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From Loading Dock to CEO in 6 painful steps. Or, Navigating the Leadership Pipeline

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leadershippipeline

Reference: The Secret to GE’s Success: A Former insider Reveals the Leadership lessons of the World’s Most Competitive Company (Hardcover) by William R. Rothschild

Reference: The Leadership Pipeline: how to build a Leadership-Powered Company by Ram Charan, Stephan Drotter, and James Noel.

Reference: Developing your Leadership Pipeline – Harvard Business Review December 2008

Before you read this posting, read our previous posting:
Amateur Radio Clubs: Good to Great; Good to Gone; Lost in Mediocracy.

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The Questions

How do companies deal with the war for talent requiring ever increasing compensation packages which are now sky high for talented people?

Why do companies recruit leadership talent from outside rather than promote from within? Is hiring gifted people from outside the organization good as a tactic or long term strategy?

Is it better to buy leaders or build them? If you can build leadership then how is this accmplished? 

The theme of this posting is building leaders from inside of an organization, which companies do it, and how they do it.

The Success of General Electric

gelogoIt can be argued that GE (General Electric) has been one of the most successful companies of all time. The question is how was this accomplished?  There are many contributing factors to GE’s success. 

One of the elements of GE’s success in the modern era is GE’s ongoing commitment to elaborating and carefully understanding a model of leadership and supporting it with formal training programs.

Another element, championed by CEO Jack Welch, is the Vitality Curve.  The vitality curve differentiates GE employees into the top 20%, the middle 70% and the bottom 10%.  The bottom 10% must go.  That’s some tough love from Jack Welch to the benefit of the shareholders. 

A third element in the era of Welch was his clear performance metric that he applied to all GE divisions.  Be number one or number two in the industry or exit the market.

From a theoretical perspective, these elements taken together – carefully understanding a leadership model, training to the model, accomplishment-based performance, clear metrics, and the deadly Vitality Curve certainly seems a dynamite synergy.  If GE’s performance is any indication of the validity of the model then the model is certainly worth a look see. 

The simple strategy for any company is this.  Look to other companies to see what works and what does not work.  Emulate what works; discard what does not work.  You don’t have time to try eveything yourself.  Benefit from the experiences of others.

We will take a look at one part of this synergy – the leadership model

The Crossroads model of leadership development

GE’s leadership model can be traced back to Walt Mahler who in the 1970’s worked on GE’s succession planning process. Succession planning is the process by which folks in an organization move up the corporate ladder from an employee in the role as “individual contributor” through the ranks of management and leadership positions up to the office of CEO.

The insight that Walt had in producing this model is to recognize distinct passages that individuals must go through to get from one level to the next. The model came to be know as the Crossroads model. The name “Crossroads” is the fundamental recognition that individuals must make very explicit transitions as they move from one level of management or leadership to the next in the succession of roles from individual contributor to enterprise leader (CEO).

From Individual Contributor to CEO – Six Crossroads

In Walts model and later elaboration there were six (6) passages or “crossroads” that individual must pass through to getfrom Individual Contributor to Enterprise Leader. In Walts model it was important not to skip any of the “crossroads”.  At each “crossroad” the individual had to accomplish a fundamental new way of thinking about themselves and the organization.

This fundamental “recalibration” of the individual is at the heart of the model.  Without this recalibration at each of the six (6)  crossroads in the leadership model the individual would not be successful.

The fundamental recalibrations are cumulative.  No crossroad is optional.  The model gets you from the lowest level (first level) of “individualal contributor” to the top of the organization – Level 6 CEO/Enterprise Manager.

Three fundamental shifts at the crossroads

Here are the areas of individual transformation at each of the the six (6) Crossroads

  • Skill requirements – the new capabilities required to execute new responsibilities
  • Time application – new time frames that govern how one works.
  • Work values – what people belive is important and so becomes the focus of their effort

So, at each of the 6 “crossroads” individuals had to fundamentally change what they value, how they spend their time, and what new skills need to be acquired. These “crossroads” or “tuning points” later got the name of “pipeline”.

The dangerous term “Leadership Pipeline”

Books written about Walts model and later elaborations have unfortunately used the term “Pipeline” to describe this model.  When people hear this term they may think of something straight and smooth.  Liquids or gas generally move smoothly through a pipeline.

If you think of this then you have it wrong.  Many people do not flow easily through the transitions that start as an individual contributor, the first management job, and up through middle management, executive leadership, and into the role of CEO. 

The transitions are fundamental changes in values and perspective – that many people can not make.  So, as far as “Pipeline” – think “crossroad”  as originally used by Walt Mahler.  If you must think “pipeline” then look at the picture at the top of this posting – the pipe has many turns which one must navigate.

The power of the model

Here are a few elements of the power of the model:

  1. The succession model (or promotion path) is explicitly defined (transparent) and communicated to employees at all levels.
  2. A Leadership training program can be built around this model and the specific “crossroads”
  3. This model provides clarity insofar as an individual performance can be objectively measured and used as the basis of promotion and job advancement.
  4. The clarity of the model is a corrective and a mitigation against promotions within an organization that are linked to politics. That is, being promoted based on who you know;  “time served” in one position and then promoted to the next;  promoted or retained based on some sort of entitlement system not based on job performance or accomplishment-based performance.

One can get the idea that this is a “no nonsense” approach to management and leadership at all levels. At a base theoretical level, one would think that this idea of the leadership pipeline can be positively correlated with organizational performance.

Diagnostic Tool for Organizational under performance

There is a fifth element to the power of the model that deserves special attention. The fifth element of the power of the Crossroads model (or any explicitly defined succession model) is that it serves as a diagnostic tool.

That is, no mature organization has made all the right judgements about people and their roles in an organization. A significant advantage of having the clarity of a succession model and objective standards for roles is that it allows one to identify people who have a role not appropriate to progress through the leadership pipeline. That is, people who are “clogging” the pipeline.

The higher the location of the clog the more the pipeline gets backed up. One can tie this to the 1970’s concept of the Peter Principle. The Peter Principle states “In a Hierarchy Every Employee Tends to Rise to His Level of Incompetence.”

Clogs in the pipeline, or people in the pipeline that have been promoted before they have made the necessary “recalibration” for the role have profound negative effects on organization.  Since these people generally make promotion decisions for levels under them, the risk is that these individuals make promotion decisions based on the wrong criteria – criteria they do not understand as they themselves were promoted for the wrong reason.  They apply the wrong criteria for promotion in the earlier stages of the pipeline.

The Leadership Pipeline – how to build a leadership-powered company

There is an excellent book authored by Ram Charan, Stephan Drotter, and James Noel on the the evolution of the Crossroads model originally conceived by Walt Mahler and further developed at GE, CIGNA, Chase Manhattan Corporation, Citibank, and other companies.

Reference: The Leadership Pipeline: how to build a Leadership-Powered Companyby Drotter, Noel, Charan

Who are these guys

Steve Drotter was at GE working with Walt on accomplishment-based executive assessment and developing the programs for GE’s leadership development center in Crotonville New York.

James Noel arrived at GE’s Crotonville training facility after Drotter left and became manager of executive education and leadership effectiveness at GE. At the time of the books writing Noel was Vice President of executive education at Citibank.

Ram Charan is a business consultant and author of many books on leadership. Charan graduated from Harvard Business School with an MBA and doctorate degree and later served on the faculty of the business school.

The Leadership Pipleline Model

Here is a summary of the Leadership Pipeline model. The book ( The Leadership Pipeline: how to build a Leadership-Powered Company) devotes one chapter to each of the 6 stages and what the transitions of skills, values, and time commitments are for each stage. After these chapters are chapters on diagnosing pipeline clogs, creating performance standards, succession planning, coaching, and how a succession model benefits the entire organization.

We highly recommend this book.  Here is are 6 leadership crossroads. 

6 Passages in the Leadership Pipeline.

  1. From Managing Self to Managing Others. People enter this stage when they demonstrate they are skilled individual contributors and they have the ability to collaborate with others.
    • Change in Time Application: These people must learn how to
      reallocate their time so that not only their own assigned work is completed,
      but also they help others perform effectively.

    • Change of Skills: Shift from doing work to getting work done
      through others.

    • Change of Work Values: From valuing their individual work
      to valuing managerial work.

  2. From Managing Others to Managing Managers.
    • Change in Time Application: In this phase, managers must
      only manage. They need to divest themselves of individual tasks.

    • Change of Skills: The key skills they must master during
      this transition include selecting people to turn passage 1, assigning
      managerial and leadership work to them, measuring their progress as managers,
      and Coaching them.

    • Change of Work Values: Learn to hold first-line managers
      accountable for managerial work rather than technical work.

  3. From Managing Managers to Functional Manager.
    • Change in Time Application: Participating in business-team
      meetings and working with other functional managers. Creating a functional
      strategy that enables them to do something better than the competition.
      Develop a sustainable Competitive Advantage within their function.

    • Change of Skills: Develop new Communication
      Skills and being able to manage some areas that are unfamiliar. Learn
      to consider other functional needs and concerns. Teamwork with other functional
      managers and compete for resources based on business needs.

    • Change of Work Values: Adopt a broad, long-term perspective.

  4. From Functional Manager to Business Manager.
    • Change in Time Application: Allocating time to think is a
      major requirement at this level: Managers need to stop doing something
      every second of the day and reserve time to reflect and analyze.

    • Change of Skills: Business managers are responsible for the
      bottom line. Rather than consider the feasibility of an activity, a business
      manager must examine it from a short- and long-term profit perspective.

    • Change of Work Values: Value the success of their own business.

  5. From Business Manager to Group Manager.
    • Change in Time Application: From running their own business
      to succeeding indirectly by managing and developing several businesses
      and business managers.

    • Change of Skills: Be able to:

      • Evaluate strategy in order to allocate and deploy capital.

      • Develop business managers.

      • Develop and implement a Portfolio Strategy.

      • Assess whether businesses have the right core capabilities to win.

    • Change of Work Values: Derive satisfaction from the success
      of other people’s businesses. Appreciate managing a portfolio of business.

  6. From Group Manager to Enterprise Manager.
    • Change in Time Application: Set direction and develop operating
      mechanisms to know and drive quarter-by-quarter performance that is in
      tune with longer term strategy. A subtle shift from strategic to visionary
      thinking, and from an operating to a global perspective. Let go of the
      pieces, and focus on the Whole. Assemble a team of high-achieving, ambitious direct reports, knowing that some of them want his job.

    • Change of Skills: Ability to manage a long list of external
      constituencies proactively.

    • Change of Work Values: Learn to value Trade-offs. Appreciate managing one entity.

Can the model be applied to small business?

The Leadership pipeline model as articulated in the Drotter, Noel, Charan book is for large corporations. However, there is a section in the book that shows how this model can be tailored to small business. The model can be reduced from 6 levels to 4 levels in companies with about 20 employees.

In the case of the smallest business of owner-founder the number of levels can be reduced to two (managing self and enterprise manager).

The question can be asked: why do some small businesses never become large organizations?  What is the reason that owner-founder enterprises fail to become large organizations?

According to Drotter et al

We worked closely with a financial services institution that did acquisitions lending to small business, and they asked us to help them determine before the loan was made whether the borrowing company could manage a large company post acquisitionand found that the companies that failed to handle the increased size were headed by people who were reluctant to change their own work habits; they found it difficult to to give up their hands-on involvement or trust a new layer of management.

In other words, they were unable or unwilling to make a crucial leadership passage.

Can the model be applied to non profits?

Drotter et al do not wite about how this leadership pipeline can be applied to non-profits. We think it is clearly applicable. Non-profits are every bit as much a corporation as a profit making corporation – the difference being that they are not so much judged on financial performance as much as they are judged on the fulfillment of their mission to their primary constituency. Non-profits are every bit in need of a leadership pipeline as are profit making companies.

Non-profits will be undermined to the extent that their leadership (Directors, President, Committee chairs, etc) have not made the most fundamental leadership passages. The worst case scenario is folks in leadership positions who still have the values, skills, and time commitmentsof Individualal Contributors.  The focus of Individual Contributors is primarily about self and NOT the organization as a whole.

Folks in even the most basic role in non-profits will need to have skills in planning, budgeting, selection of people for committees and projects, communication to constituencies, and relationship building.  They will need time commitments for annual planning, and ongoing management of the organization. They will need work values of getting work done through others, valuing the success of other people, and the success of the organization as a whole.

Resources

Developing your Leadership Pipeline – Harvard Business Review December 2008

The Secret to GE’s Success: A Former insider Reveals the Leadership lessons of the World’s Most Competitive Company (Hardcover) by William R. Rothschild

The Leadership Pipeline: how to build a Leadership-Powered Company by Drotter, Noel, Charan

Check out the Leadership Pipeline applied to Churches

http://daveferguson.typepad.com/daveferguson/2007/06/leadership-less.html

The Leadership Pipeline at McDonalds Corporation

The Leadership Pipleline Poster at McDonalds

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Written by frrl

January 9, 2009 at 8:41 am

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