Tech Companies Eye HR Impact In Leadership Development

September 8, 2003 ( - Looking for the human resources functions that have the most potential for impact on the bottom line, technology companies are eyeing leadership challenges as potential for changes in the near term.

Six out of 10 employers polled by Aon Consulting identified a lack of specific leadership skills as the number one challenge in the leadership development arena. Aon attributed this to a fundamental shift in the kinds of leadership skills now required after companies have undergone multiple rounds of layoffs, jobs being rescoped and attention now on reviving and stabilizing the health of organizations.

Related to this shift that technology firms now face was the second and third leadership development challenges named by 46.2% and 37% of companies: succession planning and too little time allowed for development activities, respectively. However, Aon found that as companies develop other areas of their human resource management in the shift to stabilizing companies, these two functions are likely to follow.

With leadership challenges, the “Leadership, High Potentials and Performance Management Practices in Technology Industries” survey found employers were looking at areas of development for individual leaders. Tops among this group were:

  • 55.4% – developing people, including other leaders
  • 50.3% – communicating well with employees
  • 38.9% – setting, articulating and inspiring a believable vision
  • 34.3% – working well non-functionally
  • 34.1% – managing a balance of strategic and tactical focus.

The process is far from static. Aon found over the coming year companies report investments being made to improve the process in:

  • training designed to reach group leaders
  • talent assessment
  • more mentoring and coaching.

Most were identified by informal means and their own general perception (91%). However, the process became more sophisticated for 23% that used a more formal process – such as leader self-assessment or 360-degree surveys.

Employee Review

Annual performance reviews were found to be a formal written process across most firms, commonly done on a five-level rating scale, and holding to the bell-curve theory. Breaking down the results per ranking:

  • 8.5% – top level
  • 26.7% – second level
  • 52.6% – third level
  • 8.3% – fourth level
  • 3.9% – bottom level.

Once the rankings were in, companies had a variety of different strategies tied to employee performance. Aon found three out of 10 companies are also using the ranking process to evaluate employee performance and 21.6% determine salary increases based on how employees rated in their annual review. On the other end of the scale, over half of the companies polled establish a target percentage (34% said they target levels 6% and above) or underperformers, with “no fault” severance packages tied to a signed release being utilized by slightly less than half of those surveyed (45.4%).

High Potential Target

Outside of the formal review process, Aon found nearly four out of 10 companies (37%) have established a formal (15%) or informal (21%) program to target high potential employees. Much like performance reviews, companies report this process is done on an annual basis, with “currently rated as a higher performer” and demonstrates business results” the most common labels given to high potential employees.

Not surprisingly, the target area is highly selective. More than half target only between 1% and 5% of the entire workforce as high potentials, based on performance and management reviews and ranking data that was used in formal evaluation processes. Once branded as high potential, most employers (67%) do not notify the target employee.

Aon found this process though is currently evolving. In fact, over the coming year, companies pointed to two major emerging themes in the identification of high potential employees:

  • addition and formalization of high potential programs
  • evolving the program’s prime objective from identification to development.