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Compliance Tip of the Day

Compliance Tip of the Day: Succession Planning in Compliance

Welcome to “Compliance Tip of the Day,” the podcast where we bring you daily insights and practical advice on navigating the ever-evolving landscape of compliance and regulatory requirements.

Whether you’re a seasoned compliance professional or just starting your journey, our aim is to provide you with bite-sized, actionable tips to help you stay on top of your compliance game.

Join us as we explore the latest industry trends, share best practices, and demystify complex compliance issues to keep your organization on the right side of the law.

Tune in daily for your dose of compliance wisdom, and let’s make compliance a little less daunting, one tip at a time.

Today we consider the role of succession planning in a compliance function.

For more information on the Ethico ROI Calculator and a free White Paper on the ROI of Compliance, click here.

To check out The Compliance Handbook, 5th edition, click here.

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Innovation in Compliance

Innovation in Compliance: Lisa Levy – Succession Planning and The Evolving Workforce: From Millennials to Gen Z

Innovation comes in many forms, and compliance professionals need to not only be ready for it but also embrace it.

In this episode, Tom Fox visits with Lisa Levy,  a thought leader renowned for her expertise in addressing succession planning challenges. We take a deep dive into this topic on this edition of Innovation in Compliance.

Lisa believes that succession planning in 2024 is more important than ever due to the complexities introduced by having five generations in the workforce, each with diverse expectations and work ethics. Lisa advocates for embedding succession planning into company culture as a strategic, intentional exercise that involves understanding employees’ skills, aspirations, and institutional knowledge to nurture and grow talent internally. She champions the use of technology, such as AI tools, to personalize growth plans and emphasizes the need for continuous evaluation, transparency, and communication to implement a successful succession planning framework, ensuring organizational resilience and smooth leadership transitions.

We discuss how the younger generations, including millennials and Gen Z, have shifted the employment paradigm by seeking roles that align with their values. Lisa reflects on their own journey of becoming ‘wholly unemployable’ over 15 years and highlights how Gen Z entered the workforce during the pandemic, taking on gigs like Uber and DoorDash as traditional roles were shut down. This generational shift shows a move towards prioritizing personal fulfillment over conventional job security.

Key Highlights:

  • Lisa Levy on her Unemployable Journey
  • Millennials and Value-Driven Careers
  • The Paradigm Shift in Employment
  • Gen Z’s Workforce Entry During the Pandemic

Resources:

Lisa Levy on  LinkedIn 

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Blog

Succession Planning in the Multi-Generational Workforce: Insights from Lisa Levy

I recently had the pleasure of sitting down with Lisa Levy, a business strategy and organizational development thought leader. Our conversation delved into the complexities and importance of succession planning, particularly in today’s workforce, which spans five generations. In today’s blog post, I will relate key insights from our discussion and explore why succession planning is more critical than ever.

The Need for Succession Planning

Given the diverse age groups in today’s workforce, we discussed the increasing importance of succession planning in 2024. We began with the traditional assumption of linear succession, where roles are handed down the hierarchy, no longer holds. “The hierarchy of organizations has been blown up,” Levy said. With people staying in the workforce longer and new generations entering with different expectations, succession planning has become a dynamic and strategic exercise. It’s not just about filling roles when someone leaves but embedding succession planning into the organizational culture.

Impact of Generational Diversity

We explored the challenge of managing a workforce that includes Baby Boomers, Gen X, Millennials, Gen Z, and now GenAlpha. Levy emphasized that each generation brings its own set of expectations and work styles. For instance, Baby Boomers, protected by legal frameworks against age discrimination, may stay in their roles longer, potentially blocking career progression for younger employees. This situation mirrors the “Queen Elizabeth, Prince Charles problem,” where long-lived leaders delay the ascent of the next generation. Similarly, in corporate settings, prolonged tenures of older employees can hinder the career growth of Gen X and millennials, who are ready and eager to take on leadership roles.

Shifting Perspectives on Career Progression

Levy underscored the importance of recognizing and adapting to the changing expectations of younger generations. Unlike previous generations, Millennials, Gen Z, and GenAlpha are less likely to stay in a job that doesn’t align with their values or offer growth opportunities. They prioritize work-life balance, purpose, and continuous learning over long-term job security. Levy pointed out that while Baby Boomers and Gen X might have stayed in roles out of a sense of duty, younger employees are more willing to move on if their needs aren’t met. This fluidity in the workforce requires companies to be more proactive in their succession planning efforts.

Implementing Effective Succession Planning

Levy provided a detailed look into how organizations can approach succession planning strategically. It starts with understanding current employees’ skills, aspirations, and potential. She advocated for a holistic approach that involves:

  1. Regular assessments are done by continuously evaluating employees’ skills and career aspirations.
  2. Institutional Memory by capturing and documenting the knowledge and experiences of long-term employees through interviews and other means.
  3. Growth Opportunities by providing training and development programs to prepare employees for future roles.

“Succession planning is a project,” Lisa noted, “but embedding it into the culture is a process.” This process requires ongoing effort and commitment from leadership to ensure that the organization remains resilient and prepared for unexpected changes.

The Role of Technology

We also discussed the role of technology in modern succession planning. AI and other digital tools can significantly enhance the process by:

  • Identifying Skill Gaps: Analyzing employee data to pinpoint areas where training is needed.
  • Automating Processes: Streamlining the creation and implementation of development plans.
  • Enhancing Communication: Facilitating better communication and feedback loops between employees and management.

Levy mentioned how these tools can save time and resources, making the succession planning process more efficient and effective.

The Human Element

Despite the benefits of technology, Levy stressed the importance of the human element in succession planning. Effective communication and understanding employees’ needs and aspirations are crucial. Leaders must be willing to listen and engage in meaningful dialogues with their teams. She shared a powerful example: “Imagine if you’re listening to a retiring employee tell their story of the last 30 years, including their successes, failures, and lessons learned. This helps in knowledge transfer and inspires and prepares the next generation of leaders.”

As we concluded our conversation, Levy reiterated that succession planning is not a one-time task but a continuous, strategic effort. It’s about building a resilient organization capable of adapting to change and nurturing talent from within.

For those looking to implement or improve succession planning in their organizations, Lisa offered this advice: “Succession planning requires time, effort, energy, and commitment. But it ultimately makes your business resilient to unexpected change.” Succession planning is more critical than ever in our multi-generational workforce. By taking a proactive, strategic approach and leveraging both human insight and technological tools, organizations can ensure they are prepared for the future while fostering a culture of continuous growth and development.

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31 Days to More Effective Compliance Programs

One Month to a More Effective Compliance Program: Day 12 – Succession Planning Around Compliance

Another area where Human Resources can help to more fully operationalize compliance is in succession planning. Succession planning is just as important as governance, enterprise risk management and strategic oversight. In other words, it is just as important. Sadly, many companies fail to give it the attention it requires. A PricewaterhouseCoopers (PwC) survey, found nearly one-half of the more than 1,000 directors gauged reported dissatisfaction with their companies’ succession plans. Imagine what that number would be if they took into account the compliance aspect of succession planning. Some of the questions you might consider are the following. How did you fully operationalize compliance into the business unit that you managed? What controls did you put in place? And then what did you do when you found out about it?

Every time I perform a risk assessment and speak to the company’s HR lead, they immediately understand the role than can play in moving forward a company’s compliance program. Even if the HR role is limited in the hiring process, they can ask potential candidates their views to determine underlying business ethics. HR can also begin the compliance inculcation process, even pre-hiring, by talking about the company’s values in the interview process. This sets an expectation that can be built upon if a candidate is selected and in every HR touch point going forward, including looking at employees in the succession planning process.
Three key takeaways:

  1. Succession planning is just as important as governance, enterprise risk and strategic oversight.
  2. Do not begin your succession planning when a senior manager announces their retirement.
  3. You are always being evaluated (or you should be).

For more information, check out The Compliance Handbook, 4th edition here.

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31 Days to More Effective Compliance Programs

One Month to a More Effective Compliance Program with Boards – The Board and Succession Planning

The 2023 ECCP mandated a Board of Directors ensure “the sufficiency of the personnel and resources within the compliance function, in particular, whether those responsible for compliance have: (1) sufficient seniority within the organization; (2) sufficient resources, namely, staff to effectively undertake the requisite auditing, documentation, and analysis; and (3) sufficient autonomy from management, such as direct access to the board of directors or the board’s audit committee.”

It went on to pose the following questions about the “sufficiency of the personnel” in the following manner. Under the topic, Seniority, and

 Stature, are the following questions:

How does the compliance function compare with other strategic functions in the company in terms of stature, compensation levels, rank/title, reporting line, resources, and access to key decision-makers? and What role has compliance played in the company’s strategic and operational decisions?

Under the topic Experience and Qualifications are the following questions:

Do compliance and control personnel have the appropriate experience and qualifications for their roles and responsibilities? Has the level of experience and qualifications in these roles changed over time? How does the company invest in further training and development of the compliance and other control personnel? Who reviews the performance of the compliance function and what is the review process?

All of this leads to the inescapable conclusion that the Board of Directors needs to be involved in not only the hiring process for a CCO but also the succession planning. Yet many Boards fall short on that score. In a Chapman and Cutler LLP quarterly update, entitled, Advancing Board Refreshment Through the Director Succession Planning Process, William Libit and Todd Freier laid out a framework for Boards to use which I have adapted for CCO succession. There are some key traits you should consider in succession planning for any senior management position, including a CCO.

  1. Examine the key corporate documents.
  2. Use an assessment framework.
  3. Conduct due diligence.
  4. Maintain a pipeline.
  5. Assess Board policies.
  6. Disclose your succession strategy.
  7. Benchmark your succession strategy.

 Three key takeaways:

1. Refreshment is a hot topic in corporate governance.

2. Review your Board policies to understand what your company will need going forward.

3. Transparency in succession planning.

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Presidential Leadership Lessons for the Business Executive

Leadership Lessons from the Presidency of Zachary Taylor

In this episode, I consider what lessons might be learned from the presidency of Zachary Taylor the 12thPresident. Taylor only served 18 months, from 1849-1850. He died in office from over eating and drinking on the July 4thcelebration of 1850.

Taylor had a long career in the US Army prior to his election, during which time he successfully operated cotton plantations in Louisiana, Kentucky, and Mississippi. He was elected as a Whig, this despite refusing to commit himself to the party platform. He was the first President not to hold elective office. While Taylor is usually ranked in the bottom percentile of presidents, he is most generally described as more a forgettable president than a failed one. However, his biographer, John S. Eisenhower, argued he was the one man who could have hammered out a compromise on slavery that would have averted the civil war contemporaries. Finally, in the political realm, both Democrats and Whigs alike generally viewed his premature death as a national calamity.

What are some of the leadership lessons from the Presidency of Zachary Taylor.

1.Take a stand-One of the leadership lessons came from an inaction by Taylor. It began before he was even elected President, did not embrace the Whig political platform, or even declare himself a Whig until February of 1848 with the election only seven months away. He thought the President should stand above party politics, even to the extent of not taking a public stand and declaring himself as a Whig. Still, for leadership, the clear message is that sometimes you do have to take a stand.

2. You must be engaged-As a business leader, you must be engaged. Taylor’s military training influenced this thinking but that training and those instincts did not serve him as President.  A philosophy of trying to be above the fray just does not always work. As a CEO, a senior executive, a Board of Director, you must be engaged in your business. It does not mean you have to get into the weeds of tactical decision making but you must set the proper tone and then oversee it going forward.

3. Succession Planning-in the case of Taylor, we have that failure from a President who died in office, some 18 months into his presidency. Taylor and his Vice President, Millard Fillmore, did not even meet in person until only a week or two before the inauguration, so there was no time to build any sort of personal relationship. This lack of engagement with Fillmore, if not to consult, at least air out his thoughts and let him know which way he was thinking about issues, was a critical failure.

4. Conflicts of Interest-As a leader, you must be attuned to and stop conflicts of interest by your senior management. There was never any allegation that Taylor was personally corrupt. However, during the later days of his administration there was the Galphin affair. Before joining the Taylor cabinet, the Secretary of War, George W. Crawford, had served as a lawyer and had been involved in a 15-year lawsuit. During Taylor’s term and to his great embarrassment, he was paid nearly $100,000 to the President’s Secretary of War for his fee as counsel. The terms of the settlement meant that two Cabinet members had effectively offered a huge amount from the US treasury to a third member of the Cabinet. This was a huge scandal at the time.

A word on Taylor’s death. It seems that during the 1850 4th of July celebrations, Taylor consumed a large number of cherries, ice cream and milk. He subsequently came down with a severe stomach ache, which turned into something called cholera morbus. There is still a considerable debate over whether the doctors actually killed him with their treatment or whether he died from the intestinal ailment. Oddly enough, many of his cabinet members came down with very similar symptoms, so it seems most likely it was due to the sanitation in Washington DC at the time.

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31 Days to More Effective Compliance Programs

The Board and succession planning for a CCO


The 2020 Update mandated a Board of Directors ensure “the sufficiency of the personnel and resources within the compliance function, in particular, whether those responsible for compliance have: (1) sufficient seniority within the organization; (2) sufficient resources, namely, staff to effectively undertake the requisite auditing, documentation, and analysis; and (3) sufficient autonomy from management, such as direct access to the board of directors or the board’s audit committee.” Here are six steps to utilize.
Examine the key corporate documents. This includes Board review of all relevant corporate governance documents, including guidelines, the Charter for Board Governance, the director nomination policy and any relevant policies setting out the appropriate protocols and procedures.
Use an assessment framework. 1) the current strengths and weaknesses of the CCO; 2) the short­ and long-term skills needs of a CCO; 3) evaluating how the Board’s assessment changes regarding departing CCOs; and 4) shifting the Board’s approach to oned based on criteria such as organization needs and director performance.
Conduct due diligence. Conduct an executive level due diligence background investigation, not simply a background check.
Maintain a pipeline. Every Board should maintain a pipeline of qualified candidates. Conditions may arise, such as health or other personal emergencies, that call for rapid director succession. It’s crucial that there are potential qualified candidates on hand to fill the gap quickly.
Assess Board policies. Just as a company should periodically assess and reassess its policies and procedures, the Board assess their policies in this area.
Disclose your succession strategy. Both a large number of institutional investors and good corporate governance advocates suggest that companies disclose their succession strategies. It provides greater transparency to stakeholders.
Benchmark your succession strategy. Every Board should benchmark its succession strategy with industry peers around the use of the steps outlined and stay aligned with the evolving policies and positions of large institutional shareholders and good corporate governance advocates.
Three key takeaways:

  1. Refreshment is a hot topic in corporate governance.
  2. Review your Board policies to understand what your company will need going forward.
  3. Transparency in succession planning.