Shrinkflation and executives: the danger of "saving" on leadership capability

Shrinkflation is a term that has gained significant relevance in recent times. It refers to the practice of reducing the size or quantity of a product without changing its price, a strategy companies use to cope with rising costs without consumers easily noticing. However, with a bit of creative license, this concept isn’t limited to consumer products; it can also be applied, with serious consequences, to organizational structures.

When a company reduces its investment in executive talent, expecting the same results with fewer resources, it faces a corporate version of shrinkflation. This approach involves diminishing the strategic and operational capabilities of its leaders without an immediate visible adjustment, but with long-term effects that are strongly felt.

Executive talent: the "product" that cannot be downsized

While shrinkflation may go unnoticed in consumer products, in talent management, it has far more visible consequences. Reducing the quality or quantity of leadership within a company directly impacts its ability to remain competitive in both local and global markets. Executives do more than just make decisions; they shape the culture, vision, and adaptability of the organization.

When companies cut back on their investment in high-quality talent, expecting to achieve the same results with less, they compromise their agility and ability to respond to market challenges

Impact of reducing executive talent on competitiveness

1. Reduction in strategic decision-making: A leadership team limited in experience or capability is less able to make agile and strategic decisions. This can lead to delayed responses to market changes and missed business opportunities.
2. Demotivation and talent loss: A strong executive team not only leads but also inspires and retains talent within the organization. Reducing the quality of leadership increases the risk of losing key individuals, creating gaps in critical competencies.
3. Lower innovation capacity: Companies that do not invest in leaders with a long-term vision risk losing their ability to innovate and stay ahead of the competition. Innovation is not just about generating ideas but also about having executives who can effectively drive their implementation.
4. Lack of adaptability to change: In dynamic environments, organizations must be agile to adapt to new circumstances. Reducing leadership capacity limits the company’s flexibility and increases the likelihood of operational errors that could jeopardize its future.
   
   

Avoiding shrinkflation in talent management

To prevent the negative effects of "talent shrinkflation," companies should:

• Invest in the recruitment and development of high-level leaders with a clear vision and execution capabilities.
• Conduct regular assessments of the executive team to identify areas for improvement and ensure that leadership is aligned with strategic objectives.
• Avoid short-term cuts in executive talent acquisition, which can lead to much more costly consequences in the long run.
  
  

At Servitalent, we specialize in executive search and talent assessment for key positions. Using tools like Steelter, we objectively evaluate the skills and values of candidates to ensure that companies bring on board the best leaders—those who guarantee a positive impact on the organization's competitiveness and sustainability.

While shrinkflation is a widely discussed consumer practice, when this concept is applied to the business world, specifically in the realm of talent, the risks are immense. Reducing leadership capacity not only impacts the company's daily operations but also compromises its ability to grow and adapt. Having a strong and well-selected executive team is crucial to facing market challenges.

At Servitalent, we are committed to helping companies avoid this type of "shrinkflation", ensuring that every leader who joins the organization adds true value and capability

Are you concerned that cutting back on your investment in leadership could impact your company?