RSM Resources

Many midsized companies succeed because they can respond more quickly to market forces than larger competitors can. And, there’s no place where that may be more evident than in the corner office.

A recent University of Pennsylvania study revealed that executives on the fast track to senior positions in Fortune100 companies from 1980 to 2001 were less likely to have an Ivy League education, more likely to be female and more likely to have been hired from outside the organization. The study’s author says midsized, more entrepreneurial businesses have been quick to embrace performance over pedigree.

"These large firms were the last bastion of the so-called ’academy companies,’ where you went to get developed for along-term executive career in one place," says Peter Cappelli, director of the Center for Human Resources at the University of Pennsylvania’s Wharton School of Business. "But I think most recruiters and senior HR people would say that smaller companies have been on board with this approach for many years."

In the study, "The Path to the Top: Changes in the Attributes of Corporate Executives 1980 to 2001," Cappelli and co-author Monika Hamori found several intriguing leadership trends in large firms, including:

The growing role of women. In 1980, there were no women in top management jobs at Fortune 100 companies. By 2001, that number had risen to 11 percent, and female executives (vice president or higher) tended to be about five years younger than men in similar roles. The study also found that female executives moved into their leadership positions after about 21 years of experience — or about four years sooner than the average for men.

Why do women seem to move on a faster track? Cappelli says it may be a combination of hard work and good timing.

"It’s always been harder for women to get close to executive roles and, because of that, once they get there they may actually be better than the men they compete against," he says. "And,it’s no secret that companies at all levels are more actively recruiting women for senior jobs than was true 25 years ago."

The shrinking value of tenure. Today, time served in an organization may actually do some candidates more harm than good. The number of senior male executives spending their entire careers with one firm declined from 54 to 45 percent over the two decades of the study. Only one-third of women in leadership roles had been with the same company for their entire career. Cappelli says those numbers suggest a decrease in the perceived value of internal training, and a higher premium on outside experiences to cope with an increasingly complex business world.

"The evidence suggests that many companies are less prone to invest in training and developing key positions," he says. "They want to hire people who can come in and immediately do the job they’re trying to fill."

A lighter shade of ivy. From 1980 to 2001, the percentage of Fortune 100 top executives with undergraduate degrees from public universities increased from 34 to 50 percent, mirroring a similar rise in the number of advanced degrees in law or business from public institutions. Meanwhile, the number of executives with Ivy League undergraduate degrees fell from 30 to 26 percent, and the number of graduate degrees from those schools had also declined significantly.

While smaller firms may have adapted to these trends more quickly than their larger counterparts, labor experts suggest that most companies do not have strong systems in place to attract, improve and retain talent. In fact, one recent human resources study found that only 26 percent of businesses strongly agreed that talent management was a top priority at their companies. Further, only one in five of those firms believed they had enough in-house leadership talent to pursue current and prospective business opportunities.

That lack of strategic talent management has a direct impact on a company’s bottom line. According to the study, companies with well-designed approaches to recruit and develop staff delivered, on average, a 22 percent higher return to shareholders than their industry peers.

What can your company do to improve its overall talent management? Human resources professionals suggest the following tips:

Understand current demographic forces. According to U.S.Labor Department estimates, the number of 25- to 44-year-old workers was projected to decline 6 percent from 1998 to 2008, while the pool of talent age 55 and over was expected to nearly double during that same period. That means smart companies are finding creative ways to continually engage talented older employees, while being savvy in how they choose and groom the next generation of leaders.

Foster a strong,positive corporate culture. The recent recession, coupled with increased pressures to do more with less, has fueled a high degree of resentment among many middle managers and executives. In another recent study, 62 percent of corporate leaders polled said they were unhappy with their current positions. And, more than half of those surveyed said employee morale at their firms was less than "good."

To address this issue, experts suggest creating an "employee value proposition" (EVP). An EVP that accurately reflects a positive work environment will assess and define how a company fulfills employees’ needs, expectations and goals. A well-crafted EVP will ring true with the experiences of current staff, while serving as a guidepost for prospective workers to determine if the firm is right for them.

"This is important, because most companies seem to be oblivious to the idea that good employees are always in demand," Cappelli says. "The best leadership teams will go out of their way to create systems to identify top performers, while ensuring they build a workplace culture with opportunities that are every bit as good as what they could get on the outside."

Tailor leadership development systems. Many businesses make the mistake of simply borrowing a successful talent-management model from another company and expecting that template to deliver similar results in their firm. For example, the forced ranking system at General Electric has been a highly successful tool for creating executive leaders, but Cappelli says it would not work in organizations where highly competitive, aggressive behavior is not rewarded.

Use industry shakeups as a strategic opportunity. If your company or industry is undergoing significant change, experts say that element can be used to lure top performers who aren’t afraid to take risks. In his research, Cappelli found that companies facing major change consistently offer the fastest route to the executive suite — provided that key talent can quickly deliver value while handling ambiguity.

"The bottom line is that turmoil creates opportunity," he says. "And, one of the reasons people get to the top faster in these kinds of situations is because other leaders are being jettisoned at the same time."

By using some of these tools, you can build or improve the effectiveness of your company’s approach to talent management.