Baker Tilly refers to Baker Tilly Virchow Krause, LLP, an independently owned and managed member of Baker Tilly International. Keeping your workforce vibrant: Establishing a Sustainable Succession Planning Program 2015 Accounting Leadership Conference & Chief Audit Executives Conference ParenteBeard and Baker Tilly merged in October, 2014
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Baker Tilly refers to Baker Tilly Virchow Krause, LLP,an independently owned and managed member of Baker Tilly International.
Keeping your workforce vibrant:
Establishing a Sustainable Succession Planning Program
ParenteBeard and Baker Tilly merged in October, 2014
Today’s agenda
1. State of our talent2. Succession planning peer efforts3. Tying succession planning programs to long-term strategies4. Where do we start?5. Effective program approaches6. Resources and tools7. Discussion and questions
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Presentation Notes
About Baker Tilly
Baker Tilly overview
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Baker Tilly offers an independent perspective to evaluating and implementing efficient business processes, financial analysis, and managing risk
80 year history of focusing on client needs and providing outstanding service
Baker Tilly and ParenteBeard merged in October, 2014 to form the 12th largest accounting and advisory firm in the United states
Energy and Utilities Group serves nearly 400 utilities nationwide
About your speaker
Russ Hissom, CPA, CIA, CISA, PartnerOver 30 years of industry experience in
> Providing enterprise risk advisory and internal audit services> Succession planning program implementation> Business process and controls reviews> Enterprise risk management programs> Financial audits> Scorecard and metrics reporting> Operational reviews and internal audit> Risk assessment > Financial training for utilities.
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1. State of our talent
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State of the utility union
> Under pressure from regulators, ratepayers and environmentalists
> Markets and pricing are changing
> Technological changes, orders and choices
> Cybersecurity impacts
> Compliance
> Oh, and our workforce is aging and needs an orderly transition
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Outright assault on critically needed service – want it, want it on demand, reliable, don’t want to pay for it and want to tell you how to produce it
Utility employment statistics
Utility industry employment
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Cost of replacing a skilled worker $150,000 - $200,000
Utility industry unemployment rate
Average hourly earningsBureau of Labor Statistics
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Points to a robust industry and one with high cost to worker replacement US average hourly rate $25
Average age is 47 Energy Workforce Development stat - Average utility worker within next 10 years These are not new stats – industry has known for some time Doesn’t only impact energy workers, pipeline and gas crews – upper management, managers – all across board Along with consolidation and downsizing find ourselves in a situation Programs out there, this talk is about taking stock and specific ways to evaluate talent for succession planning
Electric and gas hiring needs
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Needs
Construction
Operators
Line workers
Renewable energy specific
knowledge
Renewable energy
programs
Engineers: Competitive market for
skills
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Competition for electrical engineers is increasing as advances in industries such as microelectronics, computers, and communications divert student interest from more traditional fields such as the energy industry. More generous pay offered to electrical engineers in other areas will make it even more difficult for electric utilities to compete �for engineers.
Knowledge capital needed
Demand for intellectual capital:
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Knowledge capital and thought leadership is across the spectrum
2015 Population estimates
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2. Succession planning peer efforts
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What is succession planning?
Succession planning is the process of identifying high-potential employees, evaluating and honing their skills and abilities, and preparing them for advancement into positions which are key to the success of business operations.
Succession planning involves:> Understanding the organization's long-term goals
and objectives
> Identifying the high-potential candidates and their respective developmental needs
> Determining workforce trends and predictions
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Define high-potential candidates Not just hiring and hoping for leaders in various areas to step up and replace
Purpose of workforce and succession planning
Create a culture of attracting, developing and retainingtop-notch talent by:
Identifying top talent – recognizing leadership talent based upon consistent assessments and competencies.
Developing and retaining top talent – ensuring growth plans are in place to retain and advance internal talent, which will in turn increase employee engagement.
Building internal strength – renewing a focus on creating an internal talent pipeline, filling open positions quickly and ensuring appropriate career growth.
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This is organizationally ingrained All managers at all level sb trained on these techniques Succession planning sb part of annual goals of all management levels – an integral part of strategic planning Visible and vocal
Sample industry programs
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Sempra major program for succession planning – senior management team
Sample industry programs
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Basin – coop – gas/electric - ND Competition from Bakken oil fields – recently lessened, but still issues that raised pay across the region Here looked outside to develop a program using consultant
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3. Tying succession planning programs to long-term strategies
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Succession and workforce planning program approach
Strategy formalization that addresses:
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Strategic goals
Succession planning
Recruitment
Compensation and rewards structure
Performance measures and assessments
Knowledge retention and
transfer
KPMG/Rigzone survey
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A program must address these areas to be wholistically tuned into your org Strategic goals Performance measures Succession planning needs Knowledge transfer Recruiting Compensation and rewards Notice comp is last
Talent Life Cycle
Plan
Acquire
Engage
Develop
Deploy
Lead
Retain
Evaluate
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Cost per day when operating without a key player: $7,000
Cost of a poor hire: $150k - $250k
Rate of efficiency at which most businesses operate because of poor engagement levels: 30%
Average time for a new manager to become productive: 6 months
Value of top performers: 2 to 3 times the performance of average employees
Cost of losing a talented employee: $250 -$500k
Number of employees the average manager’s actions directly affect :12
Percentage of a company’s employees who are well suited for their roles: 20%
Source: “Strategic Workforce Planning.” Human Capital Institute, Version 3.2, 2012
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Describe each box Notes below To have the workforce needed to execute the organization’s strategy. To avoid extended and costly vacancies in key positions and assure the stability of business operations. To obtain the highest and best use of limited resources. To provide meaningful developmental opportunities for both the organization and its employees as it targets key leadership positions at varying levels. To help develop a diverse workforce by enabling decision makers to look at the future make-up of the organization as a whole. To cultivate a workforce that has the required skills, and is motivated and adaptable. Those roles that are vital for achieving strategic goals. Roughly 10% to 15% of roles in an organization are strategic. Future success is compromised if these roles are not filled with extremely capable people.
Succession and workforce planning program outline
Strategic goals
> Key is attracting and retaining talent not only for leadership but also all areas of utility operations, both financial and operational
> Organizational change may be needed along the way based on the ability to fill key positions or mold successors
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Review the utility’s current staffing levels Interview key personnel to understand services provided by the utility and staff providing those services Gather staffing level data from both investor-owned and public utilities that provide similar services Compare and evaluate the utility’s staffing levels with gathered benchmarking data
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4. Where do we start?
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Understanding your utility’s needs
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Aging population
Employee retention
Operations are already lean
Geographical challenges
Pool of candidates is small
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Overview of your current operations and situation Each point
Workforce planning
> Represents the opportunity to proactively identify and plan for staffing, training and knowledge transfer
> Predictive studies on critical organizational needs
> Creates time to adjust programs, training and recruitment
> Replacing loss of institutional knowledge
> On the job training for new workers and apprentices for knowledge transfer
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Start w/ workforce planning You’ll want to know what are the competency needs and identify those who are going to take you there You’ll want a formal program to do this points
Utility competency model
25SOURCE: Center for Energy Workforce Development, “Energy Industry Competency Model: Generation, Transmission and Distribution”, p. 2.
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Center for Energy Workforce Development – Energy Industry Competency Model 1 – Personal characteristics – character skills 2 – Academic competencies – credentials – management, IT, engineering, science? 3 – Workplace competencies – ethics, teamwork, problem solving 4 – Industry technical comp – specifics in the industry – safety, industry issues, environment, continuous improvement 5 – Industry technical – Gas T&D, pipeline maint, Nuclear gen, non-nuke, T&D, 6 – Occupation specific – lineworker, pipeline construction worker, util mangement, plant operator
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5. Effective program approaches
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Successful succession planning program characteristics
Tied to organizational goals
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Competencies are proven
Training is tailored
Use the PDSA (Plan-Do-Study-Act) approach
Roles are well-defined
Skills are readily assessed
Support from the top
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Overall successful programs share these characteristics
Succession and workforce planning annual process
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Process map of timing of succession program
Succession and workforce planning program outline – take stock
Succession planning
> Evaluate and consolidate current succession planning initiatives
> Identify “critical positions” that should be considered for succession planning
> What are current leadership development initiatives?
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GAP analysis of available resources and skills Nine box Define priorities Develop success measures Lower attrition rate? Reduction in days needed to fill positions Develop ongoing formal plan to monitor, evaluate, and improve
Succession and workforce planning program outline – take stock
> Recruitment- Identify options available- Review industry wide efforts - Evaluate current efforts focused on
employee retention- Use data from one-on-one interviews
and focus groups- What’s the use of internal talent vs.
outside recruiting
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Formalize strategy to address workforce challenges
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Take stock – recruiting Use exit interviews to aid in recruiting
Succession and workforce planning program outline – gather data
Key data for review> Staffing levels by departments> Vacancy reporting> Overtime> Productivity> Tenure> Age> FTE over 60> Turnover> Attrition rate> Training offered and taken> Staff certifications
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Gather data for review
Succession and workforce planning program outline - benchmark
Benchmark staff levels against other peer utilities
> Interviews> Surveys> http://www.cewd.org
Gather information on key operating characteristics and peer utilities – Compare to peers by bandwidth
> Generation employees> Employment levels per distribution miles> Employment per customer> Key operating metrics
Succession and workforce planning program outline – Statistical analysis
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Using the technical competency framework, what are the top areas of deficiency for today?
Answer Options Response Percent
Response Count
Safety Awareness 19.6% 10 Industry Principles and Concepts 54.9% 28 Environmental Laws and Regulations 49.0% 25 Quality Control/Continuous Improvement 70.6% 36 Troubleshooting 29.4% 15
answered question 51
Succession and workforce planning program outline – measure performance
Performance measurement and assessment
> Evaluate the current performance measurement system> Is the current process is in alignment with the workforce
environment?> Administer two surveys, one to supervisors and one to
evaluated employees to assess satisfaction with the process and whether or not it is perceived to assist with employee development
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Measure performance The views can be different, design the most effective program on paper, yet delivery can define perceptions
Succession and workforce planning program outline – tally gaps
Gap analysis – examples> Anticipated retirements> Skills deficiencies (smart grid)> Lack of continuing education for
engineers> Quality and quantity of internal
education and training> Staffing shortages> Candidate shortages> Technology gaps> Skills and training needed by
managers to coach, mentor, identify competencies and mange performance
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A key step is the gap analysis – current state vs identified strategies The missing pieces of the puzzle
Succession and workforce planning program outline – plan knowledge transfer
Knowledge retention and transfer> Establish a knowledge retention program> Includes an inventory of the people,
processes and technologies supporting the “deposit” of this information into a formal “knowledge repository.”
> Identify and document current training options
> Evaluate whether or not these options satisfy the competency needs of the organization
> Use an employee survey regarding satisfaction with training and development
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With the tally o t gaps need to plan for knowledge transfer programs Knowledge repository – not only P&P but knowledge encyclopedia – tapping resource knowledge while it’s available
Succession and workforce planning program outline – plan rewards
Rewards structure> What are the current
compensation levels and strategies used to incentivize employees?
> Is there flexibility (ie. not contract restrictions)
> Can merit pay and bonuses be used to help in achieving utility/departmental goals to aid in maintaining a high level of morale, motivation and productivity among employees?
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In the end tying compensation into the analysis Not first, but should follow
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6. Resources and tools
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Management competencies
Identify knowledge structure for the following areas:
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Personal Effectiveness
Workplace
Academic Competencies
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Think back to the competency model – 6 steps What are the strengths of each indiv? Can’t necessarily find clones of successful current team members
Identify key employees for development
> Selection is based on available internal candidates. There will be some available candidates who are ready, while there will be some who will not meet the demands of critical positions.
> In some cases there will be no identifiable candidate for succession at all.
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Resources and tools
> 9 Box Grid
> Individual Talent Profile
> Action Plan
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GE McKinsey 9 box The nine-box matrix offers a systematic approach for the decentralized corporation to determine where best to invest its cash. Rather than rely on each business unit's projections of its future prospects, the company can judge a unit by two factors that will determine whether it's going to do well in the future: the attractiveness of the relevant industry and the unit’s competitive strength within that industry. Placement of business units within the matrix provides an analytic map for managing them. With units above the diagonal, a company may pursue strategies of investment and growth; those along the diagonal may be candidates for selective investment; those below the diagonal might be best sold, liquidated, or run purely for cash. Sorting units into these three categories is an essential starting point for the analysis, but judgment is required to weigh the trade-offs involved. For example, a strong unit in a weak industry is in a very different situation than a weak unit in a highly attractive industry.
Resources and tools - 9 Box
What it is:
> A chart to identify an employee’s performance and potential. Provides visual overview of staff capabilities.
How it is used:
> Assists with the identification of staff who are prospective candidates for promotion.
Effort needed to complete/frequency:
> Initial review can be time-consuming – subsequently minimal. Complete once every 6 months.
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Resources and tools - 9 Box Talent Code
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Talent Code Definition Description P Promotable > Excellent performer
> Track record of performance rating of 4 or 5 > High-potential individual > Has taken on more responsibility > Ready now for the next level position
ET Emerging Talent > Excellent performer > Typically a performance rating of 3 or 4 > Shows growth potential > Can take on more responsibility > Promotable within 6-24 months or lateral movement in less than 12 months
KC Key Contributor > Consistent performer and well placed > Typically a performance rating of 3 > Could be difficult to replace > Not considered promotable at this time
IR Improvement Required
> Inconsistent performer > Typically headed to a performance rating of 2 > May lack knowledge, skills, abilities and/or motivation in one or more areas > Could become a concern if performance expectations continue to be raised > Not promotable > Performance improvement plan in place
AR Action Required > Capability insufficient for current role > Typically a performance rating of 1 or 2 > Need organizational intervention (outplace or redeploy) > Timeline for action/outcome is required
NH New Hire > Too new to rate / too early to assess
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A common method used to chart the available candidates and their readiness level to succeed is a 9-box grid. The 9-box grid helps management to visualize the available successors along with the strengths/weaknesses in the plan
Resources and tools - 9 Box Framework
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Walk thru
Individual Talent Profile
What it is: > A tool that provides a summary of an employee’s background,
competencies, and performance.
How it is used:> Helps identify strengths and weaknesses so that a development
plan can be created to assist with developing staff talent.
Effort needed to complete/frequency:
> Moderate/once a year
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Liken this to regular evaluation program, annual goal setting Not as robust as 9 box, but still gives direction
Action Plan
What it is:
> A plan that lists detailed actionable items and due dates of tasks that are to be completed so that an employee’s competencies are improved.
How it is used:
> Helps set goals and timelines for when staff should be exposed to new opportunities or training.
Effort needed to complete/frequency:
> Moderate/ every 6 months.
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Feeds from individual talent profile or 9 box THIS IS THE PLAN!
Individual Talent Profile
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> Identify employees available for succession into their positions
> Develop a profile of candidates
> Cross-departmental leadership/key decision makers must be involved
- History of performance reviews and accomplishments
- Years of relevant experience
- Education and credentials
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The incumbents in key positions identify employees available for succession into their positions. Profile of candidates are developed: A history of performance reviews and accomplishments, including years of relevant experience, education and credentials are compiled for profiles. Cross-departmental leadership/key decision makers must be involved in the plan throughout the process to represent their selections and discuss concerns with one another. Identifiable gaps need to be temporarily or permanently closed in the event of an emergency replacement of a candidate in another department.
Employment strategies
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Strategies
Improve Organizational communication and workforce
connection
Embrace generational differences
Collaborate on resource
development
Use technology
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Summary Implement t strategies in retention and hiring A visible program can lead to satisfaction and morale boost in current environment Circles
Utility industry career benefits
> Communicate the positives
> Competitive pay
> Job satisfaction
> Advancement
> Security
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Our industry has a lot to sell Career opps Low unemployment Good pay Security Technology will continue to be key in future