Leadership Talent Shortage
The Gap Between Supply and Demand and the Keys to Closing it
Executive summary
Throughout 2022 we had in-depth conversations with HR leaders representing a total of 22 companies out of Swedens 80 largest companies and 55 largest retail chains. This research focused on the crucial and very live issue of whether the demand for leadership was being matched by supply.
The business context
A significant majority of these companies feel the pain of a shortage of leadership talent
This shortage of talent is limiting both operational effectiveness and growth opportunities
So, for many companies, this talent shortage is today a real business issue
What has already been done
Most companies have invested heavily in leadership development, and many leadership development programmes are in place
Most companies have their own set of high-level leadership principles or leadership values
Many companies have leadership competency models
Many companies have a succession planning process in place
Is this expenditure giving a return on investment?
Although many companies are spending much time and effort in this area, one answer to our questions captures most of the responses we got: “We feel we have it all, but we are not solving the crucial problem of leadership supply - neither in terms of numbers nor quality”
There is a lack of overall transparency in the demand for, and supply of, leadership talents. The key numbers are missing. Executive leadership teams do not have access to the information they need.
There is a shortage of leader-led development of other leaders. Leaders of leaders do not accept the responsibility for actively and continuously developing the leaders reporting into them, as part of their work.
There is a lack of clear expectations on how leaders should create value through their own leadership and what “the leadership job that must get done” is. Leaders do not translate leadership principles and competency models into concrete, value-adding leadership behaviour.
Root causes and potential solutions
The leadership work that must get done at different leadership levels, is unclear. This crucial expectation must be made clear.
Leaders are generally not trained to do the leadership work needed when transitioning into a new leadership role. The clarified expectations must be directly supported by leadership development.
A clear picture of the quantitative and qualitative need for leaders, at different levels, is missing. Leadership supply-side reporting is absent and the gap against demand is not made visible. An architecture for bridging the gap is needed and must be installed.
There is an absence of impact measurement of leadership work and leadership development, with an associated absence of attention from the organisation and a lack of structured quality leadership development for leaders at different levels. The impact of leadership work and development must be measured, against changes in behaviours, KPIs and business outcomes.
In this report, we show
Demographics of companies where the HR-leaders are active
HR leaders’ strategic concerns and constraints
Insight on root causes
Pointers on how to attack these root causes to meet the challenges
Information about the study
Demographics of the 22 companies and other information about the study
Comment
When we ask questions such as “how many people are promoted to a managerial role, or promoted to a new managerial role in your company per year?”, we discover that most companies are not able to answer.
Sample size and significance
We engaged a total of 22 companies out of Swedens 80 largest companies and 55 largest retail chains. Although, out of this small population of companies, this is quite a large sample, we cannot point to statistical significance at the 95% confidence level for all answers, and the results should therefore be seen primarily as strong indications. The results were benchmarked against previous LPI interviews with more than 100 HR leaders from across the globe. “Leader” and “manager” in the context of this study refer to people leaders, i.e., managers who are accountable for the
Results
1.
An estimation in percentage: In one-to-one conversations, how much time do the leader of leaders spend on making their direct reports better leaders versus discussing technical matters / numbers, problem solving, review outstanding issues, etc.
Insight
One HR leader’s comment to this question was that leaders of other leaders say things like “the managers reporting into me are paid to be leaders, I should not have to make sure they are”. Another was that “leaders of leaders say that if someone is not behaving like a leader, HR needs to help them by sending them to a program or make sure they get coaching”. There is a discrepancy between the estimated time spent by managers focusing on the improvement of leadership of the leaders reporting into them, and the optimal time, as stated by the HR leaders. (90% gap). The benchmark shows that this gap is shared with HR leaders across geographies and industries, even though the percentage as gauged by Swedish HR leaders is above their international colleagues.
2.
An estimation of the percentage of leaders’ development plans that focus on how they become a better leader
Insight
There is a discrepancy between the focus on improving leadership through development plans, and the optimal (47% gap). The benchmark shows that the experience is shared with HR leaders across geographies and industries, even though the percentage as gauged by Swedish HR leaders is clearly above their international colleagues.
3.
HR leaders’ estimation of how clear the direct leaders’ evaluations of their reporting leaders’ performance as leaders are (scale 1-5 where one is “not clear at all” and 5 is “full clarity”)
Insight
There is a discrepancy between the clarity on leadership performance in evaluations by managers made towards their reporting leaders, and what the HR leaders would like the clarity to be (92% gap). The benchmark shows that the experience is shared with HR leaders across geographies and industries.
4.
An estimation of the percentage of direct leaders who would evaluate “leadership” as one of the three things their reporting leaders are best at (percentage).
Insight
The Swedish HR leaders differ from their international colleagues, when it comes to how they gauge the importance which leaders give to the leadership of leaders reporting into them (14% lower). They would like to see a strengthening of this aspect, though (a 26% increase would be needed to reach the optimal).
5.
HR leaders’ estimation of how good leaders think leaders who report into them are at “leadership” (scale 1-10 where 1 is “bad”, 5 is “average” and 10 is “excellent”)
Insight
As in the previous question, in this sample we see that HR leaders in large Swedish companies and retailers have a more positive view of how leaders view their direct reports’ leadership (12% above their international colleagues). However, this is also at a relatively low level, far from the optimal (61% increase needed to reach the optimal).
6.
An estimation of the percentage of direct leaders who would evaluate “leadership” as one of the three things their reporting leaders are best at (percentage)
Insight
In this sample we see that HR leaders in large Swedish companies and retailers have a more positive view of whether leaders in their organization would evaluate “leadership” as a relative strength in leaders reporting to them, compared to other geographies (50% above their international colleagues), albeit at a level which is far from the optimal (220% increase needed to reach the optimal).
7.
HR leaders’ estimation of how good leaders are at developing the leaders reporting into them, specifically regarding “leadership” (scale 1-10 where 1 is “not good at all” and 10 is “extremely good”)
Insight
Swedish HR leaders have a more negative view of how good leaders are at developing the leadership of leaders reporting directly into them, compared to their international colleagues (45% difference) and it is far from the optimal (an increase of 166% would be needed to reach the optimal).
8.
Number of HR leaders having experience from measuring changes to leaders’ leadership behaviours (Kirkpatrick level 3) as an outcome of leadership development
Insight
The result points to that Swedish HR-leaders do not have much experience of measuring impact of leadership development investments on a behavioural level. The HR leaders’ answers to this question showed that most have experience of measuring participants’ satisfaction only. Eight of the HR leaders also had experience of trying to capture the effects of leadership development through indirect metrics e.g., Employee Engagement. However, their experience was that it was very hard to point to causality and to get the organisation’s attention through this measurement methodology.
9.
HR leaders’ view of how important it is to have leadership development initiatives measured against clear behavioural criteria (scale 1-10 where 1 is “not important at all” and 10 is “extremely important”)
Insight
Notwithstanding the answers to question No. 8, we see that the HR leaders think that measurement of behavioural change as an outcome of leadership development is of a very high importance. All HR leaders except one, gauged the importance as 9 or 10 on the 1-10 scale. (The person who gauged the importance only as 3 explained their response by stating that they simply didn’t think it was possible to measure behavioural change (ref question No. 10).
10.
HR leaders’ perception of how possible it is to have leadership development initiatives measured against clear behavioural criteria (scale 1-5 where 1 is “not possible” and 5 is “fully possible”)
Insight
It is clear that the belief in the possibilities of measuring behavioural change as an outcome of leadership development is scattered among HR leaders.
11.
Level of agreement with the basic Leadership Pipeline principle among HR leaders (“Leaders in different roles produce value through their leadership work in different ways. They therefore need to understand the way they produce value, and value how they must work to produce this value in their specific leadership role. They must apply their time in different ways and use different skills and behave in different ways compared to other leadership roles, to create this value”) (scale 1-10 where 1 is “do not agree at all” and 10 is “fully agree”)
Insight
It is clear that the basic axiom of the Leadership Pipeline is quite easy to access and accept for the Swedish HR leaders. Some almost regarded the statement as a truism. However, as we will see from the answers to questions No. 12-14, whilst the principle is accepted, it is not used in practice.
12.
HR leaders’ experience of how often the difference in leadership roles is focused in job requirements for different leader jobs (scale 1-10 where 1 is “Never” and 10 is “Always”)
Insight
Even though the HR leaders subscribe to the notion that the leadership work required in different leadership roles is truly different, they do not see this captured in the overall requirements for different leader jobs, even though there is some spread, as shown by the range.
13.
HR leaders’ experience of how often this difference in leadership roles is focused in leadership development for different leader jobs (scale 1-10 where 1 is “Never” and 10 is “Always”)
Insight
Even though the HR leaders subscribe to the notion that the leadership work required in different leadership roles is truly different, they do not see this captured in leadership development.
14.
HR leaders’ experience of how often the difference in leadership roles is focused in measurement of leadership performance in different leader jobs (scale 1-10 where 1 is “Never” and 10 is “Always”)
Insight
Even though the HR leaders subscribe to the notion that the leadership work required in different leadership roles is truly different, and they all, except one, state that it is very important to measure the effects of development initiatives, they generally have very little experience of doing this.
Discussion
Challenges to quality and supply of leadership
The HR leaders interviewed are generally stating that a lot of hard work in the area of leadership development, succession planning and neighbouring areas is being done in their organisations. Models are created and processes are run to ensure that the need for leadership in their organisations is met. However, conversations with the HR leaders point to a frustration with not being able to create a clarity of results.
In spite of all the investment already in place in many companies, such as development programmes, competency models and succession planning processes, the HR leaders still experience a material shortfall in leadership talent. One comment captures most of the responses we got: “We feel we have it all, but we are not solving the problem of leadership shortfall in neither numbers, nor quality”. The HR leaders are not able to quantify the shortage, as they simply don’t have a means of measuring it. They feel that what is needed is not available. This feeling is, in turn, based on internal conversations with both other HR specialists and with leaders from other functions in the companies.
In most companies there is a lack of overview, clarity and transparency regarding the need for and supply of leadership talent. In comparison, the leadership team can of course answer the questions:
What is your company revenue?
What is your EBITDA?
What is you free cash flow?
However, they are unable to answer the question: What is your net production of leadership talent per year? Per leadership level? These key numbers are unavailable to the leadership teams, and are missing when strategizing.
The HR leaders point out that there is a lack of leader-led development, where leaders put leadership on the agenda in order to lead the business effectively. Instead, they turn to addressing business issues directly, and not by developing the leaders who are reporting into them. This means leaders are not scaling their value-creation. Instead they spend their time on activities that could be managed by their teams. This, in turn, means that leaders have even less time to focus on the development of the leaders who are reporting to them.
Finally, HR leaders are pointing to a lack of clear expectations on how leaders should create value through their leadership and what exactly is “the leadership job that must get done” in different leadership roles. Leadership principles and competency models are good for turning people’s attention to some important areas, but leaders have a hard time translating these into concrete, valueadding leadership expectations. On the other hand, when people attend programmes, they are taught skills which are applicable. However, as one of the HR leaders said “they learn stuff, but they haven’t really identified as leaders and how they can create value through leadership, so they don’t value doing the stuff when they come back”.
Key root causes to stated challenges
The results of this study point to a number of reasons for why challenges remain:
HR leaders clearly subscribe to the fact that leadership work is not the same across all levels of leadership (ref. q.11). However, this understanding is not applied to several important areas:
The leadership work that needs to get done at different levels, are not made clear to incumbents and candidates. (ref. q.12).
Leaders are generally not trained at doing the leadershipwork required from their specific leadership role (ref. q. 13).
Companies lack an overall leadership architecture capable of answering questions such as:
What leadership roles do we have?
How many people are in these roles?
How are they performing as leaders?
How can we effectively and equitably fill leadership vacancies internally? (Ref. q.14 and also in comments from the HR leaders).
Whilst there were no specific questions to the HR-leaders on transition support, the answers to questions 11-13 also points to there being a gap here. When leaders move from one leadership role to another, there are no clear expectations on the leadership work now needed in the leadership role the leader is entering. When employees move into their first leadership role a majority of the companies have some kind of introductory training. However, these are either more skills-based, or more focused on the leader as a person (or both). New leaders are neither clear on the different ways they now need to create value, nor on the expectations on “the leadership-work that needs to get done”, neither when they move into their first people leader role, nor when they move to another people leader role.
There is a broad-based absence of impact measurement of leadership work and leadership development activities. The HR leaders gauge the importance of measuring as being high. However, the level of belief in if it is at all possible to measure impact of leadership development activities, is very scattered. Even though the belief in the possibility to measure is scattered, the majority of the HR-leaders think that the absence of measurement makes it very hard to show the effect of leadership quality and results from leadership development activities. This also means that the area does not get the deserved attention from the organisation (ref. qs 8-10.)
HR leaders gauge that, among leaders, there is neither a sense of ownership regarding leadership development, nor that leaders are very good at it (ref. q.7). The HR-leaders generally think leaders neither invest time in developing the leadership of people reporting to them (ref. q.1), nor that they create clear development targets on leadership in development plans (ref. q.2), nor that they clearly evaluate leadership performance (ref. q.3). Most of the HR-leaders think that leaders of leaders do not gauge the leadership of the leaders who report into them as one of their main strengths (ref. q.4) and that leaders of leaders think that there is large room for improvement of leadership (ref. q.5). Still, the HR-leaders think that leaders of leaders should place a substantially higher level of importance on how the leaders who are reporting into them perform as leaders (ref. q6).
Pointers on how to attack root causes and meet challenges
Overall, and as seen in the responses to question 11, the HR leaders are very open to the basic principles of the Leadership Pipeline (Charan et al., 2011, Drotter, 2011, Pereira et al., 2021) and how it addresses their challenges. The HR leaders are also, with only one exception, very attracted to the measurement of leadership behaviours, which the Leadership Pipeline approach offers. The HR leaders do not view Swedish business-culture as a blocker against implementing the Leadership Pipeline in their companies. However, they point to the need to make sure it is adapted to the individual company and that the “Swedish tradition of involving people in change processes is given due respect”. This makes it possible to point to ways to attack the root causes and meet the challenges which have been described in the above, from the Leadership Pipeline perspective.
The specific value-add from leaders in roles at each, different level, should be clarified along with “the leadership work that needs to get done” in these different roles. With the necessary leadership development to meet the expectations in the role, it is possible for the leader who is an incumbent in the role to do value-adding work as a leader; to regard it as “real work” and; to gain confidence and appreciation for it. This is of course important both for incumbents who have been in the job for some time without having had these requirements clarified, as well as for those who are moving into a new role.
Through clarifying the specific value-add from leaders in roles at different levels and “the leadership work that needs to get done” in different roles, leaders of leaders can come to value the importance of leadership work and increase the level of attention they give this area and their resolve to assess and develop the leadership work done by leaders reporting to them, instead of treating this as an “HR issue”.
Measurement of leadership work and leadership development activities must now become a general feature of work in this area. All but one respondent is very clear on this. The belief that it can be done is, however, scattered. At this point in time, we should be ready to act on the research which shows that leadership development can be measured in valid ways and that this measurement can improve the quality, effectiveness and the perception of leadership development (see e.g., Lacarenza et al., 2017, Powel & Yalcin, 2010). The Leadership Pipeline Institute measures almost all leadership development activities’ impact across Satisfaction, Knowledge, Attitude and Behaviour levels (Kirkpatrick scale, levels 1-3) through an independent third-party specialist. These measurements show that Knowledge of how to do leadership work and Attitudes towards actually doing it improve by some 50%, while Positive Leadership Behaviours increase by some 48%.
Focusing on:
clear norms for what value leaders add through their work at different levels of leadership
how leaders must spend their time
the actual leadership behaviours leaders must execute
measurement of leadership and the development of leadership
Allows for:
real behavioural change
connecting the quality of leadership work and leader development with KPIs and business outcomes
servicing senior leadership teams with business-critical data on the quality of their leaders, and how they must develop them, to make sure that there is not a shortage of talent and that this does not become a limit to operational effectiveness and growth opportunities
References
Charan, R., Drotter, S, Noel, J. The Leadership Pipeline: How to Build The Leadership Powered Company. Josey Bass, San Francisco, 2011
Drotter, S. The Performance Pipeline: Getting the Right Performance At Every Level of Leadership. Josey Bass, San Francisco, 2011
Lacarenza, A., Reyes, D., Marlow, S., Joseph, D. Leadership Training Design, Delivery, and Implementation: A Meta-Analysis. Journal of Applied Psychology, Vol. 102, No. 12, 1686–1718, 2017
Pereira, L., Alves Vargas, R.C, Roble, G., Lopes. F, Rosini A.M. Career transition and the Leadership Pipeline of Ram Charan. RISUS - Journal on Innovation and Sustainability, 12:4, 2021
Powell, K. S., & Yalcin, S. Managerial training effectiveness: A metaanalysis 1952–2002. Personnel Review, 39, 227–241, 2010
