With the unemployment rate in the United States jumping to 8.5 percent in recent months (the highest it's been since 1983, according to the U.S. Department of Labor) the current recession is showing few signs of abating.

Many blame a lack of government oversight in key financial areas and massive breakdown in corporate governance - from the failure of corporate boards to hold executive management accountable, to the lack of solid, thoughtful succession planning within organizations - for the current economic crisis.

Unfortunately, the fallout from recent corporate failures, specifically in the finance and insurance industries, has had a trickle-down effect that has left virtually no one unscathed.

As organizations adjust to new business conditions and economic realities, they are being forced to cut costs across the board, which often means cutting critical positions, programs, and staff. To navigate through the current economic headwinds, many companies will be tempted to approach cost-cutting by wielding an ax rather than fashioning a plan.

They look to reducing headcount and downsizing their organizations without giving much thought to the skills, talent, and leadership they are losing; determing where and how those skills could add value elsewhere in the organization; or thinking about how the loss of particular skills will affect the company down the road.

Most damaging, perhaps, is that many companies will slash their investments in employee training and leadership development programs, viewing them as "nice-to-haves," rather than critical cornerstones of their business and keys to their survival during tough times.

History has shown that eliminating corporate initiatives and programs aimed at cultivating employee talent, specifically those focused on managerial and leadership development, puts organizations at a long-term disadvantage when the economy does recover.

According to Bersin and Associates, "Organizations cutting costs during the 2000 recession eliminated the very programs that provided the training and programs necessary for developing leaders. Only later would they realize that it took at least three years to rebuild their internal expertise and strategic capabilities.

Companies that consistently foster a talent-driven culture, however, have thrived despite current conditions, in great part by maintaining their commitment to leadership development programs."

Underscoring the importance of leadership development, Hewitt Associates, together with RBL and Fortune magazine, released a global leadership study in 2007 that found that leadership development was embedded into the culture of top companies. The research compared global top companies with more than 530 other organizations around the globe. The single characteristic that distinguished these companies from the others is that they made leadership a critical part of their organizational fabric.

The imperative is clear. Companies looking to emerge from the current recession stronger and better positioned to compete in the new economy must continue to invest in training and developing employees, with a goal of building a strong leadership pipeline. While it may be challenging for organizations to justify these investments right now, organizations need to recognize that long-term viability depends on a company's ability to develop strong leaders.

Who is responsible for developing leaders?

From managers to board members, leadership development should not just be limited to human resources or the learning organization. All managers are responsible for helping their employees develop to their fullest potential by continually challenging them and increasing their leadership competencies. According to an article published in the Harvard Business Review, a part of the line manager's role is recognizing her subordinates' developmental needs, helping them develop new skills, and providing them with opportunities for professional and personal growth.

These managers need to do this, even if it means pushing rising stars into different business units. They need to mentor emerging leaders both within and outside of their own department, disseminating key knowledge and offering evaluations and feedback. The managers' own evaluations, development plans, and promotions, depend heavily on how successfully they nurture their subordinates.

Companies are increasingly recognizing that solid management and leadership make all the difference. Good managers and leaders always anticipate the need for successors and are prepared. However, since organizations cannot assume that the mere existence of a talent pool guarantees that the succession will fit neatly into place, effective succession management demands careful planning and preparation, mentoring, and grooming.

Unfortunately, all too often, leadership development and succession planning are managed as separate entities within organizations, despite their shared goal of ensuring the right skills, in the right place, at the right time. Additionally, leadership development is often reserved for senior executives. To build a strong leadership pipeline at all levels, succession planning must be considered part and parcel of the leadership development process (and vice versa), and must reflect the strategic objectives and goals of the company.

Companies that implement succession plans focused on cultivating existing talent will no doubt move into the next decade and economic growth period with a significant competitive advantage.

The new economy requires new thinking

Organizations today, along with the government, need to consider how the new economy is changing and reshaping the business landscape. With the breakdown of corporate America (specifically in the financial services, insurance, and auto industries) brought on by lax government oversight, ineffective business decisions, poor risk management, and a lack of corporate responsibility and executive-level accountability, it is clear that a return to business as most of us have known it is neither possible nor even advisable.


Organizations looking to emerge from the current economic crisis stronger and better positioned to compete will be forced to embrace new ways of thinking. They will need to reinvent themselves by deconstructing ineffective corporate structures and redefining "leadership," revamping conventional business practices and wisdom around management hierarchy, and revising traditional compensation plans to align pay with performance. Equally important, they will need to determine how they can allocate and utilize their resources, specifically their employee talent, more carefully, creatively, and judiciously.

According to Rosabeth Moss Kanter, a professor specializing in strategy, innovation, and leadership for change at Harvard Business School, "In this tough economic environment, if you wait too long to envision and implement transformational changes, you are out of the game."

According to Kanter, this is true for every industry suffering as a result of obsolete business models - from newspapers to big pharma. She further explains that organizations in dire straits require transformational change, and almost inevitably, new top-level leadership. New leadership in the C-suite can bring about fresh perspective and is unburdened by the need to justify old strategies of the past. "As the saying goes, it takes a new broom to sweep clean," states Kanter.

Finding that new broom and recalibrating the business to fit the parameters of a vastly changed, more regulated economy is not an easy or enviable feat. A "sweep clean" strategy requires careful planning and prioritizing, corporate soul-searching across all levels, complex decision making, and a change in corporate behavior and culture.

Every aspect of the business must be scrutinized, challenged, and justified; corporate priorities must be established; ineffective leaders and arcane business practices must be tossed; and strategies for replacing stale leadership and rebuilding the workforce to support new business priorities must be developed and implemented.

Many of today's organizations are positioning their workforces for the future by engaging in across-the-board talent management. This involves prioritizing the positions that are most critical to the organization's current and future success and aligning the skills, competencies and training of the people they have with those required to support the new business strategy.

By understanding the skills and talents of employees and mapping them to the needs and requirements of the business, organizations can identify critical roles within the organization, determine staffing needs, and then target specific learning and development activities to groom specific employees for managerial and leadership positions.

As part of this new business strategy, companies must also establish and clearly communicate the strategic goals of the organization and hold employees at all levels - from line workers to managers to executives - accountable for achieving those goals by instituting pay-for-performance initiatives that directly link compensation and bonuses with job performance and goal achievement.

By taking a holistic approach that addresses the full talent management lifecycle - from developing and managing, to optimizing and rewarding talent - companies can maximize their talent investment while increasing employee productivity, satisfaction, loyalty, and retention. All of these imperatives will continue to have a direct influence on the corporate bottom line.

As organizations strive to achieve a balance between acquiring and developing leaders and managers, they are implementing strategies that, unlike the frenetic recruiting practices of previous high-growth periods, deliver long-term results, minimize the loss of critical talent, and ultimately save the company money. These strategies include

  • cultivating existing talent - by "farming" rather than "hunting" for the right skills, companies will keep skilled employees longer, decrease training costs, and reduce or eliminate hiring cycles.
  • improving employee satisfaction - by supporting internal talent in their personal career and mobility plans, and by providing greater opportunities for and access to learning and development activities, companies will reduce attrition and conserve their knowledge capital.
  • planning ahead for succession - companies cannot risk leaving mission-critical positions vacant; successful companies will prepare succession plans for critical job positions and keep transitions short.
  • acting on performance reviews - instead of managing performance appraisals once a year, companies must perform ongoing analysis of performance data against position requirements, career and succession plans, and the goals of employees and the organizations.
  • gaining talent visibility - an integrated, unbiased snapshot of critical roles and skills, key people and their specific skills, and relative performance ratings will help organizations avoid expensive mistakes brought about when managers make employee decisions based on incomplete information or "partial pictures." By viewing and analyzing the quality and quantity of their existing talent, executives and managers can make informed decisions that will allow them to adjust quickly to changing business conditions.

The companies most likely to emerge from today's fractured economy intact are those that continue to invest in integrated employee and leadership development programs that encompass skill and competency development, corporate training, performance management, and succession planning.

Companies should also bear in mind that investing in leadership development does not necessarily mean increased costs or expenses. In fact, Bersin and Associates predicts that organizations will actually reduce costs by centralizing HR and leaning and development functions and integrating training and competency development with talent management.

What's the best way to groom great leaders?

In the wake of mounting business challenges and a transitioning economy, talent management and leadership development are emerging as competitive advantages and corporate differentiators. As organizations react and adapt on an almost daily basis to an uncertain economy, they are recognizing that their employees are not only their most valuable asset; they are future leaders who hold the keys to the long-term success and sustainability of the organization.

For companies looking to increase their competitive advantage and ensure their viability and success in the new economy, leadership development is a must. The benefits of building internal bench strength, especially in tough times, significantly outweigh the short-term cost-savings achieved by eliminating such programs. Moreover, analyst research indicates that over time, companies that invest in developing their leaders and training their people significantly outperform companies who do not.

The organizations best positioned to succeed once the new economy takes hold are those that understand the business needs and goals of the organization as well as the skills and competencies required to meet those needs and achieve those goals. They also have insight into the skills, talents, performance history, and goals of their employees and can make informed decisions based on a holistic view of their organizational talent.

By matching employee skills and training to business needs and goals, and aligning performance with compensation and integrating this information into a corporate-wide talent management system, organizations can respond quickly and effectively to major disruptions to the business and will be better able to adapt to changing business priorities and dynamic market conditions.

Continued investment in leadership development, employee training, and overall talent management, both in good times and in bad, has proven critical to business success. To thrive in the new economy, companies must recognize that employee training and leadership development is an ongoing process, not a single event, that has a direct and meaningful effect on a company's bottom line. t+d