Talent at the Top: The CEO’s Focus

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by Steve Krupp & William A. Pasmore

Asked to identify their most pressing business concern, some 75 CEOs attending a summit earlier this year gave an answer that might surprise people outside of the executive suite. The risk of global competition did not head their list. Nor did the need to innovate, or the challenges of sustaining profitable growth. They cited their top concern as the need to manage talent effectively. Bob Chappell, chairman and CEO of The Penn Mutual, sums up the challenge: “Having a winning culture, getting the right talent in key roles, and working supportively are the most important factors for success. The CEO must lead this effort.”

Increasingly, boards of directors and CEOs are recognizing that shortage of executive talent is a significant business risk that must be managed. Boards are thinking more about the link between leadership and organizational performance, recognizing the risk associated with poorly implemented (or non-existent) succession plans, and asking tough questions about business continuity. More and more, we’re seeing CEOs take a personal lead in attracting, retaining, developing, and motivating the talent companies need to drive business growth.

One CEO we know has gone so far as to declare that people should consider him the company’s chief talent officer – recognizing the unique and critical role the CEO plays in managing talent at the top. From our extensive work with global 1,200 companies, we have concluded that CEOs get the best return on personal time invested if they focus on the four areas described below.

What’s required: Aligning leadership profile with business strategy

There are countless generic models that describe what it takes to be a successful executive in any corporation. The difficulty is that they provide little guidance for a CEO who needs to be confident the right leadership is in place to deliver a specific business strategy at a specific point in time. One CEO expressed the worry preoccupying him and his peers, “Every time I want to buy something or do something, I look down our bench and see that I’ve got nobody to play the key positions.”

Perceptive CEOs are asking questions such as: What type of leaders will we need to drive a strategy of global growth in emerging markets such as China and India? Will the leader profile be different if our strategy is innovation? As more and more manufacturing gets outsourced and the core of the business becomes knowledge management, what will that mean to the type of leaders we need? What does the profile of a successful customer-service-oriented leader look like in our business in this market?

While not on the hook for building this profile alone, CEOs have a unique understanding of the business strategy and must be both deeply involved and opinionated on the topic. They need to engage the top team, board, and outside experts in analyzing the leadership talent requirements that are driven by their strategy, competitive environment, and change agenda. This analysis gives the chief talent officer the information required to build leader profiles that reflect the unique, forward-looking needs of an organization based on the best current understanding of the people closest to the business.

Which roles will make or break us?

The CEO also has a unique point of view on which mission-critical roles need special focus because of their “make-or-break” impact on the company’s success.

For companies seeking global growth, increasingly the spotlight is on the global general manager or country manager role – and the shortage of talent with the right mix of skills and experience to take on this considerable (and largely unfamiliar) challenge. But it’s not always so obvious which roles are critical. One global pharmaceutical company we worked with recognized the role of governments in their various markets around the world – both as regulators and buyers of their products – was shifting dramatically. They realized that roles in government affairs had now become mission-critical, and that the nature of these roles and what it would take to succeed in them were changing. For large holding companies with multiple global business units that are looking for opportunities to integrate back-office functions, leadership roles in finance and information technology may take on greater strategic significance.

What’s available: Assessing and developing the top-tier bench

Armed with an understanding of what it will take to deliver the business strategy, the CEO should be personally involved in taking a hard look at the bench of executive talent currently available in the company. According to our research, companies that consistently deliver superior growth focus first on building executive talent from within, bringing in external talent only when they need to shake things up and change the game dramatically.

Successful executive talent strategies are grounded in a realistic assessment of the gaps between the ideal and the actual – both on an individual basis (the gap between an individual leader’s capabilities and the profile of a successful leader for that business) and in aggregate (how well the existing talent base matches up against role requirements dictated by the business strategy, especially the number of people available to fill mission-critical roles). While this may seem patently obvious, we have found many corporations hesitant to embark on a program of rigorous executive assessment and serious executive development. Many large companies have traditionally paid for executives to attend conferences, workshops, and leadership development programs offered by third parties. Fewer have seriously analyzed the match between what’s offered and what’s required by the individual and the company, and the ultimate return on time and money invested for either.

What was once the norm is now being challenged as CEOs step up to their role in talent management. With their boards now expecting them to report on succession plans, have first-hand knowledge of the leadership bench strength, and identify talent-related risks, it’s increasingly important that CEOs recognize executive assessment is a necessary precursor to effective development and planning. We find that it is actually welcomed by talented executives when:

• It’s done with them, not to them: A well-designed assessment gives executives an opportunity to reflect on their career accomplishments and share their aspirations. It gives them visibility and a chance to interact with and learn from more senior leaders.
  
  
• It’s reliable, meaningful, and forward looking: To be reliable, assessments must be multi-faceted and include feedback from multiple sources. The use of multiple assessment tools reduces the risk of bias from one method (which may be a bad fit with the individual’s learning or communication style), the viewpoint of one unsympathetic manager or envious peers, or one perspective (looking only at what the individual has had an opportunity to demonstrate in the past, rather than assessing future potential as well as possible derailers). Customized assessments built on leadership profiles grounded in the company’s go-forward strategy are much more likely to be meaningful and insightful than generic, off-the-shelf tools.
  
  
• It leads to practical development opportunities: Instead of being presented with an exhaustive but impractical plan that’s put on the shelf and dusted off once a year, the executive works with a coach to agree on focused development priorities and plans to meet them. As soon as possible, the executive sees this translating into new assignments, movement into stretch roles, or opportunities to participate in practical action learning. There’s a system in place to review and measure progress, and progress is regularly reported to the CEO and senior team.
  
  

We’re now seeing companies create senior talent management roles focused exclusively on the top 100 to 300 executives. While much of the assessment and development work will be managed by HR and implemented in partnership with external assessors who can assure that the process is both professionally conducted and objective, the CEO has an important personal role to play in:

• Keeping the assessment work focused and grounded: It’s only too easy for the initiative to become unnecessarily complicated and stray from the demands of the business.
  
  
• Visibly championing and supporting assessment and development: This is a great opportunity for a CEO to articulate a personal view on what it means to be a leader in the company and what’s expected of leaders. Ideally, he or she will model the importance of assessment and development by starting with the top team. In many companies it’s obvious that the CEOs are personally and deeply involved in developing successors for top roles, coaching, participating in executive education programs, and mentoring members of the senior team on their own talent development challenges. At United Airlines, for example, CEO Glen Tilton told his executive team that repositioning the company after it emerged from bankruptcy would require “a dramatically different set of leadership expectations. The single greatest point of leverage in achieving what needs to get done rests with our leadership – the officers of the company and how they must behave.”
  
  

The CEO can’t do all this alone, however. An important part of championing this effort is ensuring members of the senior team are delivering on their accountability to build talent in their own groups.

• Driving systematic talent review and succession planning processes from the top: At the end of the day, executive assessment and development efforts will pay off for the company only if there’s a rigorous process in place to get the right leaders in the right roles at the right moment of their careers. More and more, board compensation committees or executive committees are taking a close interest in the talent-review process and participating with the CEO in reviews focused on the top roles – especially on gaps in mission-critical roles. They’ve seen the data, understand that executive tenure is getting shorter, and know that bringing the wrong leader in from outside can be a disaster. They believe the mounting evidence that successful companies grow their own leaders. That demands a regular, company-wide review of who is ready now to step into a mission-critical role, who needs what type of stretch assignment to be ready in the near future, and who is at risk of leaving.
  
  

Who’s next: Identifying and developing next-generation leaders

It is rarely feasible – or good for the business – for the CEO to be deeply engaged in managing talent at every level in the organization. In a large corporation, he or she will likely be personally engaged with perhaps the top 50 to 100, and have a good view to high potential up-and-comers in the top 300 to 500.

That said, the CEO will want to be confident that there is a solid pipeline in place to keep filling the top leadership pool for the future. The cycle of defining leader profiles, assessing and developing talent, and regularly reviewing the bench will vary at different layers of the leadership pipeline, but will require attention and discipline. The companies that are most successful at maintaining this discipline have mapped out an explicit executive talent strategy driven by their business strategy.

It takes time and effort to build effective talent management practices into an organization’s culture. Whereas the phrase “the top tells the middle what to do with the bottom” might once have characterized the standard approach to talent management, today the CEO must make a personal investment in talent at the top. He or she must be absolutely clear on what’s required of all leaders, what roles are mission-critical, what the leadership bench looks like, and what must be done to ensure the right talent is in place now and into the future. It pays off in assurance that the strategy will not be derailed by lack of executive talent to execute successfully.