Diamonds in the rough

A key question on the minds of CEOs and boards is how to develop the next rung of leaders in order to ensure a smooth transition when the time comes.

In fact, leadership succession has become a cottage industry in itself, with human resource (HR) professionals, search consultants, psychologists and executive coaches.

But despite all the advice and so-called best practices available in the market, very few companies get their next-gen leadership development right. “We have been investing in succession planning activities for years, but we still don’t have a good crop of future leaders,” is the chant of most global CEOs.

The most common practice of succession planning goes something like this: HR annually draws up a list of three-four candidates for each key job, senior management discusses the names on the list and a training/development plan is created for each candidate. The so-called best practice companies go a step further. They identify their high-potential talents early in their careers, and give them a special development diet to prepare them systematically for future leadership roles. The diet consists of a mix of training, executive coaching, stretch and rotational assignments. Unfortunately, both these processes miss the mark.

In such a rapidly changing business environment, how can companies tell who among their ranks will be best suited to lead in the brave new world of tomorrow? It might, therefore, be time to rethink the “best practice” of early anointment and special treatment of high-potential people.

Finding new talent

Leadership is about having abundant emotional and physical energy to create positive change despite the most formidable of obstacles. It is about having the resilience to constantly reinvent oneself in the face of an ever-changing landscape. Such energy cannot be learnt in a classroom or acquired automatically when someone is appointed to a senior position. It must come from within. Therefore, instead of treating a chosen few differently, companies can create meaningful development programmes that allow all employees to take personal initiative and display leadership skills if they so desire, and allow management to identify “diamonds in the rough” at the same time.

After allowing the teams to work on developing their ideas for a few months, they should be invited to present their work to senior management. By listening to these presentations, senior management will automatically get a sense of who the best thinkers and performers are. By working on these teams, participants will get an opportunity to learn something that would not have been possible within their day job, and network with and get noticed by senior management. Annual programmes like this can give senior management a very good view of their high-potential people without anointing a few as such. Because participation is totally open and voluntary, it does not create any morale issues for those left out.

Another variation of this programme is to even leave topics for the teams to decide. Anyone with an idea that can save money, increase revenue, or improve any aspect of the company can be invited to form a team and participate in the programme. An added benefit of such programmes is that they unleash creativity and innovation within the organization without adding additional resources.

Nurturing the existing ones

The next challenge is what to do to keep your next-rung leaders motivated enough to ensure they don’t jump at the first available opportunity in a competitor company. While some losses are inevitable, here are some ideas to minimize the risk:

• Get to know your next-rung leaders at an intimate level. What is their overall purpose in life? What do they get excited about? What is bigger than money and position for them? If you know the answers to such questions, you have a better chance of linking their self-actualization aspirations to the priorities of the company. When such an intrinsic alignment of interests takes place, next-rung leaders don’t mind waiting a little longer for the top spot.

Unfortunately, very few bosses know their subordinates in such a way, and therefore are unable to harness their energy productively.

• Give them room for entrepreneurship. If they feel like they are creating something they can call their own, or have the independence to shape an initiative such that it showcases their leadership abilities, they are likely to stay longer.

• Try co-headship. If you have two leaders who are equally qualified for a job, make them co-heads. Most people initially disagree with the notion of co-headship, but eventually realize it is an excellent mechanism for succession planning. Companies like Goldman Sachs use this technique very effectively by appointing co-heads (even tri-heads at times) for key positions. Instead of losing the other person to competition, appointing her a co-head allows you to retain her, and the business unit gets a more balanced leadership at the same time.

There is no such thing as a well-rounded executive. Each person has unique strengths and weaknesses. However, a partnership between two or more people at the top can provide well-rounded leadership.

Of course, effective co-leadership calls for a high degree of emotional intelligence and teamwork. However, once you clarify that it is an integral part of your culture and that leaders are expected to get along with each other and make teamwork actually work, the smartest leaders get the clue and make it happen. The extra cost of having two heads is more than offset by the higher productivity and creativity if the co-headship works. Yes, it is hard to create a culture of effective co-headship, but it’s well worth it if you can get it right.

• Appoint your successor while you still have some time left. And work with him/her for a year or two before leaving. This ensures a smooth transition, and allows your successor’s peers to get used to the idea. At American Express, outgoing CEO Harvey Golub appointed Ken Chenault as his successor nearly two years before he finally retired in 2001. They worked together in the “Office of the CEO” for the overlapping period, and when Golub finally stepped down, the company did not skip a beat.

In the fast-changing and interconnected global business landscape of today, companies should get out of the talent prediction game and stop “planning” their succession. Instead, they should start creating conditions in which the cream can naturally rise to the top, and create a culture in which next-rung leaders can thrive even while they are waiting in line.

Rajeev Peshawaria is CEO of the ICLIF Leadership and Governance Centre based in Kuala Lumpur, Malaysia. He is also the author of Too Many Bosses, Too Few Leaders (Free Press).

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