Apple was on shaky ground as Steve Jobs stood down for health reasons.
According to Pia Lee, CEO at LIW global leadership consultancy, this was an example of outmoded succession planning where Apple and its board of directors relied on Jobs' stellar performance to bolster the company and its share performance.
Succession planning and climbing the corporate ladder, says Lee, are old-fashioned and outmoded particularly where the rate of change in today's markets, technology and companies mean that many jobs will not exist in their current form in a few years' time.
A recent report by Deloitte, Human Capital Trends 2011, shows that company structures today are on average 25% flatter with fewer rungs available for upward advancement, and that the outdated linear, vertical career progression up a hierarchy was more in keeping with industrial-age talent development models.
"Succession planning is not a suitable model for today's environment which sees the longevity of job roles so short that five out of six jobs now didn't exist 10 years ago, and where the jobs people are preparing for now might not exist in three years' time," Lee says.
She says boards need to look for a broader range of experience and skills in their organisations, and to develop a lattice-type approach rather than encouraging their leaders to climb the corporate ladder.
"Versatility is the key. A more relevant strategy is to build a bench of versatile leaders across the business who can adapt to different situations in the event of major change, such as an organization being bought or sold."
Boards have traditionally focused on minimizing the financial risks in the organization, however, Lee says, they must now start to take into account the human capital into this mix. "The costs of disengagement and turnover are often hidden, but they should not be ignored by a responsible board."
A recent Recruitment & Consulting Services Association report estimates the cost of replacing an employee can be over two times that person's salary. For a senior executive, that means a bottom-line impact of $500k or $5m in sales for a company with a company with 1-% net income.
Lee advises boards to ask their CEOs the same questions about human assets as they would about financial assets, such as:
- Who is your talent pool at each level?
- What are the risks of them leaving?
- What are you doing to make the most of these talents to deliver results and to build their talent through experience, exposure and education?
- What are you doing to retain them?
- What are you doing to prepare them for the next step?
Lee says the board's role now is to determine the purpose, vision and values of the organization, and aligning the people/talent and strategies to support these measurable outcomes. It means defining key roles and responsibilities, and devising a 'talent map' to support them.
"It is the board's responsibility to attract, retain and develop key talent in their organizations and see this as a human capital imperative. It is also their role to develop leadership capability at all levels which gives flexibility in moving people around where needed," she says.
Focusing solely on technical capability and not leadership and management skills to build the organisation's capability is a key mistake. Hiring the stellar CEO, unless they are skilled at building human capital, is another.
"Boardroom thinking needs to focus on a three-dimensional matrix in which careers can be built in multiple directions where people have many connections and more autonomy across the organisation.
"Relying on the rockstar CEO and not creating a depth of talent across all levels leaves an organisation and its board vulnerable," Lee says.
This article first appeared in the publication of the Australian Institute of Company Directors, edited by Zilla Efrat
HRM Asia welcomes your contribution. Your IP address is recorded in the event of
a complaint.