Succession Beyond the C-Suite: A Talent Masterclass for Boards
In years past, boards mostly focused on CEO succession and executive compensation, but in today’s business world, talent is the lynchpin for scalable, profitable growth. In my opinion, many boards need more education around talent management and talent risk. After nine years of facilitating CHRO mastermind groups, it’s clear that a large majority of CEOs, CFOs, and other C-suite executives are not familiar with the potential power of modern talent management practices. It makes sense because, historically, board education hasn't emphasized the broader aspects of talent risk and management. They can't afford to just rely on what the CEO presents about talent and need to understand the risks as well as help support the CHRO in creating cultures where employees can thrive.
However, as those same leaders are recruited into board seats, I worry that the very people responsible for governance may not be familiar enough with the deeper and modern talent management practices expected of top talent. They might not be asking the right questions or even know what good talent management looks like beyond C-suite succession.
I worry that the very people responsible for governance may not be familiar enough with the deeper and modern talent management practices expected of top talent - Cindy Lu
The Critical Importance of Talent Management
Substantial research supports the importance of effective talent management. According to a study by McKinsey, companies with robust talent management practices are 1.5 times more likely to report higher revenue growth and 2 times more likely to report improved profitability. Furthermore, Deloitte's Global Human Capital Trends report highlights that organizations prioritizing talent development are more agile and better equipped to navigate disruptions.
Despite this, I feel many C-suite executives do not possess enough talent acumen. While CEOS often say that HR leaders need more business acumen, I believe the rest of the C-suite needs more talent acumen. Understanding and managing talent risk is critical for the success of any organization. Poor talent management can lead to leadership gaps, cultural erosion, and decreased profitability – all of which directly impact a company’s bottom line.
Consequences of Neglect
When boards fail to ask the right questions about talent management beyond the C-suite, they risk significant negative impacts on revenue growth, company culture, and overall profitability:
1. Revenue Growth Stagnation: Without a strong leadership pipeline, companies may struggle to maintain and grow revenue streams. Leadership gaps can lead to missed opportunities and slow response times to market changes, directly affecting the bottom line.
2. Cultural Erosion: A lack of attention to developing leaders throughout the organization can result in a weakened company culture. Employees may feel undervalued and disconnected, leading to decreased morale and engagement. This disengagement can result in higher turnover rates, further exacerbating leadership voids and instability.
3. Profitability Risks: Operational inefficiencies and poor decision-making, stemming from unprepared leaders, can directly impact profitability. High turnover and low engagement increase costs, reduce productivity, and ultimately harm the company's financial health.
Real-World Example
I recently heard about a large private company where the CEO founder wasn't willing to provide long-term incentives. She found out the hard way that the top talent had many choices, and she experienced a mass exodus at the senior levels. This is a prime example of how neglecting talent management can have severe consequences.
The Upside of Getting It Right
Conversely, when boards prioritize succession planning and talent development beyond the C-suite, the benefits directly contribute to enhanced revenue growth, a strong organizational culture, and improved profitability:
1. Sustained Revenue Growth: A well-prepared pipeline ensures that leadership transitions are smooth and that the company can continue to capitalize on growth opportunities without interruption. Effective talent management ensures continuity and stability, driving consistent revenue generation.
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2. Robust Company Culture: Developing leaders at all levels fosters a culture of growth and opportunity, increasing employee engagement and loyalty. A strong culture attracts top talent and retains high performers, creating a virtuous cycle of development and retention.
3. Increased Profitability: Effective talent management leads to operational efficiencies, better decision-making, and higher overall productivity. Engaged and well-prepared leaders drive the company towards its strategic goals, enhancing profitability. Investments in talent development yield high returns through reduced turnover costs and increased innovation.
Join the Conversation
To delve deeper into this crucial topic, join @Board Prospects Mark Rogers on Tuesday, June 18th at 1:00pm ET/10:00am PT for "Succession Beyond the C-Suite: A Talent Masterclass for Boards." This event is designed for current and future board members, as well as CHROs who participate in board meetings or want to be better prepared for future board meetings. It will feature insights from our CHRO Partners - HR Mastermind Peer Groups members Amaris McComas , Chief People Officer at TruBridge; Carrie David , EVP & CHRO at SRS Distribution; and Suzanne Myers , CHRO at Arcosa. Josh Lipscomb , SVP of Total Rewards at Varsity Brands, will moderate the discussion.
Masterclass Highlights
- Strategies for Effective Talent Management
- Risks of Neglecting the Talent Pipeline Beyond the C-Suite
- Guidance on Assessing and Mitigating Risks
Don't miss this opportunity to learn from industry leaders and ensure your organization is prepared for future success. Click HERE to save your spot.
Cindy Lu
Founder, CHRO Mastermind Groups
Sources:
- McKinsey & Company. ["Why talent management is more important than ever."]
- Deloitte. ["Global Human Capital Trends."]