Leadership At Scale: Better leadership, better results

The short answer is that you need a bit of both, and it depends on context. But if we had to choose, we would incline toward a top-down approach – focused on what we call pivotal influencers – that is selective and deep. This is simply because leadership includes role-modelling, and pivotal influencers have a disproportionate influence on the behaviours of others in the organization, due to their role, a trusted relationship, or character. Pivotal influencers role-model the behaviour they want to encourage in others and the behaviour trickles down. The top 100 (N, N-1, N-2 and pivotal influencers) can reach 100,000. Coupled with a selective leadership development intervention should be a tailored leadership model at all levels, system embedment, and a culture of on-the-job development so that all employees know what good leadership looks like and receive on the job apprenticeship, even if they do not go through a formal leadership development intervention.

In addition to the pivotal influencers, when thinking about broad vs. deep interventions, it is worth focusing on the pivotal roles that will deliver the strategy most faithfully. For a consumer-focused strategy in an FMCG organization, for example, those who lead sales, customer-care and marketing might be prominent; in a healthcare provider focused on research, those who lead in innovation, R&D and clinical trials might be more to the fore.

When in doubt, focus on the hierarchy and the critical roles, with a clear expectation that role-modelling and influence will spread the leadership mindsets and behaviours throughout the organization. You should be able to answer these three questions:

• Who is critical? All leadership development programmes should start with a strategic alignment. Are there certain audiences or segments within the organization that are critical to executing elements of the strategy? Are there gaps in certain segments that are making it difficult to advance the CEO’s agenda?

• What has been done before? Ask about previous investments in leadership development. Explore whether it makes sense to continue investing in those areas. Do a Start/Stop/Continue analysis of existing or legacy programmes, and then compare these with new solutions.

• How does this balance initial investment vs. shelf-life vs. reach over time? Another way of thinking about broad vs. deep is to determine where there is a strong case for a sustainable programme for a critical mass of leaders. It may be that initially a programme will start out as a discreet piece of work with selected leaders, but will in due course evolve into a wider enterprise. One can think of a 2 × 2 matrix, selective vs. broad penetration on one axis, and shallow vs. deep immersion to the programme on another. To adequately shift the organizational context and culture, a critical mass of the leaders need to be reached at a deep level. This implies a move towards the top right hand quadrant of the matrix, towards sufficient depth and breadth.

In reality, this depends on the objective that you want to achieve. There are two imperatives to consider: first, if you intend predominantly to strengthen individual leadership capabilities and collaboration across the organization, then the composition of the cohort matters little. Second, if you want collective changes in behaviour and especially behaviours that rely on a team, then keeping teams intact is better.

Mixed cohorts tend to be oriented towards individual development; they create a safer space for reflection, peer coaching, and sharing. In addition, if the cohort is properly recruited and the programme design appropriate, there can be a positive effect across the organization in terms of breaking down silos and fostering cross-entity networks and collaboration. Cohort members are able to meet others from outside their departments and gain an appreciation of others’ work, and there may well be a continuation of this ‘cohort effect’ long after the programme formally closes. To put it into numbers, a programme with a mixed cohort of 20 participants can help strengthen 380 individual one-to-one connections; with five cohorts (to reach the top 100) this makes 1,900 connections in total. If an organization is able to strengthen the individual connections across all top 100 at the same time (for example, through a ‘Top 100’ event), the number of unique connections reached is almost ten thousand.

Single-team cohorts tend to be more task- and team- focused, and (as in the instance of a professional sports team) become high-performing units. In a single-team cohort, roles can be clarified and team dynamics explored; team development can take place (the literature of team development is extensive).¹

In practice, we find that a combination of both individual and team-based leadership development has the biggest effect. While we often design programmes with mixed cohorts, we recommend supplementing them with dedicated (shorter) sessions for the top 10-20 teams in the organization.

Most organizations have a range of what we might call engagement levels among employees. In our experience, there are four main employee groups in terms of engagement during a transformation or leadership development intervention.²

• Around 20 per cent are active and engaged leaders, with high levels of influence/energy, and high degree of excitement for the change: these people will contribute to the success of the leadership development programme.

• Around 50 per cent are contented followers, with low levels of influence/energy, and high degree of excitement for the change: these people understand and support the importance of the programme, but may not have the capacity or facility to contribute.

• Around 20 per cent are passive observers, with low levels of influence/energy, and low degree of excitement for the change: these people are unaware of the intent or rationale of the programme or are married to the past, and are essentially disengaged.

• Around 10 per cent are active antagonists or saboteurs, with high levels of influence/energy and low degrees of excitement for the change: these people, like mutineers on a ship, are actively antipathetic to the programme, for historical, personal or narrow professional reasons.

How, then, should each group be addressed? The key is to tailor the approach to each group. The first group, the active leaders, can be trusted to take on roles as mentors, sponsors and coaches of participants, and can play a role as faculty in the programmes. They should be assigned pivotal leadership positions and be engaged as initiative leaders; in fact, the more this group is stretched, the better.

The second group, the contented followers, needs to understand the aims of the programme and to be informed and trained (where they are part of it); ideally, they should have the skills necessary to work on relevant initiatives with the first group, and a portion of this group could also go on a leadership development journey.

The third group, the passive observers, simply needs to be informed. This includes communicating aspirations and success stories of the intervention, and ensuring linkages to the teams/leaders driving the change.

The fourth group, the antagonists, needs to be swiftly confronted and converted to a supporter; if that doesn’t work, the antagonists should be re-deployed within the organization to minimize negative impact, or fired. Our research shows that the number one regret of change leaders is not moving faster to neutralize people resistant to change. We find, however, that about 50 per cent of antagonists can be converted, and they can become some of the most powerful symbols of positive change in the organization due to their high degree of influence. Organizations must carefully monitor potential converts from the very beginning, and continue to involve them as thought leaders and change agents once they are converted.

We often ask CEOs how many people they think will not make – or may even resist – the required change during a transformation, and the response is typically around 30 per cent. In our experience, however, this number can be reduced to five to ten per cent if the change programme is managed well.

In essence, parts of the organization will often be left behind. In fact, organizations with strong cultures find that employee fit becomes increasingly binary.³ What is key during a leadership development intervention is that organizations map out the different groupings and tailor interventions to each one.

Leadership is a phenomenon that we observe in all species that have some form of a brain and social activity. For instance, bees – an eighteenth-century model for social interaction⁴ – have a queen bee; anthropological studies of primates, from Robert Yerkes in the 1930s through Jane Goodall in the 1970s to Robin Dunbar in the 2000s, show that primate groups have alpha leaders and optimal sizes.

More specifically for organizations, whenever and wherever groups gather to achieve an aim (by means of a commercial, governmental, charitable or voluntary entity), those groups need to be led. And some groups performing the same task will do better than others (faster, more efficient, more thorough etc.). All performance can be enhanced through improved leadership, irrespective of the size of the group or organization.

In small and medium-sized enterprises (SMEs), leadership development tends to match the growth of the organization itself. As it grows, so too do its requirements for leadership; in a seminal article, Larry Greiner mapped out five phases of company lifecycle, each of which require different types of leadership behaviours for success (these were amended to six phases of the ‘Greiner Growth Curve’ in 1998).⁵

SMEs should thus also focus on developing their leaders, and not fall into the trap of delaying leadership development until reaching a certain size. This is particularly true in phases of rapid growth, when demands on leaders not only change but multiply as more staff need to be lead and managed.

As we discussed in Core Principle 1, we find that organizational health is often a useful primary lens (in conjunction with secondary, organization-specific lenses) when identifying the key leadership behaviours for an organization. We work with numerous multi-asset organizations and family owned businesses, where individual entities sometimes have as little as a few hundred employees. For these smaller entities, health continues to be relevant and the four core principles of leadership development remain the same as for larger organizations, even when budgets are more restrictive (see also next FAQ).

We discussed in Question 1 that it is typically advisable to concentrate leadership develop spend higher up, if forced to prioritize. In reality, too, we often also see leadership development budgets per employee decline the lower you go in an organization. Leadership development interventions at lower levels of the organization must therefore fit into these boundary conditions. What is key is that the four core principles are adhered to – something which can be achieved through pragmatic and crafty design and rollout, despite budgetary constraints.

Core Principle 1 continues to be highly relevant at all organizational levels. Leadership development interventions should always focus on the critical shifts that are most important to the performance objectives of the organizational entity at hand, regardless of whether this is a business unit or an individual team. Leaders with a limited training budget can draw on the research and methodology presented in this book to pinpoint the behaviours, skills, and mindsets to develop.

On the contrary, it is not advisable to give employees a ‘training catalogue’ and budget to pick courses, unless these courses reflect organizational performance priorities. With regard to content, what we often see lower down in the organization is that leadership development begins to include more and more functional and technical skills, in addition to leadership skills, as these are often required to help individuals be better at their day-to-day jobs.

Core Principle 2 states that a critical mass of leaders must be engaged in order to reach a tipping point in the organization towards behavioural change. At lower levels in the organization, the same rule applies. A more limited budget can mean a greater emphasis on technology, internal facilitators, and even managers and peers playing the role of coach/facilitator in order to reach sufficient scale. Massive Open Online Courses (MOOCs), for example, are an effective way to do leadership development at scale. Similarly, some organizations invest in development of tailored online learning courses, which can then be utilized at a marginal cost of close to zero. The advantage of rolling leadership development interventions lower down in the organization is that the efforts are often more intimate and it is easier to assemble colleagues for shorter on-site sessions. In some instances where a middle manager wants to roll out leadership development for their team, everyone could end up gaining access to the programme, which then has more impact than if the programme was only for 5–15 per cent.

Core Principle 3 emphasizes the need for a holistic approach to leadership development grounded in neuroscience. It posits a field, forum and coaching approach, as well as the principles of ensuring there is a positive context, a focus is on further developing strengths, stretch, and self-directed learning. These principles should continue to be adhered to at all levels of the organization. For example, a front-line leadership development programme administered by a team leader should include structured forums (for example, by organizational leaders or peer knowledge sharing sessions), on the job apprenticeship, and coaching and mentoring. In addition, each individual should take charge of their own development journeys, develop individual development plans that focus on their strengths and stretch them.

Core Principle 4 posits that the leadership development effort should be embedded in the broader system to support and perpetuate the desired behaviours. For lower levels of the organization, this is equally important. For example, individual employees need to see their managers role-modelling the desired behaviours, they must have the conviction to change, the HR systems should incentivize them to make the shift, and the organization structure, processes and authority rights should support them. Some of these elements can perhaps be more challenging for an individual manager to influence, but it remains key to ensure that there is alignment regarding the leadership effort further up in the organization, and that it is not conducted in a vacuum, away from other organization culture and leadership efforts.

A general entry-level programme at level 3 might be inexpensive to run using a digital platform or online learning. A large European healthcare organization delivered online level 3 leadership training for 30,000 staff (and all new staff) but at the same time had only 100 level 1 Graduate Management Trainees. Military organizations spend heavily on initial training and initial officer training to ensure basic minimum standards; commercial organizations tend to spend more heavily on staff in mid and later career to ensure best practice.

Industry context is always important: different sectors will entail certain strategic goals that will, in turn, produce specific leadership models. For example, a telecoms organization could differ from a utilities or a professional services organization. Equally the governmental (or public-service) versions of those sector organizations will differ again: utilities regulators of professional services bodies run by governments will each have something of their sector and something of their origins in their strategic plan.

We stated in Core Principle 1 that we often adopt health as the primary lens when examining and developing an organization’s leadership, as we find that health cuts across industries, geographies, and organizational size. However, we also mentioned that the organizational health index has four ‘recipes’, made up of a coherent set of management practices that complement one another.

Organizations that strongly align to one of the four organizational health recipes are five times more likely to have top quartile health than organizations that only have weak alignment.⁶ There are dominant recipes in every industry, so organizations have a strong starting point about where to focus their energy if we apply a ‘recipe lens’ to mirror the industry context. For example, B2C and consumer companies often follow a ‘Market Shaper Recipe’, where they gain a competitive advantage by innovating at all levels and executing quickly based on deep understanding of both customers and competitors. Some of the top practices they should focus on are capturing external ideas, customer focus, competitive insights, top down innovation, role clarity, and business partnerships.

Organizations should see their industry and strategy in terms of the health and Market Shaper Recipe. A multi-perspective approach will then lead to a more tailored leadership model which is better linked to the organization’s performance objectives. For example, a national healthcare provider in Europe has at its heart a commitment to continuous improvement in care for patients, population and health, and also to value for money. Here, the need is for leaders equipped to develop healthcare systems in local partnerships, for compassionate, inclusive and effective leaders at all levels, for a knowledge of how to improve, for learning, and for enabling regulation and oversight.⁷

In addition to industry-specific and organization-specific leadership behaviours, there are also certain leadership behaviours which should always be considered. Our research pinpointed 4 ‘baseline behaviours’ which should always be present. In addition, we stressed the importance of building adaptability to help leaders transition between changing contexts.

In Chapter 5, we discussed the importance of measuring the impact of a leadership development intervention. We typically measure four elements:

However, there are ways to think through what the returns actually are, and they all point in the same direction: the return is big. First, one can quantify the financial impact of the BTPs related to the leadership development programme, which participants undertake above and beyond their daily jobs. The impact of these projects could be enhanced revenue (for example, new products or growth markets), reduced costs (for example, through procurement savings programmes), or improved processes and ways of working (which could enable quicker speed to market and higher efficiency per employee). In our experience the impact of the BTPs often pay back the cost of the leadership development programme.

Second, we always recommend measuring the impact on organizational health and on the leadership development health outcome in particular. However, organizations could take this one step further and approximate the impact that the leadership development programme specifically (separate from other health-related interventions) will have on the overall health, and then use benchmarks to approximate the financial impact of the health increase. Our research tracked companies over a 12-month period, and showed that organizations that worked on both performance and health improved health by four to six percentage points in 12 months, and grew EBITDA by 18 per cent (compared to 11 per cent for the S&P 500 in the same period).

Third, organizations can calculate the breakeven in terms of performance change required for a leadership development programme to pay itself back. Typically this breakeven point is very small. For example, assume an organization-wide leadership development programme costing $5m. If you look at the financial performance that can be improved through leadership (for example, sales per employee, throughput per employee, performance of assets), how much would the performance have to improve for the average employee (middle 50 per cent) in order for the leadership development programme to pay itself back? Typically this number is very small, with the absolute performance needed still lower than the top 25 per cent of employees in terms of performance; in other words, there is room for even further improvement through better leadership.

In essence, the different approaches all point in the same direction: the return on leadership development is big, and pays back the direct costs associated with the effort many times over. In addition, as mentioned earlier, organizations typically have learning and development budgets available – the money is there. The imperative is thus to spend this budget more effectively, and not necessarily to earmark new funds for leadership development.

The focus of this book was on enhancing leadership effectiveness at an organizational level primarily through leadership development interventions. Here, we review other levers that organizations can consider to enhance leadership effectiveness. We differentiate between two main ways to do this:

Organizational structure: Our definition of leadership posits that ‘leadership is a set of behaviours…these behaviours are supported by the relevant skills and mindsets’. Some organizational structures will be more or less conducive to particular behaviours. For example, if you want your leaders to collaborate more, it may be harder to achieve in an organization with strong, vertical departmental structures (these are sometimes called silo organizations, geographical or product-based departments or functions). An alternative to the silo organization is the matrix organization, where members are part of many teams; over four-fifths of employees in the US experience this kind of working.⁸ The efficacy of the matrix organization is ambiguous; the clarity of authority and responsibility – and the leadership behaviours that they call out – can all to easily become compromised. However, more agile working practices, where organizations combine both speed and stability, make fertile ground for changes in behaviour and mindset.

Organizational processes and where decision-making authority resides: For example, if you want to foster quicker decision-making but employees require numerous sign-offs, the behaviours of speed and decisiveness will not be matched (or served) by the structure around them. Or if you want more delegation, but all authority (or compliance or governance) sits with one person, then the authority rights need to change.

Employee motivation, especially leaders and top talent: Changing the HR processes that motivate and retain people across the organization can have a profound and lasting effect on behaviour and on leadership effectiveness. Here, knowing and measuring are of the utmost importance. The field of data analytics has much to offer the HR field.⁹ Predictive talent models can rapidly identify, recruit, develop, and retain the right people. Mapping HR data helps organizations identify current pain points and devise improvement actions. Surprisingly, however, the data do not always point in the direction that more seasoned HR officers might expect.¹⁰

Strategic workforce planning: Already covered in the story, but what is new is how advanced analytics are going into strategic workforce planning. With the help of advanced analytics, we can aggregate vast amounts of data on both talent demand (linked to strategy) and talent supply (looking at the external market), breaking it down by geography, business unit, level, and specific skill type needed. Algorithms can furthermore predict future changes, for example, the impact of change in growth, new product line launches, and model risks of, for example, higher attrition by level. Analytics helps us move from backward looking data to predictive insights, from judgements to fact-based decisions, and from tactical decisions to strategic planning.

Succession planning: Two-thirds of US public and private companies have no formal CEO succession plan, according to a survey conducted by the National Association of Corporate Directors in 2014. And only one-third of the executives who told headhunter Korn Ferry in 2015 that their companies do have such a programme were satisfied with the outcome.¹¹ So, succession planning is underused and imperfect. A good succession plan links to leadership development in three ways: over time, in terms of leadership criteria, and in terms of choice.

First, succession planning should be a multi-year structured process tied to leadership development. The CEO succession then becomes the result of initiatives that actively develop potential candidates. For instance, the chairman of one Asian company appointed three potential CEOs to the position of co-chief operating officer, rotating them over a two-year period through key leadership roles in sales, operations, and R&D. One of the three subsequently dropped out, leaving two in competition for the top post.

Second, a trio of criteria can help companies evaluate potential candidates: know-how, such as technical knowledge and industry experience; leadership skills, such as the ability to execute strategies, manage change, or inspire others; and personal attributes, such as personality traits and values. These criteria should fit the strategic, industry, and organizational requirements of the business on, say, a five- to eight-year view.

Third, CEO-succession planning can attract biased thinking, and its outcome is the appointment of a specific individual. As we know, decision making is biased; but three biases seem most prevalent in the context of CEO succession. CEOs afflicted by the MOM (‘more of me’) bias look for or try to develop a copy of themselves; incumbents under the influence of the sabotage bias consciously or unconsciously undermine the process by promoting a candidate who may not be ready for the top job (or is otherwise weak) and therefore seems likely to prolong the current CEO’s reign. The herding bias comes into play when the committee in charge of the process consciously or unconsciously adjusts its views to those of the incumbent CEO or the chairman of the board.

Recruitment strategy can be hugely influential over time, and must be linked to the leadership model. Some recruiting can be seen as an extension of the organization’s values (as in values-based recruiting) where it uses its brand or its perceived values to attract like-minded applicants. Equally, there may well be a need – in order to overcome the bias towards conformity – to seek out potential employees who may well have values that challenge the organization’s received wisdom. People Analytics can now be used to improve recruiting results and eliminate biases (for example, in terms of diversity, see Question 3 in Chapter 14).