WHAT ARE 700 GLOBAL CEO'S NUMBER 1 CONCERNS                                                                            

Communicate L&D value or risk budget cuts

16 May 2013 HR Daily

According to a global survey of more than 700 CEOs, human capital challenges are the number one issue for CEOs at the moment.

Nicholas Sutcliffe, the executive director of The Conference Board, says that many Australian CEOs are focusing on enhancing the effectiveness of their senior management team, which is good news for HR.

When a learning and development budget is cut, it's usual to blame tough times, but in fact the problem could well lie with HR, according to Nicholas Sutcliffe, executive director of The Conference Board.

When tough times hit organisations and budgets need cutting, L&D is often targeted.

"I'm going to be a bit blunt and tell you, it's probably down to the lack of your own skills," Sutcliffe told a Right Management briefing of HR professionals in Sydney this month.

"It's very easy to cut a training and development budget, [as] it's very hard to quantify the ROI.

"Until you as human capital practitioners can produce the analytics and the figures to show that ROI, it's going to continue to be cut," he said.

Human capital the "number one issue" for CEOs

Sutcliffe briefed the seminar on The Conference Board's latest CEO challenge survey.

The survey, which aims to gain insight into the challenges facing organisations around the world - and had more than 700 respondents this year - identified human capital as the number one issue for CEOs.

Four of the top five challenges were the same in Europe, Asia and Australia: human capital; operational excellence; innovation; and customer relations.

Respondents were then asked, "What are you going to do about it?"

Top strategies for CEOs across the globe include: grow talent internally; provide employee training and development; raise employee engagement; and improve performance management process and accountability.

In Australia, the top strategies relate to growing talent internally; training and development; and enhancing the effectiveness of the senior management team.

Sutcliffe says the focus on developing the senior management team is good news for HR.

"You cannot drive talent development from the bottom up. You cannot do it as an HR operator; you have got to ensure it's done from the top down. If your CEO is thinking that way, it's important."

A cataclysmic shift

Sutcliffe also pointed out that the world is at a "really unique point" in economic history.

"We're moving over from a situation where 60 per cent of the world's GDP was set in the West. At present, 50 per cent is now in the East. In 10 years' time, 60 per cent of the GDP will be based in the East," he said.

"This is a cataclysmic shift; it's never been seen before.

"As a result you're seeing turbulence in the market, but you're also seeing rapid growth in Asia. Hence the primary focuses of human capital, innovation and operational excellence."

Sutcliffe says that while Australia is "uniquely linked" to the Asian region - which is "driving the economy" - it remains Western-centric in its thinking.

Identifying high potentials

Ric Roi, head of talent management at Right Management's global centre of excellence, told the seminar that leadership in Asia and Australia isn't all that different.

He says that for Asia-Pacific organisations, growing mid-level managers to managing directors, country heads and business unit heads is a top priority at the moment.

Right Management, in partnership with The Conference Board, set out to understand how those companies are closing the leadership gap within one or two years - as opposed to three or four.

He notes that not every individual with drive and training can become a successful executive.

If 20-25 per cent of an organisation's middle managers are high-performing, only 10-30 per cent of those are likely to have high potential as executives as well, he said.

"It's actually a fairly small group... so there's a lot more attention focused on getting selection criteria and definitions right."

Roi says the greatest challenges in managing key talent are: retaining top talent; accelerating leadership development; and engaging and motivating talent to get maximum productivity, engagement and commitment.

"Localisation of country management teams continues to be a priority," he adds, so getting local managers ready for country or overseas roles is essential.

Growing your own talent - promoting people who understand the organisation's business model and culture, and have existing relationships - involves less risk than hiring talent, he says.

The critical question is how to distinguish employees with high leadership potential from high performers.

Best-in-class companies are planning and structuring ways to identify, grow, deploy and onboard high-potential staff, Roi says.

Few are being transparent about the identity of high-potential individuals, but they are clearly articulating their selection criteria and processes.

There has also been a big push towards experience exposure-based development - and a focus on agility, he says.

Aspiration, agility, and organisational confidence

"For many years most of us, including Right, followed the corporate leadership council's definition of what is high potential talent," Roi says.

"Most of us have moved towards some definition around agility - not just learning agility but other aspects... So we do career aspiration and agility combined with organisational confidence to select high potentials."

He says it's important to assess mobility - a leader's willingness to relocate - early in the process.

As part of the "rebalancing of economic mass from West to East", at least 30 "massive" state-owned companies in China are now going global, and a "whole bunch of companies" are preparing to, he points out.

"Companies know they need to move to experience and exposure-based development."

Roi says that while Asia Pacific companies are managing to build high-potentials up in one-to-two rather than three-to-four years, it remains to be seen whether the "psychology" of individuals will hold up.

Leadership development initiatives with the most impact are: action learning, international assignments, and rotational programs across countries or overseas, he says.

Social learning is an aspiration for some companies, but is yet to make a significant impact, he notes.