Newsletter: June 2010
Internal Talent Integration
How well does your organization select and integrate talent for internal promotion? If you are like many organizations we've seen — not very well.
When promoting from within, do you select the person who is doing the best job in their current role? Do you promote the person you like the most, the person who has the most seniority, or the person who gives you attention and deference? It is not unusual to promote a good technical person or a good clinical person into a management position. Technology companies and healthcare organizations do this frequently.
If this is your current practice, then you are missing out on the opportunity to improve business performance. You may also be dramatically and unnecessarily increasing your cost of operations. This is hardly a good strategy in the current economy.
Look at the cost of a bad (mismatched) promotion:
- Time to become productive in the job
- Time to separate from being a peer to being a boss
- Time to learn the new political aspects of the job
- Turnover cost resulting from a bad promotion
- Lost productivity resulting from the turnover
- Recruiting cost to replace employees lost to turnover
- Time to become productive for the new hire
While cost is obvious, time is a valuable and non-renewable resource. A poor promotional decision is expensive.
Internal promotions should be approached the same way you approach external hires: formally. There are distinct advantages when promoting from within. The candidate knows the business, knows some of the politics (politics at the managerial and executive level, however, are different), and is familiar with the culture. But this knowledge alone does not qualify them for promotion. What qualifies them for promotion is a positive performance track record and a demonstrated ability or high potential (versus just interest) to take on additional responsibilities and succeed.
Here are five actions that organizations can take to prepare internal candidates for promotion:
- Have a formal (or at least an informal) succession plan. Identify individuals in your organization who can fill current senior positions should the incumbent retire or leave, or new positions that are created due to growth, new product or service introductions, or new projects critical to the success of the company.
- Implement a management development program to provide future promotable candidates the opportunity to take on additional and more challenging responsibilities. A management development program will serve to identify employee strengths, preferences, values, and potential derailers (risk tendencies) that will enable a best fit for positions available.
- Introduce a valid and meaningful 360-degree evaluation. This will ensure that the candidates identified for promotion are truly qualified and not just good at managing up and managing their image.
- Provide the future promotable candidates with a mentor to help guide them through both the tangible and intangible aspects of achieving success within the company.
- Provide the newly promoted employee with coaching support to support the transition from a functional and technical focus to a manager with broader responsibilities.
Once the candidate is selected and promoted, their transition must be supported. It is reckless to assume that a candidate promoted from within the organization will automatically succeed and needs no further attention. Yes, they know the organization. But do they know how to manage and perform at a new level within the organization? Promotion doesn't result in instant competence. A mentor or a coach are excellent ways to support the transition and prove to be a good investment.
Some candidates, however, will not have had the advantage of participating in a management development (i.e. "grooming and growing") process. Some may never have held a management position. Some may have agreed to a promotion reluctantly.
Creating a formal talent integration process for newly promoted managers is a wise business practice.
Talent integration involves:
- A formal transition plan to help the manager/executive integrate into the new position. Formal and purposeful discussion between the new manager/executive and their immediate supervisor on how best to work with each other and to define clear expectations regarding job performance and expected results.
- Internal mentorship to help the manager/executive better understand how to deal with peers, how organizational politics work at the managerial level, and "how work gets done here" from a manager's perspective.
- Coaching (best done with an external/neutral executive/performance coach) — to help with the transition, especially for developing the management skills required in the new position (i.e. technical/clinical person being promoted to manager)
Recently highlighted in the Wall Street Journal, 26% of managers aren't trained to manage, according to the Rasmussen Report. Now consider the even greater likelihood of this when technical people are promoted to management. For internal promotions to be highly successful, a rigorous internal promotion process must be established and a formal transition integration process must be put in place. The cost of not doing so is simply too great. Unless your funding and talent are abundant and not a concern, you can't afford not to.
Healthcare Corner - News and Issues
Health Care Trends: Target Health Insurance Brokers
There are three significant events hitting the health care insurance industry that will have a disruptive impact, and will also drive innovation within the industry in the next two years:
- The transition from ICD-9-CM codes to ICD-10-CM
- Implementation of Patient Protection and Affordable Care Act (PPACA)
- Formation of larger health care delivery systems including physicians
ICD 10 CM is replacing ICD 9 CM. This is a not a trivial change, nor is it a simple incremental change. The classification of diseases is expanding significantly and the 4 digit numeric code (ICD 9 CM) is being replace by a 7 digit alphanumeric code. If the sender of the codes is on a different ICD version, major problems result, which can impact the flow of funds from payer to provider.
Added to this are the changes required to comply with the PPACA. Changes like:
- Benefit changes - examples include:
- Coverage of dependents up to 26 years old
- Eliminating of pre-existing conditions and exclusions
- Cap on waiting periods
- Medical Loss Ratio of at least 85%
- Comparing Medical Loss Rations across plans
- The introduction of Exchanges by 2014 to help individuals and small businesses to purchase health insurance – requires the ability to compare
And hospitals are continuing to consolidate to increase their negotiating power with payers, and this is becoming even more of an issue as hospitals form foundations to supply them with physicians.
These are disruptive changes that will re-focus the health insurance industry for the next few years on how to respond and still maintain profitability and viability in the health care insurance marketplace.
Health Care Focus (Alert) for Small Business Owners
The passage of the Patient Protection and Affordable Healthcare Act is the most significant piece of healthcare legislation since the passage of the Social Security Act of 1965, which bought in Medicare and Medicaid.
As small business owners, it is important to familiarize yourself with the key aspects of this law that will have an impact on your business. The one we discuss here is a provision Congress put into the law "that requires every non-tax-exempt business in the US to provide by January 31 of each year an information return (usually a 1099) to every payee to which it makes aggregate payments of $600 or more during a calendar year, effective 2012."
This means you will need to get tax ID numbers and submit 1099's for almost all services received over $600 from lawyers, accountants, cell phone service, FedEx and so on. This will be a compliance nightmare for small business owners.
There are efforts underway (Representative Dan Lungren, R-California) to roll back the provision. And small business organizations are also lobbying for retraction. But unless these efforts are successful, the reporting requirements will take effect in 2012.
