Include Employees in Leadership Transition Conversations

"Uncertainty" is a common word these days, used to describe everything from the economy to the future for America's businesses and workers. Having a succession plan for key management positions is one of the most valuable HR initiatives a company can leverage. During uncertain times, it's imperative for businesses to make sure employees have as much job certainty as possible, but succession planning often is neglected for more immediate concerns.

Just as the country had two and a half months to transition into Barack Obama's administration after eight years of Bush leadership, companies benefit greatly from a planned transition between incoming and outgoing top-level management.

But it's not always that easy. Generally, there are three kinds of transition:

1. An internal candidate's successful transition. This is only possible when a company knows the executive is leaving and has identified a likely successor. It eliminates surprise and enables a smooth, transition with the least amount of distraction and lost productivity.

2. An executive leaves unexpectedly. This is a good opportunity for companies to promote from within, but the news can lead to power jockeying and interpersonal struggles.

3. A company brings in an external candidate. When companies go outside for a new leader, they are implicitly saying to current employees: "You're not good enough to lead," or "Whatever you have been doing in the past, it is not what we need you to do in the future."

Planning is the lynchpin to ensure organizational stability during a change of power. For example, Hilton Hotel Corp. identified succession planning as a top company priority and emphasized this by creating a separate, dedicated succession planning department within the company's corporate structure. Hilton is able to identify different competencies for the most critical management positions company-wide, while highlighting employees with the appropriate competencies who are on track to succeed in different divisions. The company can identify successors for every executive position and ensure minimal confusion and uncertainty in the midst of change.

People likely do not fear change as much as they fear uncertainty. Uncertainty over leadership creates anxiety which leads to decreased productivity and increased turnover. Further, the more uncertain people are about the potential actions of a new leader, the more they may view that person as a threat.

Further, when there is change at top, employees naturally wonder what's next. Defining roles in advance of succession can set employees' expectations and allow them see where they fit into the organizational picture. Transparency and communication before, during and after transition reduce uncertainty and keep performance high.

The fewer surprises a company has, the better it is for employees and the organization as a whole. Creating a robust and active succession plan not only safeguards against surprise, it can contribute to higher productivity and employee satisfaction. Successful succession plans are the byproduct of a smart performance and talent management program that gives companies a clear window into its workforce's skills, strengths, competencies and goals.

Strategic succession plans engage employees at all levels in a dialogue about their company and the future of its workforce. They also empower executives to build the company's bench strength, improve individual employees' career development plans and save time and money.

Nothing communicates the employee's value in a company more than programs that actively seek to develop and advance careers within the organization. The key to succession planning is not to go into the process blind. Using the right tools, including a performance and talent management system, companies can plan for most contingencies in C-level exits. All they need is a little planning.

[About the Author: Steven T. Hunt, Ph.D., SPHR, is the chief scientist at Kronos Inc., a company that empowers organizations to effectively manage their workforce.]

Training: A Measured Response

Global-market forces and innovation related to technology are beginning to force HR leaders to redefine their training and development agendas and the skill sets needed to succeed.

Millennials -- the youngest generation of four currently in the workforce -- were recently featured in a CBS 60 Minutes segment. The TV broadcast focused on how different these workers are from the departing baby boomer leaders. Many of the challenges created by this generational chasm fall on training-and- development departments to solve, as organizations scramble to address the pending leadership gap that demographic data suggest is inevitable.

To prepare for this future, training and learning efforts must accelerate the development of leaders who can innovate in the face of rapid change. What's more, e-learning needs to become a motivational strategy, not just a cost-reduction tactic.

The only way to prepare for the uncertain future is to manage expenditures targeted at human capital as investments -- not merely current-period expenses -- something that will require the measurement of the value being created by training and e-learning programs.

Global-market forces and innovation related to technology are reshaping the worlds of training and development. What's needed in the future is dramatically different from what worked in the past. Efficiency will continue to be required, but cost reduction alone will not be sufficient. The challenge will be to demonstrate the value training and e-learning creates while simultaneously managing human-capital risk related to that change.

Uncertain Times

One force that will define the future priorities for training and e-learning professionals is the demand by senior leaders for the entire organization to embrace innovation in the face of the unpredictable future. The uncertainty is represented by a March 2007 Standard and Poor's forecast indicating the price of oil in 2008 would be $65 a barrel. It actually reached $130 a barrel in May 2008, only 14 months later.

In the face of such uncertainty, the role of training and development will shift from responding to training demands from within the firm to becoming the operation that prepares leaders to innovate in the face of external forces. Calibration of how well the training organization is developing leaders and innovators is going to require new measurements.

The most predictable of the forces that will define the agendas of training and e-learning leaders are those rooted in demographics. These forces have two certain features. First, the supply of leaders will inevitably shrink. In the next decade, almost 40 percent of the workforce will retire, including many of businesses' most experienced senior leaders. The only uncertainty is the exact timing of their departure.

The challenge for training and development is to recommend the size and focus of the human capital investments organizations must make to replenish the skills, knowledge and experience certain to walk out the door. In this case, it will require an inventory of what skills and knowledge are leaving and a financial plan for implementing the training-and- development programs needed to replace the critical capabilities of the departing human assets.

A second implication of the demographic shifts was captured in the 60 Minutes segment. The accelerating rate of change makes the values and experiences of those on the two ends of the generational continuum dramatically different. It is as if the boomers and the millennials came from different planets, not merely different decades. Nowhere is the implication greater than in e-learning.

In the past, e-learning was managed as a cost-reducing alternative to expensive classroom delivery. Potential savings for the firm still exist. In the coming months and years, however, the shift to e-learning will increasingly be driven by the preferences of the learners, not by the financial priorities of the accountants.

If you'd like proof, visit the lecture halls of any major American university. Chances are you'll find young learners only reluctantly sitting in a classroom so familiar to the departing boomer leaders.

There's no question millennial prefer the technology world. They want to learn in the same medium they use to socialize and interact with their peers. They want content delivered to their mobile devices.

This shifts the priority of e-learning from the firm's focus on cost savings to the learner's need to be motivated. The absence of motivation radically dilutes the value of even the best content. Fulfilling the potential of training and development requires the engagement of the learner.

People as Assets

So, if these are the major factors that will define the priorities for C-suite executives, what steps do HR leaders need to take to respond to a future in which innovation and leadership are key to creating value?

First, they need to ensure their organizations act on the near-mantra expression, "Our people are our most important asset." This requires that people be managed like an asset.

The pivotal feature of an asset is that it has future value. Assets are not merely treated as an expense on the current income statement. Unfortunately, CFOs don't contribute much to the effort of managing human capital as an asset. GAAP (generally accepted accounting principles) leaves accountants with no choice but to record training and e-learning expenditures as a current period expense, not as an investment.

Consequently, HR leaders are going to have to step up and play a pivotal role for their respective organizations, deploying the methods of investment decision-making when it comes to human capital.

To manage our human capital as assets, the future will require that HR leaders develop and deploy capital investment decision-making methods not currently a part of the professional capabilities of learning executives. By demonstrating the future value that can be created, HR will be able to justify the increased budgets required to reposition their organizations for the future.

What will it require for HR leaders to lead their own organizations in the future? Among other things, they need to be prepared to answer the following three critical questions:

1. What business outcomes should be measured to demonstrate the value created by a particular training or e-learning program?

2. How do we convince those leaders with the authority to approve or deny human capital investment budgets that the business impact measured is the result of our training/learning programs and not the result of other forces?

3. How do we organize the conclusions of our analyses so top management can understand their future implications?

Among the skills HR leaders need in order to deal with their list of priorities are those of communications, business acumen and statistical multi-variant analysis. The business acumen is necessary for the critical communication that needs to happen between themselves and their CFOs as a part of the human capital investment and budgeting processes.

Measuring the value that's created is necessary for arriving at executive decisions that impact the future and is essential in justifying budget and resource allocations -- strategic decisions that lead the organization in the face of accelerating change. The challenge for the profession is to champion the methods for measuring the value that's created and educate the training organization in how to make those methods an integral part of every training and e-learning initiative.

Multi-variant statistics is a required part of the value-creation analysis. Without explicitly dealing with the noise from all of the other changes going on around training and e-learning programs, HR leaders will never be able to convince their CFOs that the results are compelling and justify the increased human capital investment required. (Organizations such as Chrysler, ACS, Sun Microsystems and US Bank are already using statistical methods to measure training and e-learning value creation in research being done at Bellevue University's Human Capital Lab.)

In the end, the highest priority for training is to be able to document the compelling value-creation arguments. The challenge for all of us is to develop and deploy the skills needed to make the investment case to other C-suite executives.While we are justified in debating the particulars of the future changes, what is not debatable is that human capital will play an increasingly important role in the creation of value in the future.The HR profession sits at the eye of this storm. How well the profession responds to the challenges will play a key role in determining how well the organization performs as the uncertain future unfolds.

Ref: Michael E. Echols

[About the Author: Micheal E. Echols was educated as physicist and mathematical modeler with a Ph.D from the University of California at Berkeley. A former senior profit-and-loss executive at the General Electric Co., Echols is the author of three books on human capital investment and wrote dozens of articles and presentations on managing human capital. He is executive vice president and director of the Human Capital Lab at Bellevue University in Omaha, Neb.]

Global Leadership Challenges

Accelerating growth and globalization are forcing organizations to identify and nurture leaders who can operate effectively across the organization and, in many cases, across borders. Aging workforces in many countries increase the pressure, as a generation of senior leaders prepares to retire.

For some organizations, the key challenge is immediate: aligning current leadership with the business strategy. Other organizations struggle more with “bench strength” issues – finding and developing the leaders of the future. Many organizations face both of these leadership challenges, and almost all struggle with ensuring smooth leadership transitions.

The demands for growth and change have put HR leaders into a key role in ensuring their companies have right global leadership talent, in the right place at the right time. HR executives bear increasing responsibility for helping their organizations find and develop leaders who can move their companies forward – and then for helping those leaders to succeed. This responsibility is complicated by the fact that it’s often difficult to get a clear view into the future state of the business. Among the outstanding questions for HR executives:

How fast must they be prepared for change throughout the organization and change at the top?
What leadership skills are required for the future? How do they ensure that they hire, develop and retain the people with the right skills – intellectually, technologically and emotionally?
Should leaders be the same worldwide or should they have distinct talents and characteristics based on their location? Is there one leadership brand for a company or many?
How can they prepare the next generation of leaders, fast enough and well enough, to meet the company’s strategic goals?
How will they find the leaders who can work effectively in an ever more globalized environment?