Creating leadership value can happen by luck, coincidence or great performance of course. However, only few of us are born leaders, so why not structure your analytical approach to leadership, as you do with other assets on the company’s balance sheet. Personally, I fell in love with Dave Ulrich’s Leadership Capital Index (Berrett-Koehler Publishers, Inc. 2015), which could be one way to assess the value of your current leadership and identify improvement targets inspired by the research based drivers.
Great leadership is an untapped potential. According to at least some research below, only 25% of leaders are good leaders, half of them are “only managers”, and 25% are “bad supervisors”. Two other pieces of research reveal the challenge of leaders’ misperception of being inspirational. Thus, 77% of leaders find themselves inspiring, whereas 82% of employees find their leaders uninspiring. Acknowledging that inspiring leadership correlate positively with employee commitment (+32%), satisfaction (+46%) and performance (+16%), it could be fair to believe that better leadership would create more business value.
Figure 1: Leadership is an untapped potential
In brief, Leadership Capital Index makes the intangible leadership tangible, by pointing out competencies which drive leadership value, thus enabling an analytical and quantitative approach to the value of leadership. To really get my grips on how to improve the value of leadership, I have operationalized LCI – simply by creating an Microsoft Excel spreadsheet, which makes it possible to manage the multiple leadership drivers, leading indicators, calculating, calibrating and simulating the LCI. To supplement the valuation of a company the LCI approach can be applied to your own leadership and team, any other leader and team, or even a whole organization.
Table 1: The Leadership Capital Index competencies
All competencies have profound and research based rationales. But, let me share some examples of my interpretations.
Execution
Even the “best” plan may fail, if leaders are not able to make things happen through others. Thus, leaders are valued on their ability to prioritize and focus, ensuring clear accountability, making the right decisions timely, mobilizing others, adapting quickly, and communicating sense of urgency.
People management
No leader can do the job on his own. Thus, leaders are valued who have the ability, and find the time, to be both manager and leader at the same time, which takes strong communication skills, strong and aligned teams, people development and succession.
Performance accountability
Though, some claim that results are best driven by avoiding performance management, I find delegation of both tasks and accountability a necessity to deliver as promised. I still trust creating a shared culture of “Earning the Right to Attack” – otherwise you may not find the money to make the good intentions happen in real life. Thus, clearly defined goals, standards of achievements, link to consequences, regular follow-up and feedback provides comfort.
Leading indicators
Each of the 10 capabilities is detailed with concrete characteristics, e.g. personal resilience, professional and social intelligence, mobilization of commitment and adaptability. Furthermore, each characteristic is accompanied by leading indicators, i.e. concrete questions to assess the leader’s competencies. As almost all past research is one dimensional, the ability to situationally master and mix all 10 capabilities makes the big difference.
Now, let me share some of my experience as tips & tricks for applying LCI.
Beginner’s challenges and assessment scope
- Once you start working with LCI in practice, you will experience various traps and challenges as to resource and time demand, access to data sources and definition consistency. Thus, you need to set your own quality standards and apply them consistently, which demand some trial and error of your own.
- The LCI model can be applied in variations of depth and quality of the assessment, i.e. varying number of leadership items, indicators and assessment questions. The two domains focus on the top leader and the organization. However, you can even choose to assess the top leadership team, individually and/or as a team, or other key personnel and teams. You can even apply the LCI to the board of directors.
- Start small with intuition and first impressions, then enlarge as you go by increasing degree of assessment and number of indicators and ways to assess. Not all elements may be important in your case, nor applicable. Thus, adapt your LCI template, picking what you find relevant and important.
Automation and communication
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Applying the LCI calculation repeatedly calls for automation due to time and resource constraints. To benefit from LCI, it also needs to be easily communicated and shared with others. As my shortcut, I have converted the leadership drivers to Microsoft Excel - providing both analytical tables and graphics for presentation.
Weighting of LCI elements
- LCI elements are by default equally important, which is not necessarily true in your case. By using Excel, you can easily make your own weighting of capabilities if you find something more important than other according to your specific situation.
Scale definitions and calibration
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Scores are default rated on a scale from Low (1) to High (10), but what should be the benchmark when applying a score to a specific leader? In practice, you could use the scale according to your own experience based benchmark. However, you will most probably get in doubt, should it be one or the other score, when you compare with other leaders you know. Thus, LCI scale definitions and consistency are important, not only judging the score, but also to be able to give credible feedback to leaders.
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Should assessment scores be applied based on a general benchmark, or reflect what should be expected for a given position in a given context? I would suggest the general benchmark approach, and that position expectations are reflected by applying a target for the specific position.
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Furthermore, I would recommend that you allow time for high-level comparative assessments of other leaders and organizations, and calibrate accordingly, as you would otherwise get in doubt whether you have put a valid score the first leader, once you are about to score another leader. Thus, make sure to get comfortable as to validity and credibility.
Calculating and target benchmarking
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Calculate the sum of your scores across the selected number of indicative questions, and divide by the number of questions, which will bring you the LCI score between 1 to 10.
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Once getting to your LCI score, you may think, and so what? What is a LCI score worth without a target benchmark? I suggest that you set your targets, and not least identify gaps vs. your targets.
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Bar charts can provide overview, and spider-webs can provide the more detailed gap-profiles ready to be addressed by concrete actions.
Figure 2: Leadership Capital Index – Profile Summary
Figure 3: Leadership Capital Index – Target and Gap Analysis
Call for action
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Then plan for gap filling, whether it would be mentoring, coaching, training and development or substitution of individuals.
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In M&A cases, you might even decide to walk away from the deal process, if the LCI makes you too uncomfortable.
Good luck with your leadership value improvement efforts.
Mads Middelboe
Executive Advisor & CEO
Leadmore ®