Are Companies Failing to Build Their Leadership Pipeline?

August 4, 2015 – Despite effective leaders being the cornerstone of business success, leadership pipeline planning isn’t happening, research by U.K.-based global talent management provider Penna finds today.

Conducted among 1,000 senior corporate professionals, Penna’s research found that the majority of respondents (63 percent) do not know if they have a leadership pipeline within their organization, or they don’t actively plan for what their future leadership will look like. This trend is further supported by Deloitte’s 2015 Global Human Capital Trends Report, which found that despite ‘building leadership’ remaining paramount within organizations, little or no progress has been made in the last year. In fact, the capability gap for building great leaders has widened not just in the U.K., but globally.

“It’s concerning how many organizations are failing to plan their leadership pipeline,” said Penny de Valk, Penna’s talent practice managing director. “At a time when leadership capability is a precious commodity and critical to an organization’s success, we need to get better at succession planning and developing leaders at all levels. Building a leadership pipeline means being able to spot and develop potential and companies that are doing this well have a real source of competitive advantage.”

This competitive advantage is echoed by the findings showing that the organizations that do directly plan their leadership pipeline believe it’s paying off with nearly half (46 percent) saying they have a good talent pipeline of future leaders and almost a quarter (23 percent) going one step further to say it is ‘very strong.’

“Considering that 30 percent of investor’s decision making is based on quality of leadership, companies are taking a real gamble by not planning,” said Ms. de Valk. “Investing the time in leadership pipelines now will help organizations reduce the risk of future leadership shortfalls acting as a drag on business growth.” The investment shouldn’t be limited to succession planning within just the top team, she added.  “A strong pipeline should consider talent from across the entire organization — after all, among junior teams could be budding future leaders and it is critical that their potential is recognized.”

Penna research also uncovered other findings that seem to dovetail closely with research compiled over the last year by analysts tracking the executive recruiting industry at Hunt Scanlon Media.

According to Penna, twice as many respondents said they prefer to use internal recruitment for senior level hires over external recruitment (31 percent vs 15 percent). The greatest risk identified with hiring a senior leader externally is “finding out the candidate doesn’t have the skills or the aptitude they said they did, or what was expected” (46 percent). On the flip side, the benefit of external hires is that “they bring fresh ideas to senior teams” (52 percent).

More than one in three said that one of the biggest risks of hiring a senior leader internally is “finding out that their experience isn’t as good a fit for the role as expected.” The benefit of internal hires is that professionals “understand what will and won’t work in the business” and “know the business inside out, therefore requiring less training and support.”

“Penna’s research is an important additive to our cumulative knowledge of why succession planning is a required business imperative for companies looking to maximize their human asset potential,” said Hunt Scanlon CEO, Scott A. Scanlon.

Contributed by Christopher W. Hunt, Executive Editor / Publisher, Hunt Scanlon Media

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