As companies look to the next generation, significant shifts in the global workplace, such as workers’ changing expectations and demand for skills which are shifting faster than ever before, have combined to spur organizations to take a closer look at their leadership pipelines.
Brett Walsh, global human capital practice leader at Deloitte, says organizations are quickly falling behind on developing the right skills across all levels.
“There’s an urgent need for organizations to re-evaluate their learning programs and treat leadership development as a long term investment, rather than a discretionary training spend,” he says.
For the third year in a row, leadership has soared to become one of the most pressing talent challenges faced by global organizations today in Deloitte’s annual Human Capital Trends report.
As the economy recovers, companies see an accelerating demand for leadership across the board.
“Employers are absolutely looking for students who can lead and will be ready to create high-performing teams right away,” says Ingrid Jensen, associate director for leadership programs at Cornell’s Johnson Graduate School of Management.
Technical skills get students in the door, she says, but after that they are measured on how well they can lead and motivate other people.
Yet only 6% of companies surveyed by Deloitte this year feel ready to address their leadership issues; only 10% feel comfortable with their succession program; and just 7% have strong programs to build “millennial leaders”.
Workers are becoming more mobile and autonomous, with many employees working in global teams that operate around the clock. Leaders are under increasing pressure to manage international teams from a distance, and are expected to lead in less formal chains of command.
At the same time, pressure is growing on companies to improve succession planning, and examples of shareholder activism in response to failed leadership are rife.
Mindy Storrie, director of leadership development at University of North Carolina’s Kenan-Flagler Business School, says that it is important for organizations to hire leaders who are more self-aware.
“Employers are looking for leadership traits, even in entry-level positions,” she says.
Yet the traditional notion of “leadership” is changing, from a focus on the all-conquering CEO to leaders who promote openness and inclusivity.
Management academics are still squabbling over how to define it. “Leadership is a complex phenomenon that can be analysed and defined from different perspectives,” says Ricard Serlavós, professor at the Department of People Management and Organization at Spain’s ESADE Business School.
Geetha Krishnan, director of executive education at the Indian School of Business, argues that leadership is about empowering others, igniting their genius and thus creating more leaders.
“The role of a great manager is to ensure efficiency, whereas the role of a leader is to ensure growth, from an organizational as well as a personal perspective,” he says.
The most important quality today’s leaders need to develop, he says, is the ability to recognize the limits of their knowledge and adapt it to different environments. “Contextual sensitivity and intelligence separate the stalwarts from the mediocre.”
Technology will play a starring role in future leadership. Cognitive computing — the use of machines to read, analyse and make decisions — is impacting work at the executive level. The explosion of big data has created a new world of employee information. Deloitte argues it is urgent and valuable for companies to take advantage of this data for better leadership development.
Dustin Pusch, director of decision sciences and business analytics George Washington University, says leaders also need to promote a culture of data driven decision making. “Firms need to have an enterprise strategy for the use of data across functions,” he says.
Demographic changes are also in play. Millennials, who now make up more than half the workforce and are a majority on most business school programs, are taking centre stage. Their expectations are vastly different from those of previous generations — they expect accelerated responsibility and paths to leadership.
Executives today are also more concerned about having a positive “social impact”, according to a study this year by professional services firm EY and Oxford University’s Saïd Business School, particularly younger directors.
Pablo Esteves, managing partner at Emzingo, a global personal development firm, says globalization, sustainability, social responsibility and economic inequality are all impacting on the concept of leadership.
“The next generation needs to be prepared to lead social impact by creating new cultures, new markets and new standards,” says Pablo, an alumnus of IE Business School.
Given the sweeping changes to leadership and a growing need for talent, organizations are increasingly turning to education. The percentage of companies that rated learning and development as very important in Deloitte’s survey has tripled since last year.
Business schools market themselves as experts on leadership development, but they face challenges in catering to so many unique leadership styles.
David Loree, organizational behaviour professor at Canada’s Ivey Business School, says leadership must include individual style and characteristics. But he adds: “In most situations style is on the periphery, whereas real leadership development is at the core.”
Business leadership has been given added impetus from the growing issue of succession planning. Regulators in the UK are drawing up plans to change the corporate guidelines that cover succession, after investor criticism of companies that performed badly after the abrupt departure of an executive. The retailer Tesco and security contractor G4S, for example, have been singled out for criticism.
Research last month from the International Longevity Centre, a think-tank, warned that an ageing workforce could damage the UK’s economic recovery.
“The takeaway for succession planners is that they cannot delay seeking and spotting talent at lower levels of their organization,” says Ivey’s David. But they rarely allow leadership to manifest quickly at these levels, he says.
While executive pay remains a key issue for investors, shareholder activism has also been focused on powers such as allowing companies to raise funds without consulting stakeholders.
“A leader’s ability to consider others’ perspectives and to put himself or herself in others’ shoes is crucial. People will coalesce around an inclusive leader,” says Cornell’s Ingrid.
Dr Bernd Vogel, director of the Centre for Engaging Leadership at the UK’s Henley Business School and an associate professor of leadership, calls these “paradoxical demands”.
“We ask of managers quite a few dilemmas. You need to have decisiveness but at same time be humble and look at others around you,” he says. “Leadership is not about yourself, but rather how do I create capability within others?”
Dr Bernd singles out companies such as consumer goods group Unilever and Nestlé, the world’s largest food company by sales, as frontrunners in the leadership development race.
But while all companies are interested in honing their leaders, for many the pace of development may be too slow.
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