Sunday, December 5, 2010

You Need a Leadership Capability Portfolio Manager...


So we know that the 2010 IBM Global CEO and CHRO studies identified that both groups believe that leadership and leadership development is important, but 2 of 3 CHROs didn't think their organizations were effective at doing it. Let's start to take a closer look at something that can help change that equation.

Learning can be directed in one of three areas based upon the Unit of Analysis. This is typically focused on individuals or teams, but it can also be at the organizational level. The linkage to today's blog is by taking this same approach in the management of the learning and in this case...focused on an organization's leadership capability.

Disclaimer - I am NOT a financial investments expert. That is why I pay for the service from the pros to help me manage my resources. So what I am about to say is my simplification in terms for today’s blog.

In the financial services sector, it is fairly well known that as individuals we can make investments in a number of different financial instruments like money markets, bonds, stocks, etc. Each of these involves a strategy to maximize the return on investment, but each carries a form of risk. Investment strategies are intended to develop a portfolio of financial instruments that can weather periods of volatility, uncertainty, complexity and ambiguity…like today’s global environment…for both short-term and long-term gains.

Now look at the investment your organization is making in leadership development. As discussed in previous blog posts, it is estimated that within the United States, that over $9.5 billion is invested in making leaders better. However, that investment is typically focused at the individual level. By investing in the individual’s leadership development, it is assumed we will reach a tipping point in the organization that will lead to maximizing the overall organizational leadership capability.

This doesn’t account for risk though. In the current global environment that is volatile, uncertain, complex and ambiguous…the VUCA environment plays havoc with the development of an organization’s overall leadership capability. In order to maximize short-term and long-term investments and returns on leadership development…a different approach is not only recommended, but required…that is portfolio management. Like a mutual fund manager, organizations need someone that can act as the Leadership Capability Portfolio Manager or LCPM.

To do this requires a strategic perspective by understanding the business strategy and the leadership capability needed to execute that strategy…so that is a no brainer. However, we know that most competency models that leadership development programs are based upon are focused on what leadership capability you need now and not building the kinds of leaders you need for future competitive advantage. Additionally, if you take a strengths-based approach to leadership development like me, you know that there are going to be some capabilities within your competency model that no matter how important they are…not everyone is or will be a 5 (On a 1-5 scale) in every competency. The law of diminishing returns kicks in and increased investment in developing a tactical execution focused leader into a strategic vision leader will be wasted.

Now enter the realm of the LCPM…Because this person or group in your organization understands the business strategy, HR/HC strategy, leadership competency model, future leadership needs to execute, etc. your team is better positioned to manage for risk in the leadership pipeline and make targeted investments in areas where more risk can be taken or areas where less risk is advisable. This approach also allows you to manage individuals as a true capability. For example, if you know that the business will need frontline leaders that are collaborative and with high emotional intelligence in the next 2-3 years and reduced change management because your future looks stable (OK…this is probably WAY unrealistic)…then you can afford to “divest” change management investment in the leadership development program in order to “invest” in more leader capability in collaboration and emotional intelligence.

Taking this approach shows a direct understanding of the business and future HR/HC needs o enable its continued success AND a prudent approach to human capital investment. So the only thing left is one question…

How are you managing your leadership pipeline?


Twitter: JKeithDunbar
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  1. Very interesting post. It seems to me that not only does this strategic perspective make perfect sense, but that it should be supported with development efforts that help leaders grow in areas identified by the organziation as key competencies. The balance between the two should yield true results over time.

  2. Hi Jay...

    Perceptive insight from you. You still help people and teams as individuals, but you manage that portfolio to enable the right set of organizational leadership capabilities. Where you can't take increased risk, like strategic planning maybe, you adjust your investments in money, time, etc, to help individuals in a more targeted mindset because you want to increase the organizational leadership capability in that competency.

    Definitely a more strategic view, because as the Leadership Capability Porrtfolio Manager, you have to have an eye to the long-term future you need to enable and the right mix of leadership capabilities to enable that future.

    Thanks for the comments...