Maximizing Returns on Leadership...Competencies That Drive Growth

Greetings,

Many of us are looking for the magic answer to propelling our organization's business strategy. While we all recognize the importance of leadership and talent to that endeavor, we sometimes struggle to identify what we need to do to execute business strategy.

Research by the Corporate Leadership Council titled "Improving Returns on Leadership Investments" identified three places to focus on improving returns. This included:

1. Disconnected Strategy: Leadership Strategy is Not Integrated with Business Strategy
2. Misaligned Outcomes: Leadership Outcomes and Metrics Are Not Connected with Business Outcomes
3. Uncoordinated HR Activities: Leadership Activities are Not Integrated with Other HR Activities

At a high level...these are excellent approaches to improving returns on investment in leadership development activities. I have leveraged these approaches and still believe in their benefits in my new organization. These also align well with the Center for Creative Leadership's think piece on "Developing a Leadership Strategy."

Yet...while these high level pieces help align our thoughts...we have been missing something. What depth and breadth of leadership we need to drive growth?

Enter an interesting study from McKinsey&Company and Egon Zehnder, an executive search and consulting firm, titled "Return on Leadership - Competencies That Drive Growth." In the think piece, McKinsey and Egon Zehnder attempt to answer the following questions...

"There is little doubt that leadership quality is a key determinant of a company’s growth, but the specifics are frustratingly elusive. What matters more – analytics or people leadership? Is growth driven by a small group of stars or a broad leadership cadre? Should executives conform to one corporate leadership profile, or does diversity deliver faster growth?"

Leveraging McKinsey’s Granularity of Growth data from an extensive analysis of more than 750 leading companies worldwide and Egon Zehnder's leadership competency data in it's management appraisals, the report is able to identify areas of leadership development focus.

When companies in the bottom 25% and top 25% are compared against each other, those leaders in the top 25% are more highly rated in leadership competencies.

Specific areas from the think piece draw conclusions that are extremely relevant...

What this means is that companies can build leadership excellence in only a few selected competencies – and even then, this requires considerable time and investment. The companies with executives that excel at the competencies most relevant for growth therefore enjoy a significant competitive advantage that is difficult for others to replicate.

To generate growth, all companies need to build a critical mass of excellent leaders. Setting the bar high does not suffice but must be complemented with adaptations of business systems, talent management processes and high-impact capability building. Hence, companies should:

- ƒƒ Sharpen leadership development, by defining required competencies and skill levels for each job family and hierarchy level; anchoring critical competencies in all talent management processes, including recruiting, deployment, and assessment; and providing targeted support for the transition between senior management and top team roles given their differing skill sets.

-ƒƒ Innovate competency building, by building a “competency factory” to focus existing business processes and talent management practices on critical competencies; using “field and forum” approaches and “action learning” for sustainable change; and embedding leadership development in the company’s talent culture.

ƒ-ƒ Develop and promote “spiky” leaders by assessing the competency spikes of the current leadership team and talent bench; review the company’s existing leadership model and talent management practices for tolerance of spikes; and adapt the leadership model, talent practices, and internal communication to recognize the value added by the more unusual profiles. In addition, the utmost importance should be given to the composition of top and senior management teams. Our findings call for diverse teams with individuals of complementary leadership spikes.



These kinds of think pieces continue to point to the overall importance of leadership to organizational performance and success...but this starts to quantify in ways that can be explained to leaders in companies to drive investment decisions.

Cheers,
Keith

J. Keith Dunbar is a Global Talent Management Leader...Creator of Talent, Leadership Capability, and Culture Change...He can be found connecting and sharing knowledge on Google+, Twitter and LinkedIn.

Twitter: JKeithDunbar
LinkedIn: J. Keith Dunbar
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Blog: DNA of Human Capital

The opinions or views expressed here are mine alone and do not represent the views of the SAIC.