Survey reveals disconnect between a recognized problem in shortage of leadership talent and their ability to correct the problem.
Even in these difficult economic times, the war of talent goes on unabated. And now there is further evidence to show that the toll of failing to staff adequately is robbing businesses of their ability to compete effectively.
According to Aon Consulting’s 2008 Benefits & Talent Survey of more than 1,100 organizations, 56 percent of employers nationwide experience a leadership shortage that impedes their organization’s performance, and 31 percent expect to have a shortage of leaders that will impede performance in the next one to four years. Among the industries most affected by this leadership shortage are healthcare (62 percent cite a leadership shortage); professional services (58 percent); and manufacturing (57 percent).
The survey, the third one that Aon has conducted, found that 25 percent of participants said leadership shortage would reduce their organizations’ ability to deliver customer service; 20 percent said it reduced the ability to meet revenue growth goals; and 18 percent cited a reduction in the ability to innovate.
More importantly is that even though many organizations realize they face a problem in leadership, they are unprepared to address the problem, which potentially could mean a rise in outsourcing talent acquisitions and consultative services. According to Aon, 58 percent of survey respondents said workforce planning in light of demographic shifts and talent shortages is very important or extremely important, but only 21 percent said they are very effective or extremely effective at delivering this workforce strategy.
Dan Hajjar, executive vice president with Aon Consulting and co-leader of its human capital consulting practice, explained that this looming problem can be traced to a lot of internal upheaval among organizations, causing them to push talent acquisition and management further down a growing list of priorities. Within the HR department, constrained resources have also hampered HR leaders to address the problem.
“There is clearly a need recognized among the leadership among the companies we work with, but there is a conflict prioritizing the needs of the business,” he told HRO Today. “This is a constraint that HR departments are having right now.”
He pointed out that finding the time and resources to implement a solution to address the leadership development gap has been a major challenge for many organizations, and awareness of the problem isn’t limited to HR; even C-level executives are mindful of their leadership gap. More alarming is that some executives said the problem is severely acute and acknowledged that it needs to be fixed almost immediately in the next 1 or 2 years.
In areas such as healthcare, the looming leadership vacuum is well-recognized but not being addressed adequately. For instance, Aon’s study found that 63 percent of healthcare employers surveyed said workforce planning is critical, but only 19 percent believed that they were very or extremely effective at delivering the services around that.
Aon’s survey cited several key areas for addressing the talent shortage problem. For one, it found that only 33 percent of companies continuously recruited for hard-to-fill position, while 52 percent only recruited when a position became open. Also, in the past two years, 36 percent of respondents said they lost high-quality candidates to competing offers that the workers perceived were more generous.
Hajjar said this may help the recruitment process outsourcing market because employers may turn to providers to help them implement a more strategic and effective recruitment program to find talent. The winners may be providers with integrated talent offerings that span beyond just basic RPO services.
“Your global consulting firms that provide human capital consulting capabilities and have global access to candidates will succeed. While in the past we have had a lot of smaller recruitment search firms, particularly providing transactional services, going forward, buyers will want a more holistic approach,” he said.
Another difficulty that respondents voiced was their organizations’ inability to clearly communicate to employees and executives the total value of their annual compensation package. According to Aon, doing so helps to grow loyalty among workers and reduce turnover. It estimated that the cost to replace a senior executive is two to three times that of salary and benefits. Yet, 37 percent of organizations fail to offer this communication to employees.
Hajjar said these issues are all part of a broader human capital management effort that organizations should make greater investments in. Functions such as compensation planning, recruitment, communications, and succession planning need to be addressed holistically to help organizations avoid a leadership vacuum.