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European firms facing management and talent crisis

A preoccupation with personnel change and structural reorganisation as a key to improving performance is undermining the investment made by European businesses in developing leadership talent and making more difficult the challenge of retaining high-potential individuals


  • Personnel changes at the top are not delivering business growth targets

  • Four in five (82 per cent) European businesses pessimistic about exceeding their key targets

  • One in four high-performing employees indicate that they plan to leave in the next year


A preoccupation with personnel change and structural reorganisation as a key to improving performance is undermining the investment made by European businesses in developing leadership talent and making more difficult the challenge of retaining high-potential individuals.


This insight features among the key findings of Executive Guidance for 2010, a new research report published by global executive network and consultancy Corporate Executive Board (CEB) (NASDAQ: EXBD).


The limited impact of organisational changes as a route to improved effectiveness is reflected by the report’s revelation that only one in six (16 per cent) of surveyed organisations which made at least one senior level personnel change have succeeded in outperforming their key performance objectives (KBO’s) during 2009. In contrast, 39 per cent of leaders in organisations which have resisted leadership team personnel changes have succeeded in outperforming their KBO’s in same period.


However, additional CEB research1 reveals that amongst European companies, an estimated 40 per cent of the barriers to effective leadership are linked to shortcomings imposed by their surrounding working environment and have little to with individuals’ leadership ability.


Commenting on the findings Christoffer Ellehuus, Managing Director EMEA, Corporate Leadership Council, Corporate Executive Board, said: “European companies are rightly reappraising their readiness for outstanding future performance as the global economy exits recession, but the collective focus needs to be on ensuring that the impact of structural changes upon the ability of individuals to do their jobs effectively is factored into the planning process”


The CEB findings further suggest that the resources which companies have and are dedicating to developing tomorrow’s business leaders is being undermined by a widespread failure to ensure today’s leaders are suitably equipped to operate in the economic marketplace.


Moreover, the spotlight is on training investment and why succession plans have not delivered all that they promised. Almost four out of five ( 84 per cent) of identified successors are not ready to step into the executive roles they have been nominated for.


Further, in a worrying development for European businesses, designated high potential employees are also found by the report to be unsettled. Whilst these individuals perform 21 per cent better than (non-high-potential) colleagues they are 10 per cent more likely to leave their organisations today than a year ago – in fact one in four indicate that they plan to leave in the next 12 months.


The report confirms that despite the supposedly brighter economic outlook, more than four in five (82 per cent) senior decision makers in European businesses do not expect to exceed their key performance objectives during the first half of 2010.


Christoffer Ellehuus adds: “The areas of weakness among today’s leaders are precisely those which are being cited as key areas of focus in the training of high-potential staff in European businesses. But this rather begs the question of precisely what current trainees will inherit if shortcomings among current leaderships are not addressed. The past decade has seen European firms invest huge amounts on high-potential programmes, but the risk of history coming to view this as nothing more than a scorched earth policy is seemingly increasing”