Survey Identifies Key Business Challenges for Line Execs, HR & OD

Business leaders in the 21st century are faced with daunting, complex and unrelenting challenges as never before. In the highly competitive global landscape, these executives are challenged to simultaneously identify new opportunities for growth and innovation, remain agile and responsive, all while leading their organizations with regard to six key business challenges:

1. Supporting globalization and multiculturalism
2. Developing productive, performance-based work environments
3. Building organizational capabilities to fulfill future needs
4. Accommodating new and ever-changing forms of regulation
5. Leveraging and integrating new technologies to support the business
6. Meeting increasing expectations for socially responsible and sustainable business practices

These six challenges were identified in a research piece authored by Lilian Abrams, fellow WJM Faculty member Carolyn Ott and myself (“Assessing the Field of Organizational Development”, Journal of Applied Behavioral Science, Vol. 40 (4), December 2004).
To further our understanding of business leaders’ priorities for the 21st century, and where they are most in need of support in confronting the new realities before being overwhelmed by them, several colleagues and I recently conducted a survey of leaders in

both the for-profit and non-profit sectors. Entitled “Leading in the 21st Century,” the study gets to the heart of those key issues that can differentiate successful organizations from all the rest. It identifies the most critical organizational capabilities, as seen through the eyes of senior executive business leaders, as well as the most significant performance gaps in how well these are currently being performed.

Our research also points to the strengths and areas for improvement where Human Resources (HR), Organization Development (OD), line management, and external consulting firms are wanted, needed, and expected to play a critical role in support of the organization – and where these resources may be falling short of expectations. Specifically, the findings:

• Provide insights into those business challenges that HR, OD and consulting firms can help business leaders to address;
• Create a roadmap for helping HR, OD and consulting firms become more value-added strategic business partners; and
• Help HR and OD practitioners make more effective contributions to their organizations by focusing their energies on those areas with the highest priority and the largest performance gaps.

We administered the survey via the Internet to a cross-section of Fortune 1000 business leaders. Of the 235 total respondents, 120 were in the for-profit sector and 115 in the non-profit sector. In the for-profit sector, fifty-nine percent were executives and 32% middle management. There was a good representation of companies across a wide spectrum of industries, with the highest percentages in manufacturing, hi-tech, financial services, pharmaceutical, and consumer products. Organizations ranged from very large ($25 billion plus annual sales) to small (under $25 million annual sales). Respondents were mostly U.S. based with some non-US based companies also participating. The companies also were spread across all categories of company life cycles: from new ventures to prime to declining and revitalization. Respondents were most often in general management, with a few in other functional areas, such as human resources, finance, legal, and research and development.

Urgent and High-Priority Areas

The survey focused on 17 questions based on the six key business challenges listed above. For each of these questions (e.g., “Aligning and executing strategies in a way that meets financial goals and are consistent with core values”), leaders were asked the importance to their organization and the effectiveness of their organization’s performance in this key area.

The survey validated the six key business challenges, and showed that all 17 items were “important” or “very important.” However, the effectiveness scores were considerably lower, indicating that business leaders were not satisfied with their organization’s performance in most of the areas cited.

• For example, “effectively addressing organizational culture during organizational realignments, industry consolidations and mergers and acquisitions (M&As)” was considered very important, but not very effective.
• “Building leadership capacity for now and the future” was also considered very important, but not very effective.
• These two areas have the largest gaps and are viewed as the most urgent areas to focus on.
• Interestingly, for the group as a whole, there was only one item that was perceived to be a strength (i.e., participants said it had both high importance and high effectiveness): “Ensuring accountability for business ethics among employees at all levels.”
• The area that was the biggest overall weakness: “Solving organizational problems systemically as opposed to solving them on a piecemeal basis.”

Too Little, Too Late?

Extensive comments from the business leaders add color and texture to the numerical scores.

For example, regarding the urgent need to address organizational culture during realignments, industry consolidations and mergers and acquisitions, business leaders felt that while these events are “windows of opportunity to revisit and renew a commitment to organizational culture,” typically it was the “weakest link,” and “too little, too late.”

Regarding the critical importance of building leadership capacity for now and the future, leaders cited challenges around internal philosophies and practices around “growing your own,” and cited much need for additional work on succession strategies and succession planning.

Sources of Support

For each of the key themes and related items, business leaders were asked “To whom do you or would you most likely turn for support?” The survey revealed some extremely interesting patterns with far reaching implications for human resources, organization development, line management, and external consulting firms.

For example, regarding “positioning industry consolidation, M&A, and strategic alignment for success from a cultural perspective,” business leaders turn to line management first, consulting firms second, HR third, and OD fourth.

When “building leadership capacity for now and the future,” business leaders turn to HR first, and line management second for identifying, attracting, developing and retaining leadership talent. But they turn to line management primarily to foster leadership courage, decision making and problem solving.

Similarly, with regard to building a performance culture, they turn to line management first, HR second, and OD third for “enhancing workplace, productivity and performance culture” and “fostering employee engagement and commitment.”

Plans to Grow Organization Development

Only 36% of the for-profit respondents had a distinct OD department, and of those who did, it most often reported into HR.

Despite, or possibly because of their dissatisfaction with the current effectiveness, fully 63% of the respondents said they were either very likely or somewhat likely to invest in OD over the next three years. Over 90% said they planned to invest more (39%) or about the same (54%) as in 2004.

Implications for Human Resources

Business leaders across a wide swath of industries see increasing opportunity for HR and OD related work that is critical to the future of the business.

At the same time it should be noted that they often turn to line management first for these services.

Since there is considerable room for improvement in the effectiveness of organizations in areas that business leaders consider very important, this is a call for action by business leaders and line managers for OD and HR practitioners to step up to the plate and help close the gaps that are identified in this study.

Jeana Wirtenberg, Ph.D. is a member of WJM Associates’ organizational effectiveness faculty. For a summary of this study, please contact [email protected].