Successful leadership - how would you know?
Boardrooms and business school classrooms are equally preoccupied with leadership, and success is often assumed to be about profit or Total Shareholder Return. It’s neither.
Increased profits or share price can have more to do with good luck than good leadership. Objectives can be set low so they are easily beaten. And leadership is just as important in bad times as when things are going well. For leaders wanting to measure their own success, for those who appoint leaders to know what they are aiming at and for outsiders assessing the quality of leadership, Andrew Likierman shows how to do it.
For those who want to check on their leadership success, for those who appoint leaders and for outsiders (including analysts and competitors) assessing the quality of leadership, checklists of traits are not enough. Nor are comparisons with Jack Welch, Bill Gates or even Ghengis Khan. What's needed is how to overcome the measurement problems. So, a number of preliminary steps are necessary to make sure that measurement is robust.
Preliminary step 1: Agree what we're measuring Do you, like Warren Bennis, feel that leadership is hard to define, but you know it when you see it? The trouble is that, if you do, there's a danger of talking at cross-purposes about what makes leadership successful.
Getting an agreed definition is an essential starting point in measuring success. But note that this is the beginning, not the end of the story. Just being a leader is not the same as being successful, any more than getting into the driving seat makes one a good driver.
Preliminary step 2: Focus on outcomes, not inputs Because much of the literature on leadership focuses on the attributes or qualities a person needs to become a successful leader, it's usually assumed that exhibiting those qualities or attributes will be translated into success. But a leader can tick off all the lists and still not succeed. Success is about results, not characteristics.
Preliminary step 3: Make sure the data is as robust as possible It's one of the big practical issues of performance measurement: just how robust is the data being used?
Leaders are not always the best judges of their own success. Many are better at rationalising their mistakes than admitting to failure. Leaders also often have a big influence on the way data is collected and presented. Only at a time of crisis does the issue of whether what's being reported is right come under serious scrutiny. Any claims of success that can't be independently verified need to be treated with caution.
Having sorted out the preliminary steps above, it's much easier to tackle the challenges of measuring:
Step 1: Set up the framework.
Agree objectives Once there's a definition of leadership, more precise objectives need to be sorted out. Is the job to transform the organisation or to make one that is already doing well operate leaner, meaner and faster? Is it about team building or bringing on future leaders? Is it transformational or transactional? Successful leaders could be one or the other; great leaders are going to be both.
In larger organizations, setting objectives should be part of the formal annual appraisal process. In smaller ones, the process may be less formal, but it's still important to make them clear and, if possible, put them in writing. For those who are looking to appoint leaders to run an organisation, defining objectives is crucial in making informed choices about the kind of person they want.
The degree to which a leader meets his or her stated objectives will be a key factor in judging success. Indeed, failure to achieve his objectives is just one of the grounds on which Hitler can be judged to be an unsuccessful leader.
Find the right comparisons But meeting internally defined objectives is not enough. A successful leader is successful in comparative, not absolute terms. Comparisons will have to be set out beforehand (making them up afterwards is definitely not acceptable), may need to be changed over time to respond to changing circumstances and do not all need to be fulfilled.
One key comparison is against the level at which objectives are set. Caution is necessary here, because this is a function of many factors, one of which is often a desire to meet them by aiming low. Comparisons also have to be against a relevant peer group. The share price may be tanking, but if it's tanking less than the others (some of whom are going bust), this could be a signal of successful leadership.
Assess handling of opportunities A third comparison is with what might have been, including whether possible opportunities have been taken or foregone. One of the things that differentiate a good manager from a good leader is that the former is more focused on existing plans and objectives, the latter on additional opportunities as well as current plans. These opportunities are not easy to measure. The counterfactual (what might have been) and opportunities missed may take a long time to become clear.
Grasping opportunities cannot be on the basis of a plan, so an internal comparison isn't relevant. What's needed is a basis of comparison with others in the sector or the industry, using judgement to see how others have taken the opportunities offered or not taken up.
Step 2: Use judgement to interpret.
Comparisons with stated objectives, a relevant peer group and opportunities are rarely straightforward. The world's major banks or utilities, for example, have very different regulatory environments. So deciding who is a successful leader in banking, or any other industry, will always be a matter of judgement.
Another key element in interpretation is the effect of lags. When someone who is seen as a successful leader steps down, it is usually to the accompaniment of toasts to their achievements and statements of undying conviction that they can never be replaced. Within weeks, however, doubts often set in and questions are raised. Was that acquisition really so successful? Did we really need to go into that market? In part, this is about adjustment to the new regime; but the more fundamental questions usually relate to the lagged effects of actions taken during, or even before, the leader's years in office.
Finally, care is needed to separate having the good fortune to be in the right place at the right time from successful leadership, just as we need to separate failure from being in the wrong place at the wrong time. A halo effect surrounds company success and judgement is needed to make sure that it is separated from leadership.
Step 3: As far as possible, reconcile the needs of different stakeholders.
There's not going to be unanimity about what successful leadership means to every stakeholder, and, even if the objectives are set out clearly, success won't mean the same to everyone. Your extra profit could be my redundancy. Or it could be everyone else's excessive carbon footprint.
It's possible that the views of different stakeholders won't be reconcilable. If that's so, the measurement of success has to recognise a multiplicity of views.
Successful leadership
Successful leadership isn't what leaders do or who they are. It isn't just what the organisations they lead manage to achieve, which may be down to very many other factors. Successful leadership is about a successful outcome against stated objectives combined with comparisons against a relevant peer group and the way in which opportunities are handled.
It's also worth remembering that leadership is not just about those at the top. It is important to measure leadership at any level. For those who want to measure their own success as leader, the essentials are:
- Make sure you set out your objectives (in terms of outcomes, not inputs) so that others know what they are, particularly those who will be assessing your performance.
- Find relevant comparators.
- Include opportunities as part of your measurement framework - both those taken and those missed.
- In interpreting the information about your success, recognise the measurement problems and take steps to mitigate them. If you are a transactional leader, make sure you have definable objectives. If lags are a problem, establish milestones.
- Recognise that the result is a matter of judgement; if you don't trust your own, ask someone independent to do it for you.
In measuring your own leadership or that of colleagues, even if it's not required, it's worth the discipline of defining objectives, finding comparators and being aware of the importance of opportunities. It's also about finding that gold mine, the candid friend. For outsiders, it's about turning a vague impression into an informed judgement. Successful leadership is an elusive quality. It's worth a better class of measurement.
Sir Andrew Likierman (alikierman@london.edu) is Professor of Management Practice and dean of London Business School. His non-executive roles include chairman of the UK's National Audit Office and director of Barclays plc.
