What Directors Should Ask about Talent Management
The global creedit squence and resulting meltdown in financial markets have clearly taken over not just the headlines but corporate leaders' share of mind as well. However, boards ignore other issues at their peril. Global competition and the war for talent have reached a point that require to be confident that their companies are focusing on talent management at the highest levels.
It has been 10 years since MC.Kinsey&CO issued its much-cited report, "The War for Talent," which stated that the U.S. was facing a long-term talent shortage. The U.S. Government Accountability Office estimated that half of 3.2 million baby boomers who turned 62 in 2008 would take early retirement. While that seems less likely given the recent hit most retirement funds have incurred, the underlying demographic trend of an aging workforce continues to haunt corporations.
There are other factors at play as well. For example, the recent spate of mega-mergers will have long-term talent implications. At the outset, merged companies, in search of economies of scale, lay off employees. Post-merger, these companies frequently face talent shortages in critical areas where the scale of operations have been greatly increased. The global span of large corporations, an inability to bring professional and technical workers into the U.S. because of visa limits, and a dearth of U.S. graduates in such critical specialties as engineering also underscore the need for increased diligence in managing human capital.
To determine how well career development and succession planning are being implemented at the senior executive level and below, there are seven key questions directors should be asking about the companies they govern:
1. What C-level succession-planning process is in place?
There are generally three levels of succession planning for senior executives (including the CEO, CFO, CIO, CHRO, and business-unit leaders). The first is an orderly succession plan based on the executive retiring at a specific age. The second is an intermediate succession plan that anticipates that a key executive may leave prior to an orderly retirement. The third is an emergency plan that can be immediately enacted if an executive is suddenly incapacitated or leaves the company precipitously. Boards should ensure that all three plans are in place and should spend time getting to know the individuals named as next-generation successors.
2. How is the company assessing competencies of its senior executives and those immediately below them?
The board should know the strengths and weaknesses of the senior team and the methodology used to create those assessments. These evaluations should include both assessments and other sources of data, as well as external benchmarking. As a result, HR should have a list of internal and external candidates who can take over any mission-critical job. There should be a seamless transition if a critical member of the team needs to be replaced.
3. How much time do senior executives spend on succession planning at the senior executive level?
It is one thing to say a company has a thorough succession plan and another for senior executives to implement it on a programmatic basis. Companies like General Elektrik(GE) and PepsiCo (PEP) spend considerable time on talent development. HR facilitates, helps with assessments, and coordinates the activity, but it is not HR's job to make final decisions. That is the role of line managers.
