A wobbly pedestal: A case of ill-prepared business leaders
Corporate leadership structures play a major role in ensuring their company’s growth and sustainability in today's modern times. In the past few years, businesses have witnessed a rapid change in technological adoption, growing protectionist policies across the globe, and the impact of market economics in a globalized world. With the functioning of world economies growing more complicated, the external business environment has become more volatile, the impact of which can be felt on companies, who today are in a great need to adopt a proactive approach when it comes to mitigating potential challenges while being able to identify newer opportunities to enable the growth.
To understand the relevance of such market changes, one has to look at how leadership structures have evolved, often in response to economic threats and evolving industry practices. Leaders today have more on their plate than ever before, a fact that also increases their importance and accountability. In addition to the quintessential roles as business leaders, they also have to don many hats often with a higher degree of accountability. Not only does it come with the need to make accurate and successful business decisions, the role expands into building company culture, incubating future talent, establishing the right technological architecture within the company, and ensuring that it is ready to face unforeseen business challenges. To look at this broadened scope and to assess how successful our current leaders are in meeting such dynamic requirements, one finds that there are still many gaps left to be addressed which was also echoed in a recent DDI leadership report titled the “Global Leadership Forecast 2018”.
Sustainable leadership development
According to a CEO study done by the leadership development firm Egon Zehnder on 402 CEOs from 11 countries, over 68 per cent claimed to have acknowledged that in hindsight, they weren’t fully prepared to take on the CEO role. This reveals a significant gap in how leaders, across levels, are being hired, developed, and deployed in companies. Although a global survey, the conditions within many Indian companies aren’t any better when it comes to building and fostering leadership talent in the organization. The DDI leadership forecast report mentions that in India’s case, developing the ‘next generation’ of leaders and the failure to attract and retain top talent that could’ve been honed for leadership positions were rated as key challenges by over 68 per cent and 64 per cent of the respondents, respectively.
Given how the technological, demographic, and socio-political changes all remain a constant force of economic uncertainty, for companies to identify talent retention and development as the two major problems are indicative of the fact that companies might soon face a talent crunch when it comes to having the right leaders for the job. This was also highlighted in the report when the top skills needed for leaders in the country featured ‘identifying and developing future leadership talent’ as the number 2 skill behind building digital literacy.
There is a glaring gap between the perceived readiness of employees to become leaders and their actual readiness as perceived by the organizations.
Only 38 per cent of India HR professionals rate their organization’s bench strength—the supply to fill critical leadership positions over the next three years—at any level of strength (slightly strong, strong, or very strong) and, on average, only 39 per cent of positions could be filled by an internal candidate immediately. Forty per cent believe their succession management system and processes to be of low or very low effectiveness and 85 per cent of employees responded favorably when asked if they felt they were ready to take on leadership roles before they were asked or even the opportunity was available. There is a glaring gap between the perceived readiness of employees to become leaders and their actual readiness as perceived by the organization.
The RoI of leadership development
Today, leadership talent faces a potential threat of not being adequately prepared for the challenges of tomorrow. One of the most important tasks of talent development teams in companies is to build leadership qualities in their respective future leaders to ensure that a smooth transition happens as the role shifts between individuals and often across generations. As a result, today the focus, both in terms of investments and time, has gone up to building leadership and talent acceleration programs. But the DDI report finds that many are still sceptical of their use in ensuring that leaders of tomorrow are able to fulfil the expectations arising from an external environment where, due to technology like AI and automation, unprecedented change is slowly becoming a norm. The report found only 47 per cent of HR professionals in India who thought their organizations had an effective leadership strategy. Companies that do have such strategies in place report better returns on their investment in talent. They consistently feature deeper leader bench strength and stronger leaders at all levels.
Often it's not about all such development programs failing but rather not having the right approach to leadership development. Half-hearted and often disorganized in nature, leadership development programs that try to deal with symptomatic problems rather than executing an overall planned program fail to prepare leaders of tomorrow. Leadership models and development programs abound, only a few tie to business goals. Worse yet, there’s scant evidence that they actually work. What’s needed is a coherent, integrated leadership strategy as a well-crafted blueprint ensures that companies have the right talent, at the right cost, and with the right capabilities to deliver today and into the future.
Digital and data-driven decision-making
With leaders being tasked with both developing their own competencies by leveraging technologies like AI and Big Data, and ensuring their company culture enables its talent to do the same, building leadership capability that suits the current digital-era demands a workplace that facilitates learning every day. Being digitally literate is not only necessary to enable leaders to make better decisions, but also has a high correlation to many other beneficial attributes. The report notes that digital-ready leaders actively manage their own growth and development. For example, compared to their peers who aren’t as skilled, digitally-ready leaders in India are more likely (93 per cent versus 75 per cent) to take on assignments to build new skills. They’re also more likely to provide key inputs to grow the business (65 versus 40 per cent) and seek it from others (92 versus 84 per cent). Digitally literate leaders also impact their company culture in more ways than one as getting the culture right delivers more able, confident leaders. Digitally adept leaders are significantly more confident than their other counterparts in handling business challenges.
The report notes that, in comparison to ‘ digital laggards’, leaders with a firm grasp on digital technologies are 9 times more confident operating in a digital environment, and over 4 times more likely to anticipate and react to change.
As organizations undergo significant changes owing to a tumultuous external environment, business leaders have become an important part of their success equation. Even for a highly capable CEO to be effective in today's world, one needs a capable bunch of leaders that can execute her/his vision. But this is where major gaps appear in talent development programs as currently, only 20 per cent of CEOs in India believe that they have the leadership talent to execute their strategy. In addition to focusing on development programs, building digital organizations is the other key component that requires a reset of talent and leadership infrastructures. These are also the key areas where the HR function has to step in to ensure businesses don’t falter. For this, the HR must transform to become nimbler, data-driven, tech-savvy, and more in tune with the evolving business needs. In addition to building the right crop of future leaders, the HR function has to update itself too to remain impactful to business. The role it plays in the coming years would determine how prepared future leaders are to take on an increasingly uncertain and complicated world.