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How Many Eggs Belong in the Leadership Basket?

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Should companies invest in developing a few designated successors or broaden their effort in order to build leadership bench strength?

Companies generally understand that their survival depends on leadership succession—no leaders, no company. But how broad do their succession strategies have to be? Relying on “buying” talent on the open market can be risky. Given the high rate of failures of externally sourced executives, many companies agree that a focused internal leadership development is prudent. Where companies tend to disagree is on how many people should be targeted for development. Is it better to focus on a few key leaders or open the opportunities to a wider pool?

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We can only offer so much.
The number of developmental experiences inside our organization is limited, so we are targeting those few individuals we believe have the greatest likelihood of future success.
We believe in creating more.
Yes, developmental experiences are the key to growing leaders. You have to create those and make them suitable for the many rather than the few. We’re not leaving our future to chance or limiting it based on how many developmental opportunities are readily available.
We know who our leader will be.
One of the reasons we emphasize developing the few as opposed to the many is is that we know who’s going to be the next leader. We’ve already done the hard work to pick the successor, so we want to focus our efforts there, rather than trying to spread our limited capabilities across many.
Who it should be can quickly change.
We learned from the global financial crisis in 2008 that business strategies can change overnight. We need leaders to cover whatever scenario might arise for the business, so we are building that bench strength of diverse leadership skills and capabilities.
Limited resources demand hard choices.
It’s a lot of effort to identify, invest in and build leaders and we don’t have the funds or capacity to handle that for a broad-based group. So we’re putting our limited resources into key talent.
It’s getting easier to widen the net.
We’re taking advantage of technology advancements that make it easier to do broad-based psychometric and leadership assessments. Leadership development doesn’t have to be limited by historical organizational capacity.

My take

William Pelster

William Pelster, Principal, Deloitte Consulting LLP

I certainly hear both sides of this debate in our work with clients. I understand the practical constraints of limited funds and the capacity of a company to actually do broad-based leadership development. But, just like any other business problem, it’s important to solve for development, because the benefits of a strong, diverse leadership bench with a variety of skills and capabilities can far outweigh the costs.

As the events of the 2008 global recession reinforced, the best-laid business plans can quickly become obsolete. Companies that might have been focused on growth in emerging markets suddenly found themselves having to deal with a financial crisis and cost-cutting—scenarios that require very different leadership skill sets. The business environment continues to be highly unpredictable and the future will likely not look like the past (or even the present). Having a wide bench of diverse leaders can act as a sort of strategic insurance that your company will be positioned to adapt to different market scenarios and have the flexibility to pursue its desired business strategy.

Leading organizations are already hard at work developing their next generation of leaders. They’re doing things like creating targeted development plans based on individual leaders’ capabilities, complete with a path guiding individuals to the targeted leadership role. They’re purposefully moving leaders across regions or countries to vary their exposure and broaden their experiences. Here at Deloitte, we’ve found it effective to start development activities early on in an employee’s career, much sooner than many people would anticipate.

Companies are also working on securing their company’s future apart from developing individual leaders. For example, some are pursuing broad-based, disruptive, game-changing development innovations that could allow them to control their own destiny by training many leaders, rather than being subject to shifting economic and market forces.

The dynamic times we’re living in call for dynamic leaders. These days, hanging the organization’s hat on a chosen few is at best risky and at worst could be the end of a business. 

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Overview: Human Capital

 

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