Poor talent pipelines hampering growth

Lack of talent is turning out to be the “single biggest obstacle to growth”, according to a new report by Ernst & Young. The consultancy firm has warned that too few companies are adapting their management and talent identification systems to compete in the current business environment.

The report, Paradigm shift: building a new talent management model to boost growth, found that more successful companies were more likely to have a decentralised management structure, and that fewer than half (45%) felt they were making effective investments in talent management. High-performing organisations, it found, gave greater decision-making freedom to their direct reports – 49% of high-performers compared with 36% of low-performing companies – and had redefined roles to be more flexible.

However, when it comes to building a pipeline of talent, the report identified a lack of confidence even among high-performing companies about the next generation of leaders: only 43% of high-performing companies feel they have a clear set of qualification metrics for leadership candidates; this decreases to 38% for low-performing companies.

Global mobility was also a key factor in talent development, Ernst & Young found. Only half of the 600 companies it surveyed said that they are creating opportunities for employees to work in other countries. This could affect the development of future leaders, the report argued, by not giving them exposure to different businesses and cultural environments.

Liz Bingham, Ernst & Young’s managing partner for people, said: “Few companies have done enough to adapt their approach to meet the complexities of the current global economic and market environment. Companies looking for global growth will need to invest in developing an effective talent management strategy that successfully spans multiple geographies. They will need to change and flatten traditional organisational structures; encourage decentralised decision making; allow for a vast diversity of cultures, ages, backgrounds and geographical locations; and adopt new and more inclusive leadership styles.”

She added: “The old hub-and-spoke model of a strong headquarters and a weak subsidiary that must look to the centre for all key decisions is no longer suitable. The talent model then was built for a time when demand was predictable, workloads stable, markets and management competencies well understood, and the upheavals caused by shifting demographics and technological advances still far in the future.”

When it comes to identifying skills gaps, only 26% of high performers believe this to be an effective way to manage talent, and this drops to 18% among low-performing companies. Further, high-performing companies are more likely to consider “soft” attributes when recruiting executive posts, such as being able to lead in an international business environment or being able to articulate and embody the organisation’s value and culture.

Peter Matthews, chair of global learning at Ernst & Young, said: “Globally, companies are having trouble filling critical positions – roles in which they need people with the advanced skills essential to move the business forward. Businesses are on the brink of a leadership crisis and nothing less than a ‘paradigm shift’ – a fundamental change in thinking – is required to tackle the talent shortfall.”

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