The CHRO mandate: Developing the next generation of leaders

In an era marked by rapid change and economic uncertainty, CHROs play a pivotal role in cultivating a robust pipeline of future leaders. This pipeline is critical for organisational resilience and financial success, yet CHROs face an uphill battle. Fewer employees want to become leaders at a time when these roles have become harder, driving high levels of leadership turnover. Below, I explore this trend, and outline a number of solutions based on our own global research and conversations with CHROs. 

The path to greater resilience and financial outcomes 

Leadership development cultivates a continuous supply of capable leaders who can guide the organisation through challenges and opportunities. It enhances decision-making, strategic thinking and the ability to inspire teams, at the same time as reducing turnover and boosting morale. Organisations with strong leadership development programmes have greater resilience, are more adaptable, and retain top talent. 

What’s more, they also enjoy a significant competitive advantage, financially outperforming their peers by substantial margins. Organisations with top-performing managers yield multiple times the total shareholder returns of those with average or below-average managers – a benefit that increases further up the organisational hierarchy. 45% of an organisation’s performance can be attributed to CEO decision-making, with organisations led by high-performing CEOs enjoy a 17.6% increase in revenue.  

Effective leadership development, from the managerial level through to the CEO, has always been a strategic imperative. But in the current climate of economic uncertainty it is also a financial necessity to ensure sustained growth and competitive advantage. Developing a healthy pipeline of leaders is therefore a top priority for CHROs. 

Leadership development faces a ‘perfect storm’ of challenges 

The perception of the corporate ladder has changed dramatically over the past decade. Employees now rank work-life balance as highly as pay – more than any other workplace priority. This is a significant shift, resulting in growing numbers of employees viewing the higher salaries of rising up the ranks not worth the additional work and stress. So much so, that almost 40% of employees now say they never want to become managers, let alone leaders. 

This trend is aggravated by a rapidly evolving leadership paradigm driven by cultural and technological shifts. Chief among these changes are hybrid leadership, societal expectations of leaders, and the difficulty of inspiring increasingly unengaged workforces. These pressures have contributed to a 71% leadership burnout rate, with 41% wanting more leadership development just to meet the demands of their role. 

This is the ‘perfect storm’ of challenges for CHROs. Fewer employees want to become managers, placing constraints on the leadership pipeline, while leadership itself has become that much harder. 2023 witnessed record levels of CEO turnover because of this very reason, with leaders feeling burned out after leading through the pandemic. CHROs face a shrinking pool of candidates needed for a larger number of roles. 

Achieving leadership development in spite of the odds 

Navigating a workforce with less interest in becoming leaders requires a cultural shift. Workplaces that prioritise continuous learning, transparent communication, and proactive career development demonstrate to employees an interest in their professional growth. Ensuring employees feel as if there is a path for them to progress is the first step in inspiring them to do so. 

The second step is the alignment of personal and professional goals. We know from our own research of global financial institutions that marrying a successor candidate’s personal aspirations with the organisation’s objectives is fundamental in developing the candidate for leadership. It means they are emotionally invested in the organisation’s success and their role in bringing about this success.  

Part of this alignment methodology is embedding flexibility within leadership development programmes to meet modern candidates’ career goals. Our research found CHROs were increasing the number of secondments and rotations for successor candidates to ‘keep them interested,’ meeting the expectations of employees who increasingly want non-linear careers. 

Likewise, many CHROs were developing multiple successor tracks, designing leadership development programmes for technical and specialist roles, in addition to traditional managerial roles. This means they can retain and develop talent with specialised skills – for example, in digital – who may not aspire to general managerial leadership but want to progress. 

Finally, mentorship and coaching are fundamental in leadership development. Experienced leaders can not only pass on their hard-won wisdom, but can be a guiding hand and source of support leaders can draw upon. At a time where leaders struggle with unprecedented levels of pressure and are required to navigate novel challenges, this support is crucial. Mentorship and coaching is also part of our advice for helping new CEOs succeed, which you can read here.   

Odgers Berndtson helps identify, assess, and appoint CHROs and other HR leaders from an expansive network of national and international leadership talent. For more information or help with your next leadership appointment, get in touch: mark.odonnell@odgersberndtson.com