The Challenges of Human Asset Un-Sustainability

by Thomas Casey, Managing Principal

As Executives who are focused on Enterprise Growth and Differentiated Sustainability, ask yourself the following questions:

  1. How can the Enterprise replenish its leadership population if it’s Succession Plan is based upon incorrect assumptions?
  2. How can an Enterprise exploit the talents of, and secure the institutional memory from, Boomers if Human Capital programs are not tailored to balance their unique situations in the context strategic intents?
  3. How can an executive maximize their contribution if as they approach retirement they are distracted by the reality that they are bereft of a comprehensive a personal non-financial Transition plan?

 The exercise is likely to promote, appropriately, significant concerns?

 The two most recent editions of the Harvard Business Review are wake up calls for managers in respect to the emerging challenges in addressing the aspirations of the Baby Boomer age “cohort”.

 Several data points contained in the articles are consistent with recent Discussion Partner Collaborative research and client experience:

  • 50% of Fortune 500 Board Members are dissatisfied with the their companies Succession Planning process
  • Succession Planning is an insular process usually achieving a level of “seriousness” approximately 18 months before transition
  • The rules are being broken in respect to the age of Board Members whereas in 1987 only 3% were age 60, now 30% are 64 or above indicative of both the shifting demographics and enterprise desire for the preservation of institutional memory
  • The median tenure of a Fortune 500 CEO is 3.5 years some roles such as CIO’s even less reinforcing the need for disciplined Succession Planning scenario’s

 As reinforcement, DPC research conducted in the Third Quarter of 2011 encompassing  150 Global CEO’s and over 2,000 Executives over the age of 55 concluded the following:

  • Succession Plans, if they exist at all assume, without executive consultation, that all will retire at age 65!
  • The reality is that Executives have a “range” from “62 to I don’t know but later than 65”
  • Over 90% of the Executives in our study would prefer to have a gradual “phase down in time commitment” beginning at age 62 and ending at 66
  • Over 80% of the Executives indicated that the existing Human Capital practices did not allow for a “phase down”
  • Over 50% of CEO’s stated that they would embrace a phase down strategy if “I could keep a key Executive longer” while an additional 9% stated…..”not sure but should be explored”
  • Over 70% of Executives stipulated that the comprehensiveness of their Transition Planning was  predominantly if not exclusively Financial

Research Conclusions

Our research, led us to a working hypothesis focused on the integration of Enterprise and Human Asset Sustainability. We refer to as Human Asset Sustainability.

 Our Conclusions are that to be achieved, Human Asset Sustainability, must embody the following Principles:

  • Succession Planning cannot be realistic unless those whom are deemed “inclusions” (executives and those in key roles) are consulted in respect to their contemplated retirement timing “without prejudice”, in other words they can change their minds
  • The principle of flexibility is a Succession Planning “must have” to maximize leverage and create the most options for the enterprise, executive, and potential replacements
  • Human Capital processes must embrace the concept of Phase Down and other manifestations of flexibility to optimize Human Asset Sustainability
  • There is a disciplined approach for Institutional Memory preservation leveraging the stated desire of Generation X and Millenials to be mentored by Boomers therefore becoming the repository of their knowledge
  • Transition planning support is highly desired and should be provided to key executives and those in critical roles beginning at age 58…..provided the above Principles are embraced!

 There is no question that those of us in the Human Capital domain whether we are researchers, consultants, or practitioners need to challenge our assumptions and be more innovative if we are to influence vs. be influenced by, the rapidly shifting demographics.

 We see four major assumptions that require a “re-think”.

  1. There is a “set age” when people plan to retire
  2. Organizations to be effective require full time commitment
  3. Executives have a well thought out Transition plan
  4. Human Capital programs currently possess the flexibility to meet the challenges of the Baby Boomer age cohort

 The truth that is self-evident is that Enterprise Sustainability will be disenfranchised if Human Asset Sustainability is not an embedded strategic priority.

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