What works: workforce and succession planning

by 20 Feb 2007

Few outside of the US will have heard of PepBoys, a Philadelphia-based auto parts giant of more than 20,000 employees and 2006 revenues of over US$2.2 ($2.8) billion. Despite its size, the company recently proved itself capable of acting fast, decisively and effectively following a leadership challenge that opened its eyes to succession planning.

In 2005, PepBoys significantly altered its corporate strategy to reduce expenses and focus on core competencies. Part of the initiative involved a reorganisation of its field operations, splitting what was one division into separate service and retail components. PepBoys had 42 area directors on staff and would now need 84. The HR team was given just 45 days to essentially double the organisation’s leadership team.

Faced with a near impossible deadline and possessing “very shallow internal and external talent pools”, according to Liviu Dedes, director of training and organisational development, PepBoys quickly spent more than US$1 ($1.3) million on recruiting the leadership talent it needed – a very significant part of the overall HR budget.

A challenge on this scale isn’t likely to strike the HR team at PepBoys again anytime soon. Nonetheless, Dedes and his colleagues were determined to institute a proactive and long-term solution for leadership identification and development, starting with a rigorous review of organisational and leadership competencies. The team wanted not only to create a deep reservoir of high potential and job-ready leaders, it wanted those selected to possess the skills and exhibit the traits of leadership important to success at PepBoys.

“The foundation of the process was to define what our organisational competencies were, what makes us successful and what competencies do we need to position ourselves for success in the future,” said Dedes. In the end, after 360-degree reviews, surveys of top performers by position and extensive consultation at all levels throughout the organisation, 67 competencies were identified, including these five core competencies: customer focus; approachability; drive for results; integrity and trust; and presentation skills.

Building on the company-wide perspective, PepBoys created positional competencies for every job profile in the organisation but with an initial focus on leadership positions.

With competencies in hand, the next step was to create a pipeline of leaders. Central to the process were collaborative round table discussions – a talent review process – from unit to unit, including all key positions and individuals. Career discussions with high potentials followed in which their preferences for next career moves were discussed. “Once a ‘hi-po’ [high potential] accepts a nomination and is willing to enter into a development program, a nomination is made and they enter into the plan,” explained Dedes. “There is most likely relocation and travel involved in next career moves so it’s often a significant decision.”

Simultaneous to the talent review and career interview process, PepBoys undertook an exhaustive search for the right software. Ultimately it chose a tool that supported its need for an entirely web-based architecture which offered integrated performance management, 360-degree review functionality, competency management and succession planning all in one.

Those in the leadership pipeline at PepBoys are developed aggressively, using the “PMBA” program (PepBoys’ internal MBA), group seminars, simulations, case studies and a raft of assessments. One-to-one coaching and mentoring is also utilised to ensure that hi-pos advance step-by-step to senior leadership positions.

After one year, PepBoys has experienced a significant reduction in turnover, increased morale and 20 per cent increased bench strength for key positions. Its goal was to have two ready successors for every area director position. That has been achieved.

Moreover, PepBoys has realised significant savings through succession planning. According to Dedes, “We know that when we hire external store or service managers, for example, it costs more than twice as much as filling the position with a successor inside the company. To date, our savings are more than US$80,000 ($104,100), which means that we are already 45 per cent toward paying for the year one cost of our system”.

PepBoys HR took a tough situation and turned it into a positive for the company. Nothing fancy, no new approaches to competencies or succession planning were invented; just a solid time-proven approach to leadership identification and development powered by state-of-the-art technology and a commitment to maintaining rigorous methodologies.

“It is absolutely critical to plan today for tomorrow; it’s a high-level initiative,”said Dedes. “Define your competencies and your metrics. Train and communicate, communicate, communicate. We started with a note from the CEO to all staff, and from there HR took the ball and went the rest of the way.”

By Allan Schweyer, president of The Human Capital Institute