In the changing global economy, knowledge needed by leaders and management teams will come from direct, experience-based learning, says Scotiabank president
During the next decade, employers will face a leadership and management gap. Not only in terms of the actual leaders available, but also gaps in the development of leadership skills necessary in a changing business world.
In 2003, the oldest baby boomers turned 57. That means Canada’s leaders are aging. In the public service, more than half of the executive group were 50 years of age or older in 2000. In the next five to 10 years, many of those individuals will be retiring. At Scotiabank, about half of our leaders — vice-presidents and above — will be leaving during that time frame.
At the same time, the need for strong leaders with a global perspective is growing. We operate in a global economy — dealing with issues of a global nature — from the environment, to health, to security, to ethics, to ensuring profitability. The skill sets needed to succeed in a global business world are not necessarily ones that can be learned from a textbook or locally. The kind of knowledge that leaders and management teams will need will come from direct, experience-based learning.
Another key challenge is that organizational structures are flatter today than they were in the past. Thinking in hierarchical or traditional terms is not the way to go. But flatter organizations generally create fewer natural leadership development opportunities. What this means is we have a pool of talent that will require a more intentional, more focused effort to develop their skills to fill future leadership gaps.
Organizations are increasingly being measured based on the quality of their leaders. Perceptions about management quality are a key and increasing consideration of key stakeholders. Stakeholders are most interested in people, not organizational structures. Bay Street and Wall Street consider leadership as a leading indicator of an organization’s economic value. An Ernst and Young study showed that 35 per cent of financial analysts’ recommendations are based on non-financial variables. Management credibility is the most important next to execution of corporate strategy. Research, by international HR group the Corporate Leadership Council, showed companies with above-average leadership “bench strength” were four times as likely to outperform industry peers in revenue growth over a three-year period.
For employees, leadership has a direct impact on job satisfaction. Manager quality is the number-one retention factor identified by high potential workers.
So how do organizations deal with this gap?
It starts with identifying and establishing the organization’s values, and continually reinforcing those values. Values provide the signposts for how organizations approach achieving goals and developing leaders.
For leaders, values are critical because they guide us — they guide management and employees — especially when difficult decisions need to be made. These values must be expressed and communicated throughout the organization and monitored continually. Values are the anchor for HR’s approach to managing its leadership needs.
Secondly, HR managers should tap the full potential of their workforces. For example, at Scotiabank women represent about 50 per cent of our management-level employees. The representation at an executive level is much lower, however. That’s going to change. So we’re focusing on the untapped potential that represents to build on our bench strength.
Lastly and most importantly, leadership should be managed as a strategic priority by line management. Responsibility for leadership development must begin at the very top. HR can and does play an important role facilitating the process, but it must be owned and executed by current leaders.
If organizations can focus on these as key drivers — managing based on values, building from within, tapping the full potential of the workforce and making leadership a strategic priority for management — then we will be well on the way to addressing the leadership challenges we’re all facing in our country and our organizations.
Rick Waugh, president of Scotiabank, recently addressed the Conference Board of Canada’s National Leadership Summit. The above is an edited excerpt of that address.
