Leadership

There are three reasons why companies have trouble finding and hiring top-notch executives. First, even organizations that are adept at selecting winners will have considerable difficulty because of the way in which managerial talent is distributed across a population. Second, assessing people for senior positions is inherently tricky for a number of reasons. For one thing, the differentiating competencies for top leaders are usually in “soft” areas & #8212; such as the ability to develop people or manage change efforts & #8212; each of which is very difficult to measure in any reliable way. Finally, powerful psychological biases impair the quality of the hiring decision. Nevertheless, organizations can overcome those obstacles by deploying a set of basic practices: Define before looking, cast a wide net, compare apples with apples, evaluate thoroughly, filter biases, limit the number of people involved, close the deal and facilitate the integration. Although some of those practices might seem obvious, many companies fail to follow them. All too often, for instance, organizations make the mistake of commencing an executive search before they know what they’re really looking for. Or they unnecessarily restrict the search to certain markets, industries or geographic regions. Because of such mistakes, contends the author, the problem of poor appointments for top positions is serious and pervasive at many companies, even blue-chip corporations.

A new report reveals that companies with significant levels of employee control systematically underperform.

All executives have two basic drives: to add value to products or services, and to deploy resources with a certain amount of efficiency. The first drive can be inferred by a business's gross margin and the second by its relative indirect expenses. Together, the two numbers constitute an executive's "financial signature." There are four extreme categories of signatures: (1) gross margin and expenses are both high, (2) high gross margin and low expenses, (3) low gross margin and high expenses, and (4) gross margin and expenses are both low. The categories are labeled "venture capitalist," "buccaneer," "mercantilist" and "discounter," respectively, and each has a characteristic set of financial behaviors. Certain financial signatures are best suited for particular industries. Mercantilists, for example, are ideal for commodity markets with high fixed costs. Moreover, companies might need executives with different financial signatures at various stages in their life cycle. A startup, for instance, might be better off with a venture capitalist at the helm. Later, that same firm might need to fill its executive suites with discounters. No matter how capable the leader, a mismatch between an organization's requirements and the actual financial signature of its CEO can lead to management problems, possibly even to company failure.

How do managers and companies quickly transform new hires into productive employees, a process called "rapid on-boarding"? The authors contend that companies that are more successful at rapid on-boarding tend to use a relational approach, helping newcomers to rapidly establish a broad network of relationships with coworkers that they can tap to obtain the information they need to become productive. Most organizations realize the importance of integrating new employees, but many fail in this regard, often because of five pervasive myths about the process: (1) the best newcomers can fend for themselves, (2) a massive information dump allows newcomers to obtain what they need, (3) cursory introductions are all that's needed, (4) first assignments should be small, compact and quickly achievable, and (5) mentors are best for getting newcomers integrated. Because of those misconceptions, managers will frequently rely on certain taken-for-granted practices that can actually hinder new employees from becoming productive.

Many companies prefer employees with deep motivation, strong commitment, unquestioned loyalty and widely shared values. But the author says that employing such highly involved people can have serious drawbacks for the company. For starters, deeply motivated people can be a challenge for management because they tend to interpret organizational purposes in their own way, sometimes substituting their own purposes for the company objectives without even realizing it. Deeply motivated individuals are also likely to display strong resentment when the organization fails to fulfill the needs or desires they are so imbued with. Not surprisingly, deeply motivated people are not easy to get along with: They don't comply with rules or policies that they don't fully respect; they believe they should have a say in almost everything; and they tend to behave like the owners they are not (but wish they were). Similarly, people who are strongly committed are likely to develop excessive confidence in the face of difficulties. They can be blind to warning signs, which can lead to excessive delays in corrective actions. Strongly committed people are also prone to believing that the end justifies the means, which can lead to unethical behavior. Given such drawbacks, the author contends that companies might be better off with employees who have a moderate -- instead of excessive -- level of motivation, commitment and loyalty.

The health care system in the United States is in crisis, and the implications for businesses and their employees are profound. As employers struggle with unrelenting double-digit health-insurance cost increases, some firms have decided to drop coverage entirely, and many others have shifted costs to employees. Meanwhile, the quality of the health care being paid for by companies and their workers remains highly uneven. On its own, business cannot solve the health care crisis in all its aspects, but that doesn't mean it can't do a lot to improve the system. Some companies are taking more active control over the issue and getting better results on both cost and quality. To learn from such companies and from those who influence and deliver health care services, the authors conducted in-depth interviews with thought leaders in business, health care and related sectors. The overriding lesson from their research: Companies must build bridges to other players in the system to address the systemic problems that transcend even the most powerful corporations. They propose a partnership-based health care agenda for business that will benefit not only companies and employees but also health care overall by strengthening the market mechanism and encouraging fruitful collaboration.

For a firm to succeed over the long term it needs to master both adaptability and alignment -- an attribute sometimes referred to as ambidexterity. The concept is alluring, but the evidence suggests that most companies have struggled to apply it. The standard approach has been to create separate structures for different types of activities. But separation can also lead to isolation, and many R&;D and business development groups have failed because of their lack of linkages to the core businesses. In an attempt to shed new light on the discussion, the authors develop and explore their concept of contextual ambidexterity, which calls for individual employees to make choices between alignment-oriented and adaptation-oriented activities in the context of their day-to-day work. The authors introduce this as a complementary concept to traditional structural ambidexterity. By means of their survey- and interview-based research -- which took place over a three-year period and involved 4,195 respondents across 41 business units in 10 multinational firms -- the authors identify the four behaviors displayed by ambidextrous individuals, each of which involves taking independent, adaptive action in the service of overall company goals. They then present a framework for describing and analyzing which organizational contexts encourage or discourage such behaviors. They link organizational context to ambidexterity and, in turn, ambidexterity to high performance. Finally, the authors describe how companies such as Nokia, Ericsson, Oracle and Renault have been able to create such high performance contexts, and they offer managers guidance on how to create them in their own companies.

Getting more value from knowledge & #8212; especially from a firm’s own hard-won knowledge & #8212; is one of the central challenges facing companies today. Many organizations have approached this problem in recent years by making big investments in IT systems, but the payoff has often been disappointing. Companies would do better to emulate the innovative giants of the Internet & #8212; Google, eBay and Amazon & #8212; whose success has in part derived from their ability to make it easy for customers to find what they are looking for, to browse for products and services, and to evaluate potential purchases. These are exactly the things that are hard to do in most companies. That is, employees find that it is not intuitive to search for information in company repositories; they cannot easily browse within categories of knowledge; and they are not given the context they need in order to evaluate the quality of the knowledge they do find. The authors assert that if organizations apply the basic, proven approaches of the Internet success stories to capture the attention of their employees, they should be able to improve their ROI on sunk IT costs, while increasing knowledge-worker productivity.

The authors argue that contemporary management education does a disservice by standardizing content, focusing on business functions (instead of managing practices) and training specialists (rather than general managers). Working with several major international universities, the authors have developed a vision of management education that grounds MBA programs in practical experiences, shared insights and reflection. They suggest that management education be limited to working managers nominated by their companies, thus allowing them to apply their knowledge directly and immediately to actual management practice. They assert that business schools must make management education more directly applicable to a manager's own experiences, shaping the curriculum through interaction between instructor and student. They also recommend that managers be encouraged to share with their work colleagues specific lessons derived from their education. The goal of this reshaping of management education, say the authors, is for business schools to fully integrate experience, theory and reflection, encouraging managers to incorporate this philosophy directly into the daily functioning of their workplaces.

Groups devoted to learning must take steps to avoid stagnation.