Employers unprepared for leadership exodus: Survey

Shortage of senior executives expected by 2016
|hrreporter.com|Last Updated: 11/25/2011

Over the next five years, corporate Canada and the public sector are set for a massive exodus of senior executives who are likely to be replaced by much younger executives with higher salary expectations.

That’s according to a report released by executive search firm Odgers Berndtson that found 17 per cent of companies expect to lose more than 50 per cent of their senior executives by 2016 and one-quarter expect to lose more than 20 per cent. The outgoing executives, who are predominantly between the ages of 40 and 54, will be replaced by a younger cohort that ranges in age from 35 to 49.

More than one-half (53 per cent) of companies anticipating a wave of younger executives said they will be forced to pay higher salary demands generated by a shrinking pool of executive talent.

"The next five years are likely to bring a series of watershed moments for Canadian companies," said Carl Lovas, Canadian chair of Odgers Berndtson. "Most companies have not adequately planned for the exit of its senior staff and are now realizing it will be very difficult to find comparable replacements. While some organizations may be successful in filling the power vacuum with an interim leadership team, others may be facing a break in business continuity and, ultimately, performance."

Almost one-half of employers (43 per cent) admitted they are likely to experience a shortage of executives within their organization over the next five to 10 years, found the survey of 287 senior executives. One-third of these departing executives have been with their current company for more than 10 years and hold strong insight on company processes, culture and future plans, said Odgers Berndtson. While one-half of companies (52 per cent) acknowledge that finding candidates who are a good cultural fit for their organization is one of their top three criteria, 68 per cent said they have no succession plan in place.

"Given the importance of fit as a criteria — in other words, someone who naturally fits well with the corporate culture and organizational strategies — many companies will be looking inward to help fill senior ranks. But the lack of planning is troubling," said Lovas. "Now, more than ever, organizations need to be preparing to compete in order to retain and attract the right talent."

More than 30 per cent of managers are being groomed for a leadership position at 28 per cent of the organizations polled. Leadership development includes external education, mentoring, assessment and individual coaching.

Other highlights:
Executives in the health care and public sectors tend to be significantly older than their private sector counterparts. Only eight per cent of private sector executives are between the ages of 55 and 59 compared with 33 per cent in healthcare and 20 per cent in the public sector.
•Ontario executives are more likely to stay with a company for three to five years compared to executives out west (27 per cent in Ontario versus 13 per cent in British Columbia and Alberta).
•Organizations situated in Atlantic
Canada are the least likely in the country to have a succession plan in place (90 per cent).
•92 per cent of organizations in the Prairies feel unprepared to handle the anticipated skill shortage, a stark contrast to B.C. (43 per cent).
Quebec organizations were the least likely to say a portion of their management team is being groomed for leadership positions.
•Organizations operating in the health-care sector are almost twice as likely as private sector companies to have management undergo leadership training (46 per cent versus 25 per cent).
•82 per cent of executives in
Quebec said they will have difficulty filling leadership ranks due to a shortage of talent compared with 51 per cent in B.C. and 48 per cent in Ontario.

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