Guest Post: The Trouble with Leadership By The Numbers

Note from Art: I’m pleased to share the thoughts of Scott Spreier, head of the Leadership and Talent Practice in the Federal Sector at Hay Group, a global management consultancy.  I was a happy customer of Hay Group in a prior lifetime, where they provided my team with valuable input and guidance on a complex and fast-moving sales restructuring.  I am pleased that they reached out to share this thought-provoking post exclusively with readers of Management Excellence. Enjoy!

You can follow Scott and his colleagues on Twitter @ Hay Group.

The Trouble with Leadership by the Numbers by Scott Spreier, Hay Group

Ah, those geeks from Google.

After months of crunching numbers, a team of their top statisticians cracked the code on what it takes to be a good leader.  Their finding, as reported by The New York Times, was that what employees valued most in their managers was not technical expertise but “even-keeled bosses who made time for one-on-one meetings, who helped people puzzle through problems by asking questions, not dictating answers, and who took an interest in employees’ lives and careers.”

Now, is that surprising?

A few paragraphs into the story, the Times’ turned to human resource experts to help put Google’s research into context.

They quoted Todd Safferstone, managing director of the Corporate Leadership Council of the Corporate Executive Board, who noted that Google is at the “leading edge” of trying to apply a data-driven approach to what the Times calls the “unpredictable world of human interactions.”

Project Oxygen, as the research was named, is unusual, Safferstone says, because it is based on Google’s own data, which means that it will feel more valid to those Google employees who like to scoff at conventional wisdom.

Two observations here: (1) We (the HR experts of the world) are a sincere, but dull lot whose lingo about leadership is indeed often limp; and (2) it is this habit of sounding warm and squishy, not hard and businesslike, which drives organizations like Google to try to create leadership by the numbers.

The truth is, for more than 50 years researchers, particularly behavioral scientists, have been studying and linking these so-called softer attributes of leadership to performance. At Hay Group, we’ve done numerous studies that tie the hard stuff of business − gains in productivity, revenue, and profits − to the human stuff of leadership, such as providing vision and context, showing empathy, and engaging, coaching, and developing employees.

In general, our body of research has shown that when managers and executives use a good combination of these behaviors or styles, the performance of their teams − again in terms of measures like sales, productivity, and even revenue − tends to jump 15 to 30 percent.

That Google had to rediscover this, however, is not cause of smugness or ridicule. Like most organizations and the people who run them, it’s human nature to try to succeed by the numbers. All of us, not just Charlie Sheen, want to win. And winning in our society is defined by the specific, not the squishy: scoring more points, putting up better financial numbers, the number of goddesses one lives with, etc.

David Brooks, in a recent column, The New Humanism, blamed this in part on the fact that we view ourselves as “divided creatures” who try to separate reason, which we trust, from emotions, which are suspect.

“We emphasize things that are rational and conscious and are inarticulate about the processes down below,” he wrote. “When we raise our kids, we focus on the traits measured by grades and SAT scores. But when it comes to the most important things like character and how to build relations, we often have nothing to say.”

And, we might add, when those parents and kids go to work, their focus switches from SAT to ROI.

What our research and Google’s show is that organizations need to put more emphasis on the softer behavioral attributes of leadership. They need to move beyond what Brooks calls the “amputated view of human nature,” and embrace the role that motives, values, and behavior have in engaging people to do their best and ultimately driving performance.

Equally important, they have to let go of this nonsense about technical skills and financial results being the perfect equation for running a successful organization. Certainly they are critical elements, but as Google has confirmed, leading solely by the numbers is not only bad science, it’s bad business.

October 29th Carnival of HR (and much more)

Readers interested in some divergent thinking and great ideas should take a look at the menu of authors and content at the latest Carnival of HR.  And don't let the HR headline trick you.  This Halloween collection of articles covers diverse topics in leadership, communication, execution, talent development and priceless career advice.  Oh, and of course, Dan McCarthy, the host, was nice enough to include my recent attempt to place a quantifiable value on leadership development activities.  Check it out, it's definitely a treat. 

In Search of a Quantifiable Return on Leadership Development

Every few months, I run head-on into a discussion with someone (usually a prospective client) about how to value the return from investments in leadership development.  The question is not asked as a means of qualifying my services, but rather as a genuine practitioner-to-practitioner inquiry, not dissimilar to what two MDs might talk about with respect to the latest treatment results for an experimental drug program.  The person asking knows as well as I do that Return on Leadership Development continues to be an elusive issue that no one has substantively put to rest, and that our best answers are no stronger than impassioned, qualitative opinions. 

The venerable consulting firm, McKinsey & Company in their latest issue of The McKinsey Quarterly (2008, Number 4) offers some exciting results showing: “the relationship between financial performance as measured by profit per employee and ten dimensions of global management talent.”  Their findings: “Companies scoring in the top third of the survey (when all ten dimensions were combined” earned significantly higher profit per employee than those in the bottom third."

The McKinsey results showed strong correlations in three specific areas:

  • The creation of globally consistent talent evaluation processes
  • The management of cultural diversity
  • The mobility of global leaders.

McKinsey indicated that the firms scoring top-third in any of these three areas had a 70% chance of scoring in top-third for financial performance.  Alternatively, companies scoring poorly on these practices had a strong chance of ending up in the bottom third for financial performance.

This is exciting information for anyone and everyone interested in gauging the impact of leadership development initiatives on corporate performance, however, before we consider this case closed, it is important to note McKinsey’s own comment that, "the study results do not show any true evidence of causality, but rather that the results, strengthen our belief that these are important areas on which businesses and HR leaders should focus their attention.”  It always comes down to belief.  Welcome to my conversations, McKinsey.

Should it Be Return on Expectations?

Another interesting thought comes from Professor Albert Vicere who describes his experience facilitating a group of executives through a discussion on how to calculate a return on leadership development:

“Discussion on how to calculate a return on leadership development and learning investments were frustrating until we saw the light, stopped talking about return on investment (ROI), and began talking about return on expectations (ROE).  Participants agreed that due to all sorts of complications we may never be able to calculate a clear financial return on learning initiatives, but if we’re clear on what we’re trying to accomplish through leadership development and learning and if we measure our results against those expectations, we may have the data we need to prove the value of our investments.”

OK, at least this group is giving us a reason to accept that valuing leadership development is a tough task. It is good to know that a bunch of smart people sat around thinking about this dilemma and the best that they could come up with was looking at from a different perspective.  They may be right, and the careful expectation setting and measurement around very specific leadership development initiatives may just yield the elusive data that we’ve been seeking.

Is it time to sharpen Occam’s Razor?

More often than not,the rough translation of  Occam’s Razor: “All things being equal, the simplest solution is the best,” proves true.  My non-statistically significant, can’t prove causality hunch is that effective leadership development practices are part of a whole system and that attempting to value them independent of the other components, while intellectually stimulating, is essentially valueless.  This is perhaps like attempting to value the worth of having a healthy heart in a cancer ravaged body or a healthy body carrying an artery-clogged heart.  No matter how you look at it, the body and organizations function as complex systems and a problem in any one part can adversely impact issues across the entire system. 

Aren't These The True Measures of Leadership Development's Value:

•    Quality
•    Financial health and performance (company and versus industry)
•    Innovation
•    Ability to Execute on Strategy
•    Employee Satisfaction
•    Customer Satisfaction
•    Growth versus industry participants
•    Retention and advancement of the right people and elimination of others
•    Fulfillment of mission
•    Growing contribution to community and society

The Bottom-Line for Now

If these items are generally accepted and desirable outcomes of a well-functioning organization, then executives looking at their talent development programs should quit focusing on the search for discrete ROI measures, and instead focus on identifying those practices that are likely to contribute the most to the above.  We may not prove causality, but just like McKinsey, it is my belief that focusing on becoming great at the right few talent and leadership development practices will yield higher performance than not focusing on these issues.  My vote says focus on: individual development planning, feedback and widespread involvement in strategy creation and execution, and the results will come and the other leadership development pieces will naturally fall into place.  Oh, and the decision on how to invest in development activities is a management team decision, not just an HR call.  Leadership Development is everyone’s business.

HR Has Yet to Establish Credibility As Weapon in War for Talent

The August, 2008 Issue of the McKinsey Quarterly Chart Focus Newsletter includes an interesting article highlighting the expanding perception gap between HR Professionals and Line Managers over HR’s role in Talent Management. 

The article: Realigning the HR Function to Manage Talent, identifies three major challenges in the continuing war for talent:

  1. Minimal collaboration and talent sharing among business units
  2. Ineffective line management
  3. Confusion about the role of HR. 

Additionally, the article offers up the latest survey results on what McKinsey describes as the declining influence of the human-resources function. Line Managers significantly differ with their HR counterparts over:

  •  HR’s capabilities to develop talent strategies aligned with business objectives (33 percentage point gap)
  • HR’s accountability for success or failure of talent-management initiatives (28 point gap)
  •  Whether Talent Management is the responsibility of HR (22 point gap). 

None of the gaps are favorable towards HR.

Art’s Quick-Take:

I’ve observed a few great HR leaders that really understand that they are key enablers of a firm’s talent management success and key participants in the strategy process.  However, many others and many HR departments remain pigeonholed as compliance police and benefits administrators.  An enlightened management team and CEO recognize the strategic value of HR.  They also recognize that talent development and management is the responsibility of all of a firm’s leaders and not just HR.

As an aside, there are no excuses for the perception gaps highlighted above.  Twenty lashes for the leadership groups that allow those gaps to emerge and sustain.

One suggestion if you are a manager or leader in a firm with a generally tactical HR function: ask for help.  You might be surprised how anxious your HR professionals are to engage in something outside the normal bounds of compliance or benefits.

While not quick to throw stones as my own functional counterparts (sales and marketing) have plenty of their own challenges, it is time for HR to stand-up and be counted on as a key enabler of strategy. They can start by helping their firm institutionalize talent identification, recruitment, retention and development.

Don’t Miss the 39th HR Carnival at HR Capitalist!

If you are after thought-provoking, practical content from scores of leading authorities in HR, Leadership  and Management, then click-thru to the great Carnival being hosted by Kris Dunn at HR Capitalist.  You won’t be disappointed.  Thanks to Kris for an awesome job.