Read an Excerpt
Seven Disciplines to Achieve the Changes Great Leaders Know They Must Make
By DAVE ULRICH, Norm Smallwood
The McGraw-Hill Companies, Inc.Copyright © 2013 Dave Ulrich and Norm Smallwood
All rights reserved.
DO NOT WALK HOME
Imagine this: A group of turkeys attend a two-day training program to learn how to fly. They learn the principles of aerodynamics, and they practice flying in the morning, afternoon, and evening. They learn to fly with the wind and against it, over mountains and plains, and together and solo. At the end of the two days, they all walk home.
Real-World Leadership Development
This old sketch captures current reality. Most good leaders make earnest attempts to become better through coaching, individual development plans, training, and performance improvement plans. Through each of these efforts, leaders learn what to do to be more effective—and it's not cheap. An estimated $60 to $80 billion is spent annually on only training in the United States alone. To imagine this scale, if this money represented the revenues of one firm, it would rank between twenty-fifth (Procter & Gamble) and forty-first (Dell) on the Fortune 500. Some have suggested that training costs are about 2.0 to 2.5 percent of payroll, that the spend per learner is between $1,000 and $1,200 per year, and that employees receive about 40 hours of training per year. And these are direct costs for training, not including opportunity time and salary of those who attend.
About 20 percent of all training dollars go for leadership development and management and supervisory training, making this the largest single area of investment. Debate rages about how much of what is taught in leadership courses actually transfers to leadership practice. Some have suggested that knowledge transfer is as low as 10 percent. Other studies show the number closer to 60 percent. We estimate that 20 to 30 percent of ideas learned in leadership training turn into practice. Whichever of these statistics you believe, it is clear that the investment in leadership improvement through training (as well as coaching, performance management, and individual development plans as well) is not having the impact it could or should.
These investments in leadership improvement come as a response to persistent calls for improving the quality of leadership. In many surveys of senior executives, leadership has been and remains a top priority. In a Duke study of C-suite executives, leadership development is the number two challenge facing organizations. In our "Top Companies for Leadership" research, we found that companies that invested in leadership had much higher business performance than those that didn't. McKinsey partnered with Egon Zehnder to study growth performance of more than 700 companies and found that leadership quality is "critical to growth" and that most companies do not have enough high-quality executives. The Boston Consulting Group also found that improving leadership development was a top priority from a recent survey of 2,039 business leaders.
Similar results could be shared for performance management, coaching, and 360-degree feedback. While leadership matters and a lot of money is spent on improving leadership, it is not clear that these investments build lasting value. Unless and until leadership insight turns into leadership action, efforts to increase leadership quality amount to flying lessons for the confirmed pedestrian.
The Personal Case
Most of us have personal habits we would like to change. Most leaders have behaviors that they would like to change. Dan, a leader we coached, was head of finance at his company. He had exceptional technical skills, having spent 25 years moving up the organization and gaining certification by all the right professional associations. No one doubted his technical ability. He was well liked by his team and respected throughout the organization for his technical insights. But he had a leadership flaw.
He talked too much.
In personal interchanges, he dominated the conversation, speaking 70 to 80 percent of the time. In professional team meetings, he would control and dominate every meeting. When asked questions by bosses, peers, or subordinates, he would ramble over the whole topic instead of providing the specific information needed.
We were asked to coach him by those in the company who sincerely wanted him to succeed. He recognized that he had a tendency to be verbose. He knew that this tendency got him in trouble. He respected others and valued his team, but he just could not help himself when he spoke. We collected feedback on his behavior, shared with him the unintended consequences of his verbosity, agreed to an action plan to change the behavior, and followed up regularly. But his behavior did not change. He wanted to be a good leader, he knew what to do to be a better leader, but he could not sustain his desired change.
The Company Case
Individuals need discipline to turn leadership aspirations to actions, and so do companies. We were asked to help a company prepare its leaders to become better strategists. The company was not able to anticipate changing market trends, to articulate a clear and simple vision for its future, or to increase its customer-service scores. We worked with the senior line managers and strategic planning experts to map out what the company had done with their strategic work. We prepared leadership training where leaders would learn how to define market trends, where they would practice applying principles of strategic clarity to their vision and mission, and where they would define and practice actions to increase customer share. For a short period, the models and frameworks took hold. The company did market position statements, it crafted a strategic vision, and it put in place customer-service programs. After about six months, though, many of these initiatives faded, and people fell back into their previous practices. We had covered the traditional knowledge-transfer checklist, but somehow it did not stick.
Leaders matter. No one doubts that leaders make a difference in company results. Evidence proves it, and personal experience validates it.
Leadership matters more. An individual leader can make a lot of noise and raise the bar on expectations, but collective leadership binds leaders at all levels of the organization to shared and sustainable actions.
Leadership development matters. As the world changes, the skills of leaders must evolve. Marshall Goldsmith eloquently says, "What got you here won't get you there." Leaders derail when they fail to learn and grow with their markets and business. Unfortunately, in many development experiences, even when leaders learn they do not change enough to do things differently.
Personal change is not easy to sustain. Most of us know one or two things we want to change about ourselves (e.g., more caring for loved ones, more patience, more healthy eating, more regular exercise, more sleep, more balance in our lives, more financial responsibility). But knowing what to do does not mean we do it. Often when we attempt to make personal improvements, recidivism kicks in and bad habits persist. Consider the following statistics:
Ninety-eight percent of us fail at keeping New Year's resolutions to change bad habits.
Seventy percent of Americans who pay off credit-card debt with a home-equity loan end up with the same or higher debt in two years.
Americans spend $40 billion a year on diets, but 19 out of 20 lose nothing but their money.
Marriage counseling saves fewer than one in five couples on the brink of divorce.
Change through coaching, transfer from training to practice, or individual development plans is also very difficult. Even tailored performance management systems rarely make much difference. Like Dan, the executive with the unrestrainable tongue, most leaders find that knowing is not doing, and the challenge is often less what to do and more how to build the discipline to sustain it. Consider some additional statistics:
A VitalSmarts study found that 73 percent of employees have been in circumstances where they knew they needed to change to keep their job or to get ahead yet were unable to successfully change their habits.
Knowledge Advisors discovered that 76 percent of all the training managers who responded to a survey indicated that training is a key organization tool, but 9 percent of learners actually apply what they learn with positive results. In addition, 76 percent indicated that learners apply 50 percent or less of what they learn.
McKinsey found that only 30 percent of major initiatives succeed—and that proportion drops to 19 percent for culture-change initiatives. The conclusion: "The crucial issue is how the change is accomplished, not so much what the change is."
Ultimately, as individual leaders improve, the companies where they work also improve, becoming more able to sustain the transformations they intend. So the ideas in this book will help leaders to accomplish the corporate transformations they regard as necessary.
We call this work leadership sustainability. The term draws logic and insight from the field of environmental sustainability, which has evolved from isolated corporate social responsibility programs to a broad focus on changing a culture to include patterns of action that enhance external reputation.
The concept of environmental sustainability began by considering the context of the organization. The concept of leadership sustainability begins with recognition that what matters is the impact of the leader's actions on others—not just what the leader does or means to do. This addresses the natural human tendency to judge ourselves by our intentions, whereas others judge us (and we judge others) by behavior. Leadership sustainability has to show up not only in personal intentions but also in observable behavior.
Environmental sustainability is about caring for the earth's resources by reducing our demand for things that cannot be replaced and our output of harmful things that will not go away. Leadership sustainability is about caring for the organization's resources by adapting and changing leadership patterns so that they are consistent with shifting requirements. Environmental sustainability has shifted to a social agenda that involves giving back to the community through corporate social responsibility initiatives. Leadership sustainability occurs when leaders take personal responsibility for ensuring that they do what they say they will do, with beneficial results.
Environmental sustainability has further evolved to become a long-term commitment to changing the world in which we live and work and to creating a new culture inside our companies. Leadership sustainability is a lasting and durable commitment to personal change and creating a culture of leadership improvement that affects all leaders in a company. It is the next step in our journey of leadership. Table 1.1 summarizes the comparison between the two.
Our Leadership Journey
Over the past 20 years, we have worked to help individuals be better leaders and to build better leadership capability in their organizations. Our work has followed the same process in order to turn ideas into impact. At each step of this journey, we start with a relatively simple question and then scan the latest theory, research, and practice to discover alternative ways to answer the question. Then we use principles of taxonomy—the science of finding patterns—to synthesize what we find into a straightforward framework or typology that captures the ideas and enhances their power.
With this taxonomic logic in mind, we believe that the challenges of leadership can be simplistically captured in three phases and questions (Table 1.2):
Why. Why does leadership matter?
What. What makes an effective leader?
How. How do leaders sustain their desired improvements?
In the past, we have concentrated on the first two phases, which we review briefly here. The third phase, summarized at the end of this section, is the focus of this book.
Why does leadership matter? In our early work, we started with a simple insight—much of the practice of leadership was focused on individual psychological competencies. Virtually every book we could find then, and to a great extent now, was aimed at individual leader competency development (what we called the attributes of leaders). Popular examples:
Seven Habits of Highly Effective People (and its sequels)
Leadership Secrets of ... (whoever came to the would-be author's mind: Attila the Hun, Thomas Jefferson, Buddha, Santa Claus, and so on and on)
The Extraordinary Leader
In seminars we often ask, "What makes an effective leader?" The response generally covers much the same ground: setting a vision, having integrity, communicating, being bold, making things happen, and other personal attributes. Frequently, leadership development experiences are organized with a day on each attribute.
We proposed that this approach was half right. Leaders do need to have effective attributes, but leadership is also about getting results. So, in our book, Results-Based Leadership, we explored four results that leaders need to deliver:
Employee. Leaders increase employee productivity by building competence, commitment, and contribution among the workforce.
Organization. Leaders must build sustainable capabilities that shape an organization's identity.
Customer. Leaders ensure customer share by creating long-term relationships that delight target customers.
Investor. Leaders build intangible value (which is about 50 percent of a firm's market value) by creating investor confidence in future earnings.
We have since added a fifth:
Community. Leaders establish their organization's reputation by becoming active community citizens.
It was at this time that we realized the importance of the relationship between attributes and results. Neither alone is enough—it's the virtuous cycle between them that makes all the difference, as sketched in Figure 1.1. We connect attributes and results with so that and because of. One simple application is that when a leader receives 360-degree feedback, which is about individual competencies, it is essential to pose the so that query. I must improve this competency so that I deliver a particular result to one of my stakeholders. Alternatively, another leader delivers results and should ask the because of question. I delivered this result because of this competency I have (or lack).
It is critical for leaders to know why leadership matters. Leadership is about linking attributes to results.
What makes an effective leader? If leadership matters (the why question), then what must leaders know and do to make that important difference? As we thought about this question, we began to focus on the importance of brand as a metaphor for defining leadership. The concept of leadership brand as a metaphor for effective leadership draws on two conceptual shifts in leadership thinking:
From a focus on the leader as a person to a focus on leadership as a capability within the organization. The metaphor of brand is more about leadership than about the characteristics of individual leaders.
From a focus on what happens inside the leader or inside the firm to a focus on meeting customer, investor, and other external expectations. The metaphor of brand starts from the outside and focuses clearly on business results.
This typology leads to four approaches to leadership (as outlined in Figure 1.2):
Competent leaders: Determine and develop the knowledge and skills of the individual leader.
Leadership systems: Align selection, development, compensation, and retention systems to reinforce desired leadership behavior.
Celebrity leaders: Recruit or sponsor famous leaders who are known to customers and investors and who help to draw attention and resources to the firm.
Leadership brand: Develops leaders at every level who are recognized by employees as well as customers and investors for their ability to deliver results in a manner consistent with firm brand identity.
Leadership brand integrates the other three views and offers a robust definition of what makes an effective leader. It translates customer expectations into internal behaviors so that leaders ensure that employees deliver the desired customer experience whenever they touch the customer. We further found that leadership brand is made up of two elements: the code and the differentiators (Figure 1.3).
Excerpted from LEADERSHIP SUSTAINABILITY by DAVE ULRICH. Copyright © 2013 by Dave Ulrich and Norm Smallwood. Excerpted by permission of The McGraw-Hill Companies, Inc..
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