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leadership leap
Developing an
effective executive
pipeline for
Indias future
Contacts About the authors
Gaurav Moda is a
principal with Strategy&
based in New Delhi.
He leads the firms
organization, change,
and leadership efforts in
India.
Anshu Nahar is a
principal with Strategy&
based in Mumbai. He
focuses on strategy and
organization within
the financial services
industry.
2 Strategy&
Executive summary
Strategy& 3
Talent at the top
4 Strategy&
C-level executives in India recognize this gap, but it is not always clear
what concrete steps they can take to fill it. Indeed, few companies have
managed to produce the leadership pipeline they need. But it is possible
to overcome this hurdle. By cultivating younger leaders, and taking a
more holistic and targeted approach to their development and career
path, companies can fill their immediate gaps while building the
enterprise capabilities necessary to ensure that they thrive in the
long run.
Strategy& 5
Identifying the challenges
Although talent shortages are seen among all skilled workers, the gaps at
the middle and senior management levels relate to both the number of
candidates and the skills they offer. Given the current state of leadership
development at Indian companies, and with continued economic growth
in mind, our estimates suggest that the top management deficit may
range between 10 and 18 percent over the next five to 10 years
(see Exhibit 1, next page). This gap leads to delays in readying growth
opportunities, and can also put existing business operations at risk.
Gap
20%
18%
15%
15% 13%
11%
10% 11%
9%
People have been so focused on growth that they have not invested
in developing the next rung [of the leadership ladder], said one
senior human resources (HR) manager from a large private-sector
conglomerate. There is a strong circle of top leadership in our
businesses, but no tag team.
Until now, businesses that are closely aligned to the public sector have
been less affected by this problem; the large workforce, grown through
the ranks, has so far shielded state-run companies. But as a public-sector
bank CEO noted, The pressure is beginning to mount. He added that
this was a serious problem for the company: More than 30 percent of
our senior and middle managers will retire in the next three years. This
will leave a large numerical and capabilities gap.
Strategy& 7
The experience deficit
8 Strategy&
The talent war The demand for
As they struggle with the quantity and experience deficits, human
capable leaders
resources departments have had to rely on external hiring to build continues to
their teams. The demand for capable leaders continues to rise, and the rise, and the
competition for them has intensified. This has led to an accelerating
talent war among companies. Those companies that invest in a
competition
leadership pipeline are aware that a rival company could hire the senior for them has
managers they cultivate at any time. We have gone the buy route intensified.
[hiring seasoned senior leaders from outside], said a senior HR
manager at a major Indian conglomerate. We have infused external
This has led to
talent to support our growth. an accelerating
talent war
The professionalization of family-run businesses, the continued entry
of global corporations into India, and the emergence of new sectors are
among
further fueling this race for talent. We have been hiring aggressively at companies.
entry levels to build our talent pipeline, said the chief operating officer
of a public-sector bank. However, we see an attrition [rate] of around
25 to 30 percent among these new hires. Once trained, they are picked
up by private-sector banks at significantly higher salaries.
But there are more holistic ways to develop and nurture top talent
ways that breed loyalty and provide incentives to young leaders not to
jump at the first outside offer they receive. Determining what is causing
the leadership deficit will go a long way toward not only retaining more
versatile employees, but also decreasing the need to rely on them in the
first place.
Strategy& 9
Understanding the root causes
The challenges that Indian companies face with talent and leadership
have three underlying causes. The first two Indian demographics and
the booming Indian economy are well known. The third, Indias
prevailing technological mind-set, is less obvious to many people, but
may provide more leverage for change. Each of the three is worth a brief
explanation.
Indian demographics
Strategy& 11
A technological mind-set
Need for more breadth of experience at the top: As noted earlier, senior
team members have often risen through functional ranks by
excelling in their specialized tasks, but with a limited variety of
experience. This is not a problem just for Indian companies; it is
endemic to corporate structures in many geographies. But while
many global companies compensate through in-depth training at
the top, bringing senior executives together to help develop their
complementary capabilities, Indian companies have not invested
as much in this type of executive education.
12 Strategy&
A dearth of integrated training at the bottom: Cadre-building Changing the
programs have often been ad hoc, run in isolation or as one-off
initiatives. In addition, many Indian companies struggle with MBA
culture of a
hiring programs. Often, the MBA class is not integrated well enough company to
into the broader workforce, and companies put too much hope too one that will
early in these young managers. Meanwhile, rotation programs meant
to train the new recruits are often ill-conceived and seen as an
incorporate a
intrusion into daily work by line managers. Corporate has assigned sound leadership
two MBAs to my department for rotation I dont know what to do pipeline is no
with them, said a department head at one midsized company. My
people are already overworked with their routine work we do not
small task.
have the time to train these overpaid young recruits. But with a
well-developed
Changing the culture of a company to one that will incorporate a
sound leadership pipeline is no small task. But with a well-developed
plan, it can be
plan, it can be achieved. Such a plan will imbue managers with an achieved.
understanding that training such young recruits is an essential part of
their routine, and will provide the incentives for them to contribute. In
order to establish this type of plan, and to reap the benefits of a better-
prepared managerial workforce, companies will have to undertake a
comprehensive overhaul of how they approach leadership development.
This is an important, and wholly achievable, goal. Failure to devote
time and attention to it will cause more leadership problems and
promote a vicious circle in which short-term fixes, such as recruiting
disproportionately from outside and promoting more people to positions
they cant handle, will further aggravate overall leadership problems.
Strategy& 13
Taking the leadership leap
What does it mean for Indian businesses to take a holistic view of the
entire leadership pipeline and systematically build leaders from the
bottom up? It means making talent management identifying,
nurturing, and elevating high-potential employees a key component
of HR strategy. This involves five main steps:
2. Set up feeder roles and successor pools among the next tier of leaders
under the top team: For each key position in an organization, multiple
feeder roles must be identified. Feeder roles are the next line of roles
in the same division as a critical role; these can be set up to ensure
14 Strategy&
employees develop the required competencies. These roles must be
chosen carefully and, together, must encompass all the duties of the
considered position. Management must then identify potential
successors from across these feeder roles and create a pool of ideal
candidates. Potential successors should have the opportunity to take
on a variety of feeder roles to prepare them to embrace broader
responsibilities at the next level, resulting in a well-rounded next
generation of upper management.
Identify at least two successors for each critical role, selected from
those occupying feeder roles or with relevant job experience.
C-suite
Top management executives
Successors Successors
Middle management
High-potential High-potential
Management leader
Technical leader
individuals individuals
Junior level
Cadre Cadre
pool pool
16 Strategy&
aspirational career paths that do not require them to take
managerial positions with people-oriented responsibilities.
5. Build quality cadres at the junior level: The cadre level is an ocean
from which future leaders will emerge, so special attention needs
to be given to it. First, the organization must determine the optimal
mix of cadres recruited directly from universities and entry-level
hires from the job market. Within the former, the organization
Strategy& 17
must carefully select which undergraduate and postgraduate
schools it plans to hire from and the initiatives taken at those
schools to promote the company. The organization also needs
to develop a structured, integrated internship program to
attract outstanding students early on. Finally, as with all other
development programs, it is critical that these programs not be
run in isolation.
18 Strategy&
The long-term opportunity
Weve presented the talent shortfall as corporate Indias greatest Weve presented
challenge more difficult to master than growth, expansion,
technological advancement, or business strategy. But talent is also the
the talent
countrys greatest opportunity. As more Indian companies compete on a shortfall as
global scale, as their external ambition grows, senior executives will be corporate
drawn to think more effectively about people. India has one distinctive
cultural asset in this regard: It has a tradition of taking the long view.
Indias greatest
People need time and discipline if they are to develop, and if Indian challenge. But
companies are willing to apply that long-term outlook, they may be talent is also
able to leap past other nations companies in their approach to human
capital.
the countrys
greatest
Before the countrys top business leaders retire, they should put their opportunity.
full attention on the care and development of people coming up behind
them. That will allow them to retire with confidence, knowing that they
are leaving their business in good hands not just immediately, but long
into the future. By building the right, integrated capabilities, and
instituting a holistic leadership development program, they can ensure
strong leadership for generations to come.
Strategy& 19
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