Bridge over ocean
1 August 2015 CFA Institute Journal Review

Building Healthy Leadership Pipelines (Digest Summary)

  1. Marc L. Ross, CFA

Successful organizational leadership transcends the accomplishments of one person. Management needs to maintain a deep bench of talent to ensure a company’s future prosperity.

What’s Inside?

Leadership development is critical to the long-term viability of an organization. Existing leadership needs to consider ways to ensure a succession of leadership to preserve and perpetuate an organization’s achievements.

How Is This Article Useful to Practitioners?

Just as oil producers need to think about effective ways to distribute their product to the end user, existing organizational leadership needs to plan for competent successors to ensure the organization’s growth and prosperity. Building a leadership pipeline requires a commitment of time, attention, and money. Development of effective future leadership in the present offers peace of mind to current management, allowing it to focus on the immediate tasks at hand. Such planning is important to key stakeholders in an organization, such as shareholders, directors, employees, and clients.

The process is threefold. As a first step, current management needs to identify and nurture employees who have the greatest leadership potential. These individuals should display exceptional competence, character, and commitment. Character may be less easily measurable, but a lack of it can lead to self-serving and unethical behavior that puts a company at risk. The second step in the process involves pushing high achievers beyond their comfort zones. Learning through adversity develops skills, whereas micromanagement can suppress them. Finally, organizational investment in leadership helps strengthen competencies and commitment in those candidates identified as future leaders. Executive development through coaching and mentorship is a prime example.

When management engages in this process, it not only builds its pipeline but also identifies itself to those candidates whose professional development it has taken an interest in. Those chosen few value management’s commitment to them and, in turn, redouble their efforts to excel and advance.

The author’s observations apply to any organization. Effective leadership for the future entails commitment and investment in the present.

Abstractor’s Viewpoint

Effective and committed leadership is an organization’s most critical asset. Investment in high-achieving employees helps to ensure future success by retaining talent. Through this process, existing management recognizes and develops future leaders. In response, those individuals enjoy the recognition and take advantage of management’s investment in them. Failure to cultivate a leadership pipeline will imperil an organization’s long-term success.

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