By Daniel Hunter

CEOs, presidents and chairmen from the world’s leading companies have identified developing and engaging human capital, achieving operational excellence, and increasing innovation as the top three challenges facing them in 2013, according to new Conference Board research conducted in partnership with the Chartered Management Institute (CMI) in the UK.

The CEO Challenge 2013 report shows that business leaders in cities including London, New York and Shanghai agree that in an environment of slow economic growth, continuous improvement of internal capabilities is a prerequisite for survival. Human capital was named the number-one challenge in both Asia and Europe.

In Europe, it rose dramatically from seventh place in last year’s edition of the annual survey. The 700 leaders surveyed identified strategies including growing talent internally, providing employee training and development and improving employee engagement as ways of improving and nurturing human capital.

Despite this strong people focus, improving leadership development programmes, which was ranked the second most important strategy for tackling human capital challenges in 2012, drops to tenth in the current survey. This has prompted CMI to warn leaders that neglecting to improve their management and leadership capacity risks undermining one of the most powerful methods they have for meeting these challenges.

“Faced by tough market conditions, it is encouraging to see businesses focusing more on building their human capital," CMI’s Director of Strategy and External Affairs, Petra Wilton, said.

"Businesses are also right to seek to grow the talents of their employees at all levels in the organisation. However, the view of CEO’s that leadership development is a lower priority is of significant concern.

“There is a real risk that business leaders overlook one of the most critical aspects of the strategies they are trying to implement, which is the role of their managers. For example, the line manager relationship has been identified as the single most important factor in determining levels of employee engagement.

“What’s more, there is evidence that improving management and leadership can boost levels of business performance by as much as 23%*, which could make the difference between survival and failure in tough markets. Failing to see management development as a key strategy to develop and engage employees could be making a costly mistake.”

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