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YEC (Young Entrepreneur Council) surveyed some folks about how they develop leaders in their organization. Here are their answers:
- In order to effectively develop leaders within our organization, we’ve implemented a leadership development program that makes employees feel more connected to the business. – Anthony Pezzotti, Knowzo.com
- Increase the Pressure and Responsibilities. – Cody McLain, SupportNinja
- Give them the tools (seminars, ebooks, reading material, etc.) to learn the skills necessary to be a leader, and then empower them to make decisions on their own. – Anshey Bhatia, Verbal+Visual
- True future leaders within your organization don’t need to be managed, they need the proper framework, resources and support so they can be easily guided and developed. – Lindsay Mullen, Prosper Strategies
- To develop leaders and ensure your next generation of leadership isn’t poached by your competitors, you need to invest in them. – Brandon Stapper, 858 Graphics
- Find your key proteges and become a mentor to your potential leaders. – Blair Thomas, First American Merchant
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High Performing employees have some habits that set them apart.
- They have their own system. Whether it’s a morning routine, a mindfulness ritual, a bullet journal, etc., HiPo employees have their own way of staying grounded and organized.
- They listen to others – for feedback, suggestions, and proven strategies. High performing employees take-in information.
- They hold themselves accountable. Always focused on quality, HiPo employees keep their word.
- They are focused on the positive. This isn’t to say that everything around them is always positive. But when given a choice between celebration or cynicism, they find a way to look on the bright side.
- They will accept a challenge. And often don’t need to be told.
- They set their own goals. Along with stretch goals. HiPo employees have goals. Not only the goals that the company sets for them. They have their own goals.
- They learn from their mistakes.
- They know how to manage their time.
- They’re committed to their own personal development.
- They’re highly engaged and willing to commit to the organization. They perform at a high level because the organization is invested in their success. HiPo employees build a working relationship based on trust and respect.
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Over the last several years, we have seen more companies deliberately choosing an outsider CEO. And when they do, more often than not, it is part of a planned succession.
As part of the 2015 edition of the annual Strategy& CEO Success study, we looked back at 12 years of detailed data on incoming CEOs at the world 2,500 largest public companies. In the latest four-year period (2012–15), boards chose outsiders in 22 percent of planned turnovers, up from 14 percent in 2004–07. That represents a 50 percent increase in the rate of outsider selection. And 74 percent of all the incoming outsider CEOs in 2012–15 were brought in during planned turnovers, up sharply from 43 percent in 2004–07.
Businesses in a wide range of industries are facing significant discontinuities — including industry convergence, digitization, and regulatory change. That appears to be leading boards to look harder for CEOs whose backgrounds, perspectives, and skill sets are different from those the in-house candidates possess. Boards of directors are also growing more independent, meaning there are fewer company insiders on them than ever before. These independent board members have a broader network of experiences, and have exposure to a broader network of executives.
As we demonstrated in last year’s study, the most important reason for succession planning is to ensure orderly transitions of business leadership. This year’s study shows that succession planning at large companies continues to improve. The rate of planned CEO turnovers — as opposed to those in which CEOs were forced out — remained near its relatively high levels of the last few years.
To be sure, the large majority of companies have continued to promote insiders to the CEO position.
The Outsider Trend
Discontinuous change is the principal reason that more companies are turning to outsiders. Companies that find the context in which they operate changing so rapidly often need leaders with experiences and skill sets that are different from the ones that can be found within the company’s current management ranks. Internal CEO candidates may have excellent records executing past — and even present — business models. But these candidates may lack the skills needed to lead companies through the transformations that will be necessary to succeed in the future, and the boards know it. Boards may also recognize that insider candidates are too steeped in the company’s past practices to envision new approaches.
This sea change in board independence has brought greater diversity to the way boards evaluate CEO candidates. Company insiders are often unable to imagine that anyone from outside the company could understand or manage the business better than insider managers, particularly when the board chair was once the CEO. Outside directors, by contrast, look at the universe of potential future CEOs through a wider aperture.
Another reason boards have become more independent — and, we would argue, more professional — is shareholders’ demand that they do so. Institutional shareholders have become more willing to use their power and their voices to push for changes in governance, strategy, and leadership.
Our data shows that the background of the incumbent CEO also affects the likelihood of choosing an outsider. We found that the longer the tenure of an outgoing CEO was, the less likely it was that the successor would be an outsider.
The choice of an outsider CEO also seems to be somewhat self-reinforcing. We found that companies whose outgoing CEO was an outsider were more than twice as likely to choose an outsider as the new CEO.
Financial Performance
Historically, there has been a strong correlation between poor financial performance and the subsequent hiring of outside CEOs. Companies have been one-third more likely over the last 12 years to select an outsider CEO in both forced and planned successions when the company has been underperforming financially, as measured by total shareholder return (TSR) over the tenure of the outgoing CEO.
Looking Outside
When should a board of directors consider choosing an outsider CEO rather than promoting from within?
- One circumstance in which an outsider makes sense, as we’ve described above, is when the company must surmount a disruptive challenge or threat to its established business model.
- The board may find it difficult to judge whether an internal candidate has the right capabilities to meet future needs when the company is facing discontinuity.
- Once a determination has been made to consider an outsider candidate, the board should begin by identifying the key desired characteristics. A candidate must have expertise in the areas where the company faces future challenges.
- In addition, many boards will want a candidate with prior experience as a CEO, and will have a strong view of the kind of management style they deem necessary for the company and its future success. Boards may also want to test potential future CEOs by recruiting them first to senior positions on the leadership team (such as chief operating officer or chief financial officer) or as members of the board of directors. This affords an opportunity for the potential candidate to get exposure to the company and its culture, and for the board to get to know the candidate.
Easing The Transition
The board’s work is not over once it has made a selection. It must also carefully consider the way the outsider CEO is introduced to the public, to the management team, and to the rank and file. When an outsider is brought in to deal with discontinuous change, the new leader needs time — early on — to develop his or her perspective on the industry, to establish the company’s position in the marketplace, and to determine how he or she plans to change the game. The board needs to be closely involved in providing support, offering an unvarnished view of the company’s position, and defining expectations clearly.
From our experience working with chief executives in many sectors and industries, we have identified four critical practices for outsider CEOs.
- Do only what only a CEO can do. The CEO needs to focus rigorously on issues that are unique to the position: shaping the company’s definition of success; breaking the frame (for example, by changing some fundamental aspect of the company’s business model); resetting expectations; and integrating the company’s parts with the whole.
- Find the right pace for change. Only the CEO can set the pace for change within the company, and it may require pushing back against expectations of what can be achieved in the first 100 days.
- Get the culture working with you. Culture can be the primary impediment to an incoming outsider’s ability to lead transformational change. The CEO needs to address business priorities and change in ways the organization can reasonably accommodate. Understanding how the company’s culture influences both formal and informal behaviors is therefore essential.
- Continually engage the board as a strategic partner. Given the pressure being placed on today’s boards, and the level of accountability expected from them, board members need to take part in the strategic conversation as it develops.
Although most companies will continue to promote from within, in line with their long-term succession plans, the stigma associated with hiring outsiders is dissipating. As globalization continues, the pool for available talent has never been deeper or more densely populated. To their credit, more boards are casting wider nets.
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