Category: Finance

By Sandy Smith

All it takes is one look around anywhere employees are gathered to see it: the unmistakable sea of silver hair. The workforce in airports – as in every industry – is graying. Some call it a “silver tsunami” and the wave of retirements coming could sink many an enterprise.

The youngest Baby Boomers turn 54 in 2018 – meaning we’re only about a third of the way through this large generation hitting the typical retirement age of 65.

For some airports, that is creating something of a talent drain. However, others have been preparing for this moment and have already come up with a plan – such as WCAA, the authority which manages Detroit Metropolitan Airport (DTW) and Willow Run Airport (YIP).

“We expected this and have been working toward being prepared as much as we can,” said Mary Mullally, deputy director of HR Organizational Development. That has led to a multiyear

refocusing on learning, leadership and, ultimately, succession plans throughout the organization.

The same issue is hitting consultants, too, said Brian Conlee of Conlee Consulting. And the retirements come at a time when airport development is growing significantly, causing a “shortage of mid-level candidates. When the economic conditions took a downturn, it scared a lot of the talent away from the industry.”

For those in all aspects of the industry, a succession plan can help combat one of the reasons people leave. “In most cases, people will leave an organization at the second tier for two reasons,” said Timothy McNamara, managing partner at Odgers Berndtson, LLC, an international executive search firm. “One is economic. The other is promotional opportunity. What’s my future going to be? What’s going to be my level of responsibilities? What is the likelihood of me being considered when there is a next C-level role opening up?”

GENERATION GAP

One of the biggest hurdles in succession plans comes due to significant demographic issues. As Baby Boomers plan to retire, the next generation – Gen X – is significantly smaller and can’t fill all the roles. Many of those standing in line ready to move up are Millennials – those born between 1981 and 1997.

While Millennials are often knocked as challenging in the workforce – they want constant feedback and responsibility well beyond their experience, most studies show – Mario Rodriguez, executive director of the Indianapolis Airport Authority, sees it differently. “They are, bar none, the most talented and influential generation that this country has ever had,” he said. “If they get really excited about something, things happen.

Millennials are more likely to question the status quo and move the needle.”

At IAA, that has meant creating an ascension plan. “It boils down to having our Baby Boomers provide the sort of wisdom that they’ve gathered over the years,” Rodriguez said.

That is paying off at IAA, where a leadership development program starts early, before the talent has been hired.

“We’re recruiting for drive and talent, not experience anymore,” Rodriguez said. “I can train.”

Seeing a career path is paramount to keeping them. IAA’s leadership development program moves Millennials into different careers where “they get a chance to have their voices heard. They get to work on things they wouldn’t normally get to work on.

Instead of molding Millennials to what to them and modeled this organization in response.”

That has meant offering free and fast WiFi for travelers, something the Millennial staff insisted was necessary. It also has meant allowing rideshares and electric vehicles. IAA also has a large electric bus fleet and significant solar panel array – both designed to boost bona fides among environmentally conscious Millennials. “In a place that you wouldn’t think would be very focused on the environment, we focus on sustainability because we have a large group of Millennial employees who feel very deeply about it.”

So if IAA is being transformed by its young workers, won’t it just be prime recruiting ground? Rodriguez sees that it can work regardless. On the one hand, creating the right work environment is likely to build loyalty. On the other, “if we’re able to build that entity that people recruit from instead of us recruiting from other people, we’ve actually done our job and created an immense value for our community at large. If we retain talent here in Indianapolis, or if we bring in organization in Indianapolis, we’re still building public value.”

SIZING UP THE NEED

If you’re not looking at your current roster to assess who is ready to move up, understand that others probably are.

“I have quite a few clients who are more than willing to look at talent ready for the next move, where maybe at their current firm, there’s a logjam at the positions and not much room for upward mobility,” Conlee said.

Of course, as a public entity, airports don’t usually have the luxury of creating positions that allow people to step up while waiting for that logjam to break. And they likely can’t create a position for a strong outside candidate.

“Barring a major reorg, airports have a chartered structure to live with,” said Grice Whiteley, principal at Grice Group, LLC. “Due to budgets and risk aversion they don’t just spontaneously hire people permanently – no matter how great of a talent they may be – without some political and professional consequences for everyone. Having good recruiting tools and good networking certainly gives airports a competitive edge, which they all desperately need.”

Whiteley’s clients are most often in the private sector where “they can be a little more flexible and adaptable and scoop people up and find a position for them.”

No succession plan is perfect and, yes, there will be times when training is invested in someone who takes another job.

“People tend to move out to move up,” Whiteley said. “The machinery chugs along and the person you were grooming is leaving to go to another airport, even if you hired them specifically to groom them. It’s an unavoidable process. There are some airports that are more agile to adapt and hang on to people.”

Even those who get succession planning right still have to endure those times when the next best leader chooses to leave. “Career moving is going to happen because of life,” Whiteley said. “They have kids or get married or need to move closer to parents. It’s not anything you can predict. I don’t know if there’s anybody who has a perfect model.”

But there are issues that the industry must address – and one is a lack of ability to move to the CEO role internally, McNamara said. “A huge percentage of CEO roles are filled by external candidates, by searches that are required to be conducted because the CEO leaves. Very few are based on internal promotions. You have to ask yourself why. For the most part, CEO and other C-level changes are event driven.

It’s not based on a strategy.”

A STRATEGIC DECISION

Strategy is absolutely the place to start with succession planning, says Mario Diaz, Aviation Director for the Houston Airport System. “It’s not about moving people, but setting a strategy.

What does the airport need to do to be successful? Once you have your strategy down, then you start looking at people who are able to deliver on that strategy.”

He believes that every manager should identify one or two individuals who have the potential to replace that manager. “And yes, it is ‘replace you.’

Someone needs to replace me. I know that I could walk out of here tomorrow and could say, ‘Any one of these two or three people could do the job.’ You have to expect that at every level of the organization.”

The names submitted for consideration should go to an executive team that includes a human resources representative and other chief officers. “You bring those managers in and review the individuals that they’ve recommended. You look at resumes and performance, the things they have accomplished and why that manager thinks they are a good candidate.”

If the successors are chosen, then it is up to the executive team to make sure that “they get the development and attention they need to move forward and be successful,” Diaz said. “Once you identify those people, you make good on the promise that these would be the individuals to move up. It’s easy in the formulation. It’s in the execution where it gets difficult.”

In Houston, Diaz oversees two international airports—George Bush Intercontinental and William P. Hobby— as well as the much smaller Ellington.

“I’ve worked in airports of all sizes and this strategy can be used at any size organization,” he said. “If you’re in a smaller airport, the strategy is probably less complicated.”

And this is where it comes back to knowing the long-range plan.

People identified for leadership— particularly those groomed for senior level positions—should be trained in all aspects of the operation.

“Everyone understands operations, the international rules and regulations, and border protection. But how many people really know how the business makes money? How to go out and call on an airline to land a new route? What capital development is all about? If

there’s an opportunity to move up, you have to make sure they’re ready.”

He believes the role of CEO includes training those next leaders. “You can’t just call in a consultant and say, ‘Put in a succession plan.’ You have to think it through.”

Leaders also have to “make tough calls about individuals,” Diaz said.

“Sometimes one of the hardest things is to recognize that you’re looking at the resume of an individual who doesn’t have a lot of opportunity to move up.

That’s going to be a tough conversation to say, ‘You don’t seem to have the skillsets. You may want to go back to school.’ Even in those circumstances, you have to realize that everyone has value. Help them with what they want to accomplish to the extent that you can.”

TRAINING: AN IMPORTANT STEP

Succession planning is about far more than simply putting a name next to a position. It’s about making sure the person identified as a likely successor is ready when the role opens up. And it

means being honest about their hard and soft skills.

“You have to assess the management assets that you have,” McNamara said.

“You’ll have to make the tough decisions about people who fit your strategy and those that don’t. Then you have to also provide the resources to the CEO and management team to provide training and coaching to those individuals that you want to bring along. At the end of the day, these investments are still going to cost a lot of money. If you don’t invest in assessment and training and leadership development, ultimately, you’ll have to pay for that anyhow through additional hiring and the cost associated with organizational turmoil and instability.”

Investing in a new educational platform isn’t always the obvious first step in succession planning. But Mullally said the WCAA saw it as necessary, but just the first step. Collective bargaining agreements had to incorporate a pay-for-performance model.

“The notion of doing development training with the benefit of a bonus has been really successful,” Mullally said.

“We’ve seen an increase in engagement in our program every year.”

With the performance piece of the puzzle in place, it was time to build in the succession plan. And at WCAA, it’s a two-way street. The tool allows employees to post their resumes and to express interest in jobs that are opening or future jobs that may come along. “They can see where they match and where they don’t match,” Mullally said. “They can fill the gap with their development plan and pursue their bonus.”

Managers evaluated employees on succession metrics, including career preferences and what development is needed in the next one to two or three to five years. “The manager is able to rate each employee on their interest in advancement, their interest and capabilities and their succession readiness timeline,” Mullally said.

“We also have them identify the team’s impact of loss and probability of loss.” That latter aspect touches on identifying those who are planning to retire. “We’re able to identify critical roles throughout the organization, not just for our leadership team. We wanted this to be enterprise-wide, to really prepare for succession at all levels.”

And it is paying off. In 2014, when the program launched, 28.6 percent of employees were identified as ready for the next level in a year or two, while 71.4 percent expressed interest. By 2017, 48.9 percent were deemed ready for promotion in the next one to two years, while 82 percent expressed interest.

“This was not intended to pre-select someone for another job,” Mullally said. “It was to focus on where we want to develop employees based on their interest and their current capabilities.

This data is helping to close the gap.”

It also helps that managers are more proactively expressing interest in their careers, she said. “It was unheard of before, for a manager to say, ‘What do you want to do next?’ Now, it opens the conversation. The fact that we are backing this up with the pay-for-performance program provides reinforcement that this is important to the organization, that we want to see them develop and be interested in their own careers.”

While the program was intended to be used throughout the organization, early on it revealed a high probability of loss in senior leadership. That meant a need to develop leaders quickly. A Leadership Academy was launched. Those who participate in the academy network throughout the organization and produce a Capstone team project.

It has allowed the authority to test the talents in tackling issues such as what to do with surplus food. The Leadership Academy’s proposal was so innovative, it earned a state grant.

A related program, a Supervisor Institute, also was launched. It works similarly, but is more streamlined. The robust training program is key to succession planning, Mullally believes.

“That was our vision from the beginning. When we started to implement the learning platform, we knew it had to support succession planning. We had that as our end game, but knew we couldn’t do it without the foundation of learning and performance.”