TCAP Research Report

The Five Greatest Challenges That Are Threatening Companies Today

and the four things a companymust do to stay competitive

in today’s market place

2

Who are you?

• Whether you lead a professional service

firm, a family owned business, or a publicly

traded corporation…

• Whether you have 50, 500 or 5000

employees…

• There are alarming market trends that can

cripple the success of your company if you

do not take decisive action

Copyright 2010 Empire Research GroupExclusive Distribution Rights Sole Property of Gregory S. Smith, MS, MSW

3

Areas Covered

• Several million dollars of research indicate five major trends that must urgently be addressed by companies if they are to survive

– escalating competition + accelerating change

– the spiraling impact of stress

– increasing dependence on human capital

– a shrinking talent pool

– rising demands upon leadership

• This research also points to the critical action steps necessary to secure your future prosperity


4

Trend #1:Escalating Competition + Accelerating

Change in the Economic Landscape

• In 1990 it took six years to develop a new

model car – currently it takes 24 months

• A generation ago there were 50,000

computers in the entire world – there are

that many being installed today, as you

read this

• In another two years there will be a

billion people surfing the Web


Source: M. Brenner, PhD.

5

Even the most powerfulare vulnerable

• Lehman Brothers

• WorldCom

• General Motors

• Washington Mutual


• Enron

• Chrysler

• Texaco

• Pacific Gas& Electric

2008 and 2009 were marked by the largest corporate failures& bankruptcies in U.S. History, including such giants as:

6

Words of Wisdom

“Remember, at the end of the day, the ability to learn faster than our competitors may be our only sustaining competitive advantage. Everybody else in the world is doing the same things we are. We’re going to get there faster with better prepared people.”

Larry Bossidy, CEOAllied Signal


7

The #1 Challengefor Today’s Company

• To survive you must stay

competitive

• You must learn to master

“permanent white-water”

• You must come to grips

with constant and never-

ending change


8

restructuring, downsizing,mergers, acquisitions

• There is no escaping change in business

• While you are busy trying to make things better, your employees may be left shaken and unsure

• No matter how well you’re leading…are your employees actually following?


9

Even the most experiencedleader needs to be careful

• Some of the most simple problems can cost money and use up your valuable time

• Solving some of these problems can bring on a landslide of new problems

• There is so much more to consider than just making your product, or offering your service

• Have you begun to develop the necessary strategic plans for your business, your people, and your future?


10

Laser-Focused Strategy,Flawless Execution

• A ten year research study published in the Harvard Business Review found that companies which outperformed their industry peers excelled at eight specific business practices

• The first two are:

• Laser-focused strategy - sharply defined, clearly communicated, and well understood by employees, customers, partners and investors

• Flawless execution of that strategy throughout the company, from the top executive on down


Source: Harvard Business Review, July, 2003

11

Critical Questions

• Are you totally satisfied with the

results of your current business

strategy?

• Is it sound enough to ensure increased

success over the next 10 years?

• Is it being executed consistently by

everyone in your organization?


12

A High-Performance Strategy:2% Vision + 98% Execution

• Many leaders today recognize the importance of having a Vision, Mission, and Core Values to build the business upon and around

But most strategic documents of this nature end up not being worth the paper they’re written on

What is missing from most strategic planning is a process for effectively:

- cascading the spirit of the V/M/CV throughout the organization

- measuring, monitoring, and motivating results

Without a process for creating and maintaining consistent executionthroughout the company, the Strategic Plan is rendered fundamentally useless


13

The best strategy in the world is worthless unless your people are

fully committed to it

• Effective execution is driven by employee commitment - which is influenced by a number of variables:

• Satisfaction with co-workers• Ease of access to the tools needed to

perform their job• Task independence or team reliability• The degree to which employees receive

conflicting orders or requests from supervisors

• Satisfaction with supervision or management


Source: HR Magazine Feb. 2007

14

Keeping your employees “satisfied”is no longer enough

“The most essential best practice is the measurement and cultivation of employee engagement – which is significantly distinct from satisfaction. When employees are highly engaged and their energy and actions are aligned with the goals of the enterprise, a dynamic of growth emerges. Research in recent years indicates that employee satisfaction is only minimally predictive of organizational performance; employee engagement, on the other hand, is a powerful leading indicator of whether the company will be successful.”

- U.S. Business Review, Nov. 2006


15

Does this describe your workforce?

• Engaged employees are…

– never satisfied with status quo - they think and act like entrepreneurs

– more innovative, and add greater value

– happy with who they are, what they are doing, and where they work

– measurably more motivated to work hard and go the extra mile forthe customer and the company


16

Engagement = Commitment & Loyalty

• If you fail to inspire commitment & loyalty, it will adversely influence:

absenteeism, intention to quit, and turnover

willingness to help co-workers and complete tasks

quality and quantity of work performed


17

But even commitment only goes so farwhen making organizational changes

• Growth requires change - but employee resistance kills change

• One important underlying skill leaders must possess is the ability to

manage change and the inevitable conflicts that arise

• How you personally react to change will be the main influence of how

your organization reacts

• Your job is to ensure that the change goal is achieved and to manage

the change as it unfolds


Source: Information Outlook Magazine, May, 2005

18

Failure to Deliver


“More than 70% of strategic change

initiatives (mergers, acquisitions,

downsizing, enterprise-wide software

integration, restructuring, globalization) fail

to deliver the expected financial returns

due to employee execution and workforce

performance problems”

Source: The Center For Effective Performance

70%FAILURE

30%SUCCESS

19

Unacceptable Return on Investment

• Companies invest in technology to

streamline business processes

• They expect to get a return on their

investment in the form of increased

productivity, better efficiency, etc.

• But most companies fail to take human

factor issues into account

• This results in lower-than-expected ROI


Source: Emily Hollis, “Chief Learning Officer” Magazine

20

The Ripple Effects are Costly

• The IT department or Chief Information Officer usually makes an ROI case for purchasing new technology

• However research indicates that employees end up using about 40% of a new systems’ capabilities

• This leads workers to be inefficient or inaccurate with customers

• This leads to customer complaints, undercharges, overcharges, lost business, and increased time required by higher level managers to resolve problems


Source: Ann Parkman, “Chief Learning Officer” Magazine

21

Why do people resist change?

• Fear of making mistakes and looking foolish

• A lack of understanding or confidence about the new system and its benefits

• Anxiety about doing more than their existing duties

• Change fatigue – sticking with the knowledge from the last change and taking a rest


Source: Workforce Management Dec, 2005

22

It’s Not Rocket Science…(it’s much harder)

• Executing a major change initiative is not so much cognitively complex as it is psychologically complex

• Most of the obstacles that block organizational change are also psychological in origin

• Resistance to change

• Conflict aversion

• Impatience

• Cynicism

• Rumors


• Mistrust

• Apprehension

• Inertia

• Over control

• Egocentricity

23

Changing Minds

From Jeffrey Pfeiffer, Stanford University Graduate School of Business:

• Less than 1% of companies effectively create significant, lasting change

• Most turnaround efforts focus on new practices or products; successfulones alter how employees think

• To achieve lasting results in a company, you can’t just change “things”like product lines or org charts; you have to do something far more difficult - you have to change minds

• Changing how people think is the most difficult lever for improving performance, but it’s also the most important; it’s the only kind of change that leads to enduring - not fleeting – success


24

Trend #2:The Spiraling Impact of STRESS

on your bottom line• Organizational stressors assault your enterprise from

every conceivable direction

• Some stressors emanate from external business realities• Dramatic shifts in the marketplace, industry, and/or

regulatory environment

• Relentless pressure for new product development, with unforeseen or unmanageable events

• Morphing customer requirements while dealing with quantum leaps in technology and IT

• Volatile and ever-changing labor market, mergers and acquisitions, over-heated growth, or forced downsizing

• Executing new business models, high-risk operations, and pervasive operational problems


25

More Stress FactorsBrought to the Table

• Organizational stressors also stem from employee realities

• Employees bring their lives to work

• This impacts their health and emotional status

• Which, in turn, impedes their work performance

• Which, in turn, compromises growth and profitability


Jobpressures

Personalissues

Socialpressures

Lifestylefactors

Copingresources

Psychologicalsymptoms

Family pressures

Financialconcerns

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All these stressors convergeto land squarely in your lap

• Rising health benefit & workers’ comp costs• Increased turnover, absenteeism, burnout• Poor human resource utilization• Declining market position• Increased staff conflict & dissension• Poor decision-making & problem-solving• Increased customer complaints• Declining customer retention• Increased cycle times for:

– product development– time-to-market– problem resolution– sales


27

The Bad News Just Keeps Coming

• Tarnished corporate reputation

• Increasing “presenteeism” where employees are there in body, but not in mind or spirit

• Chronic recurring problems

• Decreased focus, collaboration, creativity, initiative, commitment, and risk taking

So, the bad news is that people are people

and life happens – and there’s no firewall

between home and work


28

40% of workers report that their jobis “very or extremely stressful”

• 52% say they work more than 12 hour days• 49% say they often skip lunch to finish the tasks at hand• 41% say yelling or other verbal abuse goes on in the workplace• 29% say they have yelled at work because they were “stressed

to the max”• 21% say their boss has done nothing to reduce workplace stress• 15% have damaged a few computers or chairs • 10% claim to work in an office where stress has led to physical

violence• 2% have actually hit a co-worker


Source: American Demographics Dec. 2000

29

Stress = Increased Legal Liabilitiesfor you and your company

• According to the Journal of Environmental & Occupational Medicine, the physical, mental, and interpersonal symptoms of stress increase the risk of job related injury & illness

• Research findings published in the Journal of Psychology suggest that employee and/or workplace stress increases the risk of malpractice claims and lawsuits stemming from employee error or negligence


Sources: Journal of Occupational & Environmental Medicine, 1998; Journal of Psychology, 1998

30

More Hard Dollar Costs

• 42% of employees say that job pressures are interfering with their personal relationships and their physical health

• St. Paul Insurance Company reports that problems at work cause more health complaints than any other life stressor

• Corporate based stress management programs have two major disadvantages:

– Beneficial effects on stress symptoms are short-lived

– Critical root causes of workplace stress are typically ignored


Sources: The American Workplace, 2001; Bureau of Labor Statistics, 2000

31

Harvard Business Review:Health care costs are 147% greater

for workers who are stressed

• A study of 46,000 employees over a three year period found that psychological factors are far more costly than medical or lifestyle issues:

– Poor nutrition habits =1% greater health care costs

– Excessive alcohol consumption =4% greater health care costs

– Poor exercise habits =10% greater health care costs

– High blood pressure =12% greater health care costs

– Smoking =15% greater health care costs

– High cholesterol =17% greater health care costs

– Obesity =21% greater health care costs

– High blood sugar =35% greater health care costs

– Stress =46% greater health care costs

– Depression =70% greater health care costs


Sources: Harvard Business Review, July 2003; Journal of Occupational and Environmental Medicine, Oct. 1998

32

Health Issues, Lost Time,Lost Productivity

• The Med-Stat Group reported that the average stress-related costs for a company had risen to $10,000 per employee annually by 2002 – and continue to rise

• 69 million workers report missing days due to illness

• 407 million work days a year are lost• 55 million workers report a lack of

productivity due to their illness or that of a family member

• That accounts for another 478 million lost days every year


Source: Prospera Reference November, 2005

33

Absenteeism: What are the Reasons?

• Notice the red pie slice

• 14% of absences are because the employee feels they are entitled to extra time off


Source: Prospera Reference Nov, 2005

35%PersonalIllness

12%Stress

14%Entitlement Mentality

18%PersonalIssues 21%

FamilyIllness

• Do you think that this deserves your attention?

34

Presenteeism(prez.un.TEE.is.um) n.

• The Harvard Business Review reports that “presenteeism” – workers being on the job but not fully functioning –can cut productivity by 1/3 or more

• Even a relatively small decline in one person’s performance may have a ripple effect on an entire team or project that falls behind


35

It may be costing youmore than you realize

• Researchers at the Cornell Institute for Health and Productivity Studies have estimated that the typical U.S. employee loses an average of 115 productive hours each year – they show up for work, but are not very productive

• The Center for Health Research calculated the cost of presenteeism in the U.S. to be more than $150 billion per year – more costly than absenteeism, medical costs, and disability benefits combined


Source: Cornell Chronicle April, 2004

36

More Research on theFinancial Impact

• The Journal of the American Medical

Association reports that depression costs U.S.

employers $35 billion per year in reduced

work performance

• Lockheed Martin found that 13.9% of their

workforce suffered from depression significant enough to reduce their productivity by 7.6%

• This translated into an aggregate annual loss to Lockheed of $786,600


37

What is Your Company doingto Shrink these Steep Costs?

• In 2000, Bank One discovered that direct costs from employee medical and pharmaceutical treatment only represented 24% of the company’s true “health & wellness” costs

• While a small amount was attributable to Workers’ Comp, Short & Long Term Disability, and Absenteeism, a full 63% of their costs was directly attributable to this phenomenon of Presenteeism

• The study concluded that “Targeted initiatives designed to reduce presen-teeism would be paid for many times over by the improved productivity that would ensue.”


Medical24%

Presenteeism63%

Absenteeism6%

WC & Disability

7%

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Trend #3:Increasing Dependence on Human Capital

for your financial performance


• Human Capital in the 21st century – the new “Information Age” - is equivalent to natural resources in the old Industrial Age

• Many companies talk a lot about human capital management, but most of them find it very difficult to do something about it

• Improper identification of human capital can lead to poor performance and even resentment by employees who are aren’t being utilized to their fullest potential

• Are you wasting your most valuable resource?Source: Personnel Today, 2005

39

An emerging perspective fromGlobal Business Leaders

• In a definitive study by consulting firm DDI, “Improving and Leveraging Talent" was the second highest business priorityof 4500 executives worldwide (Leadership Forecast: Best practices for Tomorrow's Global Leaders)

• Just five years earlier, this same study had found "talent" to be well down the list of priorities, at number ten


40

From the Executive Vantage Point:

According to a recent study by Accenture of 200 CEOs, COOs, CFOs, & CIOs:

• 74% of senior executives say that people-related issues are more important to a company’s success than they were a year ago

• 52% say the HR function is “very critical” to executing corporate strategy

• Only 25% believe most of their employees have the skills to execute their jobs at industry-leading levels

• 40% said their companies do not regularly measure the business impact of HR and training initiatives

• 57% said they never or rarely measure the impact of HR investments on employee satisfaction


41

Good to Great

• “The mismanagement of Human Resources is one of the main reasons that ‘good’ companies never become

‘great’” - Jim Collins, “Good To Great”

• “80% of Americans hate their jobs, and much of the lack of productivity in companies stems directly from that single fact” - Arthur Miller, Co-Founder PMI

• “The essence of business in the 21st century is tapping the talent of good people. It won’t be how you locate the plants, but how you locate the best people and motivate them, how you trust them and have them trust you.” - Reuben Mark, CEO Colgate-Palmolive


42

The Most Critical Performance Levers

• “The most critical organizational levers leadership must operate to extend its competitive advantage are all related to people” - U.S. Business Review, Nov. 2006

• “The development of your people is one of the last true sources of competitive advantage, since very few organizations are very good at it." - Peter Drucker

• “Research has clearly demonstrated that when an enterprise has the right people and these employees are engaged, revenues increase and turnover costs decrease” - 2004-2005 National Study on Workforce Engagement

• "Profitability and growth begins with talent - people who think entrepreneurially, who want to add value, who understand how to inspire and motivate others, and who seize opportunities rather than watching things happen around them.” - John Dickey, VP of HR, Hillenbrand Industries


43

Calculate the Coststo your business

• Today’s business includes some costs that are very clearly monitored and some that aren’t

• Identifying the more intangible costs and addressing them is imperative to success

• Consider the true costs of: • Turnover• Bad hires• Terminations• Improper promotions• Lack of proper utilization


44

Turnover:How much does it really cost?

• The cost of losing an employee is high

• The costs of time and lost productivity are no less important nor real than the cash paid to vendors for advertising

• When calculating your costs, be sure to include recruitment, training, lost productivity, and lost sales

• Also include the loss of productivity of your current staff as the inevitable gossip ensues regarding the person, the vacancy, the reason for leaving, and so on


Source: Work and Family Newsbrief, Dec. 2000

45

According to U.S. Business Review:“The costs of inaccurate hiring

are staggering.”

• Dozens of studies consistently identify the cost of turnover to be somewhere between 25 and 200 percent of annual salary

• Studies of even minimum wage-level workers show that turnover costs average more than $9000 per exiting employee

• Multiply these costs by 20, 40, or 400 exits each year of ill-hired employees, and it’s not a pretty picture

• Retaining a 25-year employee will eliminate 5-6 rounds of costly exits

• The greatest damage is usually caused by the “marginal” hires who slip through and adversely impact your company’s productivity & morale


Source: U.S. Business Review – January, 2007Employment Policy Foundation, 2002

46

Consider these Costs

• Poor hiring shows up not merely in poor decisions, but also in decreased workforce motivation

• When the less competent employees reach critical mass, their low performance standards become the de facto standards of the organization

• The longer established employees who are well equipped for the job abandon their old high standards and conform to the new, lower ones


Source: Frank Schmidt, Ph.D., University of Iowa

47

Why do even the sharpest of managers often make bad hires?

• Inaccurate hiring is most often caused by filling positions based on a candidate’s experience and education, with little attention to more strategic considerations

• To align talent with the strategic intent of the company, you must first define the competencies and personality traits that fit best with your business needsand company culture

• According to U.S. Business Review, personality traits are even more critical than competencies because they are the most powerful moderating forces when it comes to both work performance and satisfaction (Jan. 2007, “Strategic Talent Acquisition”)

• Without a strategy for accurately defining the critical traits & competencies, and then accurately identifying the best-fit candidates, hiring becomes heavily influenced by gut-feel, instinct, and the urgent pressure to fill vacant positions


Source: U.S. Business Review, January 2007“Strategic Talent Acquisition”

48

Are you finding the rightpeople for key roles?

• Research shows that 42.7% of resumes have significant inaccuracies

• A recent study of human resource managers found that almost none of those surveyed have a well-designed assessment and development strategy when promoting from within

• That means there are a lot of mid to high level executives who are not the best fit for their current role


Source: Society for Human Resource Management

49

Alarming Statistics

40-60% of executive hires fail within 18 months, and 80% of senior executive recruits change employers within 2 years

• The premature departure of even one C-level executive often has dire financial consequences for internal and external stakeholders

• This type of loss can seriously disrupt business activities, create negative publicity, and leave significant scars on company culture, team morale, and corporate performance


Source: Corporate Leadership Council, 2001Harvard Business Review, 2000

50

Neglecting new executives can equal enormous organizational costs

• In 2004, Bristol-Myers Squibb studied the retention rates of its recently hired executives

• The “survivor analysis,” as it was called, revealed the company was losing promising new executives because it was not taking steps to ensure their success

• This study showed that losing a top executive could cost 2-3 times their annual salary

• With certain key executives, the costs could shoot up to 24 times their annual salary when lost opportunities, business delays, and damage to relationships with staff and customers were added in


Source: HR Magazine, March, 2005

51

What’s wrong with everyone just doing their job?

• Top performers are as much as 127% more productive than average performers

• Many average and below job performers do not lack the technical skills; they lack the interpersonal skills and the psychological profile of a top performer


The Average Performer• Does enough to get by, but no more• Looks for someone to blame• Waits for instructions• Is problem-oriented• Doesn’t believe there is always a

solution

The High Achiever• Consistently achieves more results• Takes responsibility for solving

problems• Takes ownership of situations• Is a self-starter who takes initiative• Is solution-oriented

Source: Journal of Psychology, 2008Art Business News March, 2003

52

The Key to Attracting andRetaining Top Talent

• The results of myriad worker satisfaction studies over the past decade consistently demonstrate that of the factors that motivate a highly talented employee to stay with a company, financial compensation (salary, benefits, etc.) rank only about #8 in the hierarchy of priorities

• Companies that attract and retain top talent are those that havebecome highly adept at providing the non-financial, psychological rewards that are truly most important to employees

• Do you know what these are – and how to cultivate them in your company culture?


53

Trend #4:The Steadily Shrinking Talent Pool

North America is facing a talent and leadership shortage, drivenby demographics and never-before-seen levels of competition:

• In the next several years, the number of management jobs in North America is expected to increase by 3 million, while the 30-to-50-year-old demographic "sweet spot" from which managers and leaders emerge is expected to decline simultaneously by 3 million people – adding up to a 6-million-person deficit

• At the same time, boards and financial markets are pressuring top executives to deliver more/better/faster as the lifecycles of products, technologies, strategies, & business models grow ever shorter


Source: The War for Talent, Ed Michaels, Helen Handfield-Jones and Beth Axelrod

54

The U.S. is falling behind

• Around the world, the competition is working smarter

• July, 2005 France announced plans to invest $1.82 billion to create 67 “competitiveness centers” to fuel research and innovation

• China is building a world-class university system to produce scientists, and ranks third behind the U.S. and Japan in nanotechnology patents

• American companies now account for just 52% of U.S. patents


Source: New York Times, Aug, 2005

55

America’s next generationneeds help

• Only 6 in 100 American undergraduate

degrees are in the natural sciences or

engineering

• Only 29% of papers published in top physics

journals in 2004 were by Americans

• American teenagers ranked 24th out of 29

industrialized countries in everyday math

skills


Source: Entrepreneur Magazine Nov. 2005

56

Another way to look at thescary comparisons

Source: Organization for Economic Cooperation and Development

385Mexico29

445Greece27

483United States24

493Luxembourg20

498Slovak Republic18

506Austria15

515Iceland11

538Netherlands3

542South Korea2

544Finland1

Avg. Math Literary ScoreCountryRank


57

The Widening Skills Gap

• There is a growing skills gap that may create more woes for those trying to hang on to good people

• 80% of the new jobs created since 1992 require some degree of post-secondary training or education

• Workers with post-high school education will fall from 19% over the past 20 years to 4% in the next 20 years

• This will lead to a shortage of leaders who will be equal to the challenges


Source: 2005 US Department of Labor’s Employment and TrainingState of the Industry Report

58

Another Worry For You

• 76 million baby boomers are all within striking distance of retirement

• There is a lower birth rate with Baby Boomers than with their parents

• Couple this with a widening gap between the skills demanded of today’s jobs and the readiness of people entering the workforce and the result is going to be the labor market’s “perfect storm” by 2012

• Every available worker will be sought after by every available employer


Source: 2005 US Department of Labor’s Employment and TrainingState of the Industry Report

59

In the War for Talent

Can you really afford not to be using the best weapons available?


60

Trend # 5:Rising Demands for More

Complex Leadership Competencies

• The most successful companies have discovered that it's not core business processes that give them an edge; transcending today's harsh competitive landscape hinges on management and leadership acumen

• Ever-more-demanding consumers, a heightened emphasis on customer retention, growing needs to advance competitiveness, increasing demands by investors and boards, myriad shifts in employee demographics – it all calls for leaders who possess a high degree of emotional intelligence, andfor company cultures that are infused with emotional intelligence

• A CEO turnover of more then 300 percent in the last five years makes it painfully clear that very few leaders are meeting this challenge


Source: U.S. Business ReportDecember, 2006

61

The landscape of leadershipis changing

• Every business, big or small, white or blue collar, family owned or with thousands of stockholders, faces many of the same problems

• It’s how the leadership deals with these problems that will allow the organization to succeed or fail, to grow or stagnate

• You must consider morale problems, declining or stalled financial performance, ineffective managers, lost customers

• Then there’s the increasingly tough task of identifying and grooming future leaders

• Have you considered all of the costs associated with not fully developing your leaders?


62

The voices of experiencemake it clear

• “The soft stuff is always harder than the hard stuff – human interactions are a lot tougher to manage than numbers and profits and losses” – Roger Enrico, Chairman, PepsiCo

• “To compete effectively in today’s economy, physical assets matter less than intangible intellectual assets…world class companies must invest in constant innovation, workforce skill & learning, and collaboration.” – Rosabeth Moss Kanter, Professor of Business Administration, Harvard

• “What a professional firm sells is not time, but skill, talent, knowledge, and ability…a strategy for increasing these assets is critical if it is to survive” – David H. Maister

• “An evaluation of virtually every failed law firm reveals a clear lack of leadership and a lack of understanding of the human dynamics that must be addressed in a firm” – B. Hildebrandt, The American Lawyer


63

Life-or-Death Battles

• “Most of the companies that are in life-or-death battles got into that kind of trouble because they didn’t pay enough attention to developing their leaders.”

- Wayne Calloway, Chairman, PepsiCo

• “Good executives are ‘grown’ by companies that equip their leaders to master executive responsibilities - it is essential that each corporation have a system to develop its own executives.”

- Potts & Sykes, Executive Talent: How to Identify and Develop the Best


64

Are You Meeting the Challenge?

How effective are you at…• Grooming high potentials?

• Training managers to be effectives mentors?

• Identifying talent, and channeling it advantageously?

• Maximizing goodness-of-fit between employees and the company?

• Creating leaders - and increasing individual autonomy - at lower and lower levels within the company?

• Designing, integrating, and implementing the HR strategy as a core component of the organization’s overall strategic business objectives?

• Integrating your approach to leadership development with performance management, career development, recruiting, transfer and promotion, forecasting, compensation, and so on?


65

Grooming the Next Generation:“The future belongs to those who prepare today”

• Succession planning has been identified as one of the top five issues facing professional service firms

• Failure to plan for succession has been called the greatest threat to professional service firms

• The same could be said of most other companies

• Companies that do not address this issue will have, at best, a tenuous future

• Companies must be thinking about leadership transition at least 5 to 10 years ahead of time so that leaders can be adequately trained & prepared


Sources: The Chief Executive Oct, 2005

66

What is stopping youfrom developing a plan?

• Many CEO's, senior executives, and business owners do not have a succession plan

• If they do have a plan, it’s often not written out or not being followed

• What is stopping you?

• Too young to worry about the future?

• Too busy to bother with planning?

• Too stubborn to hand over the reins?


67

Is it apathy or ignorance?I don’t know and I don’t care

These 2004 survey results on succession planning(from AICPA’s Private Companies Practice Section) are typical for

most every industry


50%Hope todevelopa plan

30%Haven’t dealt

With the Issue yet

18%Didn’t feel

they neededa plan

8%Have poorly

managed a planin the past

28%Have had

success with a plan

19%Already have

a writtenplan

62%Believe

in itsimportance

Succession Planning

Source: Journal of Accountancy, Feb, 2005

68

Unique Challenges:the Family Owned Business

• Perhaps you find yourself faced with unique problems as your family “grows into” their roles in the company

• The average life span for a family owned business is 25 years

• Fewer than 33% of FOB’s make it to the second generation, and only 15% make it to the third

• “More often an FOB will have collapsed or declined because of a failure to manage the complex and emotion-laden issue of succession”

- BDO Stoy Howard


Source: Time, March, 2001

69

It’s a Steep Climb

• Leading an FOB, you face a daunting array of dicey challenges, many of which are never faced by the head of a public company

• You face all the common competitive market-place barriers and obstacles that confront all business leaders

• PLUS you must contend with a parallel set of volatile family-based issues that inevitably arise


70

Family Dynamics –or Family Dynamite?

• Family owned businesses must consider:• The tension between “wanting to treat everyone equally”

vs. needing to define roles and compensation based on individual ability

• Preparing to step out of the way and pass the baton to “G-2” for the greater good of succeeding generations

• Navigating dynamics such as rivalries, feuds, jealousy, selfishness, rebelliousness, passive-aggressive behavior, and the playing of one family member off another

• Handling sensitive issues between family members and the “outsider” who may play a key role within the company

• Dealing head-on with hard decisions such as succession, retirement, ownership, wealth distribution, and lines of authority


S. C. Johnson, A Family CompanyRacine, Wisconsin

71

Leading Requires Effective Skills

• The most effective leader has honed these skills:

• Delegation and development

• Prompt communication of positive and negative feedback

• Identification of the proper motivation for subordinates

• Effective management of change

• Effective building of interpersonal relationships


Source: The Catalyst Summer, 2004

72

The “other” executive competencies

• 70% of employee morale – which can determine 20-30% of financial performance – can be directly traced to the actions of the leadership

• 80% of executive performance is a function of emotional and interpersonal competencies, which are four times more important than intelligence & technical proficiency in determining leadership effectiveness

• 75% of leadership derailment is related to these competencies – e.g.:

– inability to handle interpersonal problems

– unsatisfactory team leadership during times of difficulty or conflict

– inability to adapt to change or elicit trust


Source: Daniel Goleman, PhD., Emotional Intelligence

73

Can you afford NOT to invest inyour CEO’s performance?

• A research study published in the Harvard Business Review found that CEO’s influence 15% of the total variance in a company’s profitability

• The new high-impact leadership competencies:

• Forging a vision, and inspiring commitment to the vision

• Being an effective change agent and inspiring trust & confidence

• Being a clear voice in support of visionary, strategic, values-driven behavior

• Creating and cultivating a collegial, collaborative, consultative work style within the culture

• Bringing out the best in your people – their aspirations, potential, performance, and contributions


74

You better do some investigation

• Research

studies

estimated

failure rates

for senior

executives at

up to 40%

• These are the

main reasons

for failure


Source: The Center for Creative Leadership

0% 10% 20% 30% 40% 50% 60% 70% 80% 90%

lacked teamworkskills

were unclear re:expectations

failed to achievecrucial goals

failed to quicklygrasp new role

28%

47%

58%

82%

75

Most performance issues are psychological in origin

• Ask yourself these questions about your team:

Do they secretly fear losing their job?

Do they feel unworthy in the face of praise?

Are they in the habit of underestimating their capabilities?

Are they indecisive because they’re afraid of being wrong?

Do they anticipate failure before they even start a project?

Are they reluctant to delegate because they don’t trust others enough?

Do they avoid contact with superiors because they’re intimidated by them?

The last time they blew their top, were they actually nervous about something?

When they seem disorganized, is it really because they’re procrastinating, or avoiding something?


Source: Automotive Design and Production, April, 2002

76

Tough Personalities

• “I’d rather quit than have to scrub

with Dr. Maxwell again…”

• Does this describe a similar situation in

your business or organization?

• Do you have a staff member that is

superbly trained or skilled, but who has

“rough edges” that have caused morale

problems or even staff defections?


Source: Workforce Management Sept, 2005

77

“Whine” Country

• “A study of executives from 1000 of the nation’s

largest companies indicates that managers spend

13% of their time, the equivalent of six-and-a-half

work weeks per year, resolving personality

conflicts among workers” - Robert Half International

• “Well-intentioned, hard-working people often have

blind spots about important tendencies. In fact,

they may be the only ones in their group who do

not realize that they have a problem” - Daniel E.

Coates, Ph.D.


78

Caution:Career Derailment Ahead!

Here’s the most common descriptors of leaders who arestalled out or derailing – do you know someone who….

-lacks effective interpersonal skills……….……… -isn’t accountable-is too abrasive or volatile………… …….. -is overly ambitious-is overly competitive……… …. ……-is too rigid-is isolated or too perfectionistic ………… -can’t adapt to others-has to do things his/her own way…….. .....-is too cautious-freezes up & gets paralyzed……………………… -is conflict-avoidant-has to be the most dominant……… -gets bogged down in details-is a poor negotiator………… ………… -is over-reliant on one skill-is insensitive or impulsive…… ………… -doesn’t follow-through-over manages or under manages…… …. -is a poor communicator-perpetuates mediocrity… …… -undermines talented staff


79

Just let them go?

• Having a high-performing leadership team can make the difference between profit and loss

• No matter the size of your team, one under-contributing or disruptive leader can cause performance problems throughout the entire organization

• So how do you save a derailing leader?

• How do you move them to a higher level of performance and contribution in your company?


80

What Doesn’t Work

• Weekends climbing ropes

• Inspirational seminars

• Week-long leadership “boot camps”

• A good “talking to” by the boss

• Patience

• Coddling

• Repeated slaps on the wrist


81

What you must do to succeedin today’s marketplace

• Realize that performance development is a mission-critical business priority. What will ultimately make or break the success of your enterprise - your profitability, growth, and competitive advantage - is the performance of your people, individually and collectively

• Conduct a strategically-designed gap analysis of your company, based on the Eight Levers for Maximizing Organizational Performance identified in Best Practices research

• Identify the most effective solutions for closing the gaps:

• performance enhancement for key executives

• leadership development and talent management

• organizational performance and strategic effectiveness

• Avoid wasting money – make decisions based on ROI, not cost


82

The Payoff of ExpertPerformance Development

• Elevate the leadership effectiveness and personal influence skills of your executives, managers, and other key individuals

• Find the right people for key roles, and accelerate their mastery of it

• Attract and acquire superior talent, while retaining key personnel and increasing employee loyalty

• Reduce costs of training & development, health care benefits, & workers comp claims

• Decrease legal risks, absenteeism, “presenteeism,” errors, and rework

• Improve decision-making and problem-solving

• Energize employee unity, morale, and productivity

• Create a high performance workforce that’s fully committed to your business strategy

• Gain ultimate consumer loyalty – the only true source of competitive advantage and market dominance


83

Profitability is about Performance…and Performance is about People

The right expertise can boost your profitability by helping you…• Turn-around valuable but “derailing” or under-performing executives

• Improve your leadership development, talent management, and succession planning

• Identify and groom “high-potentials” to fully harness their capabilities

• Decrease “profit bleeds” from turnover and inaccurate hiring

• Reduce the stress of your workforce, and accelerate team-building

• Elevate employee motivation and organizational effectiveness

• Effectively navigate critical transitions, reduce change-resistance, and maximize the financial return of new initiatives

• Get better results from your business strategy – and more consistent execution throughout the company


84

Research-Based Success Formula

• A 10-year research study published in the Harvard Business Review found that companies out-performing their peers excelled at eight practices:

– Laser-Focused Strategy

– Leadership Excellence

– Talent Cultivation

- Motivational Culture

- Quality Communication

– Flawless Execution

– Agile Innovation

- Strategic Relationships


85

Stunning Financial Performance

• Companies consistently following this formula:

• had a 90% chance of sustaining superior business performance

• grew twice as fast as the average company in their industry

• generated shareholder returns 2000% greater than their peers


Source: Harvard Business Review

0

10

20

30

40

50

60

70

80

90

100

Growth Rate

Industry PeersHigh Performance Companies

0

10

20

30

40

50

60

70

80

90

100

Shareholder Return

Industry PeersHigh Performance Companies

86

Need More Proof?

• American Express found that developing emotional competencies increased sales 18.1%

• Motorola has shown a $30 return for every dollar invested in employee development

• Research by the Dept. of Labor found that “best of class” people practices boosted net profits 305%

• In a study on Executive Coaching in 358 organizations, the average ROI was 600%

• Citibank spent $2 million on organizational stress reduction, and reduced costs $12.6 million


87

A Success Story:Colorado Permanente Medical Group

• In 1998, CPMG was deeply in the red, and both patient and physician satisfaction had been falling rapidly for some time

• President Jack Cochran came to the conclusion that attitudes - not technical skills - were the biggest driver of performance

• CPMG then focused its business strategy on:– Changing how professional performance was defined and measured

– Developing the leadership effectiveness of the physicians

– Addressing interpersonal effectiveness issues – anger, arrogance, impatience

• By 2003, patient and physician satisfaction were at all-time highs, net income had jumped to $87 million, and the system ranked in the top 10 in the nation for quality


Source: Business 2.0, May 2007

88

So what does it taketo create a truly high-impact

Performance Development Process?

There are a number of commonly used approaches that cannot deliver significant, sustainable change:

– A series of compelling and inspiring speeches by the CEO, or proclamations from above about the “mission-critical nature of our new performance management process…”

– Inspirational or charismatic workshop instructors, or exposure to even the best educational / training content - you can’t “teach,” “train,” or “role model” a person into improved performance

The fundamental reality of organizational performance is that it is primarily a psychological affair - any attempt to handle it otherwise will fail


Source: U.S. Business Review, Nov. 2006

89

Don’t Waste Money on Training

• Corporate America spends more than $50 billion a year on training initiatives – yet yearly research shows that the effectiveness of these courses is uncertain at best

• A recent survey of more than 300 senior and executive-level profess-ionals identified a shift from “providing training” to “improving performance” as a significant trend

• A 2009 study published in Personnel Public Management revealed that coaching increased productivity 400% more than training alone

• The study concluded that “coaching is one of the most powerful ways to accelerate the growth of any company”


Source: American Society for Training and Development (ASTD)

90

Training vs. Development

Training:• Focuses on what people need to know

• Measures success by how well participants liked the experience

• Is often nothing more than pouring information over a trainee’s head

• Rarely identifies barriers to desired performance

• Doesn’t ensure use of what is learned

• Doesn’t translate into improved skill

• Rarely produces significant, lasting behavioral change

• You can’t “train” people to adopt complex leadership competencies


Well-Designed Development:

• Focuses on what people need to do and be

• Measures success by performance change and operational impact

• Engages and mobilizes the person’s internal motivations and desires

• Identifies and deals with performance barriers

• Focuses on real-time application & implement-ation - getting people to use their potential

• Occurs over time, & measures/monitors results

• Creates an ROI 400% greater than training alone

• 80% of professional growth comes from developmental – not training – experiences

91

The dangers of not getting the RIGHT guidance

• “Executive Coaches who lack rigorous psychological training can do more harm than good…

• This can have disastrous consequences for a company in the long term…

• To best help their executives, companies need to draw on the expertise of psychotherapists…

• Otherwise the executives being coached and the companies they work for will suffer…”


Source: Harvard Business Review, June, 2002

92

The 10 most critical criteria when considering a Performance Advisor

Strong educational background in human behavior, psychology, & motivationExtensive and comprehensive field experienceReal-world business experience in starting one or more of their own companies and building it into a successful, industry-leading enterpriseA focus on developmental processes, not just training or educationPerformance strategies that have proven, superior effectivenessConstant updating of performance strategies, based on emerging best practices research and the latest advancements in performance psychologyCustomized project designs focused on the unique needs of the clientAn impressive list of current and former satisfied clientsMetrics-intensive analysis that clearly demonstrates your ROI/ROEWritten guarantees that eliminate any risk for the client


Date post:	11-May-2015
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