TCAP Research Report

The Five Greatest
Challenges That
Are Threatening
Companies Today

and the four things a company
must do to stay competitive
in today’s market place

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 Group
Exclusive Distribution Rights Sole Property of Gregory S. Smith, MS, MSW 2

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

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.


Even the most powerful
are vulnerable

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

• Lehman Brothers • Enron
• WorldCom • Chrysler
• General Motors • Texaco
• Washington • Pacific Gas
Mutual & Electric


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, CEO
Allied Signal


The #1 Challenge
for 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


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?


Even the most experienced
leader 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?


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


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?


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 execution
throughout the company, the Strategic Plan is rendered fundamentally
useless


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


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


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 for
the customer and the company


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


But even commitment only goes so far
when 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


Failure to Deliver

“More than 70% of strategic change

initiatives (mergers, acquisitions,
30%
downsizing, enterprise-wide software SUCCESS

integration, restructuring, globalization) fail

to deliver the expected financial returns 70%
due to employee execution and workforce FAILURE
performance problems”

Source: The Center For Effective Performance


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


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


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


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 • Mistrust
• Conflict aversion • Apprehension
• Impatience • Inertia
• Cynicism • Over control
• Rumors • Egocentricity


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; successful
ones 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


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


More Stress Factors
Brought to the Table

• Organizational stressors also
Job Family
stem from employee realities pressures pressures

• Employees bring their lives to
work Lifestyle Psychological
factors symptoms
• This impacts their health and
emotional status
• Which, in turn, impedes their Personal Coping
issues resources
work performance
• Which, in turn, compromises Social Financial
pressures concerns
growth and profitability


All these stressors converge
to 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


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


40% of workers report that their job
is “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


Stress = Increased Legal Liabilities
for 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


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


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
Sources: Harvard Business Review, July
– Depression =70% greater health care costs 2003; Journal of Occupational and
Environmental Medicine, Oct. 1998


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


Absenteeism:
What are the Reasons?

• Notice the
red pie
slice 12%
Stress
• 14% of
14%
absences Entitlement
35% • Do you think
Personal
are because Mentality Illness that this
the deserves
employee 18%
Personal
your
feels they Issues 21% attention?
are entitled Family
to extra Illness

time off

Source: Prospera Reference Nov, 2005


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


It may be costing you
more 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


More Research on the
Financial 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


What is Your Company doing
to Shrink these Steep Costs?
• In 2000, Bank One discovered that WC &
direct costs from employee medical Disability
7%
and pharmaceutical treatment only
represented 24% of the company’s true Medical
“health & wellness” costs 24%

• While a small amount was attributable
to Workers’ Comp, Short & Long Term
Disability, and Absenteeism, a full 63% Absenteeism
6%
of their costs was directly attributable
to this phenomenon of Presenteeism
Presenteeism
• The study concluded that “Targeted 63%
initiatives designed to reduce presen-
teeism would be paid for many times
over by the improved productivity
that would ensue.”


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


An emerging perspective from
Global Business Leaders

• In a definitive study by consulting firm DDI, “Improving and
Leveraging Talent" was the second highest business priority
of 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


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


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


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


Calculate the Costs
to 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


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


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, 2007
Employment Policy Foundation, 2002


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


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 needs
and 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”


Are you finding the right
people 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


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, 2001
Harvard Business Review, 2000


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


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 The High Achiever
• Does enough to get by, but no more • Consistently achieves more results
• Looks for someone to blame • Takes responsibility for solving
problems
• Waits for instructions
• Takes ownership of situations
• Is problem-oriented
• Is a self-starter who takes initiative
• Doesn’t believe there is always a
• Is solution-oriented
solution
Source: Journal of Psychology, 2008
Art Business News March, 2003


The Key to Attracting and
Retaining 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 have
become 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?


Trend #4:
The Steadily Shrinking Talent Pool

North America is facing a talent and leadership shortage, driven
by 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


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


America’s next generation
needs 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


Another way to look at the
scary comparisons

Rank Country Avg. Math Literary Score
1 Finland 544
2 South Korea 542
3 Netherlands 538
11 Iceland 515
15 Austria 506
18 Slovak Republic 498
20 Luxembourg 493
24 United States 483
27 Greece 445
29 Mexico 385

Source: Organization for Economic Cooperation and Development


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 Training
State of the Industry Report


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 Training
State of the Industry Report


In the War for Talent

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


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, and
for 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 Report
December, 2006


The landscape of leadership
is 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?


The voices of experience
make 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


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


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?


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


What is stopping you
from 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?


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

62%
Believe
in its
50% importance 19%
These 2004 survey results Hope to
develop
Already have
a written
on succession planning a plan plan

(from AICPA’s Private
Succession
Companies Practice 30% Planning 28%
Haven’t dealt Have had
Section) are typical for With the success with
Issue yet a plan
most every industry
18% 8%
Didn’t feel Have poorly
they needed managed a plan
a plan in the past
Source: Journal of Accountancy, Feb, 2005


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


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


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 Company
Racine, Wisconsin


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


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


Can you afford NOT to invest in
your 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


You better do some investigation

• Research
studies
failed to quickly 28%
estimated grasp new role
failure rates
failed to achieve 47%
for senior crucial goals

executives at
were unclear re: 58%
up to 40% expectations

lacked teamwork 82%
• These are the skills
main reasons 0% 10% 20% 30% 40% 50% 60% 70% 80% 90%

for failure
Source: The Center for Creative Leadership


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


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


“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.


Caution:
Career Derailment Ahead!

Here’s the most common descriptors of leaders who are
stalled 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


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?


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


What you must do to succeed
in 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

The Payoff of Expert
Performance 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

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


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

Stunning Financial Performance

• Companies consistently
following this formula:
100 100

90
• had a 90% chance of
90
sustaining superior
80 80
business
70 70
performance
60 60

50
• grew twice as fast as 50

40
the average 40

30
company in their 30
industry
20 20

10
• generated 10

0
shareholder returns 0
Growth Rate 2000% greater than Shareholder Return

Industry Peers their peers Industry Peers
High Performance Companies High Performance Companies

Source: Harvard Business Review


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


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


So what does it take
to 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


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)


Training vs. Development

Training: Well-Designed Development:
• Focuses on what people need to know • Focuses on what people need to do and be
• Measures success by how well • Measures success by performance change and
participants liked the experience operational impact
• Is often nothing more than pouring
• Engages and mobilizes the person’s internal
information over a trainee’s head
motivations and desires
• Rarely identifies barriers to desired
• Identifies and deals with performance barriers
performance
• Doesn’t ensure use of what is learned • Focuses on real-time application & implement-
ation - getting people to use their potential
• Doesn’t translate into improved skill
• Occurs over time, & measures/monitors results
• Rarely produces significant, lasting
behavioral change • Creates an ROI 400% greater than training alone
• You can’t “train” people to adopt • 80% of professional growth comes from
complex leadership competencies developmental – not training – experiences


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


The 10 most critical criteria when
considering a Performance Advisor

Strong educational background in human behavior, psychology, & motivation
Extensive and comprehensive field experience
Real-world business experience in starting one or more of their own
companies and building it into a successful, industry-leading enterprise
A focus on developmental processes, not just training or education
Performance strategies that have proven, superior effectiveness
Constant updating of performance strategies, based on emerging best
practices research and the latest advancements in performance psychology
Customized project designs focused on the unique needs of the client
An impressive list of current and former satisfied clients
Metrics-intensive analysis that clearly demonstrates your ROI/ROE
Written guarantees that eliminate any risk for the client

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