Expert answer:Ethical and Legal Issues in Succession Planning Pa

  

Solved by verified expert:Last week you examined strategies and considerations related to internal succession and the development of high-potential employees. Though internal candidates have more intimate knowledge of an organization and could be better prepared to “hit the ground running” when the time comes, not every company uses this method to address all of its succession needs. For organizations with a limited talent pool or few qualified internal candidates, human resources (HR) professionals and executive leaders may turn to external succession planning options. In fact, many organizations have acquired outside candidates to strategically inspire innovation after experiencing stagnant revenues and profit margins. When pursuing external options, organizations can use a variety of methods to identify and recruit candidates. For example, organizations can contact professional business associations to invite their members to apply for specific succession positions. In addition, many organizations encourage their executives, boards of directors, and leaders to refer individuals they know from outside the organization who may be good candidates to fill vacant positions. In this week’s Learning Resources, evaluate external recruitment methods. First, examine Chapter 12, “Integrating Recruitment with Succession Planning,” of the course text Effective Succession Planning to identify the common external recruitment methods used in today’s organizations. Then, conduct additional research via the Walden Library and other scholarly sources to analyze the legal and ethical issues that surround external methods. Compose a cohesive and scholarly response based on your readings and research this week that addresses the following: Evaluate external recruitment methods used in succession planning.Consider you are an HR professional in an organization, and select one of the following external recruitment methods you would implement: mergers and acquisitions, professional or trade associations, online and newspaper job postings, job fairs, walk-ins, employment exchanges, employee referrals, contractors, consultants, headhunters, competitors, and radio/television/Internet.Briefly identify and describe the external method you have chosen.Support your response by describing how your chosen method could or could not positively impact the succession planning process.How might this external recruitment method help and/or hinder an organization’s succession planning process?Analyze legal and ethical issues associated with succession planning recruitment methods.Describe two or three legal and/or ethical considerations that are associated with your selected external recruitment method.Explain how each of these legal and/or ethical issues you have described could negatively affect both the succession planning process and the sustainable, competitive advantage of the organization.Caruso, K. (2011, April 20). Power saw or utility knife: What kind of tool is your 9 box? [Blog post]. Retrieved from http://web.viapeople.com/viaPeople-blog/bid/52142/Power-Saw-or-Utility-Knife-What-kind-of-tool-is-your-9-Box
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Retire at 65? No way. Why we keep going at…. The Washington Post, p. G1.
Alcorn, J., & Tomassini, J. (2011, September 4).
Within a year of Johnney Pollan’s retirement, Dow Chemical asked him to come back. This time as a
contractor.
With his pension after 31 years of work and his health-care benefits, he and his wife were living
comfortably in East Texas. And he could devote more time to his hobby, archaeology.
But he answered the call, and his retirement plans have been put on hold – for more than a decade now.
Pollan was one of a few hundred people skilled in a proprietary language used to run processes at Dow’s
plants. Many of them retired at once, and the company was caught in the lurch.
“A lot of the expertise was going out the door,” said Pollan, 64. “And they found that they really needed
it.”
There’s more to come. Of the 4,200 Dow employees in Freeport, Tex., about 40 percent will be eligible
for retirement within four years.
Nationally, similar trends are emerging. Yet human resources experts, workers and executives from a
range of industries say businesses are largely unprepared to accommodate an aging workforce or to
cope with its eventual retirement.
“They are oblivious,” said economist Steven Sass of the Center for Retirement Research at Boston
College.
Many industries find themselves in a quandary. They often need older workers for their expertise, yet
they also might need to accommodate their physical disabilities and their desire for more flexible
schedules. And as workers stay on the job longer, they could need training in new technologies or work
procedures.
In the past decade, the number of seniors in the labor force has grown nearly 60 percent, according to
the Bureau of Labor Statistics. By 2018, the number of workers 65 or older is projected to climb to 11
million, from 6.5 million today.
Baby boomers are fueling the trend. Healthier and better educated than any previous generation, many
plan to continue working, at least part time, well past traditional retirement age. Human resources
managers say voluntary retirement nearly stopped after the stock market collapse in 2007.
“When do people choose to retire?” asked Karen Smith, a senior researcher at the Urban Institute.
“When they are able to replace their income.”
So employers face a dual challenge. They have to keep older workers productive and then, when those
workers do leave, find qualified people to replace them. In 22 industries – among them engineering,
agriculture, real estate and health care – more than three in 10 workers are 50 or older, according to a
2007 study from the Sloan Center on Aging & Work at Boston College.
“Suddenly, there’s this call that the baby boomers are retiring,” said Peter Cappelli, director of the
Center for Human Resources at the University of Pennsylvania’s Wharton School. “What did you think
they were going to do? Stay until they die?
“Companies are not very long-term-oriented,” he added. “They don’t spend much time worrying about
what might be coming down the pipe in the future.”Workforce planning
In a third-floor hotel conference room in Cambridge, Mass., near biotech labs and the buildings of MIT,
several dozen human resources managers recently paid more than $2,000 each to learn more about
workforce planning – how to make sure a business has the right people for the job now and in the
future.
Bob Redlo, who spoke to the group, leads workforce planning and development at Kaiser Permanente,
with 8.8 million members the nation’s largest managed health-care company. Kaiser’s aging workforce is
a critical issue, he said.
Last year, almost 12,000 Kaiser employees retired – more than 7 percent of the company’s workforce.
Forty percent of its nurses are older than 50. The average age of its clinical lab scientists is 57; they
typically retire at 63.
“It’s been mitigated a little because of the economy, but I think it’s a huge problem for us,” Redlo said.
Age and experience mean better quality and patient satisfaction, he said. Older workers are also highly
trained and can be expensive to replace.
Call it the bathtub effect. Among the engineers at Lockheed Martin’s missiles and fire-control division,
“most were hired into the industry in the ’60s and ’70s,” said Gary McPherson, vice president of human
resources for the Lockheed unit. Then new hiring dropped off, which means fewer workers between age
35 and 45. Graph it out on a piece of paper and you see “a bathtub in the middle,” between the original
generation and a wave of recent college graduates, he said. Forty to 60 percent of McPherson’s division
will reach retirement age at the same time.
Like many companies, Lockheed focuses on the 15 to 20 percent of older workers in what McPherson
calls “very critical positions,” such as lead missile propulsion engineers. Although the company has
developed mentoring programs that pair veterans with younger workers to pass along experience, the
chief risk – as at Dow – is that there simply are not enough qualified replacements.
In Texas, home to Dow and the Lockheed unit, public schools have de-emphasized vocational education,
said John Ray, dean of information and community resources at Brazosport College.
“Today, you don’t have students with experience in working with their hands,” Ray said.
Brazosport, a community college near Freeport, has joined with petrochemical companies to train
students while hosting courses for new hires at companies such as Dow and BASF.
Although Dow has recognized the long-term employment trends the industry confronts – “We’re having
to look for alternative supplies,” said Troy Bearden, Dow’s services leader for its Houston area
operations – the consequences are sobering.
“If you would ever get into a situation when you didn’t have the trained and skilled folks available to
operate the units,” said Bruce Raiff, who oversees “knowledge transfer” programs for Dow’s Texas
operations, “you’d have to shut the units down.”
Employers in other industries, coping with the same employment profile, say they face their own
challenges. Disability costs can rise with older workers. And workplace adaptations to accommodate
decreased mobility might be needed. On the flip side, older workers who do not retire could slow the
career ladder for younger workers, while newer technology that is second nature to millennials can put
off older workers. Yet older workers are also more highly engaged and absent less often than young
workers, according to the Sloan Center.
Any of these issues can create intergenerational tension, and managers might have to adapt to an
unprecedented range of ages in the workplace.Know-how, passed on
Some companies have already taken action, designing programs to allow older workers to move to more
flexible jobs, teach part time or retain health benefits via phased retirement.
Older nurses at Kaiser, for example, can switch to less physically demanding positions while training the
next generation of health-care workers. Nursing schools are not doing the job, said Kaiser’s Redlo,
adding that his nurses make excellent instructors because they know the hospital system.
Many companies have joined with academic institutions to pass knowledge from an older generation to
a younger one.
Two years ago, Brazosport College opened its Center for Processed Technology, a sleek building with
modern classrooms and simulated control rooms. Outside, the building – a glycol and water distillation
plant, 10,000 square feet of metal pipes, tanks and switches – resembles the chemical plants lining the
highways in nearby Freeport. The center and plant are underwritten in part by local employers such as
Dow and BASF.
“The equipment is smaller in scale, but it behaves just like the real thing,” said Bennett Willis, 69, who
worked at Dow for 33 years and has taught at Brazosport for 12. Since 2006, Dow has sent new hires
who do not have a degree in processed technology to a 14-week training program at Brazosport, taught
by retired Dow employees such as Willis and Pollan. Fifty-three students have completed the program
this year.
On a recent weekday, a class of new Dow employees learned to control the temperature of a chemical
process. Student Cameron Keating, a 40-year-old Army veteran, communicated via walkie-talkie with
students and instructors in an imitation control room, where a flipped switch could simulate a
catastrophe. As a temperature gauge climbed to unsafe levels, Keating and his classmates had to figure
out how to fix it.
“You need to increase the output, P-111,” Keating said, referring to a liquid control pump.
“You mean 112?” asked a voice on the other end.
“Oh yeah, 112,” Keating responded. “Should be 40 percent.”
The rate stabilized, the temperature dropped and the faux crisis was averted.
Arizona State University and other institutions have created incentives for older, tenured faculty
members to retire to open positions for younger faculty and reduce costs.
At Sodexo, which provides food service and facility management, employee feedback led to the creation
of an employee group on intergenerational workplace issues with regional chapters across the country.
“It’s not like Gen-Xers and Gen-Yers need to be like their baby boomer boss,” said Chris Weiser, who
leads the group. “It’s not about baby boomers having to learn to text 140 words a minute. It’s about
understanding that everyone has some style differences.
“For the first time in history you have four generations in the workplace,” he added. “It’s critical that we
have these conversations.” The benefits of not retiring
“Retirement policies are intended to retain and attract,” said Sass, of the Center for Retirement
Research.
But boomers reaching retirement age in droves could transform the relationship between older workers
and their employers.
End-of-career employment in the private sector will have to change,” Sass said.
If the process is underway in health care and engineering, progress elsewhere is slower. Pension rules
that reduce benefits for part-time work, the threat of age discrimination lawsuits and union contracts
can protect older workers, but they also slow change.
Employment also looks different for older workers than for younger ones, experts say. It takes them
more than a year, on average, to find work, compared with 36 weeks for those younger than 55,
according to the Bureau of Labor Statistics. Older workers are more likely than ever to change jobs after
they turn 50, often because of layoffs or buyouts. For many, that means a second career – and lower
wages – in a different field. And low-income workers face greater risk as they age, Sass said.
The upshot, according to experts, workers and executives, is that the conventional notion of retirement
has broken down.
“In the absence of employer-defined benefit plans, the structure that eased employees into retirement
no longer exists,” Sass and Alicia Munnell wrote in their 2008 book, “Working Longer.”
But Kaiser’s Redlo said employers will adapt. “It’s good for our business to keep our older workers
working,” he said.
In some cases, it’s good for the employees as well.
“Sure, you could pay me more money and I could work less hours, but I don’t think that’s going to
happen,” said Pollan, the once-retired Dow employee. “I enjoy doing what I do.”
Saving $3 Billion the HP Way
Section:
MIRACLE WORKERS
Written off as just another ill-conceived megamerger, Hewlett-Packard has exceeded all its goals. Here’s
why the union has worked — so far — and what must come next.
JUST DAYS AFTER ANNOUNCING THE MERGER OF HEWLETT-Packard and Compaq in the fall of 2001,
Carly Fiorina flew to Houston for a gut-check summit with her counterpart, Compaq CEO Mike Capellas
— and to make perhaps the most important introduction of her career. At Fiorina’s side was Webb
McKinney, the 33-year HP veteran who was considered the company’s organizational mastermind. With
Capellas was his young chief financial officer, Jeff Clarke, a numbers whiz whom Capellas admired as a
bare-knuckles negotiator.
The two men had never met — “I didn’t know Jeff from a hole in the wall,” McKinney recently recalled
— but they might have suspected that they were about to become inseparable. Fiorina and Capellas had
picked them to tackle one of the toughest jobs imaginable: moving the largest technology merger in
history from paper and promises into a functioning organism, in the midst of the worst technology
slump in two decades. In the process, McKinney and Clarke would lead the redeployment of a combined
145,000 workers in 160 countries. They would be responsible for untangling 163 overlapping product
lines — from Intel-based home computers to Unix workstations to handhelds — and firing more than
15,000 employees to meet the $2.5 billion in cost reductions that Fiorina was promising investors.
That Webb McKinney and Jeff Clarke (or Weff, as HP workers began to call the pair) hit those cost
targets by last December, 18 months ahead of schedule, and are on track to save another $500 million
this year is impressive enough. But the savings achievements aren’t the reason Tom Ridge, for example,
recently sought HP’s advice on how to merge dozens of far-flung government agencies into his new
Department of Homeland Security. What interests Ridge and business merger planners alike is the
formula HP put in place to finish the task.
CORPORATE MERGERS HAVE, AT BEST, A spotty history of success, and technology marriages have
always been the hardest to get right. One reason is that tech firms are far more dependent on knowhow than, say, a supermarket chain, and defections — a temptation in any merger — can instantly sap a
company’s value. Thirteen months after 3Com bought Palm Computing in 1997, for example, Palm’s
executive brain trust, founders Jeff Hawkins and Donna Dubinsky, left to start rival PDA maker
Handspring. 3Com spun Palm out a year later, but after a blockbuster IPO, the company began a long
decline.
Keeping pace with new products during a merger also plagues tech firms, where product cycles pass in
months, not years. After acquiring supercomputer maker Cray for $767 million in 1996, SGI struggled to
introduce high-end servers based on Cray’s vaunted technology. It watched as rival Sun Microsystems
passed it by with faster machines — using Cray designs it had bought from SGI a year earlier.
Banging out new products at a speedy clip, though, is a cinch compared with what plagues mergers
most of all — the inability to make fast decisions. Few knew that better than Clarke, who had a ringside
seat during Compaq’s $9.6 billion acquisition of Digital Equipment in 1998. By the time the deal closed
later that year, merger executives had failed to trim redundant product lines, and customers were left
guessing about the fate of Digital products, such as its high-end Alpha servers. Amid the confusion, Dell
took just 15 months to slip past Compaq as the leader in domestic PC sales. “We screwed up,” Compaq
founder Ben Rosen said. “We learned you have to make a lot of correct decisions quickly.”
Step 1: The Decision Factory
That’s exactly what McKinney had in mind when he sketched out the structure of HP’s integration team,
one designed to have the right alchemy with (and constant access to) top management. Days after the
Houston meeting, he and Clarke began recruiting managers in equal numbers — Clarke rounded up
Compaq talent, and McKinney lined up their HP matches. In just six months, the integration group,
called the “clean team,” would grow much faster than any startup. Within weeks of the merger’s
announcement, the team had 500 members; by March 2002, more than 900. Even after the merger
closed in April 2002, it kept growing, peaking at more than 1,000 fulltime employees.
By establishing such a huge body of managers and reassuring them that their jobs would be safe even if
the merger failed, Clarke and McKinney were able to coax them to share in confidence everything they
knew. It also kept most of them motivated to stay — another critical benchmark.
Step 2: “Adopt-and-Go”
Just as important was creating an assembly line for decision-making. In most mergers the power to say
who goes and who stays is weighted in favor of the acquirer. HP weighted it equally. The strategy, called
adopt-and-go, was to get cross-company pairs of managers to meet daily to determine whose products
had the most market share, the better brand, and so on. Then, at weekly presentations with McKinney
and Clarke, managers had to offer up one for elimination. In four months, this game of managerial
Survivor yielded a road map for product lines and helped close redundant warehouses and factories,
ultimately saving $500 million in procurement costs. In the end, many Compaq products beat out HP’s
(see chart, above). But when it came to choosing a brand, HP was the clear winner. On business
machines, HP will soon phase out the Compaq name.
Adopt-and-go went beyond generating a product lineup. It helped HP get through the most painful part
of integration planning: generating 18,000 pink slips. The process led to hard feelings in certain quarters.
One of them was HP’s sales team, which surrendered key positions to Compaq’s aggressive and wellregarded sales managers. “The perception was that Compaq people got all the big jobs,” says Mike Cox,
executive vice president for sales and delivery at IT services firm Logical, who left HP in early 2001. But
those decisions, Clarke contends, went by the book. Compaq veterans earned the top spots in U.S. sales
by delivering better performance. In June 2002, Clarke complained to Fiorina that management job cuts
(not among her direct reports, but in the layers below) were falling short. Managers who hadn’t been
named to posts were still collecting checks. Fiorina insisted that Clarke get the process back on track,
and within two weeks, hundreds of managers — including many HP career veterans — were gone.
Step 3: Feed the Fast Track
From the start, McKinney set up the clean team to ensure that the process wouldn’t slow product
launches. Once adopt-and-go had run its course, new-product managers got the resources they needed
to keep moving. Last November, HP launched its Tablet PC and began selling the $1,399 Media Center
PC before either Dell or Sony could respond. The company has also kept feeding its profit engine — the
printer business — with dozens of new product launches, keeping the pressure on Canon, Lexmark, and
the latest and most dangerous newcomer, Dell. “When you start doing [merger planning], you run the
risk of taking your eyes off the business,” says Mark Sirower, a corporate merger consultant. “That kills a
lot of deals.”
Step 4: Enforce Cost Deadlines
If McKinney was seen as CEO of the integration team, Clarke served as his tough-minded CFO. “If there
were issues that the teams couldn’t resolve,” McKinney explains, “Jeff and I would jump in.” If those two
couldn’t resolve the impasse, they’d pass it to a committee chaired by Fiorina.
One such issue was the pace of the cost cuts. In March 2002, Clarke reported to Capellas that he had
fallen short on efforts to reduce expenses. Walter Hewlett and other merger opponents seized on this
and quickly made Clarke’s comments the centerpiece of their legal effort to derail the merger. But when
Clarke was dragged into court that April, he wouldn’t give in; he testified that his clean-team managers
were simply “sandbagging” the integration effort, trying to make themselves look good by giving him
numbers they knew they could beat. He could wring the savings out of them, Clarke argued. If managers
could hit his cost targets, he knew he’d set them too low. “It’s a cat-and-mouse game,” he says. “I would
say, ‘Good, now why not go and get me some more?’” Clarke’s testimony helped Fiorina win the case —
and his bargaining skills with clean-team managers helped HP deliver the cuts …
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