Developing A Leadership Strategy A Critical Ingredient For .

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WHITE PAPERDeveloping a Leadership StrategyA Critical Ingredient for Organizational SuccessBy: William Pasmore

ContentsIntroduction1What is a Leadership Strategy?2Creating the Leadership Strategy3Creating the Leadership Development Strategy17Implications for Talent Acquisition, TalentSustainability and Leadership Practices21Getting Results and Building the TalentYour Organization Needs24Conclusion25References25About the Author25

IntroductionOrganizations depend upon capable leadership to guide them through unprecedentedchanges. Yet, there is ample evidence inthe news and in recent research reportsthat even some of the best and most venerable organizations are failing to adapt tochange, implement their strategic planssuccessfully or prepare for a more uncertain future. We believe the turmoil weare currently observing has something todo with leadership, and that if we don’tchange our current approach to leadershipdevelopment, we will see even more of thesame.As well-known companies disappear orare taken over (think of Lucent, Chrysler,Lehman Brothers, Northern Rock, MerrillLynch) and new forces like the economiesof China and India rise, surveys of CEOsshow that they believe the one factor thatwill determine their fate is the quality oftheir leadership talent. Yet many top executives bemoan the lack of leadership benchstrength in their companies and wonderwhat will happen once the baby-boomergeneration of leaders finally steps aside.Can we count on the next generation ofleaders to step up once they are in position? Or are we seeing evidence of a talentgap that cannot be closed and will resultin even greater numbers of high-profilefailures? What can your organization do toavoid the risks associated with inadequateleadership and better prepare its currentand future leaders for changes that areyet unforeseen?Every leader is aware of the value of a welldefined business strategy. Few, however,give thought to the leadership that will berequired to implement strategies that callfor changes in the direction or capabilitiesof the organization. Without proper leadership, even the best and boldest strategiesdie on the vine, their potential never realized. This paper defines what a leadershipstrategy is and how to go about creatingone for your organization that will foreverchange the way you develop leaders andcreate new leadership capabilities. 2014 Center for Creative Leadership. All rights reserved.1

What is a Leadership Strategy?In order to understand what a leadership strategy is, we first have to be clearabout what we mean by leadership. TheCenter for Creative Leadership has beenstudying leaders and leadership for nearly 40 years and has recently come to animportant conclusion: leadership beginswith individuals in leadership positions,but it doesn’t end there.1 The ability of anorganization to accomplish its goals doesnot depend solely on the force of will ofa single great leader, or even upon theeffectiveness of the organization’s chainof command. These things are important,but don’t in and of themselves help usunderstand why some organizations succeed where others fail.Instead, research has shown, we mustunderstand leadership culture, as defined by the collective actions of formaland informal leaders acting together toinfluence organizational success. It is notsimply the number or quality of individual leaders that determines organizational success, but the ability of formaland informal leaders to pull together inthe support of organizational goals thatultimately makes the difference. Thus,when we speak about leadership here,it is both the leaders themselves andthe relationships among them to whichwe refer. At various times, the idea thatleadership is greater than the individualleader has been referred to as interdependent, boundaryless, collective orconnected leadership.2In more robust definitions, leadership includes both formal and informal leaders.Observations of actual organizations inaction are rarely as neat and tidy as theirorganization charts would suggest.Communication, influence and collaborationare occurring up, downand across the organization, almost as if theorganization chart didn’texist, as revealed by thework of various peopleon mapping informalnetworks withinorganizations.2To ignore this reality in any discussion ofleadership is to miss the point of what isreally going on and what must be understood and managed if strategies are tobe implemented successfully. 2014 Center for Creative Leadership. All rights reserved.

Thus, when we describethe leadership of anorganization, at a minimumwe should consider:A The quantity of leaders needed, as indicatedby current and projected formal leadershippositions depicted on an organization chart(number, level, location, function, businessunit, reporting relationships, etc.)B The qualities desired in selection (demographics, diversity, background, experiencelevel)C The skills and behavior that are needed toimplement the business strategy and createthe desired culture (skills, competencies,knowledge base)D The collective leadership capabilities ofleaders acting together in groups and acrossboundaries to implement strategies, solveproblems, respond to threats, adapt tochange, support innovation, etc.E The desired leadership culture, includingthe leadership practices in use, such as collaboration across boundaries, engagementof employees, accepting responsibility foroutcomes, creating opportunities for othersto lead, developing other leaders, learninghow to learn, etc.In much of the work on talent and leadership benchstrength, the focus has been on only the first two of theseways of describing an organization’s leadership. By leaving out connected leadership and leadership culture, wehave overlooked what makes leadership come alive inorganizations and the factors that often determine whether strategies and plans will actually be achieved.A good leadership strategy takes all of these factors intoaccount. Simply having all of the leadership positions onthe organization chart filled will not produce the leadership that is required to implement strategies, adapt tochange, support innovation or other important organizational agendas. It is not just having the right number ofbodies, it is what those bodies do and how they relate toone another that matters.A leadership strategy makes explicit how many leaders we need, ofwhat kind, where, with what skills,and behaving in what fashion individually and collectively to achievethe total success we seek.Very few organizations have an explicit leadership strategy. Is it any wonder that without one, CEOs find that theydon’t have the leadership talent they require? 2014 Center for Creative Leadership. All rights reserved.3

Like business strategies, leadership strategies arebased on a thorough analysis of the current situationand an informed view of the future. The strategy thenprovides a series of recommendations to close the gapbetween the current situation and desired future. Oncethe leadership strategy is known, a leadership development strategy can be formulated to produce the desiredfuture state, and implications for talent managementprocesses can be identified. When the strategy is implemented, business results will provide feedback on howwell the leadership strategy is working and help shapewhat new business strategies can be considered withthe leadership talent that has been developed.The leadership strategy should be driven bythe business strategy and specify:A. Quantity: How many leaders will be needed over the next 5–10years, taking into account growth needs and projected turnover1. When2. Where3. At what levelB. Qualities: The characteristics individual leaders and leadersoverall should possess when selected or retained, such as:1. Demographicsa. Ageb. Genderc. Raced. Culture of origine. Educationf. Experience42. Internal promotions versusexternal hires3. Diversity, targeted diversitya. Levelb. Location 2014 Center for Creative Leadership. All rights reserved.

C. Skills/Behaviors: The specific skills, behaviors, knowledge,competencies or abilities leaders need by function, level, locationor unit to implement the business strategy1. Generic behavioral competencies thatapply to all leaders in the organization2. Specific behavioral competencies bylevel or function3. Generic skills and knowledge requiredby all leaders in the organization4. Skills or knowledge required by levelor function5. Skills, knowledge or capabilitiesby location6. Language capabilitiesD. Collective Capabilities: The capabilities that are required of leaderswhen acting together, such as:1. Providing direction, demonstratingalignment and generating commitmentas a collective leadership team2. Solving problems or making improvements efficiently and effectively thatrequire collaboration across internal orexternal boundaries3. Engaging employees in decisionmaking and to gain their activesupport in implementing plannedcross-functional actions4. Jointly formulating strategies and executing them in a coordinated fashion5. Implementing successful innovationrequiring cross-functional collaboration6. Adapting to change in a cohesive andcoherent manner7. Working together to grow the businessin new markets8. Ensuring compliance/transparencyrequiring a consistent set of values, beliefs and actions across the enterprise9. Being responsive to customers in waysthat demand cross-unit coordination10. Developing talent on behalf of theenterprise, rather than for individualunitsE. Leadership Culture: The key attributes of the culture created by leadersthrough the way in which they lead1. Degree of dependence, independenceor interdependence among leaders2. Key values that are reinforced throughthe collective behavior and actions ofleaders3. The leadership style exhibited by themajority of leaders (control-oriented,laissez faire, participative)4. The leadership practices that are bothimportant and shared across the enterprise (engaging employees, acceptingresponsibility, embracing opportunitiesto make improvements, being customer focused and so forth)Once the leadership strategy is formulated, a leadership development strategy can be drafted.It clarifies how the leadership strategy will be accomplished, explores the implications for talentmanagement systems and processes, and outlines an approach to leadership development. 2014 Center for Creative Leadership. All rights reserved.5

Creating the Leadership StrategyThe first step in formulating the leadershipstrategy is to review the business strategyfor implications for new leadership requirements. This analysis usually requires a team ofexperts composed of some people who knowthe business intimately and others who arefamiliar with processes for acquiring, retainingand developing leadership talent. Beginningwith the business strategy, the first step is toidentify the drivers of the strategy. Drivers arethe key choices that leaders make about howto position the organization to take advantageof its strengths, weaknesses, opportunities andthreats in the marketplace. They are the thingsthat make a strategy unique to one organization as compared to another and dictate wheretradeoffs will be made between alternativeinvestments of resources, time and energy. Drivers are few in number and help us understandwhat it is absolutely essential for leaders andthe collective leadership of the organization toaccomplish.The reason why identifying key drivers isimportant in constructing the leadershipstrategy is because difficult choices willultimately need to be made about where toinvest money in leaders and their development. Particularly as budgets for leadershipheadcount and development tighten, it is morecritical than ever to demonstrate a clear line ofsight between investments in leadership and desired organizational outcomes, such as growth,profitability, talent retention and other metricsthat are of key importance to top-level decisionmakers who control leadership developmentspending.6 2014 Center for Creative Leadership. All rights reserved.

Key drivers of the business are: The relatively few (e.g., 3-5) determinants of sustainable competitive advantage for aparticular organization in a particular industry. Also known as “key success factors,” “key value propositions,” critical success factors, etc. Present- and future-oriented. As customers and competitors change, are the key strategicdrivers still relevant?Note that key drivers are not in themselvesdetailed strategies; instead, they are thekey decisions leaders are making aboutwhat the organization must do. For example, in some markets, like the restaurantindustry, making certain that customersare satisfied may be chosen as a key driverof success. In other industries, like utilities,customer satisfaction may not be a keydriver. A key driver in the utility industrymight be finding long-term sources of com-petitively priced raw materials to turn intoelectric power. Customer satisfaction andlow-priced raw materials are not completebusiness strategies; instead, they drive theformulation of detailed business strategies.The restaurant owner must develop strategies for producing high levels of customersatisfaction, and the utility company mustdevelop strategies for securing low-costraw materials.Key drivers can be identified by asking a fewfundamental questions: Is this an organizational capability that is absolutely vital? Could something else be moreessential in causing the vision/mission to happen? Defined relatively, what is most important to competitive success and mission completion? Is this something that the organization is positioned to do better than its competitors? Will doing this well translate directly into continued or future success? Would not doing this well cause the organization to fail? 2014 Center for Creative Leadership. All rights reserved.7

Key DriverBecoming More GlobalBecoming More InnovativeBecoming MoreCustomer-FocusedInvesting in High-GrowthOpportunitiesImproving OperatingEfficiency8 2014 Center for Creative Leadership. All rights reserved.Leadership Strategy Implications Requirement for greater cultural sensitivity among leaders Enhanced representation of different geographies at top levels Enhanced language skills in key leadership roles to enablecross-cultural relationship building Enhanced importance of foreign assignments for future leaders Greater understanding of local laws and business arrangementsin strategy making Greater interdependence among leaders to create moreeffective collaboration across functions in bringing newproducts to market Need to increase leadership involvement across functions ingathering consumer insights and translating these into profitableideas for new products Must anticipate capital, space, talent implications of rapidlyexpanding product portfolio Need cultural change to create a spirit of innovation versus aculture of risk aversion at top levels of the organization Need to develop and implement new processes forunderstanding customer experiences and translating theminto improved business practices Must create solid linkages across the organization at allcustomer touch points, so that the customer experiences aseamless relationship Need to understand the needs of different customer segmentsand move beyond “one size fits all” approach Must instill a culture of customer primacy and customer care Rapid growth requires attention to talent development;must accelerate the acquisition and development of talentfor key roles to avoid talent becoming the constraint tocontinued growth Must grow number of leaders at every level by 10% per yearover next three years Must introduce Six-Sigma, lean manufacturing and othermethods to bring costs into line with key competitors;these must be led from the top and supported by leadersat every level Must create a culture of continuous improvement that is ledauthentically by those in leadership positions

In reality, the leadership strategy implicationswould be much more specific, reflecting the actualopportunities and issues surrounding the key drivers. The key drivers and their associated businessstrategies should have clear implications for whatleaders must do well in order for the organizationto succeed. Ultimately, leadership developmentactivities should be designed to ensure that individual leaders and the collective leadership of theorganization are prepared to implement the mostimportant strategies related to the key drivers.After the high-level implications for the leadership strategy have been identified, the next stepin developing the leadership strategy is to assessthe current leadership situation and compare it tothe desired future. This is the step that requires themost “heavy lifting” in terms of assessment anddata collection, covering a wide range of variablesthat will affect decisions regarding both the leadership strategy and the leadership developmentstrategy to follow.A sampling of the methods that may be used to collect the current-state informationneeded in each category is listed in the table on page 10. 2014 Center for Creative Leadership. All rights reserved.9

DimensionQuantityMethodologies for Data Collection Workforce planning HRIS data Scenario building Assessment centersLeadership style assessment/personality profilesTalent management forms/review sessionsHRIS dataSkill/Behaviors Career profilesAbility testingHRIS dataSurveys/interviewsCompetency identification and assessmentCollective Capabilities Focus groupsObservationInterviewsDocument analysisLeadership Culture Culture assessment surveysEmployee surveysObservationFocus groups InterviewsDocument analysisQualitiesThe data from these analyses are used to identify gaps between the current and futurestates of leadership in the organization, which provides focus for the priorities to be addressed in the leadership strategy. A simplified example of the gap analysis that shouldbe performed is shown below.10 2014 Center for Creative Leadership. All rights reserved.

Leadership DimensionQuantity of Leadersby LevelLocation of LeadersLevel 110 Year 115Year 5Level 275125Level 3450750Year 1Year 5NA450500Year 1Year 5EMEA75150APAC50 Year 1250Year 1Year 5Year 1Year 5FutureQualities of LeadersYear 5Current50040030020010041–51Year 175 Female585MaleYear 23001125Location of LeadersFuture51 FemaleMaleCompetencyOperational EfficiencyCost ReductionRisk AvoidanceInnovationAdaptation to ChangeTalent Development1 2 3 4 5Significant increases atlevels 2 & 3 will requireaccelerated internaldevelopment, as well asexternal recruitment oracquisitions.NA growth will slow,although promotionswill continue due toturnover. Significantincreases in EMEA andespecially APAC.Retirement of boomerswill create need toaccelerate developmentof their replacementsfrom a much youngerpool; new hires will beyounger as well.Age20–30 31–41Skills/Behaviors ofLeaders: KeyCompetenciesRequired by StrategyImplications of Gapfor Leadership StrategyAnalysisMust make aggressiveeffort to hire, developand retain women toreach 20% goal.Need for dramaticchange; somemay not make theshift; need to beprepared for this.Current 2014 Center for Creative Leadership. All rights reserved.11

Leadership DimensionAnalysisCurrent Mostly ex-patsSkills/BehaviorsRequired by Leadersin Asia, Africa andLatin America Few with languages or culturalbackgrounds required to createbusiness relationshipsFuture Local knowledge and relationships Language skillsImplications of Gapfor Leadership StrategyChange mix of leadersin region through hiringand accelerated internaldevelopment; makecertain their voice isheard at HQ as well. Knowledge of local regulations Intimate knowledgeof local customersCurrent Meet planning deadlines Uphold company policies Maintain product qualityCollective CapabilitiesRequired by StrategyFuture Successful innovations tomarket quickly Better/faster coordinatedresponse to gl

Once the leadership strategy is formulated, a leadership development strategy can be drafted. It clarifies how the leadership strategy will be accomplished, explores the implications for talent management systems and processes, and outlines an approach to leadership development.

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