Succession Planning - NAMIC

Succession Planning Tuesday, June 25, 2013, 8:00 a.m.

Gene Mandarino, Senior HR Consultant HRN Performance Solutions Oregon, Wis. Gene Mandarino has been with HRN Performance Solutions since 2002. He brings more than fifteen years of experience to the HRN team. At HRN, Gene works to elevate the performance of organizations across the country. He is responsible for creating customized organizational development solutions, which are designed to increase an organization’s ability to attract, retain, develop, and engage talented employees who can provide expertise in compensation and benefits, performance management, and succession planning. Gene previously worked as an organizational development manager for Arthur Andersen’s professional education division in St. Charles, Ill., as well as the Denniston Consulting group in Lisle, Ill., where he conducted organizational analysis projects, facilitated team development and strategic planning, and implemented numerous organizational development programs for businesses, municipalities, and colleges. Gene is a certified Senior Professional in Human Resources. He holds a master’s degree in organizational development from Loyola University in Chicago and a bachelor’s degree in business from Denver University. Session Description: One of the biggest challenges for mutual insurance companies today is identifying and developing leadership talent. Succession planning has historically been a back-burner item for many mutual insurance companies, but regulators are focusing more attention on documented succession plans. This interactive session is for company leaders who are responsible for creating and/or implementing a succession plans or enhancing existing succession programs. Attendees will learn the components of a good succession plan and how to create targeted professional development plans. Leave with tools that can help predict a successor’s future performance.

Succession Planning Session Outline

Overview Why is it Important? Benefits of a Plan The Board’s Role The CEO’s Role Two Types of Succession Plans

• Emergency Succession Plan (ESP) o Components

• Planned Succession o Steps

Establish Succession Planning Goals Define Future Structure

• Activity Identify & Access Potential Successors

• Sample Successor Chart • Activity

Create Development Plans

• Activity Finalize Succession Plan Document Retention Strategies Succession Planning Q & A

Succession Planning for Mutual Insurers:

Who can Step Up as Our Next Leader?

Gene Mandarino, MAOD, SPHRSenior HR ConsultantJune 25, 2013

1

HRN Performance Solutions

Since 1989, HRN has been delivering compensation, performance management,

human resources and organizational development services and solutions that

provide a competitive advantage while saving our clients time and money

Performance Management Compensation Administration HR Compliance

2

2013 NAMIC Management Conference - Mandarino Page 1 of 13

Poll

How many have a succession plan?

3

Session Objectives

• Define succession planning

• List components of a succession plan

• Understand the steps required to do a full succession plan

• Gain the knowledge required to begin your succession planning process

• Start your succession plan

4


Why Is It Important?

• 23% of organizations polled have a formal succession plan

• 38% have an informal succession plan

• Organizations with a large employee base (2500+ employees) are more likely to have a plan than smaller organizations (<500 employees)

• The most common jobs included in the plan:– President/CEO: 49%

– Executives: 54%

– Sr. Management: 58%

– Middle Management: 51%

5

Source: 2011 SHRM Succession Poll

Benefits of a Plan

• Ensure continuous quality service

• Anticipate future position needs

• Identify and prepare internal successors for advancement opportunities

• Fills vacancies with internal candidates where appropriate

• Hires and grooms future leadership

• Identifies leadership gaps that could create a risk

• Utilizes professional development investments more effectively

6


The Board’s Role

• Ensure there is continuous effective leadership

• Request a succession plan

• Review and understand the succession plan

• Annually or every other year review key aspects of the plan

7

The CEO’s Role

• Develop and administer the succession plan

• Identify successor candidate/s and:

– Evaluate their performance

– Provide ongoing feedback

– Plan ongoing development activities to strengthen their capabilities

• Delegate authority to successor candidates

8


Two Types of Succession Plans

9

• Emergency Succession Plan (ESP)

– Death

– Severe Illness

– Involuntary termination (Illegal activity, for example)

• Planned Succession

– Retirement

– Pool of executives getting close to retirement

Emergency Succession Plan

In the case of an unplanned departure of the CEO (can include interim replacements for other key positions) the ESP:

– Identifies the interim CEO

– Lists key tasks the Board and Key Managers must take to stabilize leadership

– Outlines a communication plan

– Outlines a process for acquiring a permanent CEO

10


Components of Emergency Succession Plan

See Handout

11

Planned Succession Plan

• Complements the ESP

• Identifies and assesses the readiness of potential successors

• Outlines a process for professional development

• Lists key steps that will be taken to transition a new CEO into the role of a retiring CEO

12


Planned Succession Steps

• Establish succession planning goals

• Define current and future management structure

• Identify and assess successors

• Create successor readiness chart

• Create development plans

• Update annually or as needed

13

Establish Succession Planning Goals

• Emergency Succession Plan?

• Planned Succession Plan?

• Or both?

• Positions targeted for succession?

• Professional assessment and development?

14


Define Future Structure

• Review strategic plan and business environment

• Determine impact the strategic plan has on future structure and roles

• Define future structure

15

Activity

Define Future Structure

– How will your management structure change in the next 3‐5 years?

– What new role/s will emerge?

– What current roles will change?

16


Identify & Assess Potential Successors

• Review organization to identify potential internal successors

• Create Successor Readiness Chart

• Assess skills and capabilities of each potential internal successor

• Create capabilities report on each potential successor

17

Sample Successor Chart

18

CEO/Manager

CFOCEO Successor

Code 1COO

SuccessorCode 1

VP/ManagerCustomer ServiceCEO Successor

Code 2

SuccessorCode 1

VP/ManagerClaims Mgmt

SuccessorCode 2

SuccessorCode 4

SuccessorCode 3

SuccessorCode 2

SuccessorCode 3

Readiness code:1 = Ready now2 = 1-2 years3 = 3-4 years 4 = 5 years


Activity

• Start to create your Readiness Chart

– List the direct reports of the CEO

– Assign a readiness code to each successor

– How deep is the list of potential CEO successors?

– Repeat this exercise with other key position in your organization

– How deep is your organizations overall leadership talent ?

19

Create Development Plans

• Identify strengths and developmental needs

• Determine critical development needs

• Identify appropriate development option to suit development needs

• Set completion dates

• Include plans in performance management process

20


Activity

Development Planning

Review sample development plan

21

Finalize Succession Plan Document

• Administrative Guidelines

• Process for planned and unplanned vacancies

• Successor chart with job descriptions

• Professional development plans

• Potential funding requirements

22


Retention Strategies

• Look for opportunities to promote and advance individuals

• Consider deferred compensation (golden handcuff) arrangements to supplement current compensation, fill retirement gaps, and tie the executive to the organization

• Find other retirement vehicles that you can provide to senior executives as a retention tool

23

Succession Planning

Without a plan, the right people properly prepared, the right outside resources available, and the money to implement, succession will be chaotic, hurting the organization, the customers, and the employees trying to give great service.

24


Questions?

25

Sign up to receive HRN’s free monthly HR Legal Newsletter: www.hrnonline.com

Thank You!

For additional information, contact:Gene Mandarino800‐897‐3308 ext [email protected]

26


EMERGENCY SUCCESSION TASKS

© 2012 HRN - All Rights Reserved

The following tasks are intended to provide organizations with general guidance on what to do in the event of an unplanned CEO departure. The tasks and responsible parties are not exhaustive and should be reviewed and adapted to meet each organization’s unique needs. Within 24 Hours of a PRESIDENT/CEO Departure:

• If Board Chair is not available, the order of responsibility for the tasks below is as follows: Vice Chair, ……, ……,

• If the President/CEO has to be terminated, seek counsel from an employment law attorney and task number “3” may need to be executed immediately.

• 24 hours is a general guideline, if any actions cannot feasibly be completed within 24 hours, the actions should be completed as close to 24 hours as possible.

Tasks Responsible Party 1. Name and contact the Interim CEO.

Board Chair

2. Contact the following as soon as possible and inform them of the vacancy and the proposed permanent or Interim CEO:

• Management Team Members

• Remaining Members and all committee members Create attachment that lists contact information (address, phone number and e-mail address) for all of the above.

Board Chair

3. Determine need to:

• Execute procedures for securing computer network

• Secure records

• Change locks and security system if deemed necessary o Disable master key o Notify Police department and security company

o Revise security codes at all facilities

• Secure personal property of departing President/CEO

• Block corporate credit cards

• Delegate staff to contact relevant external stakeholders in which the CEO has purchasing and/or other authority

• Stop purchasing authority of President/CEO with appropriate vendors

Create attachment that lists contact information (address, phone number and e-mail addresses) for all key external stakeholders such as vendors, regulators, associations, security agencies, etc.

4. Convene a Board meeting. At this meeting, the Board of Directors will:

• Vote to approve the appointment of the Interim President/CEO.

Board Chair

EMERGENCY SUCCESSION TASKS


• Confirm the Board’s (or committee of the Board) role as advisor to the interim CEO

• Determine content and approach to communicating the situation to the staff. Content can include and will not be limited to the following: o Fact that former President/CEO is no longer responsible for the

organization

o Reason for departure – if it can be shared o Clarification of the role of the Interim President/CEO o Response that team members are permitted to give customers,

vendors and others who ask

o Person or persons responsible for contacting external stakeholders

o Projected process for replacement of President/CEO with anticipated time frames

(see recruitment plan on following page )

o When and how additional information will be provided

• Conduct change of President/CEO Audit. Use CPA Firm. 5. Disseminate information to staff to explain the situation and the

anticipated actions. The staff will be reminded that the Board of Directors alone is responsible for any specific communication about the situation. Explanations of how they are allowed to relate the situation to customers and other interested parties (such as the media) should be provided.

Interim President/CEO

Within 10 Business Days of CEO Departure:

Responsibility Responsible Party 1. Board will meet with the Interim CEO to review and determine

appropriate level of authority to authorize for the Interim CEO. Use CEO Job descriptions for guidance. Include CEO job description with this plan.

2. Board will meet with the interim CEO and other key managers to confirm course of action for managing the organization.

Board

3. Determine appropriate interim compensation for Interim CEO.

Board

4. Commence executive search plan. Include executive search plan.

Board

5. Interim CEO will maintain regular communication with the Board throughout the period of time he/she is serving as Interim CEO.

Interim President/CEO

Succession Planning Tools HRN Performance Solutions

June 2013


Competency Category Strength Development Area

Manages Employee Relations

Basic Employment Law

Performance Management and Coaching

Staffing and Training

Talent Management /Mentoring

Written and Verbal Communication

Persuasive Communication

Problem Solving and Decision Making

Policy and Procedure Administration

Strategy Development

Aligning Department with Organizational Strategy

Developing and Interpreting Financial Information

Encouraging and Instilling Customer Service

Developing and Maintaining External Relationships

Leadership

Building Teamwork

Building Trust

Motivation and Delegation

Personal Development

Project Management and Meeting Deadlines

Achieving Results

Manages Time and Task Completion

Other Job Specific Competencies




Abbreviated Development Plan SAMPLE

Successor Name _________________________ List strengths this successor has that will be an asset to them in their next position

progression.

1. __________________________________________________________________

2. __________________________________________________________________ 3. __________________________________________________________________

4. __________________________________________________________________

List critical competencies this successor needs to develop in order to be ready to

assume their next position progression.

1. __________________________________________________________________

2. __________________________________________________________________

3. __________________________________________________________________

4. __________________________________________________________________ Identify the appropriate development strategy (training, certification, project

leadership, books, job rotation etc.) this successor can implement to develop their critical competencies.

1. __________________________________________________________________

2. __________________________________________________________________

3. __________________________________________________________________

4. __________________________________________________________________

Documents

Succession Planning - NAMIC