Perfect leadership storm looming

by 18 Mar 2008

MORE THAN 75 per cent of HR executives are concerned with their ability to develop future leaders, and given the explosive growth in emerging markets and the retirement of experienced personnel in more mature economies, companies are placing their growth strategies at risk if they cannot identify and develop the next generation of leaders.

A recent study of more than 400 HR executives from 40 countries found that leadership issues are surfacing worldwide, with organisations in every corner of the globe being impacted. Companies in the Asia-Pacific region are most concerned with their ability to develop future leaders (88 per cent), compared to Europe, the Middle East and Africa (74 per cent) and the US at 69 per cent.

“The ability of an organisation to look ahead and identify the skills it will need in the future, and then rapidly develop a critical mass of individuals with those skills in a cost-effective manner, will be a core competency for those companies looking to compete in the globally integrated world,” said Randy MacDonald, senior vice-president of HR for the IBM Corporation.

The study, which was developed by IBM Global Business Services’ human capital management practice and the IBM Institute for Business Value, with assistance from the Economist Intelligence Unit, found that rotating employees across divisions and geographies is also an important way to hone future leadership talent.

Yet, 36 per cent of HR executives stated that rotating leadership talent is a significant challenge in developing future leaders. Another key challenge is the generation gap – passing on knowledge from older to younger employees (28 per cent).

In addition to being unable to develop effective leaders, 52 per cent of HR executives said a significant workforce-related challenge facing their organisations is the inability to rapidly develop skills to address current and/or future business needs. Furthermore, more than one-third of study participants stated their employee skills are not aligned with current organisational priorities (36 per cent).

“In today’s business environment, organisations worldwide need to have a pipeline of future leaders who can deliver on today’s commitments, drive workforce and enterprise transformation, and lay the groundwork for future growth,” said Tim Ringo, global human capital management leader, IBM Global Business Services.

“Effective leadership not only guides individuals through turbulent business conditions, but creates a climate that attracts and retains high-performers, who will be in increasingly short supply in the future.”

For many companies participating in the study, turnover continues to increase. Forty-seven per cent of the organisations surveyed said that employee turnover has increased over the past two years, while only 16 per cent said it has decreased.

HR executives and line-of-business executives appear to be more concerned about developing existing employee skills than attracting new talent. Many believe their corporate reputations will allow them to attract and retain the people they need. While 52 per cent indicate an inability to rapidly develop skills is a primary workforce challenge, only 27 per cent state the inability to attract qualified candidates is a problem.

An underlying cause according to the study is that HR executives believe that despite the ongoing war for talent, they are more capable of attracting and retaining talent than their competitors. Almost 60 per cent of HR executives surveyed feel they attract and retain talent better than their peers, while only 10 per cent state they are less effective.

Justyn Sturrock, IBM human capital management practice leader in Australia and New Zealand, said most companies and their HR professionals were putting point solutions in place to ‘tick the boxes’rather than taking a more integrated approach to talent management.

“They’re going out and saying, ‘Okay, we understand this is a leadership challenge and we’ve put in an executive leadership program and we’ve gone to the local university and we’ve uploaded some of their content. Therefore we’ll tick the box on that one’,” he said.

“What we’re not seeing is any integration of such programs. So we’re saying that the differentiator is that you actually have to look at this from an integrated employee lifecycle point of view.

“So you’ve got to go right back to the equation: do you actually understand what your business strategy is and what are the skills that you need to deliver on that? That’s a huge question,” he said.

Sturrock said that HR needed to be able to provide reliable, consistent and meaningful data about employees for the executive team first, and working with IT was a good starting point.

“In some organisations where HR has lost their credibility and taken a hammering, you can almost guarantee that it was because they hadn’t had the data to back themselves up.”

Sturrock said HR has a strategic mandate to do this, but can’t do it alone and will have to operate as part of the executive suite. “If the executive suite doesn’t get this, HR’s got an uphill battle, but HR also then has to get into this space where they can start to have these discussions and debates.”

Responding to the issues raised in the survey required a whole-of-organisation response, according to Sturrock, and workforce transformation programs were too big for HR alone.


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