In our meetings with CEOs and HR directors, it is evident there is a growing concern within organizations needing to strengthen current leaders and support the bench of the future ones.
After reading Gartner’s report on How to Build Leadership Bench Strength, these are my conclusions: HR already invests 23% of its Training and Development budget in Leadership and 27% on the high potential professionals. About $3,750 per HIPO annually. In addition, executives are investing more time in succession management activities. And yet, talent pools and confidence in future internal leaders continue to weaken.
The reality is that today leaders’ abilities have hardly changed. When the business environment in which leaders and organizations must operate has changed considerably. What are the most relevant changes in the new business environment?
We are, whether we like it or not, in an era of CHANGE, and in a change of era. An era of unprecedented volatility, uncertainty, complexity, and ambiguity (VUCA). With exponential technologies, multi-Generations at the workplace, new off-industry competitors challenging incumbents, the Covid-19 New Reality…
All these events are contributing to creating this permanently changing environment that challenges all “traditional” organizations including yours.
How do they affect Leadership? First, leadership is more complex. Nowadays, more stakeholders need to be consulted, teams are working from home and spread around the world, leaders embrace wider areas of control, and as result, they have less time available for their teams.
Second, leadership roles are more frequently transformed. Some roles are eliminated, while new ones are created. And those that remain are rapidly changing.
And third, as roles change, leaders’ capabilities need to be transformed. Contextual challenges have a significant impact on the capabilities required for leaders to succeed. Different contexts have different challenges that leaders must overcome. While these challenges are inherently difficult to navigate, they require different leadership capabilities. Specific experience in a challenge enhances a leader’s success. And the leader’s performance improves when his/her skills and experience match the challenges of a specific role.
The word “Transformation” is in the mouth and mind of the leaders of all these organizations, with derivations pointing towards digitalization, new business models, leadership, culture… The whole organization seems they need to be “transformed” to face present and future challenges if they don’t want to disappear in the process in the hands of more agile competitors, better adapted to the new reality. But “transformed” how and towards what?
Thus, contextual challenges include succeeding in VUCA environments, leading geographically dispersed teams, transforming a high conflict culture, or delivering rapidly changing products, services, or processes. As a result, key competencies are required as an orientation to results, problem-solving, agility, collaboration, bidirectional communication, and overall flexibility.
The current leadership pipelines do not work. Most organizations try to create a strong leadership bench by managing a pipeline of successors who have the potential to fill a specific position or role, but this approach breaks down in the current environment.
What are the dynamics that jeopardize the effectiveness of current leadership succession strategies? Some pipelines go nowhere, as some leadership positions are eliminated every year, or many leaders are placed in newly created positions. Other pipelines are too narrow, as most organizations identify less than 10% of their workforce as HIPOs. Or clogged, as most successor candidates do not perceive the significant opportunity for career progression at their companies. Even rusty, as one-third of the organizations, would change members of their leadership team if given the opportunity.
When the organization has a weak leadership bench, performance declines. In addition, it must fill senior leadership roles with external candidates, who could be more expensive, slower to onboard, or more likely to fail if there is a leadership style or cultural misalignment.
The alternative to current individual succession plans is to manage a leadership portfolio approach. How should we transition from the traditional to the new system? A good start is to get these basics right:
Strategic Succession Planning: based on projected demand, not just current supply. Align leadership strategy with organizational strategy, and design HIPO and succession processes to meet future leadership roles and requirements, not just existing roles, and vacancies.
Broad sourcing: expand not just deepen, your search for future leaders, increasing cross-organizational access to talent through broader transparency. Encourage employee aspiration for leadership positions. Design sourcing and retention strategies for underrepresented groups, ensuring that diversity, inclusion, and belonging efforts are reflected in the leadership bench.
Deliberate Diversification: identify and develop future leaders for a few different roles and contexts, not infinite agility. Include mobility, not just fit with a single role, in successor identification criteria. Design leadership career paths around a few diversified, not targeted, experience requirements.
Leadership Team Rebalancing: rebalance your leadership team regularly as succession does not end with placement. Align current leaders’ mindset and behavior with enterprise leadership, not just role, requirements. Reassign leaders based on complementary strengths, not just role fit. Transition leaders out of, not just into, positions if they become misaligned.
As Jack Welch said Before you are a leader, success is all about growing yourself. When you become a leader, success is all about growing others.
