The context for leadership is dramatically different from what it was even five years ago. Customers are harder to get and to keep, profit margins tend to be slimmer, and lots of employees live in a state of anxiety, stressed by overwork and worries about their jobs.
What's a leader's role in these trying times, and what competencies do leaders need to succeed? The Insitute for Corporate Productivity recently conducted a major new study in partnership with American Management Association (AMA) to find out.
In August 2009, the Institute received responses from about 600 employees working at the manager level or above in a wide range of industries. We found that three competencies clearly came out on top:
1. Knowing the business
2. Knowing the customer
3. Having the ability to execute strategy
In tough times, companies need leaders who know the nitty-gritty details of their companies, and none of the details is more important than knowing the customer. They also need to be able to act on this knowledge, and that means excellent execution of the strategies that serve those customers.
But these aren't the only critical competencies today. Respondents were asked to identify, from a list of 14 leadership competencies, the six that best characterize the most successful leaders in their organizations currently. Among the other most widely cited competencies were these:
• Building good relationships
• Having good communication skills
• Creating an environment of trust and respect
These three competencies were more widely cited than such important issues as being able to develop strategy and knowing how to align the organization well.
A similar leadership survey was conducted by the Institute in 2005, also in partnership with AMA. It is interesting to note that while knowing the business and knowing your customer were also important a few years ago (that is, when the economic pressures weren't as intense), "building relationships" has gained significant ground in importance. Taken together, these results suggest that while technical competence is still paramount, there are softer skills that leaders cannot ignore, especially during the tough times.
One of the companies that has weathered the economic downturn well is McDonald's Corp., a longtime member of the Institute for Corporate Productivity's network. When Slate magazine recently looked at "who won the recession," its answer was that McDonalds did. No doubt McDonald's business model was largely responsible for its success, but it's probably no coincidence that the corporation has also been in the forefront of identifying and developing leadership competencies that are helping to build bench strength around the world.
Developing a strategic perspective and maximizing business performance are two key leadership competencies at McDonald's. Additionally, coaching and developing others and improving the performance of teams are critical components of the leadership mix. That is, the corporation emphasizes the "hard" skills such as maximizing business performance even as it leverages "softer" skills such as coaching and communication.
What's more, McDonald's knows that leadership competencies must change with evolving business circumstances, so management constantly scans the external and internal environment to make sure the firm's leadership competency model accurately reflects current needs.
The Institute's 4-Part Recommendation:
1. Ensure your leaders understand your business and, especially, your customers. Employees attribute competency to leaders who demonstrate superior knowledge in these areas. By retaining close relationships with key customers during a down economy, good leaders reassure their employees that the organization will weather the storm.
2. Leaders must have the skill of making the right things happen. This is what strategy execution is all about. It isn't enough to simply tell people "execute this plan." Good leaders know which people to involve, which processes to promote, how to track progress, and how to untangle situations where progress isn't being made.
3. Leaders need to be able to do more than interpret the balance sheet. They need to know how to communicate well and build relationships. Leaders can easily forget what it's like to not be in the information loop. They need to be able to share information and explain why decisions were made. Even an explanation that isn't well liked will be perceived more favorably than a decision that apparently comes down without rhyme or reason.
4. In a tough environment, good leaders must still be able to create an environment of trust and respect. For example, employees must believe that layoffs and restructurings are motivated by the best interest of the organization instead of pet projects and personal agendas.
Documents used in the preparation of this article include the following:
• Gross, D. (2009, August 11). Who won the recession? Slate.
• Sutton, R. (2009, June). How to be a good boss in a bad economy. Harvard Business Review, 42–50.
• Williams-Lee, A. (2008, May-June). Accelerated leadership development tops the talent management menu at McDonald's. Global Business and Organizational Excellence. Published online in Wiley InterScience (www.interscience.wiley.com), 15–30.