General Electric, Johnson & Johnson and Dell topped the list of best companies for developing executive talent, according to a recent survey by Executive Development Associates Inc. (EDA). But other research indicates that even “best practice” companies must invest more to develop the business acumen and leadership skills that the next generation of business executives need to win in the marketplace.
“The number-one challenge facing companies, based on our survey of trends, is bench strength, or having the executive talent they need to achieve their business objectives and key replacements for their executive positions,” said Jim Bolt, chairman of EDA. “That was the first time that’s ever been the number-one factor, and it was way ahead of all the other challenges facing organizations. It was the business condition that would affect the overall executive and leadership development efforts, and it was also the number-one objective of their overall efforts to develop executive and leadership talent over the next two to three years.”
Bench strength is a top concern, even among best practice companies, partly due to the large number of executives who are approaching retirement age. “I think that we’ve been asleep at the switch,” Bolt said. “We’ve ignored the demographics because when the economic situation was bad, people didn’t have as many choices in terms of job opportunities, and a lot of companies didn’t pay attention to talent management. Now, they’re paying for it.” Bolt added that many companies also are concerned with downsizing and are wondering whether or not pursuing high-stress, executive-level positions is actually worth it.
If leadership development is of primary concern to these companies, they’ll need a high level of business knowledge to draw from. “This year, the other thing that comes out loud and clear is that building business acumen is the second major area that companies are saying they see a deficiency, or the area where they’ll be spending a great deal of their executive leadership development resources,” Bolt said. “That would include business topics like strategy formulation and implementation, financial management—things like that.”
It makes sense that companies want their senior leaders to be adept in these areas, but why aren’t they already? “I think we’re still struggling with the fact that in most companies, we’ve done a really lousy job of moving leaders around in the organization before they get into senior executive positions,” Bolt said. “Therefore, they haven’t had a broad development of their executive capabilities. They still tend to grow up in a narrow part of the business. You have to move leaders through different functions and different parts of the business and provide them with global experiences before they get into senior executive positions.”
Additionally, Bolt said that investments in metrics and integrated talent management systems are necessary if companies are to capitalize on executive leadership development plans and investments. “In the survey, we found that people were pretty clear that the bench strength problem was staring them in the face and that the solution was to create integrated talent management systems to address the problem,” Bolt said. “Something like 40 percent of the companies said they excelled at having an effective integrated talent management system, which is pretty dismal. Not only that, some of the core elements that you would consider to be foundations for such a system, like succession management and having an effective high-potentials identification and development process, were also rated very low.”
“Most companies felt that they needed to do a lot better job of measuring the impact of what they do both in executive development and in talent management,” Bolt added. “Yet, if you look at the best practices people rated themselves on, metrics was the worst. Quite a few people say metrics is going to be more and more important in the future, yet it’s at the bottom of the list in terms of our capabilities. It’s the biggest gap between where we say we need to go and where we are today.”