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Succession Management at Edwards Lifesciences: A Case Study

Rob Reindl

Edwards Lifesciences is a global leader in the science of heart valves and hemodynamic monitoring, with more than 7,000 employees worldwide. In this chapter, I discuss Edwards’ strategies for identifying, developing, and retaining successors and how we measure our success.

At Edwards, the succession plans for critical jobs are proposed following the company’s strategic planning process and are confirmed during CEO talent development reviews. Because these critical jobs are closely monitored by the CEO and myself (the global leader of human resources), possible successors are not limited to those in the chain of command under the incumbent. All identifiable talent around the globe is reviewed as possible successors for critical jobs, and a high-potential label is a prerequisite. Our goal is to have a minimum of two successors for each critical job. Successors are identified as ready now, ready in one to three years, or ready in three to five years. If there are no diversity candidates in any of these categories, we ask leaders to list names of diversity candidates and when beyond the five-year mark they might be ready. If a critical job suddenly becomes vacant, the CEO and I would expect a call to discuss possible successors. Then a short list of successors would be profiled and discussed at the next Executive Talent Committee meeting.

Once successors are identified for a critical job, several development opportunities are available to them, as well as to others who have been identified as top talent.

The learning and development department receives a list of top talent names and their respective development needs. The L&D staff works with HR business partners (generalists) to determine training needs for the next fiscal year. It is critical that talent development reviews are held before operation planning so that the manager not only plans for his or her top talent development needs but also budgets appropriately for them.

Another development opportunity determined at this time is an external coach who has been trained in utilizing our 360-degree tool. This tool was customized for Edwards’ “Core Competencies”—a set of 10 competencies that we believe represent our values and approach to delivering on our commitments to patients, customers, shareholders, and our own colleagues. At times, we have set up a “triangle”—consisting of the successor’s manager, an external coach, and an internal mentor—to develop top talent. Many potential executives who are next in line for a leadership role are assigned a mentor, usually an executive leader in another group.

The most important development that a successor can receive is real-life experience on the job. We believe in the L&D philosophy that 70 percent of learning comes from experience on the job, 20 percent from others’ experiences (from mentors, coaches, managers, and so on), and 10 percent from training. At Edwards, we are not afraid to move our top talent around the company or add to their current responsibilities for the right job experience before they are promoted to the next job. A few examples will shed some light on how various jobs or additional responsibilities can really position a person for success.

An Example of a Chief Financial Officer’s Successor

Shortly after Edwards Lifesciences was spun off from Baxter Healthcare in 2000, it hired a controller who had several years of financial experience in Europe. After a couple of years of successful performance, the controller was identified as a successor to the chief financial officer, to be ready in three to five years. His development needs to prepare to become CFO at that time included experience with treasury, risk management, tax matters, and working with the outside investor community.

During the next five years, Edwards incrementally added staff responsible for treasury, risk management, and taxes who reported directly to the controller, who thus began to take on these responsibilities on a developmental basis. Additionally, the CEO included the controller on several visits to the investment community. We also made sure that the controller received visibility with the board of directors because of the criticality of the CFO role. No doubt it took some finessing with some of the functional leaders who were told that they no longer reported to the CFO but were now going to report to the controller, but such tough calls need to be made, especially when you are preparing someone for a role like the CFO job. In this case, we also needed to persuade the existing CFO to relinquish these reporting relationships. Fortunately, she had aspired to be a business unit leader, and we felt that she needed some operational experience before taking on that role. So we created a president of global operations role that included global manufacturing, supply chains, information technologies, and quality control. That experience prepared her to become a business unit leader.

Thanks to this process, which essentially involved reconfiguring the responsibilities of both the current and prospective CFOs, we now have a strong CFO, who through development opportunities was set up well for success. So the basic lesson here is that you can ensure a successful succession process by being willing to rethink and revise the job duties of those who are slated for succession and those who may be consequently moving on to other positions. In addition, the person on the road to succession needs to be given the kind of exposure to top management that will ensure a smooth transition.

An Example of a General Manager’s Successor

An employee in a midlevel role in corporate development and strategy had career aspirations to become a general manager. At the time, this high-potential employee had no experience in marketing, sales, or managing multiple people and also had no experience with profit and loss statements. We made his next assignment to lead a large, complicated divestiture of one of our global businesses. Following that, he led global marketing for one of our largest business units and then went on to lead all of sales and marketing for the business unit in Japan. His last job before becoming a general manager was vice president of strategy for the entire company. This is a highly visible role with our board, CEO, business unit, and regional leaders. As a general manager, this person now has sales and marketing experience, global experience, and strategic development experience. I imagine that this employee will take on even more responsibilities in the years to come. The lesson to take away here is simple: Give prospective successors a clear path to gaining experience needed for their likely new responsibilities.

Key Lessons

Edwards’ experiences yield several overall lessons:

Know your development jobs.

Retain top talent.

Engage your CEO.

Emphasize results.

Let’s look briefly at each.

Know Your Development Jobs

First, it is important to know which jobs are the best development jobs in the company for preparing top talent for large general management roles. These jobs are usually “flow-through” jobs, and the manager of them has to come to that realization. So the managers of these jobs need to have an ongoing talent search for them, because people usually occupy them for two to three years and then move on.

One example of a development job at Edwards is the VP of strategy position, mentioned in the previous example. Three of the five key general managers at Edwards had been VP of strategy before taking on their current position. When serving in this position, it was great experience for them to see the company’s entire portfolio and to work each year with all the executive leadership team members on the seven-year strategic plan.

Another example of a development job is a country leader or regional sales and marketing leader role. These roles provide early P&L experiences and real-life experience with strategic planning and having to ensure that sales happen on a daily basis (short-term results). In addition, some of these roles have people who report directly to them functionally (such as finance and HR). Because of these experiences, some of Edwards’ best leaders do a phenomenal job at balancing the short- and long-term results.

Retain Top Talent

Make sure all the successors are with your company when it is time to promote them to the next level. You certainly want to reap the reward from the investments you made in them.

There has been a lot of research about the reasons why top talent leaves companies. The usual culprits are their managers, pay, or career opportunities. At Edwards, we proactively provide managers with data that can forewarn them of a top talent’s potential departure. A top talent risk analysis is provided to each executive leader annually. Top talent is assessed against data to which most HR departments have access. They include

pay below 100 percent of that position’s estimated market value

not promoted or given additional responsibility within the last two years

bonus payout below 100 percent

more than two managers in the past two years

manager’s employee engagement score below 75 percent

have not attended at least one training session in the last year

At Edwards, we also strive for differentiation in our compensation programs for top talent. Why do we do this? A few years back, I asked my compensation leader for the average bonus percentage paid to all top talent and the average bonus percentage paid to the rest of the salary-exempt employees. Believe it or not, the percentage for top talent was lower. Why? Because we give them more and we expect more of them. So we decided to treat top talent differently from a bonus target perspective. Our top talent are also treated differently with regard to professional development opportunities, and they may receive additional stock options. Another aspect of retaining top talent is creating a culture in which they can thrive. We’ve paid a lot of attention to this and thus have created a credo in which we really believe and make very visible. For us, it’s all about the patient. We encourage much debate, but in the end our guiding light is the patient. Values like trusted partner, bold and decisive, thriving on discovery, and recognizing accomplishments are all things that are very apparent in our culture and that I believe are important for all high-achieving medical device talent to be successful. In short, the important part is to create a culture in which high-potential people can thrive.

Engage Your CEO

Finally, it is important to comment on the CEO’s engagement with talent development. I am fortunate to work with a CEO, Mike Mussallem, who has talent development in his heart. He has high expectations for each of those who report directly to him with respect to how they nurture, develop, and engage their top talent. Each year, he sets a performance management objective that focuses on attracting and retaining top talent. This year, his metric for all top talent globally is less than 4 percent turnover. He also expects top performance from anyone in a critical job and at least two potential successors for each position. He views talent management as a vehicle to achieving each of our top priorities. When he is asked what one thing made him successful in his career, his response is that he has surrounded himself with top talent and has encouraged his people to do the same.

Emphasize Results

So what does Edwards Lifesciences look at to determine if its talent management has been successful? We decided that if we believe that it is the talent in our organization that determines whether we have successfully executed our strategies and priorities, then why not use the same measurements? Refer to the previous page for the company’s results since we spun off from Baxter and became a publicly traded company in April 2000 through December 2010.

Summary

The results for Edwards speak for themselves. During a decade when many organizations faced significant turmoil due to economic conditions that challenged sales growth, Edwards’ talent performed extremely well. It is talent that executes business strategies. So why not ensure that a pipeline of talent is being nurtured, developed, challenged, and recognized? I hope this chapter has provided you with ideas that you can implement to ensure that you have a pipeline of talent for the future.

About the Author

Robert C. Reindl is corporate vice president of human resources for Edwards Lifesciences. When he joined the company in 1993, he was responsible for Baxter’s Institute for Training and Development and became vice president, human resources, for Baxter’s CardioVascular business in 1997. Previously, he was a manager with Arthur Andersen, where he consulted internally on a variety of human resource and organizational development issues and designed management development training. He has also been a communications instructor for Marietta College and Ohio University. He received his bachelor’s degree in communication from the University of Wisconsin–Stevens Point and his master’s degree from Bowling Green State University.