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From Resource,
July 2008
People
Power
Forward-looking human resources executives are working with their
line-of-business partners to identify high-potential leaders, to foster
emotional intelligence and to manage generational diversity.
By
Olivia Blakemore, Mallory Eldridge, and Jennifer Rankin
If
you’re a human resources professional, chances are you’re working overtime
to position your company for success in a business environment that’s more
complex, competitive and changeable than just about any we’ve experienced.
It’s
this environment that has given HR executives more than just a seat at the
table. Long gone are the days when they shuffled paperwork in the back office
and carried out orders from the business heads. Today, they are strategic equals
who have been tapped to get the right people in the right jobs and to craft an
infrastructure of opportunities, incentives and professional development that
will enable their company to attract and retain talent and to meet its business
objectives. In short, this is not your father’s Human Resources organization.
Bench
Strength
One
of the biggest challenges facing any HR team is growing leaders. Despite the
troubled economy, which has compelled everyone to worry more about dollars than
people, the topic of leadership bench strength has once again come to the
forefront.
In
fact, organizations that previously may have viewed workforce development as an
optional employee benefit are changing their perspective now that they face
challenges in filling key leadership positions, according to Douglas A. Ready
and Jay A. Conger, academic researchers who published their findings in the June
2007 Harvard
Business Review article “Make
Your Company a Talent Factory”.
A
recent study by the Corporate University Xchange, Leadership
Study 2012: Trends and Best Practices,
reports that 81 percent of 72 surveyed organizations have “significant”
concerns about their leadership bench strength, and 69 percent state they are
“somewhat” or “significantly” challenged to develop emerging-markets
leadership talent.
Another
poll, conducted by Stanton Chase International and Birkman International among
560 respondents, found that 94 percent of participants are facing current or
impending shortages of quality leadership talent. Approximately 90 percent see a
“talent gap” between the Baby Boomers who currently occupy the top
management positions and younger generations.
Identifying
employees who have a high potential for success in leadership roles—high
potentials or HiPos in human resources parlance—is not a new concept.
Top-drawer companies have been doing this for ages. There is, however, a new
sense of urgency in the C-suite, because a number of demographic, social, and
economic realities are causing concern about the availability of future
management talent and pushing organizations to identify prospective leaders
early in their careers (see The HiPo Imperative).
The
first of these is the impending retirement wave. On January 1, the oldest U.S.
Baby Boomers turned 62, the age at which they are eligible for Social Security.
Though less-than-adequate nest eggs and economic slowdowns may keep this
generation in the workforce longer than they planned, its 76 to 78 million
members will eventually retire. The impacts of this impending retirement wave
are much debated and depend to some degree on factors such as the use of phased
retirements or part-time work. But some estimates do warn of a future point at
which two
U.S.
workers could be leaving the workforce for every one who enters it.
No
matter which path Baby Boomers take—full-time, part-time, or “sometimes”
employment—the reality is that the next generation, Generation X, is much
smaller than its predecessor and may not be able to fill all the holes
(particularly the managerial ones) that Baby Boomers leave behind. And,
employers who have not adequately planned for the transition may see Boomers
walk away with valuable institutional knowledge that has not been transferred to
the next generations.
Some
research indicates that employers are not universally preparing for this
changing labor landscape. In a report released in 2007, the
Boston
College
Center
on Aging and Work surveyed 578 businesses and found that only 12 percent have
developed detailed plans to address Baby Boomer retirement issues. More than 25
percent have not done any planning.
Streamlined
operating models are another driver. The mergers, acquisitions, reengineerings,
and downsizings of previous years have, in some cases, stripped the management
ranks and created ultra-lean organizations without many layers from which to
draw new leadership candidates. According to Ready and Conger, some companies
have eliminated the country manager role in smaller regions. This step may have
been a money saver, but it eliminates a position that could be very useful in
developing up-and-coming executives. And the combination of retiring Baby
Boomers and lean operations is almost sure to create intensified competition for
management talent.
Another
challenge is CEO turnover. The tenure of chief executive officers is shorter
than it used to be, which creates a real need for companies to have talent in
the pipeline capable of filling the highest ranks.
Some
companies “stargaze”—that is, chase external talent—to fill that
pipeline. External hires, however, do not always work out. Harvard researchers
Boris Groysberg, Ashish Nanda and Nitin Nohria say star performers imported from
the competition to fill talent gaps do not always repeat their success at the
hiring firm. Sometimes these individuals fail to fit in well in their new
companies. And more than a few have left behind some of the elements—talented
team members, solid technology, company culture, and so on—that helped make
them stars in the first place.
Also
driving concern over the availability of future management talent are the
so-called urban wars. Cities are competing to attract young talented workers,
hiring consultants to help them in the escalating race to attract knowledge
workers. Richard Florida described this phenomenon several years ago in The
Rise of the Creative Class, in which
he notes that in-demand workers are drawn to regions and cities that are
economically and culturally vibrant. Some employment experts worry that even if
broad future shortages in management talent do not occur, individual regions or
cities in old-line or unpopular areas may suffer from geographic brain drains.
Finally,
the nature of leadership has changed dramatically over the past decade. Leaders
today face an increasingly rapid pace of change, growing complexity, entrance
into new and unfamiliar markets, and many other daunting challenges. Identifying
and preparing those who eventually will take the reigns can help companies avoid
leadership vacuums in strategic roles.
As
you can see, it’s more important than ever to find and develop leadership
talent. The process, however, is quite challenging—so challenging, in fact,
that companies rarely share the details of their programs, which give them
competitive advantage in the market place. Those who have gone on the record—HR researchers, consultants, academics and other
experts—have described just how difficult it is to implement these programs.
According
to a recent survey conducted by the Institute for Corporate Productivity, 69
percent of the 469 responding organizations have a high-potential assessment
process in place, and most of those organizations (70 percent) say that a
development plan is part of that process. The same survey, however, found that
only 47 percent of the organizations that do have high-potential programs track
the effectiveness of their assessment process.
Talent
pros tend to describe the process of choosing HiPos as a tricky one for which
company leaders should keep several considerations and potential pitfalls in
mind:
*
Definition. What is “high-potential” and what does it look like for our company
and its future? Organizations can stumble over this question as they attempt to
create a formal structure for identifying next-generation executives. One of the
problems is the subjective nature of “potential”. Another is the challenge
of arriving at a consensus among the committee or steering group driving the
process.
*
Assessment method.
One of the most frequently cited sticking points associated with identifying
future leaders is the tendency to confuse high performance with high potential.
Many technical and professional individual contributors and managers are highly
skilled in their current positions, but may lack the interpersonal skills,
vision, drive, or desire to succeed in other positions. While current
performance may be a consideration, experts suggest that this component should
be complemented with assessments based on the ideal attributes—effective
problem-solving or broad-based business acumen, for example—of the future
positions that need to be filled.
* Boilerplates.
The temptation to avoid reinventing
the wheel can be a strong one, but workforce planners note that HiPos in one
company do not necessarily look like the future leaders at another. While
high-potential candidates may share certain broad traits—such as drive or the
ability to handle complexity—the selection and development of high-potentials
should be tied to the specific and unique goals and objectives of the firm.
*
Communication.
Whether to tell high-potentials of their status within the company is a topic of
much debate. While critics of the practice note that it can create false
promotion expectations and a sense of entitlement, proponents of transparency
assert that “don’t-tell” companies run the risk of losing these employees
to organizations that are more open.
*
Internal tension.
In companies where high-potential selection is publicized (or just obvious),
co-workers passed over for high-potential status may resent the chosen HiPos and
the development opportunities showered upon them, which may lower morale,
disrupt teamwork and cause employee defection. It’s also possible that
managers who are not part of the HiPo program may end up overseeing early-stage
HiPos through job rotations and other programs, putting them in an awkward
position.
* Stalling. Because
HiPo identification can be so tricky and subjective, companies make some choices
that just don’t work out. Sometimes it happens because the vision or goals of
the company change, and sometimes the candidates simply do not perform at
expected levels. To address these problems, some companies have learned to
communicate upfront that initial inclusion in the program does not guarantee
continued participation or eventual promotion. Organizations also may remove
candidates from this group if progress has not been made during a pre-determined
period rather than letting individuals tread water in the program for years.
Since these individuals are probably still very valuable to the organization,
other types of development opportunities might be designed for them.
Two of LOMA’s industry committees
have conducted informal surveys among their members regarding the identification
and support of high-potential employees.
The
first group asked, “How do you identify high potential leaders?” The
responding companies were AIG American General, Assurant Health, John Hancock,
MassMutual, Principal Financial, Securian Financial, Shenandoah Life and UNUM,
who are members of LOMA’s Training and Management Development Committee.
There
were as many answers as responding companies. One company has a rigorous,
multi-faceted assessment process to evaluate employee performance and potential.
At two companies, senior management and their HR business partners identify
HiPos; two others rely on feedback from management. Another company has a talent
review process in place that has identified the top 200 HiPos. One relies on its
succession planning process. At the last company, the training and HR
departments meet at least annually with the executive development committee to
discuss and select high potentials; then, development plans are created for
these individuals.
The
second question came from a LOMA member who wanted to know how prevalent the
practice of rewarding managers for the development of their high-potential
employees is in the insurance industry. LOMA e-mailed the question to 28
Compensation Committee members and other HR contacts. By the deadline, 13 had
responded, representing a 46 percent response rate. All respondents asked to
remain anonymous. No respondent had a program that specifically rewards managers
for developing high potential employees. Instead, several mentioned that
employee development is assumed to be one of the manager’s performance
objectives and compensated as part of the annual review.
Emotional Intelligence
In
addition to finding and developing high potential leaders, companies are asking
themselves how much an employee’s people skills matter in the workplace,
particularly if the individual is an operational/technical genius who
consistently delivers good results.
This
is not a new question. Although the concept of the organizational value
associated with social and personal competencies invaded the broader American
culture with the publication of Daniel Goleman’s Emotional
Intelligence in 1995, research on EI—and
its implications for business—surfaced years earlier.
Now,
more than 10 years later, five million copies of Emotional
Intelligence have been snapped up, the
book has been translated into 30 languages, and debates continue over the value
of emotional intelligence. Is EI equally or more critical than cognitive
ability? Does EI research have any true scientific basis? Can EI be learned or
acquired over time?
While
organizational psychologists, brain-function researchers and others ponder these
important but more theoretical questions, businesses are dealing with the
reality—that is, what to do with their smart, driven, innovative workers and
executives who also happen to alienate co-workers, demoralize direct reports,
and ultimately reduce productivity.
For
many companies, concern about these employees has grown more acute as changes in
the business environment have raised the profile of social competencies. Among
these changes are:
*
Emphasis on
collaboration. Teamwork is now
inescapable in most office environments, particularly as businesses work to
break down silo mentalities, engage in more cross-selling across different
business lines, and integrate business and technology more effectively. These
are all collaborative efforts that depend, at least to some degree, on
relational skills. There are still lone-wolf jobs, but work teams—both formal
and informal—are a reality.
*
Globalization and
outsourcing. In a similar vein,
globalization and outsourcing have created relational complexities in the
workplace that span geographical regions, time zones, and corporate cultures and
must be met and overcome by colleagues who can collaborate and communicate
effectively.
*
A knowledge-based
economy. Talent management plays a
significant role in today’s knowledge-based economy. Increasing competition,
greater scrutiny of corporate bench strength and succession plans by
shareholders, and fears over the aforementioned “brain drain” that retiring
Baby Boomers may fuel are some of the factors driving HR executives to pay more
attention to attracting, retaining and developing star performers and solid
contributors. If the adage is true that workers leave bosses, not companies,
particularly in the case of high-potential employees who can easily find other
work, then a “toxic manager” with poor people skills can cause great harm to
his or her company’s talent strategy.
*
The importance of
innovation. Innovation is a
competitive edge in industries with very similar or commoditized products and
services. Employees who do choose to stay in environments with hostile,
unpredictable, aloof, or uncooperative managers are often reluctant to share
ideas, provide vital feedback, and take risks.
In response to these business
pressures, leadership development has become a more sophisticated field.
Companies have become more aware that highly competent individual contributors
with excellent technical skills may not always make the best managers. Some have
established dual-career tracks, which have been used by technology companies for
years, to separate those with management potential and aspirations from strong
individual contributors who may fare better with raises or more challenging
projects. Knowing how to distinguish these two groups involves some awareness of
the importance and practicality of emotional intelligence.
Just
what do we mean by emotional intelligence? When Goleman examined the topic in
his book, he identified five dimensions of EI, sometimes referred to by others
as emotional quotient or EQ:
*
Self-awareness (an understanding of how one’s mood and behavior affects
others)
*
Self-motivation (initiative)
*
Impulse control or self-regulation (which incorporates stress management)
*
Empathy (the ability to view things
from another person’s perspective)
* Social
skills (the ability to handle others’ feelings and behavior)
Other definitions vary somewhat, but
the essence of EI is an ability to identify and understand one’s own and
others’ emotions and behaviors, and to put that understanding to good use,
according to T&D analysts Cary Cherniss and Mitchel Adlet.
Although
the financial services industry might not seem the most natural fit for
pioneering emotional-intelligence practice, insurance and financial firms have
actually been at the forefront of practical, business-oriented applications of
EI. Death protection and retirement planning require hard facts and logical
approaches, but emotions are involved when customers face these important
decisions. In turn, the agents, service professionals, and marketers who work
with clients must know how to handle these emotions and their own responses.
In
the 1980s, for instance, a large life insurer was spending US$ 30,000 per person
on new-agent training, only to see half the agents quit within the first year,
according to Nancy Gibb, who reported on the emotional intelligence topic in her
October 2, 1995 Time
article “The EQ Factor”. Customer rejections and objections come with most
sales jobs, and certainly with the sale of products that force customers to
confront their own mortality. However, not everyone is equally suited to
persevere and succeed amid these challenges. To improve its agent-hiring
results, the insurer worked with a psychologist who incorporated tests of
candidates’ optimism into the screening process—a step that generated
positive results for the company.
Another
insurer, Canada-based Western Union Insurance (now ING Western Union Insurance)
implemented a third-party measurement test of EI for job applicants in the
1990s. And American Express Financial Advisors (now Ameriprise Financial)
launched its first training program for emotional competence in 1992.
A
sampling of more recent research on the correlation between emotional
intelligence and leadership ability or success includes:
*
2008 Koman/Wolff Study.
A study by E.S. Koman and S.B. Wolff, summarized on the Web site for the
Consortium for Research on Emotional Intelligence in Organizations, examines the
relationships among team leader emotional intelligence competencies and team
performance. Using a combination of subjective and objective measures, the study
reveals that team leader emotional intelligence has a significant effect on team
performance.
*
2006 Mercer/EIU Study.
Conducted by the
Mercer
Delta
Executive
Learning
Center
and the Economist Intelligence Unit, who surveyed 223 senior executives in
large corporations across 17 industrial sectors worldwide. The survey data was
supplemented with a number of in-depth senior executive interviews. The study
found that organizations that implement effective processes aligning leadership
development with business challenges typically realize stronger corporate
performance than those that do not have such processes in place. It also
identified three core competencies leaders must have to successfully manage in
an “era of paradox, ambiguity, and unpredictability”. These are head
(cognitive skills); heart (emotional intelligence); and guts (doing the right
thing based on clear values).
*
Hay/McBer Study.
Research conducted in the late ‘90s by the consulting firm found that division
heads with strong emotional and social intelligence skills outperformed business
targets by 15 to 20 percent, while those who lacked those competencies
underperformed by about 20 percent.
Interest in studies that link emotional
intelligence to performance results is at an all time high (see The
EI Challenge). And that interest is
not theoretical—a quick scan of EI Web sites shows that Allstate, All-American
Homes, Blue Cross/Blue Shield, Eli Lilly, Northrop Aviation, the Social Security
Administration, the U.S. Department of Labor and the U.S. Postal Service are
among the organizations that have provided EI training for their employees.
Generational
Diversity
In
addition to unearthing high potential employees and determining if emotional
intelligence really delivers business results, human resources executives are
figuring out how to leverage generational diversity.
At
Alberta Blue Cross, the age span between the youngest and oldest employees is
currently 45 years, but the organization realizes that the gap could potentially
grow to 60 years as its workforce ages.
The
Canadian insurer is not alone. Longer lifespans mean that companies now or will
soon employ four generations at once. While there has always been a certain
degree of generational tension in the workplace, the widening age gap and
demographic shifts will likely impact talent-management strategies, succession
and workforce planning, training and development, and even basic, day-to-day
interaction among workers.
Alberta
Blue Cross is attacking this issue through an initiative designed to gauge the
influence of multiple generations within the organization and identify possible
modifications, if any, to its human resource management practices. A significant
number of Alberta Blue Cross’s workers are “veterans” born between 1922
and 1943 and Baby Boomers, which will result in an equally significant
retirement wave within the next few years. In addition to these inevitable
departures, the insurer’s workforce statistics show that the employees who
leave for other opportunities are most likely to be members of Generations X and
Y, in whom the company has invested a great deal of training and development.
Alberta
Blue Cross wants to address these two trends and support a career development
strategy that engages staff of all ages and increases their productivity. The
objectives of its multigenerational project are to:
*
Develop a feedback process for
determining the degree to which the experience of each generation compares to
the factors that are identified in the research.
*
Identify approaches that have been
successfully implemented in other companies to deal with the multiple-generation
issue.
*
Recommend possible revisions to human resource policies and practices to
support its retention strategy.
To
achieve theses objectives, Alberta Blue Cross is developing focus group
materials and formats; identifying focus group participants that statistically
reflect the percentage of each generation’s presence in the workforce;
conducting focus group meetings and tabulating feedback; conducting research to
identify strategies that have been implemented successfully in other companies;
assessing those strategies to determine if they meet Alberta Blue Cross needs
and what their impact would be on current policies and practices; and
considering possible changes to existing HR management practices.
Alberta
Blue Cross will measure the success of this initiative by monitoring retention
trends and statistics, analyzing its staff-exit data, conducting employee
surveys, and collecting feedback from managers and HR staff.
Organizations
like Alberta Blue Cross are trying to predict how such a diverse span of workers
will affect their strategic workforce planning. According to researchers, these
are just a few of the possibilities that HR departments may confront in the
not-so-distant future:
*
Older employees working for much younger bosses.
Although the massive baby boomer
generation began turning 60 in January 2006, their near retirement is somewhat
uncertain. Due to longer lifespans and genuine interest in remaining engaged,
many may not opt out of the workforce at 65. And, because of shaky stock markets
and poor investment returns, many may not be able to afford retirement. But,
just because they may remain in the workforce doesn’t mean they will want to
keep full-time management positions. And in today’s flatter organizational
structures, companies are moving high-performers up faster, meaning that older
workers increasingly face the prospect of bosses who are younger than their own
children. This trend started during the dot-com boom as younger workers parlayed
their technology knowledge into promotions, and some speculate that it will
continue as boomers hit career
plateaus. Young managers in these positions may experience resistance and
hostility, while their older direct reports may resent their young bosses’
lack of experience and process knowledge. A survey by Lee Hecht Harrison reports
that more than 60 percent of responding employers are experiencing generational
tension, and that more than 70 percent of older workers are “dismissive” of
younger employees’ abilities. Almost half of younger workers feel the same
about mature employees’ capabilities.
* Knowledge
retention and customer service gaps.
When and if the Baby Boomers leave, they will take a great deal of experience
and institutional knowledge with them. By 2010, the number of 35-44 year olds,
who are typically expected to move into senior management, will decline by 10
percent, according to The Conference Board. By that same year, the number of
U.S.
workers 45-54 will grow by 21 percent, while the number of 55-64 year-olds will
expand by 52 percent. One-half of companies interviewed for a Conference Board
report feel that the departure of this large group of older workers presents
“potential knowledge vulnerabilities” for their firms. A cross-industry
working group also sponsored by The Conference Board asserts that companies that
try to retain mature workers with needed skills could put themselves ahead of
competitors that view this age group as only a pension and retirement burden.
For example, one bank in
Australia
is attempting to retain older workers in its service center because more than
half of its customers are over the age of 45. It wants its employee mix to
better reflect the profile of the customers it is serving. An insurer in the
U.S.
is working on a similar initiative, as it reaps a significant portion of its
operating income from retirement products aimed at mature consumers.
* Alternative
work schedules. Because younger
workers tend to want more work-life balance and prefer the flexibility of
non-traditional hours and locations, organizations that do not currently offer
telecommuting, part-time, phased retirement, more flexible leave, or other
alternative work schedules may have to re-think that approach in order to retain
these groups. Older workers with in-demand skills who want only part-time work
may also precipitate changes.
*
Different approaches
to career development. A 2005 report
from The Center on Aging and Work/Workplace Flexibility and the Families and
Work Institute found that older workers are more likely to continue working if
they have more control over not only their work hours and job autonomy, but also
their learning opportunities. Furthermore, demographers generally claim that
today’s youngest workers value ongoing learning opportunities and managers who
are willing to engage in their development. They do not expect to spend their
lives at one organization or in one career, and they want to get the most
experience out of every position.
*
Changing performance
management philosophies. The
“carrots” that worked for the Baby Boomers—higher pay and better
titles—don’t necessarily motivate younger employees, who want challenging
assignments, satisfying work, and opportunities to share their ideas. In
addition, a yearly performance appraisal may not satisfy younger employees’
addiction to constant feedback.
Employers have taken a variety of
approaches to addressing and adapting to generational concerns. Some have made
sure that young, first-time managers receive appropriate training to build their
confidence in supervising older workers. Others have established part-time
tracks for professional positions to retain Gen Xers who want more flexibility
in managing their home lives. Still others have focused on what it takes to
engage Gen Yers by offering to send second copies of job-offer packages to
parents and inviting parents to some college recruiting events.
Others,
like The Principal Financial Group, are supporting the mature workforce. In
February 2005, the State of
Iowa
and Principal joined the AARP Foundation in launching the AARP Workforce
Initiative to help Americans age 50 and over seek jobs and remain in the
workforce.
Principal
Financial and participating companies—dubbed AARP Featured Employers—were
selected based on their recognition of the need to prepare for the changing
workforce and their commitment to work with AARP Foundation on a program to
match qualified workers with employment opportunities. Among the group members
are Adecco, Allied-Barton Security Services, Borders Group, Express Personnel,
Johns Hopkins Health Systems, Kelly Services, Manpower, Inc., MetLife, Pitney
Bowes, The Home Depot, Universal Health Services and Walgreens.
If
you are managing multiple generations, you may want to consider pinning down
what motivates each of your age groups and customizing benefits, pay and
communication to retain these employees. You also may want to reevaluate the
traditional career ladder. Some positions that companies typically fill with
young, entry-level workers may work for mature employees who are moving toward
retirement but want to keep their hand in the workforce. In addition, consider
mentoring. This may be a way to give older workers new responsibility and show
them that their experience is valued, while young employees benefit from the
knowledge transfer.
As
the American Business Coalition explained when it released its generational
study, younger generations of workers are motivated differently than older
workers, which can create challenges for HR departments and line managers
charged with increasing productivity, growing the business, and retaining
high-potential workers. Companies that do not identify and provide what these
employees want may have more trouble filling their talent gaps.
As
you can see, your human resources team has its hands full. Resource
will continue to look for examples of insurance and financial services companies
that are developing HiPo, EI and generational programs you may find useful in
your organization. In the meantime, contact the
LOMA
Information
Center
at infoctr@loma.org or (770) 984-3720 if you would like additional information
on these topics. n
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