Thought Leaders: Vince Molinaro on Practical Strategies for Bridging the Leadership Gap

The following interview with Vince Molinaro is a condensed version of HR.com's live, one-hour online learning webcast.

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Vince is a Principal and National Practice Lead, Leadership Capability, with Knightsbridge. Vince has been providing consulting services in the field of leadership, organizational development and executive team development for the past 15 years, and has worked with an extensive list of clients within the private and public sectors.

Vince received his Doctorate from the University of Toronto and has degrees from Brock University and McMaster University.  He lectures frequently at leading business schools on the topic of building leadership capacity and is an Adjunct Professor at Brock University.

The media frequently calls him for his opinions on how organizations can build leadership capacity for competitive advantage. Vince is a provocative speaker on a variety of leadership and organizational performance topics and he has also published extensively in journals and business magazines. The Leadership Gap is his first book, which he co-authored with David S. Weiss.

KE: Our topic today is practical strategies for bridging the leadership gap. This topic ranks as a high priority right now with both HR professionals and executives. Vince, what definitive evidence do we have that increasing leadership capacity improves financial performance?

VM: Before answering that, I think it is important to define leadership capacity. One of the things that we have found is that organizations are shifting their thinking from this idea of leadership, to leadership capacity as an organizational resource. We define it as the extent to which organizations can optimize their current and future leadership to drive business results and meet the challenges and opportunities of an ever-changing business environment. To what extent is the organization´s leadership ready to meet the future demands that the business environment is going to place on them?

We´ve seen indications in recent years that there is a connection between leadership capacity, performance of an organization and ultimately its competitive advantage. We have done some research along with our partner firm in the U.K. where we surveyed a number of senior HR professionals looking at the human capital measures that are going to become increasingly important. What we´ve found is that right now HR seems to be reporting on very traditional metrics to the organization - things like turnover and hiring rates. Increasingly, we found that the number one metric that boards of directors and executive teams are looking to HR to report on in the future is leadership team capability and capacity. What this is indicating is the importance that executives are placing on leadership capacity. They are demanding that HR provide the evidence.

A Watson Wyatt study, which was one of the first studies to make the connection between strong leadership capacity and financial performance, found that the more robust an organization´s internal leadership capacity, the greater the financial return in three critical areas - revenue growth, profitability and market share.

One other indicator that I think is most telling is a survey that was done by CEO magazine and the Center for Creative Leadership. They surveyed 756 CEOs and they asked, "Compared to other factors, how important is your company´s ability to develop leaders in achieving a competitive advantage?" When you look at the combined scores, you see that 80 percent of the CEOs would link leadership to their competitive advantage.

KE: In your book you state that, "Not only are companies struggling to develop leadership capacity, they are unable to deal with emerging leadership gaps, despite making widespread investments in management and leadership education."  From your experience, what aspects of the leadership gap must be addressed in order to bridge it successfully?

VM: We´ve been finding the term "leadership gap" has been quite provocative and succinct in capturing the challenge that many top organizations are facing. In our work with clients and through the research we did with our book we found that there are four interrelated aspects of the leadership gap. The first is the talent aspect. This refers to the demographic changes taking place primarily within North America where the aging baby boomers are going to be leaving their organizations. This is not new news. However, it´s coming more into focus. We know of a large professional services firm that is aware that within the next three to five years, 50 percent of their senior executives are going to be leaving due to retirement. When they began to look at the next level down, they realized that they had not been paying attention to building their leadership capacity. The senior executives are very nervous about the future of their organization and are now really racing against time to provide future leaders with the skills and experiences they need to assume more significant roles. That describes the talent aspect.

We also found a capability aspect to the leadership gap. The traditional leadership mindset has been a functional one that focuses on the functional training or discipline of a leader. What we are finding more and more is that the critical capabilities for leadership are not technical; it is about leaders´ ability to inspire and engage employees, to build strong teams, and work horizontally across organizations. The ability to inspire and engage employees is not always as strong as is needed to be successful.

The development aspect of the leadershipgap refers to the fact that traditional approaches that organizations have taken to develop their leaders are no longer effective. This is where there is a lack of confidence. The traditional model has an overemphasis on classroom training, which is not the only way to build leaders. Most organizations know that and are starting to take a more sophisticated approach. And, even in those cases, the efforts are largely fragmented. Development efforts need to be integrated.

There is also the values aspect of the leadership gap where the values of the future generations of leaders are vastly different than the leaders of today. You have a leader who sees a high potential candidate and they have a discussion with them to let them know that they believe they have a future within the organization. Usually the response from the younger employee is not what the senior leader wants to hear. The response is often, "Well, thank you for the feedback but I see how hard you and your colleagues work and work life balance is really important to me so I am going to focus on adding value in my current role. I am not aspiring to become a director or vice president." There is a real clash in values, with work life balance being one of them.

KE: Why is it that the investments being made in management and leadership education aren´t paying off?

VM: We are finding that the whole area of leadership development has been going through an evolution. Typically, there is no one strategy that guides the organization´s overall investment in leadership. Secondly, in many cases, organizations that implement a variety of strategies, do so in a fragmented way. As an example, one of our client organizations has a core leadership development program that they offer their leaders, they have a relationship with a business school that offers executive development and they use executive coaches. There is no strategy on how they use those things. In this particular case, the client spent over $3 million on executive coaches and there is nothing to guide the identification of whom they use and how the work gets integrated into the day-to-day operations of the business. There may be other events that occur but they are not tied together, so the organization isn´t able to leverage their investment to the extent that it can.

We have seen a few organizations that take a single solution approach to leadership development. When you ask people how confident they are in that, people are usually in doubt. Most companies implement multiple solutions, which leads to internal confusion because they aren´t tied together in any cohesive way.  We are seeing the best organizations use integrated solutions that are guided by a strategy and consider how all the pieces fit together to add value to the entire organization.

KE: You talk of the need for a balanced approach to remedy this gap. Give us an overview of your recommended dual response and then we can spend some time looking at each of its elements later on.

VM: The dual response refers to two aspects: the leaders´ response and the organization´s response. Leaders´ response - What we found is that you need leaders that step up to the plate and take responsibility for their own development. Leaders have to accept the responsibility for taking their own leadership to a greater level, largely because the business world has become more dynamic and complex. Old skills and approaches are not adequate. However, that is not enough. You can be the greatest leader on the planet, but if you work with an organization that doesn´t support its leaders you are not going to be successful - that is where the organization´s responsibility comes in, which is the second aspect of the dual response. The organization has to implement four critical success factors that we found to be important.

You need the organization making the investment and you need the leaders making the investment and that is the dual approach that we advocate.

KE: You use the term "holistic leadership." Why is holistic leadership necessary?

VM: As we discussed earlier, leadership has in the past been largely about functional leadership. We´ve come at leadership by going to leadership school and specializing in one stream of business. What we have been finding is that today´s business environment is so complex that leaders need to be better rounded. They need to be more holistic, which refers to a more complex way of thinking about the organization and your role as a leader. It is needed because functional leadership is no longer sufficient to deal with the complex, ambiguous, and even interdependent challenges presented by competition, customers, and large organizations. Holistic leadership looks at the elements that will make leaders successful in the future.

KE: Interesting. For those of you who joined me in my interview with Dan Pink, in his book he talks about the importance of the attribute of symphony, pattern making and seeing the whole, which supports the whole notion of holistic leadership.

From my own experience, I found your description in the book very accurate regarding the common problems resulting from a functional leadership mindset.  For our audience, what are they?

VM: A functional leadership mindset tends to block the ability of leaders to think in a broader way. What this has done within in many organizations is give rise to an entrenched silo mentality. You´ve got marketing at odds with sales or you´ve got manufacturing at odds with sales. Increasingly, we have to rise above those functional disciplines and start thinking about our business in a broader, more holistic way. We have to overcome some of the limitations that exist.

We also find that it creates this ´micro´ way of thinking where leaders only concern themselves with managing their little box on the organizational chart. We´re saying that that isn´t enough. One of the problems that results from this functional mindset is this rigidity both structural and intellectual. It is also this ability to overanalyze that diminishes any risk taking. One CEO I worked with said, "I don´t need leaders to come in and build walls, I need them to come in and take them down." That really describes this holistic leadership approach.

KE: You talk about customer leadership in your book. What are expectations of customer leadership?

VM:Every leader needs to be able to hear the customer´s "voice" in everything they do. What are the implications of the voice of the customer to everything we do? Leaders who are aware of customer needs should be customer advocates, whether others in the organization are or not. In meetings, how often do you ask how what you´re discussing is going to add value to your customers? Leaders need to implement only those changes that are customer driven. Leaders need to be knowledgeable about the entire value chain, of how work is delivered to the customers, and ensure that the value chain interdependencies work efficiently and effectively. All objectives and measures for leaders - and their teams - need to be articulated with a clear connection to the value that the objectives create for the external customer.

HR needs to think about how they define their role. How do you work with your employees and support them so that they can add value to the external customer? HR can play the role of the customer advocate. There is increasing expectation that HR is relevant and knows about the business. It is a shift that requires HR professionals to think more broadly about their roles.

KE: You talk in your book of innovative approaches to developing high-potential leaders that involve using the internal strategic-planning process. Can you describe those for us please?

VM: Organizations that are really committed to building leadership capacity are looking at the multiple ways that they can build leaders as they conduct their day-to-day business. It is not strictly thinking about leadership development as classroom-based training, or a formal 360 process - it is looking for daily opportunities to build leaders.

How do you build the ability of future leaders to think strategically? To what extent do you include high potentials in the strategic planning process to give greater voice to the customer? These are typically people who are more directly working with the customer, so why don´t you bring them in during the strategic planning process? Not only do you deepen customer leadership, you are also enhancing leadership strategy and leadership capacity. So, one option is to include select high potential leaders on the strategic planning team.

Another option is to involve high potential leaders as shadow strategic planners. With one client, a group of high potential leaders were assigned to each of the various VPs and shadowed them as they developed their own plans. They worked with the executive team and provided feedback on strategies. This feedback is invaluable to the leadership team and at the same time, enhances leadership capacity.

A third option is to solicit high potential leaders´ input and share information on a regular basis, to develop strategy and articulate operational plans. Why not engage high potentials and other leaders to build their capacity to be strategic leaders?

KE: One of my personal frustrations is around the lack of communication I see in leadership. You discuss three success factors in the communication of strategy. What are they?

VM: A lot of senior executives see this as a gap in their capabilities. Even if they have involved high potential candidates in the planning process, at some point once a strategy is developed, it needs to be communicated. Often what ends up happening, in isolation of that feedback, is that they write and communicate the strategy from their own vantage point. Such talking around gross margin, etc. bewilders people. You need to write and communicate the strategy based on the receiver of the information and not the sender. We also found that when you ask employees from whom they want to receive the information about the strategy, it is often not from the CEO, but from their direct manager. Finally, it is not just about a one time only communication. In good organizations, leaders are constantly having conversations with their employees about what is happening and where they are in the process of achieving their strategy. It is an ongoing dialogue to make the strategy come alive. Those are three best practice ideas that we have found around communicating strategy.

KE: A lot has been written on the power of high-performing teams. What can leaders do to impact their effectiveness?

VM:Develop an enterprise-wide perspective and work in the interest of the whole organization. You have to think about the enterprise as a whole and not get caught up in internal communication problems. Secondly, build relationships and influence key stakeholders. We find that a lot of leaders are not equipped to do this because it hasn´t been required before. Finally, leaders need to increase the collaboration and integration across their organizations. How do you break down silos and organize work and units so that they are adding the value that the external customer demands?

KE: You talk of the need for the organization to have a comprehensive, enterprise-wide strategy for building leadership capacity. What does that involve?

VM: There are eight actions that leaders can take to build strong day-to-day leadership. The first one is to what extent do the leaders know who is in the room? It is a simple thing but finding out about their skills and appreciation of your team members is critical. Also, allowing teams to gel and understanding that it takes time for that occur. To what extent does the team have collective goals to work on? Do teams articulate and create team commitments around how they are going to work with each other? Establish a clear decision-making process. We find, surprisingly, even amongst executive teams that this piece gets left off. Also, identifying mutual expectations and interdependencies is important. Functional leaders often don´t understand the importance of this. A lot of the work on coaching has been done between manager and employee and we are going to see a lot more coaching of team performance in the future. Finally, it is the ability to manage conflict as it arises, instead of burying it, which is often what goes on.

KE: Powerful approaches to building great teams. Can we take a quick look at the organization´s response in building leadership capacity?

VM: There are four critical success factors. The first is that the organization commits to embedding leadership within the organization. It is about creating a leadership culture. It is about doing work on critical positions and key talents. As we talked about here today, there is the importance of integrated leadership development. Finally, there is the accountability piece. HR, the CEO and the executive team need to be clear on who owns what. We find that if we are only talking to HR people when we are doing this work we get nervous. Increasingly, we are finding that the CEO and the executive team need to own leadership capacity as a business issue and HR is a critical partner for making it happen. You need to begin by doing an audit of where you currently stand and focus in on your areas of weakness. If you are working on all four of these areas, then you are well on your way to building leadership capacity.

If you´re interested in reading the book upon which this interview was based, The Leadership Gap: Building Leadership Capacity for Competitive Advantage by Vince Molinaro and David S. Weiss, please click here.