The Impending Leadership Vacuum

IBM just released the Global Human Capital Study 2008. The study is the result of interviews conducted with 400 human resources executives from 40 countries. It suggests that companies are putting growth strategies at risk if they cannot identify and develop the next generation of leaders.

The study reports that the most vulnerable companies are those in the industrial sector and those operating in the Asia Pacific region. Yet the impending leadership crisis is a worldwide issue. Driving the problem is the retirement of baby boomers and rapid growth in Asia. Baby boomers will drain companies of valuable knowledge when they retire, while multinational firms need to find people to lead their businesses in booming markets such as India and China.

The crisis doesn’t end there. “Not only are companies concerned with their current leadership capacity,” the study says, “they are confronted by their inability to develop future leadership talent. Over 75 percent of companies indicate building leadership talent is a significant challenge.” Fifty-two percent of the human resources executives interviewed said their organizations may be unable to rapidly develop skills to meet current or future business needs. The report concludes:

Creating an adaptable workforce requires more than a series of HR programs….It requires the ability to identify experts and foster an environment where knowledge and experience travel beyond traditional organizational boundaries. It calls for a talent model that can help companies recruit, develop and retain valued segments of the employee population….The human resources organization, by itself, cannot be expected to shoulder this entire effort. True, the HR function needs to take a lead role in providing strategic guidance on workforce issues and designing human capital programs that can enhance workforce effectiveness. However, the entire executive suite needs to play a role in improving workforce performance. This may involve providing functional expertise, taking joint responsibility for executing human capital programs or simply setting a positive example for employees within their organizations. Without this unified commitment, all bets are off….The key to building that kind of workforce lies with the leadership of the organization, facilitated in large part by HR.

The ideas in Ram Charan’s upcoming book, Leaders At All Levels, while focused more at developing CEOs specifically, addresses this looming issue and leadership development in general. He has developed a new approach to leadership development that moves it from just an HR function to “an everyday activity that is fully integrated into the fabric of the business and in which line leaders play a central role.” He calls it the Apprenticeship Model. It is essentially learning by doing.

In this timely and valuable book, he states that we focus on the wrong people for the wrong reasons and thus we fail to recognize and develop emerging leaders. He constructed a guide to correctly identify leadership talent early-on, called the CEO Nucleus.

The leaders with the highest potential will have what I call “the CEO nucleus,” the intuitive ability to comprehend the total picture of a business and how it makes money in the language of a street vendor. Another essential is the ability to work with and motivate people, and a third is the intellectual capacity to see ambiguous, complex, nonquantifiable situations from a broader view and through several different lenses.

We’ll take a closer look at what Charan has to say on this important issue as we approach the book’s December 21 release date.