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The Looming Leadership Talent Wars and What Organizations Need to Do to Secure Their Future

Originally published June 5, 2007

Note: This is the first article of a multipart series covering current issues in the field of leadership development. Subsequent articles will offer actionable ideas on topics ranging from measuring leadership development effectiveness to creating a culture of leadership development in your team or organization.

The Macro Problem: An Emerging Leadership Talent Shortage

The recruitment, retention and development of talented workers are significant issues for all organizations in this increasingly global and knowledge-based economy. In the U.S. market alone, the rapidly changing demographics are projected to have a profound impact on labor pools and management resources in organizations in almost every industry for years to come. Published estimates indicate the potential for 76 million baby boomers to retire over the next decade with just 46 million workers available for replacement. A special report on “The Search For Talent” in the October 7, 2006 issue of The Economist puts this issue in focus indicating, “By one count, half the top people at America’s 500 leading companies will go in the next five years.”

Given the very predictable need for management talent, what’s an organization to do? Writing in the Harvard Management Review in April of 2006, Eric McNulty states, “As the oldest baby boomers draw closer to traditional retirement age, forward-thinking firms are investing more heavily in leadership development and succession programs. They are focusing on building up bench strength: embedding in their top young talent the skills and wherewithal to take over leadership positions when the time comes.”

Four Implications of a Leadership Talent Shortage for Organizations

With experienced leaders exiting the job market at an unprecedented pace over the next decade, unprepared organizations can look forward to four major headaches:

  1. The ability to execute complex strategies in a fast-moving, global marketplace will be compromised by a shortage of knowledge workers and experienced leaders.

  2. An investment in the retention of talented leaders will become table stakes in this emerging "sellers" market for experienced professionals. 

  3. Younger, less-experienced workers will assume leadership responsibilities earlier in their careers, often without the benefit of a veteran mentor to guide and help prevent costly rookie mistakes.

  4. Attracting, developing and retaining leadership talent will define a new competitive battleground where the stakes include survival.

The stakes are high in the battle for talent in this increasingly knowledge worker-focused world. Those organizations that focus on creating a culture where leadership development is a strategic imperative will be the winners in this important battle for brains and experience.

The Challenge: Establish Leadership Development as a Core Competency

Given the measurable and predicted changes occurring in the workforce, it is inevitable that leadership talent will increasingly be valued as a strategic asset. While a few well-heeled corporations are able to invest in creating an extensive leadership and talent development infrastructure, this is the exception more than the rule. The good news is that it does not take a lot of new infrastructure or even significant investment to take strides in the right direction. The first step down this path is to understand where current practices fall short and then to identify a number of pragmatic improvements.

Themes in the Current State of Leadership Development Practices

Fresh from our recent research efforts, it is our observation that many organizations have not yet formally recognized the need to strengthen their leadership development practices. We have talked with many accomplished and committed leaders who, when questioned about formal organizational practices for identifying, developing and retaining leadership talent, indicated that it was often left to them as functional or business leaders to manage.

In parsing the more than 1,000 answers gained through our interview process, a number of important themes emerged, suggesting significant opportunities for improvement in many areas of leader identification, new leader development and ongoing development of established leaders. These include: 

  • The identification and development of new, first-time leaders is often ad hoc with no formal structure or approach to improve success and weed out potentially poor choices. Additionally, early-career leaders often report a lack of mentoring and support during their start-up phase – a point in time where they clearly would benefit from appropriate support. 

  • Formal career planning as a means of developing and retaining talent is not widely practiced. 

  • The general perception of early career professionals is that leadership is a means to an end or a normal part of "climbing the ladder," with little perspective on leadership as a distinct career choice.

  • In many organizations, leadership development has not achieved a level of strategic significance.

Improving Leadership Development Practices – Suggested Actions

Given the expected growth in demand for leadership talent over the next decade, exacerbated by the shrinking supply, it is critical that organizations pursue leadership development best practices as a strategic imperative. The current state of leadership development is frighteningly ad hoc with well-intentioned individual leaders challenged to compensate for the lack of organizational commitment. As a result, there are tremendous opportunities for promoting managers and aspiring leaders/professionals to contribute to building a strong leadership culture through their own efforts. The following points are high-level suggestions for organizations and leaders to consider as part of a focused program to strengthen their leadership development practices.

  • Identify leadership development as a strategic priority.

Historically, a good strategy program identified the human issues necessary for execution as a part of each major initiative and assigned ownership of these issues to HR. In an environment characterized by a shortage of knowledge workers and leadership talent, burying leadership development in the larger laundry list of to-do items is no longer acceptable.

It is time to elevate this important topic to the short and very visible list of strategic priorities and provide it with the same level of attention, scrutiny and follow-up as other major investments and initiatives.

  • Ensure that leadership development is everyone's business.

The tendency of organizations to relegate talent development issues to the HR department is no longer effective or acceptable. Once leadership development is prominently identified as a strategic priority, the line of business and functional leaders own the responsibility to ensure that their plans incorporate human success factors in design and in ongoing measurement and evaluation. According to Jonathan Otterstatter, Executive Vice President and Chief Technology Officer at predictive analytics software provider SPSS Inc., "The single biggest influence to employee development is the desire of the current company leaders to develop more leaders. Although most managers understand that one of his or her responsibilities is to develop employees and leaders, few are genuinely interested and sincerely engaged to develop a subordinate to the point of displacing themselves." Otterstatter said.

The discussion about leadership development as part of the strategy will quickly evolve into discussions concerning identifying and developing new leaders, supporting the career development of experienced leaders and helping all groups develop the skills that they need to support the organization's growth. Topics including retention, career planning and succession planning quickly enter the firm's vocabulary, with HR playing a key role in creating systems and tools to aid the cause. This increased focus on talent issues and practices sets the stage for leadership development to become a cultural imperative as well as a strategic one.

  • Facilitate new leader identification and development.

Building your leadership bench organically is a powerful and efficient way to ensure a readily available pool of future leaders. These individuals learn your business from the ground up. They understand the culture and values of the firm, they become experts in products and services and they develop deep institutional knowledge. With the appropriate mentoring and guidance, many of today's first-time managers become tomorrow's line of business and company leaders.

The early stage of a new leader's tenure is an important period of time for building credibility, earning the respect of team members and gaining an understanding of challenges and opportunities. This is magnified in the case of the first-time leader, where everything is new and the opportunity to misfire in many areas is high. A consistent theme from the interviews was that early-stage coaching and mentoring coupled with frequent feedback for the new leader are powerful practices for accelerating progress and preventing costly mistakes. One of the interview participants in our research project, a Senior Human Resources Business Partner with twenty years of experience in leadership and training offered the following: “Most importantly, the business must recognize the financial impact of weak frontline leaders." Additionally, she described a four-step process as a model to help improve an organization's new leader development success: 

  1. Target – identify those individuals that have potential and have a desire to move into more leadership roles. 

  2. Assess – help the individuals learn more about themselves – which includes their values and how that translates to leadership, their skills and their capabilities. 

  3. Plan – create strong development plans that the individual owns and that their manager supports. 

  4. Evaluate – assess progress and determine readiness for movement into a frontline role.

Organizations intent on building strong leadership development cultures will need to institutionalize the discipline and practices necessary to support the development of the emerging leadership talent pool. The cost to implement mentoring and coaching for new leaders is almost nonexistent, especially when compared to the potential costs of not implementing these practices.

  • Institutionalize career planning.

Inherent in creating a culture of leadership development is the need to institutionalize career planning as a part of everyone's responsibilities. Effective career planning processes ensure that managers and associates are talking about and acting on important topics like assignment rotation, skills development and best next steps. Ultimately, an effective career planning process can prove valuable for increasing retention and helping to ensure that people are focused on aligning their interests and skills with the needs of the organization.

  • Treat leadership as a distinct career choice.

As part of institutionalizing career planning, it is important that organizations begin to specify leadership as a distinct career choice instead of simply the traditional best way to climb the corporate ladder. In a world increasingly comprised of knowledge workers, the choice to grow your career in a leadership role or as a valued individual contributor is a reality. An individual that is properly informed of the true role of a leader as well as the challenges and rewards from a career in this profession can make an informed decision about whether leadership is a proper path. Additionally, managers who are appropriately educated in these concepts can better advise and guide people though the planning process. This educational filtering mechanism can help ensure that the right people end up on the right track, allowing the organization to better focus its leadership development efforts.

The Bottom Line

Organizations that establish talent and leadership development as a core competency will enjoy a meaningful competitive advantage in the near-term and be better prepared to survive over the long-term. The identification, development and retention of leaders must become a focal point of an organization’s strategy or opportunities will shift to better-prepared competitors. The demographic tidal wave is going to hit all of our organizations and the time to invest in building a leadership development culture is now. Fortunately for all of us, most of the investment comes in the form of creating and reinforcing some remarkably commonsense practices.

Next: How to determine your organization's leadership development maturity by leveraging the Leadership Culture Index. You will be introduced to a concept with the potential to help you identify opportunities to improve or initiate practices that can dramatically evolve your culture to a competition-beating leadership machine.

SOURCE: The Looming Leadership Talent Wars and What Organizations Need to Do to Secure Their Future

Recent articles by Rich Petro, Art Petty

 

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