60% of Companies Face Leadership Talent Shortage

Nearly 60% of companies are facing leadership talent shortages. Thirty-one percent expect this lack of leadership talent to impede their performance in the next several years.

What’s even more troubling for most companies is that nearly 40% of their home-grown “high potential” leaders end in failure within the first 18 months, taking with them an investment of hundreds of thousands of dollars. The chances that a new executive will quit or be fired within the first three years jumps to greater than 50 percent. The cost of replacing a newly recruited executive could be anywhere from three to five times that executive’s salary.

Replacing a failed executive carries a much bigger cost than just salary and benefits. When you include lost opportunity, the cost of a failed leader skyrockets.  In Aon Consulting’s 2008 Benefits and Talent Survey, 25% of companies reported a reduced ability to deliver desired customer service skills; 20% reported a reduced ability to meet revenue growth goals; and 18% the reduced ability to innovate.

Failed leadership talent management doesn’t just start, however, after a high-potential candidate is promoted. In a September 2009 survey by the Corporate Executive Board, one in three emerging stars reported feeling disengaged from his or her company and 25% of them intend to jump ship within the year.  For those who remain, one in three admits to not putting all his effort into his job.  It’s no wonder companies end up with a shortfall in their leadership pipeline and surplus of missed expectations.

The problem doesn’t seem to be the result of a complete lack of interest or investment in developing leaders. In 2009, U.S. companies spent an estimated $12 billion (24% of their overall training budgets) on leadership development programs and services. It’s apparent that what many companies are currently doing to grow and develop future leaders is not working.  To correct what’s wrong with leadership development, senior managers must fix six common leadership development mistakes:

  1. Assuming that high potentials are highly engaged.
  2. Equating current high performance with future potential.
  3. Delegating down the management of top talent.
  4. Shielding rising stars from early derailment.
  5. Expecting star employees to share the pain.
  6. Failing to link your stars to your corporate strategy.

Developing leaders is one of the most critical business needs in the modern workplace, and having the right people in place to lead your organization through tough periods of fast growth and economic downturns is critical. In the United States, the leadership shortage will grow dramatically over the next decade.  A 2008 Aon Survey reported that 56 percent of the respondents report that they are experiencing a shortage of qualified leadership talent. That was up from 40 percent from the previous year (2007).  Based on the increasing complexity and pace of change in today’s markets the shortage of qualified leaders is only going to grow as leadership demands increase.

Topping the list of the 10 Critical Components of a Talent Development Program are (1) explicitly test candidates in three dimensions: ability, engagement, and aspiration and (2) emphasize future competencies needed more heavily than current performance.

Click on the link to purchase and download a copy of How to Keep Your Top Talent.


Ira S Wolfe


  1. Thomas Farrell July 6, 2010 at 1:56 pm -

    Some great ways to solve leadership issues is to use a PEO.
    Getting the most of your people:
    Professional Employer Organizations help their clients understand what it takes to get the most out of their people. They offer services such as employee performance reviews that can be integrated into policies for employee milestones, promotions, and bonuses. PEOs also offer various training seminars for managers to learn about employee motivation, communicating with employees, supervising coaching, etc.
    For more information chec out our article- http://www.peospectrum.com/peo-learning-center/PEO-Services-HR.php