Organizations around the world are failing on one key metric of success: leadership development. According to research from the Corporate Executive Board (CEB), 66% of companies invest in programs that aim to identify high-potential employees and help them advance, but only 24% of senior executives at those firms consider the programs to be a success.
The problem isn’t a lack of internal talent. We’ve identified the predictors that correlate strongly with competence at the top. The first is the right motivation. This predictor can’t easily be rated or compared meaningfully across individuals. However, the other predictors—curiosity, insight, engagement, and determination—can be measured and compared.
Unfortunately, many organizations haven’t figured out how to fully develop their prospective leaders. That limits these people’s advancement and eventually their engagement and, ultimately, leads to turnover.
Low engagement and high turnover are extremely costly for organizations, especially if the people jumping ship are high potentials in whom much has already been invested. How can companies prevent this massive waste of talent and create more-effective development programs?
- First, by determining the most important competencies for leadership roles at their organizations. In our leadership advisory services at Egon Zehnder, we’ve identified seven that we believe are crucial for most executive positions at large companies: results orientation, strategic orientation, collaboration and influence, team leadership, developing organizational capabilities, change leadership, and market understanding. In addition, many leading companies are finding that an eighth—inclusiveness—is essential to executive performance.
- Second, by rigorously assessing the potential of aspiring managers: checking their motivational fit and carefully rating them on the four key hallmarks—curiosity, insight, engagement, and determination.
- Third, by creating a growth map showing how a person’s strengths in each of the hallmarks aligns with the competencies required in various roles.
- Fourth, by giving high potentials the right development opportunities—including job rotations and promotions they might not seem completely qualified for but that fit their growth maps—as well as targeted coaching and support.
Before an organization can begin mapping managers’ potential to required competencies, it must determine what exactly it needs. That will vary from business to business. Requirements will vary from role to role within firms as well. Your organization should aim to identify the competencies that are most crucial for its top roles in light of its own challenges and goals.
You should cascade this process down through the ranks so that you have a clearer idea of the key skills needed to do lower-tier managerial jobs, too. With all positions, however, you must resist the temptation to demand high levels of all competencies, because you’ll never find leaders who are perfect. The next step is to comprehensively assess future leaders’ current competencies and their potential for growth. With this information, you can now take the critical third step: predicting where each executive is likely to succeed.
Armed with assessments of your emerging leaders’ current competencies and potential for growth in each area, you will be in a much better position to make development and succession plans throughout your organization. And that will help you ensure that you have a strong pipeline of people to fill C-suite roles in the future.
The fourth key step in turning high potentials—at all levels—into leaders: Give them the opportunities, coaching, and support they need to close the gap between their potential and their current competencies. Well-planned job rotations are also crucial. To help your high potentials build their strengths and make the most of opportunities, you can provide individual coaching and group interventions.
When companies take this approach to leadership development—focusing on potential and figuring out how to help people build the competencies they need for various roles—they see results.
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Taped to the wall outside Intuit CEO Brad Smith’s office is his unedited performance review from the board of directors. The board thinks he should “be willing to have more unstructured conversations—not everything buttoned up.” All of this feedback is publicly displayed. Of course most of Intuit’s 8,200 employees will never walk past Smith’s office—so he emails the whole package to all of them each year.
Transparency is great, but this, you might think, is ridiculous. No one seems to think so at Intuit, however, and that’s a clue to a mystery worth solving. It’s this: Why is Intuit still here? It’s No. 8 on Fortune’s new ranking of the Future 50, the companies best prepared to thrive and grow their revenue rapidly in coming years. Yet at age 34 it’s older than almost all the others. Its business, specialized personal-computing software, is brutally competitive.
Here’s part of the explanation: Since its founding, Intuit has done what every company today must learn to do, disrupting itself continuously, reinventing its products and its business model before any competitor can beat it to it.
Its current self-disruption began five years ago when top managers decided Intuit had to be more than a provider of products and services. It had to become an open platform. “The average small business uses 16 to 20 apps, and we make three,” explains Brad Smith, 53, who has been CEO for 10 years. “So we had to open up our platform and trust that this would make our customers more loyal to us and also would give us insights into problems we could go solve.”
The company gambled that it would become stronger, not weaker, by welcoming outside developers—potential competitors —onto an online platform where they can offer apps that work with Intuit products. The open platform is working and now offers some 1,400 apps. It has also created unexpected opportunities for Intuit. Intuit thus is becoming an ecosystem in which several parties—customers, app developers, accountants, and Intuit—find new ways to interact for mutual benefit.
The recurring pattern is that Intuit disrupts itself without the motivation of a crisis. That’s highly unusual. The key is to focus on the finding that makes no sense. Most organizations do the opposite, as Cook and his colleagues did at first. They ignore the information that doesn’t fit, or convince themselves it isn’t important. Time and again, digging into the puzzling discovery —“savoring the surprise,” as Intuit’s leaders call it—has enabled the company to reinvent itself before competitors caught on.
These critical insights never would have happened if Intuit hadn’t been studying its customers rigorously—another vital element of its success. The employees are trained in how to do it: You don’t interview the customer; you just observe. They debrief immediately afterward because they all will have noticed something different, “so you get a complete picture much faster,” Smith says. “It puts a face to a problem. You see the humanity.” The underlying reality is that you can’t believe what customers tell you, as most companies learn the hard way. Customer behavior is the truth.
Intuit also deploys clever managerial techniques to evade or defeat the organizational change-killers. Among them:
- Tiny teams. New ideas are initially developed by “discovery teams,” typically only three people. They don’t report up the chain of command but instead go straight to a division general manager. The teams get intensive coaching every week or two from the GM or Cook, which helps them stand up to the barrage of opposition they’ll inevitably face from those with a stake in the status quo.
- Shared experiences. When new ideas get further along, shared experiences can often obliterate conflicts.
- Shared data, fast decisions. “My staff meeting used to be just me and my 12 direct reports,” says Smith. “Now we broadcast it to our top 400 leaders every month, and they have 24 hours to cascade it to all 8,200 employees.” A lot of infighting disappears when everyone knows what the top leaders are doing and why. Decisions get made much faster, and when a conflict arises, Intuit follows a sunset rule: If you can’t resolve it in 24 hours, you get another 24 hours to escalate it high in the organization to get a decision.
Any company could adopt those managerial techniques tomorrow, at least in theory. Far more difficult to adopt, and perhaps more important to Intuit’s self-disruptive success, is a culture that facilitates reinvention. A key element is permission to admit mistakes, shortcomings, and failures, which is valuable in two ways.
First, when an organization tries to change, it is implicitly admitting something isn’t working. No organization wants to admit that. People get punished when something isn’t working, right? And if no one will go there, change is forever blocked.
The second advantage of an open, fess‑up culture is subtly different. Remember those performance reviews and feedback reports taped up outside Smith’s office? They’re Smith’s proclamations that he himself must change. When top leaders admit that they must fix their flaws, it’s hard for others to claim that they or their business unit are beyond improvement.
Intuit, in its disciplined way, is sending scouting parties in search of the next big transformation. Starting last fall, the company grouped 70 of its leaders into small teams and told them to investigate eight major trends that arose in customer interactions and tech forums.
No company tries harder to find the next big disruption before it finds them. Intuit understands that in the digital world there are no final victories but plenty of final defeats, and success is always tenuous.
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“Great teams tend to happen by happenstance as people come together,” says Linda Adams, coauthor of The Loyalist Team: How Trust, Candor, and Authenticity Create Great Organizations. “They start with expectations around how people will perform, engage, and get their work done. In teams where expectations around behavior aren’t clear, people are left to show up and decide how they want to engage with each other.”
Adams and her partners found that teams are either saboteurs or loyalists, with varying levels of each. Some come together in trust, while others gather with internal conflict and strife.
Adams and her coauthors identify four types of teams, their traits, and how they impact a company’s success:
1. SABOTEUR TEAM
This team is focused on personal wins, and failure of others is the path to success. Members have a “watch your back” and “get them before they get me” mind-set. Behaviors include blaming others, engaging in one-upmanship, creating drama, and constantly pointing out what is going wrong without acknowledging what’s going right. This is the most toxic kind of team, and they can’t deliver results because morale suffers and good people quit.
2. BENIGN SABOTEUR TEAM
Members of this team are focused on self-preservation and survival. There is a false sense of harmony, with a “live and let live” mind-set. Behaviors include withholding feedback that could be helpful to others, staying within silos, delivering only on defined commitments, and being highly skeptical about the possibility for successful change in the organization and with each other. This kind of team isn’t productive because there’s little risk taking, and artificial harmony keeps real issues from being discussed.
3. SITUATIONAL LOYALIST TEAM
The members of this team are focused on keeping things moving in the right direction. There are pockets of trust, and people are given the benefit of the doubt, but there are weaknesses that keep the team from achieving high performance. Members carefully consider the impact of feedback before providing it, and they aren’t always candid. Strong alliances exist, but not equally across the team, and this team is often leader-centered, which means the leader is essential to accountability and decision making. This kind of team isn’t as productive as it could be, because members settle for good enough, and they rely too heavily on the leader.
4. LOYALIST TEAM
Members of this team are focused on the organization’s success, and the success of others is viewed as a success for all. This group believes “we win together; we lose together,” and they have a strong commitment to each other. Behaviors include proactive and candid feedback, actively engaging in productive conflict to the get-tough issues out in the open, sharing accountability for decisions and results, and helping others maximize their strengths.
“There is almost always a strong correlation between team dynamics and leaders,” says coauthor Audrey Epstein. "A lot of leaders don’t have a process or a methodology to build teams, and they build teams based on what they’ve seen or how they’ve been led during their careers.”
It’s possible to move your team from saboteur to loyalist, but it isn’t a quick fix. You need a plan and an agreement, says Adams. “The plan will help address issues, such as the nature and quality of team meetings, relationships that exist between team members, and the impact a team leader has on managing effectiveness,” she says.
Getting an agreement can be tricky, adds Epstein. “Sometimes you have a player who doesn’t want to go along with you, isn’t willing to extend trust, can’t get past their ego, and puts their personal agenda in front of the team’s,” she says. “You have to have lots of tough conversations with team leaders. You get what you tolerate.”
- Start by changing your attitude. “When things aren’t clear, there is a tendency to give negative assignation to behavior, assuming there is another agenda,” says Adams. “If you are able to give others the benefit of the doubt and assume positive intent, you can stay in the conversation, extending and granting trust.”
- Be willing to have tough conversations. “There are no elephants in the room with a top team, no non-discussables,” says Adams.
- Make giving feedback a team requirement. “You see a much more rapid adjustment when the people around you are invested in your growth,” says Epstein. “We see a lot of failure in companies because individuals fail, and the people around those individuals have seen them on decline but haven’t stepped up. When people feel challenged but not afraid, they do their best work."
Everyone deserves to be on a loyalist team. Epstein says, “We spend so much time at work, why would we ever settle for anything less? Not only does everyone deserve a great team; every team has the potential to be great.”
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