Leadership Series

Part I - Why Develop Leaders?

Demographics and the Pending Leadership Void

Over the next 10 years, organizations of all sizes will face a critical leadership crisis. All indicators warn you will not be able to find -- inside or outside your company -- enough qualified and knowledgeable leaders to promote the growth and profitability you need. Many top executives have not faced the fact there will come a time when they will no longer be with the organization. Maintaining the success of your organization may well depend upon the succession planning and leadership development you initiate immediately.

We have already seen countless examples of organizations which have not adequately developed their leaders and have to either bring people in from other organizations or bring people back out of retirement. We see Bill Nordstrom asked to come back and run Nordstrom's when they ran into problems. We see the young Henry Ford assuming the position of chairman and CEO when Ford got into financial difficulties. And even having to bring out of retirement the former CFO to help.

This first article will focus on reasons for what some call the impending "leadership void." At least four factors are key to understanding why this is happening. In later issues we will discuss some solutions and give case studies of successful corporations who have opted for early diagnosis and prevention as a way to avoid the "void." In addition, we'll try to answer the question: "what can we do now to assure continuity of leadership in our organization?"

Reason 1: A very high percentage of senior leadership is either eligible for retirement, about to retire, or will retire over the next decade.

If you look at the demographics of the population, the "baby-boom," which is essentially this huge bulge in the workforce, will soon be in their 60's. The traditional time when people begin thinking about retirement. In fact, many of the most successful -- in top leadership positions -- may have the desire, as well as the ability, to start retirement early. The statistics are rather dramatic.

In 1995, there were about 41 million workers age 45 and older, representing about 31 percent of the labor force. By 2005, there will be about 55 million workers 45 and older, or about 37 percent of the labor force. The oldest of the baby boomers turn 65 in 2011. If they haven't already, that is when the majority of the 76 million baby boomers will retire.

So not only is there going to be a challenge for leadership talent, but there's going to be what some have called a "war" for the leadership stars of tomorrow.

Reason 2: From the late 80's through the 90's the dramatic efforts to "right size" organizations left fewer succession candidates.

In many cases, especially in the 90's, this significantly reduced the numbers of management level personnel. Staff groups were reduced considerably. Headquarters locations were drastically trimmed. So there are, in many organizations, fewer people in the talent pool from which leaders are selected.

Of course this led, in many cases, to an "experience gap." There are workers on the line. Then there is upper management. And no one in between learning how to take over the reins when the current leadership moves on. Either to retirement or hired away in the "war for talent" predicted by some of the business press.

The result was that many organizations increased short-term productivity and growth with a much smaller overall workforce. But in the end they may have sacrificed the long-term health ø even survival ø of the whole.

In addition, while maintaining the output of goods and services -- "doing more with less" -- they have actually expanded the workweek for much of their core management. It's not unusual for a 50 to 60 hour work week ø plus home and weekend work ø to be expected of upper management in all industries. They have had to "pick up the slack" as the workforce was reduced.

Is it any surprise when you see stress and burnout in many key executives? Leaders you could expect, if they have the financial means, to consider earlier retirement and better quality of life ... see Reason #1, above.

Reason 3: In the past decade many organizations created what are referred to as semi-autonomous work groups, semi-autonomous teams, or autonomous work groups or teams.

The thrust here was to reduce the number of supervisory people and integrate the leadership-type functions into the work of the team itself.

Part of the reason this worked was technology. Leaders had better information systems. They could actually find out what was happening on the shop floor through various measures and data collected by computers. They no longer needed the managers to provide the information necessary to make decisions and provide direction.

And so the thinking was, we don't need supervisors to provide direction to the work teams, and we don't need supervisors to be the ones to collect and process data. We can make that data available to various levels of the organization or parts of the organization.

This is the third factor essentially resulting in there being fewer leaders that have been prepared for leadership positions.

Reason 4: The fourth factor is that organizations have competing priorities for resources, time and dollars.

With the "right-sizing," and therefore downsizing of organizations, there was actually less time and resources available for the development of talent.

There was so much emphasis on getting the work done, making sure quality products and services were provided in a timely way, there was little time spent developing new skills, cross-training and development on the job. So a major barrier to development became time, the actual time spent in developmental programs or on development assignments was reduced.

In addition, "right-sized" organizations were not in a position to free up their people to concentrate on learning and development to prepare them for either new jobs or promotion within the same type of job. There was no number 2 or number 3 in line to step in. This lack of people resources will become more acute over the next ten to fifteen years ... see Reason #1.

Reduced budgets are also to blame here. Even though organizations historically may have spent anywhere from 2 to 4% of their payroll on development, if in fact they needed to improve their bottom line, or make the numbers look better, that 2 to 4% is easy to eliminate in the short-term. When organizations continually reduce development expenditures, they almost surely doom the entity to a leadership void as the "good" people leave for better opportunities.

The time for planning is NOW.

The above factors have resulted in a leadership gap that is becoming more and more apparent. A gap between the requirements for leadership and management talent and the people who are actually available and prepared to take these positions.

Savvy business leaders are now starting to become aware of that gap, and starting to take a look at what they have or have not done. Forward-looking companies have, in fact, identified leadership and management talent as the major factor in the growth and health of their organizations. Most are beginning to realize that the human resource development plans need to be reviewed and updated in light of strategic plans and objectives.

In future issues we will discuss further insights, tools and resources that can help you address these needs and unleash the leadership talent in your organization.

For more information on Leadership Development contact us at info@questcorp.com.