the leading edge: developing leaders in volatile times

The Leading Edge: Developing Leaders in Volatile Times

Alan Price

© 2006 Wiley Periodicals, Inc.Published online in Wiley InterScience (www.interscience.wiley.com). DOI 10.1002/ert.20096

Leadership is not what it used to be,which is both the good and the bad

news. The meaning of leadership is chang-ing, and leadership challenges are intensify-ing. Businesses and other organizations arebeing asked to find, groom, and retain lead-ers in an entirely new and increasingly com-plex environment. Old models, frameworks,and competencies don’t have the impactthey once did.

Peter Drucker, the late management guru,was famous for dispensing wisdom and clar-ity in a no-baloney style. On the topic ofleadership, he was predictably plain-spoken.Management is doing things right, saidDrucker, but leadership is doing the rightthings. In an era when the distinctionbetween management and leadership was inits infancy, Drucker highlighted one of lead-ership’s most significant challenges. Formany years, the idea of doing the rightthings formed the basis of the dominantmodel of leader as strategist. If leaderscharted the strategic vision, then managerswould handle the execution.

The leadership landscape has undergone adramatic series of evolutions, especially inrecent years. Leaders face a much moredemanding world and are called on to meeta greater range of challenges than simplycreating the company’s strategy. Today’s listof “right things” that need to be done is soimpossibly long that executives need a lead-

ership definition that provides new strategicclarity and a more practical focus. Nearlyevery company and organization today iswell advised to update its definition of lead-ership to keep pace with the nature of lead-ership challenges. To borrow from Drucker abit, it is time to clarify which things are theright things for leaders to do.

We live in challenging times for leadersin business and elsewhere, including elec-tive politics, public administration, profes-sional and collegiate sports, the military,organized religion, and the nonprofit world.Leadership—or the lack of it—is a commonthread central to many issues, from the cor-porate abuse scandals of companies such asEnron and others, to the mishandling ofcrises such as Hurricane Katrina, to the sex-ual abuse scandals that rocked the CatholicChurch over the past several years. It seemsas if today’s headlines are dominated byexamples of leadership failures and leader-ship challenges.

But nowhere is the leadership gulf aswidespread or daunting as it is in business—for companies along the full spectrum, fromlarge corporations to mid- and small-sizedfirms in nearly every industry or field. Evencompanies and industries that aren’t experi-encing an obvious leadership crisis are oftenwoefully unprepared to develop the next gen-eration of leaders internally or throughrecruiting efforts.

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Employment Relations Today

Without a doubt, leaders still have to besmart strategists. But the standards of leader-ship development today also require leadersto understand how to align their people col-laboratively toward a strategy. In industryafter industry, great strategies are likely tofail if people aren’t aligned with them. Thosesituations and others call for leaders whoknow how to develop leadership in others—more specifically, leaders who can inspire,motivate, coach for performance, and facili-tate critical agreements across a diversegroup of stakeholders. In nearly every indus-try, the leaders in great demand today arethose who are innovators and shepherds ofinnovators, and, most important, leaders whohave the personal attributes that we all look

for—but often don’t know how to develop—including courage, integrity, and presence.

This article explores the underlying issuesfueling the challenges to leadership and thecritical components necessary for developingleaders in today’s business environment.

LEADERSHIP CHALLENGES WIDESPREAD

In my extensive experience with Fortune 100companies in industries as varied as hightechnology, financial services, and manufac-turing, I find that executives face very simi-lar challenges in developing leaders. Specifi-cally, when most executives are askedwhether their company has a deep bench ofseasoned and high-quality leaders for thenext 20 years, most answer “no.” Similarly,when asked whether they have the leader-ship ranks for the most critical roles for the

Alan Price Employment Relations Today DOI 10.1002/ert

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next three to five years, most say they don’t,that they’re behind. If asked to cite theissues or barriers to developing new leaders,most executives identify the short supply ofeither a) critical thinking and strategic analy-sis skills needed to lead the business, and/orb) collaborative interpersonal skills neededto lead people.

Most companies are feeling some degreeof pain around their leadership-developmentchallenges. What’s more, the pressure todevelop new leaders is sure to grow in thecoming years. At its core, this is an old-fash-ioned supply-and-demand issue. The growingdemand is overwhelming the limited supplyof seasoned leaders capable of meeting thechallenge in today’s hyperaggressive andoften highly ambiguous business environ-ment. But several important issues point to awidening trend.

BABY-BOOMER RETIREMENT

This is the reason many observers love tocite as the primary cause of the leadershipcrisis, and it will no doubt play a huge rolein creating a leadership gulf in many indus-tries and companies. It certainly is not theonly issue driving the leadership crisis, butthe facts around baby-boomer retirement aredaunting. Boomers number nearly 80 mil-lion. The first wave of them will hit age 65—the magic year when many people leave theworkforce for retirement—in just five years.Although it’s true that many boomers likelywill work after they reach retirement age,it’s also true that many are retiring already.Nobody knows yet when the real impact ofboomer retirement will hit, but nearly everyfield and industry is staring at the prospectthat boomers will retire soon—and in droves.The key questions for most companies are

Nobody knows yet when the real impact of boomer retirement will hit.

Spring 2006

who will replace them, and how will thosepeople get up to speed?

RAPID PACE OF MARKET CHANGE

Change comes in a variety of forms, but twohave the most impact on leadership issues:the huge external changes affecting certainmarkets and the internal changes affectingcompanies evolving from entrepreneurialroots to more established operations.

The markets in some industries are expe-riencing tremendous change. It used to bethat companies knew who their competitorswere in markets that were fairly static. Thesituation is much more fluid now for manycompanies. For instance, who would haveanticipated that Apple would challenge Sonyin the music market? A few short years ago,Apple was a market laggard in an entirelydifferent realm; Sony dominated the per-sonal-music-device market with its leg-endary Walkman products. Similarly, in 10years, will eBay be only an online auctionpowerhouse? Or will its recent purchase ofthe Internet phone service innovator Skypeposition eBay as a primary competitor toconventional phone companies? And whocan predict where Google is going in its evo-lution from search engine to Internet-basedsoftware and services giant?

Those are high-profile examples, but nocompany can be completely secure aboutwhere it stands in the marketplace. Rapidchange in markets and in the evolution ofentrepreneurial cultures is influencing howcompanies plan, how they understand theirmarket and their competitors, and how theyoperate. But many company structures aren’tset up to handle rapid change or to adapt to iteasily—especially when it comes to develop-ing leaders.

The Leading Edge: Developing Leaders in Volatile TimesEmployment Relations Today DOI 10.1002/ert

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RAPID PACE OF INTERNAL CHANGE

And what about the rate of internal change?Organizations can change a lot faster now.Reorganizations happen one after the other,reporting relationships change, cultures shiftfrom an adaptable, shoot-from-the-hip,entrepreneurial style to a more layered andcomplex structure. It seems that mergers andacquisitions are more common today thanever, yet many deals fail because the peoplecomponent wasn’t as closely planned for asthe financial or operational issues. The keychallenge with internal change is findingways to develop leaders who can help theorganization adapt to internal shifts and leadpeople through change so that they adapt

more effectively and align around the newdirection.

GLOBALIZATION

The term itself has such a lofty feel—global-ization. The word sounds so intangible whenit stands alone, but the ability to shift people,ideas, and resources across international bor-ders and cultural and geographic boundariesmakes globalization a fascinating challenge.Globalization carries huge implications forleaders, especially with the logistical andcross-cultural challenges that operating glob-ally presents. For instance, how does a leadershape a company culture and then leadacross national and ethnic cultures? Usingthe software field as an example, considersoftware developers in the United States andthose in India—will the folks in India have as

Mergers and acquisitions are more common today than ever,yet many deals fail because the people component wasn’t asclosely planned for as the financial or operational issues.


meaningful a shot at being considered forleadership roles as do U.S. developers?

THE RISE OF ALLIANCES

There are many different types of businessalliances—including partnerships for going tomarket differently or better, and alliances forcodeveloping new or next-generation tech-nologies. Regardless of the type, all businessalliances present leaders with similar chal-lenges. How do you lead in an alliance whenyou don’t run the whole entity? Leaders in analliance are involved in running the jointeffort but they have little control or influence

over the whole company—theirs or their part-ners’. Alliances call for a highly collaborativeleadership approach.

ORGANIZATIONAL COMPLEXITY

The rise in organizational complexity—withmany organizations shifting to matrix manage-ment structures—calls for a highly collabora-tive leadership approach. Many midsized com-panies, and more than a few small ones, havelevels of organizational complexity that wereonce found only in large multinationals.Diverse lines of business, spanning global mar-kets and held together by alliance partners, areconstantly reorganized to maximize resourceutilization, clarify reporting relationships, andsupport an ever-changing set of customer andinternal needs. Today’s leaders must adapt tothis level of complexity in order to understandthe shifting, interrelated workings and big-pic-ture capabilities of their businesses.


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A DIAGNOSTIC APPROACH

The list of issues affecting leadership todaycertainly extends beyond the quick surveyoffered here. But regardless of the nature andcombination of these issues, the central ques-tion remains: what’s the best approach forunderstanding how to go about developingleaders for your organization? Five diagnosticquestions point a way forward.

1. What kind of leaders does your organi-zation need? Hint: You need leaders whocan be collaborative, think strategically,and adapt. Equally important, you needleaders who can move quickly even in theface of ambiguity and constant change.

Although it’s true that every organiza-tion has its own culture, history, andvision of the future, more and more com-panies have taken a fresh look at thatvision with an eye toward defining thespecific leadership characteristics that willhelp them realize it.

The myth of the heroic leader who canassess the enemy quickly, know exactlywhat to do, and save the day single-hand-edly is just that—a myth. Today the com-petitive environment is too fluid and theorganizational complexity too great. Weneed leaders with the collaborative skillsto tap into all of an organization’s talentand energy—people who can lead the pro-cess of change without getting boggeddown in procedural tar pits.

2. What do your leaders need to do? Yourcompany probably doesn’t have the lux-ury of developing leaders for some distantfuture. What specific challenges are yourleaders dealing with? The turnaround orrestructuring of a troubled business orprocess? The challenge of building global

Today’s leaders must adapt . . . in order to understand theshifting, interrelated workings and big-picture capabilitiesof their businesses.

Spring 2006

teams and alliances? The shortening of theproduct-development cycle time?

Companies need to develop leaderscapable of dealing with immediate prob-lems and opportunities. The more focusedthe call for leadership, the more focusedthe leadership response will be. Top-notchleadership development uses those real-life business needs to accelerate the build-ing of skills that are needed in both theshort and the long terms.

Companies such as Agilent, Steak nShake, and Office Depot each have verydifferent leadership competency needs. Acomplex, matrixed organization needs adifferent level of strategic thinking,unlike a simpler, more traditional retailenvironment.

PepsiCo faced a similar challenge in itsleadership-development work. The com-pany required leadership that was extraor-dinary in two areas: innovation and thecore fundamentals of the business. PepsiCochose a leadership-development programthat built leadership capacity in those twoareas and was solidly grounded in immedi-ate business challenges. The result wasmeasured in huge potential return oninvestment and a platform for carrying theskills over into long-term success.

3. What critical roles do you need leadersto fill? Effective leadership development isnot a generic course that is taught the sameway at all levels of the organization. Assessyour organization’s needs. Where do youneed to develop leaders most: at the front-line manager level, in the senior leadershipteam; or somewhere in between?

The best leadership development pro-grams make certain that leadership istaught appropriately at all critical levels.Smart companies get the highest return on


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their development dollar either by invest-ing in a systemic approach for developingthe entire leadership pipeline or by identi-fying which level of leadership will pro-duce the greatest return.

Many companies seek to accelerateboth the depth and breadth of leadershipand business experience. Even an experi-enced CEO, someone who fully under-stands the business and has worked inother companies in the industry, may nothave the time or the ability to developother leaders’ depth and breadth.

4. How deep is your bench for meetingleadership needs? You might think youhave the right people but need to developthem further. But what about growing thebench of people capable to fill that rolewhen those folks move on? That’s a keycomponent that’s often overlooked. Forinstance, if your company has 400 critical

leadership positions, you should have adeep bench of 400 leaders in those posi-tions and another 800 leaders (two foreach) in development to step up to thosepositions.

Companies have always struggled torecruit, retain, and develop the highest-quality people. It’s also true that compre-hensive, meaningful leadership-develop-ment pipelines that strengthen and align acollaborative leadership approach are suc-cessful because they are linked to bothbusiness results and career development.We have observed that the link to careerdevelopment, in turn, makes a significantdifference in recruitment and retention.

The best leadership development programs make certainthat leadership is taught appropriately at all critical levels.


Thus, leadership development creates avirtual circle where leaders stay and thebusiness thrives. Senior management andline leaders must become involved in theleadership competency identification pro-cess, ensuring their investment in thedevelopment programs. Leadershipinvolvement also ensures that competen-cies will be tied to larger strategic goals ofthe company, which creates higher stakesand better buy-in at all levels.

5. Do you have a plan for developingleaders? Better yet, do you have an inte-grated leadership-development pipeline?In other words, looking at each stage ofthe leadership journey—top, middle, andemerging—do you have candidates devel-oped for each level? And equally impor-tant, do you have a program of assign-ments to groom them with the right level

of knowledge and experience? Do theyknow where you’re headed in the future?

Excellent leadership development isnot just an event—it’s a journey for boththe emerging leader and the company.Both the individual and the company willbe pushed out of their comfort zone. Butif it’s designed well, the program will pro-duce extraordinary results for both theindividual and the company.

A FRAMEWORK FOR LEADERSHIPDEVELOPMENT

In crafting an overall strategy for developinggreat leaders, it’s helpful to explore a simpleframework for developing strong and effec-


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tive leaders capable of succeeding in today'senvironment.

Great leaders in nearly any industry ororganization excel at four challenges:

1. Setting a clear direction. Leaders are crit-ical in creating strategy, setting direction,charting the course, and sharing an inspir-ing vision that guides our collective action.

In order to develop leaders capable ofsetting a clear direction, leadership devel-opment programs must:❏ Be designed with a clear direction in

mind. A clear vision must define theprogram’s purpose and measures ofsuccess.

❏ Connect leadership development to thebusiness strategy and results. You musthave a clear intention to affect thebusiness and an equally clear intentionthat the emerging and developing lead-ers will play a significant role in creat-ing that impact. Done properly, thisaccelerates the development of strate-gic thinking and direction-setting skills.

❏ Spring from a clearly developed leader-ship profile. The word leadership coversa wide range of cultural assumptions.You must clarify leadership, and theprofile of successful leadership behav-iors, before you design the leadership-development program. Companieschange their business strategy with rel-ative frequency, but they change theircore values and mission relativelyrarely. In the middle lies the leadershipprofile, which you should reexamineperiodically with an eye toward thelong-term future of the business.

2. Making sure that the people are capa-ble of moving in the direction ofchange. In the past, this was assumed to

Excellent leadership development is not just an event—it’sa journey for both the emerging leader and the company.

Spring 2006

be the role of management and was apart of resource allocation. Companiesbelieved that changing the organization’ssystems, structures, budgets, and so onwould enable people to move in a newdirection. However, organizational reali-ties, such as the high incidence of failedorganizational change and the otherchanges mentioned earlier, have pushedus to adapt our concept of leadership tofocus as much on people as on the direc-tion of change. Leaders lead people; theydon’t just map strategy. And people needcapability building to meet the currentchallenges.

For example, a sales division of PepsiCocreated a leadership-development initia-tive and tied its action-learning compo-nent to measurable business goals. Theparticipants launched and sustainedimplementation teams, with a supportprocess and coaching from InteractionAssociates. The leaders applied the skillsand tools they acquired during the firstphase of the leadership-development pro-cess to create and present a variety ofinnovative business solutions, in manycases collaborating with customers. Byusing real projects as the core of the pro-gram, participants could immediately seethe impact of their innovation and strate-gic thinking skills on PepsiCo’s business.The potential impact of the action learn-ing teams’ projects totaled $250 million.

At Agilent Technology, leadership-development participants create a profit orperformance improvement proposal (PIP),which is not an “extra” initiative but partof the participants’ regular work duties.Participants meet in cluster groups tosolve similar issues, applying the compe-tencies they’ve developed.


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In order to build capability, leadershipdevelopment programs need to:❏ Use the best of theory and practice, ❏ Use a comprehensive learning and

development approach to accelerateknowledge transfer and skill develop-ment (assessments, coaching, mentor-ing, e-learning, classroom, action learn-ing, and so on), and

❏ Make sure that action-learning projectswill build the capabilities that theorganization requires and produceresults that the organization needs.

3. Collaboratively building people’s com-mitment to move in the direction ofchange. Even with a clear direction andstrong capability, people must be commit-ted in order to unleash their full potential.The leadership challenge has alwaysincluded inspiration, motivation, andalignment. Successful leaders understandthat they must adapt their role to inte-

grate the reality that commitment buildingis part of their responsibility. The oldmodels (command and control, heroicindividual leadership, and so on) are inad-equate in the current context or with theemerging generation of knowledge work-ers. This generation will pledge its com-mitment only in exchange for meaningand purpose and a higher degree of auton-omy. They want their lives and their workto be a part of a larger whole. They alsowant their lives to be better balanced—and they don’t want to be ordered orcoerced in order to be committed.Although people have always responded

Although people have always responded best to skillful, collaborative approaches, the new generation may give itsfull commitment only in response to collaborative leadership.


best to skillful, collaborative approaches,the new generation may give its full com-mitment only in response to collaborativeleadership. That’s an important shift thattakes many leaders by surprise today.

Consider the following issues in build-ing commitment:❏ A properly designed, collaborative

approach builds both individual andorganizational commitment to leader-ship development.

❏ Motivating, inspiring, building skills andconfidence, and connecting develop-ment to a clear career path (the leader-ship pipeline) strengthen commitment.

❏ Take a systems approach with organiza-tional commitment to the entire process,not just isolated activities and events.

❏ The emerging leader must take someshared responsibility for learning,developing, and leading at each stageof the process. This is critical to fullcommitment and true capability.

4. Producing real and measurableresults. And by results, we really meanmeasuring impact. Leaders need to beclear on the key measures of success andthen structure simple but thorough sys-tems to capture accurate data, draw con-clusions, make necessary adjustments, andreport results.

A short list of sample activities andmeasurement processes includes:

• standard paper-and-pencil evaluations,• pre- and postworkshop assessment tools

directly linked to workshop objectives,• third-party behavioral observation and

feedback processes,• decision-making cycle-time-reduction mea-

sures (for example, time to market forteams without training versus time tomarket for teams with training),


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• 360-degree feedback instruments tieddirectly to workshop objectives and admin-istered over various periods of time, and

• explicitly linking learning-program compe-tencies to key business initiatives andagreeing on the relative value of thoseskills in successfully reaching the businessobjective.

In order to develop leaders to produceresults, leadership-development programsneed to:

• anticipate individual impact on the emerg-ing leaders;

• deliver organizational business impacts,measurable for ROI (both return oninvestment and return on involvement);and

• develop and strengthen the organization’sbench of future leaders.

COMING FULL CIRCLE

To some degree, the Drucker idea that lead-ership is about doing the right things is stillrelevant, though the definitions of thosethings and of leadership itself have grownconsiderably. As we’ve explored here, thenature and focus of leaders have alsochanged considerably over the years andlikely will continue to change as the issuesaffecting leaders continue to deepen andgrow. Businesses in almost any industry arechallenged with fielding leaders capable ofsuccess in today’s unique markets. And lead-ers themselves are under pressure to adopt anew framework for providing leadership,regardless of industry or company size. Inthat context, perhaps leaders are people whoredefine leadership for themselves ratherthan follow Peter Drucker’s definition—oranyone else’s.

Spring 2006


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Alan Price is a practice leader and senior consultant in the leadership development practiceat Interaction Associates, a firm with nearly four decades of experience specializing in per-formance improvement and learning (www.interactionassociates.com). Price is the author ofthe book Ready to Lead? and can be reached at [email protected].

the leading edge: developing leaders in volatile times

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