4 1 Chapter 4 Assessing Leadership and Measuring

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Chapter 4 Assessing Leadership and Measuring Its Effects “Only 8% of Fortune 1000 executive directors rate their leadership capacity as excellent, while 47% rated their leadership capacity as fair to poor. ” ~The Conference Board Mc. Graw-Hill/Irwin copyright © 2009 by The Mc. Graw-Hill Companies, inc. All Rights Reserved 1 -2

Practice-Research Gap • The gap between what researchers know about predicting and evaluating leadership effectiveness and the techniques actually used by organizations to hire, evaluate, and promote leaders. • This gap has a profound impact on the quality of people in leadership positions today. 4 -3

Managerial Incompetence • Despite the pervasiveness of leadership, the base rate of managerial incompetence may be somewhere between 50 – 75 percent. • The Dr Gordy test is one way to determine the level of incompetence among leaders. • Effective leaders are individuals who are good at building teams and getting results. • Most people in leadership positions get paid to get results, and they get results by building teams. 4 -4

Managerial Incompetence (continued) • Managers can be categorized as being: – – Competent Managers Results Only Managers Cheerleaders In Name Only Managers • Research shows that organizations having higher number of Competent Managers occupying critical positions are more successful than those without. 4 -5

The Two Dimensions of Managerial Incompetence 4 -6

Need for Leadership Talent Management • The biggest source of worry for organizations anywhere is the lack of high quality leadership talent. • Three critical ingredients most looked for in persons in positions of authority include: – Problem solving and sound decision making abilities. – Local/functional know-how. – Ability to get things done through others. 4 -7

Need for Leadership Talent Management (continued) • Several factors contribute to the shortfall in managerial incompetence: – Demographics – Lack of employee loyalty – Lack of good systems to identify and develop leadership talent – Technology 4 -8

Leadership Talent Management • Leadership talent management system: Consists of those processes and procedures organizations use to hire, develop, evaluate, reward, promote, and retain its leaders. • Research has shown that good talent management systems can have a profound impact on organizational effectiveness and success. 4 -9

Steps Involved in Leadership Talent Management (continued) • Clarify the organization’s strategy for the future. • Identify what are or will be the critical leadership positions in the organization. • Develop a competency model for the critical leadership positions. • Ensure the organization’s recruiting and selection processes are identifying, hiring, developing, rewarding, and promoting the right candidates. • Adopt valid and well-researched processes for hiring, developing, and promoting leadership talent. 4 -10

Assessing Leadership Potential • It is fundamentally concerned with predicting who will or will not be an effective leader before they have been placed into a position. – Accurately predicting managerial effectiveness is critically important but not at all straightforward. • Research has systematically determined which leadership assessment techniques yield more valid and accurate predictions than other techniques. 4 -11

Typical Correlations between Different Assessment Techniques and Job Performance in the United States 4 -12

Best Practices in Assessing Leadership Potential • Research shows that by developing a competency model, one can clearly define the skills and attributes required in the right candidate. • The best candidate would be the person with the most, if not all, of those skills and attributes. • The multiple hurdles approach is the most cost-effective and valid way to identify the best candidate from the applicant pool. 4 -13

Example of a mid-level leadership competency model 4 -14

Multiple Hurdles Approach 4 -15

Multiple Hurdles Approach (continued) • Use most inexpensive assessment techniques first. • Use Internet or paper-and-pencil measures of leadership potential. • Interview the remaining talent pool. – Structured interviews – Unstructured interviews • Put the top three candidates through an assessment center. – In-Basket exercises – Role plays 4 -16

Making Sense of the Process • Many times, having a clearly defined competency model, a biographical form, and structural interview questions linked to the model will suffice. • Research is the only way to determine which assessment techniques are the most valid for which leadership positions. 4 -17

Measuring the Effects of Leadership • Just as various techniques are used to assess leaders, there also various ways to measure their effects on subordinates and organizations. – When judging, the consequences of leader behaviors are examined, than the behaviors per se. • Commonly used measures to judge successful and unsuccessful leaders include: – Superiors’ effectiveness and performance ratings – Subordinates’ ratings of their job satisfaction and morale or of their leader’s effectiveness – Unit performance indices 4 -18

Common Measures of Successful and Unsuccessful Leadership 4 -19

Best Practices in Measuring Leadership Success • Ratings by superiors and subordinates generally yield useful information about a leader’s effectiveness. • Multiple measures often yield the best information about leadership success. • Practitioners need to think critically about how their behavior affects the measures used to judge leadership success. • Practitioners need to be aware of leadership success measures being biased. 4 -20

Methodologies Used to Study Leadership • Qualitative Approach – Case study: In-depth analysis of a leader’s activities. • Quantitative Approaches – Correlational studies: Used to determine statistical relationship between leader qualities and various measures of leadership effectiveness. • Correlation coefficient • Casual inferences – Experiments: Generally consist of both: • Independent variables • Dependent variables 4 -21

Some Common and Uncommon Variations of Leadership Studies 4 -22

Maxims and Theories of Leadership • Maxims: Personal opinions that can give leaders valuable advice about leadership. • Theory: Framework for conceptualizing relationships between variables and guiding research toward a fuller understanding of phenomena. • Theories are central to scientific research because: – Public predictions of how leadership variables are interrelated. – The systematic gathering and analysis of data. – Peer review of results. 4 -23

Jack Welch’s Eight Rules 4 -24

Summary • Leadership is the most important topic in the world today. • Leadership talent management systems helps organizations minimize crisis of insufficient effective leaders. • Various techniques exist for organizations to assess leadership potential and performance. • Quantitative and qualitative approaches are used to study linkages between leadership potential and performance measures. • Maxims may represent valid advice, but they are ultimately no more than personal opinion. • Theories are a collection of testable predictions about the relationships between certain variables. 4 -25