Management Science Notes: What would CEOs claim as their biggest leadership challenge?

Question:

How many organizations engage in succession planning?

  

Answer: 

Most claim to, but only 2/3 of larger organizations really roll up their sleeves.

 

Some stats…

• Among companies with more than 10,000 workers, 86% reported having a succession plan in place and 69% conduct regular talent reviews.  Among companies with less than 10,000 employees, 45% have a formal plan or conduct talent reviews.  (i4cp and HR.com, 2008)
• Other studies suggest only 2/3 even have a plan—formal or informal.  According to a 2006 SHRM study of 2,406 organizations, only 29% have a succession plan in place, 29% have an informal plan in place, 26% have no plan but intend to develop one, and 16% have no plan and no intention of developing one.

 

A brief characterization of the reality: 

 

1.  Literally ¾ of CEOs claim “succession planning” was the most significant challenge for the future. 

• Additionally, about 70% of CEOs said the next most pressing problems were, “Providing leaders with the skills they need to be successful” and “recruiting and selecting talented employees.”  (Based on SHRM Foundation (2007) study of 526 C-suite executives in global as well as domestic firms of all sizes)

2.  The shape of the workforce will need to change.  Among other things, Baby Boomer generations in many countries will force change:

• In the US over the next five years, Baby Boomers (1945-1960) are retiring in large numbers and Generation Y or Millenials (1970-2000) are entering the workforce in much fewer numbers.
• Only 47 million Millenials stand ready to replace the 76 million Baby Boomers now facing retirement.

3.    Hiring from the outside may not always be the answer

• 66% of senior managers hired from the outside usually fail within the first 18 months (Center for Creative Leadership).

4.    But we may not always have confidence promoting from within without significant skill enhancements

• Only 24% of organizations are confident in their ability to staff leadership positions during the next five years (Watson Wyatt).
• 84% predict that leaders with significantly different skill sets will be required to fill vacant positions  (Watson-Wyatt).

5.    Some organizations are better positioned than others to leverage talent as a differentiator.

• In companies that foresee no additional layoffs, 60% of executives plan to increase programs for developing high-potential employees (Deloitte).
• In companies that plan still more cutbacks in the coming quarter, just 34% of executives plan to increase high-potential programs (Deloitte).

 

This prompts a key question: How do our HR priorities align with this characterization of reality?