CLC What Makes a High Potential

Part of the CHRO Insight SeriesCEB Corporate Leadership Council

CHRO QuarterlySecond Quarter 2014

Enterprise Issue: Executives Diversity and Inclusion Dilemma

Managing Millennials in a Diverse Work Environment

The Why of Gen Y: Understanding and Managing the Millennial

How to Retain Future Female Leaders

Progress in the HR Activities That Matter Most

Voice of the CHRO

Eric Severson Senior Vice President Global Talent Solutions Gap Inc.

Dan Henkle Senior Vice President Global Human Resources Gap Inc.

In This Issue

CHRO Quarterly

2014 CEB. All rights reserved.CLC8340914SYN

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COntEntS

Enterprise Issue: Executives Diversity and Inclusion Dilemma

2

How to Retain Future Female Leaders

5

the Why of Gen Y: Understanding and Managing the Millennial

6

Voice of the CHRO: Interview with Eric Severson and Dan Henkle, Co-Heads of HR at Gap Inc.

10

Progress in the HR Activities that Matter Most

15

DID YOu knOW HIGH POtEntIALS ARE tWICE AS VALuABLE tO YOuR ORGAnIzAtIOn?

tHEY ARE YOuR LEADERS OF tHE FutuRE.

MEEt tHE REAL HIPO

PERFO

RMANCE HIGH AB

ILITY HIGH AS

PIRATIO

N HIGH EN

GAGEM

ENT HIGHCA

NDI

DATE

F

What Makes a High Potential

InFOGRAPHIC OF tHE QuARtER:

1 CHRO Quarterly | Second Quarter 2014

WHAt HIPOs nEED tO SuCCEED

10 YEARS OF DAtA SHOWS tHERE IS A WAY tO CHOOSE tHE RIGHt HIPO

A HIPO employee is a proven high performer with three distinguishing attributes:

1 ASPIRAtIOn To rise to senior roles

2 ABILItY To be effective in more responsible and senior roles

3 EnGAGEMEnt To commit to the organization and remain in challenging roles

COnFIRMAtIOn StREnGtH SuPPORt CHALLEnGE DIRECtIOn

55%WIll lOSE THEIR POTENTIAl OR lEAVE WITHIN FIVE YEARS

THIS IS THE UNCOMFORTABLE TRUTH ABOUT MOST

ONLY

HIGH PERFORMERS IS A HIGH POTENTIAl

ORGANIZATIONS USE HARD ASSESSMENT DATA TO IDENTIFY HIPOs

nOW tHAt YOuVE IDEntIFIED YOuR HIPO, tELL tHEM tHEY ARE A HIPO, AnD GIVE tHEM A StREtCH ROLE

63% 70%89%OF ORGANIZATIONS DO NOT EVEN TELL HIPOs ABOUT THEIR DESIGNATION

MAkE SURE yOUR

HIPO kNOwS THEyRE

IMPORTANT AND THE

COMMITMENTS THIS

ENTAILS

STRENGTHEN

THEIR ASPIRATION;

kNOw wHAT

MOTIVATES THEM

HELP THEM BUILD

THE NETwORkS

THEy NEED FOR

THE FUTURE

PROVIDE A

COMPELLING

CAREER PATH

ENABLE MOVEMENT

TO STRETCH ROLES

AND PROjECTS

CHALLENGE THEIR

ABILITIES TO PUSH

THE COMPANy

FORwARD IN NEw

AND UNFAMILIAR

SITUATIONS

OF ORGANIZATIONS DONT ASk THAT HIPOs COMMIT TO THE ORGANIZATION

OF HIPOs wILL STAy IF THEy GET A CHALLENGING TASk AND UNCONDITIONAL SUPPORT

75%MORE lIKElY TO SUCCEED IN A MORE SENIOR POSITION

HIPOs ARE

HIPOs...

1 In 7

CONFIDENCE

50%OF HR PROFESSIONAlS LACk COnFIDEnCE IN THEIR HIPO PROGRAM

HOWEVER,

HOW DO YOu CHOOSE tHE HIGH POtEntIAL FROM tHIS LInEuP?

DID YOu knOW HIGH POtEntIALS ARE tWICE AS VALuABLE tO YOuR ORGAnIzAtIOn?

tHEY ARE YOuR LEADERS OF tHE FutuRE.

LEARN MORE: Download our free e-book The HR Guide to Identifying High-Potentials or visit the HIPO Employee topic center.


Translating Commitment into Action

Diversity & Inclusion Dilemma

Executives

Most executives want a diverse and inclusive workforce but

have not yet created a path for their teams.

Enterprise Issue

3Executive Commitment Necessary, Not SufficientExecutives clearly recognize that a diverse and inclusive organization is a competitive advantage. In the race to innovate and capture market share across differentand often globalcustomer segments, 8 out of 10 executives strongly support diversity initiatives. And in virtually every investor call and annual report, they cite diversity and inclusion (D&I) as central to ongoing business priorities.

They are right; a truly diverse and inclusive organization boosts the productivity of all employees. Employees in this type of environment work 12% harder, are 19% more likely to stay longer with the organization, and collaborate up to 57% more effectively with peers. Yet, the majority of executives have not succeeded in creating such an environment.

A disconnect exists between executives commitment to D&I and the results theyre achieving. Depending on the country, only one-quarter to one-half of workers say their organization is either diverse or inclusive. Executive teams only too rarely reflect their broader workforce or customer demographics. These problems persist despite a proliferation of policies and programsfrom affinity groups and diversity councils to scorecards and unconscious bias trainingto promote D&I in the workplace.

So why do executives struggle to turn advocacy into D&I outcomes?

Diversity Challenges Are DiverseAlthough the executive suite may set global diversity and inclusion objectives, often these are irrelevant or not achievable for their teams, who face unique market situations, customer bases, and legislative issues. For example:

As a result of European Union mandates, companies in Europe are especially focused on gender and age.

In Australia, D&I concerns center on Aboriginal representation and gender issues.

Post-apartheid rulings remain the dominant influence in South Africa.

Even within countries, the focus varies. Therefore, although nearly all organizations are working toward diversity and inclusion, theres no such thing as a universal diversity challenge.

To make and measure consistent progress, executives need to chart paths leaders can follow from their areas back to enterprise-wide D&I objectives.

What the Best Companies Do Executives who have successfully made consistent enterprise-level progress on diversity and inclusion do two things differently.

First, they drive regional ownership of broad organizational D&I objectives. This approach makes it easier for leaders and managers to address the most pressing D&I issues in their area.

Why You Need Both Diversity and Inclusion for Better Organizational PerformanceOrganizations benefit most from diversity when they have an inclusive workforce. Employees work harder and better together; they also stay longer because leaders and peers value different perspectives and backgrounds. They use that diversity to create better products and services that appeal to new and different customers.

Defining Diversity and InclusionDiversity, n.: The collective mixture of differences and similarities that includes, for example, individual and organizational characteristics, values, beliefs, experiences, backgrounds, preferences, and behaviors.

Inclusion, n.: The achievement of a work environment, in which all individuals are treated fairly and respectfully, have equal access to opportunities and resources, and can contribute fully to the organizations success.

Diversity and Inclusion Boosts ProductivityPercent Improvement in Talent Outcomes

7%

13%19

%

26%

44%

57%

6%

8%12

%

Diverse Organization Inclusive Organization Diverse and Inclusive Organization

Discretionary Effort

Intent to Stay

Team Collaboration


Second, progressive executives understand that creating a diverse and inclusive workforce can feel like an impossible goal. So to motivate leaders to act on objectives, they assess and reward teams for their progress, even if they fall short of end goals.

Get Local Leaders to Own and Address Organization-Wide D&I ChallengesLeaders need guidance to adapt the organizations overall diversity and inclusion objectives to their unique environments. The secret here is to give leadership teams a framework that weaves diversity into core processes. Leaders can use the framework to benchmark D&I in their local operations and identify their opportunities for improvement.

UK-based business services firm G4S created a D&I assessment tool for business leaders. To select what the tool would evaluate, executives and HR directors identified nine common business and HR processes that leaders control or influence, including strategy, training, marketing, and community involvement. As one leader put it, In a company as big and complex as G4S, the tool is intended to help leaders see the D&I vision and take steps to implement it in their existing business processes in easily manageable and measurable ways.

Leaders compare these nine processes in their own operations to G4Ss five stages of D&I progression. The criteria of success at each level are listed in the assessment to guide leaders in drafting action plans that transform D&I into a true source of competitive differentiation in critical business processes.

The assessment scale gives employees a common D&I vocabulary and a way to hold leaders accountable for progress. To make D&I locally relevant, G4S defines success based on local employees perceptions of the progress made by business units.

To achieve an overall rating of embedding or better, business leaders must gather feedback from a wide range of stakeholders on the businesss D&I progress. Some organizations are also tying rewards to the execution of D&I actions to ensure leaders are making progress.

Reward Progress, Not Just OutcomesCompeting strategic initiativesand their more immediate financial gainscan displace D&I goals, which may seem less urgent or harder to achieve. So motivating leaders to act on D&I objectives requires holding leaders accountable for and rewarding progress.

This is exactly what aerospace defense company BAE Systems has done. Business leaders at BAE determine their five-year vision for D&I in their part of the business. Together with HR, they set aggressive, but realistic, one-year objectives and milestones within the year to mark their progress.

Progress against these interim D&I

objectives is recognized and financially rewarded. Soft accountability is provided mainly in the form of CEO involvement. In quarterly meetings with their CEO, leaders give an update on their plans and milestones. Hard accountability is created through an annual D&I progress scorecard. Scorecard results inform bonus recommendations, and a percentage of each leaders year-end bonus is specifically linked back to whether theyve achieved their one-year objectives and in-year milestones.

What CHROs Should Be Asking NowAs the adage goes, what gets measured gets managed. However, when it comes to D&I, its easy for executives and leaders to say D&I is simply too complex to measure on an organizational level. But decentralizing ownership, setting the right objectives, and creating hard and soft accountability for progress makes it possible.

Here are the key questions heads of HR should be discussing with their peers across the executive suite to make real progress toward a diverse and inclusive organization:

Do we believe leaders across the organization are committed to promoting diversity and inclusion?

Do leaders know the specific actions they need to take in the next year to progress toward long-term organizational D&I objectives?

How should we structure leaders objectives to make D&I efforts crucial to their success?

How do we reward leaders for making progress on diversity and inclusion?

Learn More About Solving the D&I Dilemma Highlight D&I-driven risks and opportunities more effectively

in your next board meeting by reading Three Critical Talent Conversations for Every Board of Directors.

See all nine business and HR processes that leaders in G4S can assess for D&I in their operations in our best practice profile.

Hold leaders accountable for progress against diversity and inclusion objectives by applying BAE Systems best practice.

G4Ss Five Levels of D&I Progression

1. Starting: Have not previously but are just starting to focus in this area

2. Complying: Putting effort into ensuring everyone has an equal opportunity and processes are fair and equitable

3. Embedding: Understanding the importance of D&I policy and are working to embed it in all of their processes

4. Managing: Managing D&I at a level which differentiates you positively from your competitors

5. Leading: D&I is a key differentiator in the industry and in the wider community

This article is based on CEB research, Creating Competitive Advantage through Workforce Diversity.

5Strategy& (formerly Booz & Company) sought to increase gender diversity by moving from broad-based corporate policies to a suite of targeted interventions to address the career events that drive away talented women. Look at their solution as a model for your own.For Strategy&, a more diverse talent pool means it can channel more skills, expertise, and experience into better advisory service to their clients. As a result, diversity has become a key component of the organizations business strategy and People Value Proposition to attract talent.

However, Strategy& left service capability on the tableand consequently lost revenueby having too few women rising to and assuming leadership positions. HR leaders noticed that in addition to a gender imbalance in key positions, engagement scores for women were 10% below their male colleagues.

To reverse these trends, Strategy&s HR team pioneered a D&I strategy based on the fixing broken windows theory, which claims that small acts of crime (such as breaking windows), if ignored, will escalate to more serious crime. Implementing a series of targeted interventions before employees start thinking of leaving or become disengagedfixing the broken windows and placing these interventions throughout an employees career, Strategy& aimed to solve its gender diversity challenge at all levels.

With no single issue causing the gender gap, Strategy& created four separate interventions, or programs. Each one is designed to address a specific, common pain point, such as returning to work after maternity leave or having too few visible role models. Together, these discrete programs create a complete set of interventions, resulting in a more consistent pattern of engagement with female employees. Now, when there is an impending pain point Strategy& already has a process to sustain engagement.

Using these interventions, Strategy& expects to equalize attrition and engagement levels. There is already near universal adoption, and senior leaders anticipate revenue gains. Our research shows that when organizations retain a diverse talent pool they can develop a leadership bench that is 30% stronger.

Follow these seven steps to create a stronger, more gender-diverse leadership bench:

1. Identify gender discrepancies in key metrics. Engagement and female representation by leadership level are often good places to start.

2. Isolate when and where career pain points arise for your rising female leaders, and interview senior female leaders to uncover hidden pain points.

3. Create an easy to implement stand-alone fix for each pain point.

4. Start early. Ensure at least one retention intervention addresses a pain point women encounter as they are starting their careers; dont wait until theyre identified as HIPOs.

5. Specify the gains to your business and the individual employee by clearly articulating the overall value of diversity to ensure the program is supported by all parties, not just leadership.

6. Market the benefits of the targeted programs through e-mails as well as personal stories from senior female leaders to increase the perceived value and accessibility of the programs.

7. Calculate the overall return to the business by measuring not just retention and engagement of female employees, but also career satisfaction and internal promotion metrics.

How to Retain Future Female LeadersFrom Best Practice to Your Practice

The broken windows approach is based on the broken windows theory of crime prevention, which asserts that small acts of crimelittering, graffiti, broken windowswill escalate to more serious crimes if ignored. A successful strategy to prevent crime, therefore, is to fix problems when they are small to prevent further or recurrent damage.

Catherine M. Coles and George Kelling, Fixing Broken Windows: Restoring Order and Reducing Crime in Communities, New York: TOUCHSTONE, 1996.

Organizations Have Failed to Close the Gender Leadership Gap Fortune 500 Executive Officer Positions Held by Women

13.5% 14.4% 14.1% 14.3% 14.6%

2009 2010 2011 2012 2013

Source: Statistical Overview of Women in the Workplace, Catalyst, March 2014, http://www.catalyst.org/knowledge/statistical-overview-women-workplace.


Understanding and Managing the Millennial

Gen YWhy

ofThe

what HR executives need to know, from attracting millennial

job candidates to rewarding millennial employees

Enterprise Issue

7Build each map for a single critical role to allow employees to more easily narrow career options.

Frame connector roles as categories and connect them laterally to demonstrate that a linear path will not provide all the experiences needed for the critical role.

Ensure each map includes entry-level positions, so employees can see the complete journey.

Elements of a Career MapIllustrative

Connector Roles

Entry Role

Critical Role

As 25% of the global population, millennialspeople born between 1980 and the early 2000sare likely the fastest growing employee segment at your organization and may already be the largest.1 Integrating any new generation into the workplace is challenging, and millennials are no exception. The harsh economic climate of recent years and the explosion of online social networking platforms have shaped a generation that is reluctant to invest but willing to share.

To transform millennials into high-performing employees, heads of HR and their teams need answers to two important questions:

What are the most important differences between millennials and other generations at work?

How should we tailor talent management strategies for millennials?

Managing Millennials as a Critical Talent SegmentMillennials personal valueshappiness, passion, diversity, security, and experiencesdiffer from those of their more experienced peersjustice, integrity, friendship, and family.2 At work, these values have translated into a more aggressive pursuit of new opportunities that organizations need to manage. However, some work preferences cross generations. For example, compensation and worklife balance are the top drivers of attraction regardless of age.

The best companies look beyond attention-grabbing headlines about millennials to identify meaningful workplace differences that are supported by data. They adjust and reinvent their talent management strategies for millennials holistically, reexamining each critical step of the employee life cycle: attraction, engagement, development, performance management, and rewards. Here weve developed a five-step plan based on this life cycle for organizations on the journey to transform millennials into high-performing employees.

1. To Attract Millennial Job Candidates, Highlight the Opportunity for Multiple Careers

HR executives tailoring their employment value proposition to attract top millennial talent need to provide superior career opportunities. Millennials are 1.5 times more likely than other job candidates to list future career opportunity as a top attribute they want in a new job.

Millennials are also still figuring out what opportunities they want, which complicates the challenge of crafting appealing career options. In fact, more than one-quarter of millennial workers left their employer last year to change careers or industries, relocate, or go back to school.

However, HR leaders can tap into these millennial desires by highlighting the opportunity to have multiple careers at their organization. HR can use career maps to illustrate potential career paths. Show millennial candidates how entry-level positions can lead to a variety of connector roles, or lateral moves, that provide opportunities to experience different business units or functions. Also highlight the value of broad exposure, particularly for landing more senior positions. The connector roles cause career maps to look more like diamonds that start from a single position with a breadth of opportunities to explore that all lead to a specific senior role.

Career maps must be easy to find and understand for millennial job candidates, who spend less than half as much time learning about potential employers before deciding whether to apply.3 Broadcast career maps inside the organization too; even your happy millennial workers may be planning to leave.

Among departing employees, millennials are 18% more likely to say they were satisfied in their current role, but left for a better opportunity.4 For some, this could be the result of limited knowledge about internal opportunities. Others depart because they feel their personal career maps were an unfulfilled promise. Its critical to then surface and address the factors influencing millennial engagement.

2

3

1

Source: National Grid; CEB analysis.

1 Engaging Tomorrows Consumer, World Economic Forum, January 2013, http://www3.weforum.org/docs/WEF_RC_EngagingTomorrowsConsumer_Report_2013.pdf.

2 Inside the Millennial Mind, CEB Iconoculture, 5 March 14, http://www.executiveboard.com/iconoculture-blog/inside-the-millennial-mind-2/.

3 CEB 2014 Employment Branding Effectiveness Survey.4 CEB 2014 Departure View Exit Survey.


Common Approach Best Practice Approach

Type of Shadowing Opportunity

Role ShadowingObserve how a particular person performs his or her role in the organization.

Workflow ShadowingObserve a workflow to understand processes and individuals roles in them.

Purpose of Shadow

Broad ExposureFocus on gaining exposure to different parts of the business.

Specific ObjectivesSelect a shadow opportunity that supports specific collaboration and development objectives.

Follow-Up Employee ReflectionReflect on the experience and how to apply lessons learned.

Two-Way Knowledge Sharing and DisseminationMeet with the shadowing host to clarify lessons learned and next steps; share key takeaways with the broader team.

2. Increase Engagement by Rebuilding Millennial Workers Networks

Often in entry-level positions with limited advancement opportunities, many millennial workers are not engaged. Few millennials (14%) put forth high levels of discretionary effort at work and just 26% have high levels of intent to stay. Both these numbers are about one-third less than the global averages for all other employees, which suggests unique engagement challenges for this workforce segment.

The pursuit of better opportunities makes millennials less settled in their jobs than their peers are. However, organizational change contributes a lot to their disengagement too. Millennials are more likely than other workers to expect a major organizational change in the next six months. In particular, relative to other employees millennials are:

1.8 times more likely to expect a transfer to an entirely new team,

1.33 times more likely to expect significant change in skill requirements, and

1.24 times more likely to expect a significant change in job responsibilities.

To boost their engagement, get millennials out of their chairs and actively building and adapting their networks. Consider guiding managers to help their millennial workers identify the right colleagues, across projects and skill sets, to quickly build an engaging network.

Another tactic involves getting millennials to shadow the processes they support. Unlike traditional job shadowing, which

involves following one person across all the tasks they perform, workflow shadowing involves understanding the challenges and interdependencies of one entire process as it moves across the organization. Through workflow shadowing, millennials learn how to better collaborate and achieve overall process objectives while building their networks.

However, HR leaders need to complement engagement initiatives with targeted development to prepare for the one change listed above that millennials are potentially the least prepared fora change in skills.

3. Develop Millennials Through Continuous Network Learning5

Compared to their more experienced colleagues, millennial employees are on average 8% less confident in their ability to learn and apply the new skills they need.

Fortunately, they do know they need to always be learning; one in four millennials recognize continuous learning as a top skill to have. And interestingly, millennials are not more likely to find virtual learning (online and virtual classes and e-learning) effective at helping them develop new skills compared to other employees. But they are more receptive to network learninglearning that is relationship-based, reciprocal, and work-relevant. Millennials are 18% more likely to find this approach effective.

Speed feedback sessions are an effective way to boost network learning. They can be used in formal and informal training. Provide employees with a simple feedback model (such as AID: action, impact, and desired outcome) and create time for them to prepare prior to feedback sessions to ensure that they give and receive honest and actionable feedback from each other. Its important to note though that while millennials are very receptive to learning from peers, they prefer getting performance feedback directly from managers.

4. Give Future-Focused Performance Feedback

Many millennials want to build a productive relationship with their managers. They are 17% more likely to ask a manager for feedback on their work than their peers.6 And they are eager to get this feedback in part to realize their career goals. Three in ten millennials expect promotions in the next two years, and 7 in 10 expect a promotion within four years. Ambitious? Perhaps, but these expectations might not be unreasonable for this employee segment, which tends to occupy more junior roles, especially if they have the right support.

Source: Webster Bank; CEB analysis.

Building Networks: The Advantages of Workflow Shadowing

Source: CEB analysis.

Millennial Disengagement in the Workforce: Q1 2014Percentage of Employees

High Intent to Stay High Discretionary Effort

22%41%

14%26%

Millennial Employees

All Other Employees


Millennials Expectations for PromotionPercentage of Employees

Within 2 Years

Within 5 Years

80%54%

14%

30%

Millennial EmployeesAll Other Employees

5 Data in this section is from the CEB 2012 High Performance Survey.6 CEB 2009 On-the-Job learning Survey.

9However, most millennials have a ways to go. Just 11% are enterprise contributors. As new entrants to the workforce, they need feedback to develop their individual task and network performance. Given that millennials are more likely to ask for feedback, managers should not wait until formal annual reviews to provide it. Encourage managers to embrace the opportunity to give millennials feedback more often and in a way that drives enterprise contribution.

The first step is to give ongoing, future-focused feedback on individual task performance. Merge discussion of past performance with feedback on the capabilities an employee needs to demonstrate in the future to achieve personal and organizational success. This approach increases performance and shows millennials that acting on feedback is critical to moving upward in the organization.

The second step is to boost network performance by clarifying future opportunities for employees to have a broader impact on the business. For example, with numerous and even competing goals, managers should teach millennial employees how to prioritize their own work based on overall business and team impact.

The more accurate and actionable the feedback millennials receive through these ongoing performance conversations, the more their performance will improve. As an added benefit, managers who do this are also better managing millennial employees merit pay expectations.

5. Calibrate Expectations Before Rewarding Millennial Workers

Compared to other employees, a higher percentage of millennials expect their compensation to grow this year, and they expect it to grow quickly. On average they expect merit pay increases of 6.9%, compared to more modest expectations of a 3.6% increase among their peers.

Organizations have to investigate their millennials pay expectations to determine why expectations are so high. Two particular factors could be inflating millennials hopes for greater pay. These heightened expectations could be the result of the following:

Due to their short tenure in the workforce, they are less familiar with how pay is determined. They may mistakenly believe companies tie pay to the cost of living, rather than the cost of labor.

Misunderstanding pay-for-performance, millennials either think they are high performers or they assume that the business is doing well enough to provide large increases.

Implement a pay transparency strategy to dispel these beliefs. First, make sure managers are defining true high performance (i.e., enterprise contribution) and communicating millennials performance relative to that standard.

Second, provide information about the organizations compensation in a way that is easy to find and understand, such as regular updates on the company intranet portal through internal blog posts or an FAQ document.

Third, enlist senior leaders to provide candid information about organizational performance and its potential impact on compensation. Senior leaders are the best source of information for overall corporate performance and should be particularly effective at setting expectations for millennials who have more confidence in senior leaders than their peers.

What Should CHROs Be Doing Now?Progressive HR executives are making more and more talent investments based on millennials needs and they dont regret it. The whole workforce is likely to benefit from better career pathing and performance management. Just as importantly, these heads of HR are moving their organizations ahead of the competition for talent, as millennials become an increasingly large and critical workforce segment.

Learn More About Managing a Millennial Workforce

Read our best practices for creating career maps and workflow shadowing opportunities at your organization.

Equip managers with easy-to-use resources to have future-focused performance review conversations; evaluate the impact of these conversations with the Performance Review Effectiveness Diagnostic.

Contact your account manager to access best practices from CEB Compensation on Pay for Performance Communication Recruiter Training and CEB Learning & Development on Speed Feedback Sessions.


Average Expected Merit Increase this Year in Current Position

6.9%

3.6%

Millennial Employees

All Other Employees

Diff

eren

ce f

rom

All

H

R E

mp

loye

es

How Different Are Your HR Millennials?

(7%) More Likely

21% Higher(9%) Lower

(14%) Lower

Discretionary Effort

Actively Searching for

New RolesIntent to Stay

Confidence in Leadership

Unless otherwise noted the data for this article was provided by CEBs Q1 2014 Global Labor Market Survey.


Voice of the

CHRO

Every quarter we interview a chief HR executive to gain their perspective on issues. This quarter we spoke with Eric Severson and Dan Henkle about Gap Inc.s strategy for managing a large, millennial workforce.

11

You both recently became the co-leaders of the Global HR team at Gap Inc. Can you talk about the opportunity and business need at Gap Inc. that made a dual leadership model the right structure for the business?

DAn: Over the past ten years, under a single leader structure the Gap Inc. HR function had evolved. A function, which had solely focused on HR, had a number of other functions added to the portfolio. To effectively manage this portfolio the business created a governance model where Eric and I ended up being the co-chairs of the HR leadership team, under a single leader, for about a year before we formally took on co-leadership of HR. Eric was bringing the voice of the center to the table. I was the brand voice at the table.

By having the opportunity to really test this model, we were able to see that it actually ran quite well. In September of 2013, we decided to formalize this structure, and I stepped out of my role of leading HR and Communications at Old Navy to co-lead HR with a focus on our brands.

ERIC: As additional context, at the beginning of 2012 the corporation decided to restructure into a Global Brands model. We went from an operating model focused on channels and regionsfor example, we had a separate online division that had all of our online brand businesses in itto a model where all expressions of every brand were united in one business unit. And, one of the things our CEO and leadership team discovered is that we needed to be even more agile and have even better cooperation and collaboration between the global operating units and the leveraged center.

As a result, in the summer of last year we conducted an enterprise-wide HR assessment with CEO support to determine what the businesss needs were, what they were looking for from HR, what they needed to deliver on their global business priorities, and how we were meeting those needs. From that it became clear our business wanted HR to be

even faster and more agile in service delivery and responding to emerging business needs. So part of the decision to formalize the co-chair model was that we were gaining traction and becoming more agile by literally connecting business HR with the leveraged HR center.

It seems like the co-leadership model explicitly tackles that perennial globallocal, scalablecustom paradox in HR.

ERIC: You got it. We say its a paradox too, because two in this role are better at solving that problem than one in this role. One person has to stay very high level, but two people can each fly high and swoop down when needed to take advantage of opportunities.

Theres also an important political element to it. In an organization with a center and operating units, historically theres always a little bit of an us versus them mentality and sometimes the businesses compete with each other. If you have six different businesses, they all want something different. And the center wants something different, so you have seven perspectives.

But with this model, you can more easily get to one perspective on whats going to benefit the brands and the businesses. Were only trying to align two perspectives, the center and the brands. This speeds up the decision process.

DAn: In attacking any sort of issue now, were saying, How do you set this up in a way that you have some support from the centerand also brand input? If I reflect back on how we used to work youd have programs crafted mostly in the center with varying levels of brand input. And then you would unveil the final product to the brands and often customers would say, What are you talking about? That doesnt totally fit my needs. So while in some respects it sounds like it might be more complicated to have that combination up front, it makes it much, much faster because you are designing something that actually is going to stand the test of time and make sense for

Eric Severson, Senior Vice President of Global Talent Solutions, Gap Inc.

Eric is responsible for Gap Inc.s corporate HR services, including talent management and recruiting, employee relations, performance and recognition, technology and operations, and China and Gap Inc.s Growth, Innovation and Digital division.

Dan and Eric report to the chairman and CEO of Gap Inc. Together they lead HR strategies for Gap Inc.s 136,000 employees around the world and are the key architects of the companys HR operating model, which has improved alignment with the needs of each of Gap Inc.s brands and functions.Dan Henkle, Senior Vice President of

Global Human Resources, Gap Inc.

In his more than 21-year career with Gap Inc., Dan has held a number of key roles and currently is responsible for leading HR for the companys Gap, Banana Republic, Old Navy, and corporate divisions.


business partners. About every single thing weve done over the past six months is with that construct in mind.

What early successes are you seeing with this co-leadership model?

ERIC: Three of the most strategically valuable and important talent-related initiatives weve undertaken in the last ten years have been in the last six months. We would postulate this has much to do with an operating model and a leadership structure that enables agility and responsiveness to opportunity. Two of these three initiatives were not part of our objectives for the year. They were emergent business opportunities we jumped on.

Number one, which was not in our goals but aligned with our companys core values, to do more than sell clothes, was our decision to raise our minimum wage in February. Number two, also not in our goals, was achieving our first-ever consistent executive assessment protocol. That emerged as an idea in a board meeting in August. We started implementing it and had the brand presidents assessed by the November board meeting and then had their successors assessed by the next board meeting in February. Then number three is the one thing that was in our goals. We eliminated performance reviews and ratings and we put in place a performance system based on neuroscience mind-set psychology, known as GPSGrow. Perform. Succeed.

These are examples of the speed and capacity were able to handle because we divide and conquer. Dan handled the leadership on the minimum wage, and I did the executive assessments, both of which were overlapping and happening at the same time as the performance management redesign, which we did together.

For an aspiring HR leader who wants to step into that top chair, what would you say were the one or two most important personal development experiences for each of you?

DAn: For me personally, there are three major experiences Im drawing on in this role. One was being the leader of two of our brand HR teams, Gap and Old Navy. I also had an experience in the center, running all the center functions for a period time. Then I had a completely different assignment running our social responsibility division, where I had team members in 25 countries throughout the world and got to deep dive on understanding global labor and supply chain issues as well as cross-cultural communication

I would also add that our former HR leader had been good about providing us with exposure over the years to the board of directors. We both had quite a deep relationship with our board heading into this assignment, so that certainly was helpful. Its also important to note that I sat in Erics chair for a number of years, and Eric had run HR for several of our brand and function divisions as well. So we have this unique situation where we have walked in each others shoes.

ERIC: We both really think that the profile of a successful HR professional and an HR leader in the 21st century requires being a utility player. Its the ability to morph your focus and handle almost anything thats thrown at you. I think those people who are able to be challenged in many different things and build that muscle to look at almost any problem and quickly size it up and just jump on itthat skill is increasingly valuable. Our careers across Gap Inc. gave us both the opportunity to really build that skill.

The market shifts so quickly and were continuously evolving our work structure. Having lots of different experiences gets you comfortable with the speed of change. But as an HR professional if all you ever know how to do is one very narrow aspect of compensation or communication or whatever, youre really limiting your opportunity in the future.

Shifting gears a little bit to talk about diversity and inclusion, and millennialshow do you incorporate these issues into your vision and strategy for a high-performing workforce?

DAn: One of the things weve been asking ourselves is What is our talent brand and how are we depicting that to potential candidates were bringing into the system? When I was in my previous role with Old Navy, we used millennials as one of the filters for every single aspect of what we didand this is true across our brandswhether its how we attract talent, how we onboard talent, or how we reward talent. If you really use millennials as a filter, it just shapes the way that youre finding things out.

ERIC: The two are closely related for usmillennials and diversity. Our workforce is 74% female. And, whereas, the general populations only about a third millennial, our population is majority millennial. So weve been focused for years on adapting our approaches and our policies and our practices to the unique profile of this workforce. The things we choose to do are influenced by our extensive research into and constant awareness of millennials and their preferences.

For example, we recently redesigned our performance management systemto accommodate millennials need for frequent feedback. The new system involves having conversations minimally 12 times a year about performance against goals. That frequency and having brain-friendly feedback interactions are the foundation of a growth mind-set, which works for everybody but is even more critically

We both really think that the profile of a successful HR professional and an HR leader in the 21st century requires being a utility player.

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important for millennials who have been reared in an environment thats been completely digitized. They are used to continuous feedback about everything. And then typically they come into a workplace where in a formal, traditional performance management system nobody tells them how theyre doing until the end of the year.

So, in fact, we named the redesign Grow. Perform. Succeed. (GPS)to be like the global positioning system, a tool thats continuously telling you where you are relative to your goal. It doesnt wait until after you get there to tell you you missedyou took a wrong turn. It tells you all along the way, and this is how young people navigate the world.

Our decision to raise our minimum wage was an important one for us as a company. We saw it as the right thing to do for both employees and the business. The majority of our store employees are millennials. This decision has a very significant effect on our field teams, with more than 65,000 of our employees benefitting across the United States from the wage increase. And the benefit is not just for our workforce, but for our customers as well. Millennials are substantially more interested in corporate social responsibility and the issues of fairness and equality. So that decision on minimum wage, our research would show, resonates particularly strongly with millennials.

to that point, how has thinking about millennials from a customer perspective at Gap Inc. influenced your approach to managing them in the workforce?

ERIC: Weve actually shifted investments around to create a talent branding function. We just hired a marketer to be our director of External Talent Branding and were looking to take the most cutting-edge approaches in marketing to consumers and apply them to the consumers of our talent brand, our employees internally and candidates and applicants externally.

The first thing to come out of this effort was a collaboration between HR and Communications, a campaign called, Lets Do More. It was built by Communications to launch the minimum wage communications and instead of doing things the old way with press releases and posting stuff on websites, its a social media campaign built on a reference to a phrase from our co-founder Don Fisher, Lets do more than sell clothes, which has evolved into our brand promise at Gap, Inc.

Millennials dont pay attention to what we would have done a few years ago and whats traditional. Theyre not going to read a press release, but they will respond to a social networking posting on a microsite. And so our investment in this talent branding team is about taking people who are experts on how millennials communicate and translating our talent brand through those media.

thinking about the future of HR in the next few years, what issues are you most interested in discussing with other heads of HR?

DAn: Im constantly thinking about what we could be doing or what we could stop doing. Im particularly interested in getting leaders to look at their jobs increasingly as people leaders and making sure HR is not doing what is a core part of their job as leaders. Weve taken every aspect of HR and said, What would a best-in-class function look like? At the same time Id like leaders to view themselves as the chief recruiting officer, chief talent management officer, and so on. This is something we have to constantly grapple with in HR as the function becomes stronger.

ERIC: For me its about agility and responsiveness and enabling that. How do you create the most possible value for the business with the fewest resources in the shortest amount of time? And for us, were both super enthusiastic about the value of having the right governance model within HR to unleash that. It illustrates the paradox of slowing down to speed up. By slowing down for a few minutes to put in place a governance model that ensured equal representation of all voices across the businesses and the corporate center and by deliberately pushing down decision making to the lowest level possible, we dramatically sped up our operating model. As we continue to evolve, I think the three most important attributes of our culture will become speed, speed, and speed. And I dont think were alone in that.

Im constantly thinking about what we could be doing or what we could stop doing. Im particularly interested in getting leaders to look at their jobs increasingly as people leaders and making sure HR is not doing what is a core part of their job as leaders.

HR Blueprints from CEB are custom workbooks that include templates, best practices, and project management aides tailored to your organizations multiple maturity levels in different areas. The platform guides you to select resources based on your companys current practices and desired improvements.

Included in membership, the beta release of HR Blueprints is currently available for two topics: succession management and leadership development. Additional topic releases are planned throughout 2014.

learn more. ceburl.com/Blueprints-HR

Your Work, Powered by CEBCreate a blueprint to advance your functions maturity and effectiveness at specific HR processes.

Execute key Processes Advance toward Best Practices Enable Staff to take Action

Blueprints for succession management and leadership development are available now.

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we integrated CEBs Functional Maturity Diagnostic into our functions strategic planning process this year. The results drove consensus around next years plans by not only confirming our current priorities, but also revealing new priorities that we had not yet fully recognized.

Chief Human Resource Officer Fortune 500 Oil and Gas Company

A Revised Assessment Strategy

In developing our new Functional Maturity Diagnostic, we defined measures of maturity along three dimensions to better guide members transformation programs:

Maturity: Measured on a scale ranging from 1 (low) to 5 (high), maturity measures how advanced an organizations development is in a functional activity (e.g., employee engagement, succession management) relative to CEBs best practice research.

Importance: We capture the relative importance of each functional activity to the overall effectiveness of a function in meeting business objectives, on a scale from 1 (unimportant) to 5 (critical).

Activity Priority Index (API): API is the average gap between importance and maturity. This metric is computed for each activity and then weighted by its average importance. The resulting distribution identifies the activities that should be prioritized for improving maturity.

CEBs Functional Maturity Diagnostic doesnt just deliver a maturity score, it also provides a clear path to maturity and leads to practical tools and resources to advance from where you are. Furthermore, it doesnt presuppose that to advance in maturity you need to spend more or do more. In many cases, higher levels of maturity are about doing things differently, replacing some activities with others or stopping activities altogether.

Learn More About CEBs Functional Maturity Diagnostic or Request a Demonstration:

Contact your account manager or e-mail [email protected].

Visit clc.executiveboard.com.

The HR Functional Maturity Diagnostic is included in your CEB Corporate Leadership Council membership; no additional fee is required for this resource.

Progress in the HR Activities That Matter MostIntroducing CEBs Functional Maturity DiagnosticTake Your HR Team to the Next Level

Its a tough time to be a talent manager. According to our research, 71% of business executives expect revenue pressures to increase, and 67% expect cost pressures to intensify as well. To improve results while cutting costs, two-thirds of CEOs believe they should focus more on talent development and leadership pipelines. Furthermore, 89% say they plan to increase investment in creating and fostering a skilled workforce over the next three years.

Given the elevation of talent as a business priority, it seems like HRs time to shine. However, most organizations dont give their HR function stellar reviews (fewer than one in five rate it as effective), and 66% of HR executives are looking at flat or declining budgets.

Seeking to improve functional effectiveness, HR leaders have historically pursued one of two routes:

Improve the strategic planning process. Traditionally strategic planning has been difficult for HR. More than 4 in 10 HR leaders rate their functions as ineffective at this important activity. Even the best-laid plans dont remain relevant for longdown from 12 months to as little as two months in turbulent times.

Transform the function for greater business impact. Restructuring has been a popular approach; 81% of HR functions have recently undergone a redesign or are in the midst of one. Unfortunately, organizational redesign activities today arent making much difference. Although 90% of organizations are hitting their cost-cutting targets after a redesign, only 60% are achieving the anticipated performance results even a year later.

Typical Maturity Assessment Techniques

To address the shortcomings of the approaches above, HR leaders have turned to various quality management methodologies, such as:

Six Sigma with its focus on reducing waste and variability ISO 9001 and its standards for building and maintaining

quality process CMMI appraisal on a multilevel maturity scale with a focus on

continuous improvement

Such assessments, however, tend not to be customizable to an organization, and their results lack concrete and long-range guidance for advancing in maturity.


WHERE WILL YOU JOIN YOUR PEERS IN 2014?

2014 CEB HR Practice Meeting Dates

CEB Summit for HR Executives 2014

3 April Sydney17 September Chicago78 October London

Leading the Performance transformation: Strategies for Leaders to unlock Enterprise Contribution

Executive Retreat1

15 October Chicago13 November New york18 November Sydney19 November Palo Alto, CaliforniaNovember SingaporeNovember Hong kong3 December Toronto

Executive Briefing2

13 November Melbourne, Australia

1 Chief human resources officers or heads of HR only.

2 CHROs or heads of HR and direct their reports; limit of two per meeting.

3 Part of a two-day event that includes both program-specific Executive Retreats and the pan-HR Summit.

Note: Dates and locations are subject to change.

nORtH AMERICAAtlantaBostonChicagoColumbusDallasMexico CityMonterreyNew yorkOttawaPalo AltoSan FranciscoSeattleTorontowashington, DC

SOutH AMERICABogotSantiagoSo Paulo

AFRICAjohannesburg

ASIABangkokDubaiHong kongjakartakuala LumpurManilaSingapore

EuROPEDublinLondonMadridMunich

AuStRALIA & nEW zEALAnDAucklandMelbournePerthSydney

unlocking HR Business Partner Performance in the new Work Environment

Executive Retreat1

20 May Dublin (Half day)24 April kuala Lumpur

Executive Briefing2

9 April Toronto12 june washington, DC (Public

sector only; half day)

Succession Strategies for the new Work Environment

Executive Briefing2

9 April Santiago, Chile (Half day)15 May Ottawa, Canada (Public

sector only; half day)21 May Mexico City (Half day)13 August So Paulo (Half day)

the Performance transformation: Strategies to Build a Workforce of Enterprise Contributors

Executive Retreat1

13 May Chicago11 june New york24 june San Franciscojune Singapore16 july Toronto30 july SydneySeptember Hong kong21 October johannesburgOctober jakarta, Indonesia6 November Munich

Executive Briefing2

31 july Sydney 6 August Chicago12 August Auckland, New Zealand20 August New york27 August Palo Alto, California27 August Monterrey, Mexico

(Half day)August Perth, Australia10 September Toronto17 September Bogot, Columbia

(Half day)78 October London3

23 October Madrid (Half day)28 October London5 November Seattle

2014 CEB HR PRACTICE MEETING DESCRIPTIONS

Succession Strategies for the New Work Environment April 2014

Nearly 70% of organizations report that the demands of an increasingly complex and unpredictable business environment have raised performance expectations for their leaders, but few rising leaders can meet these expectations. Most organizations focus on implementing and improving traditional succession management strategies that promote leadership continuity and drive toward future role readiness. The best organizations are fundamentally rethinking their succession approach and shifting from role readiness to leadership readiness.

Unlocking HR Business Partner Performance in the New Work Environment JanuaryMay 2014

HRBPs are the key differentiator in HR support for line leaders; however, fewer than one in five HRBPs are seen as strategically effective. learn how the most progressive organizations have evolved the HRBP role to meet the changing demands of the business. Best practices and discussion will focus on how to structure the HRBP role and remove four organizational barriers, enabling successful HR delivery.

CEB Summit for HR Executives 20141 SeptemberOctober 2014

The Summit represents a unique opportunity to understand the latest trends in the HR function, network with a broader peer group in addition to your functional peers, and get insight on the newest innovative approaches leading companies are using to take HR into the future.

The Summit will open with details on the five critical priorities for HR organizations in the new work environment followed by a selection of workshops on key insights and tools to meet these priorities. The Summit is timed for strategic planning season to allow you to confirm your 2015 priorities and plan and test strategies with peers across the HR leadership team, both within and outside your organization.

The Performance Transformation: Strategies to Build a Workforce ofEnterprise Contributors

October 2014March 2015

Performance expectations for employees have changed; employees must not only do their individual tasks well but also contribute more broadly to the performance of their peers and the organization. To drive these new behaviors, organizations have implemented new performance management strategies, reward and recognition programs, and collaboration MBOs. However, few of these efforts have actually worked. Almost 75% of employees indicate that the decisions their companies have made to try to improve employee performance have actually made it harder for employees to perform.

leading organizations use the performance management system to identify high-performing employees, not to drive employee performance. learn how they drive performance by making it easier for employees to become enterprise contributors through strategies that include redefining workflows, structures, roles, and manager expectations.

Leading the Performance Transformation: Strategies forLeaders to Unlock Enterprise Contribution

October 2014March 2015

leaders struggle to create the right conditions for their teams to effectively innovate and collaborate across organizational boundaries. Furthermore, leaders themselves often struggle to work productively with their peers and to balance their own objectives with enterprise goals.

learn the new competency profile and strategies of the leaders who foster enterprise contribution among their workforce and who also work effectively with their peers. Based on this profile, learn how leading HR executives design jobs, career paths, accountability, and development to improve leader effectiveness.

1 CEB's HR practice member organizations are welcome to send the chief human resources officer (or equivalent) and/or the following leaders: head of learning and Development, Recruiting, Talent Management, Compensation, Benefits, and/or Total Rewards.

How to Attend? Contact your account manager or e-mail [email protected].

THE CHRO InSIGHt SERIES

CEB CORPORAtE LEADERSHIP COunCIL

www.clc.executiveboard.com

+1-571-303-3000 (North America)

+44-(0)20-7632-6000 (Europe, Middle East, and Africa)

+61-(0)2-9321-7500 (AsiaPacific)

2014 CEB. All rights reserved.CLC8340914SYN

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CLC What Makes a High Potential

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Transcript of CLC What Makes a High Potential