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Why it is so hard for companies to find great leaders?
By Dan MacDonald
When leaders are chosen, the decision is often based on the wrong criteria. Many look to people with strong, charismatic personalities, or passion for personal achievement. They look to people who are commanding or who manage the efforts of others well. Some people even look to physical attributes as an indication of leadership ability.
The misconceptions of what makes a person a good leader are not limited to these factors. They also include our choices of personality characteristics. Some see great leaders as people who can mesmerize a crowd with their stage performance, who can make those around them relax with their confidence, or who can think circles around other senior people in the organization. In reality, these traits and characteristics are not indicators of great leaders. Rather, great leaders are characterized by their focus on integrity over stage performance, passion for what is best for the company over self-importance, humility and passing forward credit over ego, and empowering their people over making decisions on their behalf. There have been numerous books written, researches conducted, and data compiled that point to these findings; however, even extraordinary companies with insightful, intelligent, and experienced boards of directors and senior executives have erroneously chosen leaders based on their perception of leadership capabilities.
Take Hewlett Packard for instance. In January of 1999, Hewlett Packard’s board of directors met in the Garden Court Hotel in Palo Alto, California to discuss, among other things, the rapid changes in business caused by the unsubstantiated growth of internet IPOs. There was concern among the board that changing times may call for a leader better suited to lead the company into the future. In his book, How the Mighty Fall, Jim Collins summarizes this concern best, stating that, “HP’s stalling growth and languishing stock price relative to the skyrocketing technology sector lend credence to a growing worry that HP needed an entirely new type of leader”. At the meeting, Lewis Platt, then CEO of HP, suggested he retire early to make room for an appropriate leader. The board accepted and replaced him with Carly Fiorina, announcing, in July of that year, that she would become the next CEO of Hewlett Packard.
Lewis Platt and the board of directors believed that a new CEO with a fresh perspective would help mobilize the company towards the rapidly-changing landscape of the technology industry. Fiorina, who once held Forbes magazine’s ‘Most Powerful Woman in Business’ title and had an impressive background as Executive VP at AT&T, was just the type of executive HP was looking for. In retrospect, it seems as though the board of directors may have erred on its judgment; during Fiorina’s tenure HP realized its first loss, its stock price fell from $45.36 to $20.14 and heavy job losses were incurred. In comparison, Platt, the Ford Taurus-driving down-to-earth former CEO, grew HP from $16.2 to $42 billion and earned Chief Executive Magazine’s distinction as the 11th all time wealth creator.
After closely examining HP, it becomes evident that leadership plays an important role in the rise or fall of an organization. Leaders can either drive organizations to market capitalization of hundreds of millions dollars or to losses as equally great. It is hard to dispute that leadership does not play a vital role in the success of a company, yet many organizations do not have systems in place to identify and develop potential future leaders.
Consider Sam Walton, founder of Wal-Mart. From a young age, Walton displayed a natural ability to lead. In high school, he was the starting quarterback of the football team and never lost a game. He was Vice President of the student body in his junior year and president his senior year. He was voted ‘Permanent President’ of his graduating class in university. But Walton didn’t fit the standard description of a leader. He was not an Ivy League school graduate and did not hold an MBA. Walton was a humble, scrappy, pick-up driving country boy.
Walton went to work as a manager trainee at JC Penney three days after graduating university marking the beginning of a passionate love affair with the retail industry that would help shape the remainder of his life and affect the lives of millions of people. At JC Penney, Walton embraced the customer centric JC Penney approach to retailing – especially JC Penney Ideas #2 and #3, guiding principles related to giving the customer the most value for their money. But Walton was not the most thorough employee; he hated making the customer wait while he completed paperwork, so his books were a mess. His boss often threatened to fire him, saying he was not cut out for the retail business. Walton managed to hold onto his position because of his ability as a salesman. After only 18 months with the company, Walton resigned.
If JC Penney had systems in place to identify the leadership potential in Walton, they may have been able to entice him to stay and develop him into their future leader. Instead, he started his own department store which would rival and eventually surpass JC Penney in the quest for retail dominance. As many companies began to adopt the ‘promote from within’ mindset, these types of leadership development systems are becoming more and more common. The problem is many of these companies base their criteria for identifying future leaders on misconceptions of what makes a great leader.
Very few people can pick great leaders, so the question remains—how do we create a system for identifying great leaders in the early stages of their development? Do we use psychometrics profiles to identify the leaders with the best traits and fast track them on a path to more senior roles? Do we let the people inside or outside the organization decide who will be the next leader? Many decisions must be made but before making these decisions we must be aware of our faults in choosing leaders. Organizations need new ways of deciding who will be a leader, as leadership impacts the organization as a whole. Hard-working employees rely on their leaders to make the right choices for the company and ensure the employees have a future with the organization.
It’s difficult to know the right answers but it’s clear that investing in the development of potential future leaders will provide a company with advantages over organizations that hire people from outside to fill internal leadership roles. As a result, companies are turning to post secondary institutions like the Northern Alberta Institute of Technology (NAIT) to assist them to develop their leaders from within. Their innovative Leadership Program will assist companies to develop the skills and abilities of their potential leaders (http://www.nait.ca/cit/245.htm). Forward thinking companies are already realizing the benefits that can be achieved by investing in their people and consequently the future of their organization.
Sources:
Collins, J. (2009 ). How the Mighty Fall. USA: Harpercollins.
HP. (2009). Executive Team. Retrieved September 8, 2009 from
http://www.hp.com/hpinfo/execteam/bios/fiorina.html.
Entrepreneur. (2009). Sam Walton. Retrieved September 8, 2009 from http://www.entrepreneur.com/growyourbusiness/radicalsandvisionaries/article197560.html.
Walton, S. (1992). Sam Walton: Made in America. USA/Canada: Bantam Books.
