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Leadership Dearth Threatens Corporate Growth

By Theresa Minton-Eversole  11/1/2007
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Even as the job market begins to cool, hiring experts agree that companies will continue to face workforce skill gap and retention issues, particularly as they relate to leadership development—or lack thereof.

More than 75 percent of 400 human resource executives from 40 countries surveyed by the IBM Institute for Business Value and the Economist Intelligence Unit said they are concerned about their ability to develop future leaders. Given the explosive growth in emerging markets and the retirement rates of experienced personnel in mature economies, the study suggests that companies are placing their growth strategies at risk if they cannot identify and develop the next generation of leaders.

Unlocking the DNA of the Adaptable Workforce shows that leadership issues are surfacing worldwide, with organizations in every corner of the globe being affected. For example, 88 percent of companies in the Asia Pacific region are concerned with their ability to develop future leaders, followed by Latin America (74 percent); Europe, the Middle East and Africa (each 74 percent); Japan (73 percent) and North America (69 percent).

“In today's business environment, organizations 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."

Key Workforce Challenges

Rotating employees across divisions and geographies is an important way to hone future leadership talent. But 36 percent of respondents stated that rotating leadership talent is a significant challenge in developing future leaders. Another key challenge is passing on knowledge from older to younger employees (28 percent).

In addition, 52 percent of respondents said the inability to develop skills rapidly to address current and/or future business needs is a significant workforce-related challenge. Furthermore, one-third of study participants stated their employee skills are not aligned with current organizational priorities (36 percent).

“The ability of an organization 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 human resources for IBM Corp.

Study participants also noted that turnover continues to increase, with 47 percent saying that employee turnover has increased over the past two years. Still, retention seems to be less of a concern than leadership development, with only 18 percent of respondents identifying this as a high-priority workforce issue.

These results seem to mirror those of another recent survey conducted by recruitment and talent management firm Hudson. In that survey, 75 percent of managers said they are not aware of a formal employee retention strategy at their company. However, changing trends in workforce demographics and mobility patterns suggest that they might need to invest more resources in recruiting, selection and retention.

“If pay is their only defense against turnover, employers are going to exhaust their compensation budgets quickly,” said Robert Morgan, president of Talent Solutions, Hudson, in a statement. “Finding good talent is going to be a problem across the board in the coming years. Companies are kidding themselves if they think that they will be able to hold onto their staff without thinking about the overall work experience.”

Respondents to the IBM study appeared, however, 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.

Critical Development Strategies

The IBM study identifies critical success factors to developing an adaptable workforce. Among them:

  • Predicting future skills. Successfully anticipating future business scenarios helps organizations to know what key competencies to target in advance of critical market shifts. Only 13 percent of organizations interviewed believe they have a very clear understanding of the skills they will require in the next three to five years.
  •  Locating experts. While predicting future skills is important, so is the ability to apply existing knowledge and skills to new challenges. Only 13 percent of respondents said their organizations are “very capable” of identifying individuals with specific expertise within the organization.
  • Fostering collaboration. Once the experts are identified, collaboration is the next step to foster innovation and growth. According to the study, only 8 percent of companies believe they are “very effective” in fostering collaboration across the enterprise. Technology is not the key deterrent to effective collaboration, with only 28 percent of companies indicating this as a significant factor. Instead, organizational silos (42 percent) are the leading barrier of collaboration in an organization, followed by time pressures (40 percent) and misaligned performance measures (39 percent).

Theresa Minton-Eversole is manager of SHRM Online’s HR Measurements Focus Area.

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