Nurturing future leaders a challenge for emerging-market companies

More than 80% of businesses in some developing regions do not have strong successors in place for key leadership roles, according to a new report.

Mercer, a global consulting firm, studied leadership trends in Asia Pacific, Latin America, and the Middle East for its Leadership Practices Study.

Mercer found that leadership development is viewed as more important in Latin America than in the other regions, for instance, but also found common themes across the regions.

Research has shown that companies that prioritise talent development are more likely to grow revenue. A recent Boston Consulting Group study said companies with high-level talent management processes grew revenue 2.2 times faster than those with weak talent management.

Among the key findings in the Mercer study:

• Companies can do more to prepare the next generation of leaders. Fewer than half of respondents conduct regular pipeline projections for up-and-coming talent, and very few have specific plans for developing key segments of their staff, such as women or their local workforce.
• Many businesses are not effectively identifying future leaders. Twenty per cent of businesses in Latin America, 15% in Asia Pacific, and 6% in the Middle East report that they have strong, “ready-now” successors in place for critical leadership roles.
• Investment in middle management is relatively low. Companies are spending less annually on training and developing mid-level and frontline leaders than they do on global or senior leaders. Fewer than one in five companies in the Middle East and Latin America are spending $5,000 or more per person to develop future leaders. And in Asia Pacific, just one in 20 companies is spending that much on next-generation leaders.

Progress in certain aspects, regions

The news is not all negative. Companies in the growth markets recognise the importance of having a strategy for leadership development, but some are further along in the process than others, or their focus is different.

For instance, companies in Asia Pacific are “investing heavily” in training and developing senior-level and global leaders. In Latin America, companies are leading the way in applying experience-based solutions for developing leaders. And Middle East organisations are creating opportunities for international assignments as a way to develop talent.

Key findings by region show some differences in the markets. Here are a few highlights for each:

Asia Pacific: Companies continue to rely on expatriates instead of local talent for top leadership roles, which Mercer says calls into question the effectiveness of leadership development strategies for the local workforce. Also, people-related competencies are not among those seen as most critical by organisations for leadership success.

Latin America: Nearly 75% of companies have a defined leadership development strategy, but about half of those are regularly conducting pipeline projections to plan for future leadership needs. Performance and succession management systems are “not robust enough to reliably identify the right leaders, for the right roles, at the right time,” the study said.

Middle East: Half of companies have defined leadership development strategies in place, mostly in larger organisations. Companies are relying on traditional methods such as classroom training, but these methods are not proving to be effective in nurturing future leaders. Local staff and women are under-represented in leadership positions and often overlooked in talent development programmes.

Related CGMA Magazine content:

“Leadership Pipelines May Be Running Dry”: Almost half of human resources leaders say leadership development is their top priority, according to a global survey. Many HR leaders say their companies are increasing their spending on talent development, as few have confidence in their leadership pipeline to fill critical openings.

“Management Candidates Must Know how to Motivate Others”: Motivational and leadership skills were the most important factor for promoting professionals to management positions, according to a recent survey.

—Neil Amato (namato@aicpa.org) is a CGMA Magazine senior editor.