An Exclusive Excerpt from INTELLIGENT LEADERSHIP: What You Need to Know to Unlock Your Full Potential by John Mattone (Foreword by Marshall Goldsmith, AMACOM-March 2013)

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In a breakthrough executive trends global research study (2011) that I conducted with my colleague, Bonnie Hagemann, we clearly confirmed that identifying and developing high-potential and emerging leaders is and will continue to be one of the top business issues facing CEOs. In most organizations, 40 to 70 percent of all executives will become eligible for retirement in the next five years.

In our increasingly knowledge-driven world economy, organizations are right to fear this imminent brain drain, suspecting that, when executives leave the firm, business may follow. Yet high-potentials and emerging leaders—those most likely to rise to fill those highest positions—account for less than 8 to 10 percent of the talent pool. That’s in the United States. In other countries, like Canada, Australia, the United Kingdom, Japan, and China, and in just about every country except India and various countries in Africa and South America, this issue is as pronounced as it is in the United States, if not more so. Therefore, identifying, developing, and retaining such rare talent truly is amission-critical global challenge for CEOs, senior executives, managers, and HR directors.

Given this indisputable global business challenge, the implication for current and emerging leaders is clear: The demand for outstanding leaders will soon surpass the current supply, and therefore, if you are a current leader or emerging leader, you will be able to capitalize on substantial opportunities if you are poised and ready. Regardless of your own desire to ascend the ladder, one thing is certain: All organizations will be asking more of their leaders; expectations, demands, and pressure will only increase, not decrease. The demand for truly outstanding leaders has never been higher, and organizations are raising the bar—as they must—in order to compete successfully on the global stage.

Where Are the Outstanding Business Leaders?

As I travel the globe, meeting with senior executive teams, coaching executives, and speaking to various management groups, it is clear to me that the world of business has very few outstanding leaders. There are many very good leaders, as well as a vast supply of good leaders. The distribution of outstanding leadership, like anything else, follows the shape of a bell-shaped curve. I always knew this. Everyone has always known this. But nobody really cared because being a good leader has always been good enough to keep a position and meet its basic requirements. But things are changing quickly. The bell-shaped curve needs to be shaped into a negatively skewed distribution, in which all organizations possess a larger percentage of very good and outstanding leaders just to be able to compete.

I had suspected the need for this critical shift for a couple of years, but it became very clear in 2011 as we were interviewing executives as part of our Trends in Executive Development Research Study (Pearson, 2011). Beyond the actual research, an interesting qualitative note emerged. When I ask executives to identify a great leader in their lives—someone who had a positive impact on them and helped shape their values—roughly 9 times out of 10, they mention a former teacher, coach, parent, grandparent, or friend, as opposed to a business leader. Unfortunately, the fact is that most of us in the business world can identify the poor managers we have had much more quickly than we can the great ones. Why is this?

There is no clear answer; however, it is pretty clear that many managers are promoted before they are ready to assume leadership roles. They are not adequately trained, coached, and mentored by more seasoned executives, who often can share stories and insights to dramatically shorten a manager’s learning curve. More than anything else, I believe the speed and pace of change in business—technology shifts, demographic shifts, and a more demanding operating environment—present daunting challenges to most leaders. Frankly, very few possess both the strong inner core of values, character, beliefs, thoughts, and emotions and the set of outer-core leadership competencies that are truly required to successful overcome these challenges. In the end, too many executives are beginning to derail or have already derailed because of character flaws or perhaps just sheer immaturity.

Let’s look at a couple of real-world examples of outstanding leadership.

The Role Models of Outstanding Leadership

Two CEOs (one current and one former) are recognized worldwide as leaders who possess strong character, a strong inner core, and superlative leadership skills. The current CEO of Amazon.com, Jeff Bezos, founded his company in 1994 as an online bookstore. Bezos has built Amazon into the largest retailer on the Web, selling everything from groceries to electronics to shoes. Amazon consistently succeeds with risky new ventures, a success that Bezos credits to tenacity and obsession with customer needs. Excerpts from an interview in U.S. News, which David LaGesse conducted with Bezos in 2011, contained numerous examples of his strong inner core (i.e., character, values, positive beliefs, positive emotions, self-concept) and outer core (i.e., leadership competencies) that, together, form the foundation of what I refer to asleadership maturity.

When Bezos was asked about the need for a long-term view, he replied:

My own view is that every company needs a long-term view. If you’re going to take a long-term orientation, you have to be willing to stay “heads down” and ignore a wide array of critics, even well-meaning critics. If you don’t have a willingness to be misunderstood for a long period of time, then you can’t have a long-term orientation. Because we have done it many times and have come out the other side, we have enough internal stories that we can tell ourselves. While we’re crossing the desert, we may be thirsty, but we sincerely believe there’s an oasis on the other side.

In this answer, Bezos reveals numerous examples of his leadership maturity:

• Strong statements of conviction
• Character elements of diligence and focus
• The ability to handle uncertainty and ambiguity
• An understanding the value of experience and “references” that are the foundation for creating strong and compelling beliefs about what is possible
• A powerful sense of optimism

Another great example of outstanding leadership is Anne Mulcahy, former CEO of Xerox. When Mulcahy took over Xerox in 2000, she delivered a blunt message to shareholders: “Xerox’s business model is unsustainable. Expenses are too high and profit margins too low to return to profitability.” Shareholders, wanting easy answers to complex problems, started to dump their shares, which drove Xerox’s stock price down 26 percent the next day. Looking back on that dark time, Mulcahy admitted she could have been more tactful; however, she had decided it would be more credible and authoritative if she had acknowledged that the company was broken and that dramatic actions were needed to fix it.

Although she had been with Xerox for 25 years and knew the company well, when Mulcahy was named CEO, she acknowledged her lack of financial expertise. She quickly enlisted the treasurer’s office to tutor her in the fine points of finance before meeting with the company’s bankers. Her advisors told her to file for bankruptcy to clear $18 billion in debt, but Mulcahy resisted, telling them, “Bankruptcy is never a win.” In fact, Mulcahy thought that using bankruptcy to escape debt would make it more difficult in the future for Xerox to compete seriously as a high-tech player. Instead, she chose a much more difficult and risky goal: “restoring Xerox to a great company again.” To gain support from Xerox’s leadership team, she met personally with the top 100 executives. She let them know honestly how dire the situation was and asked them whether they were ready to commit. A full 98 out 100 decided to stay, and the bulk of them are still with the company today.

Like Bezos, Mulcahy’s actions reflect numerous examples of her leadership maturity:

• Character elements of honesty, modesty, humility, and courage
• A powerful sense of vision
• Skill at empowering others
• Her passion, drive, and incredible zeal

The Other End of the Continuum: Unleaderlike Character and Behavior

Lance Armstrong’s fall from grace has been swift and harsh. Sporting News’ headline on October 23^rd, 2012 read “Lance Armstrong’s Sterling Legacy Unraveling Myth by Myth, Lie by Lie”. Scott Thompson is now the ex-CEO of Yahoo, Inc. One day, he was sitting on top of the world with a $1-million salary and $5.5 million in stock options. The next day, his board asked him to resign in shame and embarrassment for lying about a degree he said he had earned in the early 1980s from Stonehill College in Massachusetts. A few years ago, Dennis Kozlowski, then CEO of mammoth Tyco, was also asked to resign amid strong speculation he was siphoning company money for his personal use. The courts later determined that Kozlowski indeed saw Tyco’s checking account as an extension of his personal checking account to the tune of over $80 million. Kozlowski is currently in jail in a New York State correctional facility.

These are just three examples of extreme leadership immaturity. Character flaws clearly drove this unleaderlike and unquestioned illegal behavior. There are other numerous examples—executives, CEOs, senior executives, managers, and emerging executives (some of whom I have coached) who were skyrocketing one day and falling from grace the next. When character is involved—even the question of character—my experience is that the executive may never recover. When executives reach the pinnacle and then suddenly plummet, there are no limbs to break their fall; their drop is as swift as it is unforgiving.

One of the messages I deliver to leaders and future leaders in my new book, Talent Leadership: A Proven Method for Identifying and Developing High-Potential Employees, is this:Character doesn’t determine your destiny; it determines your ultimate destiny. Your character, or lack of it, will strongly impact how you are viewed and talked about, and it ultimately determines how others will remember you. All of us retain total control over how we will be remembered. It is a conscious choice we make. The question I ask all executives is, “Will you make the right choice?”

Identifying High-Potential Leaders

Senior executive teams often ask me what they should look for in identifying their high-potential leaders. My answer is always clear: They need to look for people who possess both a strong inner core and a strong outer-core set of competencies, which enable them to demonstrate the capability to develop, grow, and self-nurture to the level required for success at the most senior executive levels. The most critical thing to look for and measure, however, is character.

The essence of character is undoubtedly multifaceted and complex. When working with executives who possess character, I see a lot of what we see in Jeff Bezos and Ann Mulcahy. When working with organizations to help them identify their high-potential and emerging leaders, I look for evidence that they are, at a minimum, courageous. I look for leaders who have the guts to make the tough but ethical decisions. I look for their willingness to sometimes stand alone, in the teeth of pressure (possibly even from their own managers) to go in a counter, sometimes less ethical direction.

When coaching executives, I explain that saying no to the easiest and most rewarding route, when that decision doesn’t align with what you know is the correct one, may seem difficult. However, as soon as you begin flirting with such decisions—those that yield better operating results, greater revenue, and greater profits yet clearly compromise you ethically and morally—you enter a world of agony and stress. Making such choices will lead you into a world of painful long-term consequences, not the least of which is an increased probability you will say yes to more insidious acts in time. This is exactly what happened to Dennis Kozlowski. Great leaders—truly great leaders—have the courage to make the right decision every time.

Great leaders also possess the character elements of diligence, gratitude, honesty, modesty, and loyalty.

Most Unleaderlike Behavior Is Just Plain Immaturity

Leaders generally derail not because of a character flaw but rather because they respond immaturely to mounting stress and change. Leaders who are immature in their thoughts, beliefs, attitudes, and habits, however, are capable of recovering from their unleaderlike behavior, unlike the poor-character leaders in the previous section. For example, one of the most important traits of great leaders is what I call the Helpingtrait. Leaders who are selfless, giving, and altruistic are demonstrating the mature behaviors associated with the Helping trait.

However, when their helping is done in an unauthentic way, with strings attached, they are demonstrating the immature behaviors associated with that trait. Great leaders also possess a mature Disciple trait. Leaders who can follow others and who value being part of something bigger than just themselves are demonstrating the mature behaviors of this powerful trait. When leaders demonstrate a lack of belief in themselves and do not think they are worthy of success and accolades, they are showing the immature behaviors of this trait. In later chapters, I will explain in detail the mature and immature behaviors associated with the nine critical traits that define the essence of leadership.

I have come to believe that organizations that do not compulsively develop their leaders and future leaders—through coaching, mentoring, executive development programs, action learning projects, and the like—unknowingly grow and multiply leaders with a high probability for derailment and failure. At a minimum, when an organization, leader, or future leader leaves things to chance, the probability of leader derailment or success is the same. With targeted coaching and real prescriptions for strengthening their inner and outer cores, however, leaders and future leaders can seize the considerable opportunities that await them. At the same time, they can successfully mitigate the enormous risks associated with the unrelenting pace and complexity of change they face in their part of the business world. These principles then, become the blueprint for helping you—the leader and future leader—build a strong, compelling foundation for becoming absolutely the best leader you can be.

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