Leadership as the Starting Point of Strategy

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Leadership

Introduction

Even the best strategy can fail if a firm doesn’t have a squad of leaders with the right capabilities at the right levels of the organisation.

When it comes time to implement a strategy, many companies find themselves stymied at the point of execution. Having identified the opportunities within their reach, they watch as the results fall short of their aspirations. Too few companies recognise the reason.
Mismatched capabilities, poor asset configurations, and inadequate execution can all play their part in undermining a company’s strategic objectives. Although well-regarded corporations tend to keep these pitfalls squarely in their sights, in our experience far fewer companies recognise the leadership capacity that new strategies will require, let alone treat leadership as the starting point of strategy.

What do we mean by “leadership”? Leaders generate breakthroughs in performance. They create something that wasn’t there before by launching a new product, by entering a new market, or by more quickly attaining better operational performance at lower cost, for example. A company’s leadership typically includes the 3 to 5 percent of employees throughout the organisation who can deliver breakthroughs in performance.

As the number of strategic dimensions and corresponding initiatives increases, so does the pressure on leadership. High-performers, especially those with lofty aspirations, have the most difficulty meeting their leadership needs. The higher a company’s aspirations or the more radical its shift in strategic direction, the larger the leadership gap. This rule holds true for high performers and laggards alike.

The Consequences of Inattention

Most will agree that leadership is important, yet few assess the leadership gap precisely. Fewer still build an engine to develop the right quantity of leaders with the right mix of capabilities, at the right time, to match opportunities.

The failure to assess leadership capacity systematically before launching strategic initiatives can leave top executives scrambling to fill gaps at the last minute—with significant consequences.
In the short term, companies that undertake new strategies without the right leaders in place are forced to burden their existing ones with additional responsibilities. As such, leaders take on the new challenges, the demands from day-to-day operations invariably increase, leaving less time for other tasks.

If a company stretches its existing leaders too far, their overall effectiveness takes a nosedive. From the start, this trade-off compromises strategic objectives.

Leadership First

Given the severe consequences of a leadership gap—the best-planned strategy is no more than wishful thinking if it can’t be translated from concept to reality. The goal is to discover the leadership shortfall before executing your strategies.

Another approach is to weigh a corporation’s strategic options against its ability to launch new businesses, new approaches, and other forms of breakthrough performance—in other words, its leadership. When starting a new initiative it’s important to identify the leadership required to drive performance over the next three years in areas such as running and expanding existing businesses, developing new ones, renovating corporate processes such as risk management, and providing overall change leadership.

You have to gauge your leadership gap by comparing these requirements with the qualities of current leadership. At this point the organisation has to make a number of strategic decisions to determine the best path for realising its strategy e.g. revise its targets, develop leaders internally or hire them from outside of the organisation.

Filling the Gap

A clear picture of the leadership gap can help guide strategic thinking, but to retain as many options as possible, companies must also consider ways to fill that gap. To reduce the risk of strategic failure, they need to direct their approach to leadership with horizons in mind.

Companies need to position themselves now to meet their strategic objectives during the next three years. A company must hire and groom potential leaders before they are needed and then help them build the internal networks necessary for long-term success.

Companies must also begin cultivating leaders for specific succession planning one to two years down the road. This effort requires recognising the skills, behaviour, and mind-set that leaders must possess to be prepared for future roles. Many executives spend years building their technical skills and industry knowledge but rarely develop expertise in areas such as managing stakeholders and building networks.

Job experiences and stretch assignments are the primary development vehicles for leaders. Opportunities to achieve performance breakthroughs are critical not just for reaching a company’s performance goals but also for developing its best people. Unfortunately, organisations that are risk-averse often match their people to opportunities by looking at track records and job experiences, which they see as indicators of future performance. However, such an approach is unlikely to succeed, because the experience and skills needed for earlier successes are not necessarily forerunners for those required to achieve performance breakthroughs in ensuing opportunities.

A better approach is to use corporate-performance objectives and personal-development goals to match current and potential leaders with opportunities. This multifaceted approach uncovers a better fit between the individual and the opportunity. For this process to be successful, top managers need to acquire a holistic understanding of each individual, including professional abilities, such as leadership qualities, track record, and potential. In addition, key personal traits, such as style and preferences, character and motivation, and current attitudes and mind-set are paramount. Companies can assess these qualities through information—objective and subjective—from superiors, peers, mentors, and other sources.

Conclusion

To help leaders develop throughout any time horizon, a company must first accurately identify who its leaders are and then convince them of an opportunity’s potential. Companies often underestimate this challenge.

Strategy will not succeed in a void, and leadership often makes the difference between merely reaching for great opportunities and actually realising their potential. Top managers must assess their company’s leadership gap and find ways to close it over the short, medium, and long term. Better still, they should integrate leadership with strategy development and thoughtfully match their portfolio of leaders with opportunities.

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