building Effective Teams • Sizing Up People • Directing Others • Developing Others

• Dealing with Ambiguity • Presentation Skills • Resilience • Perseverance

Execute Strategy

Manufacturing

Commercial / Business

Technical / Innovation

Mobilize and Develop People

Manage Self

Leadership Competencies

Technical Competencies

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Corning Incorporated 53

participant was interested in developing and who came from a different part of the business from where the participant was based. The intent was to broaden each per- son ’ s network across the organization.

Once the pairings were completed, the coaches were notifi ed and provided with a biography of the participants they would be coaching. In addition, each coach received a two - hour orientation summarizing the program manager competency model, as well as a model for how to structure the coaching sessions.

The participants were notifi ed of who their coaches would be during the last day of Week One. They were provided with their coaches ’ biographies, along with an over- view of what was expected during the coaching process. The participants were respon- sible for scheduling and completing three coaching sessions during the twelve - week period between Week One and Week Two of the classroom learning.

The coaching sessions were intended to provide participants with an internal sup- port system that would help them to make real and lasting improvement. The fi rst ses- sion was meant solely to build rapport between the participant and the coach and allow them to get to know one another ’ s backgrounds. During session two, the coach and participant discussed the development area on which the participant would like to focus. During session three, the coach assisted the participant in creating an individual development plan. Then during Week Two of the classroom learning, each participant reviewed his or her development plan with a facilitation team member. Additional coaching sessions following Week Two were scheduled on a mutually agreed - on basis.

Summary: The Leadership Connections component of the program comple- mented the classroom learning activity by providing the participants with individual feedback specifi c to program management leadership competencies. This feedback was instrumental in helping the participants understand what area(s) they needed to further develop in order to become exceptional program managers at Corning. In addi- tion, the Leadership Connections process provided tailored development and strength- ened each individual ’ s linkages to members of the Corning management group.

Week Two — Launching a Business Stage IV and Stage V provide the focus for Week Two, with all of the attendant choice points regarding locking down on a technical confi guration, ramping up production to support large - scale delivery, zeroing in on a target market, and managing profi tability. The risks associated with program decisions at this stage become larger by several orders of magnitude, which brings even greater attention to sorting out options as early in the innovation process as possible. Mistakes made in the manufacturing design at Stage IV in the innovation sequence become truly painfully substantial, so the conse- quences of choices at this point bring an increasing level of management scrutiny. The beginning of this week brings attention to critical scaling issues associated with the production process and tracking cash utilization relative to market returns. Good growth, by defi nition, must generate a return on investment that exceeds the rate of cash burn to create a net positive business return and management willingness to press

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54 Best Practices in Talent Management

ahead with the program. Kate Asbeck, corporate senior vice president of fi nance, made a strong case for what would be required of a program to generate good growth, sup- ported by the objectives shown in Figure 3.6 .

A continuing narrative with regard to the Light Duty Diesel and the Epic System case studies again anchors the design for Week Two. The participants are asked to marshal arguments to justify their recommended decisions on the program direction in the transition from Stage IV to Stage V in the innovation model, and they are required to make their respective cases to a senior management panel consisting of senior lead- ers from the Life Sciences and Environmental Technologies businesses.

The design has the layout shown in Figure 3.7 , which balances the evolving case study with content related to later stage technical development, refi nement of the mar- ket strategy, and scalable manufacturing, as well as special attention devoted to pro- gram staffi ng, people development, leadership challenges and the requirements for effective program termination.

A fundamental question behind every program at these later stages in develop- ment is “ Are we having fun? ” Essential to a positive answer to this question is whether or not the program can be justifi ed fi nancially as a major source of profi tability. The program must not only be technically and commercially viable with a robust manufac- turing process, but it must also generate returns to exceed the weighted average cost of capital. In this second week, the participants engage in data gathering from actual pro- gram customers as well as from the plant teams responsible for late stage production. They are also asked to contemplate some of the ways programs may run off track at these stages and to bring to the table specifi c leadership dilemmas they are facing on programs and projects they are connected with in their back - home assignments. The learning teams within the class provide a forum to generate options for addressing

FIGURE 3.6. Corning ’ s Metrics and Goals © Corning Incorporated

Corning’s Metrics and Goals

Growth – Sales: Aspire to 10% CAGR over 5 years (minimum 7.5%) – EPS: Aspire to 10% CAGR “over a cycle” ... trough to trough or peak to peak. Better during surges and expect retreats.

Return on invested capital (ROIC) – ROIC � WACC (Weighted average cost of capital)

Cash flow – Aspire to be positive cash flow every year – Goal 5% of sales 5 year average

Shareholder value – Track and report TSR versus markets and competitive comparators – Track and report metrics that drive TSR in theory – Do not adopt formal TSR goal

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c03.indd 55c03.indd 55 10/30/09 5:10:33 PM10/30/09 5:10:33 PM

56 Best Practices in Talent Management

personal leadership dilemmas and to expand the circle of relevant resources to be tapped outside of the class.

The fi nal piece of the design explores the strengths and weaknesses of the innova- tion process within the company. Bruce Kirk, the process owner for the innovation model and the supporting online and classroom - based tools, engages the class in an examination of systemic opportunities for building on the company history in innova- tion. The participants take the opportunity to capture their collected insights in the form of formal feedback to the senior most executives about what can and must be done at both the program level and the management committee level to continue to improve the yield from the company ’ s investment in innovation. Punctuating this dia- logue with the senior leaders is a refl ection on the Corning legacy and future of inno- vation by Jamie Houghton and a shared round of closing contemplation among all present for what is possible and what represents each person ’ s highest hopes as a pro- gram leader.

OUTCOMES AND NEXT STEPS FOR GROWING THE TALENT PIPELINE OF PROGRAM LEADERS

So what happened? Thirty - three bright and motivated participants showed up, we received overwhelming positive feedback from the attendees as well as from manage- ment committee members and key leaders, and all were highly engaged. Participants came away with a deeper understanding and appreciation of Corning ’ s commitment to innovation leadership as a strategy and the program manager ’ s vital role in sustaining the growth engine of Corning.

Key Observations

Participants enjoyed learning from executives and from each other.

Diverse global representation of businesses, functions, and backgrounds adds to the program effectiveness.

Leaders as teachers brought real - world experience and credibility to the content.

Using case studies of real and current Corning programs was a useful device for learning.

Strategic control/intellectual property were important topics.

Supporting personal resilience was valued.

Extensive focus on the value proposition/business case and presenting to the mock strategy and growth council were traumatic and quite helpful.

Strong messaging about the need for early and balanced involvement of the com- mercial, technical, and manufacturing functions was important.

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Corning Incorporated 57

Keeping the customer point of view embedded in the learning was effective.

Opportunities for Strengthening the Design

Deepen the exploration of leadership behaviors and people skills required for suc- cess, especially in the later stages of program scale - up.

Provide more specifi c tools on how to kill a program effectively when appropriate.

Enrich the process and value of the interim coaching.

Refi ne the engagement of key customers in the delivery of the program and fur- ther explore the nuances of effective customer interaction.

Expand the case study materials and activities addressing Stages IV and V.

Leverage the alumni of the fi rst class in teaching and mentoring the second class.

NEXT STEPS

Program management is a highly valued function within the company and a key role to the ongoing deployment of Corning ’ s innovation strategy. Inherent in the function is a serious risk of failure in any given program, yet that goes with the territory of new product creation. The participants wanted assurances that they could survive individ- ual moments of reversal in the fortunes of any specifi c program, and they were seeking to understand plausible future trajectories for program leaders. There was a keen inter- est in understanding preferred developmental paths and a community of practice to share learning, insight, and peer - to - peer consultative guidance. Peter Volanakis was explicit in his perspective that program management is a vital and valuable proving ground on the path toward general management. Program managers have many options in front of them as they continue to progress with the company. Besides the GM roles, there are comparably important functions as country managers and senior functional positions within the technical, commercial, and manufacturing communities.

There could be few opportunities richer than what is afforded by program man- agement for cultivating a diverse set of perspectives on Corning ’ s business and testing and growing the mettle, resilience, and judgment of the highest - potential leaders within the company. There is more to be done to put in place a fully robust talent man- agement process to support the growth of this cadre. The Leadership Fundamentals for Program Managers is an essential building block to strengthen both the innovation leaders and the innovation processes. (See Figure 3.8 .) Systematic career movement, talent reviews, performance management, coaching, and practice exchange forums will better equip leaders for strategic innovation responsibilities. It is these leaders who will in turn assure the fl ow of new products through the innovation pipeline that is so critical to Corning ’ s future.

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58 Best Practices in Talent Management

REFERENCES Bowen, H.K., & Purrington, C. (2008, March). Corning: 156 years of innovation . Harvard Business School Case

Study N9 – 608 – 108.

Day, G.S. (2007, December). Is it real? Can we win? Is it worth doing? Managing risk and reward in an innova- tion portfolio. Harvard Business Review .

Tichy, N.M., & Bennis, W.G. (2007, October). Making judgment calls. Harvard Business Review .

Dr. Richard A. O ’ Leary joined Corning in April 2001 as director of human resources and diversity for Science and Technology. In 2003, he assumed additional responsibil- ities for the Corporate Legal and Patent group, and in 2005 assumed responsibility for the global Manufacturing, Technology, and Engineering organization. Effective Janu- ary 1, 2009, he was appointed global director, human resources, International Regions. Prior to joining Corning, O ’ Leary was vice president, human resources, at Cytometrics, Inc., a biomedical high - technology start - up in Philadelphia. He has also held director - level human resource positions at the Public Service Electric & Gas Cor- poration and at Owens - Corning Corporation. O ’ Leary is nationally recognized for his expertise in organization development and human resources practices. O ’ Leary is an adjunct faculty member of the University of New Jersey, School of Medicine, and is a Lt. Col. in the Air National Guard, with twenty - one years of service. He serves on the boards of Watson Homestead, the Best Practice Institute, and The Alternative School for Math and Science. O ’ Leary holds a bachelor ’ s degree in sociology and a master ’ s

FIGURE 3.8. Five-Stage Innovation Model © Corning Incorporated

I. Build

Knowledge

Evaluate Opportunity

Evaluate Concept

Confirm Concept

Confirm Profitability

Concept

Plan

Development

Plan

Profitability

Plan

Commercialize

Plan

II. Determine Feasibility

III. Test

Practicality

IV. Prove

Profitability

V. Manage Life Cycle

Life Cycle

Plan

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Corning Incorporated 59

degree in counseling from the University of Delaware, and a doctorate in counseling psychology from Western Michigan University. He was awarded Corning ’ s President ’ s Excellence Award in 2001, the Distinguished Alumni Award from Western Michigan in 2002, the Paul Harris Fellow Award from Rotary International in June 2004, the Awareness Quality Improvement Team Tower Award in 2005, and the Awareness Quality Improvement Team Outstanding Contributor Award in 2006, and was awarded two Meritorious Service Medals from the Air Force in 2005 and 2007.

Gary E. Jusela, Ph.D., consults globally with leading companies on customized learning design, innovation management, leadership development, and organization change. He has previously held the role of vice president of learning and/or organiza- tion development at Boeing, Cisco Systems, Lucent Technologies, and The Home Depot. He has served on the board of directors of ASTD, The Principals ’ Leadership Institute of the Seattle Public Schools, and the Church Council of Greater Seattle, as well as on the Service Quality Committee of Group Health Cooperative. He presently serves on the board of advisors for the Center for Leadership, Innovation, and Change at the Indian School of Business in Hyderabad, India, and on the Board Quality Com- mittee of Swedish Medical Center in Seattle. He holds a bachelor of science degree in psychology from the University of Michigan, and an M.A., M.Phil., and Ph.D. in orga- nizational behavior from Yale University.

Heath N. Topper joined Corning in August 2007 as organizational effectiveness director, strategic growth, within Science and Technology. Prior to joining Corning, Topper held the position of vice president, human resources, at Covalence Specialty Materials Corporation, a custom fl exible packaging manufacturer in Minneapolis, Minnesota. He has also held director - level human resource positions at Tyco Interna- tional and AutoNation, along with generalist positions at the Pepsi Bottling Group and Siemens. He was a leader for HR processes, including employee relations, people planning, staffi ng, and organizational development, for these corporations. Topper holds a bachelor ’ s degree in business administration from the York College of Pennsylvania.

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60

CHAPTER

4 CUSTOMER AND

ENTERPRISE SERVICES (CES) DIVISION OF A FORTUNE 100 ORGANIZATION

MICHAEL SCHECTER, JOHN PARKER, AND JUDY ZAUCHA

How transforming the talent management systems and culture of a Fortune 100 insurance company ’ s operations division created new profi ts, decreased costs, and improved productivity.

Business Background and Challenges

The Roots of the CES Transformation: Leadership and Process

The Personal Transformation of John Parker

Assessment Drives the Need for a Whole System Transformation

The Process to Transform CES ’ s Whole Body

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Customer and Enterprise Services (CES) Division 61

Diagnosing and Designing the Whole System Transformation: The Leadership Alignment Event

Aligning Behind the Common Vision: Thrill Our Customer

Aligning Behind Common Values: Wholehearted and Inclusive Behavior

Designing the Whole System Transformation

Evaluation of the Leadership Alignment Event

Implementing the Whole System Transformation: The Waves

Supporting and Reinforcing the Whole System Transformation

The Hybrid Waves

Sustaining the Change

Evaluation of the CES Whole System Transformation

The Customer and Enterprise Services Division ( “ CES ” ) of a Fortune 100 company transformed the experiences of its clients, the internal satisfaction of its talent, and its fortunes by transforming all of its systems, including its talent management systems: It assessed each system that comprises its business, changed how those systems worked, and aligned each system with an over - arching and empowering vision. CES accomplished this change through an organization development process that empha- sizes vision and values and strong leadership that created the transformation. Today, the talent in CES is more engaged, effi cient, and happy; and CES is more productive and profi table.

BUSINESS BACKGROUND AND CHALLENGES

CES division is the back offi ce to one of the largest and best - known insurance compa- nies in the United States. It encompasses all call centers, accounting, inspections, and one of the largest printing shops in the country. It handles nearly twenty - two million phone calls, sells over 250,000 new fi nancial products, and produces about three hun- dred million mailings. Historically, CES had been divided into two separate and dis- tinct divisions. It duplicated accounting, customer service, and other services, plus related fi les and procedures. Because of this division, external clients experienced dif- ferent responses from different people, missed follow - through due to miscommunica- tions, and re - told their stories because the databases weren ’ t necessarily shared.

Many managers in CES had inherited and maintained nineteenth century, industri- alist leadership principles. It managed its people like commodities: The people exe- cuted tasks for forty hours a week without a need or desire for their personality or creativity. The managers measured and held their talent accountable to internal benchmarks of time and units produced, with little regard to external factors such as customer or employee satisfaction. This management attitude was passed through generations of CES leaders, creating an impermeable and static culture.

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62 Best Practices in Talent Management

Managers marshaled no signifi cant gain nor saw a signifi cant decline in any major cat- egory such as production or effi ciencies. Nothing changed.

Beneath this crust, employees toiled silently with disappointment and hopeless- ness. The manager ’ s perception of clock - punchers was correct. Employees parked their personalities and lives at the door, did their duties mechanically, were careful to not question or create in any way that might suggest difference, boss - watched fear- fully, and waited for the evening or weekend. It was a monochrome existence.

In short, CES division was ineffi cient, stunted, and frustrating to employees and clients alike. The client dissatisfaction was becoming more pronounced, staging the need for immediate change.

THE ROOTS OF THE CES TRANSFORMATION: LEADERSHIP AND PROCESS

In writing this chapter, a debate materialized whether CES transformed its talent man- agement process because of its vice president ’ s leadership or the whole system trans- formation process used. The CES team, with the exception of Parker himself, swears it was John Parker. The external consultants, who perhaps benefi t from seeing this transformation regularly, emphasize the process, which changes the whole body, including the leader. The debate is reminiscent of Yeats ’ famous line, “ O body swayed to music, O brightening glance, How can we know the dancer from the dance? ”

Roland Sullivan, one of the external consultants, echoes this indistinction in two emails sent on the same day:

“ It was the [process that moved] countless number of individuals and teams [to] sur-

face the fantastic ideas to move CES forward . . . . The design team must get strong

credit. [Nicole Lorenzetti ’ s] role was key . . . . Then the most important people were

the 1,000 or so people who attended the waves. All other people and teams only

help set the stage for the phenomenal success. ”

“ The . . . theory says that the most critical person to model new behavior and atti-

tudes is the top person of the organization . . . . I have had a number of cases where

the top person could not change and the effort results were pale in terms of the

[CES] case. ”

Similarly, CES ’ s transformation harmonized the dancer and the dance. Its leader, John Parker, embraced change before the external consultants arrived, welcomed the formal process and consultants, courageously committed to change, modeled and (when necessary) enforced change, and inspired employees to believe again in CES. The transformation process created safety to engage, enabled people with critical knowl- edge to contribute in inclusive ways, provided exercises and forums to showcase CES leadership ’ s humanity, and built and sustained the momentum through phased interven- tions. In sum, the story of CES ’ s transformation shows the individual qualities and suc- cesses of John Parker, choreographed with the whole system transformation process.

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Customer and Enterprise Services (CES) Division 63

The Personal Transformation of John Parker Today, John Parker walks through the offi ce halls in a pressed white dress shirt, open collar, dress slacks, no coat, and an easy smile. Eyes follow him, half as star - gazers and half hoping he will stop and talk. His presence infects the staff. You might mistake him for a celebrity and not the vice president of the CES division. You might never guess that a few years ago he held a Darth Vader reputation for managing projects versus people. Before CES even recognized its need to change, its pump was primed with the personal transformation of John Parker. Parker rediscovered the value of relational leadership skills and embraced new language of wholehearted and inclusive behav- iors. He then brought these values and language to CES and, in so doing, changed and affected the change of CES.

Parker began his career in a team - centric environment. They trusted each other, supported one another, created together. It was fun and engaging. Successes earned him the promotion to lead one of the technology divisions, where there were more employees to manage and they were not structured to work in teams. He got new men- tors who taught him task - master leadership techniques, where a leader made sure that employees met or exceeded internally set measurables. Parker realized that the tech- nology division could exceed its numbers and still fail because the numbers had little real meaning. But he did not challenge the system. It was not the CES way. He knuck- led down and enforced. When asked, he acknowledges that he was not liked; he was feared, and he deserved it.

Then a friend, one of his mentors, died from a heart attack. He was fi fty - four years old.

Parker had a personal crisis. His friend spent most of his life with the company and with its people. He treated the people transactionally and was remembered by some in CES transactionally. His legacy refl ected his management style. The scene to Parker was like a visit from the ghost of Christmas future: Parker realized that he was like Scrooge following in Marley ’ s footsteps and felt the rush of urgency to change. “ Mankind was his business, ” and his management needed to refl ect this humanity.

In OD nomenclature, he had a personal appreciative inquiry moment. He remem- bered the meaning and values of his past, discarded the bad parts, kept valuable skills, and drew a line to design a new future. Without any OD training, he decided that he had three stages to his career. Stage two was over. He now set the vision for stage three.

Stage three, he chose, will be to lead through relationships and create a people - centric environment. He began by re - learning talent management skills to communi- cate, give and receive feedback, and make people feel more included and safe in conversations. He found a common language on inclusion (from the Kaleel - Jamison Consulting Group) to train the department that would instill and sustain these behav- iors. He moved his being from uber - executive to human.

Parker ’ s personal change was highlighted fi rst by his decision to be wholehearted, which means bringing your whole self to work. The alternative, parking your person- ality with your car, made the workplace transactional and unsatisfying. Without the

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64 Best Practices in Talent Management

opportunities to create, express, inquire, or otherwise be oneself, people will disen- gage, stop innovating, and show low energy. In short, they ’ ll hate being at work.

Co - workers similarly can tell when they are being treated as a transaction. By becoming wholehearted, Parker discovered new creativities, ideas, and, consequently, opportunities. He began to challenge co - workers to bring more of themselves to work — to think for themselves, question when processes made no sense, feel empow- ered to try new ways of doing things, and be rewarded for their passion in addition to their results.

In short, rather than tell, Parker began to ask. Parker ’ s second signifi cant realization was the hierarchy of being: Think, Do, Be.

At the fi rst, thinking level, a person learns what is or should be done. It is best charac- terized by the six - year - old who, morning after morning, is ready to leave for school but forgot his socks. He is reminded and, the next morning, again comes to breakfast sockless. He knows about the socks. He just hasn ’ t reached the Do stage yet.

The Do stage is when the boy remembers. Think now of the goals we set for our- selves, like eating healthier. Doing becomes a challenge for most to do consistently. Ironically, many corporate training programs are geared to Do. We create exercises and training how to be accountable, for instance, and the Doing lasts as long as a carrot is offered or the stick is threatened.

CES was stuck in the Do stage. It wanted its employees to perform per unit, show up to work a number of hours per day and days per year, and sustain per volume. It was a defi nition of Do disconnected from less quantifi able and more human character- istics. It was action measurable and thereby could be made accountable, and so CES trained its employees informally to Do and not complain.

Being is the third, desired stage, when the doing becomes engrained into our defi - nition of ourselves. We hold the door for the elderly not because we remember or are practicing, but because that simply is who we are. Being connects what we do with our desire of who we want to Be as a person. Questioning and choosing who we Be defi nes our humanity and empowers us to do diffi cult, scary, inspiring, or exotic things.

In his sunset months with the technology division, Parker discovered and re - defi ned his sense of being and living wholeheartedly. He became more humble, more inviting of feedback, more relatable and encouraging. His change became the prelude to CES ’ s transformation.

Assessment Drives the Need for a Whole System Transformation At the same time as Parker ’ s new - look technology division began to take hold, oppor- tunity struck when several executives left. The sudden vacuum in leadership raised business questions: Did it make sense to have a divided organization? Were there redundancies? Why was CES never improving? Why were CES employees asking to transfer to other departments? Why were CES internal clients asking to have work ful- fi lled by external vendors?

One of the senior vice presidents asked Parker to look into these questions. She gave Parker no directive or clear mandate, meaning that Parker did not have her blessing

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Customer and Enterprise Services (CES) Division 65

or her limitation. Parker hired outside consultants to review CES ’ s structure and fi nances, as expected, and another set of consultants to review CES ’ s culture by interviewing and surveying CES employees and clients. It is diffi cult to emphasize how novel or brave this act was. Within CES, culture was an irrelevant criteria. By showing an openness to deviate from the engrained culture and ask questions of change, Parker entered new (meaning risky) terrain without clear support.

The consultants performed the assessment survey, discovering and documenting the culture within CES. The results showed deeper problems than mere system redun- dancies, prompting the consultants to suggest addressing all of the systems. These results and recommendations had meaning because Parker was receptive to them. He then acted on the results by reaching out to Kris Kammerer.

Kammerer has sandy blonde hair, a smile warmed by the rose in her cheeks, and a sureness in her voice when she talks about organization development theory or train- ing practices. Unlike Parker, who is with the corporate offi ces in Chicago, Kammerer is based in Texas as an internal education and training specialist. She was planning a leadership retreat for CES ’ s vice presidents and division heads when she received from Parker, to her surprise, the analysis of CES ’ s internal culture.

Her theme for the leadership retreat changed. She purchased and distributed one of John Kotter ’ s books, made copies of the assessment data, and created ways to share the data with the leaders — a full, transparent discussion. She intended to create the burning platform, but without creating fear: To unfold the data carefully so it would be accepted more than challenged, reveal missed possibilities, and suggest that CES could choose to be different. She did so by weaving employee stories and experiences with the numbers and committing to inclusive conversation practices.

Opportunity then again graced CES. On the eve of the leadership event, Parker was named the new vice president in charge of the merged CES. The announcement surprised everyone, including Parker and Kammerer. Its timing, however, gave Kammerer the political backing and confi dence to engage in the leadership conference fully.

If this were a military campaign, we might talk about the leadership conference as the turning point in the war. Leaders going into the meeting had the deluded sense that the CES culture was nice, fulfi lling the needs of its clients and company according to its own internal measurements, and although not growing in revenue or effi ciency, was fulfi lling its mission. The conference would be like any other: Talk with those you normally don ’ t see, pretend to learn something, and eat well. It would be something between a vacation and a waste of time.

Parker and Kammerer, with advice and help of an outside consultant, unfolded the cultural data carefully, created the case for urgent change, and then called them to arms. As leaders of one of the world ’ s most famous institutions, the call to arms was greeted with an immediate and obvious response: The report was wrong, the assess- ment was biased or improperly performed, and the data was irrelevant. This quick response came from one table in particular: the table where Kammerer had seated the more entrenched and likely resisters. And they did not disappoint. Their table ’ s energy

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66 Best Practices in Talent Management

quickly united and their response was thick. Kammerer and Parker let them protest, patiently, and exhausted their list of protests.

Other tables had nodded to parts of the report and had experienced some of its conclusions. The more the “ resisters table ” talked, the more it became alienated. And then someone else spoke up — the resisters table did not speak for him. Then another spoke up and, soon, the resisters table was in the minority. A more open dialogue ensued, permitting more people to share critical information. Parker encouraged this conversation and insisted on the safety necessary for them to risk contributing their opinions.

In this moment, CES cracked the 19th century concrete in its culture and consid- ered a new perspective of itself. Its leaders saw through their management practices, glimpsed the truth of its culture, and found an opportunity to do things differently. Nicole Lorenzetti, a director in CES, describes:

“ [The] leadership meeting was to gather together all of our CES leaders with our new

leader, John, and discuss expectations for the new organization. The theme was the

‘ iceberg is melting ’ . . . and the discussion focused on how we must change our

approach to our work in order to be successful: Specifi cally, our internal clients saw

us as expensive and slow, while we saw ourselves as doing a great job. I did see the

call of action and the need to change based on interviews shared with us of our inter-

nal business partners, and always felt it was safe to change . ”

The key to the success, safety, was created by sharing the data and personal expe- riences openly, permitting open dialogue, emphasizing inclusive behaviors, and hav- ing Parker and Kammerer model these behaviors.

The Process to Transform CES ’ s Whole Body Parker and Kammerer had identifi ed the need and created leadership support for the case for change. They had never transformed a whole system, however, and did not know the next steps. In his next courageous act, Parker committed dollars to a team of outside change agents, Gina Lavery, Jen Todd, and Roland Sullivan, and their whole system change methodology. Parker recalls:

“ I think [I committed to the process because of the] many conversations with our OD

consultants asking me to trust the process . . . . What I didn ’ t understand until after-

wards was really the entire process has to do with transformation of many people in

many different ways, including myself, and trusting the process is sometimes part of

that type of learning. I was given a number of books to read and peruse that

did talk about the process and talk about the theory. We spent some time on theory

and it made sense to me, but ultimately working with trusted partners really

helped, and I was allowed to learn, thank goodness, through the process as to

how to transform myself not only as me personally but as a leader within

the organization. ”

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Customer and Enterprise Services (CES) Division 67

This courage resulted in part from his earlier personal transformation and commit- ments, and from the safety provided by the outside consultants. They offered confi - dence in their experience, theory that supported their beliefs, and a process that promised success.

The whole system transformation process addresses human fears and hopes. It bal- ances the needs for courage and safety, and permits all elements in the system to voice thoughts and be heard by all the other systems. It is based on sociological theory, truth perspectives shared through facilitated dialogue, and the import of a communicated vision. One of the external consultants, Sullivan, illustrates these factors in Figure 4.1 .

The process is (1) gather data on the system ’ s culture and functionality of its proc- esses; (2) share the data with the leader and, upon approval, the core leadership group; (3) create and align the core leadership group behind a vision; (4) empower the sys- tems to change; (5) involve and engage the vision and value to a max mix gathering 1 of the system for the purpose of furthering the vision and identifying action items to make the vision alive; and (6) consistently solicit feedback from the system and adjust per the feedback.

This process works because the vision and actions reinforce the message of value — that the company and leadership value the employee as a person. The process:

Asks for information, rather than telling;

Involves all systems, giving a feeling of ownership and value to all employees;

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Transformation is guided by theory and shaped by values

Transformation is a dynamic system-wide journey of

change.

Journey

VALUES

Transformation is clearly purposeful.

Theory

Th eo

ry Theory

Purpose

System Transformation connects all things within and around a system.

FIGURE 4.1. The Five Truths of Whole System Transformation Source: W.J. Rothwell and R.L. Sullivan. (2005). Practicing Organization Development . San Francisco: Pfeiffer.

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68 Best Practices in Talent Management

Trusts information to be shared with the systems, and people are hungry to share and receive information;

Emphasizes ideas and growth — personality characteristics that connect people to each other; and

Empowers people at all levels in the hierarchy to be experts on the tasks they do and to use and share their expertise.

In short, this process fi rst suggests a new vision for organization and then values the human experience within the systems. The employees can relate to the vision and fi nd a sense of identity from it, and feel valued by participating in designing the change.

The success of the process is something between magic and science. Magic because the results, the personal and systematic excitement, look miraculous. Science because the process can be duplicated with new organizations and the ability trans- ferred to new people. For CES, this was a perfect match. Sullivan was very experi- enced with organization development theories and methodologies, could use Lavery and Todd as local extensions, and could train CES ’ s internal trainers, Kammerer, Gin- ger Whitson, and Ginny Chiappetta, to make CES self - suffi cient. If CES was going to sustain a change initiative among six thousand employees around the world and man- age the initiative long term, it was going to have to develop internal competency. The outside consultants unselfi shly promoted this transference.

DIAGNOSING AND DESIGNING THE WHOLE SYSTEM TRANSFORMATION: THE LEADERSHIP ALIGNMENT EVENT

The fi rst step in the process was a leadership retreat with Parker ’ s core leaders. The iceberg leadership retreat established the case for change among a broader group. Now, CES needed to identify and assemble its core leadership group to fi nd a common vision.

The leadership alignment event followed the appreciative inquiry format. The exter- nal and internal change agents used the assessment data to help confront the past and redefi ne who they would choose to “ be in the future. ” The data compelled the recogni- tion that CES must change or die. The CES core team fi rst looked at their accountability in the culture, what difference they could make, and what actions could make a differ- ence. They then let go of the past and committed to action steps to involve and transform the whole system. They fi nally aligned with three important decisions: (1) a common vision, (2) core values, and (3) a journey to involve and change the whole system.

Aligning Behind the Common Vision: Thrill Our Customer The vision identifi es the common purpose that unites a team. The common purpose provides direction, promotes safety and trust, spurs momentum, creates value, and helps people become more human than transactional. For instance, many people decide to go to work to earn money. They punch the clock, do their time, and cash their

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Customer and Enterprise Services (CES) Division 69

checks. Although a vision or a purpose, it has nothing in common with those of others and lacks the fairy dust feeling of value.

A common purpose depends on relationships. Identifying a vision that shows how we decide to relate to others becomes more powerful naturally and harder to dismiss. Rather than sound transactional, it invokes feeling and thereby engenders wholeheart- edness and inclusive behaviors. Starting from the heart and valuing a relational vision are fundamental to dialogue, dispute resolution, feedback, feed - forward, and transformation practices. It is a different way to manage talent.

For CES, the leadership team identifi ed the vision at the leadership alignment retreat, but the language changed later when a front - line employee expressed it perfectly: “ Thrill Our Customer. ” The team also established the number one duty of each employee:

“ Major Responsibility #1 ” (MR1) has become prevalent, from a main theme in every training to the fi rst criteria used in each employ- ee ’ s annual review. It is CES ’ s “ prime directive. ” Although MR1 may seem similar to other platitudes from other companies, what makes MR1 special is that — stated so and used so — it is each employee ’ s fi rst major responsibility, from the front line to the vice president. Leaders hold employees accountable fi rst to being inclusive, open, and rela- tional, and then to numbers.

This vision invokes change. Their job had been to satisfy units and the customer, but their vision now is to “ thrill ” the customer. Create an experience. Be memorable. Don ’ t count papers; deliver smiles.

With this realization, the core leadership team found the next piece of its change language: Get Different. In the past, CES had preached to work smarter, better, more effi ciently. Although these sound bites have been pop in management circles, they also have become caricatures of disconnected leaders. Rather than motivate employees, the terms are heard as criticisms for being dumb, inferior, or unfocused. Jen Todd refl ected that this new language, “ get different, ” recognized that CES could not “ get different results without getting different ourselves. It is about a deep paradigm shift. It is about a breakthrough. ” At a more basic level, getting different simply asked employees to try something new. Not “ better, ” just different. This simple permission created great freedom and provided the space for innovation and empowerment, fail- ure and success.

Aligning Behind Common Values: Wholehearted and Inclusive Behavior The next key ingredient is to show and teach how to value one another. Any relational environment depends on respectful treatment. Fears, politics, money, and other busi- ness factors can undermine this feeling of respect. More commonly, the transactional

Major Respon-

sibility #1—Our

employees be

accountable and

highly engaged to

deliver unbeatable

service by:

1. Modeling and

supporting an

inclusive

environment

2. Referrals when

needed, coaching,

and helping to

retain talent

3. Removing

barriers

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70 Best Practices in Talent Management

side of business predominates the discussion and so, while a conversation may not be disrespectful, it can undermine respect by feeling like a command (devaluing the oth- er ’ s input, feedback, or circumstances).

Best decisions are made when all the information enters the dialogue. This means creating an environment of safety. Parker had discovered the language of wholeheart- edness and inclusive behaviors and brought these lessons to the CES core leadership team. These lessons included language to lean into uncomfortable conversations, how to give and receive feedback, and how to make others feel included in the vision and direction of the group. The core team further committed to involve all systems in the change effort and to value all voices in the system. This commitment meant trusting and empowering all systems to participate in the change.

Designing the Whole System Transformation The core team fi nally committed to a journey map that would lead CES to change all its systems. Following the Kathy Dannemiller “ Whole - Scale Change ” methodology, it designed four large group transformation events, called waves. The waves would be built along the max mix model at all levels. To achieve the max mix representation of location, hierarchy, and all other attributes, attendees would need to fl y in for the wave. This included fl ying non - exempt employees who never had fl own for the company before (some never had been on an airplane before!), hosting them in at a nice hotel, and providing meals. The core team treated each person as an executive.

Again, all these decisions were made without a budget or clear mandate from above! One key factor in the success was the leadership team ’ s commitment to the change

exemplifi ed in one simple yet dramatic act. The leadership team made its schedule subject to the change initiative. That meant that the team designing the wave could book and plan the event, and the leader would adjust his or her schedule accordingly. Meetings, travel, deadlines, and vacations took a back seat. The leaders became sub- ject to the same planning as all employees, except that the leaders needed to attend all wave events.

Evaluation of the Leadership Alignment Event Everyone in CES considers this leadership alignment event as the critical victory in its transformation. It took three days to align the leadership group to the new vision and to commit to the waves. Since that time, each leader has been “ on message ” and has helped to create a roadmap to complete the transformation. Parker recalls:

“ [The] top team alignment was totally different than other sessions that I had been

through. It was focused on really speaking as one voice, taking our core leadership

team of seven folks and making sure that as we went into our transformation of the

organization that we were speaking of one voice so that people could trust us and

trust what we were all about. What shifted for the team in the session really was all

of the background of the two organizations and the leaders at the top going through

the process and actually changing. ”

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Customer and Enterprise Services (CES) Division 71

Equally as important, the leaders got human with each other, meaning they identi- fi ed with each other as a person rather than a position, shared their hearts, and, in the process, built trust in one another and greater commitment toward and accountability for their relationships. Parker again recalls:

“ [The leaders] were all competitive with one another, they didn ’ t trust one another,

they had spent years with their leaders working on that lack of trust and that com-

petitiveness and, as a result, were not optimizing and supporting one another in

what we needed to do, even though that would be a desired effect. We had to leave

our baggage behind and we had to get to know one another and then agree that we

were going to leave it behind and come out speaking as one voice and take the orga-

nization in a different direction. That happened in the session.

“ What also happened in the session was the CLT, the core leadership team, under-

standing and ownership of what it is we were going to do in the organization . . . to

change the way we were going to conduct business: Moving from a shared service

organization totally focused on process, effi ciency, and effectiveness, [and] being

internally measured; to a valued service provider . . . providing and proving the value

that we provide to the corporation . . . . [The CLT] took total ownership of that strat-

egy in that session as well as getting to know one another. And as a result, we came

out with a purpose, with guiding principles, with operating norms as a team, and

truly started to operate as a team of one. Even though there were seven of us, our

voices were the same . . . . It was unbelievable. ”

CLT never wavered and still has not wavered, from the vision and value principle determined at this event.

IMPLEMENTING THE WHOLE SYSTEM TRANSFORMATION: THE WAVES

The leadership team committed during its alignment event to transform the whole sys- tem, or roughly six thousand employees in fourteen locations around the world. Rather than engage the whole system at one time, the leaders decided to engage the 20 per- cent tipping point amount in four waves, with roughly 300 to 550 people in each wave. The wave events were planned for two and a half days and were rooted in the Dannemiller - Tyson formula for change:

Dissatisfaction * Vision * First Steps � Transformation2

Accordingly, each wave included all of these elements with an emphasis, or “ thrust ” , on one element. This emphasis evolved from wave to wave, building momen- tum. The process is shown in Figure 4.2 .

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72 Best Practices in Talent Management

As seen in Figure 4.2 , the fi rst wave ’ s thrust was on the dissatisfaction, the past, and how things have been. It created thoughts and conclusions that were presented to the second wave, which focused on what was working at CES and the vision of what CES could be. The third wave picked up the vision and focused further on what CES could and should become. The fourth wave brought together all the thoughts and rec- ommendations and mapped the journey to sustained change.

For CES, the dissatisfaction lay with its business and premium - paying customers. They struggled dealing with CES. This customer dissatisfaction created business prob- lems that were addressable by cultural changes that the core team had considered in the vision. CES was going to be about thrilling the customer, getting different, and ful- fi lling the MR1. How this vision became action depended on the input and recommen- dations of the wave.

The waves therefore focused on the entire system, following the Dannemiller star model (depicted by the fi gure of a star in which the top, true north, is strategic direc- tion, and each following point is processes and systems, form, resources, and shared information). For instance, in reviewing where CES had been and where it could go, each wave considered each point of the star and what resources it might need or proc- esses to adjust. Action items were created at local and system levels.

The process also designed ways to grow and sustain the change. The following graph in Figure 4.3 depicts the attention CES gave to the post - wave experience, adopting a QUEST formula to continue to involve and emphasize the work done in the waves.

FIGURE 4.2. Whole System Transformation Process

Whole system transformation

Core Leadership Team Transformation*

(August 2008)

Wave 1: Current Stageˆ 304 employees (August 2007)

Wave 2: Future Visionˆ 278 employees

(November 2007)

Wave 4: Design CES-wide Transformationˆ

100 selected employeesˆ (February 2008)

Le ad

er sh

ip t

ra ns

fo rm

at io

n de

ve lo

pm en

t an

d su

pp or

t C

om m

unication and m easurem

ent

Sustainability: Continued Implementation for CES

Wave 3: Action Planˆ 560 employeesˆ (January 2008)

* � Launch 1

ˆ � Launch 2

Launch 3

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Customer and Enterprise Services (CES) Division 73

As Figure 4.3 shows, the transformation began with leadership, expanded to large groups through the waves, and then began focusing more on the local and personal responsibilities. Individuals were required to question processes on an ongoing basis and create new solutions that would improve how CES thrilled its customers. This focus on empowerment, questioning, and improvement became the momentum of constant transformation.

Each wave was co - planned by members of the core leadership team, managers, and front - line employees, including employees in the location of the event. Each event followed the max mix belief in each stage (from planning to table groups), in organi- zation chart rank, and in attitude (from cheerleaders to sourpusses). PowerPoint was banned. A “ no stripes ” policy was enforced. Leaders were seated at tables anony- mously without titles. Parker explained:

“ It was a very inclusive process, all parties represented, all levels, all parts of the orga-

nization regardless of geography, and it was designed that way. It really was designed

to bring everybody together for the fi rst time and break down the walls of the king-

doms and queendoms that existed, and the result was incredible. People found out

for the fi rst time who they were talking to on the other side of the phone when they

were working through their horizontal business processes and began to talk about

how almost immediately how to make them better. That was what we were after and

that ’ s what we got. “

Each wave began with a keynote from “ Saint ” Judy Zaucha, John Parker ’ s execu- tive assistant, and discovered inspirational speaker. Each wave then included room

FIGURE 4.3. QUEST Sustainability Process

QUEST for success Question . . . Understand . . . Explore . . . Solve . . . Transform . . .

Wave Output Wave participants generate project

ideas that have the potential to

transform our organization

Brainstorm Prioritize

Location dot voting to prioritize

project ideas (All employees)

Select Engagement contact

and local leaders selected QUEST projects from

prioritize project ideas

Train-the-trainer (Facilitation skills, QUEST process, project

Mgmt basics

QUEST Session

On-going, Repeatable Process

QUEST Session

QUEST Session

QUEST Session

Project ideas

Employee Involvement

Employee involvement in prioritization of projects ideas

leads to ownership of solutions

Project Selection Only those project

ideas with the greatest potential

are selected

Locally facilitated and owned Local facilitators

Local ownership of process

The right people The right people in the room to solve the problem

Project office support Project management (for larger projects)

Tracking and measurement accountability

Action-oriented quick wins 90 days to solve and implement a solution

Drive culture change Improve business results

Improve processes Eliminate barriers

realize opportunities

Thrill the customer

Create an engaging work environment

Wave pre-work

Launch 3 waves

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74 Best Practices in Talent Management

greeting activity, a presentation of “ what is CES, ” a candid interview with John Parker (literally, someone interviewed him on - stage, live, with unapproved questions), craft activities, and an “ elephant box ” where any question could be posed to expose the ele- phant in the room. Each step was calculated to value the opinion and presence of each attendee, knock down barriers, become human or inclusive with one another, and show commitment to the vision.

Parker, especially, got personal and unprotected. He answered tough questions. He talked regretfully and emotionally about the manager he was. He confessed to get- ting drunk in college, getting hit by a bus, and breaking a lot of bones. And learning. He also did shots with his son when his son graduated college. Employees were shocked to hear their boss having life experiences, even stupid ones, like everyone else. Parker became a person, not just a suit. He showed himself to be vulnerable and wholehearted.

To change the culture, CES needed to become more inclusive, transparent, appre- ciating and empowering. In short, they needed to Thrill Our Customer and fulfi ll MR1. The waves explored how each person could do this. For instance, the “ Stop/Start/Con- tinue ” exercise in Wave 1 asked participants to create fl ip charts answering this question:

In order to thrill our customers, we must:

Start doing?

Stop doing?

Continue doing?

The groups then discussed what “ Thrill Our Customer ” meant in the context of their work and to create solutions within their departments that would further this goal.

The waves also had fun activities that reinforced the themes. For instance, in Wave 2, CES did a “ fearless ” activity in which the group divided into twos and shared with their partners a moment when they were fearless or witnessed fearlessness. They used these stories to prompt a discussion of what it takes to act and be fearless. The discus- sion then became concrete — the participants created guidelines on being fearless and thriving in the transformed organization. Finally, each person was asked to advertise their fearless guidelines in an arts and crafts project. They made capes, decorated them with their guidelines, and showed them to others. The discussion created new creative energy about being unafraid to show initiative. A similar exercise in Wave 3 created superhero shields that would allow employees “ to step out of our comfort zones and feel empowered to achieve MR1. ”

The waves also looked at external experiences. For instance, an activity divided the teams into two groups. Group 1 put itself in the shoes of an external, premium - paying customer, and Group 2 was an internal customer. The two groups created lists of needs and wants and then shared the lists. Finally, the wave as a whole discussed how CES could support both sets of needs.

■

■

■

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Customer and Enterprise Services (CES) Division 75

Some changes were almost instantaneous. For instance, some people had worked on opposite ends of an issue, and even had spoken on the phone, but never met. They began to get a fuller view of the processes, realized barriers in how they did things, and made connections for how to improve them. People also made personal connec- tions to the change, talked about it and how it affected others. Many had to leave the room at times to gather themselves or refl ect on what was happening.

Everyone remembers “ Johny. ” She is a front - line, non - exempt, shy, plain - shirted employee who had been with the company for thirty - four years. She had seen it all, didn ’ t want any part of it, and didn ’ t want to contribute or even attend the wave. They fl ew her out anyway. Then she heard from Zaucha and Parker and participated in the conversations. She found new hope. And courage. She went on stage and publicly addressed the six hundred wave attendees: “ This is the fi rst time anyone at [the com- pany] asked me about my job and how to do better. ” She confessed that she had been cynical and wanted to be happy and involved. She challenged her role in the company and her role in her personal life, and saw how choosing a new attitude and new per- spective could create new possibilities within CES and her personal life. She cried and made others cry with her. “ I can ’ t wait to go back to my desk and begin making it bet- ter, ” she concluded.

The success with Wave 1 helped grow future successes. Another employee wrote, “ For Wave 2 one person from my department volunteered due to the information and excitement I came back with . . . . I learned so much. The hotel [CES] put us up in was just beautiful and the food was great. I will ask for my name to be submitted to attend Wave 4. ”

Following the wave, a department leader immediately identifi ed the need to be in closer relationships with her co - workers and develop relational leadership skills.

“ Personally, it was a wake - up call for me. I have found myself being more focused on

the personal relationships of the folks I work with. I can honestly say I am listening

more earnestly, driving folks to become engaged at all levels and looking at my

co - workers with more respect, acknowledging that everyone has value and can add

value. ”

She sustained this effort, became a more effective manager whose results soon became apparent in her team, and was promoted to director. This promotion reinforced the new values CES encouraged.

Another employee declared an end to triangle conversations. Her manager, who had not yet attended a wave but was impressed with the impact, reported: “ She would not entertain any more ‘ negative ’ comments. If someone had something to complain about, then [he should] come up with a solution to the issue. ”

The waves ’ impacts also were transformational in the magic way. One woman wrote the design committee:

“ Thanks again for everything you and everyone else did that made last week such a

huge success. I try explaining to people that it was not only business related, that it

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76 Best Practices in Talent Management

touched a spiritual level as well. Through what I learned last week, not only can I

become a better employee, but a better spouse and a better mom. It was truly amaz-

ing. As a matter of fact, I bought a black long - sleeve shirt and got “ GET DIFFERENT ”

in big white letters. I am wearing it proudly today. ”

Ginny Chiappetta says that, after the wave events, her family said she couldn ’ t stop smiling. She even used the OD process with her sixteen - year - old daughter, help- ing to transform that relationship.

Parker became a rock star or touchstone to many employees — the leader who understood his employees and worked toward real solutions. Today he gets emails from dozens of employees at all stations asking his advice, sharing stories, and giving feedback. He tries to respond to all of them. One employee commented after Wave 1: “ The buzz is still humming here about Wave 1. And I think I ’ m going to start a John Parker fan club. A photo he took with one of our attendees is now her screensaver. No joke. ”

The waves were transformational, meaning that attendees moved from disengaged and disenchanted to energized by a shared vision, a feeling of empowerment to achieve it, and a sense of value that being wholehearted at work is desired. Transformation speaks to the “ be ” state and includes both business and personal relations. Following Wave 2 in Ohio, one transformed participant, Tony, wrote to his table:

“ The experience that I had in Ohio was a humbling experience. It made me see that

no matter where you come from most people are all the same. Except for Table 24.

An extraordinary group of people I have had the great pleasure of meeting and

being in the company of. The compassion that each of you show for each other

was overwhelming. And it made me rethink the type of person that I am. I have

always tried to better myself each and every day. When I wake up in the morning

and look in the mirror, the fi rst thing I say is ‘ okay what can I do to make Tony a

better person today? ’ I won ’ t have to look any further. Because the little notes that

you all wrote about me say it all. They are posted on my mirror so in the morning I

just look at one and read it. It has inspired me to become even more of a better

person. Not just about a person inside. But also a better human being . . . .

What I mean by that is to think more logically . . . all of you guys at Table 24 have

made the difference in my life. And I am pretty sure a lot of your good qualities

have rubbed off on me . . . . So can one person make a difference. If that is true

that I ’ m a very lucky person because I have had seven people make a difference in

my life. P.S. if any of you guys ever happen to be in Chicago give me a call. I extend

my hospitality out to you with open arms. Also you can drop me a personal e - mail

at . . . . Your friend Tony. ”

Table participants responded hours later, including the following:

“ I did get this email from Tony, and honestly I ’ ve been touched ever since . . . . What he

comments is very true, all expectations on my side were blown away for the best and

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Customer and Enterprise Services (CES) Division 77

you are all greatly responsible for it . . . so I thank you that. I believe it is important

that we not only keep alive Wave 2 but also the friendship that was born in Table

24!!! I know I will see again Jen and Kris because I do go to Virginia at least ten times

a year (family and Tech games), and I also go to TX to visit my old peers and

friends . . . . did promise Tony that I would visit Chicago, during 2008 so that only

leaves me with the promise of making an effort to go around Ohio to see everybody

else!!! Please stay in touch!!! Your friend, Edgar ”

Another incredible, albeit sadder story, occurred when CES closed one of its offi ces. The employees cheered. They were crushed for losing their jobs but thankful for the way in which Allstate held the conversations. Rather than humiliated and lost, they felt appreciated and supported. CES included them in the transformation process and considered them part of CES, even after the decision was made to close the offi ce. Further, the decision was communicated early and respectfully, and support offered. Again, the story of how CES valued these employees spread, proving that manage- ment could be trusted to fulfi ll the intention of the waves.

SUPPORTING AND REINFORCING THE WHOLE SYSTEM TRANSFORMATION

The Hybrid Waves The success of the four waves bred new energies. First, the leadership team believed that the 20 percent tipping point had been achieved, but the division was not tipping fast enough. Employees who did not attend the events had not learned the language of feedback or communication, and either felt left out or were being left behind. Second, they wanted to support and reinforce the learning in the waves with the other employ- ees. And not unimportantly, the leadership team was so moved by the personal trans- formations of those who attended the waves that they felt all should attend a wave — all six thousand employees.

The transformational energy tugged at their emotions. For instance, one wave attendee wrote to the core team:

“ I was also blessed to be at the fi rst wave in Dallas, and am still calling to mind the

experience I had there on a regular basis. I ’ m so grateful to be a part of the CES &

the . . . corporation. I pray the rest of the CES team that hasn ’ t gone to a wave will

feel the same excitement that is brought back from each of the waves and start to

transform their thinking. ”

Other success stories, like the employee who used to make others miserable who returned from a wave ready to be a good teammate, highlighted the urgency in achiev- ing the possible quickly. Or, as Harry said to Sally, “ When you realize you want to spend the rest of your life with somebody, you want the rest of your life to begin as soon as possible. ” [ When Harry Met Sally. Castle Rock Entertainment.]

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78 Best Practices in Talent Management

For the fi rst time, though, budget became a concern. CES already had spent dol- lars on the alignment and four waves, reaching the 20 percent tipping point. Although it would be repaid multifold in savings, reaching the remaining 80 percent was budget- arily daunting.

In another defi ning moment, CES did not relent to failure. True to its vision to “ Get Different, ” CES decided to do a one - day hybrid wave.

The consultants said no. Although it was a good idea, you simply cannot get trans- formation in a one - day event. It was better to trust the process, trust the tipping point, and plan more waves over a longer period of time. This process could be designed effi - ciently, respecting budget concerns and to guard against burnout.

CES stuck to its opinion. It really wanted more employees to have a wave experi- ence, did not want to wait, and felt capable of designing and handling a hybrid one - day event. Today, they credit the outside consultants for building this internal competence through education and coaching. They then exercised this confi dence and overrode the consultants ’ decision, created the new hybrid wave, and took full owner- ship of their transformative journey.

To make up for the shortened time of the event, the hybrid wave provided pre - event training explaining transformation, what the prior waves had done and accom- plished, and CES ’ s language for feedback and inclusion. Another day of training was added after the event to follow up on the one - day event. These pre - and post - events were local, saving cost and time.

The one - day events followed the roadmap of the larger events, just shortened. They shared the work of the prior waves, explained the new language being developed to create and sustain the change, and invited the employees to join in the change effort. Specifi cally, each person was given the chance to own his or her position and perfor- mance and suggest different ways of accomplishing the task. For instance, one exer- cise asked participants to read the CES mission statement out loud and then discuss what part their team played in accomplishing that mission. They further created fl ip charts showing how they could initiate acts that would move their teams toward suc- cess and in the direction of the vision.

The one - day mini waves were extraordinarily successful, due in part to the hybrid planning and the fact that a critical mass had experienced the prior waves and paved the road for the hybrid waves. The hybrid waves let participants learn fi rst - hand the new language of change, question and experience the sincerity in MR1, and feel per- sonally included. Not coincidentally, the numbers improved immediately. Parker saw higher customer satisfaction and unforeseen money savings:

“ Following the transformation we saw things start to happen in our measurements

immediately. Our post - call survey results, a survey that our customers opt to take

when they make a phone call to our call centers, started to immediately jump. Years

had gone by and there had been no movement. We saw seven months in a row of

improvement . . . . We saw our ability to execute and manage our expenses change

this year. Without asking, without driving, we ’ re going to come in millions of dollars

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Customer and Enterprise Services (CES) Division 79

under plan and have been able to use that money in really buying more advertising

for our direct sales teams and providing resources back to the organization. ”

In addition to saving money and performing at higher levels, employees were happier and more engaged. More employees began attending and leading work activi- ties from department meetings to corrective action teams.

Sustaining the Change CES values the change it made and wants it sustained. As discussed above, it designed in its wave process the post - wave QUEST process, empowering employees to con- tinue to question procedures, engage and solve problems, and transform the processes in the system. It also provided concrete guidance to drive this questioning and con- front problems early.

Figure 4.4 shows fi rst that CES is looking at its whole system and how those sys- tems are supported and related. Within the systems, CES emphasizes maintaining the language of change, engaging actively in feedback, creating a rewards and recognition program, now learning about feed - forward, continuing personal and business growth, and keeping the MR1 in focus. In short, sustainability is a sustained campaign that is behavior and attitude focused and feedback and accountability driven.

In living this model, CES approved a new position requested by a wave. The engagement catalyst ’ s job duty is to make sure that CES is continually changing on the personal, skill development, and professional levels. Parker explains, “ We have to constantly be changing. We have to constantly adapt to the changes that are put in

FIGURE 4.4. Output for the Waves

• 360-degree feedback process for all employees

Accountability

Six Bold Ideas

Inform ation

and m etrics

Rewards

Co lla

bo ra

tio n

En ga

ge m

en t

Inclusion

• Creation of a business results dashboard

• Business acumen training

• Best practice process flows

• CES “family tree”

• Education and training around risk taking

• Online recognition tools

• “Pay it forward” recognition

program

• Traveling employee team shares ideas and

delivers key messages

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80 Best Practices in Talent Management

front of us, and we have to [be] open and willing to do that. ” The engagement catalysts provide consistent training and reinforcement of the transformation.

CES also monitors its progress and regressions with internal focused pulse surveys. Numbers that historically had been in the two or three out of fi ve range consistently have climbed and maintained a 3 to 4.5 rating. Figure 4.5 shows improved satisfaction in every system.

When a survey identifi es setbacks in an area or location, an engagement catalyst jumps in or a focus group is created. In a focus group, a facilitator gathers a max mix sample in one or several locations and dives deeper into the issues, like a wave event. A year ago, these groups might not have worked because they were foreign and there was lack of trust about how the results would be used. Today, there is a common lan- guage and trust that these events are co - designed by employees to improve the system and will have a good impact.

CES also pays attention to how it performs in comparison with other industries. For instance, it has conducted surveys with Chris Worley measuring CES ’ s perfor- mance in key categories, shown in Table 4.1 .

As the pulse survey shows, CES scores higher consistently than similar depart- ments in other industries. Another survey (seen in Table 4.2 ) shows that, because of the successes in CES, leadership is able to spend more time building future business.

These surveys further show no glaring problematic culture. Worley ’ s initial con- clusions suggest that CES ’ s culture is progressive, innovative, and agile.

FIGURE 4.5. CES Business Results

4.60 Licensed Service

4.40 4.20 4.00

3.60 3.80

3.40 3.20

Ju l-0

7 A

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p- 07

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8

Goal Licensed Service

4.75 Encompass PSC

4.65

4.55

4.45

4.35

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-0 7

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8

Goal Encompass PSC

5.00 Un-licensed service

4.50

4.00

3.50

3.00

Ju l-0

7 A

ug -0

7 Se

p- 07

O ct

-0 7

N ov

-0 7

D ec

-0 7

Ja n-

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-0 8

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-0 8

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08 O

ct -0

8 N

ov -0

8 D

ec -0

8

Goal Un-licensed service

3.62 Motor clum

3.58

3.54

3.50

3.44

3.48

Ju l-0

7 A

ug -0

7 Se

p- 07

O ct

-0 7

N ov

-0 7

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-0 7

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8

Goal Motor club

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Customer and Enterprise Services (CES) Division 81

TABLE 4.1. Pulse Survey Results, CES

Descriptive Statistics

Sense of Shared Purpose

Develops Robust Strategies

Encourages Innovation

Change-Friendly Identity

Strong Future Focus

Flexible Structure (Surface Area)

Information Transparency

Shares Power

Flexible Resources

Flexible Reward System

Shared Leadership

Change Capability

Learning Capability

CES Response scale: (1) = Not at all; (2) = A little; (3) = To some extent; (4) = To a moderate extent; (5) = To a large extent. Pilot Survey Response scale: (1) = Strongly Disagree; (2) Disagree; (3) Neither; (4) Agree; (5) Strongly Agree.

Development Orientation

4.12

Mean S.D. Mean S.D. Mean S.D. Mean S.D.

3.99

4.02

3.90

3.94

3.78

3.88

3.74

3.68

3.50

3.84

3.92

3.81

3.98

3.18

3.05

3.33

3.12

3.07

2.75

3.07

3.00

2.59

3.39

3.82

3.56

3.87

3.71

4.00

3.05

3.85

3.64

3.49

3.74

4.30

4.23

4.34

3.97

3.98

3.58

3.97

4.28

4.08

4.19

0.46

0.48

0.46

0.55

0.47

0.90

0.64

0.46

0.47

0.44

0.66

0.58

0.67

0.52

0.83

0.82

0.65

0.55

0.66

0.48

0.63

0.74

0.60

0.60

0.57

0.89

0.59

0.74

0.69

0.54

0.87

0.91

0.92

0.91

0.98

0.84

0.95

1.09

0.96

0.86

1.03

0.92

0.97

1.02

OVERALL CES Insurance

Financial Services

Health Care Services

TABLE 4.2. Pulse Survey Results, Management Attention Management

Attention (Percentage)

OVERALL CES

Mean S.D.

Support Service Facilities Bus /

Admin Cust / OpEx

Educ / Comm

Mean S.D. Mean S.D. Mean S.D. Mean S.D. Mean S.D. Mean S.D.

28.39 17.74 28.74 17.42 28.74 18.24 28.09 17.89 29.53 16.10 25.48 23.36 27.13 17.14

41.69 20.96 38.56 19.33 45.11 21.99 42.15 21.43 37.11 18.82 53.81 24.96 43.52 21.69

29.92 18.48 32.70 18.40 26.15 16.94 29.76 18.36 33.36 20.84 20.71 14.03 29.35 24.98

Time spent fixing the business

Time spent running the business

Time spent building the future business

Of Parker, his team is grateful that they have “ seen very little of the old John ” and appreciative that he “ lets us lead. ” In a recent survey, almost all leaders expressed gratitude that Parker supported creativity, was patient, and stepped out of day - to - day issues. In short, he let leaders lead and got out of their way to empower them to do so. Parker also has kept the pressure on change by making it an expectation. He holds

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82 Best Practices in Talent Management

periodic knee - to - knee chats with managers and directors, providing encouragement and accountability. And he warns about the un - popped kernels.

Parker understands that you need to take the bag out of the microwave at some point. He accepts giving the kernels a little extra time to pop. However, he won ’ t let the rest of the popcorn burn. As with popcorn, he is being patient in giving time to slower managers to embrace the new vision and way of being. As they show genuine progress, there is hope. However, at some point, Parker will make the diffi cult deci- sion that time is up and, if not transformed, the managers could be removed to non - managerial duties or let go.

On the one hand, this tactic runs counter to the theory that change can only happen by invitation and not by force. On the other hand, businesses can reach a point of expectation that its workforce be a certain way and how a manager leads will reinforce this culture. The un - popped kernel metaphor tries to strike the balance between patience for the individual and impatience for the team, and make all accountable for the feedback and culture they helped to create. They reinforce the new criteria CES uses to evaluate and promote its talent.

EVALUATION OF THE CES WHOLE SYSTEM TRANSFORMATION

CES ’ s greatest diffi culties today are in the pockets of managers who haven ’ t yet “ got it. ” These pockets may seem alarming to those in the trenches, but Parker is both confi - dent and happy. CES never before has been so productive or engaged, and it is attract- ing good talent rather than losing desired talent. The fl ock has turned and is progressing. The stragglers are the exception and, over time, hopefully they will join the fold.

Parker believes the greatest lesson learned from this process is commitment. “ If you ’ re thinking about doing a whole system transformation, you have to be signed up for the whole thing. ” Although in hindsight Parker can show that he recovered mil- lions of dollars more in savings than the money spent on the change and that the change improved system functions and satisfactions across the board, he did not have hindsight when he made his commitment. To the OD practitioner or the executive con- sidering a whole system change, Parker ’ s words ring a promise and a warning. Whole system change offers much. It also takes much courage and faith to take the leap.

The story and lessons of Parker and the success of CES are helpful to anyone con- templating a whole system change. Success depends on fi nding a mixture of courage, trusting the process, diligently enforcing the vision and value, and committing to the whole thing. When one embraces these practices, he or she becomes the kind of leader who can transform an organization and create a community.

NOTES 1. The max mix gathering is a microcosm of the company or a minimum number of representatives at the maxi-

mum levels within the company. The microcosm refl ects the locations, cultures, diversities, and systems of the company, and can answer all questions that would be presented to the system as a whole. For transforma- tions, the microcosm should be at least 20 percent of the whole organization to generate a tipping point when re - integrated into the whole system.

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Customer and Enterprise Services (CES) Division 83

2. CES and the external consultants also co - created a new formula for change, based in part on the Richard Beckhard DVF formula on creating a collective paradigm shift.

(D * A * F * B) � T � CR

“ D ” means allowing participants to voice dissatisfactions with the current state. “ A ” stands for their aspira- tions, which describes their yearning for a new future state. Aspiration better fi t CES ’ s internal desire because it felt empowering to them. Aspiration was more than the absence of pain in the current situation — it was a desire to become the beautiful butterfl y. The “ F ” stands for fi rst steps. CES was all about getting committed to the right action that would make the difference. The “ B ” standing for belief was added. CES felt that if crit- ical mass really believed they could change, anything was possible. There is incredible human talent within the organization. The talent just needed to be set free. “ T ” stood for the transformative leap to being dramati- cally different. The “ CR ” stands for the total of D * A * F * B becoming greater than any “ change resistance. ” The formula suggests that it is impossible for an organization to return to its old ways of being once it has achieved the breakthrough and the paradigm shifts.

Michael Schechter is a mediator and the general counsel and senior managing direc- tor of ChartHouse International Learning Corporation, the creator of FISH! organiza- tion development and training programs. He graduated from New York University School of Law, was awarded the Minnesota State Bar Association ’ s President ’ s award, and has helped clients from healthcare to construction.

John Parker is the vice president of CES division. He has been with the company for thirty - two years and enjoys each and every day.

Judy Zaucha is the executive administrative assistant to John Parker. She has been with the company for twenty - eight years and feels extremely privileged to have been a part of such a dynamic team in working through the CES transformation.

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84

CHAPTER

5 ECOLAB, INC.

ROBERT C. BARNETT, MICHAEL L. MEYER,

SARAH J. MURPHY, AND SUSAN M. METCALF

A long - term effort to build a full pipeline of capable leaders at all levels in the orga- nization to help the company achieve aggressive growth goals.

Introduction

Company Background

Ecolab ’ s 2002 – 2007 Strategic Plan

Culture Is Critical

Ecolab ’ s Talent Management Philosophy

The Ecolab Talent Pipeline

The Importance of Individual Development

Introducing the Talent Pipeline Model at Ecolab

Supporting Successful Implementation

Keeping the Pipeline Full

Results

Conclusion

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Ecolab, Inc. 85

INTRODUCTION

This chapter describes the talent management framework, models, and approach implemented by Ecolab, Inc., for building their leadership bench strength to support growth in their business. Ecolab ’ s approach is based on implementing leadership development systems that promote individual action planning and career mobility. Their efforts have preserved the best elements of Ecolab ’ s results - focused culture and added a well - defi ned roadmap for individual and leadership development.

COMPANY BACKGROUND

Ecolab is the global leader in cleaning, sanitizing, food safety, and infection control prod- ucts and services. Founded in 1923 and headquartered in St. Paul, Minnesota, Ecolab serves customers in more than 160 countries across North America, Europe, Asia Pacifi c, Latin America, the Middle East, and Africa. Ecolab delivers programs and services to the food service, food and beverage processing, hospitality, healthcare, government and edu- cation, retail, textile care, commercial facilities, and vehicle wash industries. Ecolab is committed to assisting customers worldwide with their unique needs by providing them with comprehensive, value - added solutions and professional, personal service.

Over half of Ecolab ’ s 26,000 associates are employed in sales, service, and related positions. With more than 14,000 sales and service experts, Ecolab employs the indus- try ’ s largest and best - trained direct sales and service force. Ecolab sales and service associates are on the ground where their customers are located to provide advice and assistance regarding a full range of cleaning, sanitation, and service needs.

Although the company provides superior products, it is the quality of the relation- ships it has with customers, its ability to solve problems and satisfy needs, and its intention to deliver nothing less than the best possible service that differentiates Eco- lab from its competitors. Ecolab has been recognized for sales and service excellence. For example, Ecolab was ranked in the top ten of Selling Power magazine ’ s “ Best Manufacturing Companies to Sell For ” list in 2007, and again in 2008. Rankings are determined through a detailed rating system that analyses compensation; sales skill and product training; and career management, retention, and promotion data.

Ecolab genuinely depends on the quality of its people. They recognize that in an organization whose success depends on providing superior sales and service, they need leaders who can attract, motivate, and develop the highest performing associates. Sound talent management strategies are central to Ecolab ’ s success.

ECOLAB ’ S 2002 – 2007 STRATEGIC PLAN

In 2001, Ecolab reported net sales of approximately $ 2.3 billion. As the company con- sidered its future, the executive team (the CEO and his direct reports — the ten execu- tives responsible for major business lines and functions) committed to an aggressive

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86 Best Practices in Talent Management

growth goal — they intended to increase revenues at a 15 percent annual growth rate for fi ve years, which would more than double the company ’ s size by 2007. Ecolab ’ s growth strategy was multi - faceted:

Capitalize on success to capture greater share in markets in which they were estab- lished leaders.

Find and enter a new segment that represented a considerable growth opportunity.

Develop a broader range of cleaning and sanitizing products and services they could offer customers.

Signifi cantly expand efforts and operations globally.

Ecolab had achieved market leadership in several segments (food service, hospi- tality, food and beverage processing), but saw that signifi cantly greater penetration was possible in these markets. In addition, they targeted the healthcare market as a major new opportunity. However, the Ecolab executives immediately recognized that they did not have the number of qualifi ed leaders required to effectively run an organi- zation that would grow to twice its current size. The need for additional leadership tal- ent and bench strength was identifi ed as a critical success factor.

As Ecolab ’ s leaders considered their strategic objectives, they began to educate themselves about a variety of possible approaches they might take to develop their bench strength of leadership talent. Among the ideas they reviewed was the frame- work described in The Leadership Pipeline (Charan, Drotter, & Noel, 2001). Ecolab ’ s leaders quickly resonated with this approach. They found that it captured and explained a sound way to build a supply of talent for the organization in a pragmatic yet power- ful manner. The pipeline framework is based on the natural hierarchy of work that exists in most organizations. Each leadership level in an organization calls for new skills and a different focus to effectively execute new and more complex responsibili- ties. Movement up the hierarchy requires transition through a series of critical leader- ship passages made possible by the development of the skills required at the next level. The pipeline framework is shown graphically in Figure 5.1 .

When viewed from the pipeline perspective, development at all levels becomes natural and necessary. The pipeline model provided Ecolab with a framework that could focus people on developing the skills and competencies required to perform best at their current levels in the organization, while helping them prepare to transition to the next. This model was particularly attractive because so many of Ecolab ’ s associ- ates occupied sales and service (individual contributor) roles. Movement from an indi- vidual contributor role to managing others represents the fi rst and one of the most troublesome leadership passages for many. However, transition through this passage creates the base of leaders an organization most likely needs in the future. Ecolab lead- ers knew that any new model or framework would fail if it ignored or was irrelevant to this essential segment of their workforce.

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Ecolab, Inc. 87

Managing Self

Business Manager

Functional Manager

Managing Managers

Managing Others

FIGURE 5.1. Ecolab ’ s Talent Pipeline Model

With line management as their partners, human resources took the lead to develop and implement a global “ pipeline ” program that would assure Ecolab could acquire and develop the leadership talent it needed to enable growth and accomplish the goals out- lined in its strategic plan.

CULTURE IS CRITICAL

Ecolab has a strong organizational culture that is characterized by an unrelenting drive to achieve results by serving customers ’ needs. Ecolab ’ s culture has always been a sig- nifi cant strength and source of pride. It helps Ecolab meet its business goals, compels associates to continually perform at their best, and guides how Ecolab associates relate to their customers and to one another. Any new initiative would need to fi t with and strengthen the culture, or risk failure and rejection from Ecolab employees. Therefore, the Talent Pipeline effort started here. Ecolab defi nes six aspects of its culture that pro- vide the foundation for its success:

Spirit . Ecolab associates are the company ’ s heart and soul. They are hungry to succeed and passionate to achieve.

Pride . No matter how big the project or how small the request, Ecolab associates strive for excellence.

Determination . Ecolab associates thrive on challenges, viewing them as an invi- tation to succeed.

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88 Best Practices in Talent Management

Commitment . Ecolab associates prize dedication and are moved to help each other.

Passion . Ecolab associates wholeheartedly believe in their company. Its goals and objectives are their mission.

Integrity . Ecolab associates set high standards and abide by them.

To shape a more developmentally oriented culture, it was imperative to maintain the spirit and passion for results embraced by individual associates while weaving the expectation of development into the fabric of the organization. Through interviews with Ecolab ’ s best executives and managers, HR gathered input about the critical com- ponents for growth within the Ecolab cultural setting. This research was analyzed and translated into fi ve key business drivers — the critical ways through which Ecolab would achieve consistent, long - term growth and maintain its competitive advantage. These include:

Talent Development . Preparing associates for current and future success.

Leadership . Creating a vision, engaging others, and leading by example.

Relationships . Identifying and building networks to advance business initiatives.

Innovation . Fostering an environment that drives creativity and risk taking.

Delivering Results . Achieving goals by effectively managing resources to get things done.

The drivers are intentionally ordered so that Talent Development is fi rst and Deliv- ering Results is last. This refl ects a shift in focus from a historic emphasis on high per- formance to a broader leadership growth and development orientation. Ecolab did not abandon its emphasis on results, but sought to be more explicit in specifying the means by which great results are achieved (i.e., through the fi rst four business drivers). The way in which Ecolab visualizes its culture and business drivers is shown in Figure 5.2 .

ECOLAB ’ S TALENT MANAGEMENT PHILOSOPHY

Human resources embraced the challenge of developing the leadership talent required to run a company that would double its size, and began to develop the details, plans, and tactics they needed. Several critical decisions were made to guide planning and crystallize the talent management philosophy they had adopted. Most importantly, Ecolab leaders determined that the company ’ s HR plan would become the third leg (with their fi ve - year strategic plan and the annual operating plan) of a comprehensive organizational blueprint for growth.

The HR plan was grounded in a philosophy that included fi ve key operating principles:

1. Talent is shared. Ecolab ’ s human talent is a company resource, not something that belongs to a particular division or function.

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Ecolab, Inc. 89

Growth Our Goal

Our Business Drivers

Our Culture Culture

Spirit

Talent Development

Leadership Relationships Innovation Delivering Results

Pride Determination Commitment Passion Integrity

FIGURE 5.2. Business Drivers and Organizational Culture

2. Ecolab believes in promoting from within. Development is the key activity that makes transition from one role or level to the next possible.

3. All associates can develop — and it is everyone ’ s responsibility.

4. Performance alone does not equal potential. Readiness to move to the next level can be defi ned and developed.

5. Talent development should be implemented consistently across the entire organization.

HR ’ s vision was straightforward: ensure the right people are in the right place at the right time to capitalize on the right growth opportunities. The HR vision that was created laid the groundwork for signifi cant organizational change. As a company, Eco- lab ’ s goal was to become an organization characterized by considerably greater disci- pline and rigor directed at ensuring that the right people were identifi ed for the right roles. It would require Ecolab to adhere to more consistent hiring and promotional processes, advocate active development and promotion from within, hold managers accountable for developing their associates, better defi ne the concept of a “ high - potential ” employee, and refocus their performance management system on how things were accomplished (in addition to what was accomplished).

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90 Best Practices in Talent Management

THE ECOLAB TALENT PIPELINE

Building on the fi ve business drivers, Ecolab designed and implemented a Talent Pipe- line framework that specifi ed the required skills and activities that supported develop- ment in and transition through the key passages for each of fi ve organizational pipeline levels:

Managing oneself (an individual contributor)

Managing others (front - line leaders)

Managing managers (mid - to senior-level leaders)

Function managers (leaders responsible for an entire function)

Business managers (leaders responsible for an entire line of business)

Ecolab ’ s pipeline model is described in detail in their Talent Pipeline Guidebook , which it publishes and provides to all employees. The guidebook provides information about all components of Ecolab ’ s pipeline framework. It explains what the Talent Pipeline is and why it was created, as well as how it benefi ts individual associates and Ecolab as an organization. The guidebook integrates development planning with per- formance management, clearly outlines expectations for development, and provides tools and resources that can position associates for greater success and potential career advancement. The essence of the Talent Pipeline Guidebook is a detailed description of the skills, knowledge, attributes, and success indicators needed at each organiza- tional level in the pipeline for each Ecolab business driver. Figure 5.3 presents a con- densed version of the way Ecolab describes expected behaviors and performance at each pipeline level.

The guidebook helps associates better understand what is expected in their current roles and also provides a straightforward roadmap through the key passages or transi- tions associates must make to move through the pipeline from one level to the next. Upward movement in the pipeline requires the addition of the skills required by the next level, a shift in the way a person manages his or her time to meet new and differ- ent job responsibilities, and a change in what an associate values or gives priority to in his or her day - to - day approach to work. The key passage points that mark the pipeline transitions for Ecolab are summarized in Figure 5.4 . As Figure 5.4 illustrates, moving through the pipeline generally requires learning how to achieve results through increas- ingly larger numbers of others, gaining a broader and more holistic view of the organi- zation, and developing a more external and strategic perspective on the business.

THE IMPORTANCE OF INDIVIDUAL DEVELOPMENT

One of the most important aspects of Ecolab ’ s approach is the emphasis placed on individual development. The Talent Pipeline Guidebook includes the tools, tech- niques, and templates for identifying development needs and designing individual development plans. To help associates understand where development might be needed, Ecolab created a “ 180 - degree assessment tool ” — an assessment based on the

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• M ai

nt ai

ns a

n eff

ec tiv

e

ex te

rn al

n et

w or

k. • B

re ak

s do

w n

c om

m un

ic at

io n

ba rr

ie rs

. • E

nh an

ce s

di re

ct re

po rt

s’ r

el at

io ns

hi p-

bu ild

in g

sk ill

s.

• I de

nt ifi

es n

ew , v

al ue

- a

dd ed

w or

k to

d riv

e g

ro w

th .

• A ch

ie ve

s gr

ow th

b y

l ev

er ag

in g

ot he

r p ar

ts o

f t

he o

rg an

iz at

io n.

• Cr

ea te

s a

cu ltu

re w

he re

g ro

w th

is e

xp ec

te d.

• T ak

es s

tr at

eg ic

a ct

io n

to d

riv e

cu st

om er

re te

nt io

n, a

cc ou

nt p

en et

ra tio

n, a

nd n

ew c

us to

m er

a cq

ui si

tio n.

• D ev

el op

s an

d im

pl em

en ts

l on

g- te

rm p

la ns

th at

c re

at e

n ew

o pp

or tu

ni tie

s an

d d

riv e

gr ow

th .

• I ns

til ls

a s

en se

o f i

de nt

ity a

nd p

ur po

se in

te am

m em

be rs

. • A

rt ic

ul at

es th

e bu

si ne

ss d

ire ct

io n

an d

en su

re s

it is

e m

br ac

ed b

y th

e te

am .

• I s

so ug

ht o

ut b

y ot

he rs

a s

a m

en to

r o r c

oa ch

.

• I nt

er ac

ts a

nd c

om m

un ic

at es

e ffe

ct iv

el y

w ith

o th

er s.

• D riv

es re

su lts

th ro

ug h

r el

at io

ns hi

ps w

ith o

th er

d ep

ar tm

en ts

a nd

d iv

is io

ns .

• F os

te rs

a n

en vi

ro nm

en t i

n w

hi ch

n ew

k no

w le

dg e

an d

i de

as d

riv e

gr ow

th .

• S up

po rt

s in

te lli

ge nt

ri sk

- t

ak in

g. • S

ee ks

u ni

qu e

so lu

tio ns

t ha

t p ro

vi de

a p

ro pr

ie ta

ry a

dv an

ta ge

.

• D el

iv er

s te

am p

er fo

rm an

ce t

ha t e

xc ee

ds ta

rg et

s. • E

ns ur

es o

pt im

iz at

io n

of

re so

ur ce

s. • U

se s

co nt

ro l s

ys te

m s

eff

ec tiv

el y

an d

im pr

ov es

effi

ci en

cy a

nd p

ro du

ct iv

ity .

• L ea

ds b

y ex

am pl

e— go

es t

he e

xt ra

m ile

w ith

a ss

oc ia

te s

an d

cu st

om er

s. • W

ill in

gl y

ac ce

pt s

s up

er vi

si on

a nd

w or

k d

ire ct

io n.

• I s

so m

eo ne

o th

er s

w an

t o

n th

ei r t

ea m

.

• B ui

ld s

re la

tio ns

hi ps

th at

b en

efi t i

nd iv

id ua

l a nd

te am

s uc

ce ss

. • A

ct s

as a

te am

p la

ye r—

s tr

iv es

to s

ol id

ify p

ee r

r el

at io

ns hi

ps .

• E xe

cu te

s ne

w w

ay s

of d

oi ng

th in

gs .

• D is

pl ay

s cu

rio si

ty fo

r l

ea rn

in g

ab ou

t c ro

ss -

d iv

is io

na l o

ffe rin

gs .

• D em

on st

ra te

s eff

ec tiv

e p

ro bl

em -s

ol vi

ng s

ki lls

.

• D is

pl ay

s te

ch ni

ca l a

nd p

ro fe

ss io

na l p

ro fic

ie nc

y— d

el iv

er s

qu al

ity w

or k.

• M ai

nt ai

ns p

er so

na l p

la ns

t ha

t r efl

ec t y

ea rly

o bj

ec tiv

es .

• E ns

ur es

c om

m itm

en ts

a re

d el

iv er

ed o

n tim

e.

M an

ag in

g O

th er

s M

an ag

in g

M an

ag er

s Fu

nc tio

n M

an ag

er Bu

si ne

ss M

an ag

er

Le ad

er sh

ip

Re la

tio ns

hi ps

In no

va tio

n

D el

iv er

in g

Re su

lts

FI G

U R

E 5.

3. S

u cc

es s

In d

ic at

o rs

f o

r B

u si

n es

s D

ri ve

rs a

t Ea

ch P

ip el

in e

Le ve

l

91

CH005.indd 91CH005.indd 91 10/30/09 5:17:29 PM10/30/09 5:17:29 PM

92 Best Practices in Talent Management

From Managing Self to Managing Others

From Managing Others to Managing Managers

From Managing Managers to Function Managers

From Function Managers to Business Manager

• From achieving results individually through technical or professional skill to achieving results through others.

• From achieving results through others to achieving results through managers.

• From achieving results through managers to achieving results for the function.

• From achieving results through functions to achieving results through comprehensive business management.

• From state-of-the-art results to competitive advantage.

• From functional excellence to customer value. • From planning for function results to creating long- term strategic plans.

• From profitable results to state-of-the-art results.

• From organizational building to functional excellence. • From planning for teams to planning for functional or divisional results.

• From a top line revenue focus to profitable results. • From team building to organizational building.

• From planning for a team to planning for multiple teams’ results.

• From teamwork to team building.

• From personal planning to planning for the team and individual results.

FIGURE 5.4. Key Passage Points in the Talent Pipeline

success indicators for each business driver appropriate to the associate ’ s level in the pipeline (see Figure 5.5 ). The 180 - degree assessment is completed by the associate as well as by his or her manager. A comparison of results shows the associate and the manager where they agree on the associate ’ s strengths and development needs, and stimulates discussion about areas where their ratings are discrepant.

The development process at Ecolab is designed as an active discussion and plan- ning process between an associate and his or her manager. In the development discus- sion that follows completion of the 180 - degree assessment, an associate and his or her manager explore the associate ’ s career aspirations, desire to move into new roles (either laterally or upwards), and how to differentiate exceptional performance from job profi ciency or performance with noticeable gaps. This conversation plays an important role in helping Ecolab associates manage their careers, gain clarity and focus about new opportunities, and calibrate expectations about what these may require.

The 180 - degree assessment and development discussion also provide the founda- tion for creating an Individual Development Plan (Figure 5.5 ). The Talent Pipeline Guidebook provides ideas, activities, and suggested readings for developing skills related to each business driver for each level of the pipeline that the associate can use to complete his or her development plan. As an example, Figure 5.6 shows the kinds of suggestions and recommended development activities that are included in the Tal- ent Pipeline Guidebook for associates who need or want help developing themselves to be more effective at building their network of relationships. A similar set of sugges- tions is included in the guidebook for developing the skills related to each of the other Ecolab business drivers.

At Ecolab, the Talent Pipeline is linked to the performance management system. The Talent Pipeline Guidebook fully describes Ecolab ’ s performance management process. It is designed to provide an avenue by which associates and managers can

CH005.indd 92CH005.indd 92 10/30/09 5:17:29 PM10/30/09 5:17:29 PM

FI G

U R

E 5.

5. 1

80 - D

eg re

e A

ss es

sm en

t an

d D

ev el

o p

m en

t Pl

an n

in g

93

CH005.indd 93CH005.indd 93 10/30/09 5:17:29 PM10/30/09 5:17:29 PM

94

M an

ag in

g S

el f

• Th

e ne

xt t

im e

yo u

ar e

in a

m

ee tin

g, p

ra ct

ic e

us in

g

ac tiv

e lis

te ni

ng s

ki lls

.

• Ev

al ua

te y

ou r

in te

rn al

ne

tw or

k. C

re at

e a

pl an

fo

r bu

ild in

g ke

y re

la tio

n-

sh ip

s an

d ex

pa nd

in g

it.

• Id

en tif

y at

t he

le as

t th

re e

in

di vi

du al

s fr

om d

iff er

en t

bu

si ne

ss u

ni ts

t o

se e

w

he th

er t

he y

vi ew

y ou

a s

a

st ra

te gi

c pa

rt ne

r. If

no t,

de

ve lo

p a

pl an

t o

bu ild

st

ra te

gi c

pa rt

ne rs

hi ps

w ith

ea

ch o

f th

es e

bu si

ne ss

u ni

ts .

• Le

ve ra

ge t

ec hn

ol og

y to

cr

ea te

c om

m un

ic at

io n

ve

hi cl

e th

at k

ee ps

p eo

pl e

in

y ou

r fu

nc tio

n up

-t o-

da

te a

nd in

fo rm

ed .

• Sc

he du

le r

eg ul

ar m

ee tin

gs

w ith

t he

h ea

ds o

f ot

he r

bu

si ne

ss es

. D is

cu ss

y ou

r

ke y

go al

s an

d ob

je ct

iv es

.

Lo ok

f or

w ay

s yo

u ca

n

su pp

or t

on e

an ot

he r.

• Re

fu se

t o

to le

ra te

la be

lin g

an

d pr

ej ud

ic ia

l b eh

av io

r.

Sp ea

k ou

t if

yo u

se e

su ch

be

ha vi

or a

nd e

xp re

ss y

ou r

di

sp le

as ur

e.

• W

he n

yo u

he ar

g oo

d

fe ed

ba ck

a bo

ut s

om eo

ne

yo u

kn ow

, p as

s al

on g

th e

co

m pl

im en

t.

• En

ha nc

e yo

ur w

or ki

ng

re la

tio ns

hi p

w ith

o th

er s

by

a dj

us tin

g yo

ur s

ty le

,

co m

m un

ic at

io n

m et

ho d,

en

er gy

le ve

l, an

d ap

pr oa

ch

to t

he p

er so

n w

ith w

ho m

yo

u ar

e w

or ki

ng .

• A

na ly

ze r

el at

io ns

hi ps

t ha

t

ar e

no t

co lla

bo ra

tiv e.

C

ha ng

e at

le as

t on

e as

pe ct

of

y ou

r be

ha vi

or t

o im

pr ov

e

yo ur

in te

ra ct

io ns

a nd

n ot

e

th e

re su

lts .

• Re

gu la

rly r

ec og

ni ze

p eo

pl e

in

lo w

er -le

ve l p

os iti

on s

to

en su

re t

ha t

th ey

f ee

l t he

y

ar e

eq ua

l a nd

v al

ue d

m

em be

rs o

f th

e fu

nc tio

n.

• Lo

ok f

or o

pp or

tu ni

tie s

to

us e

yo ur

p os

iti on

p ow

er

to h

el p

yo ur

t ea

m a

nd

di re

ct r

ep or

ts s

ec ur

e

ne ed

ed r

es ou

rc es

a nd

ov

er co

m e

ob st

ac le

s th

at

hi nd

er a

cc om

pl is

hm en

t of

th

ei r

w or

k go

al s.

• Sc

he du

le r

eg ul

ar m

ee tin

gs

w ith

t he

h ea

ds o

f ot

he r

fu

nc tio

ns . D

is cu

ss y

ou r

ke y

go

al s

an d

ob je

ct iv

es . L

oo k

fo

r w

ay s

yo u

ca n

su pp

or t

on

e an

ot he

r.

• Lo

ok f

or o

pp or

tu ni

tie s

to

of fe

r yo

ur h

el p

an d

re so

ur ce

s

to o

th er

s w

ith in

t he

o rg

an i-

za

tio n—

be fo

re t

he y

as k.

• N

ur tu

re y

ou r

ne tw

or k.

D

ev el

op a

s tr

at eg

y fo

r

st ay

in g

in vo

lv ed

. T hi

s ca

n

in cl

ud e

te le

ph on

e co

nt ac

t

or in

fo rm

al g

et -t

og et

he rs

w

ith o

th er

s. R

eg ul

ar ly

en

ga ge

in a

nd s

po ns

or

ac tiv

iti es

t ha

t br

in g

in

di vi

du al

s fr

om d

iff er

en t

ar

ea s

to ge

th er

t o

m ee

t,

di sc

us s,

a nd

/o r

so ci

al iz

e.

• A

ct iv

el y

st riv

e to

b e

a

co nd

ui t

fo r

in fo

rm at

io n

in

t he

o rg

an iz

at io

n.

• D

ra w

a m

ap o

f yo

ur n

et -

w

or ks

— bo

th in

si de

a nd

ou

ts id

e th

e co

m pa

ny . L

oo k

fo

r ga

ps in

y ou

r ne

tw or

k

an d

cr ea

te p

la ns

t o

fil l

th

os e

ga ps

.

• Se

t up

a f

or m

al s

ch ed

ul e

fo r

ke

ep in

g in

t ou

ch w

ith k

ey

in di

vi du

al s

in y

ou r

ne tw

or k.

M

ak e

a lis

t of

t ho

se in

t he

or

ga ni

za tio

n w

ho h

av e

bo th

in

fo rm

al a

nd f

or m

al p

ow er

.

C om

pa re

y ou

r ne

tw or

k to

th

e lis

t, a

nd id

en tif

y

in di

vi du

al s

w ho

n ee

d to

b e

ad

de d

to y

ou r

ne tw

or k.

• A

na ly

ze y

ou r

w or

ki ng

re

la tio

ns hi

ps w

ith o

th er

s.

W ho

t yp

ic al

ly s

up po

rt s

yo u?

W

ho t

yp ic

al ly

b lo

ck s

yo u?

W

ho is

n eu

tr al

? C

re at

e a

pl

an f

or e

nh an

ci ng

y ou

r

w or

k re

la tio

ns hi

ps .

• O

nc e

a da

y, g

et o

ut o

f yo

ur

of fic

e an

d w

al k

ar ou

nd t

he

w or

k en

vi ro

nm en

t. C

re at

e

op po

rt un

iti es

t o

co m

m un

-

ic at

e w

ith p

eo pl

e th

ro ug

h-

ou t

th e

or ga

ni za

tio n.

• Id

en tif

y so

m eo

ne w

ith w

ho m

yo

u di

sa gr

ee . T

he n

ex t

tim e

yo

u sp

ea k

w ith

h im

/h er

,

lis te

n to

u nd

er st

an d

hi s

or

he r

pe rs

pe ct

iv e

an d

pa

ra ph

ra se

it b

ef or

e st

at in

g

yo ur

v ie

w s.

• Ev

al ua

te y

ou r

in di

vi du

al

ne tw

or ki

ng s

ys te

m . I

de nt

ify

an y

ga ps

, a nd

a dd

s om

eo ne

ne

w t

o yo

ur n

et w

or k

ev er

y

m on

th .

• Vo

lu nt

ee r

to s

er ve

o n

cr os

s-

fu nc

tio na

l t ea

m s,

s te

er in

g

co m

m itt

ee s,

o r

ta sk

g ro

up s

to

b ro

ad en

y ou

r pe

rs pe

ct iv

e

an d

m ee

t pe

er s

fr om

o th

er

ar ea

s.

• A

tt en

d co

rp or

at e

fu nc

tio ns

w

ith a

g oa

l o f

m ee

tin g

or

re ac

qu ai

nt in

g yo

ur se

lf w

ith

at le

as t

tw o

em pl

oy ee

s pe

r

m on

th f

ro m

o ut

si de

y ou

r

de pa

rt m

en t.

M an

ag in

g O

th er

s M

an ag

in g

M an

ag er

s Fu

n ct

io n

M an

ag er

B u

si n

es s

M an

ag er

FI G

U R

E 5.

6. D

ev el

o p

m en

t A

ct io

n s

fo r

Im p

ro vi

n g

R el

at io

n sh

ip s

CH005.indd 94CH005.indd 94 10/30/09 5:17:30 PM10/30/09 5:17:30 PM

Ecolab, Inc. 95

work together to defi ne objectives, align them with business goals, provide feedback about results, and clarify expectations. Performance management discussions, includ- ing the formal annual performance review, are designed to promote Ecolab ’ s develop- ment culture by helping associates realize their potential while fueling the company ’ s success. The guidebook includes Ecolab ’ s performance appraisal form, which evalu- ates performance against each of the fi ve business drivers and assesses an associate ’ s fi t at his or her current pipeline level, as well as readiness for the next passage. Ecolab has found that these development and performance management tools and processes have been successful at creating increasingly transparent, candid, positive, and devel- opmentally oriented performance discussions.

INTRODUCING THE TALENT PIPELINE MODEL AT ECOLAB

The success of the Talent Pipeline Model at Ecolab stems back to the crisp and impact- ful manner in which the concept and tools were launched at the start. The Talent Pipe- line was launched at a global leadership team meeting, where approximately one thousand key leaders were introduced to the Talent Pipeline in a large group session. Following the large group presentation, Ecolab leaders met in small group training sessions to learn more about the concept and the ways in which they would need to support and use it in their units. This approach was critical for Ecolab leaders to fully understand the model, embrace the concept, and internalize the potential benefi ts.

After the meeting, Ecolab leaders were expected to cascade the program through- out their parts of the company. To aid them, Ecolab provided a toolkit (available in multiple languages) containing the Talent Pipeline Guidebook and a variety of presen- tation materials. This effort was supported with an e - mail campaign and instructional modules. All pipeline materials are available through Ecolab ’ s intranet so that every one of Ecolab ’ s associates can access the model, explanations, and tools. These include the Talent Pipeline Guidebook , job profi les, performance management and develop- ment planning training, sample performance reviews and development plans, and Eco- lab ’ s talent policies and guidelines. As a result, the initiative was spread throughout Ecolab rapidly and with energetic intensity. The model and framework were quickly accepted, primarily because Ecolab associates found it useable and instantly applica- ble in their day - to - day work.

SUPPORTING SUCCESSFUL IMPLEMENTATION

Ecolab ’ s Talent Pipeline is now well established and continues to support business growth through successful talent acquisition, retention, and leadership development. In part, this can be attributed to the sense of urgency that was created to accelerate its implementation. Creating urgency for implementing Ecolab ’ s Talent Pipeline Model began with an analysis of the numbers of new associates who would be necessary to lead a dramatically expanded Ecolab workforce. Based on a ratio of one manager for about every seven or eight associates, Ecolab calculated the numbers of new

CH005.indd 95CH005.indd 95 10/30/09 5:17:30 PM10/30/09 5:17:30 PM

96 Best Practices in Talent Management

associates, managers, and leaders it would need at each pipeline level if the organiza- tion doubled in size. To be successful, this translated into the need to add (promote or hire from the outside) one front - line manager per week and two senior leaders each month from 2004 through 2007. Once Ecolab ’ s executives understood the real implica- tions of these plans in practical terms, their commitment to the talent management strategy was solidifi ed. An example of Ecolab ’ s needs analysis is shown in Figure 5.7 .

Although Ecolab intended to promote from within, they did not want to place associates in new positions before they were ready — that is, if they appeared unpre- pared to successfully transition through the next leadership passage. Given the number of new leaders they anticipated they would need, Ecolab substantially expanded their recruiting efforts. Important components of the recruiting function were centralized to standardize processes, take advantage of technology, and better leverage Ecolab ’ s global brand and presence. Traditionally, recruiting and hiring were human resource activities owned by each business. The shift was an opportunity to achieve consis- tency, implement best practices, and guarantee high - quality new hires across the orga- nization. The approach required signifi cantly greater attention to managing relationships with recruiting partners, developing more precise job profi les for high - incumbent positions, consistent use of improved interviewing and screening protocols, and increased use of new recruiting channels.

Third, Ecolab redefi ned the concept of “ high potential. ” An associate ’ s potential to advance had traditionally been based primarily on the results an associate delivered. However, Ecolab acknowledged one of the fundamental tenets of the pipeline frame- work: past performance alone does not guarantee potential for success in future roles. Future roles that are more complex and more senior often require fundamentally new or different skills than a person may use in his or her current position. Based on

Develop GM Talent

55–60

~110

• More • Earlier • Faster

Anticipated GMs NeededTarget

GM Roles

Development Pool Target Pool Anticipated Pool

Needed

2003

12

~35

~100

49 50–55

47

2008 By 2010 By 2015

FIGURE 5.7. Leadership Needs Analysis

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Ecolab, Inc. 97

research conducted by the Corporate Leadership Council (2005), Ecolab adopted a model of “ potential ” that included three interrelated components (see Figure 5.8 ):

Capability: The ability to deliver results, think clearly and reason effectively, take on greater responsibility, and demonstrate strong leadership.

Ambition: The desire for recognition, advancement, infl uence, and the fi nancial rewards that accompany more senior, more critical roles.

Commitment: The beliefs and feelings that lead an associate to conclude that remaining with and committing to Ecolab is in his or her best interests.

Fourth, Ecolab established a Talent Council. The Talent Council is composed of ten top Ecolab executives, including the CEO, and represents all key business lines, geographies, and the marketing, fi nance, and global sales functions. The Talent Coun- cil meets monthly to review high - potential talent in the organization, endorse and rein- force the importance of development, manage the promotions and careers of Ecolab ’ s high - potential associates and executive - level leaders, and set priorities and allocate resources to support the Talent Pipeline. The CEO and the Talent Council championed and reinforced Ecolab ’ s Talent Pipeline across the company. The CEO was among the strongest advocates for the pipeline strategy. He spoke to Ecolab associates around the world with an unparalleled enthusiasm for the approach. He challenged and held managers accountable for developing their people and set the expectation that all Eco- lab associates would be responsible for developing themselves.

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High-Potential Associates

• Emotional commitment

• Consistently delivers results

• Quick study, clear thinker

• Ability to take on more

• Strong leader

• Extent associate desires recognition

• Advancement

• Influence

• Financial rewards

Commitment to Ecolab

Level of Capability

Ambition to Move Up

• Rational—believe staying is in their interest

• Discretionary effort —does what it takes

• High intent to stay

FIGURE 5.8. Ecolab ’ s Model of High Potential

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98 Best Practices in Talent Management

KEEPING THE PIPELINE FULL

To keep the pipeline full, Ecolab instituted a number of new organizational practices. One practice has enhanced the way in which Ecolab makes critical talent decisions. Ecolab determined that key promotions and new - hire decisions would be made only with the support of a comprehensive leadership assessment process. The assessment process is provided by an external consulting partner (an I/O psychology fi rm) and is comprised of a day - long series of personality, motivation, and cognitive ability testing; interviewing; and leadership simulation activities that vary depending on the pipeline level the associate is in or being considered for. The assessment produces an in - depth description of an individual ’ s strengths, work style, and potential limitations.

Because the assessment process is used as part of key hiring and promotion deci- sions, an expanded set of stakeholders is involved. These include the current manager of the associate being assessed, the prospective future manager, and the appropriate business or function HR generalist. These individuals consult with the assessment fi rm in advance of the assessment itself so that the assessing psychologist has a specifi c understanding of the outcomes Ecolab expects. Post - assessment, the group reconvenes to review the assessment results and make a hiring or promotional decision. This disci- pline has contributed to improved, more objective, and better - supported decisions about critical talent moves.

Ecolab has also recognized the need to be more deliberate in cultivating new asso- ciates ’ commitment to the organization, especially during the fi rst two years of their work at Ecolab. Their new - employee - orientation program was redesigned from a tra- ditional review of policies and procedures to a year - long retention effort called Career- Start (see Figure 5.9 ). After an initial orientation program, new associates are invited to additional programs at three and six months, and then one year after they begin employment. This provides Ecolab with an opportunity to improve retention by help- ing new employees accelerate their understanding of the organizational culture, other businesses, and functions and to “ recommit ” to the organization after a year ’ s time.

Finally, all Ecolab business lines and major functions hold an annual “ HR Plan Review ” with the CEO. The agenda for the HR plan review meetings include discus- sion of (1) business (or function) performance against the prior year ’ s objectives; (2) the current organization and its key strengths/success factors and challenges/barriers; (3) talent development plans and a discussion of direct - report, high - potential, and executive - level talent using a nine - box method; and (4) succession plans, including the availability of ready - now candidates for the most critical positions in each busi- ness or function. These meetings highlight and focus attention on the importance of managing Ecolab ’ s human resources. As many as twenty HR plan review meetings are held annually with the CEO. In addition, business and function leaders hold numerous reviews within their divisions to prepare for their HR plan review meetings with the CEO and dive deeper into their organization.

These (and other) efforts Ecolab has implemented to identify, develop, and acceler- ate its high - potential talent through the leadership pipeline are illustrated in Figure 5.10 . Their programs and resources are organized around fi ve key elements: (1) the perfor- mance management and development plan process; (2) leadership assessment;

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100 Best Practices in Talent Management

• HR Plans Reviews

• Annual PA and IDP Process

• Job Profiles – Leadership Competencies

• Career Paths

• Development Sponsors

• Executive Coaches

• Mentors

• People Management • Expand Networks

• Develop Key Positions Skills • Learn from Personal Challenge

• Driven by Talent Council • Cross Division and Function Moves • Global Experience • High-Quality Manager

• Ecolab Leadership Programs (e.g., GM Development Program, Managing Manager, Leadership Foundations)

• External Programs; (e.g., from universities)

• Action Learning Projects

• 360° Assessment

Performance Assessment and

Development Plans

Feedback, Coaching, and

Mentoring

Stretch Assignments

Leadership Assessment

Education and Training

HIPO Identification and

Development Model

• Gallup Engagement Survey

• Leadership Assessments – personality, motives, cognitive skills, simulations

• Networking

FIGURE 5.10. High Potential Identifi cation and Development

(3) education and training; (4) stretch assignments; and (5) feedback, coaching, and mentoring. However, the Talent Pipeline framework has provided the foundation, clar- ity, and consistency to Ecolab ’ s efforts as a core growth strategy for the company.

RESULTS

The Talent Pipeline strategy has proven successful for Ecolab. In 2008, Ecolab reported net sales of over $ 6.1 billion, a 265 percent increase over 2001 sales revenue. Ecolab ’ s pipeline approach — emphasizing clarity about the skills needed for success at each level, a focus on development, and the active management of high - potential talent—has been implemented worldwide. Ecolab ’ s top two tiers of executive - level leaders are fully in place and setting new performance standards. Their pool of ready - now busi- ness manager candidates has increased three - fold. Ecolab has identifi ed and developed record numbers of high - potential leaders who are ready to assume greater leadership responsibilities, and nearly all of them are in developmental positions. In 2008, Eco- lab ’ s Talent Council orchestrated a record number of developmental job rotations and cross - divisional moves and doubled the number of expatriate assignments it made.

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Ecolab, Inc. 101

At lower levels of the pipeline, all associates regularly complete the 180 - degree assessment; discuss development with their managers; and have created practical, realistic, and benefi cial development plans. Ecolab has developed a large pool of can- didates who are ready to move into critical positions managing others and managing managers. Their Talent Pipeline strategy has taken hold and is becoming ingrained in Ecolab ’ s culture.

CONCLUSION

Ecolab ’ s experience demonstrates that growth in the business requires more and better - prepared leadership talent; that they must promote and hire the best to be the best; and that they must consider how to develop the talent, cultivate the aspirations, and deepen the commitment of all their associates. While they have clearly benefi ted from a strong senior leadership team, they continue to move their focus further down the pipeline and more fully and consistently meet the challenges that a strong global talent management system presents. They continue to look for ways to accelerate their asso- ciates ’ development and identify potential earlier in associates ’ careers. Ecolab remains committed to refi ning its pipeline strategy. They are confi dent that they have estab- lished a fi rm foundation that will help them continue to drive growth and meet the challenges on the horizon.

REFERENCES Charan, R., Drotter, S., & Noel, J. (2001 ). The leadership pipeline . San Francisco: Jossey - Bass.

Corporate Leadership Council (2005). Realizing the full potential of rising talent . Washington, DC: Corporate Executive Board.

Robert C. Barnett is executive vice president and partner at MDA Leadership Con- sulting in Minneapolis. Barnett joined MDA in 1985 and has over twenty years of experience consulting in the areas of organizational psychology and organization development. At MDA, he specializes in providing executive selection, leadership development, and organizational change services. He is a graduate of the University of Minnesota, where he received his B.A. and earned his Ph.D. in psychology, and has an M.S. in organizational development from Pepperdine University. Barnett is an adjunct associate professor of management at St. Mary ’ s University of Minnesota, has authored a number of articles and book chapters, and is a frequent presenter at psychological, management, and human resource professional meetings and conferences.

Michael L. Meyer is senior vice president of human resources for Ecolab, Inc. In his current role, Meyer is responsible for human resources globally, with 26,000 associ- ates in more than 160 countries. Prior to joining Ecolab, Meyer was employed at Abbott Laboratories as vice president and general manager, Canada and Latin Amer- ica, Vascular Products, in Toronto. During his twenty - four years with Abbott, he also

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102 Best Practices in Talent Management

held numerous other positions in human resources, including group vice president, Global Human Resources and Medical Products, and vice president, human resources, International Division. Meyer received his B.A. degree in behavioral sciences from Westminster College in Salt Lake City, Utah, and an M.B.A. in international manage- ment from Thunderbird, the American Graduate School of International Management in Glendale, Arizona.

Sarah J. Murphy is a principal consultant and partner at MDA Leadership Consult- ing in Minneapolis. Since joining the fi rm in 1997, she has worked as part of the core team supporting MDA ’ s talent management and assessment practice, where she con- sults to executives of MDA ’ s Fortune 500 clients. Murphy specializes in the selection and development of senior leaders. In addition, she provides executive coaching services, is an expert in 360 - degree feedback and development of competency models and succession planning systems for her clients. She completed her B.A. at the University of Winnipeg, Canada, and earned her Ph.D. in psychology from the University of Minnesota.

Susan M. Metcalf is vice president, talent acquisition and development, for Ecolab, Inc. Metcalf is responsible for Ecolab ’ s talent pipeline, succession planning, and lead- ership development initiatives. This assignment enables her to shape the development of all 26,000 of Ecolab ’ s associates. She is a 29 - year veteran of Ecolab, and during her tenure has held a number of positions including vice president of talent acquisition, director of planning & development, and a number of human resource business part- ner positions aligned to various functions and divisions within Ecolab. She received her bachelor ’ s degree from the University of Minnesota, and completed the University of Minnesota Carlson School of Management ’ s Human Resource Executive Program and a University of Saint Thomas Mini - M.B.A.

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103

CHAPTER

6 GE MONEY AMERICAS

TAMMY GRISHAM AND D. ZACHARY MISKO

Developing and sustaining an integrated talent acquisition model utilizing recruit- ment process outsourcing (RPO), advanced sourcing technology, and process effi - ciency in conjunction with LEAN methodologies.

Introduction

Company Background and Environment

The Challenge and Approach

Solving the Staffi ng Dilemma: Two Leaders Team to Get It Right

A True Partner Steps Up

Results Chart a Success Story

The Technology

The Challenge

The Solution

The Results

Strategy Sourcing

The Challenge

The Solution

The Results

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104 Best Practices in Talent Management

LEAN Methodologies

Flexibility Defi nes the Future

Introducing Transactional Lean

FS

The Lean Journey

The Impact

Expansion

Conclusion

INTRODUCTION

This chapter introduces the framework, processes, and tools currently used at General Electric, GE Money, for executive talent acquisition. The long - term goals of the strat- egy and programs GE is currently implementing for talent acquisition include:

To ensure that an effi cient and cost - effective talent acquisition process to provide quality talent and a talent pipeline is identifi ed.

To provide robust metrics reporting to ensure analysis and measurement of process (effi ciencies, waste, quality, time, and satisfaction) are reviewed regularly.

To maximize performance of recruitment process and HR professionals through utilization of LEAN methodologies.

COMPANY BACKGROUND AND ENVIRONMENT

General Electric is a diversifi ed technology, media, and fi nancial services company dedicated to creating products that make life better. From jet engines to power genera- tion, fi nancial services to plastics, and medical imaging to news and information, GE people worldwide are dedicated to turning imaginative ideas into leading products and services that help solve some of the world ’ s toughest problems.

GE Money is the consumer fi nance brand for GE Consumer Finance worldwide. GE Money combines the trustworthiness of banks and the speed of fi nance companies to deliver a unique service to our customers and clients. Around the world, our busi- nesses have embodied the values of GE Money and prospered. Customers are drawn by what GE Money represents: speed, value, fl exibility, accessibility, and trustworthi- ness. When you work at GE, you work with people who have a passion for learning and a desire to innovate. Their obsession with fi nding better ways to do things creates an exhilarating work environment.

With more than $ 163 billion in assets, GE Money is a leading provider of credit services to consumers, retailers, and auto dealers in fi fty countries around the world. GE Money Americas offers a range of fi nancial products, including private - label credit cards, personal loans, bank cards, auto loans and leases, mortgages, corporate travel and purchasing cards, debt consolidation and home equity loans, and credit insurance.

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GE Money Americas 105

THE CHALLENGE AND APPROACH

Solving the Staffi ng Dilemma: Two Leaders Team to Get It Right We often hear the buzz word “ sustainability ” in reference to environmental resources. At GE Money Americas, we link the term with human resources, too. Our recruiting process delivers sustainable results today, thanks mostly to our partnership with Kelly ’ s Outsourcing & Consulting Group (Kelly OCG) , Recruitment Process Outsourcing (RPO) practice. This recruitment process outsourcing provider helped us get the “ peo- ple ” part right, which can make all the difference in the global scramble for talent.

A True Partner Steps Up In 2000, GE Money Americas (formerly GE Consumer Finance) wasn ’ t getting it right, and we knew it. Our company, a leading provider of banking and credit services, had staff- ing challenges common to many large organizations: a decentralized staffi ng process, inconsistent interview practices, and variable candidate quality from a small number of colleges. Moreover, the cost per hire averaged more than $ 8,000 and the time to fi ll a position typically exceeded three months. In short, our process was unsustainable.

A parade of vendors told us they had just what we needed to reform our troubled staffi ng function. In the end, however, the clear choice was Kelly OCG, which had the competitive advantage in employing experienced, caring people. No surprise that, in selecting a partner to be an extension of GE Money Americas ’ HR team, the difference came down to people! (See Figure 6.1 .)

FIGURE 6.1. The Evolution of Our Partnership

2001 Exempt Process

Implementation

Drivers & Decision to Outsource

2000

Global Expansion

Latin America 2008

Cost Reduction Initiative

2006

Non- Exempt

Expansion 2002

2003 Business

Transformation Begins

2005 External Hiring

Peaks 2007

Structure CoE to Meet Individual Business Needs

Special Initiatives Expansion

2004

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106 Best Practices in Talent Management

Kelly OCG launched a revamped outsourcing model in early 2001. Key to the solution were a centralized staffi ng process and a dedicated team. This shift to central- ization included a customized candidate application website and standardized, more thorough screening methods to enhance candidate quality and service level.

The solution also incorporated:

A hiring logistics strategy to ensure consistency, standardization, and effi ciency from interview to offer;

Management of an Internet - based applicant tracking system;

Automation of processes once done manually;

Measurement of staffi ng and activity costs; and

Establishment of new benchmarks and goals.

The ability to sustaining a process with year - over - year process improvement given an ever - changing landscape of our business, the economy, and sourcing strategy devel- opment are critical.

Results Chart a Success Story Kelly OCG helped GE Money Americas realize signifi cant savings at virtually every level of the staffi ng process. In addition, they streamlined a time - intensive prescreen- ing process, enabling more interviews of well - qualifi ed candidates during fewer recruiting visits to a diverse range of campuses in a shorter time frame.

Numbers tell the bottom - line story:

Our total staffi ng costs decreased 54 percent. The savings were attributable largely to a halving of sourcing expenditures and an 80 percent reduction in travel and relocation costs. The average cost per hire fell to $ 4,900 from $ 8,300.

Indirect savings included a cycle time reduction to 47 days from 115 days.

In the course of an eight - year relationship, Kelly OCG has helped GE Money Americas obtain year - over - year cost reductions ( $ 2 million in 2007), while continuing to manage a best - in - class staffi ng process. With a focus on operating more effi ciently and sharing best practices, they have improved both candidate quality and our interview - to - hire ratio. They measure their progress in both quantitative and qualitative terms (see Figure 6.2 ).

The process shown in Figure 6.2 combines both GE managers and the RPO pro- vider team throughout the candidate life cycle.

THE TECHNOLOGY

The Challenge With the right process defi ned and in place to attract candidates, we were now experi- encing diffi culty in managing the high volume of applicants, which negatively

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GE Money Americas 107

impacted the effectiveness of our staffi ng function. Additionally, existing technologies did not enable them to execute a highly successful, high - volume recruiting program with the ability to produce metrics on demand.

The company faced these diffi culties:

Lack of an effective applicant tracking tool designed for high volume, nonexempt hiring;

Limited outlets for candidates to apply;

A narrow scope of reporting capabilities;

Complexities of dynamic recruiting needs in more than twenty locations;

Management of the day - to - day functions of a technology provider; and

Successful management of phone interview and onsite interview scheduling.

The Solution Together GE Money and Kelly OCG sought a technology vendor to address the chal- lenges. Kelly OCG selected My Staffi ng Pro (HR Services Inc.), which offered an applicant tracking and recruiting software system with advanced applicant screening capabilities. Next, Kelly OCG stepped in to manage the implementation and the ongo- ing day - to - day activities of the applicant tracking system (ATS). This included system,

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FIGURE 6.2. The Process Model

ID Vacancy Posting

Source/ Screen Interview Offer

REQ Close

Day 1 Day 1–14 Day 14–40 Day 40–45

Primary Owner

Shared Ownership

GE

RPO

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108 Best Practices in Talent Management

end - user, and reporting functionality. As a result, a variety of improvements were made to the process.

The solution incorporated:

An interactive voice response system (IVR), which serves as an automated appli- cant screening and scheduling tool;

An integrated online and telephone application accessible twenty - four hours a day;

Automation of candidate prescreening and scheduling previously done manually;

A custom candidate portal specifi c to the client;

Standardized EEO data collection and reporting;

Advanced statistical reporting capabilities;

Strategic initiatives that maximized the use of available resources; and

Automated communication (including confi rmation and regrets letters).

The Results By strategically integrating the right technology partner, Kelly OCG was able to opti- mize the recruiting process and achieve signifi cant results for GE Money. In the fi rst year 15,332 new applicants were tracked and managed through the hiring process. In the following years the number of new applicants continued to grow and exceeds 80,000 annually. As the client hiring demands and processes have continually changed, the fl exibility provided by My Staffi ng Pro (HR Services) and its technology have helped to seamlessly accommodate their requirements and enable better hiring deci- sions. Recent successful implementations include the addition of four new call cen- ters, increasing the total number of Kelly OCG recruited call centers to eighteen.

STRATEGY FOR SOURCING

We also refi ned our sourcing strategy. The Internet, for example, remains an important weapon in our recruiting arsenal, but qualifi ed candidates who are working success- fully for our competitors may not be checking web postings. This truth calls for fresh thinking about a model that blends both contemporary approaches and traditional recruiting tactics such as cold calling, all but abandoned during the rise of the web.

Our candidate funnel (Figure 6.3 ) is streamlined due to an effi cient process. Through this process only qualifi ed candidates are invited to an on - site interview, which means Hiring Managers are spending quality interview time and have higher interview to offer ratios.

The Challenge Dissatisfi ed with their current methods of generating and implementing an effective method for research and advertising, a world - renowned consumer fi nancial services

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GE Money Americas 109

company requested assistance in fi nding a more successful channel of advertising media to increase the fl ow of candidates. Additionally, the company wanted to improve the way in which they tracked their advertising spending in order to accurately calcu- late cost - per - hire and manage their annual budget.

The relationship is managed by the Kelly OCG – RPO talent acquisition team, and it is uniform across all locations. Prior to the endeavor to merge the process of ad placement into a single, profi cient entity, nearly two dozen client locations were actively placing their own advertisements separately — using limited time and resources.

The company faced the following challenges:

Lack of advertising budget management and tracking of spending;

Inconsistent process across all client locations;

Lack of resources to research best ways to advertise and reach target candidates, including cutting - edge technology and emerging trends; and

No cost - per - hire nor ROI tracking.

The Solution The client needed to hire talent for call centers across the country but did not have a comprehensive or long - term solution in place. Together, TMP Worldwide and Kelly OCG – RPO developed a nationwide annual media plan. With the plan in hand,

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FIGURE 6.3. The Candidate Funnel

Candidate

MinQual

PhoneScreen

Show to PE

PE

Interview

Offers Made (Rescind/No Show)

36,363

38,684

67,867

452,446

1,131,115

1,508,153

9,709HIRE

10,909

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110 Best Practices in Talent Management

the client could reference the overall strategy and implement the best tactics for the specifi c market within a two - week lead time. Included in the plan were specifi c strate- gies for search engine marketing, job boards, direct email advertising, mobile market- ing, and outdoor advertising.

Since the media plan included strategies throughout the year, in addition to cover- ing all of the client - specifi c geographic areas, it was easy to implement. As a result, the client took advantage of both traditional and non - traditional media to achieve success in staffi ng the call center locations. The client is now competitive for hiring for posi- tions across the country — no matter the regional location. The well - received advertis- ing campaign promoted the collaborative and unique company culture and captured the essence of joining a successful team. In fact, the client requested two additional executions promoting the benefi ts of employment.

The solutions for the client included (but were not limited to) the following:

Budget management for advertising spending;

A consultative relationship between TMP and the client managed by the Kelly OCG – RPO talent acquisition team;

Demographic research provided by TMP Worldwide;

TMP Worldwide working specifi cally within company branding guidelines;

Introduction of new and cutting - edge products/technologies;

All requests handled by one to two direct points of contact; and

Cost - per - hire tracking from the Kelly OCG – RPO talent acquisition team to better manage resources.

The Results Through a partnership with Kelly OCG – RPO, the company ’ s respective locations no longer need to place or research their advertising. All research, recommendations, placement, spend tracking, and budget management are taken care of through this business relationship, thus helping to reduce overlapping advertisements, unnecessary or ineffective advertisements, and unnecessary spending. TMP Worldwide and Kelly OCG – RPO worked together to maintain the distinguished image and reputation of the client company.

“ Partnering with TMP as an ad vendor, and having that relationship and budget man-

aged by Kelly OCG, has allowed us to have one centralized point of contact for adver-

tising needs, research, and staying up - to - date on developments in the market(s).

Additionally, this centralized approach has helped us reduce overall advertising/

recruiting costs while reducing cycle time and increasing position fi ll rates. ”

Effective sourcing strategies have reduced agency spending by over 70 percent (see Figure 6.4 ).

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GE Money Americas 111

LEAN METHODOLOGIES

Flexibility Defi nes the Future Like all successful programs, this one is evolving to meet the needs of our ever - changing organization. Over the past year, we embarked on a Lean quality review. Through value stream mapping, we reviewed opportunities to improve our processes and defi ned our ideal process state. Working closely with Kelly OCG, we formed kaizen teams to effect positive change. Our challenge was to enhance the applicant experience through reduction in process delays and redundancies. In the end, we were able to meet more stringent federal compliance standards while maintaining cycle times and quality of service.

We are most familiar with “ Lean Manufacturing ” as introduced by Toyota ® to improve production manufacturing. In such an environment, it is used to reduce waste, increase quality, and improve production. Could this “ Lean ” approach be used to improve a transaction - based service operation — like staffi ng? GE Healthcare thought so. With help from Kelly Outsourcing and Consulting Group (Kelly OCG), “ Transactional Lean ” has been successfully integrated into their solid business part- nership with great results.

FIGURE 6.4. Sourcing Model

Features: Shared service recruiters Offsite sourcing engine Leveraged sourcing tools and expert sourcing knowledge Sourcing subject-matter experts Accountability to metrics/SLAs Reduced reliance on Search Firms

Provides for dedicated “Headhunters” at a reduced cost.

Search Firm Costs

2005 2006 2007

5.3 MM

4.2 MM

1.3 MM 20%

70%

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112 Best Practices in Talent Management

Introducing Transactional Lean In 2006, the relationship was being challenged with increasing hiring volume and heightened requirements from U.S. Department of Labor Offi ce of Federal Contract Compliance Programs (OFCCP). GE Money needed more and more staff to combat these issues, which added more and more cost to the staffi ng budget. Something had to change. We decided to apply the Lean approach to the staffi ng process to create effi - ciencies, improve performance, and generate cost savings.

A team of Kelly OCG managers and recruiters and GE Money human resources managers created a value stream map (VSM) of the current staffi ng process. The VSM revealed areas of low - quality output to target as kaizen improvement opportunities. But before anything could be set in place, a fundamental culture change had to occur.

5S To initiate the required culture shift, a Lean principle, 5S, was introduced as the foun- dation for all improvements. The 5S consists of:

Sort — separation of necessary items from unnecessary items;

Set in Order — arrange items according to how they will be used;

Shine — maintain work area for sorted and set in order items;

Standardize — ensure sort, set in order, and shine are consistently followed; and

Sustain — maintain and improve sort, set in order, shine, and standardize.

5S was fi rst applied to the physical environment, eliminating unneeded storage and fi les. It soon became evident the discipline to sustain 5S was necessary to sustain a change in the staffi ng culture to one of continuous improvement.

The Lean Journey Following the VSM and 5S, the staffi ng team focused on the kaizen opportunities. Ini- tially, the team led and participated in more than thirty - two efforts to standardize processes and improve quality. Early efforts included:

Creating application instructions;

Standardizing the initial candidate phone screening;

Creating a compliant process for documenting search strings;

Standardizing the hiring manager call for newly posted positions; and

Documenting the employee referral process.

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GE Money Americas 113

The Impact Staffi ng continued to improve, with plans to institute visual management practices to capture performance and adopt better process controls with internal audits. With the Lean improvements in place, staffi ng processes became more consistent. Defects decreased, and the quality of service continues to improve. For the fi rst time, vaca- tions, absences, and peaks in hiring volume do not disrupt customer service. The stan- dards of excellence and defi ned processes also allow new team members to more easily learn their roles and integrate into the team.

EXPANSION

In 2008 our process and abilities were challenged again to provide our process in Latin America (Guatemala, Central America). This would mark the fi rst site in Guatemala, as well as the fi rst opportunity for Kelly OCG to staff there.

Process Effi ciency and Successes

1. Implemented technology and process used for North American staffi ng and began processing candidates on March 10, 2008.

2. The fi rst hiring date for the new Guatemala site was April 28, 2008 (six weeks to process candidates).

3. In managing vendor relationships, Kelly OCG worked with an advertising ven- dor to conduct market research on trends and avenues for advertising in a new market and in a different culture. By managing ad vendor relationships and moni- toring effectiveness of ad avenues, cost per hire is at $ 603.12 as of September 30, 2008. The client averages forty - two hires per month since project inception.

4. We streamlined the hiring process to better customize for the client site: removal of redundancies in the process (preliminary English test), reducing total num- ber of interviews down from three to two by combining competencies covered in two on - site interviews to reduce redundancy. HRF also created and adjusted the phone interview used. Through this process improvement, time to process a candidate was shorter and the number of trips a candidate had to make to the recruitment site was reduced. We adjusted the fi nal English assessment (CEDS) schedule to accommodate most candidates.

5. Kelly OCG hired and trained a local team to represent the RPO onsite RPO team.

The Kelly OCG team was entirely responsible for establishing the process, provid- ing/maintaining resources, and processing of candidates. Once the Guatemala team was hired and trained, the U.S. team maintained daily communication, weekly calls, and

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114 Best Practices in Talent Management

occasional trips to Guatemala to ensure questions were answered and issues were resolved. The U.S. team co - managed the advertising and participated in weekly update calls with the entire client project management team to discuss updates and resolve issues.

CONCLUSION

We will continue to demand more from our outsourcing provider as new challenges surface. With the RPO practice of Kelly OCG as our strong right arm, we look forward to the future because, through fl exibility, scalability, and strategic thinking, we have proved we can successfully manage our talent acquisition within GE Money.

Tammy Grisham is the Staffi ng Center of Excellence Leader for GE Money Ameri- cas. Grisham has over fi fteen years of recruitment, operations, and management exper- tise. She leads the talent acquisition for the Americas and ensures proper implementation and management of the tools aligned to recruitment (employee referral program, lead- ership development program), as well as temporary and contingent workforce man- agement. Based in Stamford, Connecticut, GE Money is the consumer and small business fi nancial services unit for General Electric. Grisham is based in the Kettering, Ohio, offi ce.

D. Zachary Misko is the global RPO director and member of the leadership team at Kelly Services, Inc., Outsourcing & Consulting Group (Kelly OCG), Recruitment Process Outsourcing (RPO) practice area. Kelly OCG – RPO provides outsourced hir- ing process management and human resource skills to a variety of different compa- nies. As the global RPO director, Misko works with Fortune 500 clients throughout the world to develop and implement processes that improve and drive the hiring process, recruitment, on - boarding, retention, and selection functions within a company. Misko is based out of the Milwaukee, Wisconsin, offi ce. Prior to joining Kelly OCG, he man- aged human resource functions at a world - wide leader in biotechnology and life sci- ences, Promega Corporation, Madison, Wisconsin, and was employed as the senior training manager for Lands ’ End, Dodgeville, Wisconsin.

Misko has over fi fteen years of broad human resource and management expertise in the direct merchant arena, retail, fi nance, biotechnology, and professional services. Additionally, he has held various positions in the areas of recruitment, employment law, employee relations, consulting, strategic HR planning, performance management programs, training/development, and compensation. He has completed advanced cer- tifi cation from DILHR and is certifi ed in affi rmative action and diversity hiring. Addi- tionally, Misko has been a member of SHRM for the past fourteen years and is the past president of the Metro Milwaukee chapter.

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115

CHAPTER

7 INTERNAL REVENUE

SERVICE

SUSAN CLAYTON, VICTORIA BAUGH, MATHEW J. FERRERO

An integrated leadership development and succession planning system for front - line to senior leaders that includes executive involvement, a four - step structured process, and web - based assessment and support.

Introduction

Company Background and Current Leadership Environment

The 21st Century IRS

Leadership Competencies

IRS Core Leadership Responsibilities and Competency Model

Planned Changes to the Competency Model

Leadership Succession Planning — The Challenges

How Is the IRS Addressing the Projected Gaps and Challenges?

The Approach: Creating a Leadership Succession Planning Environment

The Four Stages of LSR

LSR Website and Infrastructure

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116 Best Practices in Talent Management

Results

Results for Competencies

Results for Bench Strength

Indicators of Success

Evaluation

Next Steps

Conclusion

INTRODUCTION

This chapter introduces the framework, processes, and tools currently used at the Internal Revenue Service (IRS) for succession planning and development. The long - term goals of the strategy and programs IRS currently uses and others being imple- mented are to:

Ensure that there are suffi cient “ ready now ” candidates to address current and future leadership vacancies; and

Provide the necessary processes to identify and develop individual leaders to ensure our long - term success.

COMPANY BACKGROUND AND CURRENT LEADERSHIP ENVIRONMENT

The Internal Revenue Service was established in 1862 by President Lincoln and Con- gress to help pay for the Civil War. It is the largest tax administration agency in the world with the following stats:

2007 total federal tax receipts: $ 2.7 trillion;

79,000 full - time employees (101,000 during “ fi ling season ” );

8,760 managers in 2008;

260 executives;

1,897 senior and department managers; and

6,603 front - line managers

The IRS operates in a fast - paced, highly regulated environment as it collects the nation ’ s revenue. For example, in 2008 an unprecedented economic stimulus package impacting nearly every taxpayer was passed by Congress. This occurred in the middle of tax fi ling season and required a tremendous effort by the IRS to implement it prior to the end of the season. Prior to the Revenue Reform Act of 1998, the IRS placed

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Internal Revenue Service 117

signifi cant emphasis on civil and criminal enforcement actions to collect delinquent taxes and encourage voluntary compliance. The reform act fostered an emphasis on balancing enforcement actions with programs that promoted taxpayer education and outreach and enhanced the way the IRS serves the taxpaying public. Additional fund- ing was provided for technology modernization projects and for pro- moting and supporting electronic fi ling of tax returns. Moreover, the IRS totally realigned its business structures and processes. For example, the prior structure was comprised of regional and district offi ces that served all types of taxpayer entities within a geographic area. This was transformed into a structure comprised of four separate business operat- ing divisions, each focused on serving a specifi c taxpayer segment, sup- porting the new emphasis on service and education, while maintaining appropriate traditional enforcement mechanisms, such as liens, seizures, and offers in compromise. Leadership development, which had been largely managed by the regional offi ces, was one of several signifi cant business processes affected by modernization.

Recognizing that the “ new ” IRS would require new and different leadership skills and behaviors, Commissioner Charles Rossotti directed a review of IRS leadership competencies. The competency model designed was implemented in June 2001 and has helped leaders to fos- ter a business culture that uses service, education, and enforcement to help promote voluntary tax compliance and support the IRS mission.

The IRS cannot achieve this mission without a highly skilled work- force. The purpose of the IRS Human Capital Offi ce (HCO) is to provide corporate human capital strategies and tools for recruiting, developing, retaining, and transitioning a highly skilled and high - performing work- force. In addition, Commissioner Douglas Shulman, in the fall of 2008, created the “ Workforce of Tomorrow ” (WoT) Task Force. He stated that:

“ The goals of this task force are straightforward: to make the IRS the best place to

work in government, and to ensure that fi ve years from now we have the leadership

and workforce ready for the next fi fteen years at the IRS. ”

The WoT is focusing on:

Recruitment strategies;

A streamlined hiring process;

Strategies for valuing and retaining employees;

Enhancing the role of managers;

A dynamic people strategy; and

Identifying and growing future leaders.

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IRS Mission:

Provide America’s

taxpayers top

quality service by

helping them

understand and

meet their tax

responsibilities

and by applying

the tax law with

integrity and

fairness to all.

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118 Best Practices in Talent Management

This chapter describes how the IRS Leadership Succession Planning program, developed in 2006, has become the foundation for many of the new recommendations emanating from the Workforce of Tomorrow Task Force.

THE 21ST CENTURY IRS

Leadership development represents a critical component of modernization, equipping leaders with the knowledge, skills, and abilities necessary to lead the changes required to accomplish the new IRS mission and achieve its far - reaching strategic business goals.

In the 21st Century IRS, effective leadership is much more than expertise in man- aging a budget, reviewing work for technical accuracy, and analyzing programs. Now, to ensure success, a leader must also communicate with others to instill a commitment to realize the organization ’ s vision, support its values, lead change, build high - performing work teams, and coach/mentor employees to transform the IRS into an organization that continuously improves. In designing and developing its leadership development framework, the IRS incorporated proven best practices in both the pri- vate and public sectors. Leadership development and succession planning are based on the IRS Leadership Competency Model.

Leadership Competencies A vital aspect of the modernization effort was establishing a consistent leadership proc- ess designed to support the Service ’ s mission, vision, values, and strategic goals. Assisted by Booze Allen & Hamilton, the IRS developed its competency model based on behavioral event interviews of thirty - fi ve top IRS executives that identifi ed fi ve leadership core responsibilities and twenty - one competencies to establish and sustain the behaviors required to transform both the people and the organization into an effec- tive “ engine ” to achieve business success.

The Hay Group is a global management consulting fi rm renowned for the quality of its research and the intellectual rigor of its work. Hay, which has longstanding expertise in competency development, validated the competencies against its volumi- nous database and described the behavioral characteristics demonstrating each compe- tency. The Department of the Treasury and Offi ce of Personnel Management (OPM) were closely involved in this process, providing input and support as the new compe- tency model was constructed. Ultimately, OPM approved the IRS proposal to link competencies directly to the performance plan used to evaluate all managers.

IRS Core Leadership Responsibilities and Competency Model The IRS was the fi rst federal government agency to directly link leadership competen- cies to the core responsibilities contained in a manager ’ s annual performance agree- ment. Thus, IRS managers establish their accountability by developing their annual performance commitments (what) based on both desired business results and the competency - based behaviors (how) required for achieving them. Figures 7.1 and 7.2 depict the core responsibilities and their linkage with the competencies.

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Internal Revenue Service 119

FIGURE 7.1. IRS Leadership Core Responsibilities

Core Responsibilities

IRS has defined 21 leadership Competencies as essential to organizational success. They are grouped under the Performance Agreement Core Responsibility categories common to all IRS managers. The five Core Responsibilities are defined below. Some Core Responsibilities will relate more to your position than others. They are:

• Demonstrates integrity, sound judgement, and the highest ethical standards of public service

• Demonstrates the importance of employee satisfaction in successfully accomplishing the Service’s mission.

• Promotes cooperation, flexibility, and teamwork among employees.

• Ensures that, to the extent possible, employees have the tools and training to do their jobs.

• Provides continuous, constructive feedback to employees concerning individual and group performance including timely evaluations of performance.

• Coaches and develops employees so that they realize their full potential as members of the Service.

• Supports labor-management partnership, responding to employee concerns, promptly identifying trends, and taking corrective action to maintain a safe, high-quality work environment in which everyone is treated with respect.

• Successfully leads organizational change, effectively communicating the Service’s mission, core values, and strategic goals to employees and other critical stakeholders and engaging them in the development of objectives that contribute to those goals.

• Motivate employees to achieve high performance by facilitating a positive workplace that fosters diversity, innovation, and initiative; open and honest communication; and teamwork among employees and peers.

• Demonstrates the importance of customer focus as a critical component of the Service’s mission.

• Effectively develops and executes plan to accomplish strategic goals and organizational objectives, setting clear priorities and acquiring, organizing, and leveraging available resources (human, financial, etc.) to efficiently produce high-quality results.

• Constantly reviews and analyzes performance measures, consults and collaborates with stakeholders, and takes decisive action, in accordance with law.

• Continuously seeks to improve business processes, sharing those efforts with other units to better overall Service performance.

• Listens to customers, constantly gathering their feedback, actively seeking to identify their needs and expectations, and effectively communicating those needs and expectations to employees.

• Insures that employees do the same, and that they are prompt, professional, fair, and responsive to the circumstances of individual customers, to the extent permitted by law and regulation.

• Continuously evaluates organizational performance from a customer’s point of view.

• Takes steps to implement the EEO and affirmative goals established by the bureau.

• Supports staff participation in special emphasis programs.

• Promptly responds to allegations of discrimination and/or harassment and initiates appropriate action to address the situation.

• Cooperates with EEO counselors, EEO investigators, and other officials who are responsible for conducting inquiries into EEO complaints.

• Assigns work and makes employment decisions in areas such as hiring, promotion, training and developmental assignments without regard to sex, race, color, national origin, religion, age, disability, sexual orientation or prior participation in the EEO process.

• Monitors work environment to prevent instances of prohibited discrimination and/or harassment.

Leadership

Customer Satisfaction Business Results

Employee Satisfaction

Equal Employment Opportunity

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120 Best Practices in Talent Management

FIGURE 7.2. IRS Leadership Competency Model

LEADERSHIP EMPLOYEE

SATISFACTION CUSTOMER

SATISFACTION BUSINESS RESULTS EEO/DIVERSITY

Adaptability Continual Learning Customer Focus Achievement Orientation

*indicates supporting

competencies

Business Acumen

Political Savvy

Problem Solving*

Technical Creditability

Entrepreneurship

External Awareness

Influencing/Negotiating*

Partnering*

Developing Others*

Diversity Awareness*

Group Leadership*

Teamwork

Communication*

Decisiveness

Integrity/Honesty*

Service Motivation

Strategic Thinking

This link between core responsibilities and competencies ensures that the service can assess results - based performance commitments against the competency - based behaviors consistent within a specifi c core responsibility. A manager ’ s annual perfor- mance appraisal includes an evaluation of those commitments in light of the associ- ated competencies and thus forms the basis for recognition and awards. In addition,

FIGURE 7.3. Values and Leadership Competencies Inform HR Decisions and Drive the Design of the Development Process

How People Are Evaluated

• Defines behaviors for effective performance • Links competencies used in selection and development to performance plan core responsibilities

Values and Leadership Competencies Inform HR Decisions and Drive the Design of the Development

Process

Values and Leadership Competencies

How People Are Developed

How People Are Recognized

How People Are Selected

• Clear definition of Knowledge, Skills and Abilities required for the job • Increases consistency through clearly defined competencies

• Career planning • Links rewards to performance commitments • Use paybanding and other flexibilities to link behavior and rewards

• Valid information is used for career planning • Employee development and training programs • Coaching and mentoring • Transformational events • Continual learning

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Internal Revenue Service 121

the IRS designed a new management selection process that assesses both past perfor- mance and future potential in applying the IRS leadership philosophy and competen- cies on the job. Thus, effective reinforcement of the competency model occurs by integrating processes for how IRS leaders are selected, developed, evaluated, and recognized as illustrated in Figure 7.3 .

Planned Changes to the Competency Model As this article is being written, IRS is in the midst of streamlining its competency model. The current plan is to identify the most vital skills and behaviors that support high effectiveness in the areas of Leading Self, Leading Others, and Leading Improve- ment. The new competency model will be implemented on or about October 1, 2009.

LEADERSHIP SUCCESSION PLANNING — THE CHALLENGES

Succession planning is defi ned as the ability to identify qualifi ed candi- dates for a position prior to the position becoming vacant. By creating a leadership succession environment, organizations are better able to maintain internal continuity and sustainability of operations.

Leadership succession is crucial for the federal government and the IRS for two reasons. First, many of the federal government ’ s leaders will soon be eligible to retire. The Offi ce of Personnel Management (OPM) projects that more than 550,000 federal employees — almost one - third of the entire full - time permanent workforce — will leave the federal government by the end of 2012. Although the majority of attri- tion is expected to occur through retirement, the current economic situ- ation will likely impact this projection.

The IRS faces concerns similar to those of the rest of the federal government as it contends with the potential loss of a signifi cant number of its current leaders by the end of 2010. The IRS estimates that an ever - increasing number of its leaders will be eligible to retire over the next few years. Projections indicate that almost 56 percent of IRS executives and managers will be eligible to retire by the end of 2010. This means that between now and 2018, IRS faces a shortfall of 3,400 leaders — with a need to hire about one manager per day during this timeframe to con- tend with this shortfall.

As indicated earlier, another reason that leadership succession is critical to the IRS is that leaders in the future will need to (1) be more proactive, (2) embrace change, (3) create and motivate employees around a vision, and (4) think more strategically. All of this will need to be accomplished in less time and with fewer resources than in the past.

Additionally, the IRS faces the following challenges:

Growing gaps in leadership competencies;

Increasing diffi culty in attracting and retaining talent; turnover percentage for mission - critical occupations has signifi cantly increased over the past three years; and

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that almost 56

percent of its

executives and

managers will be

eligible to retire by

the end of 2010.

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122 Best Practices in Talent Management

Maintaining a highly skilled leadership cadre to sustain continued technology modernization efforts and signifi cant organizational improvements.

In short, the potential loss of a large number of its leaders within the next several years increases the importance of the IRS having a process in place to fi ll anticipated vacancies quickly and effectively.

How Is the IRS Addressing the Projected Gaps and Challenges? The leadership situations described above have contributed to a signifi cant culture shift in the IRS — one that fully recognizes the need for succession planning. Initially, the IRS focused almost solely on developing leaders. In 2001 “ readiness training pro- grams ” were designed and implemented to develop senior, department, and front - line managers for the next leader level. However, leadership succession was primarily ad hoc and placements were largely uncoordinated. Information on succession risk was unavailable across the service and competency gaps were unknown. Recent efforts, beginning in 2006, have expanded to a formal and more comprehensive succession planning process that includes senior, department, front - line managers, and in some instances non - managers and bargaining unit employees. The remainder of this chapter describes how this was accomplished and the crucial next steps moving forward.

The Approach: Creating a Leadership Succession Planning Environment After a successful pilot, the IRS implemented the leadership succession review (LSR) process in FY 2007. This process was developed in collaboration with Pricewater- houseCoopers, LLC (PwC). PwC is the world ’ s largest professional services fi rm spe- cializing in accounting and management consulting. PwC consulted to the IRS on developing a succession planning model and process, the outcome of which is the LSR. LSR provides a highly structured approach described in detail in this chapter. LSR enables each IRS business unit to assess its current and future leadership needs and identify the pools of individuals who are ready now or ready with development for the next leadership level. One major goal of the LSR process is to integrate the LSR assessment process and data on leadership readiness and competency gaps into the existing readiness programs and general leadership curriculum. For readiness pro- grams this is accomplished through using the LSR ratings to identify participants. To address competency gaps identifi ed by the LSR data, both at the service - wide and business unit level, the leadership curricula are being reviewed.

The list below provides a closer look at the LSR methodology, describing its pur- pose and benefi ts, as well as the four-stage process.

The Purpose and Benefi ts of LSR

Provides an accurate, current picture of leadership bench strength and capability at every level of the organization, including potential leadership gaps;

Identifi es individuals who want to become leaders and assesses their potential and readiness;

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Internal Revenue Service 123

Highlights competency gaps at specifi c leader levels that pose risks for leader effectiveness; and

Supports planning for recruiting, training, and developing leaders, ensuring the IRS has a “ bench ” of highly qualifi ed people available for current and future lead- ership positions.

As in every other part of the IRS leadership structure, the succession planning process is based on the twenty - one leadership competencies described in Figure 7.2 . Each of the competencies is segmented into four levels (employee, front - line manager, department/senior manager, and executive) with behaviors that describe effective per- formance for each level. Each level is hierarchal and assumes that if a person is rated a “ 4, ” she or he has demonstrated the three preceding levels. An example of the busi- ness acumen competency is shown below in Exhibit 7.1 .

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EXHIBIT 7.1. Business Acumen Applies core management area (fi nancial, human resources, and technology) prin-

ciples and approaches to increase program and workplace effectiveness. Takes steps

to prevent waste, fraud, and abuse. Manages available resources, makes cost-benefi t

decisions, and develops and implements strategies to make sound business manage-

ment decisions in a manner which instills public trust.

Levels 1. Understands Core Management Areas: Demonstrates a fundamental understand-

ing of the principles of fi nancial management, marketing, human resources manage-

ment, and technology applications in day-to-day activities.

2. Uses Knowledge of Core Management Areas to Increase Workplace Effectiveness: Assesses current and future resource (fi nancial and human resource) requirements and uses cost-benefi t approaches to set priorities and identify ways to

effectively and effi ciently satisfy anticipated needs. Considers and uses technology

appropriately to increase workplace productivity. Manages programs and budgets in a

cost-effective manner.

3. Understands and Addresses the Most Current Thinking and Practices in Core Management Areas: Uses a broad perspective of the dynamic shifts in the fi elds of fi nancial management, human resources management, and technology applications

to identify opportunities for new programs or services.

4. Anticipates Future Trends and Appropriate Applications of Core Management Areas: Uses in-depth knowledge of the organization and the core management areas to identify and design new strategies for the organization. Determines how the

organization can best position itself to add value to the public over the long term.

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124 Best Practices in Talent Management

The numbers in Table 7.1 identify the target level designated for each leadership level for each competency. The four levels provide the framework for assessment of potential for the next step in an individual ’ s career path, along with an analysis of competency strengths and areas for improvement.

The Four Stages of LSR 1 Stage 1: Data Gathering Stage 1 specifi cally places emphasis on the individual. Partic- ipants in the LSR assessment website complete their demographic information that pro- vides a wealth of background and information for reports. Both a self-assessment and a managerial assessment are completed based on the twenty - one competencies and four levels. Once the manager has done the competency assessment, she or he assesses the person ’ s readiness for the individual ’ s target leadership level, typically the next leader- ship step in one ’ s career path. A person can be assessed as “ not ready, ” “ ready with

TABLE 7.1. IRS Twenty - One Leadership Competency Targets by Leadership Level

Leadership Competency Leadership Adaptability Communication Decisiveness Integrity/Honesty Service Motivation Strategic Thinking

Customer Focus Entrepreneurship External Awareness Influencing/Negotiating Partnering

Continual Learning Developing Others Group Leadership Teamwork Diversity Awareness

Achievement Orientation

Business Acumen Political Savvy Problem Solving Technical Credibility

2 2 1 3 1 1

2 1 1 1 1

2 2 1 3 2

2

1 2 3 1

3 3 2 4 2 2

3 2 2 2 2

3 3 2 4 3

3

2 2 3 2

4 3 3 4 2 2

3 2 2 3 3

4 3 3 4 3

3

3 2 4 3

4 3 3 4 3 3

3 3 3 3 3

4 3 3 4 3

3

3 3 4 3

4 4 4 4 4 4

4 4 4 4 4

4 4 4 4 4

4 4 4 4

Customer Satisfaction

Employee Satisfaction

Business Results

Executives Senior Managers

Department Managers

Frontline Managers

Employees

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Internal Revenue Service 125

development, ” or “ ready now ” for the target leadership level. The manager then com- pletes a succession planning matrix (see Stage 1 in Figure 7.4 ) on his or her people to take into the Stage 2: Talent Review Discussion.

Stage 2: Talent Review Discussion Stage 2 shifts the focus to the organization. The talent review discussions roll up the organization hierarchically. First - level managers meet with their next level managers in a meeting to discuss the employees on their matrices. In this discussion all of the people assessed are reviewed, and management comes to agreement on fi nal readiness ratings. Management also identifi es develop- mental activities/opportunities for the people discussed in the context of the compe- tencies. Readiness ratings are then compiled into a consolidated Stage 2 matrix for that part of the organization. The information from the Stage 2 meetings fl ows up the orga- nization to the executive level in the Stage 3 meeting.

Stage 3: Roll - Up of LSR Information to Senior Leaders Stage 3 remains focused on the organization. Stage 3 meetings involve executives only. The discussion focuses on those managers who have targeted executive - level positions as their next step. Addi- tionally, the executives discuss overall business unit bench strength and competency gaps by leadership level for organizational planning and training and development. The Stage 3 meeting information is shared with the executive head of the business unit.

Stage 4: Provide Individual Feedback and Development Ideas Stage 4 shifts the focus back to the individual and is crucial for individual development. Stage 4

Status Ready Now This individual possesses the skills, competencies, and experiences necessary to advance to the next level of management at this time.

Ready with Development With the proper mix of training, education, and expe- riences, this individual can be prepared for the qualifi- cations necessary for advancement to the next level of management within a 24-month timeframe.

Not Ready This individual will require in excess of 24 months of additional training, education, and experience before he or she possesses the skills, competencies, and qualifications necessary to advance to the next level of management.

Individuals to Watch Long Term Refers to promising future candidates who are not currently eligible for selection. Exhibits excellent performance in their current role. However, lacks many experiences and accomplishments to typically be considered a viable candidate. Due to positive perform- ance trends, the individual should be considered for accelerated development.

Position Title Available

Available

Not available

Not available

FIGURE 7.4. Stage 1 Matrix

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126 Best Practices in Talent Management

TABLE 7.2. Summary of LSR Four Stages

Stage Purpose Participants Activities

Stage 1 Gather Data Front - Line Managers,

Department

Managers, Senior

Managers, Executives

(1) Complete the Assessment of

Leadership Competencies.

(2) Create an LSR Matrix.

Stage 2 Conduct Talent

Review

Discussions

Department

Managers, Senior

Managers, Executives

(1) Create a Consolidated LSR

Matrix. (2) Create a Chart of

Organizational Strengths and

Areas for Development.

Stage 3 Roll - Up LSR

Information to

Senior Leaders

Executives (1) Discuss Senior Managers ’

Readiness to Become Executives.

(2) Create a Chart of Overall

Organization Strengths and

Weaknesses. (3) Make Revisions

to the Consolidated LSR Matrices.

Stage 4 Provide

Individual

Feedback and

Development

Ideas

Front - Line Managers,

Department Manag-

ers, Senior Managers,

Executives

(1) Review and Discuss Self -

Assessment Ratings and

Managerial Ratings. (2) Identify

Approaches to Address

Development. (3) Develop a

CLP for Individual Development.

meetings are for managers to provide feedback to each direct report on his/her readi- ness rating and competency assessment. Managers meet with each employee to discuss the readiness rating, competency assessments, career goals, and developmental oppor- tunities. Together, the manager and employee create a career learning plan (CLP).

A summary of the four stages is displayed in Table 7.2 .

LSR WEBSITE AND INFRASTRUCTURE

The four stages above are supported by an online user - friendly LSR website that was developed in - house by the Rapid Applications & Technology Group (RA & T) in the human capital offi ce. RA & T is responsible for programming, maintaining, and enhanc- ing the website. RA & T also creates a variety of ad - hoc reports upon request.

The website provides the assessment tool, captures the data, and generates a vari- ety of reports at the individual, group, area, organization, and service - wide levels.

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More specifi cally, the website contains information on all stages of the process and includes the process to gather demographic information from the participants, as well as walk them through the self - assessment on the twenty - one leadership competencies. Included on the website are a number of tools and resources available to assist the users through the process. A variety of reports are available to various levels of management, as well as to those who are designated by the business units to have administrator proxy access. Access to reports varies based on the level of management and permissions assigned. Those with administrator proxy access are able to download the entire data- base for their business unit in order to complete analyses, perform monitoring, and cre- ate ad - hoc reports. The Offi ce of Leadership Succession Planning (OLSP) has access to the service - wide database and can pull reports for the entire organization.

In addition to the website, the LSR is supported service - wide by the Offi ce of Leadership Succession Planning (OLSP). OLSP provides planning, support, direction, and consultation on the roll - out and maintenance of the process. Below are a number of written materials developed by the Offi ce of Leadership Succession Planning and located on the Human Capital Offi ce website.

LSR User Guide

Competency Target Matrix

Leadership Competency Booklet, including developmental activities for each competency

Competency Discussion Guide, with activities to help organizations defi ne the competencies in terms that refl ect their work

LSR Overview PowerPoint

Frequently Asked Questions

Leadership Succession Review Process Post - Stage 4 Document, targeted to how to use the LSR data from the individual to the organizational level

A synopsis for each LSR stage for quick reference

What LSR means to managers

List of business unit LSR points of contact

LSR DVD, a DVD that demonstrates, with professional actors, the entire four - stage process and models providing feedback. (This was provided to every man- ager via both DVD and online streaming video. 2 )

Essential to the success of the process was creating a succession planning point of contact for each business unit. This person ’ s role is to manage the implementation of the LSR for the organization and interface with OLSP. In addition to the points of contact each business unit designated a person with Excel or Access skills to support data collection and reporting for the business unit.

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128 Best Practices in Talent Management

RESULTS

The LSR has provided a wide variety of very useful information and reports, including but not limited to:

Interest in advancement by leadership level;

Willingness to relocate at every target level — executive, senior manager, depart- ment manager, and front - line manager;

Statistics on numbers of people “ ready now ” for advancement (bench strength);

Statistics on numbers of people “ ready with development ” for advancement;

Proportion of management population at or above competency targets (for current level of management); and

Percentage of managers who meet or exceed the target levels for current level of management.

Results for Competencies LSR results from Stages 3 (data roll - up to senior leaders) and 4 (feedback sessions) are used at three different levels:

At the corporate level, the competency profi ciencies and gaps are used to focus and refi ne the service - wide leadership training and development by leadership level.

At the business unit level, LSR results from Stages 3 and 4 are used to target lead- ership training and development to the unique functional needs of each business unit. For example, one business unit identifi ed gaps in strategic thinking and prob- lem solving and arranged for contractor - delivered training tailored to their needs.

At the individual level, LSR results are used in Stage 4 to provide specifi c feed- back on competencies to be strengthened and improved. Results are also used to identify developmental opportunities.

Figure 7.5 provides examples of LSR reports that show competency ratings for a sample of IRS senior managers, comparing current performance with the target level for the senior level manager position. The fi gure shows two bar charts. The fi rst chart illustrates an example of competencies that are closest to the target and the second indicates the competencies that are farthest from the target for sample group of senior managers.

Figure 7.6 shows the comparison of senior managers ’ average rating on selected competencies (business acumen, infl uencing/negotiation, continual learning, develop- ing others, decisiveness, and achievement orientation) with the target level.

Reports like these can be used to identify organizational strengths and improve- ment areas. The data in the report can be used to appropriately design training and developmental assignments for employees.

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FIGURE 7.5. Competency Ratings Closest and Farthest from Target — Senior Managers

Leadership Competency Ratings Closest to Target

Leadership Competency Ratings Farthest from Target

Decisiveness

Continual Learning

Adaptability

Problem Solving

Teamwork

3.0

3.0

3.0

3.0

3.08 4.0

4.0

4.0

4.0

0.00 0.50 1.00 1.50 2.00 2.50 3.00 3.50 4.00 4.50

3.32

3.35

3.38

3.55

3.28

3.43

3.59

Achievement Orientation

Customer Focus

Diversity Awareness

SM Target SM Average

FIGURE 7.6. Ratings and Targets for Competencies Emphasized at Senior Manager Level

Ratings and Targets in Competencies Emphasized at the Senior Leader Level (SMs) 4.0000

3.5000

3.0000

2.5000

2.0000

1.5000

1.0000

0.5000

0.0000

Bu sin

es s A

cu m

en

Inf lue

nc ing

/N eg

ot iat

ing

Co nt

inu al

Le ar

nin g

De ve

lop ing

O th

er s

De cis

ive ne

ss

Ac hie

ve m

en t O

rie nt

at ion

SM Target SM Average

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130 Best Practices in Talent Management

Results for Bench Strength At the service - wide level, IRS is exploring the use of 2:1 ratio for bench strength for current and predicted vacancies. People with LSR readiness ratings of “ ready now ” were plotted against projected attrition data to identify where IRS has leadership risks and surpluses corporately by leadership level. Figure 7.7 shows service - wide data. This data is then compared to projected attrition data to determine the ratio.

At the business unit level, bench strength for each managerial position is identi- fi ed. A matrix listing positions and people identifi ed as “ ready now ” or “ ready with development ” for each position is generated; this identifi es gaps in bench strength and where there are surpluses for at - risk positions. The business unit matrix consists of names across the business unit, and is not portrayed as the ratio being used at the service - wide level. The 2:1 ratio is a corporate aggregate indicator: each business unit is identifying its business specifi c requirements on a more granular level.

At the individual manager level, each manager has identifi ed his or her potential successors within the work group. If there are no potential successors, the manager has looked at his or her talent pool available and identifi ed those who need development.

FIGURE 7.7. Sample Service - Wide Bench Strength Report

Senior Managers Assessed = 1214

Readiness Level

# and %

# Interested in Advancing and % of

Readiness Level

# Mobile and % of Those Who Are Interested in

Advancing

Ready Now 415 / 34% 249 / 60% 164 / 67%

Ready with

Development 579 / 45% 365 / 63% 274 / 75%

Not Ready 220 / 18% 132 / 60% 101 / 76%

Department Managers Assessed = 359

Ready with

Front-Line Managers Assessed = 4,891

Ready with

Non-Managers Assessed = 1,271)

Ready with

Development 560 / 44% 444 / 79% 282 / 63%

Ready Now 126 / 35% 109 / 86% 49 / 45%

Development 193 / 54% 167 / 86% 83 / 50%

Not Ready 40 / 11% 30 / 75% 21 / 70%

Ready Now 1362 / 28% 1050 / 77% 549 / 52%

Development 2157 / 44% 1602 / 74% 915 / 57%

Not Ready 1382 / 28% 962 / 70% 592 / 61%

Ready Now 550 / 43% 462 / 84% 269 / 56%

Not Ready 161 / 13% 109 / 68% 73 / 67%

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INDICATORS OF SUCCESS

The success of the LSR process is measured by using the data gathered to help to answer some of the questions below and to develop a corporate process that will address cross - functional and service - wide issues.

How can bench strength be built and sustained?

Where are the critical positions that require recruitment/selection?

Where and what are the competency gaps? At what level, in what function, and/or geographic location?

What are the competency gaps across the service?

What are the common needs that can be developed through the IRS leadership curricula, out - service offerings, or cross - functional details or acting assignments?

The IRS is using the LSR data in a number of ways to address competencies, bench strength development, and strategy, as described below.

Competency Profi ciency

Identifying core competencies and competency requirements;

Planning strategies to close competency gaps;

Determining talents needed for the long term; and

Developing a comprehensive picture of where gaps exist between competencies the workforce currently possesses and future competency requirements.

Bench Strength

Determining current supply and anticipated demand; and

Developing a business strategy based on long - term talent needs, not just on posi- tion replacement.

Development

Setting up a pool of managers who rotate among various departments or outside of a business unit; and

Creating organizational learning opportunities by assigning teams of managers from various departments to conduct ongoing or special projects of organizational signifi cance.

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132 Best Practices in Talent Management

Strategy

Aligning workforce requirements directly with the IRS ’ s strategic and annual business plans;

Identifying and implementing gap reduction strategies;

Establishing a formal succession plan for the organization; and

Utilizing LSR data for strategic and workforce planning.

EVALUATION

There have been a number of forms of evaluation of the LSR process and website since it was implemented.

Lessons Learned The OLSP has held a number of lessons learned meetings and col- lects data during monthly conference calls with the business unit points of contact (POCs). One of the key learnings was that it is critically important for managers and subordinates to have a common understanding of the meaning and behaviors related to each competency in their specifi c work environments. The Competency Discussion Guide was a direct output of this learning. Additionally, daily communication with POCs provides direct feedback to OLSP, and a number of teams have been created to address issues and improvements to the process. For example, an LSR System User Group was formed that evaluates and prioritizes requested system enhancements and identifi es issues for resolution.

Online LSR User Survey At the time this article was written, an extensive survey exploring every stage of the LSR process was developed and has been administered to a randomly selected group of 1,869 senior, department, and front - line managers and to all IRS executives. The response rate was 71 percent, showing a tremendous inter- est in the process. The results of the survey will be used to make further improvements to the LSR and the website.

Focus Groups Knowledge Bank (KB), a contractor collaborating with OLSP in writ- ing the IRS Strategic Leadership Succession Management Plan, has done a bench- marking study and a gap analysis on the IRS succession planning process. As part of the gap analysis, KB has conducted focus groups with users and is currently in the process of compiling and analyzing the data. The results will be combined with the information from the survey to improve the system and process.

Lean Six Sigma Workforce of Tomorrow (WoT) has recommended and OLSP and the business units are going to be participating in a Lean Six Sigma exercise designed to determine whether there are process effi ciencies to be gained. Lean Six Sigma will assess the LSR process overall, including the four stages and the website. The data from the LSR User Survey and KB focus group fi ndings will be included in this analysis.

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LSR Participation One measure of success for a process is the level of participation. Currently the LSR has been used in every business unit to assess managerial potential, and there are more than nine thousand records in the database. A number of the busi- ness units have completed one full cycle, defi ned as assessing all levels of leadership below executive, and most have either started or are preparing to start their second cycle. Furthermore, the majority of the business units have begun or are getting ready to assess specifi c non - manager populations.

NEXT STEPS

There are a number of next steps planned, including the implementation in late calen- dar year 2009 of the IRS Strategic Leadership Succession Management Plan, currently under development. The plan addresses and integrates all components of succession planning from recruiting through performance management.

The WoT “ Growing Future Leaders ” team has been working closely with the Human Capital Offi ce to review and enhance the IRS succession planning strategy and process. Included are proposals for:

An integrating mechanism called the “ Geographic Talent Board ” (GTB), described below;

Developing high - potential employees using the GTB;

Reducing the number of leadership competencies;

Streamlining the LSR process (Lean Six Sigma);

Enhancing the LSR website; and

Using the GTB to foster a coaching and mentoring approach for development.

A pilot of the GTB is being planned. The pilot will test the concept and functional- ity of the board. The GTB will consist of executives in a geographic area who meet regularly to:

Identify high - potential employees (based on the nine - box matrix described below), oversee their development, mentoring/coaching, and feedback and follow - up;

Coordinate developmental assignments for front - line, department, and senior managers both within and among the business units in the geographic area; and

Identify mentors and prot é g é s for enhancing development.

To facilitate identifying high - potential employees, the GTB will use a nine - box model based on readiness information from the LSR (potential) and performance data from the last three performance appraisals (performance). This matrix will result in a plot combining potential and performance, assigning individuals to specifi c blocks which will identify those who are the “ stars, ” demonstrating both high potential and high performance.

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134 Best Practices in Talent Management

The current IRS career learning plan (CLP) is paper - based. With the paper CLP there is no real aggregation of information and there is no effi cient method of gather- ing developmental needs individually, organizationally, or cross - organizationally. Thus, the IRS initiated a project group to design, develop, and implement a web - based career learning plan. The web CLP will automate the process and generate a variety of reports that may be used at all leadership levels. The data will also provide a wealth of information that will be used to plan and budget for training and development. The piloting of the Web CLP will occur in early 2009 with one IRS business unit. WoT expects to pilot it in support of the GTB shortly thereafter.

CONCLUSION

With the leadership succession planning process, the IRS embarked on a journey that has provided vital and important information for managing talent. The LSR process has exceeded expectations. The system is not perfect (no system is). However, the IRS process and technology have been recognized as a best practice in government. With the advent of the WoT Initiative, the succession planning process will move to the next level, providing the information required for identifying and developing our leader- ship talent, and helping to fulfi ll Commissioner Shulman ’ s goal of making the IRS “ a best place to work. ”

NOTES 1. The IRS LSR process was designed and implemented in collaboration with PricewaterhouseCoopers LLP

through an exclusive contractual arrangement to address specifi c IRS organizational needs. The PwC fi rm does not accept responsibility to any other third party.

2. The IRS has shared many of these resources and continues to be willing to do so.

Susan Clayton, Ph.D. , is assigned to the Offi ce of Leadership Succession Planning in the IRS. Dr. Clayton was a manager of organization development in the IRS; manager of organization and management development at Sun Gas Company. She held a visit- ing professorship in the Cox School of Business at Southern Methodist University and taught in the business school of the University of Texas at Dallas. Clayton consulted with several Fortune 500 companies regarding their strategic change initiatives. She is a Phi Beta Kappa who holds a master ’ s degree in psychology and a master ’ s in busi- ness from Southern Methodist University. Her Ph.D. in behavioral management sci- ence is from the University of Texas at Dallas.

Victoria Baugh , M.A., M.Ed., is assigned to the Offi ce of Leadership Succession Planning in the IRS. She played a key role in the implementation of the LSR and the establishment of a service - wide succession planning program in the IRS. During her

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tenure with the IRS, Baugh has been an organization development consultant, an instructional systems designer, and a training manager. She formerly worked for the Department of Navy as a senior education specialist in a training command and for Escambia County Public Schools as a curriculum coordinator for a self - contained school for severely emotionally handicapped children. Baugh has a M.Ed. in educa- tion, training, and management systems and an M.A. focused on learning psychology from the University of West Florida. She also has professional certifi cations in organi- zation development and process management.

Mathew J. Ferrero is director, Offi ce of Leadership Succession Planning, in the IRS. He and his team support business unit executives in identifying and developing leader- ship talent for current and future vacancies at all leadership levels. Previously, Ferrero was director of the IRS Leadership Development Center, where he and his team helped create leadership development and succession planning programs that have become the benchmark in the federal government, receiving “ best practice ” recognition from the American Society for Training and Development, American Productivity and Quality Center, and Linkage, Incorporated. Ferrero was team leader for the IRS West- ern Region Organization Development Consulting Group and he has held front - line and senior manager positions in the IRS fi eld collection operation. He received his bachelor ’ s and master ’ s degrees in American history from the University of California, Riverside.

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136

CHAPTER

8 KAISER PERMANENTE COLORADO REGION

MARGARET TURNER

A leadership succession management strategy that creates a pipeline of talent to drive current and future organizational performance. Executed through a fully sup- ported system process to develop leadership talent.

Introduction

Company Background

The Business Case

Design

Process

Implementation

Support and Reinforce

Evaluation

Next Steps

Conclusion

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INTRODUCTION

This case study introduces the systematic process and tools that are currently used to develop leaders in the Colorado region at Kaiser Permanente. This process and tools, specifi c to Colorado, were built upon the national review process. Using the national review and the Colorado systematic process and tools helps to create a pipeline of national leaders through the identifi cation of leaders ’ ability, aspirations, and readiness for their next roles.

Company Background Founded in 1945, Kaiser Permanente is the nation ’ s largest not - for - profi t health plan, serving 8.6 million members, with headquarters in Oakland, California. It comprises:

Kaiser Foundation Health Plan, Inc.;

Kaiser Foundation Hospitals and their subsidiaries; and

The Permanente Medical Groups.

At Kaiser Permanente, physicians are responsible for medical decisions. The Per- manente Medical Groups, which provide care for Kaiser Permanente members, con- tinuously develop and refi ne medical practices to help ensure that care is delivered in the most effi cient and effective manner possible.

Kaiser Permanente ’ s creation resulted from the challenge of providing Americans with medical care during the Great Depression and World War II, when most people could not afford to go to a doctor. Among the innovations it has brought to U.S. health care are

Prepaid insurance, which spreads the cost to make it more affordable;

Physician group practice to maximize their abilities to care for patients;

A focus on preventing illness as much as on caring for the sick; and

An organized delivery system, putting as many services as possible under one roof.

Organization - wide, Kaiser Permanente has 8,663,543 members, 159,766 employ- ees, and 14,087 doctors to serve its regions. Kaiser Permanente is comprised of the following regions:

Northern California

Southern California

Colorado

Georgia

Hawaii

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138 Best Practices in Talent Management

Mid - Atlantic

Ohio

Oregon/Washington

Kaiser Permanente Colorado is driven by a social mission. Its mission is to exist to provide high - quality, affordable health care services to improve the health of our members and the communities we serve. We promise to consistently provide high - quality affordable health care in an easy and convenient manner with a personal touch. This case study will focus on the work in leadership succession management in Kaiser Permanente ’ s Colorado Region.

Kaiser Permanente Colorado is a non - profi t integrated health care delivery system operated by Kaiser Foundation Health Plan of Colorado and the Colorado Permanente Medical Group. Together they have provided comprehensive health care to Kaiser Permanente Colorado members since July 1, 1969. Kaiser Permanente is Colorado ’ s oldest and largest group - practice health care organization, with 490,000 members in the six - county Denver/Boulder metropolitan area and the Colorado Springs service area. The region has more than 5,400 employees and 2008 revenues of $ 2.3 billion.

Kaiser Permanente Colorado owns and operates seventeen medical offi ces and three behavioral health and chemical dependency offi ces throughout the Denver/ Boulder area. In Denver/Boulder, members receive care from more than 300 primary care and 530 specialty physicians. Kaiser Permanente Colorado provides health care in the Colorado Springs service area through a network of 219 primary care physicians and 534 specialists. Additionally, the organization is affi liated with Memorial Hospital in Colorado Springs and Parkview Medical Center in Pueblo.

In 2008, Kaiser Permanente Colorado was awarded the JD Powers award for the highest customer satisfaction. Each year, J.D. Power and Associates surveys millions of consumers around the world to gather their opinions and expectations about the products and services they purchase. This information is used to compile rankings based on product quality, customer satisfaction, or other industry - specifi c metrics that gauge company performance. Kaiser Permanente Colorado in 2008 – 2009 is also a top - ranked commercial health plan and top - ranked Medicare plan, according to rank- ing by U.S. News World Report (Camarow, 2008) and the National Committee for Quality Assurance (NCQA).

The Business Case The Kaiser Permanente executive recruiting department conducted an analysis of past executive - level hires, internally as well as externally, and realized that 65 percent of its executives were recruited externally. The information from the analysis helped the organization realize that there was a gap in the way leaders were being developed in the organization. Due to this information, the organization set a goal to hire 60 percent internally and 40 percent externally to create opportunities for current leaders to grow with the organization, and still bring in new talents and perspectives to the leadership

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Kaiser Permanente Colorado Region 139

ranks. The importance of this is for the regions to use and build on the national approach for developing leaders to reach our national internal/external hiring goal. Kaiser Permanente is a matrixed organization. Using a common national framework and region - specifi c processes to support the growth and development of its leaders serves to create synergies between the national organization and its regions. Because of this, Kaiser Permanente can create a robust national pipeline of leaders, consisting of proven leaders across our multiple regions.

This case study will showcase the systematic approach that Kaiser Permanente ’ s Colorado Region developed to create a regional pipeline comprised of the senior direc- tor/director leadership. This systematic approach builds on national processes and feeds into the national pipeline.

The high - potential leadership attrition rate in Kaiser Permanente Colorado is less than 5 percent since 2005 . Sixty percent of the high - potential population has either been promoted to their aspired roles or had job role expansions. These statistics are due to the fact that the Colorado executive team identifi ed a need for a systematic approach to build leadership bench strength for the region in 2005. The executive team is responsible for setting short - term and long - term strategic direction for the region. The strategic direction is focused around affordability, service, quality, membership growth, community benefi t, and people. The executive team is also responsible for monitoring the execution of the strategic plan and ensuring that we have the talent in place to deliver on its promise.

The executive team strongly believes that leadership development must be aligned with the organization ’ s business strategy, so that Kaiser Permanente Colorado can exe- cute against its top critical business strategies now and in the future. Leadership devel- opment is not seen as a program, but rather as part of the organizational strategy that creates leadership capability.

When the leadership review process was fi rst introduced in the Colorado region, it was the beginning process for identifi cation of high - potential talent. This was a great initial step in the process of developing leaders. The review process was implemented from the Leadership Development Department at Program Offi ce (corporate offi ce), since there was not capacity within the region to execute on the process. The begin- ning of the leadership review process (Figure 8.1 ) had the executive leaders fi ll out an assessment on the incumbent based on the incumbent ’ s competencies, interest, and potential. This information was gathered and presented in an all - day forum with the Colorado executive team. The incumbents were discussed as to their potential, aspired roles, and level of readiness. This process was not transparent, and there was not a clear process for communicating the results or resources to follow through on the sug- gested actions. Also, the review process was designed to have the executives be accountable for the development of their high - potential leaders. As the executives started to work on the development of their high - potential talent, they realized that they needed support to develop these future leaders. The Colorado executive team realized that without those resources the process was incomplete and not driving the needed business results.

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140 Best Practices in Talent Management

In 2005, Kaiser Permanente Colorado created a systematic approach to the devel- opment of their leaders. First and foremost, the process of leadership development needed to become transparent. It was also agreed by the executive team that all leaders reviewed would be afforded the opportunity to develop not just the high - potential tal- ent. In this systematic approach, different levels of development and resources are identifi ed based on the leader ’ s level of readiness.

The approach for a systematic process involved the following components:

Identifi cation of high - potential talent and behavior gaps;

Management of talent;

Development of talent; and

Creation of a leadership pipeline for regional and national roles.

Building leadership capacity in the Colorado region (Figure 8.2 ) feeds the national pipeline for leadership succession management. The national talent pipeline is com- prised of high - potential talent from all regions. Each region conducts a leadership review process and then feeds the information of high - potential talent who aspire to a vice president and/or executive director role to the national leaders. Once validated by the national functional leaders, the incumbents are placed in the national pipeline for development. National and regional resources are used to accelerate the pipeline can- didates ’ development. The Colorado region helps not only to identify incumbents with a high level of readiness for the region, but also for the national organization.

As this case study proceeds, it will outline the systematic process that has been built and the integrated approach to Kaiser Permanente Colorado ’ s leadership succes- sion management.

DESIGN

The purpose of the leadership succession management process folds into the Kaiser Permanente People Strategy for Colorado, which has a clear line of sight to the organi- zational strategy. Developing leaders is a signifi cant component of the Colorado

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FIGURE 8.1. Beginning Leadership Review Process

Executive Assessment Incumbent assessed on Competencies

Next Role/Readiness Strength/Development Needs

Leadership Review Forum Strengths/Development

Future Role Readiness Validation

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Kaiser Permanente Colorado Region 141

Region ’ s People Strategy, which acknowledges that our people drive business results. Increasing employee engagement and accountability to execute the region ’ s strategic priorities requires highly skilled leaders and a plan to sustain those skills through succession manage- ment. The People Strategy enables organizational performance through people.

One of the outcomes of the People Strategy is to have the leader- ship talent in place to effectively lead the current business and trans- form the organization to meet future business challenges. Out of the People Strategy, the framework for building leaders emerged. This framework keeps the customer as the center of focus for leaders to drive business outcomes. Each of the buckets in Figure 8.3 represents areas in which leaders need focus to be successful in driving optimal results for the organization.

The organization ’ s competency model was aligned with this frame- work. In this way, the development of the organization ’ s leaders is focused on what is most important to drive results.

Another outcome of the People Strategy and the leadership frame- work was for the executive team to agree to be accountable to the development of the high - potential population as a group. In other words, there was team ownership of

The overarching

focus is “ To select,

retain, and engage

talented and

accountable

team - oriented

individuals to

execute the

region ’ s key strate-

gic initiatives. ”

FIGURE 8.2. Capacity Building in Colorado

Entry Level/Junior Staff

Supervisor/Individual

Managers

Director / Senior Director

Exec

Building Leadership Capacity in Colorado

Co m

pe te

nc ie

s f or

c ur

re nt

ro le

s

Re gi

on al

C ar

ee r L

ad de

r

Na tio

na l P

ip el

in es Executive LR and Development of

Sr. Leadership Team

LR & Development of Directors and Sr. Directors

Functional LR and Development of Staff

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142 Best Practices in Talent Management

identifi ed talent by the executive team. Together the executive team holds itself accountable by:

Conducting two yearly review processes to update current high - potential talent and to identify new talent (approximately fi fty - fi ve incumbents). This also includes leadership diversity talent;

Providing feedback to the incumbents from the review process as a fi rst step in developing them for their aspired roles;

Continually working together to identify experience management opportunities that will accelerate the high - potentials ’ growth toward their next aspired role (approximately thirteen high - potentials, on average);

Sponsoring and supporting development processes for the high - potential talent as a group; and

Coaching and mentoring, based on best practices and best - fi t principles.

PROCESS

Kaiser Permanente Colorado leadership succession management is a systematic approach to development that starts with the national talent assessment. The national

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FIGURE 8.3. Leadership Framework

Goal:

Leaders prepared for Future Business Needs

Leadership Development

Financial and Business Success

Creating Value for the Member

Clarity and Execution of Strategy

Financial and Business Performance

Operational Excellence

Assets and Resource Allocation

Risk Management

Cost Management

Performance Improvement

Leading People

Building a Performance Culture through high-performing teams

Motivating and Engaging

Cultural Competency

Partnership

Working together to create optimal business outcomes

Holds others accountable for developing/maintaining partnership

Customer Service

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talent assessment process that is used in Colorado is based on a behavioral compe- tency model that measures behaviors that are observable, demonstrated, and critical to successful leaders (Figure 8.4 ).

The leadership success factors (LSF) were developed after a comprehensive anal- ysis of the leadership competencies that managers must exemplify for Kaiser Perman- ente to be successful, both now and in the future. These competencies are recognized as applying to Kaiser Permanente managers in all entities and at all management lev- els of the organization. The LSFs provide a framework for Kaiser Permanente manag- ers to identify and communicate critical leadership behaviors, assess individual manager capabilities (360 - degree feedback), and focus developmental and learning efforts. Each LSF is associated with a leadership competency cluster. The clusters pro- vide an overall view of what a leader needs to be successful. The clusters and themes are outlined in Figure 8.4 .

Research has shown that emotional intelligence has a positive impact on successful leadership and organizational performance (Goleman, 2002). In order to successfully demonstrate the LSF, one must have emotional intelligence as a base- line competency. For example, to demonstrate effective infl uence behaviors requires that one be effective in managing one ’ s emotions and understanding the needs of others.

The LSFs are a part of the national talent assessment process which is designed to:

FIGURE 8.4. Leadership Success Factors

Sharpening the Focus

Strategic/Systems Thinking Service Orientation Decisiveness

Building Commitment

Communication Influence Team Focus Change Leadership Partnership

Building Capacity

Cultural Competence Develops Others Personal Development

Driving for Results

Results Orientation Confidence/Initiative Reward/RecognitionEmotional Intelligence

Emotional Awareness

Emotional Management

Empathy

Personal Integrity

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144 Best Practices in Talent Management

Foster objectivity;

Assess performance and potential, and

Distinguish between “ high potential ” and “ high performers. ”

In the national talent assessment process, objectivity is achieved by evaluating the incumbent against the organization ’ s competency model and the Colorado executive team leadership review. The outcomes of the leadership review include:

Collective understanding and agreement of the high - potential population;

Peer feedback/input on the performance, strengths/development needs, aspiration, engagement, and willingness to learn;

Identifi cation of future role, readiness, and mobility; and

Collective agreement to map high - potential talent to key experiences for their development.

The national model shown in Figure 8.5 clarifi es an incumbent ’ s picture of a high - potential candidate. This national model creates a common framework for the regions to identify leadership talent.

The leadership talent review is the fi rst step in the development process, working in partnership with the National Offi ce of Leadership Development. Kaiser Perman-

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FIGURE 8.5. National Model of Potential

Model of Potential High Potentials = “Individuals who are likely to advance to the next level (within the next 3 years) through

their consistent display and contribution to sustained individual and business unit performance, proficiency in leadership and technical / organizational skills, and demonstration of the behavioral predictors of potential.”

PERFORMANCE ABILITIES PREDICTORS

OF POTENTIAL PROMOTABILITY

Sustained / Increased Performance Over Time: • Individual • Business Unit

• Technical Skills • Leadership Competencies • Experiences • Organizational Knowledge

• Learning Agility • Engagement (including Culture/Value Fit) • Managing Ambiguity / Complexity • Enterprise Business Acumen

+ Aspiration to Advance / Motivation to Lead + Mobile * (Within Region)

MANAGER ASSESSMENT

DEVELOPMENT FOCUS:

• Advance (High-Potential)

• Develop • Re-Assess

CALIBRATION MEETING

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ente Colorado has built upon the national review process (Figure 8.6 ). To further clar- ify high - potential status in the review process, additional components were developed in the Colorado region, which include preliminary incumbent self - rating, calibration meetings in which the incumbent is discussed with his or her leader to identify several factors, and measurement of engagement and learning. These processes help to give the organization a more informed picture of the incumbent and lead to a transparent talent management process.

The talent review process in Kaiser Permanente Colorado is transparent, in that the incumbent is aware of the expectations of the process. The incumbent fi lls out a survey with the following information:

Resume;

Aspirations;

Willingness to relocate and time frame; and

Vice - president - level experiences.

The leader will fi ll out an assessment on the incumbent based on the leadership success factors, performance (both personal and business unit), future role, and level

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FIGURE 8.6. Colorado Leadership Review Process

Candidate Profile Functional Assessment Leadership Experiences

Aspirations

Leader Assessment VPs review direct reports

Use Profile Data

Calibration Meetings VP & LSM consultants

• Candidate Profile • VP Review of Direct Report

• Engagement & Learning Outcome: ID Hi Potential

Leadership Review • Business Priorities • Model of Potential • Review HiPo Talent

• Validate Development Focus and Actions

Leader Feedback to Candidates Follow up conversations with

all reviewed candidates

HiPo Development 360 Feedback

Individual Devel. Plans Case Management

Pipeline Validation By PO Leader

Talent Planning Map experiences to HiPo

development needs

Diversity/HiPo Colorado Review HiPo Leadership Diversity Graduates

HiPo Colorado Specific Talent

Communication VP’s communication purpose and process to direct reports

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146 Best Practices in Talent Management

of readiness. Both sets of information are then brought together and the Leadership Succession Management Consultant meets with the leader to conduct a calibration meeting. In this meeting the following is discussed for each incumbent:

Strengths — for both current and future role;

Development needs — for both current and future role;

Aspiration for future role;

Derailing behaviors;

Learning agility;

Engagement;

Level of readiness; and

Development actions.

As a result of the calibration meeting, the incumbent is placed on a readiness matrix. Those incumbents who fall into the now - to - one-year, and one - to - three - year levels of readiness and have the ability to relocate (high potential), move onto the leadership review forum. All other incumbents who go through the process are given feedback from the calibration meetings, create individual development plans, and work with their leaders though quarterly development meetings (Figure 8.7 ).

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FIGURE 8.7. Leadership Succession Management Process

Leadership Review

Orientation/Hay 360

IDP Update/Development— internal coaches and mentor identified

Experience Management

Peer Learning Group

If needed: Executive Coaching

Ready 3+ yrs/Needs Improvement

Work with leader to update IDP. Continue development until next leadership review process.

Ongoing -

Ready for Next EM Process Ready for Promotion

Executive Leadership Development (Ready now/Ready 1–3 yrs)

Leadership Edge Program/Outside Programs

Integration of Diversity

Leadership Program

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The high - potential candidates are reviewed in a one - day forum with the executive team to validate their level of readiness and aspired, future role. The main results of the leadership review process are the identifi cation, agreement of the talent, and group ownership of the high - potential talent.

Once the high - potential talent has been identifi ed, they start in the systematic proc- ess of development. The processes in Figure 8.7 were created in the Colorado region to keep focus and accelerate leaders ’ development. The process begins with the high - potential orientation and fl ows into the following processes: peer group activities, individual case management of high - potential leaders, and development opportunities driven by levels of readiness for aspired roles. Each of these processes will be defi ned in the following section.

Kaiser Permanente Colorado has designed processes, programs, and opportunities for leaders to enhance their development (Figure 8.8 ). Each of these programs has been strategically aligned to address the development gaps in the organization. Each process, program or experience, inculcates the systematic process for development of the organization ’ s leaders.

Orientation/Assessments Once the high - potential leaders have been identifi ed, they attend an orientation to the systematic process for their development. Accountabilities are outlined and agreed on to continue in the process. Assessments are utilized after the review process is complete to measure the high - potentials ’ preferences, determine emotional intelligence, and give 360 - degree feedback. These assessments help iden- tify current strengths and development needs that inform the individual development plan for each high - potential leader.

Individual Development Plan The individual development plan (IDP) is the road map for a high - potential ’ s development. This plan is focused on the individual ’ s

FIGURE 8.8. Development Process

Orientation/Hay 360

IDP Update/Development— internal coaches and mentor identified

Experience Management

Peer Learning Group

If needed: Executive Coaching

Ready for next EM Process Ready for Promotion

Leadership Edge Program/Outside Programs

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148 Best Practices in Talent Management

business objectives and what behaviors need to be developed to successfully execute those objectives. The IDP process also identifi es the high - potentials ’ future roles, development needs, and experiences for that role.

Case Management Each high - potential leader is assigned a case manager who works with him or her on the development plan. The high - potential leader and case manager meet quarterly with the high - potential ’ s manager to the review development progress. The executive team, as a group, also receives quarterly updates on each high - potential leader. The case manager, who also partners with National Leadership Development, is the champion for the high - potential leader to help the leader develop toward his or her aspired future role. The outcome of this process:

Continuous monitoring of the high - potential ’ s development;

Coaching for development;

Roadblocks to development addressed; and

Experiences identifi ed for the high - potential leader.

Peer Network The Peer Learning Group, composed of our high - potential talent, meets quarterly to discuss development and to provide networking opportunities. The executive team is involved with the group by sharing their experiences of their leader- ship journey. Expected outcomes of this program include:

Cross - functional partnerships that help the organization move away from a “ silo ” orientation — reducing redundant processes;

Internal/external mentoring support; and

Peer support network that brings together the high - potential population to work on their development.

Leadership Edge — Senior Director/Director Level This program was developed by Kaiser Permanente Colorado based on the leadership gaps within the region. It is a thirteen - day learning program extended over a four - month period. The program is based on the core leadership competencies, gaps, and skills critical to the region. What is unique and important about the Leadership Edge program is that executive team members play the role of “ color commentators ” throughout the curriculum. The color commentator role is designed to have the executive, who is the subject - matter expert, come into the class and interact by challenging participants on current issues that face the organization; listen to solutions to implement; and dialogue on innovation. The Leadership Alumni Group continues working with past graduates on critical business initiatives with the executives. Outcomes of this program have been:

The fi rst cohort assisted the executive team to defi ne the six key business strate- gies for the organization;

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Cohorts have made recommendations to focus on two strategic initiatives, down from six initiatives previously; and

Most importantly, this program is instrumental in breaking down silos for leaders to work effectively across functions.

Experience Management Experience management (EM) is a challenge in a small region. EM is a structured process that identifi es the scope of the project, competen- cies, and resources. High - potential talent is mapped to the following year ’ s key strate- gic initiatives based on their developmental needs. Risks associated with the project are also identifi ed before assigning a project for the experience. Other sources for developmental experiences are national projects and outside community projects. The outcomes of this program are

Incumbent gains experience in an area needed for growth for his or her current or future role;

Incumbents have exposure to executive/national teams; and

Incumbents receive cross - functional exposure and experience.

Executive Coaching Program The executive coaching program provides a structured approach for individual development. Each high - potential leader has an external exec- utive coach available to him or her. Once the IDP is created, the high - potential leader can request an executive coach through the leadership succession management (LSM) department. Based on their developmental needs, the high - potential leaders receive three bios of coaches and interview questions to help in selecting a coach. Once a coach is selected, the high - potential leader, his or her manager, and the coach meet to agree on the outcome of the coaching, There are mid - course check - ins with these three parties. At the end of the coaching program, there is a fi nal meeting and evaluations are completed. The results have been:

Increased quality of the individual development plans;

Noticeable increase in leadership effectiveness; and

Noticeable increase in commitment to development, at multiple levels.

Outcomes of the System Process Kaiser Permanente Colorado measures high - potentials ’ satisfaction with their development process with an annual survey. In the 2007 survey, 100 percent of respondents strongly agreed they would stay with the organization. The leadership succession management process has proven to increase the retention of our leaders. As stated earlier, throughout the three - year proc- ess, Kaiser Permanente ’ s attrition rate in the high - potential development program is less than 5 percent.

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150 Best Practices in Talent Management

IMPLEMENTATION

Sponsorship from the executive team is of paramount importance for successful exe- cution and sustainability. In the Colorado region, the executive team is the sponsoring body for the leadership succession management process.

Two talent review processes are conducted each year with the executive team. One is for overall identifi cation of high - potential talent; the other is for high - potential diverse leaders (supervisor and manager level) and high - potential talent who do not have the ability to relocate within the organization. After the review process, the exec- utive team meets to map the high - potential talent to experiences for the coming year.

Once the high - potentials have been identifi ed, their leader gives them the feed- back from the review and they then enter into the case management process. The high - potential talent goes through an orientation process that gives them information on the expectations for being high - potential leaders and the resources available for them. They build their individual development plans, which guide the development actions they will be focusing on for the year.

The training programs discussed below contribute to the development of high - potential leaders:

National Executive Leadership Program — President/Vice President/Executive Leaders The Kaiser Permanente Executive Leadership Program (ELP) is a compre- hensive leadership program whereby leaders from across the program gather to con- centrate on business focus designed to enhance participants ’ knowledge, tools, and relationships. This is accomplished through extensive case studies that are designed to help participants examine and refi ne their leadership points of view. ELP provides par- ticipants with a unique opportunity to evaluate their leadership approaches and skills with the expectation that they return to work with their “ game up. ”

The objectives of the program are to:

Give leaders a broader perspective;

Develop leaders to ensure KP ’ s future;

Build a network of organizational relationships that provide current and future value to the participants and to the organization;

Deliver customized business content relevant to KP ’ s issues and needs;

Build commitment to KP; and

Improve participants ’ effectiveness in their current roles.

ELP participants ’ behavior change is evidenced by:

Taking initiative and leading change more frequently;

Exhibiting greater confi dence;

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Using a broader perspective to lead more effectively;

Having higher expectations of themselves and others;

Having greater energy and delivering better performance;

Communicating more effectively; and

Innovating — using newly acquired tools and a network of colleagues to develop new processes.

Diversity Leadership Program The leadership diversity development program for supervisors and managers is a fi fteen - month program that includes mentoring, training and development, and case management for leaders of diverse background to increase their leadership skill sets. The program gives the diverse leaders the opportunity to work with mentors and gain exposure and knowledge around organizational issues. It also gives the mentors the opportunity to increase their awareness and skill levels around diverse cultures from the mentees. The outcomes of this program include:

Identifi cation of high - potential diverse leaders;

50 percent promotion rate for individuals who have attended the program;

Targeted development and support of high - potential diverse leaders; and

Exposure to senior leaders.

Leadership On - Boarding This program is an introduction for new leaders (both inter- nal and external hires) to create focus and clarity during their fi rst ninety days in their roles. A 30 - 60 - 90 - day plan of action is the major product of the leadership on - boarding. An executive coach can be attached to this process if needed.

Additional Training Programs Organizational effectiveness (OE) in Kaiser Perman- ente Colorado believes that the performance management pyramid, as shown in Figure 8.9 , is one of the keys in mapping employee development.

OE works with mid - level leaders to achieve the following:

Set performance objectives linked to organizational objectives;

Establish standards against which the performance objectives can be measured;

Identify areas for performance improvement; and

Provide ongoing feedback.

The paths in Figure 8.9 , Explore, Ascent, and Summit, have specifi c training pro- grams attached that address the developmental needs of that level. The design continu- ously develops leaders from their fi rst supervisory experiences and empowers leaders in service, change management, and strategic execution.

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152 Best Practices in Talent Management

OE provides various training programs that link to the developmental gaps of leaders in the organization. Kaiser Permanente ’ s program offi ce also has national pro- grams that support the learning of leaders that are used in the development of regional leaders.

All elements of the systematic process are critical, as one builds upon the other. The elements that have had the biggest impact on the development for Kaiser Perman- ente Colorado are the Leadership Edge Program and individual case management. The success with the Leadership Edge Program is driven by Kaiser Permanente Colorado ’ s executive team involvement. Learners directly interact with the executives and have an impact on the direction of the organization. The case management process gives the high - potential employee personalized one - on - one assistance, which has been instru- mental to ensuring development.

SUPPORT AND REINFORCE

Kaiser Permanente Colorado ’ s leadership succession management process is based on sustained commitment to development. The process looks at the leadership talent life cycle from an end - to - end perspective. This starts with the on - boarding of new leaders, identifi cation of top talent, and steps leading to promotion. The manager is ultimately accountable for the high - potential leader ’ s development, with support from the leader- ship succession management consultants.

Since 2005, we have identifi ed a yearly average of thirteen high - potential leaders. Sixty percent of the high - potential population over the last three years has either been promoted or given expanded roles as an outcome of the systematic process Kaiser Per- manente Colorado has developed. To continue executive involvement with the

FIGURE 8.9. Organizational Effectiveness Map

Summit

Ascent

Explore Professional/Individual Contributor

Supervisor and Managers/ Middle Management

Higher Level Development Opportunities Leaders Who

Drive Organizational Performance

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development of our leaders, the Leadership Edge Program has an alumni group that continues to work with the executive team on business solutions.

The executive team models commitment by following through on their actions. They keep development in their daily conversations. When a position becomes open or a project opens up, one of the fi rst places they look is at our high - potential popula- tion. This helps to create a culture of development for the organization.

EVALUATION

Kaiser Permanente Colorado measures the success of the leadership succession man- agement process through several different tools. The fi rst is the standard measure around promotion/role expansion per year of our high - potential population. Another is through the leadership development satisfaction survey. In the Leadership Edge Pro- gram, the organization is currently reviewing the anecdotal evidence and outcomes of projects to measure ROI. One of the most telling pieces of anecdotal evidence is with the executive team. They are asking the question of development when projects or opportunities arise that might fi t an experience for our high - potential population.

Kaiser Permanente Colorado stands out in leadership succession management through the work of creating a systematic process for the identifi cation and develop- ment of high - potential leaders. The process has strong executive leadership account- ability and support, robust tools, and training, coaching, and mentoring programs in place. Metrics and progress are monitored. All of these elements lead to a successful leadership succession process that retains the organization ’ s top talent and drives orga- nizational performance.

NEXT STEPS

To continue to build on the organization ’ s leadership succession management success, the following is a high - level overview of the work for 2009 – 2011:

Drive the leadership review process down to the supervisor level to create a regional pipeline for all levels of leaders;

Integrate the diversity leadership program into the systematic leadership succes- sion plan to increase the development of diverse leaders;

Integrate recruiting and pipeline work;

Generate additional metrics that measure success;

Conduct a predictive analysis of future leadership needs;

Deepen the understanding of critical roles;

Create a peer network for different levels within the organization; and

Create a formal mentoring process for leaders.

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154 Best Practices in Talent Management

CONCLUSION

The systematic approach used in the Colorado region has provided a consistent frame- work to identify and develop leaders. It is successful in the fact that it supports the executive team ’ s development of their direct reports, which drives their sponsorship for the leadership succession planning strategy. Success also lies in the partnership with the national leadership development department.

This process is only three years old, and it is still evolving. The systems are con- tinually evaluated and updated for effectiveness. Processes are slated to be incorpo- rated that will enhance leadership development and hopefully increase the velocity with which leaders are moving through their roles. Kaiser Permanente Colorado fi rmly believes that the development of their leaders will drive creative opportunities and solutions for the organization to execute on its current and future business objectives.

REFERENCES Camarow, A. (2008). Behind the health insurance ranking. U.S. News & World Report . www.usnews.

com/healthplan

Goleman, D. (2002). Primal leadership. Boston: Harvard Business School Press.

Margaret Turner is currently the internal senior consultant for leadership succession management at Kaiser Permanent Colorado. In her role, Turner is responsible for the strategy and execution of leadership succession planning. She collaborates with her national partners in creating a robust leadership succession process. Because of the success of Kaiser Permanente Colorado ’ s leadership succession process, the body of work is benchmarked throughout the national organization. Turner has over twenty years of experience in organization development, planning, and coaching of leaders. She has a master ’ s degree in organizational management.

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155

CHAPTER

9 MCDONALD ’ S

JAMES INTAGLIATA AND NEAL KULICK

This chapter describes fi ve separate initiatives that have been introduced in the past eight years to strengthen the areas of performance development, succession plan- ning, and leadership development. For each initiative we describe how and why the changes were introduced, how they have been refi ned, and the multiple positive impacts they have had on the business over time.

Context for Global Talent Management Initiatives

The Need for Change

Business and Global Workforce Strategy

Striking the Right Global/Local Balance

Customer and Employee Focus

Evolution of the Talent Management System: Key Initiatives and Enhancements

Initiative 1: Performance Development System Enhancement

Initiative 2: Global Succession Planning and Development Process

Initiative 3: The Leadership at McDonald ’ s Program (LAMP)

Initiative 4: The McDonald ’ s Leadership Institute

Initiative 5: The Global Leadership Development Program

Overall Summary

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CONTEXT FOR GLOBAL TALENT MANAGEMENT INITIATIVES

The Need for Change For most of its fi fty - four years of existence, McDonald ’ s has been quite successful growing its business while utilizing a decentralized approach to managing its global workforce. As the size, complexity, and global character of the business have continued to grow (to more than thirty - thousand restaurants in 118 countries serving fi fty - fi ve million customers per day), however, it became increasingly apparent that sustained success requires the development of more consistent and disciplined approaches to talent management and development. In response to this recognized need, McDonald ’ s has taken a number of steps, starting in 2001, that have enhanced its capabilities for developing local leadership talent and ensuring management continuity throughout its global system. This chapter will provide an overview of how McDonald ’ s system for developing its management talent throughout the world has evolved over the past eight years and will focus on describing the design, roll - out, initial impacts, and continued refi nement of fi ve major initiatives that have been introduced to enhance this system since 2001.

A number of factors led the organization to the conclusion that enhancements in its talent management and development system were needed. First, after many years of outstanding business results and growth, business performance began to falter. For the fourth quarter of 2002, in fact, the company declared the fi rst loss in its history. In contrast to the signifi cant problems surfacing in the company ’ s business results, how- ever, the ratings of managers in McDonald ’ s performance management system were incredibly high and suggested that everyone was doing an outstanding job. More spe- cifi cally, more than 90 percent of the managers were rated either “ outstanding ” or “ excellent, ” and over 75 percent were assessed as having the potential to advance to take on greater responsibilities. Senior management recognized that “ something was wrong with this picture. ” It was clear that the bias toward infl ated ratings of both per- formance and potential did not align with the overall performance of the business. Fur- thermore, senior management noted that, despite the very high ratings of employees ’ potential throughout the system, when key leadership positions actually needed to be fi lled, the company was frequently having diffi culty fi nding individuals everyone could agree were truly ready for these roles.

These factors led senior management of the company to begin to take signifi cant actions to upgrade the company ’ s talent management systems and processes on a global basis. (Note: While the initiatives to enhance talent development that are described in this paper were well under way at the time, the urgency for them was painfully validated when in April of 2004, McDonald ’ s CEO Jim Cantalupo died sud- denly and unexpectedly. Fortunately, due to the heightened attention that was being given to talent management at this time, his successor, Charlie Bell, was quickly and smoothly named to step into the CEO role. Tragically, not long after Charlie Bell was named as CEO he was diagnosed with colon cancer and died within a year. Once again McDonald ’ s was challenged to address the succession issue at the very top of the orga- nization and did so by naming Jim Skinner as CEO in January of 2005.)

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Business and Global Workforce Strategy Before launching into an in - depth description of McDonald ’ s talent management system, it is important to make clear how this system fi ts into McDonald ’ s overall business strat- egy and aligns with its key values. McDonald ’ s strategy to develop its global workforce is designed to be aligned with and support the execution of its over - arching strategic busi- ness goal, which is “ to become everyone ’ s favorite place and way to eat. ” McDonald ’ s has an overall “ plan to win ” that provides the global business with a common framework for developing tactics to reach this goal. The framework includes fi ve key elements: (1) people, (2) place, (3) product, (4) promotion, and (5) price (see Table 9.1 ).

The fi ve initiatives that have strengthened the company ’ s talent management sys- tem, and that will be described in this chapter, are key elements of the “ people ” com- ponent of the “ plan to win. ” They have been designed and implemented to enhance the organization ’ s global capability to develop and have “ at the ready ” the quantity and quality of leadership talent needed for effectively executing its “ Plan to Win ” and ensuring the company ’ s continued growth and success. Further, in order for these talent management initiatives to be successful, it was clear that they also needed to refl ect the value that McDonald ’ s places on striking the right global/local balance and customer/employee focus.

Striking the Right Global/Local Balance In order for McDonald ’ s to successfully execute its business strategy, the company has determined it needs to excel at developing and successfully implementing a balanced

TABLE 9.1. Framework for “Plan to Win”

Key Elements Relevant Measures

People Well trained

Fast and friendly service

Delighting customers

Place Clean

Relevant

Inviting

Product Food tastes great

Lots of choices

Hot and fresh

Promotion Consistent with the brand

Relevant to the customers

Price Best value to the most people

Affordable

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158 Best Practices in Talent Management

global/local approach in managing and developing its global workforce. While global frameworks and parameters can be used to set the stage for success and align the entire business with regard to strategy, essential tactics, and a shared company culture — at the end of the day, the actual execution of the company ’ s “ plan to win ” depends on the capability of local talent to develop and customize the elective tactics to fi t their local culture and circumstances. As a business, McDonald ’ s success relies not only on the leverage that comes from its coherent business strategy and focus on standardizing core operations/processes but also on its ability to adapt its tactics to fi t the needs and preferences of specifi c customers in particular regions or countries and to develop a deep connection between McDonald ’ s and the local communities in which it operates. This connection is refl ected in McDonald ’ s commitment to local charities; to Ronald McDonald Houses; and, most importantly, to the very people who own, operate, and manage McDonald ’ s stores in any locale, country, or region. Given this, it is deemed highly important that the individuals operating the business come from, under- stand, and represent the communities and cultures in which the business is located.

All areas of world have freedom to execute in their locales as long as they stick within the basic parameters of the “ plan to win ” framework by (1) developing an aligned strategy, (2) meeting customer needs within the marketplace, (3) supporting the global brand campaign — “ I ’ m Loving It, ” and (4) ensuring that their people develop and demonstrate key competencies that refl ect the core elements of the com- pany ’ s common culture and support its “ plan to win . ” In addition to having the techni- cal skills and expertise to do their specifi c jobs, staff throughout McDonald ’ s are expected to be attentive not just to getting results but to doing so in a way that is aligned with the company ’ s shared global company culture and values.

Customer and Employee Focus Whatever is done within McDonald ’ s is routinely assessed and measured against its impact on customers. Customer service and experience levels are key metrics that are embedded within the performance expectations for employees throughout the system. The company ’ s focus on and commitment to quality, service, cleanliness, and value (QSC & V) is strong. These variables have been shown to be strongly linked to cus- tomer expectations and loyalty. Any and all efforts to enhance the company ’ s global workforce management system incorporate a focus on key behaviors (customer focus and service orientation) and results - metrics (speed and quality of service, food, and environment) that deliver to customers what they value.

McDonald ’ s has also paid signifi cant attention to its employees and their develop- ment throughout its history. The company is well known for the opportunities it has given many of its people to grow with the company and to rise (over time) from work- ing as a member of a store crew to its highest executive ranks. In addition, the com- pany has placed strong emphasis on its managers ’ ability to create a work climate within which their employees are motivated to excel, give their best, and help to make McDonald ’ s “ everyone ’ s favorite place and way to eat. ” Since 1997, McDonald ’ s has

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used its commitment survey to assess the extent to which the desired work climate is being created throughout the company. This survey gathers employee feedback on a wide variety of specifi c management behaviors and practices that have been shown to be linked to employees ’ personal satisfaction and commitment and to the company ’ s business success. More specifi cally, the survey assesses employee satisfaction with such factors as the support and recognition they receive, the extent to which their skills are utilized and developed, their workload, the degree of their empowerment, resource availability to get the job done, the quality of supervision/leadership, and their com- pensation/benefi ts. A manager ’ s scores on the commitment survey are one of many important factors considered in rating his or her effectiveness and potential for advancement. In addition, turnover and tenure measures are used to evaluate the effec- tiveness of managers — especially in retaining top talent. The global workforce initia- tives described later in this chapter were developed so that they refl ect both the customer and employee focus described above.

EVOLUTION OF THE TALENT MANAGEMENT SYSTEM: KEY INITIATIVES AND ENHANCEMENTS

As mentioned earlier, fi ve separate initiatives were developed and have been imple- mented since 2001 to enhance McDonald ’ s talent management and development proc- esses and support the organization ’ s goal of meeting the global leadership needs of the business. These include: (1) the redesign of the performance development system (PDS) for all staff positions throughout McDonald ’ s; (2) introduction of the talent review process for all offi cer - level positions; (3) the development and roll - out of a series of accelerated development programs beginning with the Leaders at McDonald ’ s Program (LAMP) launched in 2003 to enhance the development of high- potential individuals for offi cer level positions; followed by (4) the introduction of the McDonald ’ s Leadership Institute; and (5) the design and launch of the Global Leader- ship Development Program.

Initiative 1: Performance Development System Redesign Prior to 2001, McDonald ’ s performance development system was comprised of (1) an “ MBO - based ” annual performance plan that measured performance against estab- lished annual objectives but included no assessment of how these results were achieved (that is, leadership behaviors); (2) a 5 - point rating scale of overall performance rang- ing from “ outstanding ” to “ unsatisfactory ” ; (3) a personal developmental planning element based on a McDonald ’ s - wide competency framework that included nine core competencies and four leadership competencies as well as a menu of “ elective ” com- petencies that could be chosen/applied as relevant in specifi c functional areas (see Table 9.2 ); (4) a three - level assessment of career potential that combined performance and demonstrated leadership competencies; and (5) an annual compensation system element tied to the results of the annual performance rating.

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160 Best Practices in Talent Management

TABLE 9.2. McDonald’s Competency Framework (as of 2003)

Competency Category Specifi c Competencies

Core Competencies

Change Orientation

Communicates Effectively

Continuous Learning

Customer Focus

Drives to Excel

Holds Self and Others Accountable

Problem Solving and Innovation

Teamwork and Collaboration

Values and Respects Others

Leadership Competencies

Coaches and Develops

Maximizes Team Effectiveness

Maximizes Business Performance

Strategic Perspective

Functional Competency Menu (elective) Job Knowledge

Leverages Resources

Decisiveness

Gathers and Uses Information

Impact and Infl uence

Negotiation and Confl ict Resolution

Uses Technology Appropriately

Vendor Management

While the process for rating performance and potential was not unusual in struc- ture and design, the outputs of the system refl ected the culture of McDonald ’ s at that time. Specifi cally, there was signifi cant rating infl ation for both annual performance (98 percent of managers were rated either “ outstanding ” or “ excellent ” ) and potential (78 percent of managers were rated as having the potential to advance in the business at least one level). Because there was signifi cant infl ation in such ratings, there was little meaningful performance and compensation differentiation. Further, since almost everyone was rated not only as being an excellent/outstanding performer but also as having advancement potential, it made differentiation for purposes of realistic succes- sion planning very diffi cult.

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Senior management realized that because the business had been so successful for so long, a culture of entitlement may have set in. This was exemplifi ed by many employees believing that their past success and associated rewards would guarantee their future success/rewards rather than their having to earn success each day with every customer. Senior management believed it was important to change the culture in order to help the organization become better able to face the challenging realities of a more competitive global marketplace. As one approach to signaling the need for this change to the organization, the top management team at McDonald ’ s asked human resources to redesign the performance development system in order to (1) place a stronger focus on accountability for results , (2) increase performance differentiation, and (3) enhance openness to change and innovation.

The redesign and enhancement of the system (designed for all staff throughout the company — not just offi cers) rolled out in 2001 included the following changes:

1. The addition of six key expected leadership behaviors termed “ performance driv- ers ” (see Table 9.3 ) as an element of how annual performance will be assessed so that managers would be measured not just on the “ what ” of their accomplish- ments but also on “ how ” they accomplished them. The performance drivers were very much like “ competencies ” but were written to measure the actual applica- tion of those competencies on the job versus measuring one ’ s level of capability. Further, these “ performance drivers ” were used as an additional key lever by top management to signal the importance of needed culture change along certain dimensions identifi ed as critical to enable the organization to compete more effectively in the marketplace (greater accountability and performance differen- tiation, more innovation, etc.).

2. The introduction of a 4 - point rating scale ( “ exceptional performance, ” “ signifi cant performance, ” “ needs improvement, ” and “ unsatisfactory ” to replace the 5 - point scale) with a rating distribution guideline of 20 - 70 - 10 percent for each category, respectively (the last category of 10 percent includes both “ needs improvement ” and “ unsatisfactory ” ). The new 4 - point rating scale and distribution guidelines were put in place to help address the rating infl ation problem.

3. A new incentive compensation plan that tied to the improved performance dif- ferentiation and ensured that those rated in the “ top 20 percent ” were receiving signifi cantly higher compensation than those who did not.

4. A revised assessment of potential that utilized a combination of performance, per- formance drivers, position - specifi c competencies as criteria supported by a facili- tated calibration roundtable process. This revised assessment of potential was also accompanied with a guideline that stated that no more than 20 to 25 percent (this guideline was set based on internal discussions regarding what was realistic as well as some external benchmarking done with outside companies) of managers in any given year were expected to be assessed as “ ready ” immediately for a promo- tion to the next - higher level and “ ready within two years ” for such a promotion.

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162 Best Practices in Talent Management

TABLE 9.3. Performance Drivers

Performance Drivers Sample Behaviors

Setting Clear Objectives with Results Accountability

Involves establishing high standards for performance, well-

defi ned objectives and targets, and clear priorities for what

must be accomplished and taking full personal responsibility

for doing what it takes to deliver promised results. For people

managers, it includes ensuring that direct reports understand

what is expected of them and receive regular feedback on

their performance as well as clearly differentiating between

top and lower contributors when evaluating performance.

Coaching and Valuing People

Involves treating people with dignity and respect at all times,

demonstrating honesty and integrity in all dealings with

others; ensuring that the highest quality people are being

selected for the organization and are actively provided with

opportunities to use their capabilities to contribute to the

business as well as grow and develop their potential to do

more in the future.

Strategic Focus and Business Planning

Involves being able to develop an effective organizational

business vision and strategy that are based on sound facts

and that are well thought through, communicating them so

that others understand and commit to them, and translating

the vision and strategy into a clear overall work plan as well

as into the individual goals and priorities that will guide and

align the efforts of people at all levels of the organization.

Acting in the Best Interest of the System

Involves demonstrating consistent commitment to work

together as a team to achieve the vision and what is in the

best interest of the system. Shares information and resources

with others to contribute to their success. Acts to break

down silos or boundaries in order to help the business maxi-

mize the leverage from its combined resources.

Open Communications Involves demonstrating strong “listening for understanding skills” and valuing diverse opinions. Conveys information and

ideas in an open, articulate, and timely manner that enables

others to get their jobs done. Communicates in a high-

energy, positive way that motivates people to achieve.

Embraces Change/ Innovation

Involves being open to new ideas and innovation and having

not only the fl exibility to adapt to change but also the energy

and drive to initiate and lead it.

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New System Roll - Out — Global vs. Local Emphasis How this new system was rolled out globally refl ected the balance between the global and local approaches to work- force management. When it was introduced at a global HR meeting in June 2003, it was clear that certain elements of the new system redesign were not suited for the for- eign cultures and legal structures that existed in certain countries. As a result, all 119 countries were given latitude (labeled “ freedom within the framework ” ) to make cer- tain changes (for example, the labels given to the three rating categories), while they were not permitted to customize other aspects of the process (such as rating distribu- tion guidelines or the use of performance drivers in the ratings). Providing this fl exi- bility made a key difference in how well the new process was accepted by each country and, while many countries would have preferred to continue to use their own perfor- mance plans and processes, most willingly began the implementation of the new sys- tem and accepted the value of following the framework.

Results of Implementation As with any major change that impacts employees ’ indi- vidual performance ratings and compensation, the introduction of the new performance development system (PDS) was diffi cult and met some expected resistance. While this resistance was directed, in part, to specifi c concerns regarding particular changes made in the system (the number and labels for rating categories, changes in format, etc.), people ’ s reactions also refl ected the reality that the revisions in the performance management process were designed to help drive what were believed to be some needed changes in the company ’ s management culture (enhanced accountability, greater differentiation in evaluating performance, increased emphasis on openness to change/innovation, etc.). At the same time, leaders of McDonald ’ s wanted to ensure that the focus on people and people development was not diminished.

The introduction of the new PDS system impacted signifi cantly on the distribution of ratings for both performance and advancement potential. For example, in 2000 the vast majority of U.S. - based offi cers and managing directors received ratings ( “ out- standing ” or “ excellent ” ) that were above the mid - point ( “ good ” ) on the 5 - point rating scale. In 2001, however, only 25 percent were given an “ exceptional contributor ” rat- ing (this rating is for individuals who are judged to have “ achieved results that far exceed expectations and requirements of the job in the face of challenging demands during the performance cycle and who have done so while modeling the values and behaviors expected of McDonald ’ s leaders ” ). Most individuals received a “ signifi cant contributor ” rating (for “ consistently meeting and perhaps exceeding some expecta- tions and planned objectives while demonstrating the McDonald ’ s values and behav- iors ” ) that was perceived to be average because it was the mid - point on a 3 - point rating scale. For the fi rst time in their careers, many managers (at the corporate offi cer and managing director levels) had received ratings that were not labeled “ exceptional ” or “ outstanding, ” and this was a shock and source of discomfort to them. In addition, a relatively small proportion of individuals were actually rated below the mid - point on the scale ( “ lower contributor/needs improvement ” or “ unacceptable performer ” ), which was highly unusual in McDonald ’ s culture. It should be noted, however, that the very year the new PDS was introduced, McDonald ’ s business performance was well below expectations and the stock price hit new lows. This softened the blow a bit, as

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164 Best Practices in Talent Management

managers could see that change was necessary and that McDonald ’ s was operating in a different world with new challenges that needed to be met in order to get the busi- ness turned around and once again moving in a positive direction.

As the new system has continued to be used, the proportion of individuals in each of the categories described above has stayed in a similar range. We have discovered along the way that it is a challenge to keep the distributions of individuals across per- formance rating categories consistent across levels of the organization. In other words, ratings creep seems to be a natural tendency as you move, for example, from the VP to the SVP level. What we have done to address this is to emphasize the importance of individuals being compared relative to those in the peer group at their specifi c level of the organization.

Ratings of Potential Consistent with this more critical differentiation of performance, changes in distributions were also seen in the company ’ s ratings of individual poten- tial for continued advancement. In 2001, approximately three - quarters of U.S. – based offi cers and managing directors had been rated as having the potential to be promoted at least one more level. With a much more critical and challenging succession plan- ning review process instituted, 2002 ratings of this group ’ s future potential were far more realistic (the proportion evaluated as having clear potential for further advance- ment from their current offi cer - level positions was closer to 15 to 20 percent). This proportion has remained in this same relative range since that time.

Lessons Learned While the process was diffi cult to do, our results would suggest that it ’ s sometimes easier to “ bite the bullet ” and make a signifi cant change all at once rather than trying to make incremental changes. The PDS change enacted in 2001 effectively lowered the ratings of more than 50 percent of McDonald ’ s managers on a year - over - year basis. This was all done in a single year, but by year two, the organiza- tion had adapted to the new process. Other key lessons learned in implementing this initiative included the importance of: soliciting input from around the globe prior to program design fi nalization (the fi nalized system has been well accepted and has worked smoothly across widely varying geographic/cultural locations) and keeping the centralized, structured processes as simple as possible. Finally, we have purposefully given the organization time to become familiar with the new system and have resisted any signifi cant “ tweaking ” of it. Some changes to further streamline the system continue to be made, but they have not been major.

Initiative 2: Global Succession Planning and Development Process Design of the Global Talent Review Process Prior to the launch of the current global talent review process, succession planning had been conducted at McDonald ’ s for many years. Prior to 2003, this process was less formal, less structured, and less con- sistent across various areas of the world, yet it probably met the needs of the business, which had an outstanding record of growth of profi tability. As business growth slowed and competition increased, however, there was a recognized need to enhance the focus on leadership talent to align better with the new global business challenges.

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McDonald ’ s 165

Beginning in 2003 it was decided that the talent management process at the leader- ship level needed to be more rigorous and also more transparent. To achieve this rigor and transparency, the presidents of each area of the world (U.S., Europe, Asia/Pacifi c/ Middle East/Africa, and Latin America), along with each corporate staff head (EVP - HR, EVP - Finance/CFO), were given a talent management template that consisted of a series of questions about their leadership talent requirements and the depth and diversity of their talent (see Exhibit 9.1 ). They were asked to prepare answers to these questions for their respective organizations. It was made clear that these questions would form the basis of the in - depth talent reviews that each of them would have with his or her imme- diate superior, who at that time was either the vice chair or the chief operating offi cer.

EXHIBIT 9.1. Talent Review Template Questions I. Forecast of corporate leadership talent requirements for next three years, including

positions, people, and/or competencies

The answers to the following questions should be based on the strategic plan for the

business as well as the operational requirements:

■ Specify the corporate leadership positions that will be added, eliminated, or

changed from the current organization?

Expected retirements, terminations, promotions, transfers, etc.?

■ What, where, when, and how many openings are forecasted for the next three

years?

■ What, if any, changes in the competencies or roles will be required of the

leadership team and how will they be addressed?

II. Assess and develop current talent pool

Who are your A, B, and C players?

■ What actions are you taking to develop and retain your A players? Development

plans including development moves? Retention strategy?

What actions are being taken with your C players to improve or remove them?

■ Who represents your next generation of leaders (“ready now/ready future” with

higher-level target positions)?

Development plans including planned development moves?

III. Replacement and/or diversity gaps and associated action plans

■ What, if any, signifi cant replacement gaps exist, and what plan is in place to close

these gaps?

What, if any, diversity gaps exist and what plan is in place to close these gaps?

IV. Summary of planned actions

■

■

■

■

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166 Best Practices in Talent Management

The stated purpose of these executive talent reviews was as follows:

Identify executive (offi cer/managing director) talent requirements for successfully executing their organizational strategy over the next three years and how these requirements will be met.

Ensure that plans are in place in each organization to upgrade the executive talent via development, planned movement, strategic hiring, etc.

Ensure the “ next generation ” (the “ feeder pool ” ) of leaders has been identifi ed and is being developed to ensure both depth and diversity.

As can be seen from the questions listed in Exhibit 9.1, the talent review covered the broader aspects of talent management, including forecasting needs, assessing cur- rent offi cers/MDs, identifying depth and diversity of replacements pools, and develop- ment planning. The premise behind these reviews is that the president and lead staff offi cer of each area of the world are responsible and accountable for ensuring that they are addressing the leadership talent needs in their area and are doing so within the framework of the template. Transparency was achieved as a result of the in - depth dis- cussions that took place during the actual review meetings.

The talent reviews were held as planned in 2003 and resulted in a much more real- istic and rigorous assessment of the “ health ” of the talent pools in each area of the world and each functional area than had been achieved previously within McDonald ’ s. The increased ownership that leaders were taking for the results of these reviews was refl ected in the specifi c actions that they proactively initiated (such as accelerating the development of high-potential managers, special recruiting initiatives, etc.) to respond to the current and anticipated replacement gaps that had surfaced. The HR support team was able to analyze the overall results of these reviews and look for any organization - wide interventions that would contribute to better addressing talent needs and gaps.

Talent Review Process Impact Results of the one - year follow - up survey with execu- tive management and HR leaders in each of the company ’ s four major regions yielded the following observations regarding improvements in the talent review process: (1) managers and the organization overall became much more aware of the strengths and talent gaps in each area; (2) more candid and more challenging discussions took place on talent and not only focused more crisply on strengths and development needs but also more effectively addressed when it was time to remove individuals from positions in which they are not performing and not developing; (3) more specifi c actions were being planned and taken to close replacement gaps and development talent in a more focused way; and (4) senior executives were placing greater overall priority on and taking personal ownership for talent management.

Metrics for Assessing Quantitative Impacts In addition to the qualitative feedback described above, a number of quantitative metrics are currently being used to assess the impact of the talent review process. These include tracking:

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McDonald ’ s 167

The number of offi cers/managing directors considered to be strong contributors and evidence that those “ not meeting expectations ” have specifi c development plans in place and/or have been replaced;

The number of key leadership positions for which there is at minimum one “ ready now ” and one “ ready future ” replacement;

Improved year - over - year diversity in the talent pool;

The retention rate for strong performers and high - potentials; and

The percentage of recommended developmental job moves (these are identifi ed in the talent reviews ) that have actually occurred within the planned timeframe.

As the process has continued to be used, the organization has done a better and better job each year of not only building up feeder pools (that are deeper and more diverse) but also with addressing issues with lower performers.

Next Steps for Talent Review While the process has not changed for the most part, it has been done in a more comprehensive manner each year. This includes doing a more in - depth analysis of who needs development, moves to enhance their experience, and a process that facilitates this movement. In 2006 we introduced comprehensive talent management plans at the major country level, which enabled us to roll - up the country plans into areas of the world plans and fi nally to an overall enterprise talent plan that is presented to our board of directors.

Our current CEO, upon his appointment, declared talent management and leader- ship development as one of his top three priorities, and the focus on this process has never been greater. Senior management has expressed a strong desire to spend more time in this arena, and they realize that to successfully develop their talent, they must depend on their peers to provide development job opportunities (special assignments, project teams, new jobs) that cannot be provided unless people are able to move more freely across organizational boundaries.

Additional Positive Impacts One additional result of the analysis that was part of the talent review process was the decision to develop a global executive staffi ng process designed to ensure that when an opening occurred for an offi cer or managing director role anywhere in the world, potential candidates could be identifi ed on a global rather than a local basis. Prior to 2003, there had been no formal process for identifying tal- ent globally, but rather the organization with the opening would identify candidates based on their own knowledge of qualifi cations which, more often than not, led to a local candidate being selected. With the new global staffi ng process, the organization with the opening can come to the talent management organization for a list of candi- dates who have been identifi ed via the talent reviews described above. As a result of this new process, there has been more cross - organizational movement that has resulted in better selections and also more development opportunities for those moving to these assignments .

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168 Best Practices in Talent Management

A second additional impact driven by the results of a more robust global talent review process was the decision to design a program to build up the depth and diver- sity of the replacement pools for several offi cer/MD roles and to expedite the develop- ment of the highest potentials for these roles. The global Leadership at McDonald ’ s Program (LAMP) was designed and is described below as the third major initiative to enhance McDonald ’ s Global Workforce Management System.

Overall, the executive talent review process introduced in 2003 has not only stepped up the focus on talent management at the leadership level, but has made it more of an ongoing process, versus the episodic process that it had been previously. Our leaders all consider talent management as a high, if not their highest, priority. It ’ s less about a binder being constructed once a year and then put aside for another year and more about working the talent issue on an ongoing basis. It is also clear that by starting the process at the “ top of the house ” and having it accepted as useful and necessary, the process has been more easily implemented down through the other management layers across the organization and regions.

Initiative 3: Design and Implementation of the LAMP Program Specifi c Design Considerations Based on what had been learned in global talent reviews and in earlier training programs directed at developing high - potentials within McDonald ’ s, several particular areas of competency/skill gaps had been identifi ed and were specifi cally targeted in the design of LAMP content. These included: (1) expand- ing participants ’ mindset from local to regional to global; (2) enhancing participants ’ ability to maximize business performance through strengthening fi nancial acumen; and (3) enhancing participants ’ innovative, “ out of the box ” thinking. From an organi- zational perspective the goals of the program included: (1) building deeper bench strength for key leadership positions; (2) shortening the ramp - up time required for newly promoted offi cers and obtaining quicker business results; (3) becoming more effective at developing and retaining top talent; and (4) continuing to improve the diversity profi le at the offi cer level.

The Leadership at McDonald ’ s Program (LAMP) was designed to be an integrated approach to developing high - potential talent. Using leadership development as a process to drive results, shape culture, and build leadership depth, the program accel- erates the development of future leaders. With a focus on strengthening and building the capabilities of McDonald ’ s future leaders, the program leverages leadership devel- opment to improve performance and drive business results by:

Increasing the ability of participants to improve business results in their current roles as well as prepare them for achieving success at the next level;

Leveraging participants ’ on - the - job accountabilities as opportunities to learn and develop;

Helping participants gain the insight needed to further develop individual leader- ship capabilities; and

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McDonald ’ s 169

Providing opportunities to build strong peer networks internally and externally by having them work closely with McDonald ’ s high - potential peers throughout the program and with talented management peers from other companies/industries as part of the Thunderbird Program.

Participation The program was piloted in 2003 – 2004 with an initial group of twenty high - potential directors who were nominated by their regional, divisional, or func- tional leadership teams. Selection criteria included:

Individuals considered “ ready now ” or “ ready future ” for positions at the vice - president level or higher based on results from the McDonald ’ s annual talent review process;

Succession plan gaps (priority for participation given to functions with a shortage of successors or other business priorities, such as improving the diversity profi le at the offi cer level); and

Participant and boss willingness to fully commit and participate throughout the nine - month - long program.

Group Sessions LAMP was designed to help participants drive results in two ways: vertically (as leaders of their respective departments) and horizontally (as leadership team members). The fi rst LAMP program had fi ve key program components. These included: (1) executive assessment and program orientation; (2) individual develop- ment planning and executive dialogues; (3) leadership modules focused on leadership of self, team, and organization with experiential exercises to reinforce the learning; (4) a two - week executive education program with a focus on global business and culture; and (5) business improvement recommendations presented to the chairman ’ s and pres- idents ’ councils. These original program components are described in greater detail in Table 9.4 . All of the sessions were held at the company ’ s headquarters in Oak Brook, Illinois, with the exception of the two - week executive education component that was held at a university campus.

Individual Learning Opportunities Based on the assessment results, participants consulted with individual coaches to develop a “ breakthrough business goal ” — one that could truly drive business results in their areas of responsibility. Critical to this process was the linkage of personal developmental objectives to higher levels of busi- ness results. The assessment process and feedback to participants helped identify the competencies needed to enhance their contributions to the business. The development needs were then linked to the individual ’ s breakthrough goal. To support and encour- age individual learning, the following was made available to participants: (1) individ- ual coaching and development support — each participant was assigned a coach to discuss progress against objectives and receive objective feedback and developmental coaching throughout the program; and (2) LAMP Online! — a web - based tool that

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170 Best Practices in Talent Management

TABLE 9.4. Leadership at McDonald’s Program (LAMP)

Program Session Session Description Length

Program Orientation and Executive Assessment

McDonald’s contracted with a leading assessment fi rm

to deliver the assessment process over a three-and-one-

half-day period. The assessment process included the

following: (1) inventories of thinking skills, personality,

work style, and interests; (2) 360-degree feedback; (3)

realistic work and business simulations, with immediate

feedback provided after the role play or simulation; and

(4) background interviews. In addition to the assess-

ment process, participants received detailed information

on the LAMP leadership framework, program goals,

and key deliverables. They also had the opportunity to

dialogue with senior executives. Upon completion of

the assessment process, verbal feedback was provided

to the participants by their assessors/coaches. A detailed

written summary was provided approximately three

weeks later.

4 days

Individual Develop- ment Planning and Executive Dialogue

During this session, participants received the written

summaries from the assessment process. Utilizing these

results, participants worked one-on-one with their

bosses and coaches to create a development plan focused

on driving results in their areas of the business. Utilizing

a custom development plan template, participants iden-

tifi ed the experiences, coaching, and training required to

achieve their goals. In addition, two executive dialogues

during this session provided an opportunity to learn

more about the business and leadership through direct

interaction with senior McDonald’s leaders.

2 days

Executive Dialogue and External Thought Leader

LAMP participants had another opportunity to dialogue

with senior leaders during this session. A large portion

of time during this session was devoted to building

knowledge and skills around the critical components of

high-performing teams. A number of experiential exer-

cises were utilized to enable the participants to apply

and practice their learnings as they began to form their

sub-teams responsible for developing and delivering a

“business improvement recommendation” to the execu-

tive councils.

2.5 days

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McDonald ’ s 171

Executive Education Program

The university consortia program brings together select

groups of non-competing, globally focused companies.

Each consortium program is two weeks in length and

custom developed in consultation with representatives

from each member fi rm. The university offers partici-

pants the opportunity to gain a broad understanding of

global strategic issues and to strengthen their general

management skills. Learning is reinforced through dis-

cussions, case studies, exercises, and simulations.

2 weeks

Business Improvement Recommendations

This session focused primarily on a large team review

and feedback session for each of the four sub-team’s

business improvement recommendations. Signifi cant

time was devoted to letting the sub-teams continue to

develop their recommendations, with feedback, sup-

port, and coaching from an external expert in execu-

tive communications. An executive dialogue was also

incorporated into this session.

2 days

Presenting Team Recommendations and Program Wrap-Up

At the conclusion of LAMP (February 2004), participants

presented their business improvement recommendations

to the executive leadership councils, comprised of

approximately twelve senior-most executives of

McDonald’s. Teams made presentations to the

council members and discussed the overall impact of

the program on their personal development and on their

individual business results. Support from coaches, dry

runs of the presentations, and group dialogue and

feedback around each team’s presentation helped

participants prepare for the presentations.

2.5 days

supports individual learning, facilitates dialogues about the business, and tracks the progress being made against the LAMP goals and key deliverables.

Commitment and Expectations LAMP required a strong commitment from partici- pants and their direct supervisors in terms of time and behaviors. It was clearly com- municated to participants and their bosses that participants would be expected to spend approximately 25 percent of their time on LAMP - related activities (attending LAMP group training session, working with their action learning teams, working on their per- sonal development plans, etc.). Recommendations for managing the time commitment included using LAMP as an opportunity to develop the direct reports of the participants — by giving direct reports the opportunity to assume some of their bosses ’ responsibilities while participating in LAMP.

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172 Best Practices in Talent Management

LAMP Program Evaluation and Impact: Qualitative Feedback and Geographic Program Expansion A survey (shown in Table 9.5 ) was conducted mid - way through the LAMP pilot program and also at the end of the pilot. It was given to both the par- ticipants and their immediate supervisors. It was evident from this survey that the pri- mary goals of the program were met. Both groups surveyed gave the program high ratings and, importantly, reported seeing evidence of signifi cant personal develop- ment. The most highly evaluated elements of LAMP included:

TABLE 9.5. LAMP Program Evaluation Survey

Survey Features Approach and/or Results

Methodology Evaluation of Program Components

Online (95 percent response rate)

Effectiveness of Eleven Key Program Components

Executive Dialogue Sessions

LAMP Online!

Books

Learning Journal

Team Building Modules

Immersive Development Activities

Classroom Experiential Activities

Individual Development Plan

Breakthrough Business Goal

Overall LAMP Assessment

LAMP Support Team

Rating Scale Used

5-point scale ranging from “not effective to “highly

effective”

Narrative comments solicited as well for each program

component

Evaluation of Overall Program Effectiveness

Questions

To what extent has LAMP better prepared you for a

signifi cant role at McDonald’s?

The LAMP program has been worth the time and

effort required for my development.

I would recommend LAMP to others in my position.

Rating Scale Used

5-point scale ranging from “strongly disagree” to

“strongly agree”

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The opportunity to interact with senior managers during the executive dialogues;

The participants ’ development processes being integrated with the current job and taking place over an extended time period (nine to twelve months), which signifi - cantly improved the probability that development would take place; and

The experience of going to the university program, where they were exposed to different thinking and best practices from outside of McDonald ’ s via the partici- pation in the program of leaders from several other global companies.

An area identifi ed for improvement was “ boss involvement, ” specifi cally the need to get the participants ’ immediate supervisors more directly involved in the process and more directly involved in assisting with their development. This feedback led to enhancements for the subsequent LAMP programs offered — with the level of boss involvement being signifi cantly increased.

Since the successful pilot, the LAMP program has expanded into three parallel programs in order to increase the number of participants needed to meet feeder pool demands more quickly and effi ciently. In addition to the LAMP program, which now develops U.S., Latin American, and Canadian high - potentials, European and Asia - Pacifi c programs were launched beginning in 2004.

Quantitative Impact In addition to the qualitative feedback described above that led to ongoing program design changes, a number of quantitative metrics are currently being used to assess the impact of the LAMP as well as the programs in Europe and Asia - Pacifi c. A review of these statistics for the 2004 – 2008 period refl ects the kinds of results being achieved. These include: (1) promotions: as of 2008, 37 percent of the 249 graduates had been promoted (these graduates came from thirty - four countries, seen in Figure 9.1 ); (2) retention: as of 2008, only 5 percent of the individuals in this highly select and talented group had left the company for other opportunities (it is a key objective of the program for its participants to know they are highly regarded and that the company will continue to invest in their ongoing development); and (3) boss feedback has indicated that development is taking place as a result of this experience and being demonstrated in practical ways on the job. In addition to these results, addi- tional measures have been gathered to further evaluate program impact including: 360 - degree feedback follow - up (to be compared to the “ baseline ” 360 results at pro- gram start) and self - assessment of personal change as compared to specifi c targeted change goals.

Evolution of the LAMP Program Changes to the program itself have been relatively minor since it was introduced in 2004. One element of LAMP that has been enhanced is the process for getting into the program. While the overall steps are the same, we have improved the screening of those nominated to improve the overall quality of par- ticipants. This is done by making sure the senior team in each area of the world reviews each nominee and concurs with the judgment of the nominee ’ s own manager that he or she is appropriate for the program. This higher - level review has caused more attention

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174 Best Practices in Talent Management

on the part of those making nominations to make sure they nominate quality candi- dates. We have also taken and continue to take further steps to enhance the active involvement of the managers of the participants in the program.

Continued Evidence of Success We have completed four LAMP programs serving participants from the U.S. business, Latin America, Canada, and home offi ce, and now call this program “ America ’ s LAMP. ” We have also completed three sessions of the European leadership development program (ELDP) and three sessions of the ALDP (Asia/Pacifi c, Middle East, Africa) program. Across these programs there have been a total of 249 graduates, and the number of key leadership positions for which there is now a strong identifi ed back - up has increased from 50 to 80 percent.

One other interesting indication of the success of this program is that it has devel- oped its own strong brand identity and equity within the organization. The value of brand identity is refl ected in the differing names for the program in each region, and the brand equity is refl ected in the fact that so many employees want to be considered for participation. Overall, the support of the program has increased over time among the senior leaders, who are always asking us when the next program will begin. They also use their talent management plans to identify candidates for LAMP, as this is built into our planning process.

Initiative 4: McDonald ’ s Leadership Development Institute In 2006, the McDonald ’ s Leadership Institute and the Global Leadership Develop- ment Program were introduced as two important additions to McDonald ’ s arsenal to

FIGURE 9.1. LAMP Participants by Country

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McDonald ’ s 175

support leadership talent development by attracting and retaining high - performing leaders. The McDonald ’ s Leadership Institute was approved by the company ’ s CEO and funded to provide enhanced development support for all leaders throughout the organization who are positioned at the director level and above (n � 1,200 to 1,500). It was designed to house all of the company ’ s high - potential programs as well as pro- vide development resources to all non - high - potential leaders in the way of an “ online development resource center, ” an in - house leadership curriculum, special learning events, executive coaching, and so forth.

The Institute is a global community that drives McDonald ’ s business by guiding leaders to reach their full potential. Unlike a “ brick - and - mortar ” approach, the Insti- tute is not a physical place, but a community that provides a culture of learning and development and that can be accessed from any geographic location through our lead- ership portal and team of Institute guides. Its goal is to be respected as an essential part of McDonald ’ s business and a world - class leadership institute, offering sound guid- ance as well as challenging, innovative development opportunities and resources to an admired community of leaders. Its offerings include:

Participation in challenging development experiences at critical career points and transitions;

Interaction and networking with other leaders globally;

Individual consulting and tools for development needs assessment, development planning, and key transition activities;

Exposure to leaders from inside and outside McDonald ’ s; and

Leading - edge information on McDonald ’ s, the industry, business practices, and leadership.

Initiative 5: The Global Leadership Development Program The Global Leadership Development Program was developed and introduced in 2006 and focuses exclusively on the company ’ s highest potential offi cers and managing directors. The initial cohort for this program that was conducted in 2006 included twenty - one individuals from eleven different countries — including North America, Latin America, Europe, Asia/Pacifi c, and Japan. This program focuses on preparing participants for broader leadership responsibilities. It will also build a strong peer net- work that will be leveraged going forward as these individuals begin to move into top leadership positions throughout the company. The program was offered again in 2008 and will likely be repeated every two years.

OVERALL SUMMARY

Over the past eight years, McDonald ’ s has taken a number of signifi cant steps to enhance its ability to develop leadership talent and ensure greater management continuity

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176 Best Practices in Talent Management

throughout its talent management system. This chapter has described fi ve major initia- tives that have been designed and implemented to enhance the system. These included a major re - design of the company ’ s global performance development system, a signifi - cant enhancement of the global succession planning and development process, the design and implementation of a customized leadership development program targeted to developing high - potentials at the offi cer level (LAMP), and, fi nally, the introduction of the McDonald ’ s Leadership Institute and the Global Leadership Development Pro- gram. In addition to the specifi c positive impacts on internal metrics that have already been described (increased strength and diversity in the leadership team, greater depth/ diversity in candidates ready now for advancement, and retention of key performers), as of December 2008, McDonald ’ s had posted sixty - fi ve consecutive months of positive comparable sales — the longest run in McDonald ’ s history — and the stock price hit an all - time high in September 2008. What the overall process described in this chapter has demonstrated is how broad-scale initiatives to develop talent — when top management owns and drives them and human resources plays the roles of partner/enabler — can be a powerful lever of culture building and change and make a valuable contribution to business success.

James Intagliata, Ph.D. , is president and founder of The NorthStar Group, a manage- ment consulting fi rm that specializes in senior - level executive assessment, individual leadership coaching, and competency - modeling for culture change. Over the past twenty years he has consulted to a diverse group of companies and senior executives and has worked extensively with McDonald ’ s. In addition to his consulting work, he has held faculty positions at the State University of New York at Buffalo and the Uni- versity of Missouri at Kansas City and taught organizational theory and management at the graduate level. He received his Ph.D. in clinical psychology in 1976 from the State University of New York at Buffalo. His recently published articles include “ Leveraging Leadership Competencies to Produce Leadership Brand: Creating Dis- tinctiveness by Focusing on Strategy and Results ” (with co - authors Dave Ulrich and Norm Smallwood) in Human Resources Planning ; “ McDonald ’ s Corporation: A Cus- tomized Leadership Development Program Targeted to Prepare Future Regional Man- agers ” (with co - author David Small) in Best Practices in Organization Development and Change by Louis Carter and Best Practice Institute.

Neal Kulick, Ph.D. , has been McDonald ’ s vice president of global talent management since 2001. His responsibilities include executive assessment/development, executive recruitment, and succession management and planning. From 1999 to 2001 Dr. Kulick ran his own organizational consulting practice specializing in the areas of human resource effectiveness and leadership development. Prior to consulting, he served as VP of corporate human resources for Ameritech Corporation in Chicago and as a line operations manager at Michigan Bell Telephone Company in Detroit.

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177

CHAPTER

10 MICROSOFT

CORPORATION

SHANNON WALLIS, BRIAN O. UNDERHILL, AND CARTER MCNAMARA

Leaders Building Leaders — transforming Microsoft ’ s high - potential development experience that integrates assessment, coaching, mentoring, learning circles, action learning, and business conferences.

Introduction

What Led Microsoft SMSG to Make the Change

Expo Leaders Building Leaders — The New High - Potential Development Experience

High - Potential Identifi cation

ExPo Tiers

Five Drivers of Accelerated Development for High - Potentials

Five Development Components

The Process of Redesigning the High - Potential Development Experience

Key Steps and Timeline

Research Activities

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178 Best Practices in Talent Management

Team Structure and Thought Leaders

Transition Management Activities

Coaching as a Primary Development Component for HiPo Development in SMSG

Learning Circles as a Primary Development Component for HiPo Development in SMSG

Circles Process Mirrors How Today ’ s Leaders Work and Learn

Unique Principles of Learning Behind Learning Circles

Learning Circles Compared to Traditional Forms of Training

Life of a Circle

Coaching Goals

Actions Between Meetings

Circle Termination and Renewal

How Circles Are Organized

Results and Benefi ts for Circle Members

Conclusion

INTRODUCTION

The opportunity for ongoing learning and development is a commitment Microsoft makes to all employees. Microsoft invests more than $ 375 million annually in formal education programs directed at the employee, manager, and leader, offered by the Cor- porate Learning and Development groups and other profession - specifi c learning groups throughout the company.

In addition to the development offered to all employees, Microsoft invests in a smaller group of employees who have the potential for, and strong interest in, taking on more senior, critical roles as individual contributors or managers. These individuals are identifi ed and considered for more focused career development, which may include participation in one of several professional development experiences known as high - potential development programs.

In identifying employees as high - potential, it is important to appreciate that natu- ral “ gifts ” are not suffi cient. For an employee, reaching his or her full potential depends on a combination of natural gifts, what he or she does with that talent (hard work, per- severance, courage, etc.), the experiences he or she is given, the support of others along the way, and the context/culture within which he or she operates (McCall & Hollenbeck, 2002; McCall, Lombardo, & Morrison, 1998).

At Microsoft, high - potential development goes beyond traditional management or leadership development. Instead, it focuses on accelerating the development of these individuals to advance to the next career stage. The remainder of this chapter will

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Microsoft Corporation 179

present Microsoft ’ s case for making a signifi cant shift in high - potential development within the Sales Marketing and Services Group (SMSG).

WHAT LED MICROSOFT SMSG TO MAKE THE CHANGE

The Sales Marketing and Services Group is more than 45,000 employees responsible for Microsoft sales, marketing, and service initiatives; customer and partner programs; and product support and consulting services worldwide. Its fi eld sales and marketing professionals delivered $ 53B in billed revenue in fi scal year 2008 and $ 34.8B in profi t. Additionally, the group is responsible for corporate operations and IT functions that support the work of Microsoft ’ s approximately 91,000 employees around the world.

Recent key accomplishments of the group include:

Signifi cant increases in customer satisfaction ratings;

Growing the Windows Client, Server and Tools, Information Worker, Mobility, and Microsoft Business Solutions businesses and winning new customers in a very competitive environment; and

Building a world - class fi eld infrastructure and streamlining a rhythm - of - the - business, allowing the fi eld to execute in harmony with the business groups on growth planning and the way in which we measure the health of the business.

The organization operates within thirteen geographic “ areas ” and has more than ten vertical segments, sectors, and functions. In 2004, SMSG had high - potential pro- grams operating in nearly all of them. The individual programs were not aligned to Microsoft ’ s Leadership Career Model and were not easily scalable. Furthermore, con- sistent criteria for identifying high - potentials did not exist, and areas and segments independently determined the number of “ high - potentials ” that they wanted to develop. This impacted the larger talent management system and made movement among pro- grams diffi cult when employees changed areas, segments, sectors, or functions. Given the various objectives of the programs, the experience of high - potentials was inconsis- tent across SMSG.

To build the pipeline of future leaders, Microsoft SMSG decided to align high - potential development within SMSG to create a consistent experience.

EXPO LEADERS BUILDING LEADERS — THE NEW HIGH - POTENTIAL DEVELOPMENT EXPERIENCE

SMSG began with questions. What is a high - potential? How is high - potential talent identifi ed? How many HiPos are needed to meet future demand? Finally, how is the development of high - potentials accelerated? The answers to these questions led to a new program, ExPo Leaders Building Leaders. ExPo, which stands for “ exceptional potential, ” is a long - term leadership development experience in SMSG for high - potentials. Leaders Building Leaders is a leadership development philosophy that sets

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180 Best Practices in Talent Management

up a cascading approach to the investment of time and resources by current leaders into emerging leaders at the next career stage level. Microsoft SMSG would apply this leadership development philosophy across less than 4 percent of the population or more than 1,600 high - potentials in 107 countries. To begin, they needed to identify the high - potentials.

High - Potential Identifi cation SMSG heavily leveraged the Corporate Leadership Council ’ s 2005 empirical study, “ Realizing the Full Potential of Rising Talent. ” A high - potential at Microsoft is defi ned as someone with the ability, commitment, and aspiration to advance to and succeed in more senior, critical roles (see Figure 10.1 ).

These roles include individual contributor, manager, technical and executive lead- ership. A high - potential differs from a high performer in that a high performer may demonstrate exceptional ability, but may not demonstrate commitment and/or aspira- tion to advance to more senior roles or to do so in an accelerated timeframe. High - potentials are a subset of high performers and are promotable into the next potential band. In other words, not all strong performers are high - potentials. HiPos must have the ability (skills and competencies), commitment, and aspiration to grow and succeed and be a top performer as a people leader in an accelerated timeframe relative to high performers. The combination of the three is required, and only those employees deter- mined to be highest on all three are selected. As they take on risky jobs, this might

Ability A combination of knowledge, skills, and competencies an employee uses to carry out his or her day-to-day work

Aspiration Seeks and takes on roles that offer advancement, increasing influence, greater impact and/ or recognition

Commitment Willingness and ability to align with MSFT needs, priorities, and goals

FIGURE 10.1. High-Potential Criteria

Source: Adapted from Corporate Leadership Council High-Potential Management Survey, 2005.

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Microsoft Corporation 181

slow momentarily as they master new skills, which needs to be accounted for. It is expected that they will catch up and continue on a fast trajectory.

ExPo Tiers Once the high - potential talent is identifi ed, SMSG sorts them by career stages. Whereas in the former programs, high - potentials were grouped regardless of career stage and received similar development opportunities, ExPo provides differentiated develop- ment. ExPo Tiers are the organizing function for offering the development experiences based on the needs of specifi c career stages. High - potentials are segmented into a three - tier system, as seen in Figure 10.2 : junior individual contributors in Tier 3, senior individual contributors and managers in Tier 2, and managers of managers, functional leaders, and business leaders in Tier 1. Each tier has a different focus area based on the unique needs of the particular career stage.

Tier 1 ’ s development focus is building leadership capability in priority areas and building a globally diverse network. Tier 2 focuses on building an understanding of the requirements of leadership at Microsoft and broadening the network across time zones. Tier 3 builds commitment and aspiration to leadership through greater self - awareness and understanding of Microsoft SMSG and non - SMSG businesses.

Five Drivers of Accelerated Development for High - Potentials Once sorted into the appropriate tiers, the high - potentials ’ development experience begins. Underlying all development are fi ve drivers of accelerated development for high - potentials at Microsoft. The Five Drivers are development activities that signifi - cantly impact the development of high - potential leaders and are derived from two

FIGURE 10.2. Key ExPo Tiers

ExPo Tiers are the organizing function for offering a differentiated development experience based on needs of specific career stages.

The Tier 1 development focus is: • Building Leadership Capability in identified priority areas* • Building a globally diverse network

The Tier 2 development focus is: • Increasing an understanding of the requirement of leadership at Microsoft • Broadening network across the time zone

The Tier 3 development focus is: • Building commitment and aspiration to leadership through greater self-awareness • Understanding of Microsoft SMSG and non-SMSG business

* Microsoft Leadership Model

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182 Best Practices in Talent Management

primary sources, the Corporate Leadership Council (2005) and Morgan McCall (McCall & Hollenbeck, 2002; McCall, Lombardo, & Morrison, 1998).

Research indicates that fi ve key areas, if executed effectively, have the most sig- nifi cant impact on high - potential development (Corporate Leadership Council, 2005):

Senior leadership commitment to developing leaders;

Manager capability and engagement in the development high - potentials;

A professional network that allows for contacts throughout the business;

A high-quality, customized stretch development plan with clear objectives; and

On - the - job experiences.

These fi ve areas were used as design principles in the design of ExPo. We will consider each one separately.

Senior Leadership Commitment to Developing Leaders Executive ownership in high - potential development is critical to the success of any program. Executives and senior leaders play a key role in modeling the behavior expected of all leaders in developing their high - potentials. They are also responsible for holding managers accountable for developing their high - potentials. For high - potentials to accelerate their development, they must have regular interaction with current leaders in order to build their own capability. Observing executives and senior leaders in action and learn- ing from their stories of successes and failures are a foundational aspect of ExPo.

Executives and senior leaders can demonstrate ownership and engagement by committing to and spending time in activities such as

Being accountable for the success of leadership programs, development of their direct reports, and development of their own leadership capabilities;

Conducting ongoing reviews of high - potential talent and facilitating cross - company development moves;

Acting as mentors and coaches;

Speaking at high - potential conferences, teaching in high - potential program ses- sions, and sponsoring action learning projects; and

Spending time with high - potentials in the course of their business travels.

Manager Capability and Engagement in the Development of High - Potentials The research indicates that the most valuable development for any employee is on - the - job learning and key to that learning is the active engagement of the employee ’ s manager (Corporate Leadership Council, 2005).

Partnering with the manager to create access to leadership development opportu- nities in the current role enables faster development of the high - potential. Managers must be provided with training and coaching on how to develop their high - potentials. In addition to coaching, managers should be made aware of the kinds of experiences

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Microsoft Corporation 183

that would allow the high - potentials to accelerate their development. When opportu- nities for those experiences arise, the manager should think fi rst about providing those to their high - potentials.

In addition to being rewarded for business results, managers need to be held accountable through the performance management system for developing their high - potentials. An example would be the inclusion of a measurable objective for develop- ing their high - potentials in their annual performance objectives. It is also necessary to defi ne the accountabilities of the high - potential, the business group, and the organiza- tion, as each plays a role in development.

A Professional Network That Allows for Contacts Throughout the Business High - potentials thrive when they have a diverse network of people across the organization that they can draw on to gain access to information, solve complex business problems collaboratively, and achieve business goals. More importantly, the network is most powerful when it consists primarily of other high - potentials. High - potentials develop most quickly when they are managed by high - potentials, participate in a team of high - potentials, and manage high - potentials themselves. Consequently, creating opportuni- ties to build a peer and leadership network across the business is a core aspect of ExPo.

A High - Quality, Customized Stretch Development Plan with Clear Objectives Ensuring each high - potential has a customized, robust, stretch development plan that contains the right mix of learning based on individual development needs is another important aspect of development. A clearly defi ned career aspiration statement is the most important element of this plan. Without it, the development gap cannot be estab- lished, and impactful development activities cannot be selected and executed.

On - the - Job Experiences In ExPo, SMSG has shifted the majority of learning from programmatic to on - the - job development and relationship building. On - the - job devel- opment is informed by the experiences that high - potentials have that are related to handling future business challenges and usually includes a cross - business group or international perspective. This type of learning can happen in two ways: placing high - potentials into roles that have been identifi ed as containing key learning experiences or mining current roles for all of the stretch learning opportunities available. Either way, it is critical that learning objectives be defi ned and that the high - potential is sup- ported in the learning. To gain the most value from development on the job, learning - from - the job must be facilitated and made explicit.

In many respects the Five Drivers of Accelerated Development may appear to be common sense. But common sense is not always common practice. For example, it is diffi cult to ensure that every high - potential reports to a high - potential manager, works on a team of high - potentials, and manages high - potentials. Given that high - potentials represent only 4 percent of the employee population, this is virtually impossible. Thus, ExPo educates high - potentials about the Five Drivers of Accelerated Development and asks them to be conscious about activating them in their development. Addition- ally, ExPo attempts to simulate the drivers within its development activities. They are imbedded through all aspects of the ExPo experience.

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184 Best Practices in Talent Management

Five Development Components ExPo allows emerging and experienced leaders to learn from each other through fi ve developmental components that are tied to the fi ve drivers. Each component is exe- cuted differently at each tier to provide a unique development experience that builds leader capability over the duration of the ExPo experience. This creates consistency and integrated development for emerging leaders as they move vertically through the ExPo tiers.

The fi ve developmental components, highlighted in the pinwheel (Figure 10.3 ), pro- vide a leading - edge development experience that builds leadership capability over time.

Orientation Orientation provides the programmatic component of ExPo. It is designed to address learning needs that high - potentials have in common, such as understanding the business strategy at Microsoft, increasing business acumen, and understanding what it means to be a leader at Microsoft. Core content relevant for a high - potential leader at the targeted career stage is provided in a classroom setting and is not meant to duplicate development found in other management or leadership devel- opment courses.

Sessions are conducted in peer groups, such as Tier 1, Tier 2, and Tier 3, and:

Introduce high - potentials to the core elements of ExPo; ■

FIGURE 10.3. ExPo Development Framework

Leadership conference

Leadership orientation

Leadership in action

Learning circles + communities

Coaching + mentoring

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Microsoft Corporation 185

Provide expert instruction — classroom - based education in leadership theory and practice;

Include opportunities to network with executives (both internal and external) and peers;

Provide a forum for delivering developmental feedback; and

Set up executive coaching, mentoring, and “ learning circles ” (peer coaching groups of fi ve to seven people).

Most importantly, Orientation provides opportunities for leaders who have already demonstrated the targeted competencies (Exhibit 10.1 , Microsoft Leadership Compe- tencies) and/or are considered high - potential leaders themselves to teach and share key insights. The program includes and initiates several capability - building activities in order to build individual leadership competencies. Other skill - building activities that are completed in and around orientation include:

Assessment — one of three assessments is used.

A Microsoft sponsored 360 - degree assessment tool such as the MS Leader 360 instrument created internally and used to assess the eleven Microsoft leadership competencies; or

Kouzes and Posner ’ s Leadership Practices Inventory (LPI) 360 instrument, which assesses the leadership behaviors associated with The Five Practices of Exem- plary Leaders; or

Assessment of psychological preferences in how people perceive the world and make decisions via the Myer Briggs Type Indicator (MBTI) psychometric questionnaire; and

Manager/member contracting sessions (a contract is signed to support participa- tion in ExPo).

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EXHIBIT 10.1. Microsoft Leadership Competencies (Subset) Microsoft Leadership Competencies

Executive Maturity

OneMicrosoft

Impact and Infl uence

Deep Insight

Create Business Value

Customer Commitment and Foresight

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186 Best Practices in Talent Management

A successful development process is a strong partnership between the high - potentials, their managers, skip - level managers, and HR. The partnership is vital for ensuring a concentrated “ high touch ” and personalized learning experience for each high - potential member. And it is important to highlight that the high - potential devel- opment process is self - managed by the high - potential member with approval, collabo- ration, and encouragement from his or her manager, skip - level manager, HR, and POC team. Although the high - potential development process is managed by the high - potential member, without the above - mentioned people contributing time, thought, and effort, the member may still progress, but not at the accelerated rate. The signifi cant expectations on high - potentials and the people involved in ensuring their success rely on each high - potential ’ s level of committed engagement and the people who are sup- porting their activities.

The manager/member contract is designed to assist high - potentials and their man- agers in clarifying the purpose, expectations, roles, responsibilities, and commitments of the high - potential development process between these two parties. To ensure clear understanding of the above - mentioned subjects, a contracting guide and session were created to facilitate a robust conversation between the high - potential, his or her man- ager, and human resources, which concludes with signed contracts ensuring commit- ment to the high - potential development process.

The signed contracts between the high - potential and the manager pledge the respon- sibility of personal and professional development with shared partnership necessary to cultivate the high - potential ’ s skills and abilities.

Leadership Conferences Leadership conferences are business conferences, round- table discussions, and live meetings that bring executives (both internal and external) and high - potentials together for mutual benefi t and learning. Area Leadership Teams — thirteen geographic leadership teams comprised of the area VP and his or her direct reports who set the direction for and manage the business — commit to a two - day lead- ership conference that connects the senior leaders of the area with local high - potentials. These conferences create a forum for dialogue and learning around the strategic business issues and challenges of leadership at Microsoft.

Conferences are conducted across tiers, usually Tiers 1 and 2, with occasional par- ticipation from Tier 3. They are designed to facilitate refl ection, build critical relation- ships from one level to the next, and provide an additional forum for sharing learning from the job that is discussed throughout the year in other components (particularly “ leadership in action ” and “ learning circles ” ). Smaller leadership conferences, such as leader roundtables, are also held within business units or areas as appropriate and pro- vide opportunities for substantial networking.

Most importantly, leadership conferences are designed and led by the area leaders in cooperation with local leadership and organization development consultants. Each area is able to choose a conference design that is appropriate to its cultural needs and business challenges, so there are differences in design and format.

Conferences enable high - potentials to:

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Work collaboratively with peers and leadership teams on strategic business challenges;

Gain insight into the requirements of being a broad business leader and the transi- tion required from functional expertise;

Develop relationships and raise their profi le as high - potentials with members of their leadership team; and

Build and extend their networks.

Leadership in Action Research demonstrates that emerging leaders develop new leadership capability when their learning is linked to real business impact. Develop- ment that maximizes this type of learning is called “ action learning. ” It develops lead- ership qualities, analytical skills, and strategic thinking by way of experience - based exercises. By including the Leaders Building Leaders dimension so that all partici- pants — Tiers 1, 2, and 3 — are engaged in one integrated experience, Microsoft SMSG created Leadership in Action (LIA), which benefi ts SMSG by:

Building and promoting a common leadership culture as exemplifi ed by the lead- ership competencies;

Developing leaders for the future, while establishing a strategic link between senior and rising leaders; and

Identifying recommendations and action plans to address top business challenges.

The LIA practicum provides the opportunity for small groups of high - potentials to work on fi nding new solutions to real and tough business challenges. At the same time they are encouraged to refl ect on their thinking and action to maximize their develop- ment as leaders. At the LIA practicum, tough business challenges are presented to each small group by a selected team leader, a Tier 1 member. Projects are real business chal- lenges from Tier 1 team leaders and are rigorously selected as appropriate action learning projects. Each team leader works with his or her group throughout the event on a solution that he or she is expected to use in solving the challenge during the next six months.

While LIA is centered on action - learning projects, the program is integrated to leverage other capability - building activities such as assessment, executive coaching, and career - focused coaching, which benefi t high - potentials by:

Providing the opportunity to practice thinking systemically;

Developing their mastery of listening and coaching through use of action learning methodology;

Building deep relationships with peers across Microsoft and extending their senior networks; and

Increasing their strategic perspectives on Microsoft.

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188 Best Practices in Talent Management

In addition, Tier 1 team leaders gain fresh perspectives on their business challenges from the high - potential population.

Learning Circles Building leadership networks and collaborative working relation- ships are two of the most signifi cant leadership needs at Microsoft SMSG. Learning circles are small peer - based learning groups designed to connect diverse groups of high - potentials, both functionally and geographically, to mutually support each other in developing themselves as leaders. Comprised of fi ve to seven high - potentials who meet either face - to - face or virtually, learning circles integrate the learning from cur- rent role experiences with development priorities to provide a more impactful learning experience.

Members form close, confi dential networks in which they feel free to share support, feedback, and materials to help each other address current priorities and to progress in their careers. Utilizing coaching and feedback as the primary developmental tools, high - potentials surface their learning and identify realistic actions to move their devel- opment forward between meetings. In addition, the learning circles enable them to refl ect on the actions that they took, which in turn cultivates skills in learning how to learn from their own experiences.

Learning circles enable high - potentials to:

Drive personal development as a future leader by:

Enhancing their profi ciency at cross-business collaboration;

Increasing their learning agility from their current roles;

Customizing action and learning plans;

Linking formal learning with on - the - job experiences; and

Deepening their insight and understanding of the Microsoft business.

Create greater business impact by:

Creating more effective and diverse organizational networks across Micro- soft ’ s emerging leadership talent pools;

Sharing support and accountability for results;

Increasing performance levels against current performance objectives; and

Delivering innovation and execution against key strategic business issues.

Coaching and Mentoring In addition to learning circles, Microsoft offers one - to - one partnerships through coaching and mentoring that involve a thought - provoking proc- ess that inspires the individual to maximize his or her personal and professional potential. Through individualized follow - up, coaching, and mentoring, they integrate learning from a variety of sources such as assessment feedback, current role experi- ences, and development priorities to provide a more impactful learning experience.

Coaching and mentoring enable high - potentials to:

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Build skills and close development gaps;

Develop “ big picture ” understanding of Microsoft and our industry through cross - boundary and cross - role exposure; and

Become more accountable for their own development since the coaching and mentoring process is a self - directed one.

Microsoft has a well - developed mentoring program that automatically matches high - potential mentors with high - potential mentees. The coaching process will be described in greater detail later in the chapter.

THE PROCESS OF REDESIGNING THE HIGH - POTENTIAL DEVELOPMENT EXPERIENCE

Creating ExPo was a classic change management project with three phases.

Key Steps and Timeline First, Microsoft analyzed the current state — understanding what was working and not working, studying the best practices that existed, and reviewing the research related to high - potential development. Next, the Microsoft team envisioned the future state — considering both internal and external best practices, adopting or adapting them, and creating some new ones. Finally, they implemented the changes. Although this initially began in 2004 with a desire to bring more consistency to the high - potential develop- ment experience, the majority of the work took place between August 2006 and August 2007 and was mostly completed by a small team of internal leadership development consultants. It is important to highlight this, as it demonstrates that a change of this magnitude can be completed internally when the right resources are applied. The cur- rent state analysis and initial research related to the drivers of development were com- pleted between mid - August and mid - October 2006. A high - level vision was then crafted, refi ned, and socialized between mid - October and mid - December 2006. Once approved, more research was conducted on best practices in leadership development between January and March 2007 and implementation guides were crafted along the way. The detailed design was communicated in April 2007, and program content was built through the summer in preparation for the launch in October 2007.

Research Activities To develop the ExPo program, Microsoft began by asking the question, “ How is the development of a high - potential accelerated? ” The team was guided to the Corporate Leadership Council ’ s 2005 empirical study, “ Realizing the Full Potential of Rising Talent ” (Volume 1), which provided a strong basis for the rationale and drivers under- lying ExPo. After analyzing that research and drawing conclusions appropriate for Microsoft ’ s environment, the team looked at additional research by McCall and Hollenbeck (2002) and McCall, Lombardo, and Morrison (1998).

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190 Best Practices in Talent Management

Once the fi ve drivers were established, the team researched the ways to embed them in the development activities. An extensive literature search for best practices in leadership development was conducted. The team mapped these development activi- ties to the drivers and landed on the fi ve primary development components. With this, the team was able to move from a high - level vision to a more detailed vision. Several months were dedicated to crystallizing the detailed vision and writing implementation guides that would enable HR professionals to comprehensively understand the pro- gram so that they could effectively communicate it to business leaders in the fi eld.

Team Structure and Thought Leaders Core to design and implementing ExPo was a diverse group of professionals who enabled the change to take place. The team structure evolved over time. Initially in 2004, it began with a group of eight individuals who worked virtually and volunteered their time to the initiative. (By August 2006, three full - time positions were created, which expanded to four by August 2007.) Known internally as the POC Hippies (People and Organization Capability High - Potential Team — with High - Potential even- tually shortened to “ HP, ” which later evolved to “ Hippies ” ), they isolated the fi ve driv- ers and created the high - level and detailed drafts of the vision. By February 2007, it was clear that, for the change to be implemented globally, more stakeholders would need to be engaged around the world. The team was expanded to approximately twenty members, who represented different segments, sectors, functions, and geographies. As more responsibilities were added, it was clear that the structure to support ExPo also needed to evolve. Today, three teams exist:

POC Hippies: A group of nearly twenty organization development, leadership development, and business professionals who share a passion for high - poten- tial development; contribute to the overall design and development of the ExPo experience; and work closely with the ExPo core design team. They meet monthly via two international conference calls and twice annually face - to - face in April (Microsoft Headquarters) and August (international location).

ExPo Execution Excellence Team: A group of nine program managers who ensure the execution of ExPo in the thirteen areas worldwide. They meet once monthly at a minimum via conference call and once annually face - to - face in June (location to rotate). They meet virtually and frequently during the pre - launch period (August through September).

ExPo Core Design Team: A group of fi ve full - time leadership development con- sultants responsible for the overall HiPo strategy and experience for Microsoft SMSG and act as the primary thought leaders for the ExPo components. They meet once per year face - to - face in early February and virtually as needed ongoing.

These three teams were the primary owners of the change management plan and transition management activities.

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Transition Management Activities A change of this magnitude requires leadership commitment, stakeholder involve- ment, and appropriate phasing. It begins with leadership. Kevin Turner, COO of Microsoft, was unwavering in his desire for one consistent program worldwide. When areas and segments suggested that they were unique and somehow exempt from mak- ing the change, Turner did not yield. Instead, he continually asked for one program and one name, ExPo, which was symbolic of the change. In addition, Sue Bevington, CVP HR for Microsoft SMSG, and Jeff McHenry, senior POC director at that time, were equally committed to a common approach to high - potential identifi cation and development, globally.

Critical to making the change was the expanded Hippies team, which met for the fi rst time in April 2007 in Tokyo, Japan, to evaluate the viability of the detailed vision and implementation plan and to provide feedback on how to improve both. Energized by the possibility of change, the team contributed many hours to taking the thinking to all potential HR and business leader populations in order to increase their engagement and the probability of implementation success. In addition, sorting the responsibilities of the team and understanding that three primary team roles were required enabled the team to divide and conquer as the program expanded.

Finally, implementation was phased in over a two - year period. Only four of the fi ve development components were introduced in October 2007. Leadership in Action was held until October 2008 to allow more time for research and testing prior to launch. Likewise, new content is introduced annually as each tier progresses through each year of the program.

Although the program is relatively new, the feedback from the business has been substantial and positive. ExPo has been highlighted as an example of what Kevin Turner calls “ business excellence, ” meaning “ innovation � operational excellence. ” The team responsible for the design and implementation has received internal recogni- tion and awards, and the program has been recognized as a best practice by profes- sional associations.

In order to deliver ExPo on the global scale required, partnership with external organizations was critical. As the design and implementation plans were fi nalized, SMSG began a search for partners who could lend additional subject - matter expertise to a couple of key components, executive coaching and learning circles. More detailed descriptions of the work with these partners, CoachSource and Authenticity Consult- ing, are provided next.

COACHING AS A PRIMARY DEVELOPMENT COMPONENT FOR HIPO DEVELOPMENT IN SMSG

Executive coaching is offered to Tier 1 ExPo participants (managers of managers, functional leaders, and business leaders) in the fi rst year of their ExPo experience. Microsoft initially met with CoachSource as the potential executive coaching partner because of numerous references to the fi rm noted in their study of best practices.

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192 Best Practices in Talent Management

They selected CoachSource for the availability and quality of their global coaching pool, use of technology to support the coaching process, and the fl exibility they dem- onstrated in meeting Microsoft ’ s needs. In the fi rst year, approximately 214 of 250 leaders took advantage of the executive coaching program via CoachSource.

Why executive coaching? Microsoft believes that executive coaching provides the most effective ongoing behavioral development for leaders. Participants receive regu- lar, individualized follow - up to help drive behavioral change over time. A coach offers a third - party, objective support for the leader ’ s improvement efforts.

The defi nition of executive coaching adopted is the “ one - to - one development of an organizational leader ” (Underhill, McAnally, & Koriath, 2007). While there are dif- ferent approaches to coaching, ExPo ’ s focus was around the development of leaders in the organizational context. Coaching is focused on changing leadership behavior in the workplace.

Coaching Process The coaching design allows for approximately two sessions per month, mostly via telephone (or all via telephone if participant and coach are not co - located). The coaching timeline is provided in Table 10.1 . Coaching sessions are focused on feedback from the Microsoft 360 -degree assessment, associated Microsoft leadership competencies, other relevant data points, and the Coaching Action Plan (CAP) crafted from the results of this assessment. (A sample is provided in Exhibit 10.8.)

This coaching process requires clearly defi ned goals to be created, which are out- lined in the Coaching Action Plan. After the plan is created, it is shared with the pro- gram managers, allowing an additional audit that tangible goals are the central thrust to the coaching work. Goals have to be clearly identifi able and behavioral in nature to allow for the use of metrics to measure improvement at the conclusion of the assign- ment (see “ Measuring Results ” ).

Following the “ feed - forward ” process (coined by Marshall Goldsmith), partici- pants are encouraged to share their development objectives with their key stakehold- ers. Thus these stakeholders become involved in the participant ’ s growth by being made aware of the development objectives and are able to offer future - focused sug- gestions related to these areas for development. Stakeholders are then surveyed at the conclusion to measure progress over time.

Coaching is ten hours spread over a maximum six - month period. After this time, unused coaching hours are lost. This is done purposefully to encourage participants to stay active with their coaches and keep momentum alive. Leaders at Microsoft are often pulled toward multiple priorities simultaneously. Enforcing a coaching deadline, as well as cancellation and no - show policies, actually helps drive greater (and more effi cient) use of the service.

All coaching activity is tracked via an online web - based database. Coaches log dates of sessions, time elapsed, and any general notes to the database. Program admin- istrators can then easily monitor progress of the pool and provide monthly reporting.

Participant/Coach Matching While matching is accomplished through a “ full choice ” process, it is also designed to operate quite effi ciently. Leaders need the element of choice, which research shows increases participant satisfaction and reduces the possibility

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of mismatches. Prior to program start, all ExPo coaches indicate which of the MS leader- ship expectations are their “ sweet spots ” (coaches are allowed to select up to four of the eleven leadership competencies). Simultaneously, the development needs of the ExPo participants are gathered. Each leader is then matched with two potential coaches based on regional location, development needs, and language requirements (in that order). An automated email is sent to the participant with coach biographies attached.

Participants are encouraged to review biographies and telephone interview the fi rst coach of interest. If this seems like a match, the participant commences with that coach. If not, he or she interviews the second coach. (And if that doesn ’ t work, additional choices are provided, along with a website of all coach bios authorized for ExPo.)

TABLE 10.1. Coaching Timeline

Coaching Month Suggested Coaching Hours, Format, and Topics Coaching/Meeting Hours

1 Session 1 (telephone): Debrief 360˚ assessment, goal setting, and action

planning

Session 2 (in person): Finalize action plan, meet with manager to gain

support for action plan

1.5

0.5

2 Session 3 (telephone): Coaching on goals and action plans

Session 4 (telephone): Coaching on goals and action plans

1.0

1.0

3 Session 5 (telephone): Coaching on goals and action plans

Session 6 (telephone or in person): Review post-coaching development plan,

meet with manager to gain support for

post-coaching development

1.5

0.5

4 Session 7 (telephone): Coaching on goals and action plans

Session 8 (telephone): Coaching on goals and action plans

1.0

1.0

5 Session 9 (telephone): Coaching on goals and action plans

Session 10 (telephone): Coaching on goals and action plans

1.0

1.0

Total Coaching Hours 10.0

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194 Best Practices in Talent Management

The selection deadline date is enforced, and participants are reminded that coach availability fi lls up (which it often does). This seems to encourage leaders to make their selections quickly. Nearly all the matching for 214 leaders was complete within about six weeks.

Measuring Results Two key metrics are employed during the ExPo coaching engage- ment. First, a coach satisfaction survey measures participant satisfaction with their coach. Secondly — and much more importantly — a “ mini - survey ” measures impact. This coach satisfaction survey is automatically run after four and a half hours of coach- ing is logged (see Figure 10.4 ).

The fi ve questions asked are:

“ How satisfi ed are you with your coach in the following areas:

Q1: Identifi es clear priorities for my growth and development

Q2: Genuinely listens to me

Q3: Provides specifi c, actionable suggestions/advice

Q4: Communicates in a direct and concise manner

Q5: Overall satisfaction with your coaching experience ”

This graph shows high satisfaction ratings among the fi ve questions surveyed (N � 39). These data are shared with the individual coaches and adjustments/ reassignments are made for any poor feedback.

The mini survey measures improvement over time in the eyes of key stakeholders working with the executive. This is the best “ impact back on the job ” metric currently available. Results can be aggregated over a set of participants to show leadership impact over time. The mini uses a 7 - point “ less effective ” ( � 3) to “ more effective ” ( � 3) scale (Figure 10.5 ).

In the fi rst year of ExPo, 22 percent of raters felt the participants had improved at a � 3 level; 59 percent noted improvement at a � 2 or � 3 level; and an impressive 89 percent of raters observed improvement to some degree with the participants ( � 1, � 2, � 3 levels).

FIGURE 10.4. Coaching Satisfaction Survey Results

4.5

Q1 Q2 Q3

Satisfaction

Q4 Q5 0

5

4.87 4.47

4.68 4.63

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Roles and Responsibilities The participant ’ s boss is an important part of the process. In fact, two of the ten coaching hours are three - way sessions with the participant, his or her manager, and the coach. Managers participate in follow - up metrics to measure improvement over time. Table 10.2 defi nes the role of the boss (as well as the other key stakeholders).

Roles are clearly delineated for each of the key stakeholders in the coaching proc- ess (Table 10.2 ). Clear responsibilities are defi ned for not just the participant, coach, and program manager but also for the participant ’ s boss, skip - level boss, and human resources.

Coach Selection and Orientation After a fair amount of research into coach qualifi - cations, the general criteria for ExPo coaches include the following:

Business/corporate experience: Does the coach have specifi c business or corpo- rate experience and/or background? Has he or she coached executives in organi- zations of similar size, complexity, industry, etc.?

Coach - specifi c training: Has the coach had training in a coach - specifi c process and skill set? How much?

Experience in giving feedback on 360 - degree or other assessments: Has the coach had training and/or experience in providing feedback and developing action plans around assessments that will be used?

Educational background: Does the coach have a degree, and in what area?

Coach credentials and/or base number of accrued coaching hours: How long has the coach been coaching? How many accrued coaching hours does the coach have?

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FIGURE 10.5. Leadership Effectiveness Improvement

Average Change in Behavioral Questions 40%

35%

30%

25%

20%

15%

10%

5% 0% 0% 0%

11%

30%

37%

22%

0% �3 �2 �1 0 1 2 3

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196 Best Practices in Talent Management

TABLE 10.2. Key Stakeholder Roles for HiPo Coaching Program at Microsoft

Stakeholder Role Description

Human Resources Program approval and general oversight

Approval of all communication drafts before they are

sent to other stakeholders

Approve and sign invoices

Coaching Program Manager (SMSG Program Offi ce)

Decide on coach selection criteria

Source interested and qualifi ed coaches

Interview and select coaches

Manage external coach-client match process

Obtain contractual agreements with coaches

Train coaches in MS leadership development process

and external coaching process

Manage and communicate with coaches throughout

coaching process

Assure surveys (for measurements) are designed,

completed, and results reported

Assure invoicing and payment to coaches

Track themes that surface from clients to coaches and

provide updates to HR

Participant’s Manager Meet with coach and client twice during external coaching process: once at the beginning of the

engagement, once at the end of the engagement

Approve and support client’s action plan and

post-coaching development plan

Provide ongoing support throughout external coaching

process (meet monthly with client and include action

plan as an agenda item)

Look for opportunities to acknowledge and

support client

Understand confi dential nature of coach-client

relationship

Participant’s Manager’s Manager

Hold client’s manager responsible to the client’s

development

Participant (“The Coaching Client”)

Review biographies of three coaches and call best-fi t

coach to make a selection by date indicated

Take primary responsibility for the coaching experience,

goals, and progress, including all meeting agendas,

action plans, and post-coaching development plans

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