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The War for Leadership Talent: Forget Demographics – Lack of Depth is a Global Problem
December 15, 2016 | Category: Blog, Executive Coaching
Achieving and maintaining breakthrough operating results are standard expectations placed upon today’s CEOs and senior executive teams. Yet, globalization, challenging economic times, a constantly shifting regulatory environment, and stricter governance make it increasingly harder to realize shareholder value. The fundamental challenge underlying all these expectations is identification and development of new leaders.
My colleague Bonnie Hagemann and I, in a 2014 executive trends global research study, confirmed that the identification and development of emerging leaders and high-potential professionals will continue as one of the top business issues that CEOs will face. The world economy is increasingly knowledge-driven, and fear of “brain drain” is endemic. The main fear is that when executives leave an organization, businesses will follow. At the same time, high-potential professionals and emerging leaders likely to fill the highest executive positions account for less than 10% of the talent pool in the United States. Around the world, in just about every country except for the Middle East, India, certain African countries and some countries in South America, the situation is similar.
It is difficult to overstate the importance of identifying, developing, and retaining top talent as a mission-critical global challenge for senior executive teams and HR directors. This is the demographic argument. But, when I talk with and work with top-level CEO’s in other parts of the world in which top younger talent is in plentiful supply, I am hearing exactly the same sentiment as what I hear from top CEO’s in the US, Canada and Europe! I work extensively in the Gulf Region and when I asked my client, Nabil Al-Alawi, the outstanding CEO of Almansoori Engineering in Abu Dhabi to share with me his most pressing business challenges, he is quick to point to the need to accurately identify and accelerate the development of their company’s future leaders. When I asked my client, Harib Al Kitani, the respected CEO of Oman LNG, he shared exactly the sentiment Nabil did. Forget the demographics! I am convinced that the War for Leadership Talent is flat out a global issue that needs to be fixed and fixed quickly.
Because of the size and scope of this global business challenge, current and emerging leaders face a stark reality: demand for outstanding leaders is exceeding supply. If you’re a CEO, the message you must deliver to current and emerging leaders should be persuasive and clear. That message is that to be rewarded with opportunity and responsibility, you must have capability (“can do”), commitment (“will do”), and connectedness (“must do”) to what your organization requires (and will require).
However ambitious an individual is about climbing the corporate ladder, one thing remains unchanged: today’s organizations ask more of their leaders in terms of expectations and demands. Pressure is, in other words, increasing rather than decreasing. Demand for genuinely outstanding leaders has never been greater because CEOs, Boards of Directors, and executive teams have raised the bar so they can compete successfully in a global marketplace.
Leadership competence is distributed in any organization like the classic bell-shaped curve. If you’re a “good” leader, you’re competent to maintain your position. The problem is, things are changing rapidly, and leaders that fall under the tallest part of the bell-shaped curve are no longer considered sufficient. Consistent leadership greatness from CEOs and senior executives is the expectation from employees, stakeholders, and customers. The bell-curve distribution is becoming outmoded, and needs to be replaced with a negatively-skewed distribution where all leaders are “very good” or “outstanding” for organizations to compete effectively.
We noticed the need for this critical leadership distribution change back in 2014 when we interviewed executives as part of our Trends in Executive Development Research Study (Pearson, 2014). And while the data are clear, qualitative aspects are clear as well. Roughly 90% of CEOs who were asked to identify a great leader in their lives who positively shaped their values identified a parent, grandparent, teacher, or coach rather than a business leader. In the business world, it’s unfortunately true that people generally have an easier time identifying poor managers than identifying great ones.
Why is this so? One problem is that many of today’s managers are promoted before they’re ready to excel in a leadership position. The pace of change in today’s business environment is based on changing technology, demographic shifts, and an overall more demanding operating environment, which all present massive challenges to leadership. Too few leaders possess the strong inner core of values, beliefs, and just plain character, along with outer core leadership competencies that are necessary to meet these challenges. Character, beliefs, thoughts, and emotions now count more than ever, but in the end, too many executive leaders derail because of flaws in their character or because they lack the capability, commitment, and connectedness required for them to truly excel.
Outstanding Leadership Role Models
One current CEO who is recognized worldwide as a leader with strong character, a steel-like inner core, and outstanding leadership skills is Jeff Bezos, current CEO of Amazon. Of course, he founded the company back in 1994 as an online bookstore, but Amazon has since become the largest web retailer and sells just about every type of item imaginable, from car parts to diapers to shoes. Amazon has tried (and succeeded with) several risky new ventures based upon Bezos’ obsession with customer needs and his tenacity. A 2011 US News interview of Bezos by David LaGesse made clear the many ways in which Bezos possesses a strong inner core (i.e., values, beliefs, character, self-awareness, and positive emotions) as well as a strong outer core (i.e., leadership competency) that when combined add up to a sterling example of leadership maturity.
Asked about the necessity of taking the long-term view, Bezos said, “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.”
What can we see in his answer in terms of leadership maturity?
- Strong conviction
- A diligent and focused character
- Ability and willingness to deal with ambiguity and uncertainty
- Thorough understanding of the value of experiences and reference points that lay the foundation for creating strong, compelling beliefs about what is and isn’t possible
- Intense optimism
A second example of exceptional leadership is Anne Mulcahy, the former Xerox CEO. Upon taking the helm as CEO in 2000, Mulcahy delivered the following blunt message to Xerox shareholders: “Xerox’s business model is unsustainable. Expenses are too high and profit margins too low to return to profitability.” Since they were actually after easier answers to increasingly complex problems, Xerox shareholders started to dump their stock, driving the price of Xerox stock down by 26% in a single day. While admitting she could have made her case more tactfully, Mulcahy believed she would have more credibility and authority if she went ahead and acknowledged the ways in which the company was broken, and indicated that serious steps were needed in order to fix it.
Even though she had been with Xerox for over 20 years and possessed in-depth knowledge of the company, Mulcahy was the first to acknowledge her lack of financial expertise upon being named CEO. So she took matters in hand, enlisting the company’s treasurer’s office to train her in important points about finance before meeting with company bankers. Though she was advised to file bankruptcy to clear up $18 billion in debt, Mulcahy refused, saying that “Bankruptcy is never a win.’
Not only that, Mulcahy believed that escaping debt through bankruptcy would ultimately make it harder for Xerox to compete effectively as a technology player. Her goal thus became that of “restoring Xerox to a great company again.” She met with all top 100 Xerox executives personally and gained buy-in from executive leadership. While being honest about the severity of the situation, she made sure they were ready to commit to making needed changes to get back on track. Ninety-eight out of 100 leaders elected to stay, and many of them remain with the company to this day.
Here are some clear examples of Mulcahy’s leadership maturity:
- A character built upon honesty, humility, modesty, and courage
- Powerful vision of the future
- Exceptional skill at empowering others to accomplish great things
- Drive, passion, and zeal
The Flip Side: Poor Leadership Behavior and Character
Athlete Lance Armstrong is a prime example of a leader who experienced a stunning fall from grace. The Sporting News headline for October 23, 2012 was, “Lance Armstrong’s Sterling Legacy Unraveling Myth by Myth, Lie by Lie.” Scott Thompson, former CEO of Yahoo, Inc. used to be sitting pretty with a salary of $1 million and an additional $5.5 million in stock options. He was asked by his board to resign in a disgraceful revelation of having lied about a degree Thompson said he earned in the 1980s from Stonehill College in Massachusetts.
Tyco CEO Dennis Kozlowski was asked to resign his position several years ago after evidence emerged that he was embezzling company money for personal use. In court over the matter, Kozlowski was revealed to have seen Tyco’s checking account as an extension of his own – to the tune of $80 million! Kozlowski spent several years in prison in New York before being granted conditional release in 2014.
In these three examples of remarkable leadership immaturity, it’s easy to see how character flaws enabled unethical and in some cases, illegal behavior. Unfortunately, there are countless other examples of high-level leaders seemingly on top of the world and then falling from grace in a spectacular manner. Executives who reveal flawed character don’t recover; when they fall from grace, their descent is swift, with little to break their fall along the way.
When it comes to executive development, our study of CEOs and other top leaders reported that the need to identify and develop leadership was of paramount importance. In addition to preparing outstanding individuals for leadership, companies must also develop clear succession plans and a deep bench to ensure the company remains strong. Billionaire Warren Buffett says that risk emerges from not knowing what you’re doing, and no organization in the world can survive having leaders who are clueless. What’s most important for today’s CEO and senior leadership teams is mitigating operating risk both now and in the future. And to do this, there is simply no substitute for identifying and aiding with the development of today’s and tomorrow’s leaders.