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Independent research published by The Conference Board (TCB) and two recent studies released by AESC take the pulse of global business executives and leaders of AESC member firms worldwide in order to gauge the top issues facing organizations, now and in the future. Karen Greenbaum, AESC president and CEO, pulls the research together to explain the leadership challenges faced by a changing world.
“Attracting and Retaining Top Talent Remains the Number One Business Issue Around the World”
The talent shortage continues, and according to Greenbaum it is only getting worse. “Everyone is looking for the next generation of digital, diverse leaders, and it’s a candidate market. The top talent has choices, and there is a high demand for talent with similar profiles.”
Greenbaum identifies four key forces that influence the global business climate: global uncertainty, a mass demographic shift, technology accelerating the pace of change, and gender inequality. Greenbaum explains how each of these forces are talent issues.
Global Uncertainty is the New Norm:
“Uncertainty around the world creates a situation where businesses are trying to figure out how to lead in a time of instability. That may require in itself a different kind of leadership.”
Mass Demographic Shift:
“The demographic shifts are driving interesting challenges. While its different around the world, there is an aging demographic that’s retiring, and people are living longer. We have this big population of older workers and retirees who are living a long time, combined with a declining birthrate in most parts of the world, so there aren’t as many people coming up through the ranks.”
Technology Accelerates the Pace of Change:
“Businesses of all types are looking at how technology is changing their business. This isn’t about tech businesses—it’s about all businesses. Businesses are asking, ‘how is technology transforming what we do? How is it transforming us internally, how is it changing our clients, and our business strategy?’” She says, “It’s not about a particular function or business or industry. It’s about leveraging technology to make us more efficient, to better connect us with our customers and to drive innovation. And it’s about who are the leaders who can inspire and motivate transformative thinking?”
Gender Inequality is Still a Reality:
“At a time when there is a shortage of talent, half of the world is under-employed—women. And that’s everywhere in the world. There are a great many talented women who aren’t being given the opportunities to move up to the upper echelons of management. The reasons are many, and complex. According to the World Economic Forum, Future of Jobs Report, reasons include lack of work-life balance, unconscious bias amongst managers, lack of female role models, lack of qualified incoming talent and even women’s confidence and aspirations. The fact is that gender inequality is a reality around the world and it’s past time for this to change."
Priority: Digital Transformation
According to AESC research, digital transformation is rightly seen as an immediate and a long-term priority by clients and members. AESC members and their clients have identified it as a top issue, now and in the future.
In their 2019 survey of clients, Executive Talent 2025, AESC asked executives to identify their top five business issues today, and what they expect their top five business issues will be in five years. The executives surveyed identified “actualizing digital transformation” as their number one issue today, as well as a top issue in five years. Improving organizational agility, expanding portfolios of products and services, creating and maintaining a culture of innovation and developing next gen leaders also made the top five in terms of both current and future issues.
We know that actualizing digital transformation requires a culture of innovation. And we know that diversity drives innovation. So, why aren’t more organizations making this connection and taking action? Attracting diverse talent is on the top five list today, but it drops out of the top five in the future. Greenbaum says, “The same thing happened the last time we asked this question, and I describe it as this: hope springs eternal. I think business leaders look at diversity and think, ‘I know we’re still tackling the diversity issue—surely in five years we will have figured it out.’ But, they said the same thing three years ago.”
She adds, “People feel like we’re going to get this done and that’s why it drops—not because it’s a lesser priority, but because they hope we will have succeeded. But there is just no evidence that is the case.”
Another noteworthy observation is that “developing the next generation of leaders” moves from the number seven ranking among top issues today to the number one issue in five years. Greenbaum suggests that the executives surveyed recognize “our leadership team is aging today and in five years they’re going to be older still. So we have got to start looking at the long-term in how we are going to attract and develop the next generation of leaders.”
Greenbaum points to the high correlation between digital transformation, diverse talent, innovation, and next gen leaders. “All these things actually go together. You can’t have a culture of innovation without having diverse leadership; you can’t have a culture of innovation without developing the next generation of leaders; and these diverse, next generation leaders are the ones who truly get digital strategies—all of that is needed to drive digital transformation.”
In an increasingly competitive environment, businesses also cannot afford to delay. Greenbaum says, “You can’t wait five years to do it, and you have to understand how these things are interconnected.” Attracting that talent is only becoming more urgent. According to The Conference Board research, of the executives surveyed worldwide “43% cite a lack of talent and skills as the biggest and growing obstacle to overcome for future innovation.”
Greenbaum reiterates the issue: “Global executive leadership does not see the lack of talent and skills as a big but declining problem; rather, it’s a big issue today and it is going to get worse. That again goes back to the shortage of talent. We need specific talent to drive innovation and transformation and not only is it hard, it’s going to get harder still.”
Why? Greenbaum explains, “Transformation is a top business issue today and it will be a top business issue in five years, and everyone wants the same talent, so it isn’t going to get better.”
The harsh reality that organizations must grapple with is this:
- There is a shortage of top talent with digital expertise
- Half of the population [women] is underutilized
- Next gen leaders have different expectations
- Most companies do not have a compelling value proposition or brand
- Culture matters
Employers are facing a dramatic turnabout in the talent market. Greenbaum explains, “Most companies haven’t been working in a candidate market, and so they expect five people to be interested in their position, and they get to pick which one. They are not ready for the fact that there is only one candidate, and three other firms are competing for that one person including their current employer.”
She adds, “So what are you—the hiring firm—going to offer this talent to make them want to come to your organization and stay? And how are you going to change your own value proposition to create an environment where people are ready to select you? Employers have to understand that the next generation of leaders have different expectations, and culture matters.”
Attracting and Retaining Top Talent
AESC research identified four key challenges to attracting and retaining top talent:
- Strong competition for top digital talent
- Next Gen talent demands a diverse and inclusive culture
- Multinationals lead in gender diversity
- Authentic culture and brand matters
However, in the AESC client survey, the executives surveyed identified slightly different challenges to attracting as opposed to retaining top talent:
Attracting Top Talent
- Employee value proposition/brand
- Access to/supply of talent
Retaining Top Talent
- Growth and development
- Culture fit
The number one challenge to attracting talent, according to executives, is having the right employee value proposition. The second ranked challenge is getting compensation right and the third challenge is the access to and supply of the right talent. It gets interesting, Greenbaum observes, “When we asked clients about the top challenges to retaining talent.” She explains, “Number one was creating growth and development, number two was compensation, and number three was culture fit. The employee value proposition didn’t make the top three.”
But, how should clients be thinking about the employee value proposition? Greenbaum explains, “It isn’t only what attracts talent, it’s what retains talent. And the fact that they don’t have it in the top three under ‘retention’ means that they don’t get it. They just don’t understand the power of having the right brand and value proposition.”
According to Greenbaum the employee value proposition “isn’t just some slogan. It’s all about this: what is your purpose—your business purpose and your social purpose? What is your culture, and is it authentic? What are your total rewards—not just my pay but the whole package? Are you offering a continuous learning opportunity? Do you have workplace flexibility? Top talent wants to work someplace where they can connect with other energized and engaged top talent and where people enjoy the work environment. People matter and that gets back to a diverse and inclusive workplace, as well. Everything ties together.”
Based on the client responses, Greenbaum says, “They are undervaluing the importance of creating the value proposition and brand that is lasting and authentic and that resonates with the talent they are trying to attract and retain. And that means that an organization may have to shift everything about how they are working to be an organization that people want to come to and want to stay.”
The Role of Leadership
“You can’t change your value proposition by having a good writer craft something. This is about everything that happens in your organization, so leadership matters,” Greenbaum says.
According to AESC’s Leading Transformation report, “Organizations are not actualizing their digital transformation because they haven’t clearly defined what it means for their business. There is a lack of understanding, a lack of training, and often a perception that it is the responsibility of one department. To build a successful culture of innovation, it starts at the top and all C-Suite functions are impacted.”
Everyone in the C-Suite has to change in order to drive digital transformation, according to the report. Greenbaum says, “The roles most required to change are the CEO and the CTO, but it’s not just one person’s job. Everyone needs to figure out their role in the transformation process.”
- CEOs must drive the culture through change
- CHROs must lead a business 4.0 talent strategy
- CFOs must support innovation through investment
- CMOs must evangelize customer centricity across the enterprise
- CTOs must become more commercial and seize opportunities in the marketplace
“The roles most required to change are the CEO and the CTO, but it’s not just one person’s job. Everyone needs to figure out their role in the transformation process.”
The report also shows that a talent strategy for the current environment should include these elements: develop a stronger employee brand strategy, be open to talent from other industries, provide development opportunities to high potentials, and bring digital talent and diversity to your board.
Barriers to Innovation
Research demonstrates unequivocally that diversity and inclusion drive innovation. Yet in AESC’s client survey, the respondents identify the barriers to innovation as: day-to-day performance pressures, lack of talent and skills, lack of resources/ money, lack of clear innovation goals, and legacy technology, in that order. “What I thought was interesting is that the lack of an inclusive innovation culture, the lack of diversity, and an insular culture, three things that we would put at the very top of the list of barriers to innovation, didn’t make the clients’ top five list,” Greenbaum says.
“Again,” Greenbaum says, “the insular culture and lack of diversity and inclusion directly gets in the way of attracting and retaining the talent companies need to drive digital transformation and innovation.”
AESC members identified several skills other than digital that employers actually need to drive digital transformation. Greenbaum says, “When people think about digital transformation, they think they need to hire some tech-savvy people. But our members ranked the top ten competencies for digital transformation, and ‘digital’ is number ten.”
“The notion that, ‘if I can get some really good tech people, then we can drive change in our organization’ is a mistake,” Greenbaum says. “Being a tech expert doesn’t mean you know anything about changing people’s behaviors. You need someone who can lead change, be entrepreneurial, have emotional intelligence, critical thinking, innovation, can inspire others, be collaborative, be agile, open to change and, of course, digitally savvy.” She adds, “But, it’s not just about tech.”
About Gender Diversity
The top five 2030 goals the United Nations has set for sustainable development around the world are no poverty, zero hunger, good health and well-being, quality education, and gender equality. Greenbaum reflects on those goals. “I think it’s shocking that in 2019 gender equality is among the top five UN Sustainable Development Goals. Why is gender equality still something we’re talking about in 2019?”
Greenbaum puts the issue into a global context. “When we talk about gender equality in the executive search and leadership consulting profession, we’re really talking about having women on the board and in the C-Suite. In the developing world they are talking about women who have no education and who are married off when they’re nine years old, women who have no rights. They’re talking about big equality issues. If gender equality is a top five issue identified by the United Nations, it is no wonder we’re still struggling with this issue at the top of the house.”
Part of the issue (at the top of the house) may be a perception problem. In 2013 McKinsey & Company conducted a survey of global executives asking if they agreed or disagreed (or did not know) with the following statement: “Even with equal skills and qualifications, women have difficulty reaching top management positions.”
“At a time when there is a shortage of talent, half of the world is under-employed—women."
According to McKinsey, 93% of the female executives agreed with the statement, as contrasted with only 58% of the male executives. It demonstrates clearly that men and women see this issue through a different lens. To drive change, we need to begin to see issues with the same perspective and manage our own biases. Remember everyone has biases—men and women.”
The World Economic Forum’s Future of Jobs Report identified unconscious bias as the top barrier to hiring and promoting women. The report also included lack of work-life balance, lack of role models, lack of qualified incoming talent, and women’s confidence and aspirations.
Regarding work-life balance, Greenbaum says, “You might ask why is that a woman’s issue rather than a man’s issue, but in many cultures around the world it doesn’t matter if you’re an executive, bringing up your children is still viewed as the woman’s responsibility, as is the education of the children and even taking care of your husband’s parents. So when you look at why women are not in the workforce, if you have to do all of this and still do your job, there is no balance. And in many cultures, there is no solution because they don’t have great childcare, and they don’t have infrastructure to help. This is changing with the next generation—where men and women are more motivated to share responsibilities for family and are both seeking a balance."
Greenbaum clarifies the “lack of qualified incoming talent” identified in the World Economic Forum survey. “This doesn’t mean that women aren’t properly educated or well-educated, but often times they aren’t picking the right degrees. Organizations are often looking for people with STEM backgrounds and women are getting social services degrees, so women candidates need to be well-educated with the right expertise. That is all beginning to change.”
Regarding the lack of role models, organizations often struggle with gender diversity in industries where women are underrepresented. According to the World Economic Forum report, “Across all industries, companies reported that they found women harder to recruit. The reported ease (or in this case, difficulty) of recruiting women is directly proportional to the existing gender composition of the industry.”
Greenbaum sees a similar problem at the organizational level. “I travel all over the world and the local companies in many markets just don’t get the issue of diversity. It’s a macho culture and they don’t really understand why this is a business issue, but the multinationals in that same country have global priorities that demand gender diversity, so they are in that local market finding the best women and hiring them. When the local firms finally start to get it, no woman is interested. Why would anyone want to come in and be the only woman, when she can work for a multinational that cares about gender diversity, where she can be part of a really diverse and inclusive culture?”
Call to Action
Greenbaum identifies concrete actions leadership can take in order to advance diversity (and therefore innovation and digital transformation) in their organizations.
What gets measured gets managed:
AESC research found a direct correlation between organizations that report their diversity and their performance on diversity measures. “The average that clients rate themselves is 2.8 out of five, and those who publicly reported their diversity were 78% positive and those who didn’t were 64% positive,” Greenbaum says. Of those who publicly report their diversity, 22% gave themselves bad scores, countering the argument that only companies with a good story to tell actually report. “I think in fact when you report publicly, it makes you more motivated to improve,” Greenbaum says.
Leaders as champions of diversity:
“Developing a commitment to diversity must start at the top. This cannot be a bottom-up, grass roots initiative. If you don’t have leaders committed to diversity, change them out.”
Partner with outside experts:
“A sure sign of insanity is doing the same thing over and over again and expecting different results. If you really want to change the composition of your leadership team, partner with the experts, using a well-respected executive search firm.”
Fair hiring and employment practices:
“It’s a fact that there is an issue with pay equity between men and women around the world. To create an environment where top women want to join your firm, make sure that you pay equal pay for equal work. And recognize ‘unconscious bias’ in your hiring practices and work hard to remove these barriers.”
One is not enough:
Greenbaum urges companies not to think, “We have one woman on the board, or we have one woman in leadership, so now we’re done.” Strive for parity to truly unleash the value of a diverse team.
Make this a priority—not an initiative. No more excuses!
“Don’t make your commitment to a diverse leadership team the “initiative du jour”—this is a priority in terms of how you run your business, not a short term initiative.”
Identify and develop women of potential:
Companies don’t have to look only on the outside to improve their gender diversity. “You’ve got to identify your own women in your organization who have potential, and develop them,” Greenbaum says.
Create a “best place to work” culture:
Greenbaum goes back to that value proposition: why would someone want to work here? “Because the best women are actually in high demand and they may choose to work for you or they may choose to work for someone else. And they really look at the organization before they make that decision,” she says.
Dealing with Talent Scarcity
Why is it so hard to look outside-of-the-box for talent? For example, a candidate with decades of industry experience might be exactly the wrong person to drive digital transformation. “Roles are changing now, and often times we are looking to fill roles that weren’t around 20 years ago, so you can’t look for someone with 20 years of experience because they don’t exist. So, you have to look at competencies, agility and the ability to do something different,” Greenbaum explains.
Looking for talent outside of an industry or drawing on skills developed in a different role can feel risky. Greenbaum says, “I think in general people are risk averse and so they wonder, how do I know that this person can do the job? But in this day and age it’s actually risky to not think out-of-the-box,” she says. “You’ll miss opportunities for great hires. This is where expert talent assessment is critically important. Often you can’t look backward at track record—you need to be able to assess a candidate to lead through change and to step into a role that didn’t exist 10 or 20 years ago.
Executive search and leadership advisors help companies navigate the talent shortage. “This begins with a fresh perspective on the position profile, an “out-of-the-box” search for potential candidates, and even advice on how to create a strong employer brand that is authentic and that will make the organization a place where top candidates want to come and want to stay. A trusted advisor isn’t afraid to be honest and realistic when discussing leadership strategies,” Greenbaum says.
AESC’s Executive Talent 2025 report explored where organizations are looking to retain outside services. Greenbaum says, “The bottom line is that they’re looking for a trusted advisor who knows them and understands them to take the knowledge and add more value.” She explains that companies want to know, “How can you help me assess my own talent? How can you help me not only find board members but look at board effectiveness? How can you help me in succession planning and building a strong and diverse leadership team? How do I understand my current culture but also make the needed changes to my culture and value proposition to truly be an employer of choice for the talent I need?” Greenbaum adds, “All of these things are a natural evolution for advisors who truly are experts in leadership.”
As organizations face increasing pressure to innovate, digitize, and compete for people with the skills to lead change, AESC members are stepping up to help. “Innovation and digital transformation demand the right talent,” Greenbaum says. “That talent is diverse, it is digital, it is next gen. All of that comes together for innovation.”