The pace of baby boomers retiring from organizations has not been the expected tsunami-like mass exodus. Instead, it’s more of a slow undercurrent. Consequently, many organizations have been addressing succession management only sporadically, perhaps as an occasional topic on the agenda of an executive group meeting. As today’s leaders gradually turn into tomorrow’s retirees and the need for ready leaders reaches a steady boiling point, many companies may find themselves completely unprepared.
According to the Bureau of Labor Statistics (January 2012), the number of people 65 and older will double between 2010 and 2050 in the US. By 2020 (note, that is in less than seven years), 25% of the labor force will be composed of older adults (55+), up from 13% in 2000.
Also, new expectations are coming from executive boardrooms: integrating leadership development into an organization’s risk management. In the report “The new business imperative” that outlines seven trends in leadership development, Deloitte identifies four risks:
- Vacancy risk: risk of critical leadership positions left vacant
- Readiness risk: risk of underdeveloped successors
- Transition risk: risk of poor assimilation of executive talent
- Portfolio risk: risk of poor deployment of talent against business goals
This trend has also been confirmed in an important study of C-level executives conducted by Ivey Business School faculty in 2010. Their findings were published in the Ivey Business Journal article entitled “The Role of Leadership in Managing Risk.”
How can organizations accelerate leaders’ development to prepare for succession and mitigate these risks?
Identify High-Potential Leaders More Rigorously
A key part of the succession management process is identifying high-potential leaders, though doing so can raise many challenging questions. How can leaders consistently determine potential?
A common practice is using a nine-box grid to position the probable high-potential leaders on a low, medium, or high performance and potential axis. But, to predict and rate leadership potential objectively and consistently, HR professionals and leaders need to assess candidates against a standardized, reliable set of leadership potential factors.
Experience and extensive review of research about what determines future leader success led to six factors that, when measured and used effectively, streamline and improve the high-potential leadership assessment process:
- Cognitive complexity and capacity
- Key descriptors: conceptual thinking, strategic thinking, differentiating, integrating
- Drive and achievement orientation
- Key descriptors: initiative, perseverance of effort, consistency of interest, achievement, realization
- Learning orientation: self and others
- Key descriptors: learning orientation, continuous improvement, openness to feedback
- Personal and business ethics
- Key descriptors: personal and business ethics, fairness, authenticity, honesty, integrity, trust
- Motivation to lead
- Key descriptors: leadership self-efficacy, leadership emergence, value leading others
- Social and emotional complexity and capacity
- Key descriptors: emotional intelligence, interpersonal sensitivity, emotional resilience
Executive leaders can use standard factors like these six, along with the key behavioral descriptors, to determine which of their high performers have the potential to perform at one or two levels higher.
Seminal research by the Corporate Leadership Counsel and the highly popular article in HBR “Are you a high potential?” strongly support the necessity to improve the way we define high potential in order to maximize the return on the development effort. Using high-potential leadership factors leads to selecting true high-potential leaders, helps avoid possible errors, and saves time and investment.