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Transcript of A Perceived Crisis in Leadership
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A PERCEIVED CRISIS IN LEADERSHIP:
A CASE STUDY RELATED TO WOMEN EXECUTIVES
by
Bonnie E. Altman
A Dissertation Presented in Partial Fulfillment
Of the Requirements for the Degree
Doctor of Philosophy
Capella University
December 2006
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UMI Number: 3239057
3239057
2007
Copyright 2007 by
Altman, Bonnie E.
UMI Microform
Copyright
All rights reserved. This microform edition is protected againstunauthorized copying under Title 17, United States Code.
ProQuest Information and Learning Company300 North Zeeb Road
P.O. Box 1346Ann Arbor, MI 48106-1346
All rights reserved.
by ProQuest Information and Learning Company.
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Bonnie E. Altman
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Abstract
Organizations nationwide are facing what is perceived to be a leadership crisis as large
numbers of baby boom generation executive leaders become eligible to retire over the next
18 years. These executive positions are held mainly by men which has created a dearth of
women executives. Qualitative case study methodology was used to answer the question
How can organizations increase women in executive leadership positions while preparing
for the leadership crisis? Data collected via personal interviews with executive leaders and
human resource directors indicated these organizations are preparing for the perceived
leadership crisis by implementing succession planning and management systems and
development for upper level leaders; however, seven of the eight organizations in the study
are not attempting to increase women in executive leadership positions.
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Acknowledgments
This study culminates an academic journey made possible through the support and
assistance of several individuals. I would like to acknowledge my family who patiently
endured my time consuming research. To my daughter Michelle, who encouraged me to
complete the journey and to my son Derek, who became my inspiration and support as I
analyzed data. To my husband Alan, whose patience and encouragement kept me going when
a disability seemed overwhelming.
I would like to express my sincere thanks to Dr. Heinz Buschang, who as an external
reviewer gave me valuable feedback on the data, assisted with triangulation, and served as an
excellent editor. I would like to acknowledge the members of my dissertation committee, Dr.
William Reed, mentor, and Dr. Johnny Morris, committee member, in the School of Business
and Technology and Dr. David Balch, committee member, in the School of Education. Their
positive feedback is most appreciated.
This study was made possible by the contributions of the eight women and men who
gave their time and candidly participated in interviews. Although their identities are not
revealed, their contributions are greatly valued.
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Table of Contents
Acknowledgments iii
List of Tables vi
CHAPTER 1: INTRODUCTION 1
Introduction to the Problem 1
Background of the Study 2
Statement of the Problem 4
Purpose of the Study 4
Rationale 5
Research Questions 5
Significance of the Study 6
Definition of Terms 7
Assumptions and Limitations 11
Nature of the Study 15
Organization of the Remainder of the Study 16
CHAPTER 2: LITERATURE REVIEW 17
Context of the Impending Leadership Crisis 17
Implications of the Leadership Crisis 30
Preparation for the Leadership Crisis 35
Women in Leadership 45
Case Study Research 84
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CHAPTER 3: METHODOLOGY 90
Researchers Philosophy 90
Theoretical Framework 91
Research Study Design 92
Sampling Design 93
Measures 95
Data Collection Procedures 101
Data Analysis Procedures 106
Limitations of the Methodology 107
Expected Findings 108
CHAPTER 4: RESULTS 109
Interviews 109
Participants 109
Data Presentation 110
CHAPTER 5: DISCUSSION 138
Data Analysis and Comparison to Literature 138
Field Notes and Unexpected Findings 156
Relationship of Findings to the Research Questions 158
Recommendations for Further Research 162
REFERENCES 165
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List of Tables
Table 1: Retirement Projections 139
Table 2: 5 and 10 Year Retirement Projections 140
Table 3: Number of Women Executives and Board of Directors 147
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CHAPTER 1. INTRODUCTION
Introduction to the Problem
Organizations today are in a rapidly changing and unforgiving global environment in
which competition is fiercer than ever before and effective leadership represents a rare
source of competitive advantage (Kaiser, 2005, p. 1). As a result, leadership has become
more challenging. Leaders feel pressure from financial institutions and expectations of boards
of directors as well as impatient shareholders. They face increased complexity and
competition as a result of globalization, rapid information technology changes, more
demanding customers, increased employee expectations, and difficulties finding and retaining
excellent talent (Barrett & Beeson, 2002; Fisk, 2002). As leaders face greater challenges,
organizations are facing what is perceived to be a leadership crisis. Crainer and Dearlove
(1999) posited that on a global scale one of the most critical issues in the 21 st century will be
the lack of qualified managers and executive leaders. Research supports this supposition
(Barrett & Beeson, 2002; Bernthal, Rioux, & Wellins, 1999; Chambers, Foulon, Handfield-
Jones, Hankin, & Michaels III, 1998; Michaels, Handfield-Jones, & Axelrod, 2001).
Leadership is a process whereby an individual influences a group of individuals to
achieve a common goal (Northouse, 2004, p. 3). Strong leadership is needed to achieve a
common goal; if missing, the organization may become fragmented. This study examines the
perceived leadership crisis, in organizations in a geographically defined area, and
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investigates what actions are currently being taken to increase women in executive positions
while preparing for the crisis. The examination involves assessing how potential leaders are
being identified and groomed and if the lack of women in executive positions may improve
because of the leadership crisis.
In addition to leaders facing greater challenges, demographics, the loss of significant
knowledge, and inadequate leadership development are critical issues exacerbating the
leadership crisis organizations are facing. Additional critical issues include outdated
succession planning and management systems, job mobility, and limited source recruitment.
Background of the Study
The current leadership challenges and the increased challenges projected for the
future are expected to test both the capability as well as the supply of executive and mid-level
leaders. As the challenges and demands increase, potential leaders are questioning whether
advancing to leadership positions, particularly executive leadership positions, is what they
desire, which is further decreasing the pool of qualified leaders (Barrett & Beeson, 2002).
Several demographics are contributing to the impending leadership crisis as well.
Sixty million people in the baby boom generation are nearing retirement and will leave the
workforce over the next 15 years (McClintock, 2003). Many of the baby boom generation are
in executive leadership and management positions. The Bureau of Labor Statistics noted that
19% of the baby boom generation who are in executive, administrative, and managerial
positions expect to retire in the next 5 years and the number of baby boom generation
employees eligible for retirement will be 12,480 per day from 2010 until the mid-2020s
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(Carey, 2003). The experienced leaders have a significant amount of knowledge regarding
their organization and industry. The knowledge will leave with them unless this knowledge is
captured prior to their exit.
A second demographic involves the decrease in the number of candidates for the
leadership positions due to a decline in the number of people in generation X, the generation
following the baby boom generation. Approximately 76 million people compose the baby
boom generation while there are only 45 million people in generation X (Muson, 2003).
Additionally, due to the downsizing of middle management in the 1990s, there are not an
adequate number of replacements who have been groomed for leadership positions (Byham,
2000). The potential leaders, currently in the talent pools, have not been groomed to
successfully replace the retirees due in part to the lack of adequate succession planning and
management systems needed to prepare leaders for the rapidly changing global environment
(Beeson, 2002).
With the increasing complexity of the global economy demanding more sophisticated
leadership, the talented leaders are in great demand resulting in a war for talent (Michaels, et
al., 2001). Between this war for talent and a change in the job security for loyalty mantra,
leaders have recognized the advantages of changing organizations. As they move from one
organization to another, organizations experience high financial costs, political disruption,
and psychological turmoil.
Corporate America is not recruiting leaders from all available sources as women are
significantly under represented in executive leadership positions (Catalyst, 2002a, 2003;
Crainer & Dearlove, 1999; Joy, 2006a). The Federal Glass Ceiling Commission (1995a)
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reported that corporate America has not expanded its recruiting networks to explore avenues
to hire women. Also, research studies have indicated that line management experience is
needed for advancement to upper level management and leadership positions (Hurley,
Fagenson-Eland, and Sonnenfeld, 1997; Ragins, Towsend, & Mattis, 1998). However,
organizations have been reluctant to place women in line management positions which has
effectively constructed glass walls as obstacles long before women reach the glass ceiling
(Townsend as cited by Corporate Leadership Council, 1999).
These critical issues have exacerbated the leadership crisis facing United States
organizations. The critical issues have developed into a multifaceted problem.
Statement of the Problem
Organizations are facing a leadership crisis. There is not enough leadership talent to
replace the leaders who will be eligible to retire, the potential leaders in the talent pool are
not prepared for the demands of the changing global economy, and not all leadership
potential is being identified and groomed. Therefore, the talented leaders are in great
demand, which has resulted in a war for talent (Michaels et al., 2001). The mobility of the
talented leaders is financially costly to organizations, causes political disruption and
psychological turmoil, and affects the long-term sustainability of organizations.
Purpose of the Study
The purpose of this study was to explore how organizations, in a geographically
defined area, will be affected by the perceived leadership crisis and investigated if actions are
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currently being taken to increase women in executive positions while organizations prepare
for the leadership crisis.
Rationale
Given the significant number of managers and leaders who will be eligible to retire
and the impact these retirements will have on organizations, examining and analyzing how
organizations are identifying, assessing, and developing potential leaders, including women,
may provide valuable insight on ways to decrease the negative effect of the impending crisis
and positively affect the number of women in executive leadership positions. This
information will be helpful to organizations in this geographical area as well as add to the
body of knowledge regarding the perceived leadership crisis and women in executive
leadership.
Research Questions
The research attempted to answer the question How can organizations increase
women in executive leadership positions while preparing for the perceived leadership crisis?
It was approached through the following questions regarding the leadership crisis, womens
roles in leadership preparation, succession planning, and knowledge management.
1.How will the perceived leadership crisis impact organizations in a geographicallydefined area?
2.How are organizations identifying individuals with leadership potential, assessingskills and skill gaps, and developing them for executive leadership positions?
3.What are organizations doing to ensure women are identified and developed forleadership positions?
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4.What succession planning and management systems are currently utilized?5.How is knowledge management approached in the succession planning and
management systems?
The perceived leadership crisis has vast implications for organizations and the global
economy.
Significance of the Study
Leadership plays an essential role in all organizations. The viability of an
organization depends on the knowledge, skills, and abilities of its leaders. As organizations
face an exodus of leaders over the next 15 years, addressing the preparation of leaders to fill
these positions is essential. How an organization is affected by the perceived leadership crisis
will depend upon the quantity and rigor of the preparations.
Excellent leadership is needed at all levels of organizations; therefore, the perceived
leadership crisis could have a significant impact on how organizations function. Research
indicates leadership and talent management dramatically impact competitive advantage and
financial performance (Axelrod, Handfield-Jones, & Welsh, 2001; Deloitte Touche, 2002;
Dorgan & Dowdy, 2002; Watson Wyatt Worldwide, 2001), which in a global environment is
critical. Other factors also drive financial performance; however, it is evident that talent
management and financial performance are related and that leaders are responsible for talent
management. Early in the 20th century Henri Fayol pointed out that it is managements
responsibility to ensure the stability of personnel tenure and if ignored positions will be filled
by ill-prepared people (Rothwell, 2001). For organizations to survive in the midst of the
leadership crisis they must have the right people in the right places at the right time. This
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means that organizations can no longer leave leadership development to chance or depend on
headhunters to find replacements but rather organizations must identify and prepare high-
potential candidates for key positions. When there are no leaders groomed for positions,
incumbents tend to select and develop successors similar to themselves. Consequently, white
males tend to select other white males, a practice which can perpetuate the glass ceiling and
other forms of discrimination (Rothwell).
Women are entering the workforce in greater numbers than ever before (Bennett,
2002). As more women enter the workforce, more are also becoming leaders and managers;
however, organizations have been reluctant to place women in line management positions,
the positions that lead to upper level positions (Corporate Leadership Council, 1999).
Therefore, few women have reached executive positions. In 2005, only 16.4% of corporate
officer positions were held by women (Joy, 2006a) and the numbers decrease further up the
ranks (Catalyst, 2003).
The implications of the perceived leadership crisis clearly indicate that organizations
need to identify, develop, and retain leaders. The data collected and analyzed in the study
identified measures currently being taken to address the perceived leadership crisis, offered
insights regarding the advancement of women in the perceived leadership crisis, added to the
current body of knowledge regarding methods of developing leaders and managers, as well
as succession planning and management. Prior to beginning the study, pertinent terminology
was defined.
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Definition of Terms
Leadership, management, and talent are key words, which have varying meanings and
are therefore defined. Terminology regarding talent management, succession planning and
management, and competencies are defined, as well as the terms sex and gender and the
generational cohorts.
Leadership and Management
There are numerous definitions of leadership and management; however, most
definitions of leadership state that leaders influence, motivate, inspire and develop other
people to work toward shared aspirations or a common goal (Greenwood, 1993; Hughes,
Ginnett, & Curphy, 2002; Kouzes and Posner, 1995; Napolitano and Henderson, 1997;
Northouse, 2001;), while managers plan, organize, and direct (Bennis, 1989; Topping, 2002).
Leadership involves people while management involves projects and activities (Topping);
thus, leaders and managers are needed at all levels of an organization.
Talent
The term talent has evolved from a unit of weight to a unit of money to a persons
innate abilities to gifted people collectively (Michaels, et al., 2001. p. xiii). Today, in the
most general sense, talent is the sum of a persons abilities his or her intrinsic gifts, skills,
knowledge, experience, intelligence, judgments, attitude, character, and drive (Michaels, et
al., p. xii). When discussing the impending leadership crisis, talent is defined as the code
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for the most effective leaders and managers at all levels who can help a company fulfill its
aspirations and drive its performance (Michaels, et al., p. xiii).
Talent Management
To ensure that the talent within organizations is utilized effectively, talent
management programs have been developed. Talent management is the implementation of
integrated strategies or systems designed to increase workplace productivity by developing
improved processes for attracting, developing, retaining and utilizing people with the
required skills and aptitude to meet current and future business needs (Lockwood, 2006, p.
2).
Succession Planning and Management
With the new employment contract, in which corporations no longer (implicitly)
assure anyone continued employment (Leibman, Bruer, & Maki, 1996), succession planning
is not independently sufficient and should be paired with succession management.
Succession planning identifies replacements and coaches them while succession management
is a more systematic approach which identifies and develops high potential individuals to
ensure there is not just a list of potential candidates but a pool of prepared candidates when a
vacancy occurs (Berke, 2005). Therefore, succession planning and management is any effort
designed to ensure the continued effective performance of an organization, division,
department, or work group by making provision for the development, replacement, and
strategic application of key people over time (Rothwell, 2001, p. 6). A succession planning
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and management system then is a deliberate and systematic effort by an organization to
ensure leadership continuity in key positions, retain and develop intellectual and knowledge
capital for the future, and encourage individual advancement (Rothwell, p. 6).
Succession planning and management is sometimes confused with replacement
planning. Although they are complimentary and may overlap, replacement planning focuses
on risk management and ideas for coping with crisis and is used to reduce the chance of a
catastrophe should key incumbents be lost unexpectedly (Wolfe, 1996). Replacement
planning identifies replacements for key positions, usually only the top two to three levels,
but does not include development of the identified individuals (Berke, 2005). Succession
planning and management goes beyond replacement planning in that it is a process, which
attempts to ensure the continuity of leadership by cultivating talent from within the
organization through planned development activities (Rothwell, 2001, p. 7).
Sex and Gender
In research regarding women in leadership positions, the terms sex and gender are
used extensively and are sometimes interchanged. According to Kaminer (2001), sex refers
to the biological categories of male and female while gender refers to the cultural norms of
masculinity and femininity ( 3). Indvik (2001) defined the terms in greater depth.
Sex refers to biological differences including anatomy, physiology, and hormones,although some theorists argue that even sex is a continuum rather than a simplebipolar set of categories. The categories ofmale (or man) andfemale (or woman),based on sex, imply nothing, in and of themselves, about cognitive, emotional orinterpersonal abilities. Most cultures, however, have assigned meaning to thecategories ofmale andfemale. Genderrefers to the way in which meaning andevaluations are associated with sex by members of a culture. In other words,masculinity and femininity have various sets of characteristics associated with them,
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depending on the culture. The degree to which males and females are expected tobehave differently, are treated differently, or are valued differently has little to dowith sex and everything to do with gender. (Indvik, 2001, pp. 215-216)
When discussing women in leadership, cultural norms and the degree to which women are
expected to behave differently and are treated and valued differently exists, therefore gender
is the applicable terminology used in the current research.
Generational Cohorts
The generational cohorts are defined by their birth years. The researchers, who have
studied the generational cohorts, agree that there are four distinct cohorts in the workplace
today; however, they vary on the exact parameters of each cohort. The terminology for each
generational cohort also varies. The four generational cohorts in this paper are defined as (a)
the veterans, born between 1925 and 1945; (b) the baby boom generation, born between 1946
and 1964; (c) generation X, born between 1965 and 1980; and (d) generation Y born between
1981 and 2000.
Assumptions and Limitations
Assumptions
Impending Leadership Crisis and Increasing Women Executives
Literature indicates the baby boom generation will be eligible to retire within 2 years
followed by a mass exodus through 2020. Numerous executive positions held mainly by the
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baby boom generation will be vacated. The literature also indicates that women are under
represented in executive leadership. It is assumed that the exodus of executive leaders,
referred to as the leadership crisis, presents an opportunity to increase women in executive
leadership positions.
Geographical Representativeness
The perceived leadership crisis will affect all demographical areas of the United States.
Literature indicates senior leaders are aware of the leadership crisis and are beginning to
prepare for it by identifying the potential leaders within their organizations, assessing the
potential leaders strengths and skill gaps, and developing potential leaders. Therefore, it is
assumed that organizations in the selected geographical area will be affected by the
leadership crisis and are beginning to prepare potential leaders.
Leadership Enhancement
Leadership is complex and requires knowledge as well as experience. Whether
leadership is an inborn characteristic or a learned skill continues to be debated (Northouse,
2001).For the purpose of this study, it is assumed that although leaders may possess innate
or inborn characteristics or qualities that make them leaders, leadership is a process that can
be enhanced through education and experience.
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Representative Interviewees
Leaders in organizations differ in their background experience and education as well
as their personalities. The participants for the study were selected from senior leadership
positions as well as human resource directors. It is assumed that the participants selected for
this study are representative of the leaders within this geographical area. Furthermore, it is
assumed that the data they provided is accurate regarding the organizations they represent. It
is not assumed; however, that the data they provide will be free from personal bias.
Validity of Qualitative Interviews
When using qualitative methodology, the data must include the perspectives and
voices of the people being studied (Strauss & Corbin, 1994). This in fact, is an assumption
fundamental to qualitative research: The participants perspective on the phenomenon of
interest should unfold as the participant views it, not as the researcher views it (Marshall &
Rossman, 1999, p. 108). To gain these perspectives, qualitative interviews are typically used.
The researcher develops semi-structured, open-ended interview questions which provide the
participants the opportunity for in-depth discussion. After the dissertation committee has
reviewed the interview questions, they will be pilot tested. For this study, it is assumed that
interviewing is a valid method of data collection.
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Limitations
Qualitative Research Limitations
Although all research methods have limitations, qualitative findings are highly
context and case dependent (Patton, 2002, p. 563); therefore, the findings may not be
generalizable to a broader population. Creswell (2003) contended that reliability and
generalizability play a minor role in qualitative inquiry. Validity, on the other hand, is seen as
a strength of qualitative research (p. 195). Jacelon and O'Dell (2005) noted that
trustworthiness in qualitative research is the equivalent of validity in a quantitative study. It
is established through ensuring rigor in the process of data collection and analysis (p. 51).
Limited Sample Size
The sample size in qualitative studies typically is small (Gall, Borg, & Gall, 1996,
p. 217). Qualitative inquiry typically focuses in depth on relatively small samples, even
single cases (N=1), selectedpurposefully (Patton, 2002, p. 230). The intent of the study is to
interview eight senior leaders and human resource directors, four women and four men.
However, access to leaders and human resource directors may be limited due to their
availability and desire or willingness to participate in the study.
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Researcher
The researcher, in qualitative research, is the data collection instrument (Patton,
2002). The researchers education and experience as well as personal biases, values,
attitudes, and beliefs enter into the research and pose an intrinsic limitation.
Nature of the Study
After selecting a phenomenon, which based on a preliminary literature review appears
to be inadequately explained, the research question is designed as qualitative research
design begins with a question (Janesick, 1994, p. 210). The way the research question is
stated is important as it determines, to a large extent, the research methods that are used to
answer it. [Thus,] the basic premise is that the research question should dictate the
method (Strauss & Corbin, 1998, p. 39).
If a concept or phenomenon needs to be understood because little research hasbeen done on it, then it merits a qualitative approach. This type of approach maybe needed because the topic is new, the topic has never been addressed with acertain sample or group of people, or existing theories do not apply with theparticular sample or group under study. (Creswell, 2003, p. 22)
Other criteria for selecting qualitative methodology include the need: (a) to explore the topic
in depth, (b) to present a detailed view of the topic, and (c) to study individuals in their
natural environment (Creswell, 1998). The significance of the leadership crisis and the lack
of women in executive leadership positions indicate the topics need to be explored. If the
leadership crisis may be an opportunity to increase women in executive leadership positions
has not been explored. The research will facilitate a detailed view of the topics. To
accomplish this, individuals will need to be studied in their natural environment.
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There are several qualitative methodologies that can be used to study individuals in
their natural environment. As previously stated, how the research question is stated
determines the research method. When how and why questions are used, case study,
experiments, or histories are appropriate (Yin, 2003). However, what questions are
appropriate for exploratory research. The current study is exploratory and uses how and what
questions. Yin posited that when the relevant behavior of the participants can not be
manipulated and contemporary events are examined, case study is the preferred research
design; both are conditions of the current research.
Organization of the Remainder of the Study
Chapter two reviews literature relevant to the perceived leadership crisis and the lack
of women in senior leadership positions. It reviews research studies which provide an
overview of the crisis as well as research which supports the lack of women in leadership
positions. It also includes a section on case study methodology to hopefully assist the reader
with the origin and context.
Chapter three discusses the research methodology utilized in the study. The
researchers philosophy as well as her background and interest in the research problem are
described. The theoretical framework, research study design and sampling design are
discussed as are methods to increase the credibility, transferability, dependability, and
confirmability of the research. Data collection and analysis procedures, pilot testing, and data
storage are described. The use of human participants is discussed as well as limitations of the
methodology. The chapter ends with the expected findings.
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CHAPTER 2. LITERATURE REVIEW
The literature presented in this chapter is intended to provide an overview of the
context and implications of the perceived leadership crisis, research regarding the lack of
women in executive leadership, as well as an overview of case study methodology. The
literature assisted in the development of interview questions and assisted with data analysis.
Context of the Impending Leadership Crisis
Previous research identified several causes of the leadership crisis. They include (a)
the decline in current and potential leaders, (b) job mobility, (c) more demanding leadership
skills, (d) inadequate leadership development, (e) lack of attracting high performers, (f)
inadequate succession and management planning, and (g) limited source recruitment.
Decline in Leaders
The United States faces a decline in leaders as approximately 60 million of the baby
boom generation become eligible for retirement over the next 15 years (Drake Beam Morin,
2003) as well as a decrease in the talent pool due to the decline in the birth rate following the
baby boom generation, a decline in potential leaders, and the downsizing of middle
management.
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Retirement
Many senior executives are reaching normal retirement age and other younger
executives are retiring early to take advantage of consulting opportunities or to apply their
skills in other fields. According to Casher and Lesser (2003) 19 percent of the workforce
holding executive, administrative and managerial positions in the United States will retire in
the next five years (p. 2) while Rothwell (2002b) found that one in seven senior executives
in the Fortune 500 will be eligible for retirement within the next few years (p. 30). Rothwell
also reported a crisis in the federal government in that an estimated 82% of all the senior
executives and 72% of all middle managers in the United States federal government will
become eligible for retirement during the current administrations term in office (p. 32).
Watson Wyatt Worldwide (2002), a global consulting firm which focuses on human capital
and financial management, reported that someone in the United States turns 50 every eight
seconds, or 11,000 people per day. The United States Census Bureau indicated that nearly
50% of the adults in the US will be over 55 years of age by 2020 (Rappaport, Bancroft, &
Okum, 2003). It also reported that between 2000 and 2010 the number of people in the 55-
64 age group is expected to increase by more than 50 percent, while the number of people
35 to 44 years old will decrease by almost 20 percent (Rappaport et al., p. 55-56). Therefore
as a large percentage of leaders are becoming eligible for retirement the talent pool is
decreasing.
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Decreased Talent Pool
The talent pool is decreasing due to a decline in the birth rate, a decline in potential
leaders, and the downsizing of middle management.
Decline in birth rate. Research conducted by Chambers et al. (1998) of 77 large
United Statescompanies in a variety of industries, indicated that if the economic growth-rate
over the next 15 years is 2% the demand for executives will increase by about a third;
however, supply is moving in the opposite direction; the number of 35 to 44 year-olds in the
United States will decline by 15 percent between 2000 and 2015" (Chambers et al., p. 47).
Morton, Fpster, and Sedlar (2005) posited that by 2010, the number of 35-44 year olds,
those normally expected to move into senior management ranks, will not grow but will
decline by 10 percent (p. 9). They also reported that by 2010, the number of U.S. workers
ages 45-54 will grow by 21 percent; the number of 55-64 year olds will grow by 52 percent
(p. 9). Rothwells (2002a) research indicated a similar trend, between 1998 and 2008,
workers age 45 or older will grow from 33% to 40% of the U.S. workforce, while those
between the ages of 25 and 44 will plummet from 51% in 1998 to 44% in 2008 (p. 32). As
the number of potential leaders is declining, the desire to advance to senior leadership
positions is being questioned by generation X.
Decline in potential leaders. When the Veteran Generation first entered the
workplace, men worked away from home and had more time to focus on their jobs while
women worked at home and had time to keep the household running. However, as more
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women have entered the workforce work/life balance has become a major issue. The Ranstad
North America (2002) study stated, employees now demand that employers understand that
personal lives are a priority in fact, a top priority (p. 12). The study also showed that over
the past few years, the number of people putting family first has increased from 54% to
68% (Ranstad North America, p. 12). Although work/life balance is important to all
generations, it is a major factor for generation X. Therefore, as the challenges and demands
for senior leadership positions increase generation X, the generation of potential leaders, is
questioning whether advancing to leadership positions, particularly executive leadership
positions, is what they desire (Barrett & Beeson, 2002). This work/life balance issue is
decreasing the pool of qualified leaders.
Downsizing of middle management. During the 1990s, the downsizing of middle
management reduced the talent pool as well. A survey conducted by the American
Management Association indicated that during 1995 through 1996 middle managers made up
only 5-8% of the workforce; however, middle managers represented 15-20% of the positions
downsized in 1996 (Byham, Smith, & Pease, n.d.). Outplacement specialists Challenger Gray
and Christmas reported that in 1986 just 27% of their clients were middle managers;
however, by 1996 the number had risen to 60% (Byham et al.). In addition, offering
candidates who may have moved up in the organization incentives to leave eliminated other
positions. Thus, over the last 10 years people who would have been candidates for top
leadership positions were eliminated from the ranks. The result is a shortage of leadership
talent as well as an age gap between senior and middle management. As middle managers
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have less experience the senior cadre perceives them as young and unprepared for senior
positions in the rapidly changing global environment (Byham et al.). Lack of preparation is
also impacted by a more mobile society.
Job Mobility
Based on the lack of experience of middle managers, the perception by the senior
cadre that middle managers are young and inexperienced may be warranted; however, there
are differences in the generations perspectives as well. The veteran generation and the baby
boom generation have traditionally followed the job security model, find a company where
you can stay for a long time, work your way up, become vested and make yourself
increasingly secure by virtue of your accomplishments and your tenure there (Lancaster &
Stillman, 2002, p. 53). Generation X and generation Y embrace the career security model
which states one should build a portfolio of skills and experiences that guarantees that no
matter what cataclysmic event occurs youll be able to land on your feet" (Lancaster &
Stillman, p. 54). Having watched their parents be downsized, generation X learned to
embrace career security rather than job security; therefore, they keep building a repertoire of
skills and experiences and adding to their career portfolios which are transferable between
organizations should they need to move or should they receive a more attractive offer.
Although senior leaders have subscribed to the job security model, they also
participate in job hopping due in part to the rise of many small and medium-sized companies
that target the same executives as large organizations. Small companies with the lure of stock
options are increasingly attractive and corporate life no longer appeals as strongly to talent
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(McKinsey & Company, n.d.). Poaching, known as direct sourcing in the recruiting industry,
which was reaching a fevered pitch in the late 1990s is making a comeback but likely will be
limited to senior level employees (King, 2004). As senior leaders become more mobile, the
number of organizations they work for will increase. The 50 senior executive search
professionals, surveyed by Chambers et al. (1998), indicated the number of companies an
executive will work for in a career has increased from three to five over the last 10 years.
For organizations, the cost of executive job jumping is very high. Development
Dimensions Internationals (1999) focus group study of 110 executives and managers from
95 organizations found the average first year cost of a new senior executive to be in the
vicinity of $750,000 which included compensation, recruitment, selection, relocation, and
training and development.
The emotional impact of the terrorist attacks of September 11, 2001 and the recession
caused employees to feel more uncertain about their jobs and therefore job mobility
decreased. However, David Stum, president of Aon Consultings Loyalty Institute, predicted
that when the economy improves and September 11 is further behind us, employees will
return to the job-hopping habits of the late 20th
century (Caudron, 2002, p. 36). Accentures
2004 workforce study validated this prediction; the executives who participated were
optimistic with regard to the economy the implication of which is that the war for talent will
intensify (Brakeley, Cheese, & Clinton, 2004). Anthony Carnevale, former Chairman of the
National Commission for Employment Policy stated we are about to face a demographically
driven shortfall in labor that will make the late 1990s seem like a minor irritation (Wall &
Aijala, 2006, p. 3).
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High potential talent is always in demand. In a study of 22 leading organizations in 11
industries conducted by Towers Perrin, one of the worlds largest management and human
resource consulting firms, 73% of the organizations indicated that although they have cut
staff in the last six months they continue to hire talented employees in the midst of
downsizing (Towers Perrin, 2002). Talented employees are an absolute necessity, as
leadership is becoming more demanding.
More Demanding Leadership
The more complex global economy requires more sophisticated leaders (Chambers, et
al., 1998; Bernthal, et al., 1999). Jobs for senior managers are more challenging than they
were 10 to 15 years ago (Basrie, 2002). Leaders need global acumen, multicultural fluency,
technological literacy, entrepreneurial skills, and the ability to manage increasingly
delayered, disaggregated organizations (Chambers, et al., 1998, p. 47).
In today's flattened and intensively competitive organizations, the competenciesrequired for success at senior levels demand individuals who can shape and articulatevision and mission; build business relationships and partnerships; serve as effectivechange agents; develop and articulate new business strategiesand guide theirexecution; grasp technology; seize marketing and entrepreneurial opportunities; anddeal with persons and issues throughout the world. (Byham, 2000, p. 35)
The terrorist attacks of September 11, 2001 and subsequent threats and hostilities have
increased the skills needed by leaders. RHR International, a management-consulting firm,
outlined four newly important competencies for senior leadership to develop. Included are
mental agility, empathy, team leadership, and organization development (RHR International,
2001).
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1. Mental Agility. Agility of this sort is the ability to grasp complex, ill-definedsituations and rapidly learn from them.
2. Empathy. Being truly alert to how people think and feel, and to their impact onothers.
3. Team Leadership. Being skillful at creating high-performing teams, even whensome team members will be dealing with distracting uncertainties.
4. Organization Development. Knowing how to assess and mobilize entireorganizations to be wise and agile (a better metaphor than lean and mean) in theface of great uncertainty. (RHR International, 2001, III. The Imperatives, 2)
As leadership has become more demanding it requires increased leadership
development and succession management and planning; however, organizations are not
keeping abreast of the demands.
Inadequate Leadership Development
Chambers, et al. (1998) posited that for the past 20 years executive talent has been the
most under managed corporate asset. According to Charan, Drotter, and Noel (2001), lack of
effective talent development is the most significant cause of the leadership crisis and dates
back to the late 1970s when organizations cut costs due to the increase in the price of oil and
the flood of imported goods made in other countries with cheaper labor. Then during the
1980s and 1990s, consolidation of organizations reduced inefficiencies by eliminating layers
and roles within organizations; however, many developmental opportunities for middle
managers were also eliminated (RHR International, 2002).
As developmental opportunities were eliminated, smaller incremental increases in
responsibilities were also eliminated. Byham, Smith & Pease (2002) described this as rungs
on a ladder. In traditional hierarchical organizations the rungs were closer together and it was
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assumed excellent performance at one level would predict excellent performance at the next
level. As organizations became flatter the rungs became further apart, and therefore require
different competencies at each level. Thus managers must step into more demanding roles
with less preparation and with requirements for success very different at each rung, a
successful middle manager may not be a success at the senior management rung (Byham et
al.). In the traditional hierarchy, managers assisted subordinates to develop managerial skills;
however, in leaner organizations, employees are trying to do more with less leaving little
time for managers and leaders to assist subordinates with developing their skills. Therefore,
formal leadership development is imperative; however, many organizations are not
developing potential leaders.
In the Employee Development Survey Report conducted by the Society for Human
Resource Management and Catalyst, about two thirds of the 248 human resource
professionals who responded indicated that in their organizations employee development was
mostly informal (Esen & Collison, 2005). Research conducted by the Conference Board, an
independent membership organization which creates and disseminates knowledge regarding
management, concurs (Barrett & Beeson, 2002). Its survey of 150 organizations disclosed
that only 47% of the respondents strongly agree or agree that developing future leaders is a
major priority of their senior management and 26% disagree that it is a major priority. Also
only 34% of the respondents felt their organizations are effective at identifying future leaders
(Barrett & Beeson). A second Conference Board survey was conducted in the spring of 2003
with 730 global business leader participants followed by interviews of 18 CEOs. The survey
compared current management priorities with management priorities projected for 2008. This
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survey indicated only 23.8% of the participants believed that developing and retaining
potential leaders is currently a top priority and 30.5% indicated it will be a priority in 2008
(Rudis, 2003). Additionally only 12.3% of the participants indicated that talent identification
and growth is currently important to their organizations success, while 22.3% indicated it
will be a priority in 2008 (Rudis).
Similarly, Drake Beam Morin, a global human resources consulting firm, surveyed
200 human resource professionals in major metropolitan areas of North America. Ninety-four
percent indicated their organizations have not adequately prepared younger generations to
replace senior leaders (Drake Beam Morin, 2003). Leadership Forecast 2005/2006,
conducted by Development Dimensions International of 4,559 leaders and 944 human
resource representatives from 42 countries, indicated little improvement in leader
development over the 2003/2004 research (Bernthal & Wellins, 2004). Fifty-three percent of
the 2005/2006 respondents were satisfied with the development opportunities compared to
54% 2 years earlier. Only 47% believe their organization provides them with all they need
to develop (p. 14); however, when comparing the degree of satisfaction of the development
offerings between leadership levels, senior leaders were the most satisfied (Bernthal &
Wellins).
The Ken Blanchard Companies, an international training and consulting firm,
conducted corporate issues surveys for the four years between 2003 and 2006 (The Ken
Blanchard Companies, 2006). A total of 2,044 training and HR leaders and line managers
from a variety of organizations, industries, and countries participated in the surveys. In all
four studies, the number one management challenge was developing potential leaders (The
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Locating and developing high performers within the organization for leadership
positions is essential. However, succession planning and management is neglected by many
organizations.
Inadequate Succession Planning and Management
During a time of mergers, downsizing, reorganizations, and reengineering succession
planning has become a lost art (Byham, 2000). Although there is an obvious need for
succession planning, it is neglected by many companies (Greengard, 2001). The Conference
Board survey of 730 global business leaders indicated that only 9% of the respondents felt
that top management succession planning is currently important to organizational success
while 27.4% felt it will be important in 2008 (Rudis, 2003). Another survey conducted by the
National Association of Corporate Directors showed that 45% of organizations with revenue
over $500 million do not have a meaningful CEO succession plan (Charan, 2005).
Additionally, the Corporate Leadership Council survey of 276 large company human
resource executives found that only 20% were satisfied with their top-management
succession processes (Charan, p. 1). A Society for Human Resource Management (SHRM)
survey, of Human Resource professionals, indicated that fewer than two out of ten
[organizations] had succession plans in place for job titles ranging from vice president to
CEO (Esen & Collison, 2005).
Rothwell (2001) noted that lack of succession planning has been a longstanding issue
for leadership positions lower in the organization as well. Below many a corporations top
two or three positions, succession planning is often an informal, haphazard exercise where
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longevity, luck, and being in the proverbial right place at the right time determines lines of
succession (Rothwell, p. xx). According to Charan (2005) the result of poor succession
planning is often poor performance, which translates into higher turnover and corporate
instability (p. 1). In addition to lacking a succession plan, many organizations are not using
all talent resources.
Limited Source Recruitment
Corporate America is not recruiting leaders from all available sources. There has been
much talk regarding women making their way into top positions; however, research indicates
that they are still hugely under represented (Crainer and Dearlove, 1999). Meyerson and
Fletcher (2000) expressed similar concern regarding the lack of women in leadership
positions. Only 1.4% of Fortune 500 CEOs are women (Prime, 2005). The Catalyst 2005
Census of Women Corporate Officers and Top Earners in the Fortune 500 companies showed
women represented 16.4% of corporate officer positions, up 0.7% from 2002 (Joy, 2006a).
At the estimated growth trend for the past ten years (0.82 percentage points per year), it will
take 40 years for women to reach parity with men in corporate officer ranks (Joy, 2006a, p.
2). Catalyst research indicated that CEOs believe women need line experience; however, of
the 6,428 total line corporate officer positions, only 9.9% are held by women (Catalyst,
2002a, p. 2).
Many factors are contributing to the leadership crisis for which there are implications
to organizations.
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Implications of the Leadership Crisis
The implications of the leadership crisis are far reaching. First, organizations are in
danger of loosing the tremendous knowledge the retirees have acquired over their years of
employment. Michaels et al. (2001) posited that the war for talent has two profound
implications. The first being the shift of power from the organization to the individual and
the second being that excellent talent management dramatically impacts competitive
advantage.
Knowledge Loss
Knowledge loss, often an unintended consequence of downsizing or retirements, can
be one of the costliest problems confronting organizations today. It is also one of the most
widely ignored (De Long & Mann, 2003, p. 39). Bernthal and Wellins (2004) posited that
the real danger to the growth and stability of organizations worldwide is the loss of
experienced leaders who have a significant body of knowledge about their organizations and
their industries (p. 6). Research conducted by Accenture Institute for Strategic Change
identified the consequences of knowledge loss as compromised growth strategies, reduced
efficiency, costly errors, and lack of innovation (De Long & Mann) while Boath and Smith
(2004) contended that knowledge is a primary source of competitiveness and profitability. As
the baby boom generation retires and the war for talent renews, mission-critical knowledge,
which can not be captured by debriefing employees as they leave, needs to be captured prior
to the exit of leaders and managers.
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Knowledge in the business context is defined by Leonard and Sensiper (1998) as
information that is relevant, actionable, and based at least partially on experience, (p. 113).
According to Martz and Shepherd (2003), knowledge cannot be understood without
understanding its relationship to data and information (p. 42). Data are raw facts or
elementary descriptions which can be stored and classified; however, they are not organized
and do not convey any specific meaning. As data takes on specific meaning it becomes
information, whereas knowledge is a product of inquiry concerning information (Martz &
Shepherd, p. 42).
Knowledge can be explicit or tacit. Explicit knowledge is articulated in words and
numbers and shared in various modes of communication (Nonaka & Konno, 1998; Zach,
1999). Explicit knowledge such as procedure manuals, software, and product literature plays
a large roll in organizations, is an important factor in the knowledge economy (Zach), and
can be stored and formally and systematically transmitted between individuals (Nonaka &
Konno). It is unlikely organizations that have integrated knowledge management systems to
store and transmit information are at risk of loosing explicit knowledge when individuals
leave an organization. However, an enormous amount of information and knowledge resides
in the minds of key people, but this material is rarely organized in a fashion that allows
for its transmission to others (Powell, 1998, p. 237).
The knowledge that resides in the minds of key people is referred to as tacit
knowledge, which is knowledge that is subconsciously understood and applied, difficult to
articulate, developed from direct experience and action, and usually shared through highly
interactive conversation, storytelling, and shared experience (Zach, 1999, p. 46). According
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to Droege and Hoobler (2003), tacit knowledge is intuitive, difficult to express, gained
through experience, and shared with others through interaction (p. 52). Scholars and
business people who attended the First Annual U.C. Berkeley Forum on Knowledge and the
Firm felt that unlocking tacit knowledge
required a highly interactive social process between workers in a co-located, face-to-face environment. The co-location factor was considered critical because much of thetacit knowledge that is shared and exchanged is accomplished through direct first-hand observation, interaction with others, subtle body language, and so on.(Holtshouse, 1998, p. 277)
However, Holtshouse (1998) pointed out that business and economic forces are not allowing
this to happen as the number of mobile workers is increasing, which disrupts social
connections. Additionally, outsourcing, partnering, alliances, and mergers are requiring new
work boundaries to be formed (Holtshouse, p. 278). Thus the issue is how to provide tacit
knowledge exchange without face-to-face interaction or co-location. Complicating this
further is the problem that explicating tacit knowledge so it can be shared and reapplied, is
one of the least understood aspects of knowledge management (Zach , 1999, p. 47).
Shift of Power
Power has shifted from the organization to the individual. This shift of power has
resulted in individuals having greater career expectations. In the industrial age, machines,
capital, and geography comprised competitive advantage; however, in the information age
talented people assure competitive advantage. As organizations changed their mantra from
long-term job security and lifetime career development to market-based employment
transactions such as short-term contracts, temporary staffing, and outsourcing, loyalty
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Competitive Advantage
Excellent talent management dramatically impacts competitive advantage. The
McKinsey 2000 update study found that companies scoring in the top quintile of talent
management practices outperformed their industrys mean return by 22% (Axelrod et al.,
2001). An interview survey conducted by Dorgan and Dowdy (2002) of 100 manufacturing
companies in France, Germany, the United Kingdom and the United States indicated,
companies with the highest management scores outperformed their sector. The correlation
between a companys management practices and its financial performance was significant
(p. 15). The results of a Human Capital Return on Investment (ROI) Study completed by
Deloitte and Touche (2002), a leading professional services organization, suggests that
human capital practices may account for as much as 43% of the difference between a
companys market-to-book value and its competitors (p. 2). Deloitte and Touche defined
market-to-book value as a ratio of enterprise market value divided by book value of assets.
This ratio represents the portion of a companys total value not explained by or accounted for
by physical and financial assets (p. 2).
Watson Wyatt Worldwide (2001), a Human Resource professional service
organization, conducted other Human Capital Index (HCI) studies. The first of three,
conducted in 1999, surveyed more that 400 United States and Canada-based publicly traded
organizations with a minimum of 3 years of shareholder returns and $100 million in revenue
or market value. Human resources practices questions were matched to objective financial
measures. To gain a global perspective a second survey was conducted in 2000 in Europe
with more than 250 organizations from 16 countries responding. The third survey conducted
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in 2001, included 500 North American companies. The results of all three HCI studies were
the same: the better an organization does at managing human capital, the better its returns for
shareholders. A summary of the HCI scores indicated the organizations with low HCI scores
averaged a 21% return over 5 years. The medium group averaged 39% and the high HCI
scoring organizations returned 64% over 5 years (Watson Wyatt Worldwide).
Other factors also drive return on investment and financial performance; however, it
is evident that talent management and financial performance are related and that leadership is
responsible for talent management.
The impending leadership crisis will affect all organizations regardless of size or
sector. There are several ways in which organizations can prepare prior to the crisis.
Preparation for the Leadership Crisis
Although the literature regarding the leadership crisis appears daunting, organizations
can prepare for it by implementing short and long term solutions. In the short term,
organizations can work with potential retirees to delay their retirement, re-hire retired
employees, and attract new workers age 50 and older.
Short Term Solutions
Delaying Retirement
Retirement is a difficult decision for most people and many would prefer to continue
working past the traditional retirement age at least on a part time basis (Feinsod, Davenport,
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& Arthurs, 2005). Medical science has increased life expectancy which is now roughly 15
years higher than it was when 65 was established as the social security program age and it
appears life expectancy will continue to increase (Cappelli, 2005). At today's rate, by 2075
"average US life expectancy is projected to reach 87" (Srikanth, Benton, & Herrera, 2005, p.
2). Wellner (2002) cited a poll conducted by the institute and research firm Zogby
International, which found that of the baby boomers who plan to work in retirement, 71%
prefer to work part-time. The Center on Aging and Work/Workplace Flexibility at Boston
College and the Families and Work Institutes research indicated that having control of their
hours, being able to exercise autonomy, and finding opportunities to learn are important to
retaining age 50+ employees (Older workers seek flexibility, 2005). Therefore, to retain
retirement age knowledge workers organizations will need to implement flexible phased
retirement, which may include part-time work, reshaping jobs, telecommuting, part-time
consulting assignments, job sharing, flexible scheduling, extended time off, and sabbaticals
(Byham, 2000; De Long, 2002; Wellner, 2002). Cappelli (2005) posited that there will not be
a shortage of workers if older employees remain working while the American Association for
Retired Personnel (AARP) research indicated that some organizations may be able to avoid
the labor crunch if todays 50+ workers continue working beyond the age at which previous
generations retired (Feinsod, et al.).
However, developing phased retirement options have legal implications. "Employers
that offer benefit programs must comply with three complex statutes - the Employee
Retirement Income Security ACT (ERISA), the Age Discrimination in Employment Act
(ADEA), and the Tax Code - plus their own defined benefit plan provisions" ( Morton,
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Foster, & Sedlar, 2005, p. 18). ERISA requires that all employees be treated uniformly
therefore restricting key individuals whose knowledge needs to be retained from special
arrangements. "The ADEA requires benefit rules that do not discriminate against mature
workers" (Morton et al., p. 19). The Internal Revenue Service (IRS) has assisted phased
retirement by proposing to ease the Tax Code to allow workers "59 1/2 to draw a partial
pension and hold a part-time job with the same employer" (Morton et al., p. 19).
Re-hire Retired Employees
Another option is to re-hire former employees who have retired. The facts are, it
costs half as much to rehire an ex-employee as it does to hire a brand new person; rehires are
40% more productive in their first quarter at work; and they tend to stay in the job longer
(Sertoglu & Berkowitch, 2002, p. 2). Organizations are implementing alumni networks
which internal recruiters use to identify job candidates; sourcing from the alumni network is
less costly than sourcing prospects cold (Zimmerman, 2006). The networks are also used as a
communication tool and a business development channel. Again however, rehiring has tax,
pension plan, and healthcare benefits implications which organizations need to be aware of.
Organizations can also bring retired people back as contractors and consultants to capitalize
on the knowledge they alone possess (De Long, 2002); however, this too has tax
implications.
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Attract New Age 50+ Employees
Individuals who have retired from other organizations may be interested in working
in an organization that is friendly to older workers. Organizations that are hesitant to hire age
50+ managers state the reason as financial; however, Towers Perrins research indicated that
the largest component of compensation is cash compensation and is driven chiefly by the
employees skills, responsibilities and individual contribution, rather than age (Feinsod et
al., 2005, p. 18). Towers Perrins data also indicated that older workers are more motivated
to exceed expectations on the job than their younger counterparts are (Feinsod, et al., p. 11).
Although these solutions will assist organizations in the short term, older employees
will need to be replaced; therefore, organizations also need to develop long term solutions.
Long Term Solutions
Short term actions are vital to short-term survival; however, a holistic, comprehensive
approach is needed for long-term sustainability (Srikanth, Benton, & Herrera, 2005). The
first step is to know where the critical talent lies and how to manage it (Deloitte, 2005, p.
2). To determine where the talent lies, organizations may conduct a situation analysis
(Rappaport et al., 2003; Srikanth et al., 2005) as part of their talent management process.
Although the focus of talent management is to increase work place productivity, talent
management processes for attracting, retaining, and utilizing employees are strategies that go
hand in hand with succession planning. However, succession planning and management
include employee development and is more comprehensive.
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Attracting Leaders
When attracting leaders, the compatibility or fit between the organization and the
employee is critical (Lockwood, 2006) so organizational culture is a major consideration.
New people bring fresh attitudes, new perspectives, and new ideas to an organization
(Michaels, Handfield-Jones, & Axelrod, 2001, p. 72). Michaels et al. recommend filling
about 20% of the non-CEO positions from outside the organization. While searching outside,
the best companies use a wide variety of sources, but most of these companies recognize the
necessity of looking for people who are representative of both the evolving labor market and
future customers (Martel, 2002, p. 101). When recruiting from external sources, the
reputation of the organization and a strong brand assist to attract top talent. According to
Mathis and Jackson (2006) to become an employer of choice for excellent job candidates,
companies find that it is advantageous to have a recognized brand or identity (p. 193).
Organizations which are regularly listed in Fortune magazines 100 Best Companies to
Work For have been successful in establishing a brand image which assists with recruitment
(Mathis & Jackson).
Another effective strategy for external recruiting is to tap into a specific labor pool
such as women who are reentering the work world after childbearing years (Lockwood,
2006; Tucker, Kao, & Verma, 2005). Women who have been in leadership positions and
choose to stay at home with young children frequently volunteer with non-profit
organizations serving on boards of directors, leading fundraising activities, and other
functions. These activities keep their leadership skills honed and ready for reentry into the
work world. Employment agencies, headhunters, and media sources are also used to locate
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external executives. Luecke (2002) suggests establishing internships and partnerships with
colleges, universities, and community organizations as a source to enhance the pipeline.
Hiring from the outside has negative consequences as well. Studies have shown a 40
to 50% failure rate for executives hired from outside the organization (Byham, 2000) and
considering the high cost of an executive search as well as the organizational turmoil and the
time it takes for an executive to acclimate; this alternative must be approached cautiously.
Developing internal candidates is imperative and is discussed in the succession planning and
management section of this paper. After attracting high performance employees, retention
becomes a priority.
Retaining Leaders
Retention is a high priority. The Center for Creative Leadership conducted surveys as
part of its Emerging Leaders Research Project (Bryson & McKenna, 2002). Three hundred
participants were randomly selected from a variety of organizations and industries. The
retention themes that emerged included fair compensation, challenging work, support,
opportunities for advancement, receiving recognition, values, and organizational success
(Bryson & McKenna). Gunsauley (2001) posited that the employees who are the most likely
to leave an organization are the high performers with the marketable skills; therefore,
organizations need to identify the most critical employees, prioritize retention efforts, and
focus retention efforts on these employees. A frequently cited cause of turnover is the
feeling that good employees are carrying the load for their low-performing peers
(Gunsauley, p. 11). In their research on what it takes to build a pool of great managerial
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talent, Axelrod, Hanfield-Jones, and Michaels et al. (2002) observed that, as much as an
organizations success depends on the careful management of A and B performers, it also
depends on the pruning of C performers (p. 82). Axelrod et al. found that high-performing
companies are 33% more likely to take deliberate action on C performers than average-
performing companies are (p. 82). Retention not only involves motivating and retaining
employees but also dealing with low performing employees.
Acquisition and retention are important talent management strategies; however,
organizations need to go beyond talent management to compete in the talent war. According
to Guenther (2004) organizations increasingly view retention of high-potential leaders as
going hand in hand with succession planning.
Succession Planning and Management
The pursuit of leadership bench strength is not a race for talent. It is a steady,
ongoing labor that requires discipline, decisiveness, and responsible risk-taking (Kesler,
2002, p. 32). As organizations face the retirement of senior executives as well as the
increasing value of intellectual capital and knowledge management, it is more important than
ever before to plan for leadership continuity at all levels (Rothwell, 2001). Although this can
be a daunting undertaking, the September 11, 2001 attacks on the World Trade Center twin
towers and the Pentagon brought succession planning and management to the forefront. As
organizations faced the sobering fact that they had lost key executives, key talent, and
brainpower which left gaping holes in their management structure, it is not surprising that
organizations are now taking a closer look at succession planning and management
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(Greengard, 2001). However, the succession planning techniques and procedures used
previously are obsolete, inappropriate, and no longer effective in todays unpredictable
environment (Beeson, 2000; Karaevli & Hall, 2003). Traditionally, succession planning
involved moving people through positions on the organizational chart. In a stable economy
organizations could tell employees where their careers would be in 15 years if they achieved
various goals and objectives (Caudron, 1999). In todays volatile economy, organizations
have difficulty forecasting where they will be in 5 years much less determining what kind of
executive positions and leadership will be needed (Caudron). It is time to revisit, rethink and
perhaps reengineer succession planning and management (Rothwell).
To establish a successful succession planning and management system, senior level
commitment is essential (Fulmer & Conger, 2004; Kesler, 2002; Rothwell, 2001). Led by
the CEO, top executives must establish and implement a set of principles and philosophies
that serve the overall interests of the company and directly confront political dynamics that
undercut effective collaboration on the companys talent agenda (Berke, 2005, p. 43).
Verbal support is not sufficient; the CEO and executive team must be enthusiastic champions
(Fulmer & Conger). Rothwells Life Cycle of Succession Planning and Management
Program: Five Generations model begins with the CEO and works down through the
organization thus insuring that the CEO and executive team are involved from the start.
Although senior level positions are key to an organizations success, the entire
management structure determines how a company acts and reacts to industry conditions and
global events (Greengard, 2001, p. 36). According to Rothwell,
succession planning and management should support strategic planning and strategicthinking and should provide an essential starting point for management and employee
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development programs. Without it, organizations will have difficulty maintainingleadership continuity or identifying appropriate leaders when a change in businessstrategy is necessary. (p. xxi)
Mathis and Jackson (2006) also stress the importance of including issues that affect
human resources, such as succession management, in the strategy formulation processes
while research of three organizations with strong succession management systems conducted
by Conger and Fulmer (2003) indicated that combining succession planning and leadership
development led to deep and enduring bench strength. They also note that succession
planning generally focuses on upper management and leadership development begins with
middle management. The Acceleration Pool model developed by Byham et al. (2002)
identifies high potential candidates throughout the organization and develops them through
stretch jobs and task force assignments. Based on research initially completed by Walter
Mahler called Critical Career Crossroads, Charan, Drotter, and Noel (2001) designed the
Leadership Pipeline model around the natural hierarchy of work that exists in most
organizations (p.6) in which different leadership skills are needed at different management
levels. Development at one level leads to the next level beginning with self management and
ending with enterprise management. The Acceleration Pool, Leadership Pipeline, and Critical
Career Crossroads models enable employees to track how they are progressing. Conger and
Fulmer support this change from the traditional succession planning systems, which have
been shrouded in secrecy, to a transparent succession management system. Transparency is
not just about being honest (p. 81) it also assists participants to know what they need to do
to reach the next level (Conger & Fulmer).
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These models are successful only if appropriate talent is identified. At the core of
succession management is the identification of talent with future potential. The point of
differentiating future potential is to allocate scarce development resources to the targets that
are likely to bear the most fruit (Kesler, 2002, p. 40). However, identification of talent
requires skill. Historically, performance outcomes were used for identification purposes;
however, they were often inaccurate as high performance at one level does not guarantee
high performance at another level (Fulmer & Conger, 2004). Potential for advancement or
potential for development is now considered to be a more accurate assessment strategy for
which competencies are developed. Because leadership is one of the most important
proficiencies for senior managers, leadership competencies have been added to assessments;
however, the trend is to simplify to a set of core competencies (Fulmer & Conger). Karaevli
and Hall (2003) note that a core set of competencies are beneficial for a leadership
practitioner with the major focus on learning how to learn. The core set of competencies
form the basis for professional development and performance management (Fulmer &
Conger).
Research completed by the American Productivity and Quality Center, a consortium
focused on identifying business best practices and innovative methods of transferring those
practices (Fulmer & Conger, 2004, p. x), found four major common factors in how best
practice organizations engage their current and future leaders in developmental activities (p.
84). The first most important developmental activity is job assignments/work experience.
The organizations assign jobs that will assist people to grow and develop their potential.
These assignments stretch or over stretch the candidates. Secondly, they use developmental
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activities such as mentoring, coaching, job rotation, traditional educational programs, and
formalized feedback processes (Fulmer & Conger, p. 85). These organizations are also
trying some of the newer approaches to development which include special assignments,
action learning, and Web-based educational activities (p. 85). Finally, Fulmer and Conger
found that computer-based technology has expanded their ability to effectively monitor
developmental activities (p. 86).
The impending leadership crisis can negatively affect organizations; however,
adequate preparation will assist organizations to withstand the crisis. Although research
regarding the preparation of more women for executive leadership positions as a solution is
not available, research has indicated that women are capable leaders. A sample of this
research is discussed.
Women in Leadership
The demographics worldwide are changing as women enter the workforce in greater
numbers than ever before. In the United States more than half of all women are employed
outside the home and in the future half the people entering the workforce are expected to be
women (Bennett, 2002, p. 157). As more women enter the workforce, more are also
becoming leaders and managers; according to recent Catalyst research, 50% of managers and
professional positions are held by women (Prime, 2005). However, few women have reached
senior leadership positions; only 1.4% of Fortune 500 CEOs are women (Prime). Therefore,
research regarding women as leaders and managers has evolved. Indvik (2001) noted that
early research concentrated on the question of whether or not women could be leaders.
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Research regarding women leaders in corporations answered this affirmatively. Women have
also proven they are very capable leaders of their own organizations as evidenced by the
increase in women owned businesses. According to the Center for Women's Business
Research (2004), the number of businesses in which women own 50% or more is increasing
at nearly twice the rate of all organizations (17% vs. 9%). More dramatic is the increase in
employment by women-owned businesses 24% compared to 12% for all firms (Center
for Womens Business Research, 2004, p. 1). Research conducted by Christenson Hutchison
McDowell Partners International LLC., Right Management Consultants, and the Womens
Global Business Alliance indicated that a larger number of women than men have become
entrepreneurs. The women cited the ability to control their destiny, a flexible schedule, and
a chance to realize a dream as reasons (Anderson, 2003, p. 2).
After proving women to be capable of leading, research shifted to how women lead
and whether men and women differ in their leadership behavior and effectiveness. Because
few women have reached top leadership positions, recent research has been expanded to
include why more women have not reached top positions as well as what can be done to
assist women to reach executive positions (Indvik, 2001). Research regarding these issues is
discussed.
Women and Men as Leaders
There is an ongoing debate regarding female and male differences in leadership
behavior and effectiveness. Daly (1995) posited that there are two perspectives,
psychological theories and situational theories. The psychological perspective suggests that
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women differ from men in their approach to management and leadership. According to Daly
psychological theories emphasize the differences in outlook, attitudes, and values inculcated
in men and women during their development and socialization (p. 1). In contrast, the
situational perspective argues that when men and women are in similar situations with
analogous expectations they behave similarly. Situational theories argue that gender
differences are few and largely an artifact of difference in opportunity, power, and lack of
representation in business and organizational settings (Daly, p. 1). Although gender related
expectations lead to gender biases and stereotyping, which are inherent in research settings
and leadership questionnaires, numerous studies have been conducted attempting to prove the
two perspectives regarding gender behavior and effectiveness. A small representation of the
research is discussed.
Klenke (1996) reported that studies conducted prior to 1980 claimed significant
differences in the leadership style of men and women; however, research findings in the
1980s and early 1990s indicated small or insignificant differences. More recent research is
again identifying gender differences in leadership style. Although some of the research
discrepancies can be attributed to methodology, the differences may also be related to the
position (self, boss, peer, direct report) of the individuals participating in the research. The
large number of studies done to compare male and female leaders has allowed other
researchers to conduct meta-analysis.
Eagly and Johnson (2000), in a meta-analysis, analyzed 162 studies of male and
female leadership styles. They did not address methodological issues but rather included all
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measures that researchers regarded as assessing task-oriented and interpersonally oriented
styles or autocratic versus democratic style (Eagly & Johnson, p. 52).
The results showed little evidence that men and women differed in their interpersonal
style or task style. However, on measures that assessed tendencies to be democraticversus autocratic or participative versus directive, men were more autocratic ordirective than women, and women were more democratic or participative than men.(Eagly & Johnson, 2000, p. 54)
The studies were divided into three main classes: organizational, assessment, and laboratory
with the results in each class somewhat different.
The absence of sex differences for task and interpersonal style that appeared in ouranalysis averaged over all the studies was limited to the organizational studies. In
contrast, in the laboratory studies, and to some extent in the assessment studies, menand women did have stereotypic styles, with men appearing more task oriented and