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Succession in the Friendly Skies

In order to ensure its future, United had to keep talent taxiing on the runway, ready to take flight when needed.

July 1, 2010
Related Topics: Strategy and Management
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In order to ensure its future, United had to keep talent taxiing on the runway, ready to take flight when needed.

In today’s business environment, where every company decision is transparent to employees, stockholders and even the media, the margin for error when it comes to strategic leadership development is narrowing.

Getting an executive team assessed and groomed for CEO succession is not easy, but it’s no longer optional. In October 2009, the U.S. Securities and Exchange Commission issued Staff Legal Bulletin No. 14E, a CEO succession mandate recommending greater transparency and shareholder disclosure about the management of succession risk “so that the company is not adversely affected due to a vacancy in leadership. … We now recognize that CEO succession planning raises a significant policy issue regarding the governance of the corporation that transcends the day-to-day business matter of managing the workforce.”

A survey by PricewaterhouseCoopers published in January 2010 said that 40 percent of board directors are dissatisfied with their companies’ management of succession planning. But the picture gets more complex when organizations consider a few other macroeconomic factors like the impact of an overall diminishing workforce on their management succession and the succession options for critical players in the organization, like actuaries in an insurance firm or critical care nurses in a hospital. An Egon Zehnder study published in late 2009 cited a 30 percent shortfall of management-level players in the workforce and a whopping 50 percent drain on overall talent.

Therefore, developing effective leadership using a consistent talent management program at all levels across the organization — not just in the C-suite — can return significant short- and long-term business value and viability. Further, companywide leadership development requires the effective — and consistent — execution of many processes. Talent management technology applications help to provide the enabling platform. One case in point is the success that United Airlines has achieved with its succession planning initiative.

With 48,000 employees worldwide, United Airlines operates approximately 3,300 flights a day on United and United Express to more than 200 U.S. domestic and international destinations from hubs in Los Angeles, San Francisco, Denver, Chicago and Washington. With key global air rights in Asia-Pacific, Europe and Latin America, United is one of the largest international carriers based in the United States. United also is a founding member of Star Alliance, which provides connections for customers to 916 destinations in 160 countries.

A Rough Decade
In the 2000s, facing challenges of elevated proportions — terrorism, pandemics, escalating fuel prices and bankruptcy — United was forced to make significant layoffs. This, in turn, led to challenges in retaining top talent. United recognized that it had a huge opportunity to connect, align and engage employees in its business and its future.

Along all fronts, the airline faced challenges but still needed to remain true to its core value to provide every customer with a good service experience. Senior leaders from the business units and HR were tasked with assessing the many facets of the challenge and identifying solutions that could be put in place in the near and longer term. Their key goal: deliver a work environment that set up employees to succeed. In order to accomplish this, it needed strong leadership. “All these challenges we were facing had a cumulative effect on the heart and soul of our organization,” says Steve Rugg, director of HR technology at United Airlines. “We needed good, strong leadership to help employees overcome their feelings of frustration and uncertainty for their future at the company.”

Unfortunately, United faced significant gaps in the talent pool of successors for critical leadership positions. In order for United to survive, it had to have talent pools that covered all critical operational functions and to help chart its future. After losing nearly half of its staff over 10 years, United needed to regroup, re-energize and re-engage its team.

A New Flight Path
United’s human resources team set out to get a clear picture of its talent and ensure the best were hired, developed and engaged to deliver the company’s vital customer service. While United had the right strategy, the company had a bad experience with technology to meet its talent management aspirations.
United tried to leverage its existing enterprise resource planning (ERP) system to help meet its needs for a central system of record to manage goal and succession planning. Unfortunately, that software proved too cumbersome and costly to maintain. While its ERP system worked for tracking job titles and salary information, when it came to the finer requirements of talent management, United was looking for a different kind of information. It was looking for information that would help determine how to best develop its workforce. Based on the successful use of on-demand recruiting, United looked for a more nimble, software-as-a-service (SaaS) solution.

With the economy putting continued strain on United’s staff, the business selected a succession planning platform from Taleo that integrated with its recruiting system. “It really pays to have all your employee data in one place,” Rugg said. “We wanted to find a way to narrow down our talent management solution to one vendor.” The only catch: United needed to launch its new internal enterprise succession planning initiative in only a few months. The eventual implementation process took eight weeks with guidance from consultants. United employees were able to complete the primary implementation work and configurations.

The succession planning process at United involved the following key steps:

Talent reviews:
United’s new succession planning process obtained information about employee performance, competency ratings, 360 feedback, personal goals and career aspirations. Based on this information, United’s executive teams conducted enterprisewide talent reviews where groups of senior leaders took the time to discuss each individual and develop a deep understanding of the executive-level talent pool.

Talent segmentation: Once the talent assessment was completed, United used the nine-box model — developed for GE in the late 1960s and 1970s to categorize employees as enigmas, dilemmas, underperformers, growth employees, core employees, effectives, future leaders, high-impact performers or trusted professionals — to achieve further talent segmentation. The process helped the company identify high-performance and high-potential enterprise talent that was critical to move the business strategy forward.

Positioning succession planning: Talent review and segmentation results were used to identify potential and interim successors. While having a documented plan is critical from a risk management perspective, understanding the entire executive talent pool gives senior leaders the ability to respond to needs that the succession plan can’t anticipate, such as a need for talent in an entirely new market sector or to lead an unexpectedly struggling service offering.

Leadership development: Once the talent segments were identified, based on their competency gaps, leadership development plans were created.
United used a phased approach to roll out the system. During phase one of the rollout, United used the system to identify business-critical positions within the company and plan for them, targeting the top executive positions within the company. Because United had not yet activated goals and reviews, it created user-defined fields within the system to include additional personal information. This included professional affiliations, personal summaries and fields for additional metrics such as 360 assessments and performance review ratings. Phase two of the rollout will include targeting specific business units, such as airport operations, to begin identifying critical roles and a succession pool. After phase two is completed, all major divisions are expected to participate in future rollouts.

Talent Traffic Control
United developed two different metrics to measure the success of the new program. The first was bench strength, which is the number of employees ready for promotion out of its total talent pool. This metric measures the preparedness of successors to fill roles. The second measurement was planning ratio, which is measured by the number of succession planning candidates promoted out of the total number of critical roles. This measurement shows the success of the plan.

Prior to implementation, United had a formal talent review and segmentation process in place. With the help of succession technology, United successfully rolled out succession planning that targeted the 45 top positions within the company. It now has more than 250 executives in a talent pool planned for these top positions, so United can grow leadership internally. “It takes dedicated effort on the part of top leadership in order to put a process in place that will grow leaders that know how to keep employees engaged,” Rugg said.

With a next-generation user interface that focuses on people, United experienced increased user adoption throughout the company. United also cut down on costly customizations by using the self-service configuration. As a result, it saw increased talent visibility, employee engagement and retention of top performers.

United is now meeting the requirements of the SEC and providing specific growth options for its staff — a crucial move to help United keep and engage its top talent. Its early success here has bolstered its reputation: In March, United was nominated for Aberdeen Group’s Achievement Award for Excellence in Human Capital Management.
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