Wednesday January 2, 2013
Leadership is not just some nice-to-have, soft-stuff - it is a key driver of organisational performance in the areas that really matter
Extracted from Talking HR with Graeme Field, Star Biz.
How do you think most company leaders CEOs or boards would answer the question: “If you could have just one wish a major improvement for your company what would it be?”
The obvious answers are top-line growth, bottom-line growth, very satisfied and loyal customers, engaged and productive staff, and so on.
Everything on this list would be a great thing for any company or organisation to have - and everything can be obtained. All it takes is for you to have the right leaders for your organisation.
Sound simple is that too bold a claim? It is a bold claim; however, we have the data to back up the claim.
Over the last two years we have gathered information on leaders in Asia have and how they impact their organisation's performance.
We call the leadership requirements for winning over the next 12 years of difficult growth Smart Growth Leadership. Some of the countries that have been covered in our leadership research include India, Singapore, Malaysia and China.
But let's start with some macro-economics. Everyone knows that Asia, in particular, has had some spectacular growth over the previous 10 to 15 years - some countries, like China, have even managed double-digit growth.
Over the last 12 years average growth in Asia's economies was nearly 10%. For the same period, the developed economies managed an average growth of about 4%. However, the Conference Board Global Economic Outlook in 2012 predicts that the average growth in Asia over the next 12 years will be around 4%-5% and the average growth in the developed economies will be less than 2%.
So, if we didn't know before, we now know that business is not so easy at the moment and it is going to get tougher. Somehow it is not so difficult to lead' your organisation when the global economy and your country's economy are doing well. During that time, growing the top and bottom lines can be relatively' easy. If you haven't done as well as you should have over this period, then you need to think very carefully about how you will win' over the next decade.
By leadership' we normally refer to the CEO, their senior executive team and that team's direct reports.
Generally this group of around 40 people lead large teams within their organisation and can really influence how things are done. Of course, the leadership team' can be defined in many different ways according to the structure and needs of the organisation.
So, does leadership of the organisation' really make that much difference?
Well, let's look at some recent research that throws some light on this subject. According to the Global Leadership Forecast in 2011,organisations with the highest quality leaders are 13 times more likely to outperform their competition in key bottom line metrics such as financial performance, quality, employee engagement and customer satisfaction.
Here we can see that leadership is not just some nice-to-have, soft-stuff' - it is a key driver of organisational performance in the areas that really matter!
However, in their 2011 study, Bersin and Associates found that “more than half of organisations state that their business is being held back by a lack of leadership talent”
BCG reported in July 2012 that companies that are highly capable in 22 key HR topics consistently enjoy better economic performance than those less capable companies. The more capable companies enjoyed up to 3.5 times the revenue growth and as much as 2.1 times the average profit margin than the less capable companies.
Many of the 22 key HR topics' are directly related to leadership as you would expect.
Again, the leadership characteristics drive the major financial measures of both the top and bottom line!
In 2012, the Conference Board asked CEOs around the globe, what they thought their major challenges would be over the next few years. Interestingly, the top concern for CEOs was Innovation' with its emphasis on leaders' ability to inspire the creation of the new and different' keeping their companies ahead of the curve with the competition struggling to keep up.
This was followed closely by Human Capital' with its implications for leadership at the top and its impact on attracting, retaining, developing and inspiring performance of the talent of the organisation.
These recent studies truly emphasize the importance of effective leadership in driving key financial measures of organisational performance. They take leadership out of the warm and fuzzy' arena and place it front and centre' as the key dimension that will differentiate the winners from the losers over the next decade as we grapple with Smart Leadership Growth!
Around the region, the question that on the minds of many CEOs at the moment is “How can I develop my leaders to be more Smart?”
The answer is both very easy and very difficult! First, organisations need to define what they mean by leadership. Given that there are more books written on the topic of leadership than there are on all other business topics combined this may not be as easy as it seems.
Every organisation should have a different view of leadership and what it means to them - some slight nuances, something that they particularly want to emphasise, an element that they believe will give them an edge in a competitive world.
Once defined, an organisation can then take stock' and see what it has on hand, it can determine who has the right stuff', who is never going to have the right stuff' and who can be developed to have the right stuff'! The organisation can also bring new people on-board who already have enough of the right stuff' by making sure that their recruitment practices emphasise their already-defined leadership competencies.
Lombardo and Eichinger make the point in The Leadership Machine' that organisations need to get rid of those who can't and will never perform in the desired way, recruit those who can and already do, and develop those who can be developed! Stated another way, Jim Collins said in Good to Great' - “get the right people on the bus and the wrong people off the bus, get the right people in the right seats and then figure out where to dive the bus”
Leadership development programs can then be developed that will reflect the desired leadership competencies and characteristics of the organisation. Contextualising the nature of leadership for each organisation is the first and most important step in any successful leadership development program. Put simply, if the Leadership Development program doesn't reflect your own particular leadership requirements then you will never achieve what you want to achieve.
As the Cheshire cat said to Alice as she wandered through Wonderland “if you don't know where you want to go, then you can take any direction you like, because it won't make any difference...”
The leaders need to get good feedback about their performance against the organisation's requirements, have the ability to write meaningful development plans and then receive coaching that will enable them to develop and grow.
The feedback can come from a number of sources 360 degree reviews against the leadership requirements are a terrific source of actionable data, psychometrics can be targeted to the specific requirements, coach/mentor observations can be a powerful motivator for change, performance reviews might give some insights. Writing great development plans is an easily acquired skill.
Unfortunately the quality of internal coaching (from the individual's direct manager, for example) is often not at very high standard (that's why we like to start at the top!) and we find that we are building an element of external coaching into more of our leadership development programs these days.
Continual feedback and encouragement through effective coaching is a key to successful behaviour change! In sum, what does a great leadership development program look like? Well, let's leave that discussion for a future column. So, here's to a very happy and leadership-led - prosperous New Year!
Dr Graeme Field is a principal consultant and head of the leadership and talent consulting team, based in Korn/Ferry International's Kuala Lumpur office. He believes that managerial courage - taking bold and courageous decisions for the overall good of a business - will need much greater use in the future if businesses are to survive and be competitive.