The past couple of years have forced leaders at all levels to face many uncertain and challenging situations. As many begin to reach a new normal, they find themselves worrying about what the future holds for their organizations.
At the top of the list of concerns for CEOs is developing the next generation of leaders. As the pandemic pushed many experienced leaders into retirement, younger generations are largely reevaluating their relationship with work. With a focus on work-life balance, many have chosen to take a step back, wondering how much of their time and effort they want to dedicate to work.
As a result, CEOs are panicking about attracting and developing the leaders they need. It’s clear that the model for leadership will have to change dramatically to fit the evolving needs of next-gen leaders.
Diminishing bench strength
One of the first questions to address relates to the current state of bench strength, which helps companies plan for day-to-day business continuity while preparing for the future. According to DDI’s Global Leadership Forecast 2021, global bench strength has been diminishing over the past decade.
Today, bench strength is the lowest it has ever been, with only 11 percent of organizations having a strong enough bench to fill leadership roles. Further, companies report only being able to fill about 47 percent of leadership roles on average. As resignations continue to be a threat, these numbers are rapidly dropping, leaving companies deeply vulnerable.
Concerns about having a strong leadership bench are shared by CEOs. In DDI’s CEO Leadership Report 2021, CEOs were less likely than other levels of current organizational leadership to rate the next generation of leadership as high-quality. In fact, only one in three CEOs said their first-level leaders are “very good” or “excellent” quality.
This could mean CEOs have higher standards of leadership effectiveness than leaders at other levels in their organizations. It could also mean that leaders may be struggling to gain CEO visibility, or that CEOs may be disconnected from other levels of leadership. As companies feel increased pressure to be innovative in an environment that is constantly changing, having a strong bench of leaders who are proactively prepared to lead will set companies apart from competitors.
HR as reactor, partner or anticipator?
Business leaders may feel the outcomes of not having the right talent in the right place at the right time. However, they are not alone in their talent planning ventures. Human resources teams also play a heavy role in working to fill talent needs in their companies.
However, HR’s role changes dramatically depending on how the company views the department’s strategic role. In DDI’s Global Leadership Forecast research over the past decade, three common groupings have emerged that describe HR’s role: as reactors, partners or anticipators. These roles are established through the extent by which HR proactively leads talent planning efforts in their companies.
Companies with HR teams that are more reactive in nature aim to provide key tools and systems to be used in talent planning processes when needed. These teams make sure resources are compliant with policies and practices but tend to play supportive roles to leaders who really drive the talent planning process.
HR teams that are seen as partners are a little more involved than reactor HR teams in the talent planning process. They openly exchange information with their business leaders about the talent issues their companies are facing. These HR teams also work collaboratively with business leaders toward common goals.
Last, HR teams can play the role of anticipators. Anticipators are more proactive and involved in the talent planning process. Instead of providing information when needed, like reactors do, anticipator HR teams leverage analytical techniques and human capital data to provide deeper insights about their current talent in relation to strategic objectives. They work closely with business leaders for alignment purposes, but they are typically leveraged for their expertise in the talent planning space.
Anticipatory HR teams bring positive outcomes
The role HR plays in talent planning for the future has important implications for companies in all industries. When CHROs are revered as anticipators, their HR teams are three times as likely to hire the right people versus those who are more reactive.
When HR’s role is more anticipatory, their companies are also more capable of reacting to change. HR teams have helped prepare their companies for change through hiring the right people and the right amount of people to help drive the business forward.
There are financial implications, as well. Not only are less time and money being spent on backfilling roles, but companies with more anticipatory HR teams are twice as likely to be among the top 10 percent of high-performing organizations than those who are more reactive in nature. Proactively planning for future talent needs in alignment with senior leadership’s strategic objectives helps improve the likelihood of being successful.
Internal promotions versus external hires
When it comes to selecting talent for new leadership roles, leaders can decide to select from their internal candidate pool or source talent from outside the company. Often, the decision is made to source talent externally because it may be more efficient. However, especially at the executive level, leaders have identified that internal hires succeed more often than external hires. In fact, DDI’s Leadership Transitions Report 2021 found executives hired internally are 25 percent more likely to succeed than those who were hired externally.
There are a few reasons why internal hires may be more likely to succeed than external hires. For starters, more information about internal hires may be available, such as work ethic, assessment information and past performance. Internal hires may have a more realistic idea of what it takes to succeed in their company than those who are externally sourced. Internal hires may also have informal coaches or strong internal networks that could mentor or lend advice when needed.
Why do leaders leave?
Although the reasons why leaders leave organizations are often unique, the Global Leadership Forecast 2021 research outlines a couple variables that may cause leaders to be a flight risk to their companies.
Burnout. When leaders experience burnout, they are at a much higher risk for leaving. In fact, results indicated that 26 percent of leaders experiencing burnout plan to leave their organizations within a year compared with only 6 percent of leaders who are not experiencing burnout.
Leaders experiencing burnout may be working hard to stand out, but they may feel they do not have opportunities in their current companies, contributing to their intentions to leave. In fact, 44 percent of leaders experiencing burnout expect to change companies in order to advance, almost double the percentage of leaders who are not experiencing burnout (24 percent).
The good news is burnout can be mitigated. The biggest factor that influences burnout is leaders’ ability to demonstrate empathy. When leaders connect with their teams on a more personal level, their team members feel that they understand when things become overwhelming.
Coaching and delegation skills are the second biggest influencer for burnout. Through receiving guidance and working to delegate to others, leaders can better manage expectations to get their work done.
The third biggest factor mitigating burnout is influencing skills. Influencing skills play a mitigating role to burnout because they permit more opportunities to guide decisions and foster excitement about common goals.
Leadership quality perceptions. Leadership quality matters. When leaders feel the leadership in their companies is effective, they are more than twice as likely to be engaged in their roles compared with those who rate their leadership as low-quality.
Having this stronger sense of engagement also has an impact on intentions to stay within their company. When leaders rate their senior leadership team as high-quality, they are 40 percent less likely to quit their organizations within a year compared with those who rate their leadership poorly.
Leadership alignment. CEOs and CHROs have different roles and perspectives in their organizations. And yet, they need to work closely together to align on the direction they are going. This alignment happens about half of the time. But when it does happen, it is felt throughout all levels of leadership in the company.
When CEOs and CHROs have alignment, 36 percent fewer leaders intend to quit within a year compared with those in companies where the CEO and CHRO do not align. To drive stronger alignment, the CEO and CHRO need to focus on co-creating strong leadership strategies, aligning to create clear expectations and competencies. They also need to agree on goals for diversity representation at the senior leadership level.
The time to act is now
With the leadership pipeline being the worst it has been in years, now is the time to better prepare high-potentials for leadership opportunities in the future. With the threat of turnover and retirements a constant concern and the initial crisis shock of the global pandemic subsiding, leaders are able to reevaluate strategic objectives and gauge what talent will be needed to bring goals to life.
In addition to strengthening the bench for key leadership roles, organizations may benefit from revisiting those who have been promoted into next-level leadership roles since the pandemic began. These leaders are significantly less likely to have received key development opportunities in the form of formal assessments, leadership skills training and 360-degree feedback. These tools are leveraged to help raise awareness of leaders’ strengths and opportunity areas and build individualized developmental opportunities for them to be even better prepared for what they may encounter in their new roles.
By skipping these key development opportunities, these leaders of the future do not have the same odds of being successful — and they feel it. Of those who transitioned just before or during the pandemic, 11 percent indicated their likelihood of leaving their organization increased, despite receiving their recent promotion.
By identifying high-potentials and developing them through the use of assessments, coaching and development opportunities, companies can build stronger benches of leaders who are better prepared for what lies ahead.
