Report of the NACD Blue Ribbon Commission on Talent Development

Why Talent Is a Critical Issue  

From the board’s perspective—and the investor’s—few things in business are more rewarding than the execution of a winning strategy by a successful executive team. Having the right leadership in place to drive strategy, manage risk, and create long-term value is essential to an enterprise.  

Far less obvious, however, is what it takes to find, groom, and retain the talent that is required—at the top and down through the ranks—to keep the company on track. This is particularly true in a business environment that continues to grow more complex, unpredictable, globalized, and competitive by the day.  

Clearly, the talent management challenge goes well beyond CEO succession. Do the company’s talent development efforts support its strategy and fit its risk profile? Is there a clear view of management’s bench strength—and any gaps in the pipeline—in critical areas of the business? Does the company understand what its talent needs will be in three years—or five years—in a landscape that may look very different from today’s?  

The reasons to move talent risk and development higher on board agendas are difficult to ignore: 

• The gap between talent needs and talent resources—particularly in light of how globalization, digitization, and demographic shifts are reshaping business—continues to widen. 
• Studies clearly point to higher success rates for CEOs recruited from within the organization, yet, designing talent development and compensation programs that effectively nurture and retain home-grown talent is a major challenge for most companies.  
• Human capital can represent half—or more—of a company’s operating costs. 
• The pool of experienced senior management and executives has begun to shrink (reversing a decades-long expansion). 

This 2013 report draws on the experiences and insights of our Blue Ribbon Commission members and research from the National Association of Corporate Directors (NACD), as well as the thoughtful work and writings of others in the business, human resources (HR), and governance arenas. With a focus on the board’s responsibility to help ensure that the company is appropriately developing talent to meet expected future needs, this report addresses:  

• The role of the board and its standing committees in overseeing talent development and retention.  
• Elements of an effective talent development program— from hiring philosophy, sourcing, and onboarding, to the role of HR and business units.  
• Ongoing assessment and reporting on the company’s talent development efforts.  
• CEO and C-level succession—the culmination of an effective talent pipeline. 

These and other key elements are highlighted throughout—and at the end of—this report in the Ten Imperatives for Effective Oversight of Talent Development Programs.  

Of course, no single approach will fit every organization, but we believe that this report can help boards and committees better understand their roles in helping to guide the company’s efforts to find and develop the talent it needs to stay competitive and build long-term value. As one of our commissioners noted: “Success cannot happen without the right talent.”  

Our hope is that this report will inspire and promote more robust discussions in the boardroom aimed at ensuring that the company has the talent it needs—on point and on deck—to make success happen.