'Talking the Talk': Jeff Schwartz on Building Talent During a DownturnPublished: July 21, 2010 in Knowledge@Wharton
Although many business leaders are not convinced that the worst of the global economic crisis is over, there is no better time than the present for top executives to ramp up their recruiting of top talent, launch new in-house programs for training future leaders, and map out a formal succession plan covering the CEO or other top officials.
These are among the key findings of a massive, year-long study of approximately 1,800 global executives by professional services giant Deloitte titled, "Managing Talent in a Turbulent Economy: Where Are You on the Recovery Curve?", which seeks to answer some of the questions about how leadership training and development fits into economic recovery efforts.
The project, which surveyed senior executives from a cross-section of large companies around the globe, found that the firms that posted stronger performances and were more optimistic about the future were those that refused to put retaining top employees -- or even hiring some of their rivals' future stars -- on the back burner.
"These companies were on, and are on, the offense; they are not on defense," Jeff Schwartz, global leader for Deloitte Consulting's organization and change service line, said during a speech at the recent 14th annual Wharton Leadership Conference. "They are more committed to retaining their key employees and are building a stronger internal pipeline -- which is probably one of the main measures by which you might [gauge] the effectiveness of leadership programs.... They were cherry-picking in the market because they knew that a recession was a really good time to increase their recruitment."
Schwartz presented data addressing the conference's main theme of "Leading in a Recovering (and Even Rebounding) Economy." When it came to leadership issues, for example, the message from the Deloitte study was that companies using the recession as an excuse to ignore the fundamentals of employee development -- and cease efforts to nurture a new generation of star talent -- did so at their own peril.
One of the key goals of the Deloitte surveys, Schwartz noted, was to see whether there was any measureable difference between the performance of companies that merely said leadership issues were important to them, and the firms that were taking bold steps to do something about it. "This was the big 'Aha!' to us," Schwartz stated, "Those who were actually doing something and believed they are doing a good job [on leadership] are actually performing differently than those that are just talking about it." These firms, the survey findings showed, were less focused on layoffs and cost-cutting than their rivals, and reported higher morale and more employee confidence in the management.
The idea for the study came up in the immediate aftermath of September 2008, when the bankruptcy of Lehman Brothers and major losses elsewhere in the financial sector led to a worldwide recession and a near economic collapse. Officials at Deloitte saw the events as an opportunity to gather real-time data about the role of leadership and talent development in dealing with a crisis of that magnitude.
According to Schwartz, the goal was to make the study as comprehensive as possible. Forbes Insights was hired in December 2008 to conduct extensive research over the course of a year, based on the stated actions and opinions of 335 top executives and talent managers. The survey respondents hailed from a broad cross section of industry groups and from the Americas, Asia Pacific and Europe, as well as the Middle East and Africa. The managers all worked for large firms with more than $500 million in annual sales. The study consisted of five surveys of the executives and one survey of employees.
Over time, these industry leaders began to display a measure of confidence that the world economy was turning around, although slowly. In December 2009 -- when the final part of the study was released -- the surveys found that 35% of executives thought the worst of the economic crisis had passed. It was the highest figure since the meltdown occurred. Despite a growing sense of optimism, however, a majority of managers continued to maintain that their top priority was managing costs and making cutbacks.
In fact, the number of executives who cited "reducing employee headcount" as their highest talent priority jumped up in the final tally. At 31%, it still ranked as a higher priority than "training and development" (29%) or "retention" (27%). Preparers of the Deloitte survey expressed concern that firms placing reduced emphasis on employee retention may be facing what they called a "resume tsunami" of top talent shopping their skills elsewhere.
But the researchers also learned that almost every top executive -- regardless of industry group, geographical region or his or her company's economic outlook -- paid strong verbal homage to what Schwartz called "talking the talk" about the importance of leadership development efforts. The study showed that nearly three out of four managers thought that leadership development was either critically important (27%) or very important (45%).
That is why, according to Schwartz, the Deloitte team was surprised to learn that most executives -- even those who claimed to place a high value on leadership training -- readily acknowledged that their programs in this area are not top notch; indeed, just 10% of participants described their leadership initiatives as "world-class across the board."
"We didn't expect to have a majority of respondents say that they were world-class at [leadership development], but we expected that ... more than one in 10 would have [thought they were] really good at it," Schwartz noted. "Everybody's talking the talk but even by their own admission, not everybody is walking the walk." The 10% of companies that considered themselves leadership-oriented stood out because "they were less focused on layoffs and they were not bound to a weak economy. They were continuing to invest in training and development."
The companies that lagged, according to the report, may have been aware of the need for stronger leadership development efforts, but either did not -- or could not -- place an emphasis on specific programs. Many didn't avail themselves of some of the basic methods for nurturing future executives. Only 31%, for example, sent potential leaders on global assignments, and six out of 10 firms lacked coaching or mentoring initiatives.
One of the most troubling findings, Schwartz said, was that 77% of these large, global companies lacked a strong succession plan for top leadership. Schwartz suggested that the absence of such a strategy not only has important practical implications that lead to weak leadership or confusion when vacancies suddenly arise at the top, but also is a good indicator of how seriously a firm values leadership in a broader sense.
Leadership-focused firms, he added, have formal governance and succession programs, and typically also have panels of senior executives tasked to identify and work with the future leaders of the organization. The companies with strong talent development programs were most likely to report a healthy pipeline of future executives. The 10% of companies that claimed to have "world-class" leadership training were also more likely by a 25% margin to describe their leadership pipeline as "robust" or "very robust" in the survey.
Perhaps most importantly, executives at firms that placed a greater emphasis on leadership, with ongoing programs in place and clearly identifiable procedures, also reported higher morale and greater confidence in management from the rank-and-file. Nearly 60% of the respondents that described their leadership development programs as "world-class" reported increasing employee morale, while 53% reported greater trust and confidence in corporate training.