Leadership transitions are inevitable for any organization. But without proper preparation, it's all too common to rush to appoint an underprepared successor and end up failing. It's not enough to identify potential leaders within your organization; your company's C-Suitables need to follow through and personally help develop these leaders to augment your talent.
Matt Paese, senior vice president of leadership insights at global leadership consulting firm DDI, says the key to building a strong talent base is to take proactive steps to prevent potential leaders from leaving for better opportunities.
According to DDI's Global Leadership Forecast, talent numbers have fallen by a third since 2011, and only 12% of HR professionals say they currently have a strong pool of talent to fill leadership roles. What do you think is causing this talent decline?
Building bench strength, like many high-return strategies, requires ruthless prioritization of limited energy and resources — and in today's environment with so many competing demands, it's common for organizations to get this wrong and pour disproportionate effort into things that seem important but ultimately don't produce strong leadership.
The best example is potential identification, which is a necessary starting point for building a stronger talent pool. It can take a lot of effort to build a process to fairly and accurately identify diverse talent with the potential to grow into higher level roles and responsibilities.
This involves formal, objective assessments, executive meetings, and talent and performance discussions so that organizations can make honest decisions about who and how to invest in accelerating leadership growth. While the coordination, communication, and investments involved in these efforts can be significant, the expected talent enhancement outcomes are believed to be worth the effort.
While it makes sense conceptually, there's a catch to this approach. Here's how it works: HR and leadership teams work together to evaluate, discuss, and nominate people with leadership potential, sometimes recommending their development. It takes a lot of work, but the conversations are nuanced and thoughtful, and leadership develops a deeper understanding of the organization's talent.
All of this effort feels like a great accomplishment, but unfortunately, it still does nothing to strengthen the workforce. In many companies, having invested time and effort in identifying potential, management has a dangerous misconception that the work of developing talent is done, while accountability and support for actual development is vague or nonexistent.
This misappropriation of energy and focus becomes increasingly costly in a world with many competing priorities. It is essential for HR leaders to guide their executive team in balancing the identification of potential with development activities that accelerate skill growth and prepare them for more challenging assignments. The aim is to generate more energy and focus on growth by showing more evidence of growth.
What risks do talent-challenged organizations face? What competitive advantage can organizations gain by focusing on talent shortages?
DDI research convincingly shows that the highest potential leaders will quickly look for new employers if they aren't nurtured by their current employers. This means that failing to retain top talent is one of the most damaging costs of neglecting the talent shortage. But it's not the only risk.
Without a ready successor, leadership positions remain vacant, often for long periods of time, creating gaps in execution, team engagement, cross-functional alignment, and of course bottom-line results. And because these risks are often predicted, organizations rush into decisions and put inexperienced leaders in positions long before they are ready. This pressure-driven succession drive is the reason for the persistently high rate of executive failure.
These risks become even more difficult to bear when compared to the performance of organizations with strong talent. DDI research of more than 1,500 organizations worldwide has found that strong talent leads to many times higher quality leadership, greater retention and engagement, less burnout, and stronger financial performance. The competitive advantage these organizations achieve sets them apart from their peers.
How can HR leaders ensure their organizations are proactively planning for future talent needs and building a strong leadership pipeline?
Building a proactive organization that cultivates a healthy leadership pipeline requires shifting executive attention to development activities rather than simply judging potential and performance.
A common example that embodies this is how organizations routinely assess readiness for promotion. The phrase “ready for growth” is often used to describe leaders who could be promising successors, but only after some growth has occurred. Curiously, however, these assessments are often without active engagement from management to help with that growth. Management decides they're ready for growth, then moves on, leaving the actual work of growth to the individual and HR.
This avoids key accountability in building a stronger talent pool. Leaders who need further development before they're ready for promotion will need new assignments, work experiences, and formal learning that broadens their awareness and builds more advanced skills. Leaders can't do this on their own, and HR often can't make these actions happen without active executive involvement.
To develop a stronger workforce, the mindset must shift from seeing and understanding people to mobilizing them to stretch them and develop their skills in areas that will improve them. This is not a function that management can fully outsource. There is some risk involved in creating stretch assignments, but it is a risk that is far preferable to putting underqualified leaders in key roles, or even worse, not having people available at all.
When confronted with the reality of what is truly needed, most senior managers and executives quickly become interested not just in setting the stage for development but in putting their energy into making that development happen.
What metrics can HR teams implement to evaluate the strength of their organization’s talent and track progress over time?
There's one powerful metric that can transform the talent strength of any organization, and this simple example will explain why it's so effective.
The CEO of an underperforming company was challenged to hold senior leaders more accountable for developing their people. Change was too slow, and many leaders missed the mark.
The company had an annual process for identifying successors for key leadership positions, requiring at least two “hit-ready” leaders to be named as potential successors for every key role, but the painful misstep saw the process fall apart as it became clear that the nominated successors were not always as ready as advertised.
This forced CEOs and CHROs to face the reality that they needed to do more and sooner to develop potential successors. Rather than simply expressing this need and asking for help, they decided to implement a groundbreaking metric: C-level executives would now be evaluated on their contributions to the corporate talent pool – the number of successful successors they had produced from different departments and groups across the organization.
The goals were customized for each C-level leader based on the size and nature of their organization, but each leader understood this new element of performance evaluation: going forward, they would be evaluated by how frequently their organization produced successful leaders who advanced to senior positions in various departments within the organization.
Not surprisingly, this new metric led to a dramatic shift in the succession planning process. It was no longer enough to simply have a name on a succession chart; it became imperative to track the growth and development of successors and the performance of newly promoted leaders. This rippled through leaders across the organization, with C-level leaders now needing to “prep more leaders” for bigger jobs, accelerating their learning and taking on new challenges.
The point is simple: the best metrics for talent development are metrics that produce action. By challenging senior leaders to go further, real learning and growth occurs. The C-Suite leader in the example above began creating special challenges, projects, training and coaching that would accelerate experience, encourage new skill development and improve performance for emerging leaders. Creating development plans wasn't enough — they needed evidence of actual development, growth and performance.
