Given the global economic headwinds and a challenging macroeconomic environment, companies across the board are finding innovative ways to sustain profitability. According to the CEOs who responded to the 2012 edition of The Conference Board CEO Challenge survey, the race to innovate, the war for talent, ‘black swans’, bad debts, and the hunt for new markets — all driven by an increasing drumbeat of regulation and oversight — define today’s global business environment. This combination of risk, uncertainty and complexity creates an intense set of unique leadership challenges for CEOs and business leaders across the world. Leadership capability has therefore come to the fore as arguably the most important differentiator in these times. The potential worth of an organisation is the collective worth of the management capability inherent within, which can be tapped for the greater good.

Understanding how to develop and retain leaders can be elusive in the context of an unpredictable economy, the exit of baby boomers from the workforce, and increasing global competition for leadership talent.

Organisations that have strong leadership want to retain it while others look at buying it as a way of improving competitiveness. The ‘buy or build’ question might not be relevant for many organisations which are not in a financial position to ‘buy’ their way out of leadership problems, so more emphasis is placed on ‘building’ leaders from within.

Forward-thinking companies know that sustaining competitive advantage is possible through identifying, developing and retaining leaders in critical areas, who can deliver measurable results. Sustainable leadership competency is important for stability and growth of India’s domestic and global organisations. More importantly, a collaborative leadership team can lead the much needed governance in HR for a measurable impact on business by improving productivity and driving organisational change.

To capture the wisdom about what’s working when it comes to grooming leaders from within, Mercer embarked on one of the most comprehensive studies on the state of leadership development – the Asia Pacific Leadership Development Practices Study – with participation from 663 organisations across the region. The primary purpose of this study was to develop insights into the current state of leadership strategy, assessment, development and succession management in the Asia Pacific.

1) While strategies are in place in many organisations, execution remains a significant problem

According to the study, many organisations are taking a comprehensive approach to grooming leaders from within, with 58 per cent of organisations reporting that they have a defined and agreed leadership development strategy. The problem is more in executing those strategies to move the needle on leadership development. A majority of the companies surveyed said that their performance management processes were not effectively identifying who was ready for the next move or position within their leadership pipeline.

2) Organisations are not focusing leadership development efforts on women as a segment

Women continue to make up a small percentage of senior leadership in organisations in Asia Pacific. In 37 per cent of organisations, women make up 5% or less of those in the top hundred most senior roles. Women leaders hold more than 30 per cent of senior positions in only 14 per cent of organisations. At the same time, over half of the organisations surveyed say they have no barriers preventing women from advancing to senior leadership positions. Yet, even among these organisations, women hold very few top leadership roles. A major problem contributing to this outcome is the organisations’ lack of focus around developing this segment. Among organisations with a defined and agreed leadership development strategy, only 42 per cent specifically address female leaders as a unique segment important to the company.

3) Leaders and managers are not being held accountable for grooming leadership talent

Successfully grooming leadership talent from within requires the efforts of all managers & leaders in the organisation. Yet 59 per cent the respondents say that their people managers have little or no accountability for developing future leaders. Given the serious talent demand challenges facing organisations, frontline managers should have much more accountability for developing talent.

4) People-related competencies are not among those seen as most critical by organisations in Asia Pacific

As part of the study, companies were asked to choose, from amongst 16 essential leadership competencies, the three that were most critical for leaders in the Asia Pacific. None of the top four competencies chosen had anything to do with leading and developing people. This calls into question whether companies in the region are placing sufficient emphasis on the need for their leaders to groom future leadership talent. Given this correlation between leadership and engagement and, therefore, retention and stability, it is surprising that organisations place people competencies well down the list of those critical to leaders in the region.

5) A lack of funding is not one of the barriers to leadership development

When it comes to funding leadership development, companies are willing to invest, at least when it comes to top-level leaders. Almost one-third of companies are spending more than $5,000 per person annually to train and develop their senior-level and global leaders. And 62 per cent use overseas assignments, one of the most expensive as well as one of the most effective development tools, as part of their development programme.

Certainly, we need more abundant and better qualified leadership to get us through the challenging times. Yet, we are moving to a leadership pool that is getting smaller and younger. While this presents obvious challenges, it also perhaps presents us with a great opportunity. The opportunity lies in the fact that we do know far more today about the importance of leadership continuity and the key leadership characteristics that contribute to the long-term success of institutions.