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Consult Cashman
Where Have All the Leaders Gone?
Kevin Cashman 08.14.06, 6:00 AM ET

Minneapolis, Minn. -

There's a new crisis in Corporate America. It has nothing do with Enron, ethics or Sarbanes Oxley. The real problem is the dwindling supply of CEO and C-Level talent. In May, CEO departures within U.S. companies hit a record high of 148 executives, according to Challenger, Gray & Christmas. "In five years, 50% of all C-Level executives will retire," says Paul Reilly, CEO of Korn/Ferry International.

What's causing such attrition? Wall Street pressure for results with no hiccups doesn't help. Neither do boards who seem fixated on finding heroic hired guns. Meanwhile, the pool of talent is dwindling as baby boomers retire and many corporations fail to properly invest in their high-potential talent.

Who will step up and fill the growing void? That's a good question--with an unpleasant answer. In the next decade, the challenge to locate and develop leadership resources may be every bit as much of a struggle as drumming up new energy resources. In fact, our leadership "reserves" may be heading for an all-time low. Demand is going up, and supply is going down. Is it any surprise executive compensation is accelerating?

The following reader questions give a taste of what it feels like to be a leader in short supply today. (To encourage an honest dialog, executives' and companies' names have been withheld.)

Former CEO in the publishing industry : As a former CEO, I know how difficult it is to face even an occasional talent drain. What practical measures can senior leaders take to deal with potential crises?

Cashman: It may sound simplistic, but the best thing a top leader can do is be a great coach, boss and mentor. After conducting 19,700 exit interviews of key employees leaving companies, the Saratoga Institute found that 85% of bosses thought their top people left for more money and opportunity. But the real reason behind the turnover: 80% said they left due to poor management and leadership or because of a dysfunctional company culture. If you're a board member, a CEO or a leader on the front lines, paying more attention to the development of your people and teams is the crucial variable for retaining key people.

President and COO in the educational services industry: Will the coming shortage of senior-level talent cause companies to become more thoughtful and aggressive in their development and retention initiatives?

Cashman: Let's hope so. However, the current situation doesn't look so good. We estimate that only 35% of all firms have a retention or talent management system that will produce at least one successor for each key position. World-class organizations have two people ready for each key job that will need filling at the top. But this only accounts for about 10% of companies. The crisis is here, and most leaders don't fully see it yet. The ones that do and invest in succession and leadership will have a significant competitive advantage in the coming decade.

CEO in the financial services industry: Faced with a shallower pool of talent but armed with lucrative compensation packages, how can I ensure that--amid fierce competition for talent--we do not unintentionally compromise our values and become an Enron?

Cashman: Enron espoused beautiful values and believed in paying top dollar for top talent, but recognizing and living values are not one in the same. Retiring business owners can attest that the heart of succession planning is finding talented people who genuinely connect with the company's culture and values. In fact, upholding values on par with results in every phase of business is what transforms corporate cultures. As a result, people will be attracted to the company and its value proposition. This is why Southwest Airlines (nyse: LUV - news - people ), in the midst of a tough marketplace, still has thousands of qualified applicants beyond its need. Companies that walk the talk attract the people they want.

More specifically, when looking for principled successors, don't be afraid to put them to the test. Solid behavioral assessments, interviews or simulations can gauge values--not just achievements--helping character-centered leaders stick out from more self-centered ones. Also, involve the company from top to bottom. Surveys reveal that board members and employees are both more stringent than CEOs when it comes to evaluating a candidate's ethics. Use checks and balances to make sure you're not viewing individual candidates with rose-tinted glasses.

Kevin Cashman is founder and CEO of LeaderSource, a global leadership development, executive coaching and team effectiveness consultancy headquartered in Minneapolis. He is the author of four books on leadership and career development, including the bestseller Leadership From the Inside Out (revised edition due out soon).

Next up: Leadership and philanthropy ... How do these two worlds conflict or connect? Submit questions or ideas to

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