Posted by Noah Rabinowitz on May 24, 2017.
As the world rapidly transforms around us, organizations have had to learn how to adapt quickly or risk falling behind, or even worse, become extinct. For example, only 12 percent of the Fortune 500 companies from 1955 are still in business, and last year alone, 26 percent fell off the list.1 During periods of disruption and change, leaders can either serve as the primary catalyst for growth, or hold companies back. One of the greatest challenges today is understanding whether the leaders you have in place are the right leaders to support transformation.
Consider the disruptions that are spurring the constant and accelerated need for transformation. Technology change is a big one, creating the potential for new products and services (via the Internet of Things, for example), enabling new business models (such as flexible consumption or the excess capacity economy), and spawning new ways of working (including augmenting the workforce with AI [artificial intelligence] and RPA [robotic process automation]—a top-10 Deloitte Global Human Capital Trend for 2017).
Volume and pace are additional disruptive forces. Massive volumes of data, both internal and external to organizations, are available and potentially useful, but using them requires analytical capabilities and the insight to apply what’s learned to the business. The increasing pace of change (and of day-to-day life in general) can keep people and organizations reactively trying to keep up, rather than proactively adapting to or even leading change.
Leaders can either serve as catalysts for change or hold organizations back.
Our fear of change serves a vital purpose in preventing us from making simple mistakes, but it can also prevent us from keeping pace with the changes around us. An overwhelming 97 percent of CXOs surveyed in Deloitte’s Business Confidence Report 2016 believe they need bold leaders in order to have breakthrough performances, but most admit their companies are not investing in cultivating and promoting leaders who exhibit this trait. This gap between knowing and doing is nothing new, but still begs the question of why so many organizations still haven’t fully committed to making leadership their competitive advantage.
While companies can make significant investments preparing for the future, they will only get as far as their leaders allow them to go. Good strategy sets direction, but it’s the quality and depth of leadership and execution that ultimately determine success.
How do you know if you have the “right” leaders?
For years, research has recognized common characteristics successful leaders share.2
- They are better able to tolerate current and future stress.
- They are quicker to spot patterns and react to them.
- They are more willing to trust others quickly.
All of these characteristics help leaders collaborate more readily, anticipate positive outcomes, and manage setbacks more effectively. If transformation efforts are going to be successful, you need to have the right leaders in place—leaders who exhibit these traits, among others.
Identifying these leaders starts by conducting a “risk analysis” of the current leaders you have. This involves zeroing in on the key leadership characteristics needed to make the business successful by analyzing anticipated changes and defining the capabilities necessary to respond to those changes. The next step is evaluating leaders to determine who is ready to make needed changes and who is likely to struggle, flounder, resist, or derail. Bottom line—you need to evaluate what you have in relationship to what you need. If the gap is too big, strategy is at risk before it’s even launched.
Determining the size of the discrepancy between the leaders you need and the leaders you have is the first necessary step toward addressing it. This process will likely be painful, as it often means acknowledging that some of the leaders who have been valuable contributors so far can’t provide what is needed going forward. However, it’s better to face the reality than keep ineffective leaders in the pipeline who can limit space for high-potential candidates, be a derailing force against transformation, and cause frustrations for everyone who has to work with them on a regular basis.
Change management, while critical to successful organizational evolution, is not enough on its own.
It’s possible to have a great change management plan in place and still have it fall short. It is often easier to point to a process as the reason for failure than to identify specific leaders who prevented change efforts from being successfully executed. However, some leaders are simply not equipped to quickly execute plans that call for greater risk taking, more experimentation, and frequent changes in behavior.
So now what?
Imagine the following scenario: a CEO is supporting a significant change in strategy and conducts a comprehensive assessment of her leadership team to determine if she has the right people in place to execute. This assessment indicates that her leadership is not ready to embrace the changes she’s recommended, leaving her with three choices:
- Reduce the ambition of the strategy, dialing back the pace and scale of transformation. While this is sometimes advisable, it is rarely possible to avoid the momentum created by forces such as market competition, the drive to maintain profit margins, or pressure from the board.
- Fail on execution, not because leaders aren’t working hard enough or the change management program isn’t being followed, but simply because leaders don’t have the raw material and potential to pivot and work in drastically different ways than they are today.
- Find the people needed to fill the gap through a build or buy strategy.
Determining the best way to fill this gap is never an easy question, but we will begin to address the key considerations in our upcoming post:“Leader-proof” your transformation efforts: Build or buy transformational leaders.
1 Introduction, Rewriting the Rules for the Digital Age: 2017 Global Human Capital Trends, Deloitte University Press, https://dupress.deloitte.com/dup-us-en/focus/human-capital-trends/2017/organization-of-the-future.html.
2 Dr. John Krump, Senior managers: are they really different?, Kaisen Consulting Limited.