The Challenges and Opportunities Of Preparing The Next-Gen Leader

As we witness industry after industry disrupted by the ripple effects of technological advancements, it’s clear that today’s companies must continually adapt and evolve to survive. Against this backdrop of rapid transformation, the always challenging task of attracting, developing and retaining talent becomes even more complex, agreed CEOs gathered for a recent roundtable discussion co-sponsored by AlixPartners and Chief Executive.

For UPS CEO David Abney, changes wrought by the growth of e-commerce coupled with innovative technology created talent challenges at a company long lauded for its ability to recruit and retain workers. “Our business used to be primarily B2B, but now more than half of our business is B2C,” explained Abney. “We’re determined to be on the front end of the technology that can help us be much more efficient than we have ever been before. On the other hand, there are people trying to figure out how to use the latest technologies to take a niche of our business here and a little bit there.”

Embracing Outsiders
Despite a reputation for successfully attracting young recruits and retaining them for decades, UPS now faces a need to augment that talent pipeline model. “Once we get them ‘brown-blooded,’ as we call it, we promote from within and keep them for life—that’s been our story,” said Abney, who joined the company himself as a loader while a freshman in college. “But our business has changed so much that for the first time we’ve been bringing in people at much higher levels in a significant way.”

“Once we get them ‘brown-blooded,’ as we call it, we promote from within and keep them for life—that’s been our story.”—UPS CEO David Abney

On-ramping experienced talent with fresh perspectives, however, has proven more challenging than expected. Ironically, the company is actually too good at indoctrinating new employees in the ‘UPS way’. “I’ve noticed that as soon as we bring them in, we try to make them like us,” explained Abney. “We have to learn that the reason that we’re bringing them in is that we need to change a little bit—and that the same things that worked with our former system are not going to work as we bring more people in midstream.”

Abney noted that bearing in mind that the biggest challenges his company faces are also its biggest opportunities helped in navigating these changes. “It’s really important to frame it in that direction, because if you just focus on the challenge part, it becomes more of a defensive maneuver,” he explained. “I don’t think that brings as positive an outcome as embracing the opportunity.”

Fighting Complacency
Galvanizing existing employees toward change can be particularly challenging for healthy companies. Henry Schein CEO Stan Bergman is no novice at transformation, having been named Chief Executive’s 2017 CEO of the Year in part for his success in shifting his company from a healthcare product distribution company to a provider of management solutions for dental and veterinary practices. Yet, Abney’s experience resonated with Bergman, who pointed out that convincing employees to leave the familiar behind and embark on new paths takes a healthy amount of persuasion.

“We have a company that has been successful for a long time, so when you go to the team and say, ‘We’ve got to change,’ they say, ‘Why? Things are working,’” asserted Bergman. “So, we have to find a way to convince the team.”

Both technological innovations and the swinging pendulum of healthcare reform have become platforms for Bergman in rallying his troops toward embracing change. “We know healthcare is going to evolve over the next 10 years, because [the country] can’t afford what it is today,” he said, likening his situation to Abney’s. “No one knows exactly where the future is going, but we do know we have to change from a logistics, a technology and a solutions point of view. We need to drive change and drive change quicker. We’re not a technology company per se, but at the end of the day, we are not going to be selling product. UPS is not going to be selling shipments. We will both be selling solutions.”

For some leaders, transformation required a complete overhaul. “You don’t have to be a rocket scientist to see that seven management layers wasn’t the right structure for what we were trying to accomplish,” said Quest Diagnostics CEO Steve Rusckowski, recounting his decision to restructure the company he joined in 2012. “We took out three layers and 15 percent of management. It wasn’t easy, but it had to be done.”

Having a more egalitarian leadership structure enabled the team to move more quickly and to overcome the resistance from within that typically plagues turnaround efforts. “It’s a perpetual fight against all the antibodies of change,” he noted. “There are always a lot of people in the middle who don’t want change. They think, let’s see how long he lasts. Five years later, I’m still here, so we’re wearing them down. Some of it is mechanical but some of it is just strong, hard, dedicated leadership and persistence.”

The Power of Purpose
For Steve Collis, CEO of AmerisourceBergen, moving toward a purpose-driven culture helped align employees behind what might well have been a tricky transition for the company, which has been working toward combining its specialty pharmaceutical and wholesale businesses. “Our purpose is honoring our responsibility to create healthier futures,” he explained. “That’s a very powerful message in the company and one that I think our teams are responding to.”

Having defined values can serve as a touchstone for employees of companies navigating transformation, noted several business leaders. Faced with ramping up from 3,000 people to about 16,000 in 10 years, Gulfstream Aerospace invested two years in developing leadership and technical training programs geared toward maintaining the culture that had helped to drive the company’s success during the ramp-up process.

“We were worried we were going to lose that customer intimacy culture that we had spent 40 years building,” explained Mark Burns, president. “The training taught people how they should behave day to day interacting with each other, as well as with the customer. It was so successful for the manager-level-and-above employees that we rolled it out to every employee.”

Respecting and rewarding employee initiative also goes a long way toward getting employees onboard with transformative strategies. “Nobody wants to be told what
to do everyday,” noted Tom Quinlan III, who says empowering employees helped him lead R.R. Donnelley through a reorganization that broke the company into three separate public entities, one of them LSC Communications, which he now helms. “Personally, I wanted to work in an organization where I get up in the morning, come in and make a difference—and I think we created that. If we hadn’t, I don’t think we would have gone on.”

“ “Our purpose is honoring our responsibility to create healthier futures. “That’s a very powerful message in the company and one that I think our teams are responding to.”

Bridging Generation Gaps
A culture viewed as outmoded and rigid can be a hindrance for established companies seeking to hire young, technically skilled workers. Alan Masarek, CEO of Vonage, pointed out an often-faced dilemma: the very companies that most need to attract young talent to transform face an uphill battle because they’re viewed as dated and out of touch.

Tasked with shifting Vonage’s focus from residential communications to business communications in pursuit of growth, Masarek found it difficult to attract new talent to replace employees who were ill-equipped for the journey. “We’re based in New Jersey, not viewed as particularly innovative and have a hierarchical top-down management—all things millennials hate,” he noted. “We’ve been trying to make the company a destination workplace, and doing it in the midst of a transformation, which is interesting because, when you go through a transformation you get hammered on social media on sites like Glassdoor.”

Creating growth and development programs helped, as did taking a bigger role in the hiring process. “I started signing off on every new hire,” he reported. “A lot of people from the old world of Vonage don’t know what ‘great’ looks like, and that’s a problem if they’re going to be hiring for the next generation.”

Like UPS and Vonage, AdvanSix CEO Erin Kane also needs to jump-start talent development at the resins and chemical company she’s been leading since it spun out of Honeywell in 2016. “I’m blessed with the privilege to celebrate employees with 30-plus-year anniversaries, but I also recognize that I need to bring the next generation workforce into the organization. We will face significant retirements in the years to come,” she said. “If you go into one of our plants, they’ll tell you it takes three to five years to train an A operator, who then may be ready to become a frontline supervisor in seven to 10 years. But I don’t have 10 years to train my next workforce for the future.”

In addition to the need to speed up the development process, Kane is focused on employee engagement among her workforce, approximately 55 percent of which is union-represented employees. “As a leadership team, we are focused on building a culture that is performance driven and employee centered. With the spin we asked ourselves, ‘How do we enable a culture that will inspire 110 percent performance from those who we need to come to work enabled and connected to what we need to safely achieve, day in and out?’” The answer is a work in progress and built on a foundational principle of continuous improvement. For example, Kane started by simplifying legacy operating systems, principles and behaviors to be “fit for purpose,” and is working toward instilling them at AdvanSix.

Defining values that employees can align themselves behind was a common theme among CEOs who shared their transformational journeys, noted Ted Bililies, managing director of AlixPartners. “Providing a set of behaviors or values, making that blueprint simple enough that it could be put on the back of a card and having financial and non-financial rewards for that seems like a very big theme,” he said. “Being consistent in your values and the way you behave and over-communicating those principles and values gives employees a kind of North Star that keeps companies steady.”

Ultimately, responsibility for not only adopting values but ensuring that they become part of a company’s DNA falls to the CEO, added Fred Hassan, managing director at Warburg Pincus. “A culture really is the reflection of senior leadership, it’s really the CEO and the top management team,” he said. “If they truly develop a culture of expecting the best and giving your best and role model that themselves, it’s amazing how much productivity gets unleashed and how a company can change and evolve.”