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.

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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

A Perceived Crisis in Leadership

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