Succession planning has long been a priority for many organizations but building a strong pipeline of high-potential leaders is not always an easy process. This doesn’t mean they can afford to ignore it, however. Without careful planning and development programs in place, companies leave themselves vulnerable to talent and leadership gaps that can disrupt operations and leave them scrambling to catch up in highly competitive markets.
To highlight the importance of succession planning in the life sciences industry, we recently spoke with Rebecca H. New of RSR Partners. In her position as managing director and head of the firm’s Human Capital and Healthcare Practices, New provides an inside perspective on the high-stakes concerns facing companies in the pharma, biotech, and healthcare space.
Challenges Facing Today’s Life Sciences Leaders
The life sciences industry is undergoing tremendous changes that are having an impact on talent trends. From increased scrutiny into drug pricing and changes in global regulator collaborations, to the continued focus on outsourcing for both optimization of ROI capital and speed to market, leaders must manage a wider range of challenges than ever before.
For C-suite level executives, fundraising and optimizing supply chain relationships takes up a great deal of their attention. They must be able to facilitate growth by finding ways to differentiate their organization from competitors while minimizing business disruptions. To sustain business results in a competitive industry, leaders must also create work environments that attract and develop quality and diverse talent.
“Employees want to feel connected to the strategy and purpose of the company,” says New. “A leader needs to be a change agent in driving sustainable and effective organizational culture.”
Ideal leadership candidates have the ability to connect, adapt, and deliver, helping companies plan for long-term sustainability, optimize growth and maximize ROI with regards to products and services. They will need to play multiple roles and be comfortable dealing with uncertainties in the market. The primary objective of leadership succession planning should be to find these candidates.
New finds that the ideal candidates are resourceful enough to meet these challenges: “Savvy leaders are differentiating their skills and their business through more advanced business analytics to determine trends and opportunities to provide value to their clients and customers.”
Why the Talent Gap Matters
Having the right leadership team in place is critical to success in any industry, and life sciences companies are certainly no exception. New highlights several independent studies from the last few years that reveal the extent of the talent gap problem. According to Deloitte research, about 56 percent of talent managers expect to see shortages in executive leadership. About the same number don’t have a formal succession planning process in place. It’s hardly surprising, then, that about 54 percent of companies reported that talent shortages significantly affect their ability to meet customer needs. McKinsey research has found that companies with effective talent management are six times more likely to deliver higher returns to shareholders than their competitors.
All these factors have caused corporate boards to recognize succession as a serious business risk. In response, they have focused on employee development and retention with an eye toward “critical position” succession. While these companies are still focusing on desired competencies, they are also assessing candidates for cultural fit and alignment with company values. Research suggests there’s good reason for this: According to Forbes, lack of cultural fit is the primary reason why most leaders fail in their new role while four of the top 10 reasons for strategy failure are related to a lack of accountability, involvement, and commitment on the part of leadership.
Changing Businesses and Changing Skill Needs
The shifting structure of large companies has altered the type of leadership skills necessary for success in today’s market. These companies typically had siloed functional accountability in which decisions were made top down, with leaders in lower levels executing strategies handed down from above. They were not empowered to make their own decisions or incentivized to take risks. Since responsibilities were siloed into distinct departments, leaders had limited exposure to other aspects of the company. Someone working in product design, for instance, had little awareness of the pressures facing the supply chain.
All these factors made it difficult for employee succession planning programs to identify ideal leadership candidates for C-suite succession. Few of these leaders understood how all the constituent parts of the company contributed to the success of the whole. They didn’t understand the importance of customer satisfaction in business success or how customer service and quality impacted revenue and customer retention. They don’t understand trade-offs of invested cash (when to outsource, build vs. buy). They may not know how to drive and sustain change. Today’s companies are instead emphasizing adaptability and the ability to influence others over traditional management skills.
New says: “As we look at the number of CEO and COO opportunities for small and mid-sized companies, companies are looking for candidates who have more than big company/pharma experience.”
Finding the Right ‘Fit’
The increased public scrutiny from traditional media outlets and social media channels has forced leaders in the life sciences industry to keep issues involving pricing, ethics, and social responsibility at the forefront of every decision. A good assessment process not only needs to consider whether candidates are a good fit for the company’s culture, but that they align with its organizational ethics, corporate responsibility, and social expectations. These qualities are critical for effective succession planning.
“For years, we have heard about the importance of focusing on EQ (emotional intelligence), not just IQ (intelligence quotient),” New explains. In today’s environment, however, New feels companies have to go beyond these two attributes. “When assessing talent, consider how you or your recruiting partner assess for ‘MQ’ (moral intelligence).”
Evaluating moral decisions and integrity are crucial to determining if a candidate is a good fit for an organization’s internal culture and public image. This helps ensure that leadership hires will not only be more likely to be retained and contribute to business success, but also won’t cause damage to the company’s brand.
Strengthening their leadership succession planning with robust assessment and development programs offers life sciences companies a proven path to success in a rapidly changing industry. Identifying high-potential candidates early and providing them with the resources they need to thrive in leadership positions will help them to overcome talent gaps and ensure greater levels of continuity in a volatile market.
Darleen DeRosa, Ph.D., is managing partner with OnPoint Consulting. Email Darleen at firstname.lastname@example.org.