The CEO Imperative: Identifying and Developing Leaders and Future Leaders
In today’s challenging economy, CEOs and senior executive teams are facing enormous challenges when it comes to achieving and sustaining breakthrough operating results. Globalization, economic change, more stringent regulation, and tougher governance make realizing shareholder value increasingly difficult. But, there is a tougher challenge: identifying and developing new leaders.
January 10 2013 by John Mattone
In a breakthrough executive trends globalresearch study I conducted with my colleague, Bonnie Hagemann, which was published by Pearson in 2011, we confirmed that identifying and developing high-potential and emerging leaders is and will continue to be one of the top business issues facing CEOs as we know that 40 to 70 percent of all executives in most organizations 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 a mission-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. As a CEO, the resulting message you deliver to current and emerging leaders should be clear and convincing. The message? If you possess the capability “can do”, commitment “will do”, and connectedness “must do” that your organization requires—and will require—of its’ executive leaders, you will rewarded with more opportunity, challenge and responsibility. Regardless of an individual’s desire to ascend the corporate ladder, however, one thing will remain indisputable: all organizations will be asking more of their leaders with expectations, demands, and pressure increasing not decreasing. The demand for truly outstanding leaders has never been higher as Boards, CEO’s and executive teams are “raising the bar” as they must in order to compete successfully on the global stage.
The distribution of outstanding leadership in any organization, like anything else, follows the shape of a bell-shaped curve. Being a good leader generally has been accepted as “sufficient” to keep a position. Things are changing quickly, however–very quickly. The bell-shaped curve representing the even distribution of leadership talent in any organization no longer can be accepted as “sufficient”. It is now critical that employees, stakeholders, customers–expect nothing short of consistent leadership greatness from CEO’s and all leaders they work with. The bell-shaped curve needs to be replaced with a negatively-skewed distribution where all organizations possess a larger percentage of “very good” and “outstanding” leaders at a minimum just to be able to compete.
The need for this critical leadership distribution shift has been apparent since 2011 as we were interviewing executives as part of our Trends in Executive Development Research Study (Pearson, 2011). Beyond the actual research, qualitatively, it was interesting to note that roughly 9 times out of 10 when CEO’s were asked to identify a great leader in their lives who had a positive impact on them and helped shape their values, they mentioned a former teacher, coach, parent, grandparent or friend as opposed to a business leader. It is unfortunate but true that most people can much more quickly identify the poor managers they have had rather than the great ones.
But why is this? It is pretty clear that many managers are promoted before they are ready to assume leadership roles. More than anything else, the speed and pace of change in business today—technology shifts, demographic shifts and a more demanding operating environment represent massive challenges to most leaders and frankly not enough of them possess both a strong “inner-core” of values, character, beliefs, thoughts and emotions and “outer- core” set of leadership competencies that are truly required to successfully navigate these challenges. In the end, too many executives are beginning to derail or have already derailed because of character flaws or at a minimum because they lack the “can do”, “will do” and “must do”.
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 as leadership 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 23rd, 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– executives 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.
In our Executive Trends Research Study, CEOs clearly identified the need to identify and develop leaders and future leaders as the most influential condition and their top objective in executive development. Supporting this objective was the need for clear succession plans with adequate depth and development of bench in order to ensure the strength of the succession plan. As Warren Buffet once said, “Risk comes from not knowing what you are doing.” No organization wants to run the risk of having leaders who don’t know what they are doing. The imperative for CEO’s and senior teams is clear: to mitigate operating risk now and in the future, organizations must do a better job identifying and developing leaders and future leaders.
John Mattone is the president of JohnMattonePartners, (firstname.lastname@example.org) a global leadership consulting firm. He teaches in the executive MBA program at Florida Atlantic University and, in 2011, he was named to the “guru radar” by the Thinkers50. He is the author of seven booksand livess in Orlando, Florida.