Leadership in peril Featured

9:45am EDT July 22, 2002

Tony Lombardo, president and CEO of Mon-Vale Health Resources Inc., wants to retire someday — maybe not next week or next month, but someday.

He’s not ready to clear out his office, but at 62, Lombardo is the first to acknowledge that the time to begin planning for his departure from this 1,000-employee, $78 million operation is now.

Mon-Vale faces two choices: Identify and develop someone from within the organization to move into Lombardo’s seat or bring in someone from outside the health system to take the top spot. For most companies, doing either is an increasingly difficult proposition. At the moment, this company has done neither.

The Mon-Vale scenario is familiar to William Byham, president and CEO of Development Dimensions International, a Bridgeville-based human resources and training consulting firm with more than 1,000 employees at operations around the world.

Byham, playing off the notoriety and concern for the millennium bug, characterizes the emerging crisis in corporate leadership as the “Millennium Elephant,” a phenomenon caused by a number of factors on the corporate scene. Demographic shifts, corporate down-sizings and changes in attitudes toward work, says Byham, have created a perilous situation that’s more than a blip on the corporate leadership screen.

Unlike the millennium bug of Y2K renown, expected by some to bring things to a grinding halt at a specific point in time, Byham contends that the Millennium Elephant will degrade the corporate landscape over a longer period, in a more profound way.

There’s evidence that the erosion has begun. In a recent survey conducted by DDI, nearly three-quarters of the firms queried revealed they have a tough time finding qualified leaders. Only about a third, DDI discovered, are confident they will be able to find top-flight leaders in the next decade. Ironically, the percentage of companies reporting that they have a formal succession plan has dropped as well, DDI reports.

So what can you do to halt the problem in your company? Byham is trotting the globe to spread the message that “growing your own” is the answer to ensuring that businesses have a pool of leaders to draw from when top managers move out of or retire from the executive suite.

A shrinking pool ...

The crisis in leadership is emerging because a large number of senior managers and executives plan to retire over the next decade as members of the baby boom generation move into their golden years, Byham says. As many as half of the top executives in the San Francisco area are expected to retire within five years, according to a survey by DDI.

Meanwhile, companies nationally face a 5 percent growth in new positions. At the same time, the generation behind the baby boomers is smaller, leaving a more limited pool from which to choose — despite gains by minorities and women in the workplace.

The number of 25- to 44-year-olds — the age group in which leaders typically emerge and mature — will fall 15 percent between now and 2015.

... and a rising bar

While the pool of workers continues to shrink, says Byham, the job of the leader grows more demanding as business changes at an accelerating rate and leaders have to juggle more duties. That’s a phenomenon Byham has witnessed firsthand.

“The jump bar is going up, and there are more bars,” says Byham. “We’re running into it all the time in our company. We’re partnering with a company and also competing with them. It gets complicated.”

Mergers, acquisitions, expansions and organizational restructurings are coming at a faster rate. Meanwhile, businesses are venturing into the global marketplace, so leaders have to be able to adjust to other cultures and transcend geographic boundaries.

“You have to be skilled in more things, and you have to be better in each of those areas,” says Byham, author of a dozen books on management, including his best-seller, “Zapp! The Lightning of Empowerment.”

The downsizing dilemma

The downsizings and restructurings of recent years have left a lasting legacy.

“Certainly, the whole idea of leaner and meaner management has created a lot of leadership problems,” says Jim Kwaiser, president of C.H.A.L.L.E.N.G.E.S. Inc., a Pittsburgh-based consulting firm that assists businesses with succession planning.

A company that slashes its middle management ranks in half has to spread the duties around, and the remaining managers may not welcome or weather the changes well.

“Those four, five or six are still doing 10 jobs,” says Kwaiser.

In some cases, employees view the changes as simply having to do more work, rather than as opportunities to gain new skills and move up in the organization. In other instances, they may not be capable of handling the extra load.

“Some of the people we have as leaders and managers are beyond their own competencies,” says Kwaiser.

Corporate loyalty is tenuous, as employees are wary of a company’s commitment to them. Individuals rely more on themselves than on an employer to chart their career course. Executives have more career options, Byham points out, and are likely to search out other opportunities if their positions leave them dissatisfied.

Entrepreneurial ventures, for example, are a powerful draw for experienced executives. And with more opportunities, higher salaries and other enticements, executives are leaving the workplace at an earlier age, further diminishing the pool.

“Retirement age is going down, while the demands of the job are increasing,” Byham says.

An outdated system

The traditional system of moving individuals up the ranks has often been a secretive one. Byham says that one major Pittsburgh corporation had a room in which the names of up-and-comers were posted on the wall. Only a select few executives had access.

Employees could only guess who was and who wasn’t being groomed for advancement. Sometimes it was obvious who the favorite sons were, but in other cases, it wasn’t so clear. Stars sometimes jumped ship if they perceived that they weren’t among the chosen.

In an employment market rich with talent, that wouldn’t hurt as much, but when the pool is shallower, a defection can deal a harsh blow.

What’s the solution?

The paradigm has shifted so dramatically in recent years that businesses need to make radical changes in the way they develop leaders, and corporate America can’t risk doing things the old way, says Byham. High performers have to be identified early, made aware that they are being groomed for the fast track and given assignments that test their talents.

Promising employees need to be mentored and coached by senior-level executives.

Kwaiser says some companies are persuading executives to stay on longer as coaches and mentors. That can work, he says, but only if the elder executive is willing and able to adjust his leadership style and push more of the decision-making responsibilities down the organizational chart.

One of Byham’s favorite techniques and the subject of his book, “Grow Your Own Leaders,” is the acceleration pool, a group of individuals within an organization who have been identified as having the potential to move into positions of higher responsibility. Those in the pool learn general executive skills rather than prepare for specific jobs.

“Things change quickly,” says Byham, so teaching skills that prepare potential managers for narrowly defined positions won’t serve candidates well.

Byham terms another technique “action learning.” Employees are presented with an issue the company faces, such as marketing a new product. This gives them hands-on experience in the executive decision-making process and gives the organization insight into how potential leaders will respond in such situations.

The big lesson

If ensuring that you will have the right leadership sounds like an uphill battle, take comfort in the fact that companies of every stripe are struggling with the same dilemma.

“Nobody’s immune,” says Kwaiser.

In his practice, he says, he sees companies of all sizes and types struggling to find ways to make flatter organizations more efficient and leaders more flexible and responsive.

For Byham, there is no simple fix. Still, he says, companies that prepare their people and their organizations will have the best chance of surviving.

Says Byham: “The bigger lesson is you can’t stop developing people.”

How to reach: DDI, www.ddiworld.com; reach C.H.A.L.L.E.N.G.E.S. at www.challengesinc.com

Ray Marano (rmarano@sbnnet.com) is associate editor of SBN.