With the Baby Boomers retiring and the reduction in numbers among the Gen Xers, many nations around the globe are seeing a serious problem in their corporate ranks – a critical lack of leadership in many different departments.
In Brazil, this situation is playing out in a particularly difficult fashion: as Baby Boomers retire, instead of replacing them with highly experienced leaders, corporations are choosing to replace this senior talent with less experienced, much younger employees. Not surprisingly, these younger employees lack knowledge of their predecessors as well. This decision is causing unprecedented employee turnover and costing their corporations a lot of money.
According to recent worldwide research, conducted in partnership between the Human Capital Institute and the University of North Carolina Kenan-Flagler Business School, "Forty-seven percent of survey respondents highlight gaps in knowledge between current and future leaders as an important issue in their organizations." Obviously, the solution is to speed up the development of new leaders. However, the increasing pace of change in our knowledge economy and a lengthening of the global learning curve complicate this situation.
In polling human resources and training and development professionals, 55 percent of whom were at the director-level or above, the team came up with some interesting and troubling findings. First, they describe the state of leadership as "bleak." While the organizations are concerned about their leadership bench strength, more than a quarter of them report that 20 percent or more of their employees will reach retirement age within the next five years.
Most senior leaders are not satisfied with their current bench strength and are concerned that their own "high-potentials" will not be adequate to meet future business needs. Fewer than half (40 percent) reported that their high-potentials could meet future business needs.
On the other hand, respondents also reported their learning and development budgets are not meeting current needs (77 percent). At the same time, the study identified the top five leadership competencies: "ethics and integrity, drive for results, effective communication, strategic thinking/insight and relationship management."
Wise organizations, effective in developing leaders faster and reporting more "leadership-ready employees have development activities fully integrated with business strategies." Moreover, they "hold employees accountable for the application of new skills and knowledge to the job." Another key that we at The Herman Group always shared with our clients is to rate and compensate leaders on developing their direct reports.
Expect the shortage of leaders to be a critical factor in the growth of organizations in the years ahead. Investors will increasingly ask questions not only about employee retention, but also about the organization’s leadership bench strength.
