Thought leadership by Dr Belinda Board
The founder of PeopleWise, Dr Belinda Board, is a world-renowned business psychologist and executive coach practitioner, specialising in leadership potential, assessment and development, individual and collective behaviour change, strategic thinking, cultural and gender diversity and psychometric tool design.
We know that the quality of senior executives matters. There is a wealth of research to prove this. For example, one study of 193 companies concluded that the quality of executives related to 44% of variation in profit margins and 47% of variation in stock prices (Weiner & Mahoney in Stamoulis 2009). Other studies have found that who the CEO is relates to 14% of a business’s movement in financial results (Joyce, Nohria & Roberson in Stamoulis 2009). However, studies by Mckinsey and Egon Zehnder (2011) disprove the myth that a small group of high-potential (or a star CEO) can drive business success alone. Rather, a critical mass of excellent leaders is needed to trigger and sustain corporate growth.
Conversely, having the wrong people in leadership roles can have devastating effects on business performance. This means that there are serious consequences (both financial and non-financial) to making poor hiring decisions, particularly in critical leadership roles. The CIPD reported in a recent survey that the cost of poor hiring decisions in general managerial roles can result in losses of between 110% to 137% of the incumbent’s annual salary (2011).
"The total cost of executive level turnover or mismatch is estimated to be 18 – 47 times of the mismatched executive’s total cash compensation."
This is without considering the associated covert costs such as potential litigation or labour disputes, poor team morale, opportunity loss and potential reputational risk for the business, all of which increase exponentially as the seniority of the appointment increases. Therefore, getting it right first time is critical when it comes to appointing senior leaders. However, this becomes more challenging as the business landscape becomes increasingly volatile, uncertain, complex, and ambiguous (VUCA).
In a VUCA world, everything is interconnected and no one can predict what big changes are coming next. Businesses must be agile, adaptable and forward-looking to survive and thrive in this landscape. Individuals who are equal to the task of creating, sustaining and leading businesses in the VUCA world are those who can deal with constant ambiguity, notice the key patterns amongst the noise and look at the world through multiple stakeholder perspectives. These are the capabilities that enable leaders to flourish and produce outstanding results in complex times. This necessitates a shift in how we define and (consequently recruit) at senior leadership levels. However, what is lacking to fully predict performance in the VUCA landscape is consideration of how the leader will continue to perform and grow in dynamic and ambiguous contexts into the future, in other words, potential.
If we understand leadership potential to be an individual’s capacity to lead, develop and grow into the future in a dynamic and uncertain business landscape, understanding the complexity of the world of work and the individual’s place in it provides a useful framework for positioning recruitment and assessment activities.
Understanding the type of work and responsibilities at the various levels of leadership can enable selection of individuals who are not only comfortable to cope with the level of complexity required for the role for which they are being considered (ensuring a good fit with current role), but can also provide insight into their longer-term career trajectory and potential comfort with increasing levels of strategic focus, enabling organisations to build a strong leadership pipeline into the future. Along with this theoretical foundation, the Peoplewise matrix model of potential provides a clear assessment framework to enable selection of high performing, high potential leaders.
Furthermore, the model also allows for ongoing development and succession planning and consists of five key psychological (the vertical) capabilities and five behavioural (the horizontal) capabilities. The vertical capabilities are those core psychological attributes that underpin workplace functioning and performance and have been consistently shown to be associated with current and future success. They are not linked to specific skills or knowledge, but are rather the personal qualities influence a person’s professional and personal performance.
These capabilities are:
mental agility – the ability to think conceptually, analytically and flexibly and to study, analyse and understand new problems and situations;
emotional agility – the ability to be personally and interpersonally effective;
confidence – the ability to take on and put in the necessary effort to succeed at new and challenging tasks;
resilience – the capacity to bounce back and even grow when beset by challenges and adversity;
drive – the capacity to strive for success and pursue goals.
The behavioural or horizontal capabilities are:
Thinking: these relate to cognitive capabilities that reflect in behaviours around, for example, problem-solving and analysis and strategic thinking. These are critical to success in many roles, but particularly as seniority increases.
Performing: these pertain to personal capabilities that drive individual performance. Examples include planning and organising, self-management and results orientation.
Engaging: these are the capabilities that drive effective interactional behaviours, such as relationship building, influencing and collaborating.
Leading: these are the capabilities that underpin leadership behaviours and enable the attainment of results through others. Examples of sub-capabilities within this capability are delegating, motivating and empowering and coaching for success.
Transforming: in a VUCA world, the ability to cope with, ignite, manage and embed change in some way is critical across levels of seniority within the organisation. The Transforming capability looks at skills in adapting to, managing and enabling others to cope in times of change. Transforming sub-capabilities include innovation, leading change and, at more senior leadership levels, selling the vision.
Overall, it is clear that for organisations to be successful in a VUCA world, they need to select and develop leaders who can think in complex, systemic, strategic and interdependent ways. This necessitates a move from selecting on the basis of what leaders have already achieved to what they have the capacity to achieve in the future. It is this that we need to get to the heart of when making hiring decisions.
It is, therefore, necessary to embrace a new model of assessment and selection. This is an integrated model of potential that considers the psychological capabilities critical for success as well as the key behaviours that will ensure the realisation of the organisation’s vision and strategy. This is supported by robust, valid and reliable assessment processes and tools to identify and develop strong leadership talent and potential.
Having a laser-sharp focus on talent potential is not a “nice to have”, it is the key differentiator for business success in today’s VUCA world.
Contact Dr Belinda Board directly firstname.lastname@example.org
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