We are experiencing a leadership crisis in every facet of our lives. There is $366B being spent annually on developing leaders (Hieker & Pringle, 2021). With that level of investment, we should have an abundance of great leaders, but we do not. One major root cause of this is attributed to choosing the wrong people to start. This is a treacherous problem for all businesses but particularly important for small businesses when there is often a limited bench of leaders based on the size of the organization.
Bottomline, is we have too many people in place that are poor leaders and our pool to choose from is shrinking due to people leaving the workforce post Pandemic and with more than 10k Baby Boomers turning 65 every day. Several recent studies focused on understanding how to determine leadership potential. A few big outcomes of those studies indicated that variation is a big contributor to this issue. A clear definition of what leadership potential is has gone missing from many organizations, but the bigger issue is the crazy amount of variation in what people look for in leaders. This results in something different being sought at every level in an organization. How could a company possibly develop a pipeline with that dynamic?
The recent research showcased in the new book, Determining Leadership Potential – Powerful Insights to Winning at the Talent Game, consisted of three studies. One was a qualitative case study of one industry, another was a quantitative global study of nearly 600 leaders, and the third study was an interview-based study of CEOs from more than 50 companies around the world. We asked what criteria they used and just taking the CEO study, the top answer was offered by only 8% of the CEOs and the second top answer offered by only 5%. The variation is a major issue.
The studies were conducted against the backdrop of the Leadership Blueprint, a comprehensive solution on how to think about leadership potential based on a meta-analysis of thought leadership over the last 50 years and examination of actual practices in the workplace. That extensive work produced four reliable predictors of potential: intelligence, personality, learning agility, and motivation. When we asked directly about each of these criteria and whether they were used as criteria, the vast majority (90%+) said yes, they use each of these criteria and place a high level of importance on each of them regardless of the fact that most didn’t mention them in the list of criteria they used. The punchline on this point is when people focused on each of these criteria, they emphasized how vital they were to the leadership potential assessment process. It makes sense. Let’s look at each independently.
Intelligence
Research for centuries has supported the idea that intelligence is fixed. Intelligence becomes critically important in leadership roles because a leader’s world only becomes more complex as they rise in an organization. The scrappiness that is needed for small organizations to succeed places an even greater emphasis on hiring people with strong cognitive skills.
Personality
Like intelligence, personality is largely fixed. As a key determinant of leadership potential, it’s less about ideal personality types and more of an emphasis on identifying whether folks have any derailing personality characteristics. No one wants to work with someone who focuses only on themselves, is afraid to make a decision, is extremely negative or critical, doesn’t regulate their emotions, or ends up yelling or being very aggressive. This point is compounded in a smaller organization because it is harder to get away from such people. The costs of people with such attributes, beyond being polarizing, is tremendous and shows up in hard costs (ex. absenteeism, turnover, missed opportunities, etc.) but also soft costs such as limited innovation and fear.
Motivation
You should surround yourself with people with great passion, imitativeness, and energy to reach a winning formula. No one controls motivation other than the person. We don’t “motivate” people, they come with their own engine. High motivation is even more necessary at the leadership levels to be able to chart a course and generate enthusiasm and accountability around getting results. That is taken to a higher level with small companies where people have to do more with less and be innovative on how to execute on their agenda.
Learning Agility
In the research referenced above and many other research studies, learning agility has been identified as a big differentiator of success. The world seems to be changing on a dime often and new challenges are surfacing for businesses to face every day. Very often what worked last time isn’t going to work next time. This all requires a tremendous appetite for learning, experimenting, and reapplying these learnings. Because of the high failure rate of small business, this is a critical component of the resiliency necessary for survival. Leaders who have a high learning agility are essential to the sustainability of these businesses.
One of the biggest challenges small businesses face in using these factors for determining leadership potential is they often lack the resources that can aid in developing competence in assessing candidates for these components. The use of assessments to assist in this process (ex. Wonderlic, DiSC, Myers Briggs, Hogan Executive Assessment, etc.) is limited in organizations of all sizes but especially so in smaller organizations. Observation is often cited as the most frequent method for assessing the presence of these components in candidates or employees. The problem with that is the people doing the observing are not trained behaviorists and miss quite a bit that could help tell the story properly of the absence or presence of these four components in people.
The other limiting factor is that small businesses are often founded by entrepreneurs. Many of these folks don’t have a deep foundation in talent management and are often too busy to develop their talent management skills. Add in the fact that who you start with in your business may not be who you need as your company evolves. This becomes an issue because on average, employees stay on for four years or more and nearly 40% stay for 8 years or more (NSBA, 2017). These loyal employees who have helped you start your business are often not the ones you should choose to be your leaders but that is often what happens. Using assessments, multi-rater feedback, and other tools can help add in more objectivity to the process.
We have an opportunity to improve the results of leader selection by getting better at the front end and leaning on the true predictors of potential – intelligence, personality, learning agility, and motivation. Because the margin of error is even more narrow with small business, it would be prudent for leaders of those businesses to raise their acumen in this area to increase the hit rate of their leader selection.
Check out www.determiningleadershippotential.com for more resources to help increase your success in determining leadership potential.
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