Succession Planning: Why Companies Are So Bad at Picking Good Leaders

Contributed by Jeffrey Cohn and Jay Moran

Many women today worry about what it takes to reach the top. They want to know what they can do to become better leaders.

The old paradigm said that they should adopt a traditionally “masculine” style or set of traits. Very few experts believe that now. In fact, when it comes to important leadership attributes, recent research shows that women have a natural advantage. Where they still suffer (like men) is in trying to understand the source of this power. Now as much as ever, both genders need help with their leadership development efforts.

Just as important – albeit less discussed – is knowing how to choose better leaders. In a way, not having the answer to this question produces the same effect as not knowing how to leverage one’s personal abilities. After all, when we do a poor job of selecting leaders, it stunts our own careers. When a board of directors hires the wrong CEO to run an organization, and that individual fails, it reflects negatively on everyone. When a division president picks a less-than-stellar candidate to manage one of her teams, she will be held to account for that group’s subsequent lack of performance.

Yet, most people don’t focus on this side of the issue. As a result, even today’s best organizations commit some serious errors when it comes to important leadership selection decisions.

The first mistake stems from not knowing what qualities to seek in potential leaders. For decades we have been told that a magnetic personality, or Ivy-League education, or certain style, make all the difference. They don’t. None of these factors is a reliable predictor of leadership success.

Other times we focus on qualities that do matter, but we don’t go far enough to seek a healthy balance. For example, we gravitate toward individuals who possess enormous passion and vision, but who are lacking in good judgment. Or we promote individuals with enormous cognitive skills, but who lack enough empathy to handle sticky social situations.

The second big mistake we make when trying to judge leadership potential is the use of insufficient assessment techniques. In other words, even when we know what to look for, we don’t know how to look. We rely on backward-looking interview questions, or inappropriate personality tests, or letters of reference from those who simply cannot predict how a person will perform in a fundamentally new position. Even the perennial favorite among promotion criteria – prior performance – is not a good indicator of future leadership success. At best, it tells only half the story. A solid manager with ten years of experience in marketing, for example, might be poorly suited for a generalist role that will require her to lead an entire division.

In our book Why Are We Bad at Picking Good Leaders? the two of us answer these crucial “what” and “how” questions. Based on more than fifteen years of experience working with premiere executive education programs and some of the best organizations in the world, we explain how to identify the very best leaders. Here are some highlights that will help your company do a better job in this area…

Focus on the Qualities that Count. There are seven essential attributes of leadership success—integrity, empathy, emotional intelligence, vision, judgment, courage and passion. Take away just one, and a person who is called upon to lead will eventually fail.

For example, when Carly Fiorina was brought in as CEO of struggling Hewlett-Packard in 1999, she was seen as a corporate savior – a bright, passionate leader who could turn the company around. She impressed everyone with her energy and brains. Yet, her tenure was marred by friction, and she was eventually fired. Several company veterans thought that she possessed a deaf ear when it came to the tradition of humility and camaraderie that characterized HP’s culture. They thought she was out of touch, aloof, intimidating. In short, Fiorina’s leadership was undone due to issues of empathy.

Contrast her case with that of Anne Mulcahy, who was hired as CEO of Xerox in 2001 when the company was on the verge of bankruptcy. Seven years later, after leading Xerox through a painful but highly successful turnaround, Mulcahy was selected as CEO of the Year by Chief Executive magazine. Colleagues and competitors alike applauded her strong passion, judgment, vision and empathy. Her impressive performance at Xerox reflected a healthy balance of leadership traits — the kind of person who could give tough love and simultaneously listen.

Use the Right Assessment Techniques. Even when companies know what to look for, they rely on some rather misguided assessment techniques. Not too long ago, we met with a human resources manager who was reeling from a poor hiring decision. Just six months after filling a key position, the company had to terminate its new hire and start a search all over again.

When we asked the president how she and her team chose the person who was originally selected, she said: “He [the candidate who was hired] had great experience in the industry, a track record, and already had relationships with several of our largest customers.” In addition, the company hired a search firm that conducted extensive background referencing, and all signs were positive. The candidate was results-oriented, friendly, well liked, and driven.

While these findings sounded good, further investigation on our part revealed that the HR manager fell into some classic assessment traps. The most serious mistake she made was relying on an evaluation process that was essentially backward looking. She spent large amounts of time going over the candidate’s résumé and credentials: she asked about prior successes and failures, she asked others how the candidate performed, and so on. But this backward-looking investigation has limited predictive value when trying to determine a candidate’s likely success in a fundamentally new position.

In our assessment practice, we overcome this obstacle by using a variety of different techniques, including simulations and case studies, direct observation in group settings, and specially created hypothetical scenarios that test a candidate’s leadership potential. This last technique is critical because it is forward-looking. Unlike a typical interview question that asks candidates to discuss what happened in the past, these hypothetical situations present candidates with unfamiliar and challenging leadership situations. No amount of preparation or interview savvy will enable a candidate to fudge his answer or game the interview process.

For more information on how the best companies in the world choose first-rate leaders, including how to purchase Are We Bad at Picking Good Leaders? Visit www.pickingbetterleaders.com or email the authors directly at jcohn@liag-advisors.com and jmoran@liag-advisors.com.