Wednesday, December 16, 2009

Gambling on Leadership Potential

Why is it so hard to predict the success of leaders before we hire or promote them to the next level? We hear about the failure rate of new CEOs and senior leaders all the time, and hear from the “experts” how shortsighted and ignorant we are for not being able to get it right.

OK, now I’m one of those idiots responsible for identifying the next generation of leaders, so excuse me if I get a little defensive here. The reason our success rate is barely better than 50%, maybe worse depending on what study you’ve read, it that IT IS DAMN NEAR IMPOSSIBLE TO PREDICT THE FUTURE!

Sorry for shouting. I’ll give you two examples to make this point.

1. Drafting NFL quarterbacks.
Pro football has the most sophisticated succession planning and development system on the planet. Future quarterbacks are identified and groomed from the moment these little future stars play their first Pop Warner game. They are groomed and scouted through high school and college. The NFL spends millions on scouting departments, Wonderlic tests to measure intelligence, combines, and all sorts of ways to measure and assess a player’s ability. They watch hundreds of hours of tape, studying the player perform under pressure. You would think pure physical abilities would be WAY easier to assess than leadership ability, right?
Well, if it were so easy, how do you explain:
- Matt Leinhart
- Jamrcus Russell
- Ryan Leaf
- Akili Smith
- Art Schlichter
- Cade McNown
- Dan McGwire
- Steve Pisarkiewicz
- Todd Marinovich
- Jim Druckenmiller

Would anyone care to bet your mortgage on Colt McCoy or Tim Tebow?

These “can’t miss” quarterbacks were all taken in the first round and all turned out to be colossal busts! The failure rate of quarterbacks selected in the first round is so high that some teams are afraid to spend a first round pick on a quarterback.

2. Picking stocks.
Wall Street hires some of the best and brightest MBAs from the top schools and trains them to be stock market analysts. They spend millions on the more sophisticated modeling software, they study the industries and companies they are responsible for, and work their fingers to the bone on the behalf of their clients. Yet, some would say a blindfolded monkey throwing darts at a newspaper’s financial pages could select a portfolio that would do just as well as one carefully selected by experts.

When it comes to predicting the success of quarterbacks and stocks, it seems the best pickers in the world have about a 50.5% success rate. That’s just a little better than the odds of winning at roulette or blackjack at the casino.

Again – it’s impossible to predict the future. There are just too many variables. Call it chaos theory, call it whatever you want, but until someone invents a time machine, 50.5% may be the benchmark.

When it comes to leadership development, even the best companies don’t get it right all of the time. However, they do a better job at it than most of their competition and even a 20% improvement gives them a huge competitive advantage.

Before we turn to the blindfolded monkeys, are there some things we can do to stack the deck a bit in our favor? Sure – we can:

1. Cast a wider net and create an environment and infrastructure where everyone has the opportunity to reach their high highest potential. 50% of 1000 gives you a much larger pool of candidates than 50% of 100.

2. Improve our ability to recognize talent early and use all of the tools at our disposal to accelerate their development and prepare them for potential roles.

3. Use consistent, reliable criteria to select for potential, instead of strictly relying on past performance or meaningless criteria.

4. Support our high potentials once they are promoted and give them a better chance to succeed (give them a mentor, a coach, feedback, etc…)

Do these things, and do them well, and then roll the dice. Hopefully we’ll get it right slightly more than half the time, and be able to admit it when we get it wrong and minimize the damage.

What do you think? When it comes to assessing leadership potential and leadership selection, is 50.5% a realistic expectation, or can we do better?


14 comments:

Rodney Johnson said...

Dan, great question. Here are a couple of items that are not on your list when identifying potential leaders.
1. Are they constant learners? In my work with CEOs of small to mid-sized companies, individuals that are constantly reading and inquiring seem to have a greater chance of becoming a leader.
2. Are they able to receive feedback? Feedback is a critical component in helping potential leaders become effective leaders.

Just a couple of my thoughts...

6p00d8341c500653ef said...

Dan,

This is one of my favorite topics. One of the reasons relates directly to #3 and is one that I continue to espouse even though it meets with disapproval due to "conventional wisdom". However, I happen to be right:-) And it looks as if you are on the same track.

a. Financial firms are required to have disclaimers that "past performance is no indicator of future yields." Why? Because performance is situational--global economy, local economy, personal needs/wants, management changes, product lines, blah blah blah.

b. When we use the term "high potential," we are using the observation of current & past performance and then merely saying: "Under the identical circumstances, this person can perform really well in the future."

c. We don't know what the future holds.

I've observed one practice as being *most* effective in management/leadershpdevelopment: increasingly broader and deeper assignments.

We can observe the results in real time, the results are real, the feedback is based on real info, and we can tell whether someone is predisposed toward learning new things.

Honestly, the notion of "high potential" is great for marketing but really means zero. Everyone has the potential for something. The question in business is: Can this person manage at the next step on the ladder.

So, do a "What About Bob?"--Baby steps.

Too often we look at someone who is a second year manager and a star, then decide to invest lots of time, money, and energy with the *expectation* that this is a future CEO.

There are many reasons why the military can continue to be effective. One is that they don't groom Privates to be Generals. They groom them to be Corporals, then watch what happens.

Aaron Windeler said...

Dan,

If any of us can really figure this out, I think that we are due for some of the millions going to all those CEOs who quit early.

In regards to QBs, Steven Pinker thinks that the data against our ability to pick good QBs is overated. I don't know, it isn't my area. I do think that all the guys you list may have been due for a fall - the law of regression to the mean affects us all.

I agree w/ Rodney and 6p00R2D2, desire to learn & ability to take feedback are important qualities & grooming someone for the next step, not 10 steps ahead is good advice. But we don't really know how good b/c CEOs (and any top management) won't take the time to be properly studied - I think we could do much better at predicting who will be a good CEO if that world was opened up to more research.

The research we do have on individuals' performance in business does say some pretty consistent stuff - intelligence and conscientiousness are key. I don't know of any studies that look at desire to learn, or openness to feedback, but I'd love to see if that helps predict the abilities of people from CEOs down to mere mortals.

If anyone reading (or writing) this blog can get access to a bunch of CEOs for research, contact your local universities' management department. They would love to talk to you.

Mary Jo Asmus said...

Dan,

I think you got it right with "too many variables". It isn't just the high-potential leader that is responsible for success or failure. It is also the context of all the variables in which they work: the culture, the team, the customer, the stock market - to name but a few. These contextual items are constantly changing, making the variables involved even more complex. To top it all off, we're dealing with human beings here, and all of the complexities that we just can't seem to condense into a tangible, predictable system.

What we need to do is our best at choosing those we think can adapt well, are good at relationships and are ethical, smart, resilient, and quick. And then support them in whatever way we can to help them to do their best within the messy, crazy context of our organizations and our world.

Dan McCarthy said...

Rodney –
Thanks, agree!

Steve (yes, that 6p00d… is Steve Roesler) –
Stick to your guns, you’re right. And I love that investment disclaimer, I’ll have to start using that.

Aaron –
Thanks, great points and questions. There has been leadership potential research, and it supports your experience. The ability to learn, accept feedback, and adapt (“learning agility”) is supposed to be a predictor of senior leadership success. However, you’re right; it’s a tough thing to measure and track.

Mary Jo –
Right! You’ve so eloquently stated the point I was trying to make.

Brian W. said...

I need a little more out of your conclusion...

Improve our ability to recognize talent early (How?)
and use all of the tools at our disposal (What tools?)
to accelerate their development and prepare them for potential roles (How?).

Use consistent, reliable criteria (What criteria are consistent and reliable?)
to select for potential, instead of strictly relying on past performance or meaningless criteria. (What commonly-used criteria are meaningless? How valuable is past performance? Quite a bit? A little? Not at all?)

Dan McCarthy said...

Brian -
My post was not meant to be a comprehensive explaination of how to develop leaders. That's what I write about in my blog, with over 450 posts addressing the questions you've asked. You can use the Google search on the side bar, or look under any month and year in my archives. You find posts on potential, coaching, workshops, feedback, development assignments, mentoring, development, etc...

Brian W. said...

Dan,

Fair enough. And perhaps my response was a bit crude. I guess what I mean to suggest is that, being your average first-time reader from the unwashed masses, I'm more likely to latch onto you if you give me a little more direct of a payoff after I spend 2 minutes reading to determine, "yes, perhaps this guy will have something interesting to say."

If it falls on me to go digging, so be it. I'm just a little more likely to get hooked if you make it easier to get to more directly actionable goodies.

Links to relevant past articles or something would be great. In the mean time, I'll check out some of your other content.

Dan McCarthy said...

Brian -
Thanks, that's helpful feedback. I'll admit, on this post I got lazy at the end, and missed an opportunity to link to posts that would have provided specifics.
I hope you did check out some of my other content and liked what you saw.
Here are a few posts that address most of your questions (copy and past in search bar):
1. How to Identify Leadership Potential
2. Using the performance and potential matrix to assess talent
3. Traps to Avoid When Evaluating Leadership Potential
4. Leadership Development for A Players
5. 10 Ways to Derail a High-Potential

Wally Bock said...

Congratulations! This post was selected as one of the five best independent business blog posts of the week in my Three Star Leadership Midweek Review of the Business Blogs.

http://blog.threestarleadership.com/2009/12/23/122309-midweek-look-at-the-independent-business-blogs.aspx

Wally Bock

Miki said...

Hi Dan, perhaps the answer is to stop the "high potential" nonsense, make leadership a core competency throughout the organization rather than an elite, selective one, and stop promoting people to their Peter Principle.

Dan McCarthy said...

Wally -
Thanks!

Miki -
I get what you're saying, but in practice, it's easier said than done. Resources and opportunites are often scarce (like investment dollars), forcing us to place our chips on our best bets.

Miki said...

Dan, does that mean that the cost of spreading leadership skills throughout the organization is higher than the cost of the 50% fail rate?

Dan McCarthy said...

Miki -
How about if we agree that MORE leadership development is always a good thing, both wider and deeper?