Succession Planning: From Concepts to Measurable Reality
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Introduction
"We needed to grow our leadership strength by 50%, we had very shallow internal and external talent pools... we started a very intensive recruiting effort, investing over 1 million unbudgeted dollars, it was an urgent situation." Liviu Dedes, Pep Boys
Liviu Dedes is the Director of Training and Organizational Development for Pep Boys, a car parts and tire retailer established in 1921 and now in 595 locations across the United States. With over 20,000 employees, Pep Boys is growing rapidly. This year, it was faced with the need to expand its leadership team by 50% (42 qualified people) and had just 45 days to do it. In this paper Dedes describes the methods by which Pep Boys built an integrated competency and performance management process combined with a transformational succession planning system. Pep Boys' story is the basis for HCI's expert panel in succession planning meeting of November 15, 2005, which was participated in by more than 200 HCI members.
In 2003, Pep Boys appointed Larry Stevenson as its new Chairman and CEO. Stevenson directed a comprehensive organizational overview aimed at reducing expenses and eliminating an entire layer of field management in order to flatten the hierarchy. In the second stage of the plan, in 2004/05, Pep Boys reorganized its field operations, splitting it into service and retail divisions. It originally had 42 area directors and would now need 84. Half would be in retail and the other half in service. "It was a very painful growth spurt for us and as we looked at our internal talent pool it became evident very quickly that it was a shallow pool," said Dedes, "we urgently needed a system and a plan."
"Looking back on our succession planning process then, it was entirely paper based. We had only a very narrow view of performance and a small line of sight into the organization, it was somewhat subjective with no common yardstick. Our development programs were also ineffective," recalls Dedes.
Succession Planning At Pep Boys: "Planning Today For Tomorrow"
The foundation of the process was to define what our organizational competencies were, what makes us successful and what competencies do we need in order to position ourselves for success in the future. explained Dedes, "We wanted to balance our performance management so that we had a blend of qualitative and quantitative measures and were able to define and measure potential better in our workforce."
Pep Boys started by creating an organizational competency model that was common across the company. It had to be simple, relevant and effective. The highest level, "core competencies" had to be meaningful for everyone in the organization - from a part time driver to a divisional president. Dedes explains, "We ended up with 67 competencies that were researchbased and that followed a methodology. Then we looked at crafting the model."
Pep Boys initiated an exhaustive review of internal documents - performance reviews, 360° reviews, mission and vision statements - "you name it, we dissected it and drew direct correlations to our competency models", said Dedes, "We surveyed leaders throughout the organization and at all levels of performance to understand different perspectives. Then we analyzed all the data and came up with 5 core competencies." They are:
- Customer Focus
- Approachability
- Drive for Results
- Integrity & Trust
- Presentation Skills
After defining its core competencies, Pep Boys turned its attention to positional competencies. The competencies change as the position's responsibilities and scope change. "But it is more an evolution of the same competencies than an abrupt change", explains Dedes. "Building effective teams, for example, becomes motivating others as we move up. And then with the V.Ps, they don't depend on each other as much for results, they are held accountable for outcomes so their competencies are reflected differently. Things like 'Functional/Technical Skills' morph into business acumen type competencies as another example."
Pep Boys tests the competencies for their validity against business results. So "Customer Focus" is tested against quantitative business results tied to Pep Boys' Customer Service Index (CSI), and "Drive for Results" is tied to sales and profits, for example. "We want balance and we want to be sure they are exhibiting the behaviors that drive the competencies and then the results." Dedes explains, "And we sometimes have to drill down when there is a disconnect. The manager may exhibit the competencies and behaviors, but may not be getting the results and we have to understand why. In one of our retail locations, for example, there was a major construction project going on in front of the store. To get in, customers had to navigate their way through a series of turns and side roads. This essentially blocked access to the store unless a customer took elaborate measures. It was clear that this the reason for the anomaly."
Succession Planning At Pep Boys
At Pep Boys, succession planning is a phased activity that is intricately linked with the competency models and performance management. It starts with preliminary competency reviews at all levels and units. Central to the process are "collaborative roundtable discussions" that occur physically and virtually right across the organization from unit to unit and by position. This process is comprehensive, covering all key positions and individuals.
After the roundtable process, Pep Boys moves on to career discussions with those that have been identified in the succession plan as high potentials. Direct managers sit down with "Hi-Pos" to discuss their preferences for next career moves, expectations, implications of the program on their personal and family lives, etc. Once a Hi-Po has accepted the nomination and understands the requirements for the next position, including the demands of the development program that is part of Pep Boy's succession planning process, a nomination is made and they formally enter into the plan. "There is most likely relocation and considerable travel involved in next career moves, so it's often a significant decision", says Dedes.
Enabling Technology
Pep Boys operates almost 600 retail locations throughout the United States. The limited network bandwidth connecting each store must run mission critical applications for credit card processing and email, as well as remotely distributed applications like performance, competencies and succession management. As such, the talent management applications could not be bandwidth intensive. The solution also had to work within the current HRIS structure, "and it needed a lot of functionality," said Dedes, "perhaps most importantly from HR's perspective, we wanted a performance management system with succession planning, 360 assessments, compensation and competency tools all in one. We did not want to have to integrate multiple systems. We also wanted a solution with intuitive navigation and robust super user capabilities for configuring ad hoc reports, changing fields and forms, etc. and an adaptive user interface for the various people using it".
Dedes emphasizes superior reliability and support as well. In the end it chose SuccessFactors for its partner in that it met all of Pep Boys criteria. Dedes explains, "This is not a pitch for SucccessFactors, every organization has its own needs and should perform a diligent and thorough search for its ideal partner. There are some common needs that I would emphasize though, great support and an integrated, multiple-solution platform are key among them."
According to Dedes, the solution should also offer rich views into the organization, "At the roundtables, we use the organization chart view to get visibility into the entire organization. As you look at it you can see the structure, who the successors are, their risk and impact of loss, our bench strength, performance ratings and hi-potential ratings all in one screen, and you can look two levels down the organization. This is where the roundtable discussion begins."
Dedes also emphasizes robust and flexible reporting and analytics capabilities. "Our system offers critical visibility into the most common competencies, strengths, weaknesses, gaps, and more. When we forecast the need for a new position, we can generate the competencies for it and then query the system to find who best fits that new position and whether we have the skills and talent internally to fill the role."
Outcomes
Since Pep Boys implemented its solution last year, it has seen a significant reduction in turnover, increased morale and 20% increased bench strength after 1 year for key positions. "We wanted 2 ready successors for every area, so an area director will have 2 assistant managers ready to take over a store manager position at any time, for example. We aren't all the way there yet but we've made considerable progress," Says Dedes.
Dedes and his team are also encouraged by the progress they have made in hard dollar savings. "We've realized significant savings with succession planning already. We know that when we hire external store service managers, for example, it costs more than twice as much as filling the position with a successor inside the company. To date, we've used our succession management plans to avoid external hiring costs for 8 store and service managers. Our combined savings are more $80,000, which means that we are already 45% toward paying for the year one cost of the system."
Final Thoughts
It is absolutely critical to plan today for tomorrow, it's a high level initiative. Define your competencies and determine your metrics. In the initial phases of the program and through implementation you must communicate, communicate, communicate. We started with a note from the CEO to all staff, from there HR took the ball and carried it the rest of the way, advises Dedes.
Panel Discussion
High Potential Pools
Among the panel and several members of the audience, there was debate around the merits of an open, publicized high potentials pool versus keeping the members of the pool confidential. In several organizations, such as Analog Devices, where panelist Larry Raskin manages succession planning, such lists are kept confidential. Similarly, at Pep Boys, the decision was made not to disclose the list, however, informal discussion about the list was not discouraged. "We let the chatter communicate the message," said Dedes, "we let it diffuse by discussion in the trenches, and it's worked out because where 'Billy' may not be a high-potential, he may go to his boss and asks why. We view that as a good thing, a great trigger for a coaching discussion and an opportunity for candid feedback as well as for advice on what it would take for Billy to get there."
At ADVO, Inc., High-potentials are not publicized, "but we encourage all leaders to have coaching discussions with all their staff. These are development discussions tied to the performance management process. The 'Hi-Po' exercise is very subjective so we also look at the value of non-'Hi-Pos'. But we do have specific events for those in the Hi-Po pool." Says Kathryn Green Director of Talent Management.
The panel also discussed how meetings with high potentials should be conducted and how managers are prepped for the conversations. At Pep Boys, managers are given a loose script, "just to prime the discussion," Dedes explains, "they are given direction on what the conversation should look like, but they conduct it according to their own discretion."
"At Sara Lee Corporation," relates panelist Mark Demich, Director of Global Training and Development, "we did something similar, we had a script but we also had an HR or talent management person in on the conversation with the leader. We did this to show commitment to, and better explain the process, and also to make clear the role of the organization and the individual." In terms of succession planning, High-Potentials and the correct internal/external hiring mix, Dedes explains that " We looking to have an 80-20 mix where 80% of 'positions are filled from inside using the 'Hi-Po' pool and succession plan, but we want new points of view too, so we still hire from the outside into all levels."
Building Competency Libraries
Pep Boys took about 6 months to develop its core and positional competencies, but this included working out the career paths behind them. Panelist, Brian Fieser, Director of Talent Management at FOLLETT Corporation agrees that this is a critical component of a competencies project and something his organization undertook as well, "You need to describe the skills and other attributes, the things people need from a competencies perspective to reach the positions they aspire to."
Regarding the competency library Pep Boys developed, Dedes explains, "We liked the Lominger library and SuccessFactors offers it embedded in their system. As far as deciding the core and position competencies, it wasn't easy but we gained consensus quickly, made presentations and got organization-wide buy in."
About The Panel Participants
The guest moderator for this open session was John Chaisson.
Liviu Dedes - The Pep Boys
Liviu Dedes is Director of Training & Organizational Development at The Pep Boys - Manny, Moe & Jack (NYSE: PBY), the nation's leading automotive aftermarket retail and service chain. During his 8 years tenure with the company, Liviu has held position of increasing responsibility in operations and human resources. Currently he leads the talent management practice at Pep Boys, to include, core training, leadership on-boarding & development, succession planning, performance management, analytics, and supporting systems. Liviu holds a Bachelor of Science in Management from Kennedy-Western University as well as a number of training and O.D. certifications.
Patrick Chantelois - Con-Way Western Express
Bio Not Available
Mark Demich - Sara Lee Corporation
Bio Not Available
Brian Fieser - Follett Corporation
Brian Fieser is currently the Director of Talent Management and Organizational Effectiveness at Follett Corporation. Brian helps develop and manage the numerous TM programs which include processes such as assessment centers, individual coaching, 360° assessments, goal setting, performance appraisals, and individual development planning. He has been engaged in launching Follett's first formal executive succession program, instilling consistent evaluation procedures to drive calibrated views of talent across the various enterprise functions. His work in organizational effectiveness has included large scale culture assessments, workforce commitment, and values alignment initiatives. Brian has also been involved in teaching for the past nine years. Dr. Fieser presently serves on faculty within the School of Professional Studies at Loyola University Chicago in the Organizational and Leadership Development Program. Brian holds a Doctorate in Psychology from the Illinois School of Professional Psychology. He is also currently pursuing his Masters in Business Administration at Northwestern University's Kellogg School of Management.
Kathryn Green - ADVO, Inc.
Over the past seventeen years, Kathy Green has helped individuals, teams and organizations navigate through mazes of complexity and ambiguity to clarify the business issues that must be addressed, and to develop strategies to solve them. As Director, Leadership Development, Kathy Green is responsible for shaping the strategy and implementation for leadership and talent development. At ADVO, she has designed a comprehensive talent management process that includes a robust succession planning process, integrated performance management process incorporating leadership competencies and individual development plans, and leadership development programs. Prior to ADVO, Kathy was Director, CIGNA Center for Learning at CIGNA Corporation where she was responsible for all enterprise-wide employee, leadership, team and professional development for the corporation. Kathy holds a masters degree in Industrial and Organizational Psychology from Springfield College, an MBA from University of Massachusetts, and a BS in Psychology from University of Connecticut.
Jim Kauffman - Develpment Dimensions International (DDI)
James Kauffman designs and delivers programs that help clients identify, assess, and develop senior leadership talent. He has over 15 years of experience creating solutions for selecting, developing, and retaining personnel at all organizational levels. Dr. Kauffman has worked across industries to shape new consulting services and deploy existing services in the area of succession management.
Larry Raskin - Analog Devices
Bio Not Available
Ed Yip - SuccessFactors
Bio Not Available
About The Author
John Chaisson - Human Capital Institute
John Chaisson is a Senior Director with the Human Capital Institute and leads the Talent Acquisition thought leadership panels and webcast activities for HCI. He is also the Chief Purpose Prophet and Principal Qualitative Analyst for The Prophet Group based outside New Orleans and is responsible for uniting the leadership perspectives, approaches and tools for building leaders and leading enterprises. John has built a career founded on the "purpose" of fostering sustainable workforces, businesses, services and products. After completing Stanford Law School, he worked as a corporate attorney for leading law firms including internationally-renowned Wilson, Sonsini and later began his Silicon Valley business career as General Counsel and VP Business Development for Resumix, also supporting public software and HR services giant Ceridian Corporation. He later co-founded several market-leading technology and management consulting groups focused on ERP software and Human Capital solutions, before launching TPG. Among other roles, he is a Member of the National Advisory Board of the Human Capital Institute and a Board Member of consumer electronics incubator, Sector Labs.
About The Human Capital Institute
The Human Capital Institute is a catalyst for innovative new thinking in talent acquisition, development and deployment. Through research and collaboration, our programs collect original, creative ideas from a field of top executives and the brightest thought leaders in strategic HR and talent management. Those ideas are then transformed into measurable, real-world strategies that help our members attract and retain the best talent, build a diverse, inclusive workplace, and leverage individual and team performance throughout the enterprise.
About SuccessFactors
SuccessFactors supports organizations in achieving their objectives of rapidly aligning, developing, motivating, and rewarding their workforces. This is achieved through the delivery of on-demand, world-class applications that drive organizational alignment, workforce performance, and bottom line business results; to the complete satisfaction of all customers. SuccessFactors' Succession Management solution facilitates the end-to-end process of identifying employee development opportunities, career planning, succession planning, and performing regular talent inventory gap analysis of your human capital assets; from the highest level of executive management to individual contributors. At SuccessFactors, customer success and satisfaction is our top priority. We enjoy the highest renewal rate in the industry (97%). SuccessFactors is headquartered in San Mateo, CA. and has multiple worldwide offices. The applications are being used in over 100 countries and in multiple languages.
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