Canadian HR Reporter

STRATEGIC CAPABILITY NETWORK'S PANEL of thought leaders brings decades of experience from the senior ranks of Canada's business community. eir commentary puts HR management issues into context and looks at the practical implications of proposals and policies. CANADIAN HR REPORTER May 4, 2015 EXECUTIVE SERIES 11 www.scnetwork.ca Edmond Mellina OrganiZational EFFectiVeness July 13, 2015 Join our professional community of Canadian HR & Organizational Leaders: • Connecting @ monthly events • Collaborating with peers • Challenging conventional thinking The Power of Human Capital CULTIVATING LEADERSHIP FOR 35 YEARS Great Leaders GROW www.scnetwork.ca Is the real problem board eff ectiveness? It would it be reasonable to expect that a key role for a company's board is to conscientiously execute a defi ned suc- cession strategy for developing top talent. But that may not necessarily be the reality. Even more alarming is the fact that one in three CEO suc- cessions fail, according to McKin- sey & Company. Having recently listened to Da- vid Gibbons and Paul Gryglewicz on CEO succession planning, I decided to take a deeper look into what appears to be a common in- adequacy at many corporations. Almost one-half of companies with revenue greater than $500 million have no meaningful CEO succession plan in place, accord- ing to the National Association of Corporate Directors. And only 20 per cent of HR executives are sat- isfi ed with their top-management succession processes, according to a Corporate Leadership Coun- cil (CLC) survey of 276 large com- panies last year. Many expert articles can walk you through an eff ective and rig- orous succession strategy to iden- tify top talent and best-fi t CEO candidates. However, I found less information or guidance on how a board can positively implement and operationalize eff ective talent management strategies. Inevitably, I began to wonder if the perceived lack of CEO suc- cession planning pinpoints a far greater problem: the strategic eff ectiveness of the CEO-board relationship. Could there be a systemic problem for some public companies in the dysfunctionality of the board itself? I found a must-read article in the April 2013 Harvard Business Review: "What CEOs Really ink of their Boards" where CEOs re- ported "directors too often put self-interest and self-preservation ahead of shareholder interests." In this same article, William Donaldson, former SEC chairman and Aetna CEO, is quoted as ask- ing, "What's really going on in that boardroom?" A critical component of the Sarbanes-Oxley requirements is boards need to regularly evaluate their overall performance. How- ever, boards also need to assess individual board members. So where and how are the ana- lytics on the effectiveness and performance of the board and di- rectors captured, and who should conduct them? And how robust and eff ective is the board's self- evaluation process? Kassy Corothers' article "A fo- cus on board performance" in the February 2015 edition of Corpo- rate Governance highlights the need for boards to rethink and take a more proactive and fl ex- ible approach to revisiting and renewing board policies, along with an explicit focus on director performance. ere is also a revised 2013 pa- per from the Canadian Coalition for Good Governance (CCGG) that has developed and updated guidelines on "Building High- Performance Boards," with ad- vice on how boards can structure themselves and their policies to promote good governance prac- tices. Interestingly, the focus is on governance and not necessarily on execution or measurable de- liverables by the directors. e reality is boards can make the biggest diff erence for success or disaster for any corporation. If boards fail to carry out best prac- tice strategies for identifying the best-fi t directors for their own team, how can any succession planning be meaningful and ef- fective for the CEO role or top leadership succession planning? Perhaps there is a greater op- portunity in accelerating the ca- pability of a number of boards to execute and operate eff ectively before questioning the eff ective- ness of CEO succession planning. Trish Maguire is a commentator for SCNetwork on leadership in action and founding principal of Synergyx Solutions in Nobleton, Ont., focused on high-potential leadership develop- ment coaching. She has held senior leadership roles in HR and OD in education, manufacturing and entre- preneurial fi rms. She can be reached at synergyx@sympatico.ca. Trish Maguire Leadership In Action Time to turn around ugly stats On my way back to the offi ce after SC- Network's event on CEO succession, I received an email from McKinsey Quarterly with an article on the same topic. e piece started with an ugly sta- tistic: "Two-thirds of U.S. public and private companies still admit that they have no formal CEO succession plan in place, accord- ing to a survey conducted by the National Association of Corpo- rate Directors (NACD) last year." A CHRO recommended CEB's research briefi ng titled "Succes- sion Strategies for the New Work Environment." She added: " e current work environment is changing too fast for traditional succession planning approaches to work eff ectively." Her comment points to a broader problem with succession management — not just CEO successions. irty-eight per cent of HR leaders and 36 per cent of senior leaders who responded in 2013 to CEB's worldwide survey agreed elimination of current succession processes would not change the quality of successors. Yet, 61 per cent of HR leaders indicated succession manage- ment was the top talent priority for their board of directors. CEB found major leadership gaps all over the world — not just in the U.S. ey explain the shock- ing statistics as follows: • Our work environment is chang- ing. • Leadership is also changing. • Current succession management practices, which were designed for the old world, have become highly ineff ective. Strong partnership CEB recommends replacing the traditional "pipeline approach" to succession management with a "portfolio approach." I am assum- ing other experts in the fi eld are advocating diff erent solutions, all with their own merits. Finding the right fi x is obvious- ly important. But another issue might be even more critical: Who should take the lead in reinventing succession management? My mind goes back to SCNet- work's event. Speaker David Gib- bons talked about the importance of a strong partnership between current CEO, CHRO and head of the board of directors' HR com- mittee. I know from experience that unleashing the power of part- nering is critical to succeed with change. I don't think it really matters who takes the lead in establish- ing the partnership — as long as someone does. If the CEO or head of the HR committee hasn't already started the process, then successful, the types of experi- ences that one needs to have to be successful in these roles — these all bundled together are what makes this hard." In terms of best practices, the gold standard today is not neces- sarily a board rubber-stamping a company's job profi le for a CEO, said Gryglewicz. "It's not an exercise of 'We've met on it in the Q2 meeting that we have a succession plan and it's in this binder' … It's actually having the head of HR leading and part- nering with the current CEO and the compensation committee to talk about 'Where are you in your strategic plan today and what is a natural exit period for the CEO?' "And having that conversation, and having the CEO prepared (for that)… that then starts to reinforce the organization de- sign — the depth, the structure is meeting the current needs and the future needs of the organiza- tion," he said. In taking a deep-dive look at where the organization is going, a company may recognize its op- erating model doesn't hold water anymore — there are going to be changes in the organization's structure that are going to impact how the leadership will look and act in the future, he said. "You may be looking for a CEO that needs to be a 'fi x-it' CEO that's not going to make friends when they join but they're ready to make the hard decisions to clean up the organization," said Gryglewicz. "On the other hand, you may fi nd that the organization is in a stable state… you just need a new leader for the organization." Having a strategic off -site meet- ing with the decision-makers is a good forum for the board to dis- cuss diff erent viewpoints around the organization design and the succession plan, he said. "You can use one-on-one, confidential interviews to dis- cuss with each board member that's going to be participating on this — have a discussion with them around their viewpoints on what would make the new CEO successful, what are the key chal- lenges they'll be facing?" he said. After hearing the viewpoints of those directors — and perhaps management as well — you need to synthesize those viewpoints into key themes that you've heard through that process, and bring that forward in a nice, tight sum- mary for the board to do pre-read- ing in advance of that strategic off - site meeting, he said. "That helps to make them aware of the diff erent viewpoints that exist on that board in a very professional forum — that is not a lobbying forum. Where boards can become divided is when that sort of process is skipped and it's just sort of a reaction to the mo- ment, an emotional response." Take deep-dive look at future SUCCESSION < pg. 10 INCREASED > pg. 12

• Cover