Leadership development report (Leading for Change)

Spring 2004 41

E X E C U T I V E F O R U M

For bulk reprints of this article, please call 201-748-8771.

W hat do the Bank of America, General Electric, IBM, Lufthansa, PepsiCo, Pfizer, Royal Dutch Shell, and RBC Financial Group share in common? Each company enjoys a reputation for doing an outstanding job of iden-

tifying and developing leaders. But how do they do it? What do the best leader-builder organizations do that differentiates them from the many other firms that talk about the importance of developing leaders but fail to deliver on their promises?

At first glance, the answer appears easy. Each and every one of them uses competency frameworks to develop their leadership talent. In other words, these organizations translate the term leadership into clear frameworks outlining the leadership behaviors they expect from their managers. Using simple language, these frameworks set out a list of tangible and measurable competencies, skills, and mind-sets that provide the developmental benchmarks for leaders in the organization.

Given that such prominent firms are using competencies, it seems this must be the right thing to do. This conventional wisdom, however, may not be the case. The com- panies that are best at developing leaders know that leadership development is hard work and not a quick-fix, paint-by-numbers exercise. While these organizations have long abandoned the view that competency frameworks alone will help them shape the perfect leader for their organizations, these models still are seen as having a critical and foundational role in their developmental efforts. We feel that despite their attrac- tive benefits, competency frameworks have key drawbacks that have been largely over- looked. In this article, we explore why organizations are drawn in the first place to their use as a developmental tool, and outline their critical shortcomings. We conclude by describing how organizations can harness their advantages while effectively address- ing their limitations.

B Y J AY A . C O N G E R A N D

D O U G L A S A . R E A D Y

Rethinking Leadership

Competencies

Leader to Leader42

The Evolution of Leadership Competency Models

Typically built around a set of behavioral dimen-sions, leadership competency models form the basis for professional development in many organizations. They set the stan- dards for how leadership should be demon- strated by a firm’s managers and executives. Their popularity has been so significant that they have migrated beyond developmental initiatives into performance measurement, career management, high-potential iden- tification processes, and succession man- agement systems, where they are used as baseline criteria for selection, promotion, and compensation. As an example, Eli Lilly and Company utilizes seven leadership be- haviors in the assessment of performance and potential. They include a manager’s ability to

• Model the values.

• Create external focus.

• Anticipate change and prepare for the future.

• Implement with quality, speed, and value.

• Achieve results with people.

• Evaluate and act.

• Share key learnings.

As interest in leadership and leadership development grew in the 1990s, the use of competency models gained greater momentum. After all, organizations needed clear definitions of the skills and behaviors that they expected

of their current and future leaders. CEOs climbed onto the bandwagon. Many commissioned leadership compe- tency models were tailored to their organization’s spe- cific needs as they sought to build new organizational

capabilities and to instill a high-performance mind-set. For example, Gordon Nixon, CEO of RBC Financial Group, Canada’s largest and most successful company, directly linked his organization’s capacity to achieve and sustain competitive advantage to four key leadership dimensions. The dimensions were behaviors that were mapped directly to RBC’s capacity to execute its priority stra- tegic imperatives and most important core values. In early 2001, RBC had decided that its best route to strategic success would be through cross-border acquisitions. Given such a decision, RBC would need leaders who were capable of articulating and exe- cuting complex strategies simultaneously. As such, they would need leaders skilled in “shaping the future” and “driving to suc- ceed.” And since RBC was a leading finan- cial services institution, Nixon knew its leaders must possess the strongest capacity for “leading with integrity.” Finally, given the turmoil surrounding the industry, RBC would need leaders who were adept at “lead- ing continuous change and reinvention.”

Given recent concerns about business ethics and a rise in executive failures, these mod- els have expanded further to incorporate di- mensions such as corporate values, learning capabilities, and derailment behaviors in their leadership competencies. With the

dramatic rise in the popularity of 360-degree feedback tools (these surveys are built entirely around competen- cies), the position of competency models as essential to the leadership development and assessment fields has

Jay A. Conger is professor of organi- zational behavior at the London Business School and senior research scientist at the Center for Effec- tive Organizations at the University of Southern California. He has authored 11 books on leadership.

His most recent books include “Growing Your Company’s Leaders,” “Shared Leadership,” and “Building Lead- ers.” BusinessWeek magazine named

him the best business school professor to

teach leadership to ex- ecutives and one of

the top 10 “gurus” in management education

worldwide. �

Spring 2004 43

now been cemented. For example, a study by Jessica Sweeny-Platt conducted during the U.S. Leadership De- velopment Conference in June 2001 found that com- petency modeling was used by almost 75 percent of all companies as a tool for leadership development. The same study showed that 69 percent of the development initiatives of midlevel man- agers were using competency models as a basis for developing training initiatives. A study conducted by Donna Rodriguez and others at Arthur Andersen Worldwide also found that the majority of companies had applied competency models in the area of training and development.

The Benefits That Competency Models Offer: The 3 C’s

The popularity of competency modelsis easy to explain. They offer at least three critical benefits: clarity, consistency, and connectivity. Most obvious is the clarity ad- vantage. Competencies help organizations set clear expectations about the types of be- haviors, capabilities, mind-sets, and values that are important to those in leadership roles. In a simple format, they send a tangi- ble message about the company’s most highly valued leadership behaviors. For those aspiring to leadership roles, compe- tencies offer the foundation for a tangible developmental plan. Since competencies are embedded in feedback tools, managers can more easily and quickly ascertain where their strengths and development needs lie simply by scanning a set of numerical scales produced by the feedback survey.

The second benefit that competency frameworks pro- vide is consistency. By establishing a single model for an

organization’s management ranks, competencies pro- vide a common framework and language for commu- nicating and implementing the fir m’s leadership development plan. For example, with a competency framework that is adopted on an enterprise-wide basis,

the top team of an organization can hold focused dialogues to identify the leadership skills and behaviors that are most valued in the context of their company. Whether working in New Jersey or in Singapore, managers have a better chance of knowing what skills and behaviors are needed to move ahead as a leader in the company. Most competency models are built around feedback processes that quantify the extent to which a manager or executive demon- strates a specific competency. Quantifiable data allow for uniform measurement across managers in an organization. In this sense, the organization can more precisely ascer- tain where its managers stand on specific competencies and track development prog- ress over time.

The third advantage is connectivity to other HR processes. Competency frameworks pro- vide foundational metrics for many of the company’s other human resources processes. Competencies become a driving force in performance management and feedback pro- cesses, high-potential identification, succes- sion management, and reward schemes.

Given the clarity, consistency, and connec- tivity advantages of competency models, few question their utility. As a result, they

have become so pervasive that their role has gone largely unchallenged. We believe it is time to step back and take a hard look at these models and their role in leadership development.

Douglas A. Ready is senior lecturer, leader- ship development, at MIT’s Sloan School

of Management. Ready is also the founder and CEO of the International

Consortium for Exec- utive Development

Research, a leadership development partner- ship between 30 lead- ing companies and 20 of the world’s

top business schools. Profiled by Fortune magazine as a guru for developing global leadership capability, Ready advises CEOs around the world on

building effective enter- prise leadership teams.

�

Leader to Leader44

The Limits to Leadership Competency Models: Three More C’s

While the benefits of competency frameworks areeasy to see, we have also identified three limita- tions. These limitations are that competencies are apt to be complicated, conceptual, and built around current realities. Since many of the models are based on research on a wide range of managerial and leadership behaviors, there is a tendency for a company’s competency framework to be- come overly complicated—in other words, to contain too many dimensions. For example, some competency frameworks specify 30 or more different desired leadership di- mensions. Yet it is far from clear whether managers can focus de- velopmentally on more than a few behaviors at a given time. Certain coaching experts argue that managers can and should focus on only one to two behav- iors at a time. So while multiple competencies may capture a complex reality, they also dilute attention and create a blurry pic- ture of which competencies are priorities in the organization.

From the organization’s standpoint, a large number of competencies may serve to lessen an appreciation for the company’s top priorities. In a recent biography, Louis Gerstner Jr., chairman and CEO of IBM from 1993 until 2002, describes his experience with his firm’s use of a competency model to drive changes in leadership behavior within IBM. Using a set of 11 competencies (customer insight, breakthrough thinking, drive to achieve, team leadership, straight talk, teamwork, deci- siveness, building organizational capability, coaching, personal dedication, and passion for the business), train- ing and evaluation was designed to reinforce these be-

haviors with the aim of producing a new culture at IBM. While Gerstner did indeed witness changes in be- havior and focus as an outcome, he concluded there were simply too many competencies to focus the orga- nization’s attention. In the end, these 11 competencies were clustered into three categories—win, execute, and team. The original competencies did play a key role in developing a new generation of leaders at IBM by cre- ating a common language, a sense of consistency, and a basis for performance management and rewards. How- ever, the model needed to be simplified to be viewed as workable among IBM’s senior business leaders.

The second limitation is that competency models are based on an idealized concept of leader- ship—the concept of a universal best-in-class leader capable of functioning in all situations. In part, this is a product of the re- search from which these models are derived. In some cases, re- searchers examined small samples of outstanding senior leaders— the best of the best—to deter- mine the competencies.This is a process analogous to studying Tiger Woods to determine the

characteristics of an effective golfer. In other cases, re- searchers examined very large samples of managers to identify the fullest possible range of skills. While some managers may have exhibited a greater range of these skills than others, few managers possessed all the skills at the highest levels of competence. After all, the aim was simply to identify the fullest range of capabilities rather than determine how many managers were adept at them all.This process, however, is analogous to studying a broad sample of competitive swimmers to determine all con- ceivable swimming strokes.Yet in certain competitive sit- uations, skill at a single stroke—say the breaststroke—is

�

Competency models

are complicated,

conceptual, and built

around current realities. �

Spring 2004 45

the key determinant of success rather than breadth of repertoire of strokes.The dilemma then is that few man- agers are outstanding in the full range of leadership be- haviors that these models promote. Moreover, they may not need to be—as in our example of the breaststroke competition. As a result, competency models can rein- force the notion of a perfect or well-rounded leader, and such individuals rarely exist in reality. In addition to this dilemma, there can be natural tensions between some of the competencies. For example, an individual manager or executive might be expected to exhibit a strong opera- tional orientation and a willingness to challenge the sta- tus quo—both at very high levels of competence. But these di- mensions are not natural part- ners. Achieving operational excellence demands that pro- cesses not be routinely chal- lenged or disrupted; otherwise critical efficiencies will be lost.

Moreover, to ensure the advan- tage of consistency, organizations have moved toward universal competency models—a single model for the entire manage- ment population. While this has allowed for ease of administra- tion and consistency in comparing data across the com- pany (as mentioned in the benefits section), such a universal model fails to recognize that leadership re- quirements vary by level, culture, and situation. Leader- ship skills at the executive level are often significantly different from those at the middle ranks. Similarly, the behaviors that characterize a leader in a Western cul- ture might not be the behaviors that will define the leader in that company’s Asia-Pacific operations. Dif- ferent functions and operating units may also demand different leadership capabilities given their unique requirements.

Most important, the underlying assumption behind the conceptualization of competency models of leadership is that an effective leader is the sum of a set of compe- tencies.This does not reflect the reality of the manager’s world. The logic of these models suggests that if we de- velop each competency to the point of mastery one after the other, a manager will emerge as a successful leader.

Morgan McCall and George Hollenbeck, two experts on leadership development, argue that there are myriad ways of accomplishing a leader’s job—especially at the executive level: “No two CEOs do the same things

much less in the same ways, or have the same competencies. This conclusion is not only ob- vious on its face, it is evident when we observe outstanding leaders, whether military offi- cers, heads of states, or CEOs— one cannot but be struck by the differences rather than the sim- ilar ities in their makeup.” In other words, to argue that the jobs of executive-level leaders can be universally defined around 7 or 9 or 11 behavioral dimensions is grossly oversim- plifying a very complex role.

The very complexity of an executive position allows for multiple ways of doing the job and multiple forms of talents.

McCall and Hollenbeck go on to state:“A person may compensate for a lack of some skills (e.g. make up for a lack of knowledge in finance by drawing effectively on the knowledge of others), acquire missing skills (e.g. learn enough finance to get by), substitute something else for the skill (e.g. outsource), or change the job so that the skills are not so crucial (e.g. split off the fi- nancial component).” So there appears to be merely a

�

Well-rounded

leaders rarely

exist in reality. �

Leader to Leader46

loose coupling between the results an executive achieves, the means to achieving those results, and any uniform set of behaviors and competencies demon- strated by executives.

Our last concern is that competency models tend to be focused on current leadership behaviors—in other words, they are developed using today’s high-performing lead- ers as benchmarks. Moreover, the models tend to stabi- lize themselves in organizational systems—after all, extensive investments are required to revise performance and feedback systems, not to mention the time it takes to educate managers in these new models. Yet unfortunately, the competencies that helped current leaders succeed may not be ap- propriate for the next generation of leaders. Next-generation lead- ers require different skills, be- haviors, and insights for the challenges ahead, and yet all too often we see these individuals being identified, assessed, and re- warded on how they stack up against yesterday’s business model.

To combat this potential pathol- ogy, forward-looking organi- zations have begun trying to identify the characteristics that their future leaders will require and integrate these dimensions into what might be referred to as aspirational competencies. Leadership development specialists at com- panies such as PepsiCo, IBM, Royal Dutch Shell, RBC Financial Group, Unilever, National Australia Group, and BP have successfully linked their leadership competency requirements to a future-oriented view of their strategic and organizational capability require- ments.We believe that a future-focused competency per- spective is essential for building next-generation organizational and leadership capabilities.

Are Competencies Obsolete?

Competencies are not obsolete, but their use must beplaced in perspective. Those who are accountable for identifying and developing the next generation of leadership in their organizations—whether they be managers or executives or leadership development prac- titioners—should consider the following guidelines:

Keep it Simple

Focus attention on the select few differentiating skills and behaviors that will separate next-generation leaders from the rest of the pack. Be focused, keep it simple, and ruthlessly prioritize your leadership de- velopment agenda for action. If your firm has a long list of lead- ership competencies, reflect carefully and identify the few that your business or function really needs to succeed over the next several years.

Link Competence Development to Capability Development

Don’t rely on a list of fancy buzzwords or somebody else’s leadership models as the foundation of your com- pany’s leadership development efforts. Use your common sense and create a leadership development logic that every manager in your organization will find easy to follow. If your strategy is to grow through cross-border acquisitions, then your organization had better possess strong capabilities at acquisition integration. If this is the case, you will need a group of leaders talented at thinking strategically across national borders, capable of integrating systems and people effectively, and skillful

�

Leadership

requirements vary

by level, culture,

and situation. �

Spring 2004 47

at building partnerships and promoting teamwork. The development of your competency model should be built around these very capabilities. It should be that straightforward. The idea is to translate your company’s strategic demands into a prioritized set of leadership capability requirements. All of a sudden, next-generation lead- ership requirements become easier to see for busy line man- agers who don’t specialize in the intricacies of leadership de- velopment.

Be Future-Focused

Make sure your leadership development strategy ad- dresses tomorrow’s business model, not yesterday’s. Don’t fall into the trap of identifying potential leaders who are clones of today’s leaders in your company. As your busi- ness strategies change, so will your organization’s lead- ership development requirements. As your company

globalizes its operations, be mindful that you will prob- ably require leaders who have different perspectives on what constitutes leadership effectiveness. Accept and embrace these differences in perspective, as they will help in building a cadre of leaders ready to take on to-

morrow’s challenges.

Leadership competency mod- els are here to stay. Their abil- ity to spell out in a concise and concrete manner the behaviors that organizations wish to see i n t h e i r m a n a g e r s ’ a c t i o n s guarantees them a br ight fu- ture. That said, we must be-

come far more sensitive to their shortcomings. They are not flawless tools. Their tendency to become complicated rather than simplified, to portray ideals of leadership rather than realities, and to focus on today’s rather than tomorrow’s competencies all seriously work to undermine their benefits. �

�

Address tomorrow’s

business model,

not yesterday’s. �