August 2006 Insight Newsletter


The Critical Need For Leaders

Did you ever work for a boss who would have been great except for one glaring flaw? Most of us have.

I recall a top executive who one day gave me an assignment and sent me off to spend several millions of dollars to get it done. A few weeks later I ran into another of his reports who said he had just been given the same assignment and was about to start spending money and hiring people. Fortunately I was able to iron things out, but similar incidents of inconsistent behavior by this individual eventually cost the company hundreds of millions of dollars. And ultimately cost him his job.

Meeting The Need Should Be Easier

Developing effective leaders is now easier and pays off in greater value than ever before, yet the gap between the numbers of leaders needed and how many are trained keeps increasing. Even today most leaders are dropped into jobs and left to figure out for themselves how to motivate, guide, coach and maximize the contributions of their operations.

Organizations are flatter, more widely-dispersed, leaner and are composed of more sophisticated jobs. This stretches right down to front-line workers who must resolve complex customer problems that require far more initiative and leadership-style thinking than ever before. With repeated changes in strategies and processes, the need for self-motivated learners and innovative thinkers means that far more staff require leadership-type skills.

A typical organization in the past might have had 5 to 7% of its people in formal management or leadership roles with another 7% of key staff showing significant individual leadership in the way they carried out their jobs, for a total of perhaps 15% of staff needing to show leadership. Today this need has ballooned to 50 to 60% – four times as many – requiring initiative, creative, independent thinking and often broader leadership skills for teams, task forces, joint ventures, research initiatives and organizational responsibilities.

At the same time we have a more educated workforce, capable of learning faster, thinking critically and exercising initiative, whether managing just themselves, providing effective one-on-one customer service or leading others in formal roles.

That should be great news because it means we have the material required to develop the many more leaders we need. Moreover this workforce has been raised to continually seek self-improvement and fulfilling jobs and careers.

Many Challenges Remain

There is a down-side however. With higher salaries, more skills and often more family support than in the past, many are freer to drop out of jobs that offer little challenge or bad bosses. More of them can quit pretty much whenever they like and take their time finding a better, fulfilling job that today’s society encourages them to seek. Although this is most pronounced in developed countries, most nations are finding their educated workers require better leaders to keep them engaged and get maximum productivity.

We know from studies that as many as 70% of employees believe they work for a “toxic” boss and are routinely circulating résumés for which there are far more channels than ever before. As many as 80% in the workforce are said to be “disengaged.” We have all heard the saying that employees do not leave companies they leave poor leaders.

The need, not only for leaders, but better, more effective ones is dramatically higher and so is the payback for companies that excel at developing them. An overview of major stock markets shows companies that do this well can now achieve a total market value averaging as much as four times book value or the original cost of all concrete inputs into the company, which used to be about maximum value for most companies. This extra “intangible value” now represents as much as 75% or more of the value of top-notch organizations. Annual profit advantages of four to 10 times the competition are routinely noted in research. It is estimated that half to two-thirds of this extra value results from the effectiveness of a company’s leaders — not just those at the top, but at every level throughout the organization.

Research Confirms What’s Needed

At the same time we have the knowledge we need to develop leaders effectively. Mounting research affirms the skills effective leaders have reported as critical for generations and places them in context along with what it takes to develop them. The core skills are easier to learn in practical situations than a classroom. In my practice I define and illustrate them as simply as possible – leaders must develop habits of: being positive, being honest, asking what and how continually to develop better creative ideas for solutions, using those ideas to build better habits and finally, developing a habit of keeping all five of these habits or “skills” in balance.

Missing capability in any one of these five critical areas is fatal to effective leadership. Just think of a boss you’ve had who was weak in one of these areas. For instance that senior boss I worked for, who lost money and got himself fired, was very skilled at being positive and a great motivator. He was also very honest about the problems we faced, had great ideas, vision and strategies, but his flaw was tremendous inconsistency. His behavior did not produce reliable habits or skills in his people nor did it follow consistent patterns, but jumped all over the map. As a result all of us were routinely off-balance. That one basic flaw brought down his entire operation.

This individual’s one glaring gap had not turned up in more than 20 reference checks on his background. For most of his career he had worked under a very focused, consistent boss who evidently filled this gap he suffered. With us, as a top leader, no one was there to restrain him. Many such experiences confirmed for me what research shows — that the most effective leadership development comes from coaching and mentoring executives as they rotate through varied, challenging positions. We need to make sure they are tested in a wide variety of challenges. They benefit most from individual development plans and assistance that focus strengths and weaknesses among these seemingly simple five skills that every effective leader needs.

Leaders Develop Leaders

It is truly said that leaders develop leaders. That will occur provided the senior leaders (a) understand that developing others is a significant, perhaps most important, part of their role and (b) they have in turn developed sufficient skill to coach. Building a coaching culture in which every leader learns those skills is essential and unfortunately still rare. It is also highly cost effective because once the culture is established more senior leaders develop up-and-coming juniors as part of their day-to-day work, with little direct cost and considerable leverage in improved profits and value. The burgeoning executive coaching industry provides evidence that more companies are recognizing the need to give their senior executives these skills. But ultimately most of the work must be done in-house by people who understand the need and the tools involved. Guidance helps, but an overall culture is needed.

Similar Opinions

Forbes published the following article by leadership guru, Kevin Cashman, this month (I happen to be quoted in another article on recruiting in the same issue although it isn’t on-line – August 14): Here. This is a topic that won’t go away. We’re at a crossroads when leadership needs are escalating and the nature of what makes leaders effective is dramatically expanding. This is a by-product of the faster-paced, more individualized world in which we live and work – opening great opportunities, but posing equally great challenges.