Establishing a Sustainable Succession Planning Program

Transcription

1 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 Baker Tilly refers to Baker Tilly Virchow Krause, LLP, an independently owned and managed member of Baker Tilly International.

2 Today s agenda 1. State of our talent 2. Succession planning peer efforts 3. Tying succession planning programs to long-term strategies 4. Where do we start? 5. Effective program approaches 6. Resources and tools 7. Discussion and questions 2

3 About Baker Tilly Baker Tilly overview 80 year history of focusing on client needs and providing outstanding service Baker Tilly and ParenteBeard merged in October, 2014 to form the 12 th largest accounting and advisory firm in the United states Energy and Utilities Group serves nearly 400 utilities nationwide Baker Tilly offers an independent perspective to evaluating and implementing efficient business processes, financial analysis, and managing risk 3

4 About your speaker Russ Hissom, CPA, CIA, CISA, Partner Over 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. 4

5 1. State of our talent 5

6 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 6

7 Utility employment statistics Utility industry employment Utility industry unemployment rate Average hourly earnings Bureau of Labor Statistics Cost of replacing a skilled worker $150,000 - $200,000 7

8 Utility employment age distribution Utility Industry Age Distribution 35% 30% 25% 20% 15% 10% 5% 0% Percentage 5% 19% 21% 32% 20% 4% 8

9 Electric and gas hiring needs Construction Engineers: Competitive market for skills Operators Needs Renewable energy programs Line workers Renewable energy specific knowledge 9

10 Knowledge capital needed Demand for intellectual capital: 10

11 2015 Population estimates 11

12 2. Succession planning peer efforts 12

13 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 13

14 Purpose of workforce and succession planning Create a culture of attracting, developing and retaining top-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. 14

15 Sample industry programs 15

16 Sample industry programs 16

17 3. Tying succession planning programs to long-term strategies 17

18 Succession and workforce planning program approach Strategy formalization that addresses: Recruitment Succession planning Performance measures and assessments Compensation and rewards structure Strategic goals Knowledge retention and transfer KPMG/Rigzone survey 18

19 Talent Life Cycle Cost per day when operating without a key player: $7,000 Plan Value of top performers: 2 to 3 times the performance of average employees Evaluate Acquire Cost of a poor hire: $150k - $250k Cost of losing a talented employee: $250 -$500k Retain Engage Rate of efficiency at which most businesses operate because of poor engagement levels: 30% Number of employees the average manager s actions directly affect :12 Lead Develop Average time for a new manager to become productive: 6 months Deploy Percentage of a company s employees who are well suited for their roles: 20% Source: Strategic Workforce Planning. Human Capital Institute, Version 3.2,

20 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 20

21 4. Where do we start? 21

22 Understanding your utility s needs Aging population Operations are already lean Pool of candidates is small Employee retention Geographical challenges 22

23 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 24

24 Utility competency model SOURCE: Center for Energy Workforce Development, Energy Industry Competency Model: Generation, Transmission and Distribution, p

25 5. Effective program approaches 26

26 Successful succession planning program characteristics Tied to organizational goals Support from the top Competencies are proven Skills are readily assessed Training is tailored Roles are well-defined Use the PDSA (Plan-Do-Study-Act) approach 27

27 Succession and workforce planning annual process 28

28 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? 29

29 Succession and workforce planning program outline take stock Formalize strategy to address workforce challenges > 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 30

30 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 31

31 Succession and workforce planning program outline - benchmark Benchmark staff levels against other peer utilities > Interviews > Surveys > 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 32

32 Succession and workforce planning program outline Statistical analysis Average Years of Business Area Average Age Service Admin & General Customer Services Meter Reading Generation T&D Engineering PSCC Overall Average

33 Succession and workforce planning program outline Statistical analysis Year Retirement Eligibility Administration Operations 0 Fully Eligible With Penalty Fully Eligible With Penalty Fully Eligible With Penalty Fully Eligible With Penalty Fully Eligible With Penalty Fully Eligible With Penalty Fully Eligible With Penalty Fully Eligible With Penalty Fully Eligible With Penalty Fully Eligible With Penalty Fully Eligible With Penalty

34 Succession and workforce planning program outline Statistical analysis 35

35 Succession and workforce planning program outline Statistical analysis 36

36 Succession and workforce planning program outline Statistical analysis Using the personal competency framework, what are the top areas of deficiency for today? Answer Options Response Percent Response Count Interpersonal Skills 48.1% 26 Integrity 24.1% 13 Professionalism 22.2% 12 Motivation 38.9% 21 Dependability/reliability 33.3% 18 Self Development 61.1% 33 Flexibility & Adaptability 42.6% 23 Ability to Learn 22.2% 12 answered question 54 37

37 Succession and workforce planning program outline Statistical analysis 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 38

38 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 39

39 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 40

40 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 41

41 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? 42

42 6. Resources and tools 43

43 Management competencies Identify knowledge structure for the following areas: Personal Effectiveness Workplace Academic Competencies 44

44 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. 45

45 Resources and tools > 9 Box Grid > Individual Talent Profile > Action Plan 46

46 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. 47

47 Resources and tools - 9 Box Talent Code 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 IR Improvement Required > Not considered promotable at this time > 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 48

48 Resources and tools - 9 Box Framework 4

49 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. > Moderate/once a year Effort needed to complete/frequency: 50

50 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. 51

51 Individual Talent Profile > Identify employees available for succession into their positions > Develop a profile of candidates - History of performance reviews and accomplishments - Years of relevant experience - Education and credentials > Cross-departmental leadership/key decision makers must be involved 52

52 Employment strategies Improve Organizational communication and workforce connection Use technology Strategies Embrace generational differences Collaborate on resource development 53

53 Utility industry career benefits > Communicate the positives > Competitive pay > Job satisfaction > Advancement > Security 54

54 Contact Info Russ Hissom, Partner Jim Nowoswiat, Partner

55 7. Discussion and questions 56