Few successors lined up for top roles: Report

Building leadership capacity top priority for HR
By Sarah Dobson
|Canadian HR Reporter|Last Updated: 09/15/2014

By Sarah Dobson

There’s an app for that — that’s what one division of ATB Financial realized when looking at its succession planning efforts.

Before, the 400-employee Investor Services division presented its plan the traditional way: Here’s our top talent, here are the key roles and here’s the plan behind it, said Sherri Wright-Schwietz, head of talent and story at ATB Investor Services in Calgary. But the tricky part was tracking the plan and keeping it alive and useful — so HR developed an app.

“There was no way to visually show the board an overall health of the organization, like a heat map... The idea of being able to use an app to do live scenario planning and actually be able to show different scenarios and show the ripple effect all of a sudden made succession planning very real, helps with accountabilities,” she said.

“Having the app have everything in one spot has, all of a sudden, allowed us to be more proactive and realize where we had gaps, especially on the external, and say, ‘We need to put a lot more energy around this and we need to show our company and our leaders why it’s so important that they be out building those relationships.’ It gave a much better visual to have those conversations.”

Building leadership capacity is the predominant human capital challenge over both the short- and long-term for employers, according to the report HR Measurement Benchmarking, Third Edition from the Conference Board of Canada. And management and leadership development and succession management are identified as top priorities.

“There’s a high level of awareness around the demographics and the aging workforce and we know that, in many organizations, not only the top leadership group is fairly old and coming close to eligibility for retirement but so are people in the feeder group underneath, so that’s a concern,” said Ruth Wright, director of leadership and HR research at the Conference Board of Canada in Ottawa. “There’s a growing focus and concern on looking at building leadership capacity at earlier career phases.”

And yet leadership bench strength for top executives has dipped slightly, posing significant risks for leadership capability and capacity, found the report, based primarily on a survey of 169 Canadian HR leaders.

For every senior executive, organizations have just under one-half (0.4) of a designated job-ready or near job-ready successor while for every executive position, a median of 0.7 successors are job-ready or nearly job-ready.

“A lack of successors poses a risk to the organization in terms of governance, business continuity and, ultimately, competitiveness. If you look at the wheel of what goes on in an organization and people practices, from
engagement to strategy, innovation, vision, leadership is at the centre of it,” said Wright. “There’s more work for organizations to do in terms of thinking about identifying high-potential talent and beginning that focus on development at earlier stages in people’s careers so that you can bolster that leadership pipeline.”

With slower labour force growth, fewer new people coming onstream and accelerated retirement, employers need to get on top of it, she said.

“It’s going to be tougher going forward to find these individuals on the market, so it’s going to be really critical going into the middle of this decade and beyond to be growing this talent internally,” said Wright. “If you only have about a half an individual or… one person for every two, then you know that if the external talent market gets tight, that you could be at risk because you haven’t developed a sufficient number of prospective leaders internally.”

ATB Financial’s Investor Services tries to have at least two internal and one external candidate for key roles, said Schwietz. And in looking outside the company, it’s about building relationships and looking beyond whether people are good on paper, she said.

“Ours is about cultural fit and the right attributes in our culture so we need to spend time with them to make sure we know that, eventually, they would be a good fit with our company, and then they can come on our app as a potential external.”

Less than one-third (29 per cent) of top executives are recruited from within, found the Conference Board survey.

Recruitment has become a big — and costly — part of succession planning, with employers paying high fees to executive recruiters to poach people, pushing up the cost of the asset in a limited pool of skills, said Bruce Diemert, managing director at Paul Alexander Talent Management Consultants in Vancouver. So it’s important to have proper succession planning programs and high-performance evaluation processes to figure out who are the people to bet on — and keep them there, he said.

But then retention is a challenge when today’s executives are like sports stars, said Diemert.

“The perception that an executive should change companies every three to four years is not only perceived as best practice, it’s also completely accepted by society,” he said. “There used to be a stigma attached to movement; today, it’s almost a badge of honour.

“The future is demanding that we spend more effort and time within succession planning because of the baby boomers, because of the cost of recruitment, because of the competitive nature or the mindset of the way people will move from company to company for what’s best for them and what’s necessary or we’re saying is best practice within your career. What we’re creating is the opposite effect, so succession is an offset or balancing strategy to those particular initiatives.”

While companies might have a handful of people they consider potential successors, eventually some of these people move on — there are leaks at both ends of the hose, said Lisa Cefali, vice-president of executive search at HR consulting firm Legacy Bowes Group in Winnipeg.

“The reality is you’ve got a shrinking workforce overall and so without the proper leadership, obviously companies won’t succeed and I think it’s always really easy to focus on the day to day, what needs to get done today, versus putting in that extra time,” she said.

“A lot of time’s spent on recruitment and trying to fill the vacancies, and maybe we’re at a time now where that’s (not realistic) anymore — companies will never be at zero vacancies — and then they can now work on professional development.”

HR’s role

While succession planning makes sense for the long term, boards want results, so they want HR devoting time to measurable results that impact growth, customers or revenue, said Cefali.

“Coming in and being able to say that, ‘OK, you’re going to go spend six hours on leadership training or coaching,’ that’s a long-term investment and some see it and some don’t.”

Without the right leadership to truly engage, motivate and share a vision with associates, you can’t be successful, said Schwietz.

“It has to be the priority of every business,” she said. “Most boards now are also really aware and very good at questioning their HR leadership around what kind of risk mitigation you’ve got around your brilliant leaders and talent inside the organization, so succession planning has become even bigger and more of a hot topic because it’s very important to boards.”

But certain core, focused executives may perceive that certain second- or third-level or longer-term HR initiatives may not be the best use of their sparse funds given the current market conditions — though it makes good sense to anyone, said Diemert.

“When you start to prioritize, some of these longer term activities that don’t have immediate shareholder value… they sometimes get put on the backburner.”

For those organizations that have leadership capacity all figured out, “quite often that has to do with the standing of HR within the overall organization and their ability to sell their platform,” he said.

“Although it’s necessary, we all know it’s a good thing to do, we just really don’t know how much ROI is directly related to it. Therefore, when you go to sell it, you’d better be charismatic and have a lot of sway because you can’t put the numbers on the table.”

Add Comment

  • *
  • *
  • *
  • *