CHAPTER 2

What Makes a Great NextGen Leader?

Leadership Challenge from the “New” Business Environment

A topic as complex as what makes a great NextGen or future leader can be viewed from various perspectives and be broken into various elements and each is examined in detail.

Today’s turbulent business environment demands that individuals and organizations perform at higher levels and with greater speed than at any time in the past. Organizational leaders and team members alike must place a new emphasis on developing an open and trust-based relationship that will lead to the development of a positive organizational climate and organizational success (Bawany 2018e).

The global environment is increasing the degree of complexity for organizations operating anywhere in the world. With this complexity arises the need for a different kind of inquiry operating within our lives and organizations. The requirement for greater openness to uncertainty will challenge our sense of purpose, identity, and self-efficacy.

Too often in times of turbulence, including in a disruptive, volatile, uncertain, complex, and ambiguous (VUCA) world, the temptation is to “batten down the hatches” and seek safety by focusing on what can be controlled. Typically, this means turning inward and acting “defensively” to avoid damage and minimize risk. Caution and prudence, like most other leadership behaviors, are useful only in conjunction with the exercise of good judgment. In stressful circumstances, leaders need to remember that not all risks are bad, not all opportunities for growth disappear, and a broad, externally focused perspective is more important than ever.

Leaders are facing an almost overwhelming task of restoring confidence and respect in leadership and business. They are being called upon to guide organizations through times of turbulence and uncertainty, to show the way forward, and to set an example—all this in the face of an increasingly disruptive global economy and in a climate of cynicism and mistrust: tough economic and political circumstances by any standards.

Aligning people is about generating awareness and understanding the differences between individuals’ preferred ways of working and making decisions or managing relationships, and creating a common understanding, a common sense of purpose, and a shared commitment to action.

Organizations need leaders capable of envisioning the future and motivating, inspiring, and engaging their employees. They should also adapt themselves to the changing needs of both the internal and external stakeholders.

In essence, the heart of the leadership challenge that confronts today’s leaders is learning how to lead in situations of ever-greater volatility and uncertainty in a globalized business environment. In addition, leaders need to deal with the increasing scale and complexity of new organizational forms that often break away from traditional organizational models and structures within which many have learned their “leadership trade” (Bawany 2015a).

Leadership Is a Facet of Management

A useful starting point is to briefly consider the similarities and distinctions between the functions of leadership and management. While, fundamentally, both are concerned with effective goal accomplishment, and both involve influencing the actions of people, leadership and management are distinct concepts. Much has been written on the subject of “leadership versus management,” and a detailed examination is beyond the scope of this book. However, the distinction between the two is important to recognize, particularly when seeking to establish interventions intended to shape leadership development and effect organizational culture change.

Leadership and management are two notions that are often used interchangeably. However, these words actually describe two different concepts. We will discuss these differences and explain why both terms are thought to be similar.

With dramatic changes in the business landscape today, organizations must embrace, adapt, and respond quickly to changes, and this reality calls for a new paradigm of leadership. One of the biggest challenges that leaders face is to develop a new mindset that relies on strategic and critical thinking skills along with emotional and social intelligence competencies. This is the hallmark of high-performing leaders, which requires a move from transactional management to transformational leadership in engaging the various stakeholders toward organizational success.

Management and leadership are both important, but it is often difficult for leaders to focus on both dimensions of their job. Traditional management is needed to meet current obligations to customers, shareholders, employees, and others. The problem is that too many people are doing management, with too few providing leadership and fewer still who have integrated the skills and qualities needed for meeting challenges in both leadership and management.

Jack Welch, the legendary former chairman and CEO of General Electric, is one of the best known examples of a business leader who combines good management and effective leadership. He not only understands and practices good management such as cost control but is also a master leader, actively promoting change and communicating a vision, resulting in GE being consistently one of the most successful Fortune 500 organizations throughout his tenure.

The primary aim of a manager has been for a long time (and will continue to be in this era of Industry 4.0) toward maximizing the output of the organization through administrative implementation. To achieve this, managers must undertake the following functions (Fayol 1949; see Figure 2.1):

1. Organization
2. Planning
3. Staffing
4. Leading
5. Controlling

Figure 2.1 The five basic management functions

Leadership is an important component of the management function. A manager cannot just be a leader; they also need formal authority to be effective. For any organizational initiative to take effect, senior management must be fully engaged with the organization and act as a role model. This engagement cannot be delegated.

Managers think incrementally, while leaders think radically. Managers do things right, going by the book and adhering to company policy, whereas leaders do the right thing, seeking out the truth and making decisions based on fact, not prejudice. Oftentimes, they stand out by being different—questioning assumptions and showing a preference for innovation.

Warren Bennis further explicated a dichotomy between managers and leaders. He drew 12 distinctions between the two groups (Bennis 1989):

1. Managers administer, leaders innovate
2. Managers ask how, leaders ask what and why
3. Managers focus on systems, leaders focus on people
4. Managers do things right, leaders do the right things
5. Managers maintain, leaders develop
6. Managers rely on control, leaders inspire trust
7. Managers have a short-term perspective, leaders have a longer-term perspective
8. Managers accept the status quo, leaders challenge the status quo
9. Managers have an eye on the bottom line, leaders have an eye on the horizon
10. Managers imitate, leaders originate
11. Managers emulate the classic good soldier, leaders are their own person
12. Managers copy, leaders show originality.

Who Are the NextGen Leaders?

Baby boomers are stepping into retirement in growing numbers. This means that companies are starting to lose institutional knowledge and experience, not to mention an entire section of leadership. While there is still time to get younger generations of high-potential employees up to speed on managerial leadership tasks, it is crucial to remember that executive development, including training and coaching, is not something that should be an afterthought but a carefully planned and calibrated strategy to ensure the sustainability of the organization.

The current leadership needs to identify potential leaders and allow them to make decisions about important tasks while coaching and mentoring them through the leadership challenges that the baby boomers have been through. Preparing for an effective leadership transition will ensure that potential pitfalls are foreseen and avoided, making way for a smoother change of hands later.

While business and human resource leaders seek to understand the generational shifts in the global workforce on a macro-level, at the micro-level (the focus of this book), organizations need to reexamine their human resource and talent management strategies. They need to focus on the readiness and development of their high-potential NextGen leaders for the era of Industry 4.0 to lead high-performance teams and organizations. Sustained efforts are needed in the following areas:

1. Identification, assessment, and selection of high-potential leaders
2. Provision of developmental support (including coaching, mentoring, and training).

Who Are High-Potential NextGen Leaders?

The identification, assessment, selection, and development of NextGen leaders, including the high-potential leaders, is a cornerstone of the talent strategy of many leading and successful organizations.

If an organization can identify early on those with high potential for leadership among its human resources, it can concentrate resources on developing these people to help them realize their potential. Through this process, it can efficiently build up a leadership bench strength and a pipeline of talent who can eventually become the leaders of the organization. While this is a sensible objective, Konczak and Foster (2009) found that organizations generally lack a clear definition for high potentials and even program goals and objectives.

In a study that Ready, Conger, and Hill (2010) conducted, as much as 98 percent of the 45 organizations surveyed reported having a process for identifying high potentials. However, Silzer and Church (2009a), in a separate study, found that there was no clear, universal definition of potential, and some organizations relied on definitions that are not backed by well-grounded research. In particular, many organizations define potential according to the perceived likelihood of progression to a specific higher level in the organization. Such definitions are so vague that they could be subject to different interpretations, and different managers may rely on different criteria for identifying the high potentials.

In addition, a common misperception of managers, human resource practitioners, and even high potentials themselves is to equate high performers with high potentials (Dries and Pepermans 2008; Martin and Schmidt 2010; Silzer and Church 2009b). As a result, it is not uncommon for organizations to rely on past and current performance data to identify high potentials even though these individuals are moving to positions that may have significantly different demands and thus require a different set of behaviors and skill sets for effective performance.

What is clear from the work of a number of researchers in this field is that high potentials are not the same as high performers. Nonetheless, potential and performance are related in that a higher level of potential tends to support a higher level of performance, and strong performance is often what helps high potentials to get noticed in the first place. Thus, it is not surprising to find that most high potentials are high performers (Martin and Schmidt 2010; Ready, Conger, and Hill 2010).

However, not all high performers are high potentials. Research by the Corporate Leadership Council of more than 20,000 high-potential employees in more than 100 organizations worldwide revealed that only about 30 percent of high performers are high potentials (Martin and Schmidt 2010). What distinguishes high potentials is that unlike high performers who are merely defined by their effectiveness in their current role, high potentials possess the qualities to be effective in roles involving broader responsibilities at higher levels in the organizational hierarchy, and the roles are to be assumed within the next 3 to 10 years or longer timeframe (Silzer and Church 2009a).

According to Ram Charan (2017), who is a highly acclaimed business advisor and best-selling author of several books on developing the leadership pipeline of high potentials, “Everyone has potential to grow, but not everyone, not even every person with leadership skills, has the potential to lead a large, complex organization in the near and distant future. Amidst everything that is new and different, today’s high potential leaders, or ‘HiPos’, must be able to ‘identify the untapped opportunities their companies will pursue that will mobilize the organization’” to meet the forthcoming needs.

How inclusive or exclusive should organizations be when developing employee talents? In a world of unlimited resources, organizations would surely invest in everyone. After all, as Henry Ford is credited as saying, “the only thing worse than training your employees and having them leave is not training them and having them stay.” In the real world, however, limited budgets force organizations to be much more selective, which explains the growing interest in high-potential identification. An employee’s potential sets the upper limits of their development range—the more potential they have, the quicker and cheaper it is to develop them.

In line with Pareto’s principle, these studies show that across a wide range of tasks, industries, and organizations, a small proportion of the workforce tends to drive a large proportion of organizational results, such that:

• the top 1 percent accounts for 10 percent of the organizational output
• the top 5 percent accounts for 25 percent of the organizational output
• the top 20 percent accounts for 80 percent of the organizational output.

Chamorro-Premuzic and his coauthors in a Harvard Business Review article state that

Scientific studies have long suggested that investing in the right people will maximize organizations’ returns. In a world of unlimited resources, organizations would surely invest in everyone. In the real world, however, limited budgets force organizations to be much more selective, which explains the growing interest in high potential (HiPo) identification. If we are going to invest in the right employees, how do we find them? What are the key indicators that signal star potential? (Chamorro-Premuzic, Adler, and Kaiser 2017)

Attributes of High Potentials

A survey of the current research and perspectives on high potentials (e.g., Bawany 2015b; Bolt and Hagemann 2009; Campbell and Smith 2010; Chamorro-Premuzic, Adler, and Kaiser 2017; Charan, Drotter, and Noel 2001; Corporate Leadership Council 2005; Gallup 2018; Hagemann and Bawany 2016; Ready, Conger, and Hill 2010; Silzer and Church 2009a) indicates that these qualities include a combination of variables such as ability, drive/motivation, engagement, learning agility, and social skills (part of the suite of emotional and social intelligence competencies).

Ability

The abilities identified are typically based on the success profile of current leaders and/or the expected profile of future leaders and tend to be fairly broad and generic, as the high potentials are not being selected for a particular target position but for a range of possible leadership positions. Intellectual abilities are almost always included as an important attribute because top leaders need the cognitive capacity to deal with complex business challenges.

Ability here refers to indicators as to whether an individual is able to do the job in question. The best indicator for leadership ability here is demonstrating the knowledge and skill it takes to perform the key tasks that make up the job. The single best predictor of job performance is a work sample test, where one can observe the candidate actually performing the tasks that make up the job.

However, in forecasting potential to excel in a bigger, more complex job at some point in the future, the question shifts to assessing how likely an individual is able to learn and master the requisite knowledge and skill. The single best predictor of this is IQ or cognitive ability. Learning ability includes not only a substantial cognitive component but also the motivation to pick up new knowledge and skills quickly and in a flexible manner.

Any role requires abilities beyond cognitive ability. For instance, the potential for performing in a leadership role at the executive level requires cognitive readiness skills, including critical thinking, strategic thinking, complex problem solving, and decision making, as well as the ability to reinvent the organization to ensure its survival in the long term. Others crucial skills required are vision, innovative, and imagination as well as an entrepreneurial mindset. Thus, early indicators of the ability for senior organizational leadership may also include creativity and a knack for systems thinking.

Personality-related interpersonal and emotional skills are important, too, as leaders have to manage themselves and work with a range of people and work through other people. In particular, they need to be able to lead a team, which entails having the skills to manage, inspire, support, and develop others in order to get the best out of them. Emotional resilience, an established predictor of long-term leadership success, is also commonly included as a key attribute because it helps leaders to deal with stressful situations. In addition, high potentials may be required to possess sound technical skills in their career field or relevant business knowledge. Essentially, these are skills and knowledge that will help them to succeed in their chosen career.

Drive/Motivation

While ability is necessary, it is not a sufficient condition for being considered high potentials. Individuals may possess the ability but may not be motivated to make use of their ability to perform on the job. Thus, in addition to ability, it is widely agreed that high potentials need to be driven to excel and achieve results. At the same time, beyond being motivated to excel in their current job (which could characterize high performers equally well), high potentials have a strong desire to lead and to advance in their career. This aspiration is important, as the key to spurring the high potentials is for them to put in the necessary effort to strive for, take on, and succeed in progressively higher level leadership positions. This also means that high potentials are more likely to take the initiative to pursue career opportunities and relevant developmental challenges.

High potentials demonstrate the will and motivation to work hard, achieve, and do whatever it takes to get the job done. It is easily identified as work ethic and ambition—an ability to remain dissatisfied with one’s achievements. This deeply motivational mindset is the accelerator that multiplies the potential influence of ability and social skills on the future success. Ability and social skill may be considered talent, but the potential is talent multiplied by the drive, as this will determine how much ability and social skills are put to use.

Drive can be assessed by standardized tests that measure conscientiousness, achievement motivation, and ambition. It can also be identified behaviorally—as signaled by how hard an individual works, willingness to take on extra duties and assignments, eagerness for more responsibility, and even readiness to sacrifice. For instance, many executive-level roles require a global mindset and some degree of cross-cultural experience. The willingness to embrace a degree of psychological and even physical discomfort (maybe even relocate in order to gain the experience and develop these skills) separates mere talented individuals from those who are truly high potentials.

Engagement

The “high potential” distinction is meaningful only within the context of an organization. An organization identifies high potentials because it wants to groom them to be future leaders. Hence, it is important that the organization identifies people who are likely to stay with the organization over the long term. Thus, another attribute of high potentials is that they should feel a sense of engagement toward the organization and be committed toward its mission and values. This is particularly important in this day and age when people typically have a greater range of career choices (Silzer and Church 2009a) and, thus, are less likely to stay with a single organization throughout their working life (Erickson 2010).

Employee engagement and retention is a constant struggle for businesses all over the world. In fact, according to data from Gallup, “87% of employees worldwide are not engaged.” An engaged employee is more likely to stay with an organization, produce a strong performance as a leader, and inspire others to action than a disengaged employee (Gallup 2018).

Some of the hallmarks of an engaged employee to look for when assessing leadership candidates include:

• Passion for your company’s industry. How enthusiastic is the employee about the industry your company serves? Leaders set the tone for their teams, and their enthusiasm or reticence will spread to others quickly, affecting performance.
• Engaged in the workplace. How often does the employee go above and beyond the minimum requirements of their job? Engaged employees will volunteer to task forces and projects and work harder and take ownership of their work to make sure it is completed in the right way the first time.
• Acting as an ambassador for your company. When interacting with others, does the employee represent your company in a positive light? Do they mentor junior employees or help with the onboarding process of new employees? Employees who are engaged enough with your company’s brand to recommend the company to their circle of friends as both a great place to work and an example of the best traits of your industry are more likely to stay with the company and inspire others to do their best work.

Highly engaged employees aren’t just productive—they show everyone around them the best traits of your business, which inspires others to be more productive as well.

Learning Agility

Learning agility is the ability to incorporate new material quickly. It has been found that the ability to learn quickly and use that information in business was the strongest predictor of success. Those with agility show strong leadership qualities. Only about one-third of high-potential employees live up to their promise, but those with various dimensions of learning agility perform at the highest rate. These skills can be developed and improved. Those with various agilities learn quickly from information and experience, take risks, strive for growth, and exhibit resiliency. These people absorb information through books and classes, peer learning, direct experience, and reflections on past performances. Even failure can prove valuable to those with agility because they learn and adapt quickly from their unsuccessful experiences.

The seminal research in this area was conducted three decades ago by McCall, Lombardo, and Morrison (1988). In their groundbreaking book entitled Lessons of Experience, the authors discovered that many managers who produced positive results on the basis of their current technical skills did not perform well after they were promoted. They found that numerous managers and executives derailed because they tended to depend largely on the same skills that got them promoted in the first place rather than learning new ones. The strengths that used to work became weaknesses when they relied too heavily on them or applied them when the context was inappropriate. In contrast, the successful ones (i.e., the high potentials) seemed comfortable with new, different, and challenging situations. These managers and executives were willing to learn and develop from their “lessons of experience.”

In another research entitled “Learning Agility as a Prime Indicator of Potential,” the authors hypothesized that high potentials with a higher level of learning agility would perform better once they had been promoted. Indeed, this hypothesis was borne out of the finding that more successful leaders were those who scored higher on the levels of learning agility after they were promoted (Eichinger and Lombardo 2004). They highlight four types of learning agility:

1. Mental agility: they are excellent critical thinkers who are comfortable with complexity, examine problems carefully, and make fresh connections.
2. People agility: they know themselves very well and can readily deal with a wide variety of people and tough situations.
3. Change agility: they are curious, like to experiment, and can effectively deal with the discomfort of change.
4. Results agility: they deliver results in first-time situations by inspiring teams and exhibit the sort of presence that builds confidence both in themselves and in others.

Social Intelligence Skills

There is a growing significance of teamwork and collaboration in leading high-performance organizations. At a basic level, all employees should be able to get along and earn the support of supervisors and coworkers.

The life of a leader has plenty of demands and pressures. Having the skills to handle them is a prerequisite for success. From the ongoing longitudinal research by the Centre for Executive Education (CEE), we have identified several specific skills from a wide array of emotional and social intelligence competencies, such as the ones that differentiate successful leaders from other people. Fortunately for high potentials, these skills can be improved with appropriate executive development support, including training and coaching (Bawany 2015b).

Research has shown that most successful leaders have strengths in demonstrating emotional intelligence competencies. Emotional intelligence is the ability to manage ourselves and our relationships effectively, and it consists of four fundamental capabilities: self-awareness, self-management, social awareness, and social skill. Each capability, in turn, is composed of specific sets of competencies (Goleman 2000).

Social skills involve two fundamental abilities: the ability to manage yourself and the ability to manage others (relationships). Employees willing to succeed in bigger, more complex jobs should first be able to manage themselves—to handle increased pressure, deal constructively with adversity, and act with dignity and integrity. Second, they are able to establish and maintain cooperative working relationships, build a broad network of contacts and form alliances, and be influential and persuasive with a range of different stakeholders. And for senior roles, they have to be able to develop sophisticated political skills—the ability to read an audience, decode the unspoken rules, and find solutions that satisfy the often competing interests of key powerbrokers.

Goleman defines social intelligence as being knowledgeable about both our interpersonal relationships and also how we act in them (Goleman 2006). These include:

1. Visionary leadership: the ability to take charge and inspire with a compelling vision.
2. Influence: the ability to wield a range of persuasive tactics.
3. Developing others: the propensity to bolster the abilities of others through feedback and guidance.
4. Communication: skill at listening and at sending clear, convincing, and well-tuned messages.
5. Change catalyst: proficiency in initiating new ideas and leading people in a new direction.
6. Conflict management: the ability to de-escalate disagreements and orchestrate resolutions.
7. Building bonds: proficiency at cultivating and maintaining a web of relationships.
8. Teamwork and collaboration: competence at promoting cooperation and building teams.

The ability to manage oneself as well as others is the core element of emotional and social intelligence that can be assessed by psychometric assessment tools and further refined through training and development.