Over the course of my career, both in Corporate America and with investor-driven startups, I came to understand the driving elements of breakthrough performance. Elements that transcend markets, industries and technologies. What I observed, and wrote extensively about in my book, was that the companies that consistently over-achieved and outperformed their competition optimized and aligned leadership, strategy and organizational culture. As simple as this sounds it takes a concerted, mindful effort to coordinate and execute these mission-critical elements.
Adding to this challenge is the shift in the underlying driver of value creation in our ever-accelerating evolution from the Information Age to the Age of Ideas. Human creativity, in the form of commercially viable intellectual property, is now the source of value creation in our global economy. Today’s business leaders, for the most part, came up through the ranks optimizing processes, eliminating variability (think Six Sigma and TQM), and reducing costs. Optimizing processes requires technical skills and evolves around good management. Optimizing human capital requires adaptive skills (the so-called soft skills) and is driven by inspirational leadership. The underpinnings of business success have shifted beneath our feet.
Taleo Research® published a white paper that supports this perspective. The study, entitled, “Talent Intelligence – Key To U.S. Business Success”, identifies that in today’s knowledge economy upwards of 70% of an organization’s value is based upon the skills and experiences of its associates. When we overlay other research from Gallup, McKinsey, and CEB, breathtaking opportunities for breakthrough performance and company valuation growth are revealed.
Employee engagement levels continue to hover around 30%, meaning that upwards of 70% of employees are sleepwalking through at least a part of their day. Realistically, what level of discretionary effort can we expect from the 70%? CEB’s Executive Guidance – 2013 report revealed CEOs currently believe they will need to increase workforce productivity by 20% in order to stay competitive in the coming years (the CAGR of workforce productivity has been a little over 3% per year since 1993). The takeaways? The 30% of employees that are intrinsically motivated contribute the vast majority of company value and elevating the growth rate of productivity from 3% to 20% will require innovative thinking and new approaches to engaging and motivating the other 70% of associates. As daunting as this appears, the upside is nothing short of spectacular.
The fact is, robust Talent Management is central to success going forward. So where do we begin? Taleo identified the most important talent analytics and found they could be broken down into four major categories.
1.) Business Strategy – Defining goals and aligning employees to achieve these goals.
2.) Retention – Identifying and retaining high potentials and high performers.
3.) Leadership Development – Identifying and developing leadership bench strength.
4.) Workforce Metrics – Insights into the skills gaps to execute the business strategy.
Supporting my observations from twenty years of executive experience, Taleo’s report reveals leadership, strategy and organizational culture (a key to retention) are driving elements of Talent Management, which is now the driver of breakthrough performance.
It all begins with leadership, but what kind of leadership? In June, 2011, the McKinsey Quarterly® published a major study that identified the fact that only 1% of “C” level executives and one step down executives measured “excellent” in five out of eight leadership competencies. Ten percent scored “above average”, leaving the vast majority of executives scoring average or below average. Strikingly, many of the competencies McKinsey was measuring back in 2010/2011 were more closely aligned with an approach to leadership that no longer resonates in our multi-cultural, multi-generational workforce.
Fortunately, CEB’s recent research has identified the key competencies high performers are demonstrating in today’s highly volatile, fast-paced environment. Skills that include self-awareness and social/organizational awareness, adaptive, innovative thinking, as well as learning agility. Critical skills that don’t show up in McKinsey’s research. Critical skills that must be present if we are to reverse the employee engagement trends and achieve a 20% improvement in productivity. There’s lots of room for improvement here as well, as CEB reports that, on average, only 5% of workers demonstrate a well balanced blend of these skills.
We’ve coined a phrase to describe this approach to leadership. We call it Affective Leadership, which is the leadership of engagement (the approach integrates research from many scientific disciplines including affective neuroscience; how our brains react and function under various, emotional stimuli and interpersonal relationships). An approach to leadership that is grounded in empathy and authenticity. In fact, the Creative Leadership Institute conducted an eight year study in which they identified the only competency that differentiated mediocre management from inspirational leadership was empathy. This is a learnable skill that requires a shift in perspective; from me to we. The path for cultivating empathy begins with the development of emotional intelligence competencies; self-awareness and social awareness; which leads to self-regulation and the emergence of strong relationship management skills.
This is the starting gate for capturing that 20% improvement in productivity. There’s a hidden workforce lying just beneath the surface in many organizations and it is through the process of implementing Affective Leadership that spectacular improvements in productivity, innovation and creative thinking will emerge. With this foundation of leadership in place, strategy becomes more mindful and adaptive, and the organization’s culture becomes much more supportive of open collaboration, communication and innovation. It is this approach to leadership that will set the tone and trajectory for success in the 21st Century.
© 2013, Terry Murray