Managing your Company's Leadership Pipeline:

Questions that Count

By Patrick R. Dailey, Ph.D., and Charles H. Bishop Jr., Ph.D.

A company's leadership pipeline is expected to deliver the "crude" necessary for developing the company's "next generation" leadership. The payoff is a full and flowing supply of senior talent that continues to achieve quarterly targets while maintaining the ethical compass, and skillfully navigating the company through transformational change. Unfortunately, some companies allow their leadership pipeline to run dry. When this occurs, the downward spiral of competitive capability becomes discernable, the edge is lost, and the "magic" disappears. The competition begins to outwit, outflank and out perform these companies. The future of the company becomes uncertain along with that of the CEO.

Company's win or lose based upon the quality of their leadership according to a groundbreaking Michigan research study [1]. Yet, there are few roadmaps for ensuring that succession management processes produce that full and flowing pipeline of leaders.

One of the major reasons for this situation is that many CEOs are more than willing to ask the "easy" questions about their leadership pipeline, but many times do not ask the hard ones. They may ask if they have a good successor picked or if they're doing a decent job recruiting talent from the top business schools. On the surface, OK…but some tough questions need to be asked.

Companies continue to search for solutions that will ensure their leadership pipelines enable a full and flowing with "ready now," best-in-class leadership talent. Douglas Ready and Jay Conger in the Wall Street Journal article [2], report that the vast majority (97%) of surveyed companies have a formalized succession management process which is intended to keep the leadership pipeline full and flowing. Yet, only 3% of these surveyed companies report satisfaction with their leadership pipeline-the quality and readiness of leadership talent is not adequate. These survey results clearly document that investment is being made but resoundingly, the process is not delivering results.

This article is about the tough questions and discipline necessary at the most senior levels of an organization to insure your leadership pipeline flows with the necessary quality and quantity of leadership talent to plan and implement your long term business plans.

The good news is that even if the answers aren't what CEOs initially want, once they start asking the questions they are well on their way to remedying the problem.

1.   Can your leaders differentiate "great" talent from "good enough?"

Each day, leaders throughout your organization make judgments, or "calls," to select talent for more challenging and pivotal jobs. When these decision-makers fail to make accurate talent assessments and predictions, a little bit of your company's future is chipped away.

When inept assessments from individual managers are combined across an organization into an overall picture of your organization's talent strength and readiness, this composite view too often catches senior executives off guard as they scrutinize or "scrub" promotability slates to select key leaders for critical assignments. That full and flowing pipeline is just not there.

Senior management is typically disappointed with these newly found talent deficiencies, but chalk up this problem as a natural aspect of talent management.

Meanwhile, the ability of your organization to rapidly muster great talent for strategic moves in the marketplace is compromised by both quality and timeliness factors. When the talent assessment process ultimately generates only "good enough" talent and teams, what is the outcome to your organization when those great competitors in your sector take aim at your markets and your customers? The stakes are high. Boards and Wall Street do not often have the patience for the uncertain adventure of evolving good teams into great ones when the individual talent does not measure up to winning. Better to start with "great" in building high-performance organizations.

Questions that count…about gauging the quality of leadership assessment are:

• Can your hiring managers explain the difference between "great" vs. "good enough"?
• Which managers accurately spot promotable talent early in the career of the emerging leader?
• Who were the members of your promotable talent pool three years ago, and where are they now?
• Do your hiring managers confuse candidates' past performance with their future potential when formulating promotional decisions?
• Is there a healthy balance between internal executive promotions and "best in class" external recruitment?

2.   Are you willing to settle for "good enough" talent in pivotal positions?

Organizations can lose their performance edge when not challenged to attain market share or functional excellence. In the early stages of decline, signs of "organizational dry rot" [3] can be detected in the middle-managerial appointments. In those cases, "good enough" leaders are appointed to key roles and steer their operating units toward incremental improvements and even deliver strong results. These organizations work harder and manage to win-for a period of time. Often, they have chosen to keep score using internal measures of success and performance-year-to-year metrics, for example, as opposed to external metrics that score against best-in-class performance comparisons. Soon these organizations are in over their heads-overworked and out of gas. Their reputations slip, and great talent becomes difficult to attract and retain. Predictably, the competition begins to outmaneuver them.

Questions that count…about tolerating "good enough" leadership talent are:

• Is an operating unit or function capable of stepping-up to additional challenges, if needed (a major acquisition, change in strategy, departure of a key player)?
• Are "compromise" candidates appointed into pivotal roles?
• Into which operating units is your best emerging talent reluctant to go?
• Are "one-horse" races all too common in filling pivotal senior roles?

3.   Are you personally willing to break down the silos of protectionism that impede the development of your pipeline?

Protectionism exists when organizational walls and cultural norms limit the movement or development of emerging leaders across organizational boundaries. This narrows your degrees of freedom regarding development for emerging leaders and ultimately limits choices in appointing "ready now" leaders, compromising the quality and readiness of your leadership pipeline.

Protecting emerging leaders is noble and necessary. Yet, overprotecting emerging leaders often stifles their professional development. Equally harmful is allowing underperforming "favored sons" and slow-learning leaders to be shielded in safe harbors erected within "silos" throughout your organization. This practice is a sure signal to the organization of a tolerance for mediocrity. Silos naturally operate as an outgrowth of complex organizations reaching for functional focus or specialization. They are not necessarily destructive. The leadership challenge is to bridge silos with management process when it is essential for the broad organization. Succession management should be one of these processes.

Questions that count…about overcoming protectionism are:

• In which units do your organization's best emerging leaders get lost or leave?
• Which senior leaders too frequently use the excuse that an emerging leader is "not quite ready" for an assignment elsewhere in the company or that business conditions are such that their promotable talent can't be freed up for a move elsewhere in the company?
• What senior leaders are successful exporters of talent into other units?
• Do the talented outsiders have difficulty breaking into the culture and "finding-their-way" in your organization?

4.   Where does your Board place accountability for the quality
and readiness of your leadership pipeline?

One of the most unforgivable sins a senior executive can commit is underestimating the future leadership needs for the business-either in terms of quantity or quality. These oversights traditionally go unmentioned in annual reports and during analyst meetings. Yet these oversights compromise your organization's competitive future. Many senior leaders show up at annual succession planning meetings but have not been fully engaged throughout the year in the process. No leader would ever think about going through the motions with the company's strategic planning process.

Yet sustaining the organization's leadership pipeline is the one of the most strategic activities leaders face in dealing with the future of their organizations.

Questions that count…about accountability are:

• Are your leaders accountable for their candor in discussing subordinate leaders' strengths, limitations and promotability during talent review meetings and the accuracy of their promotability calls? Does this impact their compensation?
• Are metrics tracked from year to year for judging the effectiveness of the process?
• Are there senior leaders with a pattern of failed selection and appointment decisions?

5.   Are you willing to take short-term risks with business results as emerging leaders learn the lessons of experience?

Developing leaders with the keen instincts and well-honed skills to lead organizations into their futures does not come without risk. This risk involves placing talent into real and challenging situations where they must perform and learn from their experience. It is a truism that the greater the challenge, the greater the learning opportunity-and, unfortunately, the greater the risk of failure to the individual and the organization. So-called 100-percent "safe-fills" provide little growth opportunity for the individual. They may introduce stale skills, low motivation, or overconfidence into the leadership team. The ideal situation is a job that demands performance and provides a challenge for the individual. Examine your organization for symptoms of playing it too safe in developing your talent.

Questions that count… about playing it too safe in leadership development are:

• Do your high potentials get the most "developmentally-valuable" slots and assignments?
• Are you truly stretching emerging leaders with developmental assignments that equip them with the necessary lessons of experience?
• Are promotions too frequently delayed until emerging talent becomes "over ripe" and disillusioned?
• Do you find ways of protecting great, emerging talent as they learn from their missteps build their confidence and legitimately earn an achievement reputation?
• Does your organization deal with derailed talent?

6.   Are you borrowing or buying a succession-management process, then force fitting it into your culture?

Many of our best known brands-IBM, Dell, Nike, FedEx- have their own "secret sauce," something that makes them distinctive. If you probe into the genesis of what makes such great brands, one of the key factors is their approach to talent-their selection, development, and retention. Often, the founder or a pivotal leader has put their personal touch on crafting a style or direction in leadership development. Noteworthy developers of leadership include GE, Bank of America, PepsiCo, and FedEx [4].

Elsewhere, we often see "herd mentality." Leaders borrow what is going on at a GE, or PepsiCo, read an article or two, bring a new process into their organizations-and fail. Jacques Nasser's adoption of GE's "forced ranking of people" in many ways led to his sudden departure from his CEO role at Ford. What worked in one culture may not be a good fit in another. Bob Nardelli, the former CEO of Home Depot "imported" much of what he had done at GE into Home Depot. The overall approach created cultural misunderstandings, a lack of ownership and is cited as one of the factors that ultimately led to his exit. When leaders try to imitate the success of others by importing their methods, the organization many times loses its focus and commitment to any process.

Questions that count…about creating ownership are:

• Is your succession planning process thought of in the same stature as other key processes, i.e., strategy process; annual budget process?
• Do you showcase your leadership management process in your annual report, analyst presentations, and recruiting materials?
• Does Wall Street tend to enhance your market valuation due to your leadership depth?
• Is succession management a senior leadership accountability or is it relegated to "staff level?"
• Has your succession process been cobbled together from fad-de jour and technology borrowed from other companies?

7.   Is your succession planning process an annual "event" that goes nowhere except to a shelf on your office credenza?

"Credenza-ware" is the unrealized output of talent review meetings. This output finds its way to the shelves, disk drives, and credenzas of senior executives and presenters. Nice work that goes nowhere. We believe the culprit is the once-per-year process of conducting talent and leadership review meetings in which forms and formal presentations overwhelm the process of candidly assessing your organization's leadership strengths and deficiencies and setting plans in motion to close gaps.

When your talent and succession planning meetings are characterized by "all talk" and feel more like reviews than talent to-do sessions, be on guard that the time and effort of many executives may have be squandered. Your future is in jeopardy.

Questions that count…about avoiding credenza-ware are:

• Are talent and leadership review meetings characterized by challenging and constructive dialogue [5] or a "conspiracy of politeness" among the meeting participants?
• Are leadership development plans and commitments discussed during talent review meetings actually funded during the annual budget?
• Are those assessed as "promotable" actually appointed to forecasted positions, over time?
• Can you walk down the hall to your central talent office to have pipeline questions answered immediately? Or, do answers require a special study?
• Do you have "true believers" up and down in your organization about the value of your succession management process?

SUMMING UP

Leadership is often about delegation. Effective talent management is not. We have discussed the serious and purely personal work that the senior leader and other members of the senior team must perform in order to send signals to your organization about the value of building a deep and ready bench and the standards by which the process must be executed.

Leadership-rich organizations never believe their talent management process and activities are discretionary duties. They understand the process as an essential core competency that cannot be duplicated, that largely cannot be delegated, and must not be neglected. There is nothing altruistic about these values. It is about building the capacity to perform and win. Great leadership is the foundation for sustained performance through both evolutionary and revolutionary phases of any company's life span. Without a leader putting a personal stamp on this process and investing personal time to know one's pipeline, the process is doomed for credenza-land. At the end of the day, the central question for senior leadership is: "Do you have the leadership talent and bench strength to successfully implement your strategy?"

 

Patrick R. Dailey, Ph.D. and Charles H. Bishop Jr., Ph.D. have been senior human resources executives for leading global organizations, including Baxter International, PepsiCo, FedEx, Bank of America, Lucent Technologies, and Hewlett-Packard. Together, they founded and operate Chicago Change Partners, a boutique human resources consulting firm specializing in supporting senior leaders and their teams navigate personal and organizational change.

References

1. In a series of studies conducted by the University of Michigan, David Ulrich, Wayne Brockbank, Arthur Yueng, and Dale Lake concluded that leadership and change capacity were the key differentiators in performance. "Top Books on Change," in Human Resources Management Journal, volume 40, No. 3, Pp 275-286 2001 John Wiley and Sons, Inc.
2. Douglas A Ready and Jay A. Conger; Leadership How To Fill the Talent Gap. The Wall Street Journal. Saturday/Sunday, p. R4 September 15-16, 2007.
3. John W. Gardner, "How to Prevent Organizational Dry Rot," in Management and Organizational Behavior Classics, ed. Michael T. Matteson and John M. Ivancevich, (Homewood, IL: Irwin Press, 1993) p. 140.
4. Fred Smith, Chairman of Federal Express, devoted time to in-depth personal involvement in leadership development. He was personally involved and, by any measure, met our description of "inventing the wheel." His personal involvement provided the impetus and a model essential to make progress in this critical area.
5. Larry Bossidy and Ram Charan, Execution (New York, NY: Crown Publishing Group, 2002), p.172. In which the authors discuss the need for candid, robust dialogue.

 

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