Leadership Development in Overdrive

To hear Mark Hodges, K. Hovnanian Companies' senior vice president of corporate operations, talk about the home building firm's intensive efforts to identify and train new leaders for senior management positions, you can't miss his sense of urgency.

"We recognize that there is simply nothing more important for us to do than to devote energy to the development of our future leaders," says Hodges. "The business unit that does well, does well because of its leadership. Markets conditions change, but strong leaders make the most of a market, make the most of a bad situation, bring the best people along, achieve the best results."

Like few other home building operations in the country, Hovnanian has put identifying and nurturing its next generation of leaders atop its priority list. The idea is to avoid a common pitfall encountered by other fast-growing companies in any industry: being too dependent on one or two key individuals. Worse yet, Hodges says, would be for the company to find itself in a situation in which top leaders have overseen a period of vast growth only to suffer setbacks in outlying regions due to a lack of quality leadership to fill vacancies at the division level.

Hovnanian is on a growth path on a par with, or beyond that of, any other public home building company in the United States. In the past five years it has added operations in Virginia, North Carolina, Maryland, Texas, California and Ohio, expanding on its original base of operations in the New York and Philadelphia metropolitan areas.

"We want to grow all of our geographic units, and the way to make that happen is to groom future leaders within all of our geographies," CEO Ara Hovnanian says. "This is a very important part of the whole growth process. If a division grows from 650 homes to 1,000, then we have the opportunity to split it off and give another leader an opportunity to grow it."

Formalizing the Succession Process
The Succession Planning Program at Hovnanian is a new and distinct entity. While more than 100 people have progressed into the leadership development program, fewer than 50 have been tapped by their supervisors to enter the Succession Planning Program. Since the succession program's inception in mid-2002, each area president, division president and region president has been charged to select two or three potential successors. These potential successors' background and career information must be assembled into a detailed package and presented by the nominator to a committee of the most senior leaders in the organization, the Succession Planning Committee.

Composed of chief operating officer Geaton DeCesaris, chief financial officer Larry Sorsby, vice president of organizational development Bill Moore and vice president of human resources Lou Csabay, along with Hovnanian and Hodges, the Succession Planning Committee approves candidates for the program and signs off on their progress throughout a one- or two-year development program tailor-made for each candidate.

Once a nomination to the program has been approved, the candidate works with Moore to go through background information about his or her career and formulates a training program.

For softer leadership skills, about 60% of the candidates get one-on-one coaching with an outside executive coach. For technical requirements, such as land buying and finance, the candidate is required to blend self-study and on-the-job training. Once Moore and the candidate agree to the plan, the next step is for the candidate to stand before the committee and explain how he or she plans to achieve the development goal of being "ready now" to succeed into a position of area president or higher.

"These candidates are expected to spend between 10% and 20% of their time on this development program," Hodges says. "That is a minimum of a half a day to a day a week devoted to their development program."

In these first meetings with the Succession Planning Committee, candidates really begin to understand the opportunity and respond to it, Hodges says. The face-to-face interaction also benefits the committee members.

"The focus on people is clearly a major part of my job," Hovnanian says. "These meetings are a great way for me to regularly, consistently and systematically get to know our future leaders."

Developing a Baseline Profile
Gathering all the necessary data about candidates before they can be presented to the Succession Planning Committee is a major undertaking. First, a feedback report is generated by a 360-degree review from 12 to 14 direct reports, colleagues and senior managers. Conducted confidentially by e-mail, the survey is designed to establish a baseline assessment of overall leadership ability.

Second, a candidate's employment history and experience are vetted to list each of the technical and managerial situations the candidate has encountered throughout his or her career. This establishes the technical "gaps" in work history that must be overcome.

Third, as most succession candidates are in managerial positions when they are considered for the program, their management skills are assessed in detail. The objective information for this part of the dossier is found in the details of a companywide survey of associates who have been direct reports to the candidate.

"These are responses to statements such as 'my manager treats me fairly,' 'my manager gives me recognition for great work,' 'my manager keeps me informed about changes in the com-pany,'" Hodges explains. "About 15 or so assessments of their skills as a manager are provided by their direct reports, and we also examine that in great length and identify areas of improvement in that area as well."

All this information is put into a two-page, 11x17 spreadsheet so detailed that 10-point type fills it. Grades assigned range from 1.0 to a high of 5.0. Any grade of 3.9 or below requires a training remedy. (See Successor Candidate Profile)

Filling the Gaps

The meat of Hovnanian's Succession Planning Program is to identify the areas where strong players need work and get them up to speed in those areas as fast as possible. Based on the needs uncovered in the Successor Candidate Profile, a High-Impact Development Plan quickly becomes the focus of future actions.

After the committee accepts a candidate's nomination, Moore and the candidate evaluate all available tools to aid the candidate in meeting a particular training need. For one potential area president - who worked his way from construction superintendent to divisional roles as construction manager, vice president of construction, vice president of sales and marketing, and community builder before being tapped as an area president succession candidate - operational skills needed related primarily to land acquisition and finance.

To get up to speed on land acquisition, this candidate agreed to complete a series of self-study modules developed internally. This would then be followed by a regimen of real-world land-buying experience. From how to build accurate pro formas to completing feasibility and due diligence reports, each self-study module relating to land has a target date for test completion, usually about 30 days out.

These modules are intended to provide a basic understanding of the subject before the candidate is assigned to shadow a land buyer as he or she selects land and structures a deal. Once the shadowing is complete, the last step is to go out and do it.

"We say to them, 'Here is a piece of land. Go do it. Make the deal,'" Hodges explains. "'Do two or three of these, and we will consider you to be sufficiently skilled in the area of land acquisition, and you can move on to another area if there is another gap. It is a very long process."

Acquiring leadership-level behavior skills runs on a different track at the same time. This particular candidate needed better presentation skills, better listening skills and better overall composure. In addition, his scores for "motivating others," "building effective teams," "delegating," "managing people development needs" and "managing self-development needs" indicated a need for work in these "soft" areas.

The remedy was to work with an outside executive coach hired by the company. Before even meeting with the coach, Moore and the candidate set concrete goals and action steps for each behavior skill lacking.

For listening and composure, target goals were set in terms of grades to be achieved in the candidate's next 360-degree feedback report. He has to work on how to not be "knocked off balance by surprises," how to not be "defensive and sensitive to criticisms" and how to not "appear arrogant, impatient or uninterested." These are the less tangible issues managed item by item in meetings with the executive coach over several months.

Getting to 'Ready Now'
In the eight months since Hovnanian Enterprises instituted its Succession Planning Committee, about 50 candidates have been approved to join the program, and each has subsequently presented a High-Impact Development Plan to the committee.

When a development profile is completed, each succession candidate is put into one of three designated categories that describe the timing of their readiness to succeed into a senior management position. Hodges says about 50% of the development plans call for those candidates to be ready in two years. About 40% of the current crop are designated "ready in one year."

The final 10% started at the finish line. Based on all the career data gathered by the Succession Planning Committee, their experience and skill sets deem them "ready now" for promotion to area president, division president or region president, depending on whom they are designated to succeed.

This is good news to Ara Hovnanian. "We have tried succession planning both ways," he says. "Those we have promoted internally are nearly 100% successful, and those we have hired from the outside are closer to 50-50."

The dimensions of the Successor Candidate Program at K. Hovnanian are best put in context with its overall organizational development program headed by Bill Moore. Up and running in its Northeast division and other business units for more than four years, the Career Path development program is a detailed process by which associates in every job title in the company can map out a program of improvement to get to a desired position. Starting superintendents can work up to intermediate and mastery pay and skill levels with that job title and then graduate into community management positions and so on. The same is true with individuals in sales and marketing or administrative roles.

"Career Path provides a snapshot or a picture of the path of their development from wherever they are in the organization and ways for them to climb the ladder in the organization into positions of leadership," Mark Hodges, senior vice president of corporate operations, explains. "That includes horizontal movement across job roles, which is a really important part of the Career Path program."

At the highest levels of the program, mid-level managers can move into the company's standard leadership development program, but they are distinct from those selected to join the succession program. The leadership development program is designed to enable managers to set out on a learning curve and acquire the skills and attributes the company wants in its leaders. The detailed list of attributes and proficiencies covers everything from leadership behaviors to technical requirements in finance and other disciplines.

Who Makes What In The Industry: Purchasing/Land Acquisition