You Say Goodbye, You Say Goodbye, I Say Hello:I Say Hello:

Succession Planning with Succession Planning with an Aging Workforcean Aging Workforce

Eva LaBonte, MS, ARMEva LaBonte, MS, ARMRisk and Benefits AnalystRisk and Benefits AnalystClean Water ServicesClean Water ServicesHillsboro, OregonHillsboro, Oregon

AgendaAgendaAging Workforce IssuesAging Workforce Issues–– Know your risk horizonKnow your risk horizon–– The value of planningThe value of planningGoodbye and HelloGoodbye and Hello–– Why employees leaveWhy employees leave–– Becoming an employer of Becoming an employer of –– Becoming an employer of Becoming an employer of choicechoice

Succession PlanningSuccession Planning–– Succession planning nuts and Succession planning nuts and boltsbolts

–– Succession Planning Road Succession Planning Road MapMap

Summary & QuestionsSummary & Questions

Clean Water ServicesClean Water Services

BackgroundBackground

79 million people 79 million people born between 1946 born between 1946 & 1964 in the US & 1964 in the US 11

64 million Baby 64 million Baby Boomers are poised Boomers are poised Boomers are poised Boomers are poised to retire in large to retire in large numbers by the end numbers by the end of the decade of the decade 22

Between 2002 and 2012, the U.S. population over the Between 2002 and 2012, the U.S. population over the age of 55 will grow 49 percent, while the portion of the age of 55 will grow 49 percent, while the portion of the population under age 55 will only increase 5 percent population under age 55 will only increase 5 percent 33

1 – Wikipedia.org2 - Managing the Mature Workforce – report #1369, The Conference Board3- Urbana/Champaign News-Gazette (IL) (02/15/08); Dodson, Don

(1)

Goodbye or HelloGoodbye or Hello

Older employees may not be ready Older employees may not be ready or able to retireor able to retire–– Leadership roleLeadership role–– May want to continue working (60%)May want to continue working (60%)11

–– May need to continue working (30%)May need to continue working (30%)11–– May need to continue working (30%)May need to continue working (30%)

Organizations are finding they Organizations are finding they need to retain experienced workersneed to retain experienced workers–– Leadership roleLeadership role–– Institutional knowledgeInstitutional knowledge–– Skills and experienceSkills and experience–– Local labor shortagesLocal labor shortages

1 1 –– April 24, 2008, Pew Research CenterApril 24, 2008, Pew Research Center

Negative StereotypesNegative Stereotypes

Older workers are less productive Older workers are less productive than younger workersthan younger workers–– A recent study found mature A recent study found mature employees have higher dependability employees have higher dependability and reliability and are more motivated and reliability and are more motivated than younger workers to exceed the than younger workers to exceed the than younger workers to exceed the than younger workers to exceed the requirements of their jobrequirements of their job11

Mature employees file age Mature employees file age discrimination claims whenever a discrimination claims whenever a negative action is takennegative action is taken–– The number of age discrimination The number of age discrimination cases in the U.S. fell by 22% from cases in the U.S. fell by 22% from 2003 2003 -- 2006200622

1Pirk, M (2008) Maximizing the Potential of the Older Workforce

2EEOC

Negative StereotypesNegative StereotypesOlder workers are more likely to take FMLA leave Older workers are more likely to take FMLA leave for their own or a family member’s serious health for their own or a family member’s serious health conditioncondition–– EEmployees between the ages of 25 and 34 are mployees between the ages of 25 and 34 are statistically the most likely to take family and medical statistically the most likely to take family and medical leaveleave11

Older workers are unwilling to learn new skillsOlder workers are unwilling to learn new skillsOlder workers are unwilling to learn new skillsOlder workers are unwilling to learn new skills–– Mature employees are Mature employees are motivated to learn new skills motivated to learn new skills in order to keep their value to in order to keep their value to their employertheir employer

–– Younger workers are more likely Younger workers are more likely to simply move onto simply move on

1US Dept of Labor

Examining You OrganizationExamining You Organization

Know your risk horizonKnow your risk horizon–– Retirement potentialRetirement potential

Age and length of serviceAge and length of serviceRetirement plan eligibility and benefitsRetirement plan eligibility and benefits

–– Existing succession planningExisting succession planning–– Existing succession planningExisting succession planning–– Skill sets neededSkill sets needed

Static or dynamicStatic or dynamic

–– Local labor availabilityLocal labor availabilityHow hard is it to recruit new employees nowHow hard is it to recruit new employees nowWhat is the competitive landscapeWhat is the competitive landscape

Why Plan?Why Plan?

Continuity of operationsContinuity of operations–– Lost productivityLost productivitySmooth transitionsSmooth transitions–– Departing personnelDeparting personnel–– Departing personnelDeparting personnel–– New personnelNew personnelMeet organizational Meet organizational objectivesobjectives–– Knowledge transferKnowledge transfer–– Maintain service levelsMaintain service levels

Succession Planning 101Succession Planning 101Succession planning is often confused with Succession planning is often confused with replacement replacement planningplanning which is a more basic process of identifying which is a more basic process of identifying employees who can step in as backemployees who can step in as back--upsups–– Replacement planning is still important Replacement planning is still important

Sudden departures and personnel lossesSudden departures and personnel lossesSuccession planning is a more systematic approach for Succession planning is a more systematic approach for longlong--term objectivesterm objectiveslonglong--term objectivesterm objectives–– Future may not be like the past, merely “cloning” past Future may not be like the past, merely “cloning” past personnel may not be in the best interest of the personnel may not be in the best interest of the organizationorganization

–– Identify internal talent poolsIdentify internal talent pools–– Assess what is needed to develop the pool Assess what is needed to develop the pool

80% readiness before promotion80% readiness before promotion–– External sourcesExternal sources

The Nuts and Bolts of Succession Planning, William J. Rothwell, PhD, 2007The Nuts and Bolts of Succession Planning, William J. Rothwell, PhD, 2007

Not Just For ManagementNot Just For ManagementSuccession planning should not just focus on Succession planning should not just focus on management positionsmanagement positions–– Critical functionsCritical functions–– Specialized skillsSpecialized skills–– Hard to recruit positionsHard to recruit positions

Internal and ExternalInternal and External–– Development of existing personnelDevelopment of existing personnel–– Knowledge transferKnowledge transfer

Sometimes critical positions are not identified Sometimes critical positions are not identified until the person is gone and no one knows how until the person is gone and no one knows how to perform their dutiesto perform their duties

•• Lack of opportunity to grow and be promoted

•• Management doesn't clarify Management doesn't clarify goals and decisionsgoals and decisions

•• Supervisor shows Supervisor shows favoritismfavoritism

Reasons Employees LeaveReasons Employees Leave

favoritismfavoritism• Management creates a creates a rigid structurerigid structure

•• Allows departments to Allows departments to compete against each compete against each other while promoting other while promoting “teamwork”“teamwork”

Why Good Workers ResignWhy Good Workers Resign

•• Competitors want your best employees, and they Competitors want your best employees, and they can be lured away by higher pay and growth can be lured away by higher pay and growth opportunitiesopportunities

•• Recruiters are looking to cull the very people you Recruiters are looking to cull the very people you cannot afford to losecannot afford to lose

•• The bad economy is the perfect time for them to The bad economy is the perfect time for them to strike!strike!

Gregory P. Smith, Business Growth SpecialistGregory P. Smith, Business Growth Specialist

“In today’s business “In today’s business environment, where environment, where many companies have many companies have reduced staff levels, reduced staff levels, managers need to be managers need to be managers need to be managers need to be extra attentive to the extra attentive to the needs of their teams, or needs of their teams, or they risk losing their they risk losing their most valuable most valuable employees.”employees.”Max Messmer, CEO, Robert Half International, 2009Max Messmer, CEO, Robert Half International, 2009

What Happens When Experienced What Happens When Experienced Employees Leave?Employees Leave?

Bye Bye, KnowledgeBye Bye, Knowledge

••ThirtyThirty--nine years ago, Neil nine years ago, Neil Armstrong became the first man Armstrong became the first man to set foot on the moon, marking to set foot on the moon, marking the zenith of a 10 year $24 billion the zenith of a 10 year $24 billion space program by NASA.space program by NASA.

•• In the years following, NASA In the years following, NASA

Lost KnowledgeLost Knowledge

•• In the years following, NASA In the years following, NASA found it could not repeat the feat found it could not repeat the feat because all of the key people because all of the key people involved had retired and no one involved had retired and no one had recorded what they knew. had recorded what they knew.

•• The blueprints for Saturn V, the The blueprints for Saturn V, the only rocket powerful enough to only rocket powerful enough to get to the moon, were lost.get to the moon, were lost.

What Should You Do What Should You Do BeforeBefore Your Your Experienced Employees Leave or Your Older Experienced Employees Leave or Your Older

Employees Retire?Employees Retire?

Plug the Knowledge GapPlug the Knowledge Gap

“Organizations that do not “Organizations that do not ‘plug the knowledge gap’‘plug the knowledge gap’ will will find themselves relearning, or find themselves relearning, or renting, old knowledge at a renting, old knowledge at a renting, old knowledge at a renting, old knowledge at a high cost.”high cost.”

One chalk mark One chalk mark -- $1$1

Knowing where to put it Knowing where to put it -- $49,999$49,999

John Davidson, Partner, Facilitators UK, Society of Petroleum John Davidson, Partner, Facilitators UK, Society of Petroleum Engineers, January 2006Engineers, January 2006

• Projected demographic trendsProjected demographic trends

•• Aging workers will be seen as an asset to be appreciated, Aging workers will be seen as an asset to be appreciated, and not a cost to be cut and not a cost to be cut

•• The value of human capitalThe value of human capital

PayingPaying Greater Attention to Human CapitalGreater Attention to Human Capital

•• People and their People and their ideas ideas will be recognized and identified as will be recognized and identified as a commoditya commodity

•• A shift toward a knowledgeA shift toward a knowledge--based economybased economy

•• Knowledge resources such as Knowledge resources such as knowknow--howhow and and expertiseexpertise are are just as critical as other economic resourcesjust as critical as other economic resources

Univ. of Vermont, School of Business Administration, 2008Univ. of Vermont, School of Business Administration, 2008

EXPLICITEXPLICIT

InformationInformation organized in a organized in a particular way for future retrieval.particular way for future retrieval.•• Documents, databases, Documents, databases, spreadsheets, proceduresspreadsheets, procedures

TACITTACIT

Types of KnowledgeTypes of Knowledge

TACITTACIT

KnowledgeKnowledge people carry in their people carry in their heads.heads.•• Most people are not aware of Most people are not aware of what they possess or its value to what they possess or its value to othersothers•• Provides context for information Provides context for information and is not easily capturedand is not easily captured

www.jobs.sc.gov/OHR/wfplan/wfplanwww.jobs.sc.gov/OHR/wfplan/wfplan

Knowledge HarvestingKnowledge Harvesting

• Knowledge harvesting transfers individual's tacit knowledge to a more explicit format to be used by others

• Often completed when individuals • Often completed when individuals are about to leave an organization

• Risk of knowledge loss is increasing due to:

üEarly retirement incentivesüBusiness re-engineering üDown-sizingüAging workforce

•• Identification of crucial Identification of crucial atat--risk knowledge risk knowledge

•• Prioritization of key atPrioritization of key at--risk knowledge holders risk knowledge holders

So long, Suckers!

All around the world, knowledgeable people are retiring, and their

knowledge is leaving with them

risk knowledge holders risk knowledge holders

•• Knowledge interviewing Knowledge interviewing can discover the core tacit can discover the core tacit knowledgeknowledge

•• Packaging the Packaging the knowledge into a reusable knowledge into a reusable asset for othersasset for others

Becoming an Employer Becoming an Employer of Choiceof Choice

Companies are now focusing on Companies are now focusing on how to recruit the best new how to recruit the best new

employeesemployeesToys?!

This isn’t pre-

school!

…and keep …and keep the good the good

employees employees they already they already

havehave

school!Look! Two dinosaurs!

More Than a Buzz WordMore Than a Buzz Word

Becoming an employer of choice may require Becoming an employer of choice may require a new corporate culture a new corporate culture –– Employees are valuable assets to Employees are valuable assets to the organizationthe organization

What does it mean to be an What does it mean to be an What does it mean to be an What does it mean to be an employer of choice?employer of choice?–– People will choose to work for you People will choose to work for you and dedicate themselves to the and dedicate themselves to the company’s successcompany’s success

–– Employees will choose to stay with Employees will choose to stay with you, even if courted by other employersyou, even if courted by other employers

11Pirk, M (2008) Maximizing the Potential of the Older Workforce Pirk, M (2008) Maximizing the Potential of the Older Workforce

22EEOCEEOC

A reputable companyA reputable company where employees can count on the where employees can count on the organization’s honesty and integrityorganization’s honesty and integrity

A company cultureA company culture that supports high values and standardsthat supports high values and standards

Enlightened leadershipEnlightened leadership that has a clear vision and that has a clear vision and communicates icommunicates it wellt well

Qualities of an Employer of ChoiceQualities of an Employer of Choice

communicates icommunicates it wellt well

A caring attitudeA caring attitude where the where the organization takes workorganization takes work--life life balance into considerationbalance into considerationCompetitive compensationCompetitive compensationand benefitsand benefits packagespackages

A corporate social conscienceA corporate social conscience committed to making the committed to making the world a better placeworld a better place

The $64,000 (or more) QuestionThe $64,000 (or more) Question

Would your Would your employees employees recommend recommend your your your your organization organization to others as to others as a good place a good place to work? to work?

Chances Are….Chances Are….Your organization will be Your organization will be impacted by the aging impacted by the aging workforce in one or more workforce in one or more waysways–– Empty positionsEmpty positions–– Retention challengesRetention challenges–– Retention challengesRetention challenges–– Knowledge gapsKnowledge gapsThose organizations that Those organizations that examine their specific examine their specific situation then plan and adjust situation then plan and adjust will be in the best position to will be in the best position to leverage the experience of leverage the experience of the older workers while the older workers while attracting and integrating attracting and integrating younger workersyounger workers

Step 1Get commitment

Step 2Analyze the work and people now

Step 7Evaluate program

results

Succession Planning Road MapSuccession Planning Road Map

Rothwell, W (2006) The Nuts and Bolts of Succession PlanningRothwell, W (2006) The Nuts and Bolts of Succession Planning

Step 3Evaluate

performance

Step 4Analyze future work and needs

Step 5Evaluate potential

Step 6Develop people

Analyze Current People and JobsAnalyze Current People and Jobs

Evaluate your current organizational needsEvaluate your current organizational needsUtilize org chart and information from Utilize org chart and information from managers and Human Resourcesmanagers and Human ResourcesConduct a demographic studyConduct a demographic study–– Discover what percentage of Discover what percentage of –– Discover what percentage of Discover what percentage of employees will become employees will become retirementretirement--eligible in the eligible in the near futurenear future

–– Identify the key people whose Identify the key people whose departure would be a significant departure would be a significant loss to the businessloss to the business

Evaluate PerformanceEvaluate PerformanceEstablish performance goals and Establish performance goals and incentives that are tied directly to incentives that are tied directly to corporate goalscorporate goals11

–– Allows management team to identify and Allows management team to identify and reward “key performers” and identify areas reward “key performers” and identify areas that require development that require development reward “key performers” and identify areas reward “key performers” and identify areas that require development that require development

–– Don’t wait for openings to begin developing Don’t wait for openings to begin developing skill sets for a future responsibility or skill sets for a future responsibility or promotionpromotion

–– Create opportunities for each individual as Create opportunities for each individual as they grow and mature to help keep they grow and mature to help keep employees challenged and stimulatedemployees challenged and stimulated

11Beyond.com (2008) Succession Planning for the FutureBeyond.com (2008) Succession Planning for the Future

Analyze Future Work and NeedsAnalyze Future Work and Needs

Employers are discovering they want to Employers are discovering they want to retain mature workersretain mature workers–– Specialized knowledgeSpecialized knowledge–– Labor shortageLabor shortage–– Labor shortageLabor shortage

Organizations will also want Organizations will also want to recruit older employees to recruit older employees and crossand cross--train older workers for other train older workers for other positionspositions

Analyze Future NeedsAnalyze Future NeedsRetaining and recruiting mature Retaining and recruiting mature workers may be important for workers may be important for your organization your organization Workplace characteristics Workplace characteristics preferred by older workerspreferred by older workers11

–– Training offered to employeesTraining offered to employees–– Training offered to employeesTraining offered to employees–– Willing to make workplace Willing to make workplace accommodations to suit their accommodations to suit their reduced physical capabilitiesreduced physical capabilities

–– Provides flexible scheduling (such Provides flexible scheduling (such as part time work and work from as part time work and work from home)home)

–– Offer retirement and health Offer retirement and health benefitsbenefits

11Galloway Consulting Group (2007) Retaining Skills and knowledge as Older Galloway Consulting Group (2007) Retaining Skills and knowledge as Older Employees Start to RetireEmployees Start to Retire

Evaluate and Develop Evaluate and Develop Older WorkersOlder Workers

•• Develop an internal career path for mature Develop an internal career path for mature employees to follow based on abilities and employees to follow based on abilities and talents to continue to grow within the talents to continue to grow within the organization organization Encourage key employees to continue their Encourage key employees to continue their Encourage key employees to continue their Encourage key employees to continue their educationeducation–– Offer specialized trainingOffer specialized training

Create new hiring strategiesCreate new hiring strategiesDevelop rewards to encourage Develop rewards to encourage mature workersmature workersCommunicate successCommunicate success

SummarySummary•• All organizations will be affected by the aging workforce All organizations will be affected by the aging workforce and could benefit from utilizing succession planningand could benefit from utilizing succession planning

•• Understand why your employees leave Understand why your employees leave -- this is critical to this is critical to retaining your best and brightestretaining your best and brightest

•• Take steps to harvest the knowledge from the Take steps to harvest the knowledge from the experienced employees BEFORE they leaveexperienced employees BEFORE they leave

•• As the economy recovers, it will become important to be As the economy recovers, it will become important to be •• As the economy recovers, it will become important to be As the economy recovers, it will become important to be an employer of choice in order to recruit and retain top an employer of choice in order to recruit and retain top talenttalent

•• Assess your company’s ability to attract and retain Assess your company’s ability to attract and retain mature employeesmature employees

•• Utilize the succession planning road map to develop Utilize the succession planning road map to develop older workers and utilize them to their full potentialolder workers and utilize them to their full potential

Questions?Questions?

Eva LaBonteEva LaBonteRisk & Benefits AnalystRisk & Benefits AnalystClean Water ServicesClean Water ServicesClean Water ServicesClean Water ServicesLabonteE@cleanwaterservices.orgLabonteE@cleanwaterservices.org503503--681681--36173617

The Aging ProcessThe Aging ProcessWhat we all have to look What we all have to look forward to:forward to:–– Loss of muscle strength, Loss of muscle strength, flexibility, hearing, reduced flexibility, hearing, reduced grip strength, ROM, reduced grip strength, ROM, reduced nervous system responsesnervous system responses

–– Tire more quickly,Tire more quickly, take longer take longer to recover, less endurance, to recover, less endurance, diminished postural diminished postural steadiness, reduced visual steadiness, reduced visual capacitycapacity

–– Chronic illnesses Chronic illnesses –– diabetes, diabetes, high BP, osteoporosis, high BP, osteoporosis, arthritis, etc.arthritis, etc.

*National Institute for Occupational Safety & Health, 2005*National Institute for Occupational Safety & Health, 2005--159159

The Aging ProcessThe Aging Process

What we all have to look forward to:What we all have to look forward to:–– Body's metabolic rate slows and can lead Body's metabolic rate slows and can lead to obesity & an increase in to obesity & an increase in badbad cholesterol cholesterol levelslevels

–– Decline in mental function complex Decline in mental function complex –– Decline in mental function complex Decline in mental function complex problemproblem--solving, multisolving, multi--tasking, slowing of tasking, slowing of mental processingmental processing

–– Increase in MVAs Increase in MVAs –– Leading cause of Leading cause of occupational fatalities for older workers in occupational fatalities for older workers in the U.S.*the U.S.*

*National Institute for Occupational Safety & Health, 2005*National Institute for Occupational Safety & Health, 2005--159159

Wellness ProgramsWellness ProgramsA fully developed wellness program addresses A fully developed wellness program addresses physical, nutrition and mental health issues for aging physical, nutrition and mental health issues for aging workersworkersBeneficial for both employers and employeesBeneficial for both employers and employeesExercise improves flexibility, strength and range of Exercise improves flexibility, strength and range of motionmotionOlder employees may not Older employees may not Older employees may not Older employees may not be aware that good be aware that good nutrition can help with nutrition can help with disease management and disease management and preventionprevention–– Employers can offer Employers can offer healthy food options on healthy food options on sitesite

Benefits of a Wellness ProgramBenefits of a Wellness ProgramThe results of a healthier workforce1 The results of a healthier workforce1 –– Lower sick leave usageLower sick leave usage–– Higher productivityHigher productivity–– Lower rate of injury and illnessLower rate of injury and illness–– Faster recovery Faster recovery It’s never too late It’s never too late -- small lifestyle small lifestyle changes can be beneficialchanges can be beneficialIt’s never too late It’s never too late -- small lifestyle small lifestyle changes can be beneficialchanges can be beneficialHealth screenings can detect Health screenings can detect medical issues affecting older workersmedical issues affecting older workers–– Vision testingVision testing–– Cholesterol and Diabetes checksCholesterol and Diabetes checks–– Blood pressureBlood pressureKey cost issue: Poorly managed Key cost issue: Poorly managed chronic diseaseschronic diseases