Losing The War For Talent

New research conducted in partnership with Wharton, UBS, and Harvard Business
School shows that 97% of large corporations are not developing vital leadership skills.

By Sue Todd, President & CEO, Corporate University Xchange

As the rules for business survival are continuously transformed by growing competition from emerging markets, the operational best practices utilized by the majority of companies are rapidly becoming antiquated. Strategies based on supply chain and procurement optimization have reached their peak value and are now delivering diminishing returns. In order to maintain competitive strength, a company must now optimize the use of its only true asset - knowledge. There is ample, credible data showing that the next key opportunity for business efficiency and innovation lies with leveraging knowledge through strategic leadership development. A failure to respond to this need will cripple the ability of an employer to attract, retain and develop top talent.

McKinsey’s Lowell Bryan and Claudia Joyce wrote in “Mobilizing Minds, Creating Wealth from Talent In The 21st Century Organization” that leaders must address the challenges confronting complex structures and processes if they want to stay in business. Research, however, indicates that models for selecting, developing, and retaining these leaders need to be fixed or updated as a first step. Additionally, Bryan and Joyce found that “thinking-intensive” companies – those with a large percentage of employees who must think subjectively and solve problems rather than perform well-defined tasks – are delivering staggering income, profitability, and market capitalizations.

The author’s research is based on a study of 1,500 companies, and found that “profit-per-employee” in thinking-intensive organizations was $30,000 more than competitors in the same industry. Based on their findings, Bryan and Joyce argue that a company with 100,000 employees could increase revenue by tens of billions of dollars by more effectively mobilizing knowledge, skills, and relationships to deliver superior service to customers. Conversely, companies that are not actively developing this type of talent are increasingly at risk of being overtaken by more agile competitors who are adept at leveraging their human capital.

Corporate University Xchange (CorpU) - a global learning and leadership research and consulting firm that has spent over a decade studying employee performance optimization and measurement - recently completed the Leadership 2012 study, focusing on trends and best practices for developing leadership talent. Eighty Global 2000 organizations participated via telephone interviews and a survey of 225 data points on leadership and talent practices. Organizations involved in designing and completing the research included UBS, Wharton, Harvard Business School, Toyota, Honeywell, Google, and many others (a complete list is available at http://www.corpu.com/leadership/).

Real Leadership Challenges The results from CorpU’s Leadership 2012 study revealed that current models for developing leaders seem to be falling short of delivering adequate leadership talent, which organizations desperately need to execute their business strategies. A small selection of the survey results indicates the degree of the current problem. For example: 97% of surveyed organizations indicate that they are concerned about current leadership bench strength or their ability to develop the leadership talent required to support the company’s future growth objectives. 81% of surveyed organizations have “significant” concerns about the leadership bench strength and their ability to support growth initiatives. 69% say they are “somewhat” or “significantly” challenged to develop the leadership talent required to compete in emerging markets. 91% say they are challenged to identify high potentials early in their careers. While organizations say that “developing talent” is a key competency for their leaders, the topic receives the fourth lowest amount of attention in formal leadership development programs and action taken by managers.

Many participants in the study voiced concerns regarding their ability to support their firm’s business plans and strategies by delivering key leadership talent when and where it’s needed. Their concern is not yet translating to a substantial change in action at the top of their organizations, and a full 68 percent of survey participants said their firm’s commitment to leadership development is either weak or is not backed up by appropriate levels of financial investment.

Additionally, participants noted that the focus of leadership competency models is requiring leaders to coach and mentor employees, but that the day-to-day actions of leaders do not match the organization’s rhetoric. For example, leaders often do not release people for stretch assignments or give them adequate time to complete their development plans as corporate training policy may dictate. The research also discovered that many companies have adopted the Jack Welch playbook, but are receiving mixed results in their firms.

For example, only 32 percent say their leaders-as-teachers programs are highly effective. This is likely caused by the subtle cultural nuances that make them effective programs in one organization, and a wasted effort in another. Survey participants know that their challenges to attract, grow, and retain good leaders will only become more difficult as the projected shortage in leadership talent becomes a reality in the next few years. Some reported that their businesses have already bungled growth opportunities because they did not have the right leaders, or any leaders, to drive them.

Ultimately, results of the Leadership 2012 research study indicate that Human Resource, Learning, and Talent Management professionals are concerned that:

• They are not building a strong core of great leaders
• Programs and processes for developing leaders need significant improvements
• Without change, shortages of leadership and other key talent may prevent their companies from achieving their objectives, leading to a negative impact on company performance

A Time of Change

These concerns demonstrate the amount of change currently surrounding the way organizations grow and develop their leaders. For example, study participants describe leadership development programs that are in an almost constant state of flux. Participants from one automotive company actually withdrew from the study because they were unraveling a previous merger and realized that they would need to rebuild significant aspects of their programs as a result. Others reported changes at the CEO level that were driving philosophical shifts in their overall approaches to leadership development, thereby causing delays in the execution of those programs.

Data collected in another recent, self-funded CorpU study focusing on employee development practices in large, international organizations shows that 41 percent of the 226 participants said that Executive Development programs have completely or significantly changed in the last 18 months.

In addition, the degree of change in programs for other leaders and high potentials is even more dramatic, with almost 50 percent of respondents reporting significant or complete change.

As pressure mounts in all organizations to attract and retain top talent, leadership development challenges will require more attention than ever before. In general, leadership talent processes are not managed as an integrated set of activities in the way that other organization core processes are. Leadership activities often are managed as discrete and separate activities owned by a variety of groups within the Human Resource, Learning & Development, Organizational Development, Talent Management and other support functions.

Organizations should consider the “integrated supply chain” as a more appropriate model for structuring leadership and talent processes. In order to succeed, this model must streamline the flow of information among the owners of the process steps and improve the efficiency for moving leadership talent through its development evolution.

Very few companies have built a technology or systems infrastructure to offer significant transparency into leadership talent pools across the enterprise. In most cases, stand-alone systems monitor critical activities such as:

• Performance results.
• 360-degree assessments.
• Past work experiences.
• Specialized skills and knowledge.
• Formal training.
• Task force assignments.
• Employee engagement study results.
• Individual development activities.
• Other variables that contribute to an in-depth profile of potential future leaders.

In order to identify and effectively manage leadership and basic employee development operations, companies must invest in systems that can produce an accurate picture of the current state.

Morgan McCall, author, professor and thought leader on the topic of leadership development, says that the key to the development of successful executives has little to do with formal training and more to do with increasingly challenging work experiences. The majority of participants in the CorpU study revealed that developmental assignments are often performed in an ineffective, ad hoc manner based on gut-level feelings from supervisors about the experiences they “think” potential leaders require. In addition, participants indicated that there is little or no science behind how stretch and rotational assignments are used to round out a leader’s developmental experiences.

Bright Spots On The Horizon

As it becomes increasingly important for organizations to develop good leaders who are capable of working on a global stage, new ideas are emerging about how to improve current leadership practices, including:

• Embracing the notion that Human Resources is evolving as a “decision science” and creating the structures, systems, and measurements to make fact-based decisions, as well as identifying new metrics that can improve how organizations predict talent needs and estimate the value of talent.
• Understanding the impact that leadership roles have on an individual’s entire family, therefore beginning to include spouses or partners in decision-making processes and in the leadership development programs to strengthen the family’s commitment of a future leader’s success.
• Investing in leveraging so-called “soft skills” in order to create a workforce that is committed to, and able to work towards, clearly defined company goals.
• Recognizing that intangibles such as culture, personal ownership and job satisfaction are now becoming the critical factors in the development and retention of a highly innovative and competitive workforce.

These and other new ideas must be understood and implemented for businesses to develop strong leadership benches to survive and excel in the changing global corporate paradigm.

Additional Resources for Leadership Development

The 10-page executive summary of the Leadership 2012 report is available to the public at http://www.corpu.com/leadership/. The complete report is available to Corporate University Xchange members in the online collaboratory at www.corpu.com

About the Author

Sue Todd is President and CEO of Corporate University Xchange, the world's leading corporate university research and advisory company. She works as an advisor to Global 2000 organizations on all aspects of designing learning strategies, monitoring the impact of learning and development on business performance, and implementing enterprise-wide learning technology infrastructures. Sue also administers the development of CorpU research.

Sue has more than 20 years of experience consulting with corporate universities and learning and development groups on performance management, eLearning, learning content, program measurement and other HR and training-related topics. She has taken the lead on corporate university design projects with companies like Air Products, M&M Mars, Rio Tinto and others, and has presented at ASTD and Training events and other industry conferences.

Prior to joining CorpU, Sue was V.P. of Product Management for KnowledgePlanet, and directed the development of the first business-to-business eLearning marketplace. She also drove the development of technology-based performance management solutions and helped both media and industry analysts shape the LMS and eLearning industries.

Sue received her BA in English with a Minor in Business from Shippensburg University. She has done her graduate work at Temple University.