Our Ten-Year Study Reveals What Makes Executives Exceptional
By Ron CarucciTuesday, October 24th 2017
It’s no secret that not all “leadership” is created equal. The wide array of definitions of “good” leadership is nearly endless. The risks and potential consequences of executive leadership are far greater than other forms of leadership. As part of our ten-year longitudinal study on executive transitions, which included more than 2,700 leadership interviews, we did a rigorous statistical analysis (including more than 90 regression analyses) to isolate the skills of the top-performing executives. We isolated seven performance factors correlated to strong organizational performance as well as leadership strengths through IBM Watson’s content analysis tools as well as historical performance reviews of these leaders and their direct reports. Our intent was to identify the greatest executives from among the top, otherwise good, executives to detect what distinguished them. What separated the “best of the best” from everyone else is a consistent display of mastery across four highly-correlated dimensions, while “good” executives may have only excelled in two or three. Executives who shine across these dimensions achieve the greatest success for themselves and their organizations. To hear more about these patterns “in action,” you can view this whiteboard session at HBR.
Breadth: Connecting Organizational Dots
Exceptional executives have deep knowledge of how the pieces of the organization fit together to create value and deliver results. Many leaders arrive into the C-suite having grown up in functions like Marketing or Finance and lean too heavily on instincts and cognitive biases shaped by their ascent within those disciplines. Leaders who ran one business of a multi-business enterprise often favor that business within the larger portfolio. Exceptional executives defy such predispositions in order to integrate the entire organization into a well synchronized machine. Executives develop breadth by broadening their exposure to the full organization, taking assignments across disciplines, and paying particular attention to linking organizational seams.
They also focus on strengthening the organization’s seams to minimize poor coordination and fragmentation while maximizing the things the organization must do in competitively distinct ways.. They ensure key capabilities that exist only at the seams deliver differentiated results. One client struggled for years to consistently meet customer satisfaction expectations. In comparative rankings they were generally at or near the bottom of the list. Sales traded on the strength of personal relationships with key individuals. Customer Marketing, a newer, less-understood function, reported up separately from Sales and the Brand businesses. When quarterly forecasts were missed again, Sales retrenched to fix a pricing issue, Customer Marketing focused on better content, and Supply Chain tried to stay ahead of last-minute changes. When all their well-intentioned, but separate, solutions showed up at retail, customer satisfaction never improved. Ironically it was the head of R&D who forced all the functions into a room to solve the problem systemically. Together, they revealed obstinate issues of coordination and contradicting priorities between functions who needed to synch up to meet customer expectations. A year later their customer satisfaction improved by 40%.
Choice: Constructing Great Decisions
Exemplary executives have the ability to declare their views, engage others’ ideas, analyze data for insights, weigh alternatives, own the final call, and communicate the decision clearly. This skill inspires markedly higher confidence and focus among those they lead. Because they’re good decision-makers, they’re also good prioritizers, since setting priorities is all about selectively choosing from among various tradeoffs. At the heart of great decision making lies a balance between instinct and analytics. On one end of the continuum are leaders who “trust their guts.” They combine experience and emotion into well-developed intuition. On the other end of the continuum is the leader who relies on exhaustively mining data for insightful perspective to address the decision or problem they face. Exceptional executives function fluidly along this entire continuum, and recognize where their predispositions lie for either being overly impulsive or paralyzed by analysis..
The importance of this can’t be overstated. Making good decisions seems to be a comparatively rare skill. In one McKinsey survey of 2,207 executives, only 28 percent said that the quality of strategic decisions in their companies was generally good, 60 percent thought that bad decisions were about as frequent as good ones, and the remaining 12 percent thought good decisions were altogether infrequent. This is consistent with our own findings. The proclivity of bad decision making is usually intensified by poor decision making systems in organizations. So even leaders whose instincts might otherwise be effective have their ability compromised. In addition to a well-defined process for making and communicating decisions, exemplars ensure successful execution by sustaining laser focus on the choices they have made to avoid overwhelming the system with too many priorities. Executives develop choice by designing and participating in decision making systems that bring clarity and accountability to the organization. They must also know their own predispositions to impulsivity or paralysis when it comes to balancing instinct and analytics.
Context: Knowing the Playing Field
Exceptional executives maintain a solid grasp on the ever-changing context within which their business competes. Their natural contextual intelligence lies at the intersection of insights into how their organization uniquely competes and makes money, and what is most relevant to the customers they serve ─ even when customers may not know themselves. The ability to apply intricate wisdom of one’s business to emerging competitive threats requires the ability to see trends and emerging possibilities on a multi-year horizon. Too often, leaders are stymied by competing investment options or caught flatfooted in the face of profit shortfalls. Lacking an understanding of how value is delivered to their market, they make suboptimal investments. More typically, they reflexively make across-the-board cost cuts that restrict their ability to maneuver in a shifting competitive arena. The exemplars were described as having innate curiosity and deep knowledge of their business context which they apply to wider economic, technological, and customer trends. Armed with a clear point of view, exemplars more readily addressed threats and took earlier advantage of opportunities. Executives develop context by grounding themselves in external realities of their organization, by remaining curious about adjacent industries, and seeking disconfirming data about commonly held assumptions regarding their company.
Connection: Deep, Trusting Relationships
Every organization has executives everyone wants to work for. These executives form deep connections wit superiors, peers, and direct reports. They communicate in compelling ways and reach beyond superficial transactions to form mutually beneficial, trusting relationships. Their legacy becomes a positive reputation within the organization for consistently delivering results while genuinely caring for those who deliver them. Exceptional executives study and meet the needs of key stakeholders. It was no surprise that of the four dimensions, relational failure led to the quickest demise among second-best executives. While exceptional executives led with a humble confidence that graciously extended care to others, second-best executives were inclined to manage perceptions, creating the illusion of collaboration while masking self-interested motives. Executives develop connection by investing heavily in their own emotional and social intelligence, actively solicit feedback about how others experience them, and learn to be vulnerable with their shortcomings to create trust with others.
There’s a lot of research on the importance of executive relationships. One study revealed that executive’s fears of appearing incompetent, underachieving, and political attacks from rivals accounted for 60% of bad behavior among executive team relationships. Another study supports our findings that among the high failure rate of transitioning executives, failed relationships account for a disproportionately higher percentage of all executive failure.
While it may seem like a high bar to suggest being an exceptional executive requires mastery in all these dimensions, the data are undeniable. After more than 90 regression analyses, the correlations returned conclusively confirmation all four are what distinguish top executives. All four of these attributes are learnable, and it’s never too early to start developing these skills. Consider where in your current role you have the greatest opportunity for more impact, and which of these four dimensions might be holding you back. You will quickly find they are highly interrelated. So learning more about your own company’s business may require building relationships in others departments. Making sharper investment choices might require learning more about your industry’s changing context. Pick one place to start that will accelerate your impact, and you will be surprised at how quickly you and others see the difference.Comments subject to review.