Succession & Workforce Planning aligned to Strategic Business Initiatives

1. Succession & Workforce Planning aligned to Strategic Business Initiatives Lorraine Webb Vice President Organizational Development Philadelphia Gas Works GVFHRA April 12, 2010

2. Topics • Workforce Planning and Strategic Business Management • Understand the elements of a successful succession plan • .Linking HR initiatives to strategic business initiatives

3. About PGWLorraine Webb VP of Organizational Development Philadelphia’s source of safe, reliable, natural gas Our nation’s largest municipally owned natural gas utility PGW began on February 10, 1836 with 46 gas lights Today provides natural gas to the 6th largest city in the US

4. The PGW Journey 10-12 Years ago PGW was faced with: significant debt ($1b) and potential insolvency billing systems meltdown no performance management systems, rewards or recognition programs, working or strategic knowledge of our human capital bench strength “accidental leaders” and management in transition

5. The PGW Journey • Recognized that by 2010 roughly 50% of the workforce could retire w/i 5 years 20 member senior team were and 18 of the eligible • Significant drain on the organization in terms of knowledge, skill, experience and talent • Extreme external pressures

6. Risks to appropriate qualified staffing levels Staff for the Gap Identification of critical positions Compensation Employer of Choice/Good place to work Risks to loss of institutional knowledge and skills Knowledge management initiative Aligned learning opportunities created curriculums for different levels within PGW Workforce Planning Succession planning initiative identifies candidates Workforce development identifies employees at all levels for bench strength. Low Morale/Performance Performance Management System and Career Development/Employee Development Plans Risks and Challenges

8. Focused on Integrated Talent Management Staffing & Recruiting Training & Development Employee Relations Performance Management & Succession Planning

9. How Did We Get There? • “C” Suite focus: sense of URGENCY! • Identify succession gaps • Assessed 60+ leaders of the organization • 360’s, performance reviews, development plans and coaching • CEO made it clear that this was a top priority • He announced to the Management Team that he would have a 360 as well as coaching • Succession plan • Surveyed employees anonymously as to plans for retirement • Developed high potential programs • Many senior people and others shared their plans often volunteered to be mentors

10. Finally… We changed the culture by becoming strategic partners with the business

11. What We Did • Succession Planning • Leadership Development Programs • Strong Recruitment Efforts • Formal Programs to Assess People and Talent • Knowledge Transference • Rotational Assignment Programs • Cross Functional Assignments • Affinity Groups

12. Succession Planning: The Process • Communicate Plan to Management Team • Try to identify projected turnover and likely job openings • Clarify and communicate what competencies will be needed • Open it up - who’s interested and willing? • Survey of all employees • Assess competency readiness • Prepare development plans • Offer learning opportunities and resources • Compete for “in-training” positions • Employee share responsibility for career development

13. Key Deliverables Identify Succession Gaps Implement Succession Plan Inventory Internal Talent Strategy Meeting Key Positions At Issue Position Criteria • Outline Key Deliverables • Discuss process • Plan communications • Manage expectations • Identify Key Positions to be filled and/or replaced • When will needs occur? • Develop alternative scenarios • Develop key criteria for each position • Build on PGW competencies • Inventory internal talent pool • Use Talent Mapping • Map Talent to needs of PGW • Identify HiPo’s and associated development needs • Begin Implementation of development plans The Process

14. The Process • Apply succession planning process to the leadership positions at PGW • Create a list of candidates for the leadership positions • Review Essential Succession Planning Process • Set criteria for the job • Create Talent Map for candidates • Create list of potential candidates for the position who meet job criteria • Got the assistance of a third party, Career Concepts, that could lead us through the process

15. The Philadelphia Gas Works Leadership Succession Plan The Pipeline A = Ready for promotion to next level or significant increase in responsibility within 12 months B = Ready in 3 years C = Primary level achieved; not likely to increase responsibilities 1 = Ready to assume role within 3 months 2 = Ready to assume role within 12 months 3 = Ready to assume role within 3 years 4 = No internal candidates; recruit Sample President & Chief Executive Officer

16. Process: Key Positions at Issue • Review the organization chart • Does current organization design reflect future needs? • Are there alternative futures likely enough to be considered? • Add positions technically vacant at present • Review each position, the incumbent and state the assumptions • Start with CEO • Progress through succeeding layers • Iterative process • Internal successors to a position, create vacancies

17. Process: PGW Competencies Start with Core Competencies Connected to Performance Appraisals and Development Plans • Does the position require candidate who is highly competent for each specific competency? • Is adequate acceptable? • Is the competency not critical for the position?

18. Process: Executive Attributes We had discussions early on regarding what we deemed to be Executive or Leadership attributes and what were not… • Does the position require candidate who is highly gifted with these attributes? • Is adequate acceptable? • Is the attribute not critical for the position?

19. Process: Barrier to Success Attributes Barriers to Success • Does the position require candidates who do not have these attributes? • Is a ‘mild case’ acceptable? • Is the attribute not critical to the position?

20. Process: The Talent Map • A way to graphically show where people are in their development • Cross between performance and potential • Subjective rating only – no formula • Not an ends, but a means to identifying those ready to move up and helping all develop appropriately

21. Coaching and Developing Others Focus Over-managing Creating a Service Culture Intellect Insensitive Adaptability and Embracing Change Charisma Defensive Smart Risk Taking Communication skills Arrogant Visioning Passion Overdependence on a single skill Networking and Leveraging Culture fit Key skill deficiencies Professionalism Poise Failure to build a team Enterprise Focus Appearance Failure to staff with winners Negotiation and Influence Lack of composure Disciplined Execution Unwilling to adapt to differences Teamwork and Collaboration Over-managing Position: _________________ Position Criteria - sample

22. High Average Low Niche Player Develop for Next Level Accelerate Pe r f o rmance Box 2 Box 1 <= 5% Box 4 20% Monitor Stretch Stretch Box 7 Box 5 Box 3 Release Monitor Track and Assess Box 6 Box 9 Box 8 Low Average High P o t e n t i a l

23. Legend for Sample Charts

24. Draft-Sample Organization Chart

25. How Organizations Derail People • Defining development largely as educational experiences and job rotations • Moving people so fast they never really finish a job • Considering vertical movement in one area a meaningful developmental sequence • Letting one failure knock someone off track • Loading the fast track with people who run into trouble as strengths become liabilities

26. Staff for the Gap • Reduce time to fill (from 80 to less than 40 days!) • Begin resume banking/continuous interviewing • Create on-line application process • Improve caliber of candidates • Use down market to recruit: PGW stability and benefits • Introduce state of the art recruiting including social media (i.e. Monster.com; LinkedIn, etc.) • Replace passive application process with proactive resume searches, community outreach and recruitment (i.e. NSBE, SWE, Honickman, etc.) • Ensure fairness • Post vacancies • Continue to use employee referrals wisely • Ensure diversity at upper levels

27. Retirement Survey • Of approximately 1700 employees close to 20% responded • Gave us an excellent lens into what people were thinking • Closer to retirement, the more willing to share and provide dates • Of interest were comments • Union contract coming up • If no changes in medical benefit plan, people would stay longer • Plans are to make this an annual event during benefit enrollment

28. Talent Replenishment Overview

29. Where We Are Today • Two thirds of the union positions can be backfilled through union progressions and many middle management positions are also part of a career progression path. • But PGW is clearly vulnerable as to those positions that require extensive on the job training and technical knowledge. • Areas of vulnerability include Operations, Gas Management, Customer Affairs, Finance and Regulatory Affairs

30. Develop Employees • Automate systems • Geo Learning LMS • SuccessFactors • Applicant Tracking system • Add management tools • Career Development (CDP) • Performance Improvement (PIP) and Employee Development Plans (EDP) • Time and Labor System • ADP HRIS System

31. Education and Training • EEOC and Staff train all management employees in harassment prevention, accommodations and respect • Learning and Development open to all PGW employees • English as a Second Language classes offered on site • Community College classes on site • Tuition Reimbursement • Leadership Development

32. PGW As Employer of Choice • Goal: Employer of choice • Change culture, diverse and inclusive • Realignment —best of old; add new • Worklife balance • Purpose: Ensure talent to meet objectives of company in an environment with few financial rewards as well as sustaining a diverse and inclusive culture • Task: To attract and retain the best, management needs to manage • Partner in staffing; evaluate through first year focus and probationary period • Actively coach and mentor • Provide performance feedback, honest evaluations and realistic career development plans

33. Develop Employees--Programs • Leadership Development program--2 cycles • Ed2Go • CCP @ PGW provides work-life balance for employees • PGW Training Series, taught by PGW employees, gives ‘facilitators’ exposure • Boot camp • Tuition reimbursement • Buddies • Mentoring and coaching • Ongoing succession planning • New talent assessment program • Establishment of an development/assessment center • In house training aligned to organizational need • Educational and aspirational survey

34. PGW Career Development Initiative • Mandatory for all management employees • Forward thinking • Learning opportunities • Stretch goals • For all employees at the proficiency level • 400+ • Fosters a “developmental” mindset with supervisors

35. Create a Collaborative and Results Oriented Culture • Union/Management relationship based upon transparency and trust • Management and Union probably have the most productive relationship in the history of the Company • Implemented a win/win negotiation process between Management and Union • Reduced grievances/arbitrations • Union involvement and input for company initiatives. • Introduced mediation training for both Union and Management in an effort to amicably resolve issues. • Six Sigma, affinity groups

36. Knowledge Transference Program • Small cross functional team conducting pilot • Line management, OD and BT • Program is a collaborative effort and includes identifying key processes • We document via a videographer (college intern) • Interviews • Update of policies and procedures • Employees are concerned about knowledge transference • Pride in their work and the company • Belief and feeling that their work is unique

37. EDP’s and PIP’s • Mandatory for all employees with ratings between 2.76-2.99 • Preemptive measure • Assist employee avoid Performance Improvement Plan • Mandatory for employees with rating less than 2.76 • Collaborative process with Supervisor/OD • Meetings at the 30,60,90 day milestones • Less than 5% of management population • Failure to successfully complete results in termination

38. Educating the organization on key HR business initiatives • Legacy retreat • Drexel PGW mini MBA program • CCP and Finance • Assessing what organization needs on an annual basis • Surveys and interventions

39. The PGW Journey Now Significantly higher ratings on Wall Street Raised customer collection rates (86% v 98%) New CEO entered succession plan 5 years ago and succeeded at year 4 fully prepared Successfully managing rate of attrition; an integrated talent acquisition and management process in place Guided by HR/OD metrics aligned to business The right people are in the right jobs and the organization has depth of talent (despite a strict residency requirement) Awards received for Human Capital Management/Sales & Marketing Credibility with external stakeholders

40. Successes • Named HR Department of the Year 2009 • Named one of the nation’s top diversity employer • Rapidly reestablishing “employer of choice” status • Reduced costs associated with training delivery • Labor relations ( reduction of arbitrations) • Zero external fact findings substantiated

41. What’s Next? • Formal Talent Assessment Program • Understand employees’ aspirations • Employees often don’t know how to manage their careers or which next steps to take • Need to manage employee’s expectations • Everyone with a degree is not getting promoted • Must replace in kind mentality as opposed to re-thinking alternative models i.e. administrative assistants versus analysts • Dearth of good candidates within lower grades • Need additional training, education and exposure • Is a 1% turnover rate (absent retirements) a good thing? • Ongoing retirements • Market improvement coupled with new raises poses retention issues

42. QUESTIONS?