Most thought-ful investors recognise that l e a d e r s h i p matters, but

are not sure how to assess or create it. My latest work aims to help them do just that. Over the last decade, I have developed a leadership capital index, which draws on a useful metaphor for how to include, conceive, and audit leadership in the assessment of firm value.

A leadership capital index is like a financial confidence index. Rather than assessing a firm’s likelihood of paying its debts, however, it offers a more thorough way to assess a firm’s present and future lead-ership. Most acknowledge that leaders affect an organisation’s value, but they use simplistic and intuitive approaches to apply that insight. My research offers a more rigorous way of evaluating leadership as part of a firm’s value.

The need for such an in-dex is clear. This was brought home to me a few years ago when I attended the annual conference of a major private equity group. The conference was for the chief executives of companies it had acquired, where it would share advice on what these independent chief executives should focus on in the next year. Soon after world markets collapsed, this conference focused for two days on leadership.

The group executives had discovered that it often took five to seven years to turn around a distressed company – and that in 60 to 70 per cent of cases, the biggest challenge was the quality of leadership. Often the leaders who’d gotten the company into a position where it was purchased by the private equity group were not able to make the bold chang-es needed to turn around and transform their company to prepare it to be repositioned in the marketplace. The group leaders felt that if they could prepare acquired-firm leaders to be more capable, they could turn the companies faster.

The group decided to hire a talent czar, someone who could assess leadership tal-ent in companies likely to be acquired, then develop lead-ership in acquired companies to be more able to transform their company and prepare it to be resold. These private equity investors recognised that leadership mattered – and that they were not in a po-

sition to perform thoughtful or thorough assessments of leadership – so they retained a specialist to do so.

Investors who worry about discovering full firm value should pay attention to the leadership within the firm. Even though senior leaders essentially work for the in-vestors, investors with deep expertise in industry and fi-nancial analytics often lack the skills to assess the quali-ty of leadership. My new re-search proposes some very specific and applicable tools that investors can use to assess and anticipate the quality of leadership.

Investing in leadership cap-ital may result in a leadership premium or discount depend-ing on the outcome of the assessment. The importance of valuing leadership comes from and extends the work on intangibles. Two firms in the same industry with the same financial results may have dramatically different market valuations. This differ-entiated market valuation is often attributed to intangibles, which show up in business by boosting – or undercutting – investors’ confidence in a firm’s performance. Leaders architect intangible value. When investors accurately assess leadership, they are indirectly, but accurately, as-sessing the future intangible value of a firm. Now they can do that more robustly and ac-curately.

Dave Ulrich is Rensis Likert Professor of Business at the Ross School of Business at the Univer-sity of Michigan, and the author of Leadership Capital Index (Berrett Koehler, September 2015). He re-cently addressed members of the Irish Management Institute at their practitioner network event in Dublin

Horses don’t talk back, but they can surely let you know when they

don’t trust you.What better client than a

horse to learn the subtleties of executive coaching and leadership.

In my work with executive coaches and leaders alike I tend to see both roles as strongly linked. Leaders and coaches share the privilege to impact and guide others to achieve desired outcomes. In the case of a leader, the out-come is shared, in the case of the coach, the outcome is personal and individual.

In the process of developing people in these two roles, I find that coaching with horses is one of the most transforma-tive events that leaders and coaches alike can experience.

Entering an arena with a horse in it for the first time causes all sort of assumptions and limiting beliefs to rise. “This animal is dangerous”; “I’m afraid of horses”; “What can a horse possibly teach me about coaching or about lead-ing my organisation?”; “Why did I get myself into this?”; “What do I do now?” and many more.

Yet coaching through hors-es can offer very deep and in-sightful learning about many aspects of both being a coach and being a leader.

AuthenticityThe fact is that to earn a

horse’s trust and lead them to perform a specific task, we need to be true to ourselves first. In the same way, to be excellent coaches and great leaders we need to be authen-tic first. Once we are true to ourselves, our words, actions and intentions become clear and decisive – not only to our-selves, but they also help us to inspire others.

Purity of intentHorses trust only someone who has their best interests at heart. In the same way, when we engage with others in a coaching relationship, it is critical they feel and un-derstand the intention of the process. A student must be comfortable that the coach is there to guide them in find-

ing the best they can be for themselves.

When we lead others to-wards a common vision, pu-rity of intent is instrumental in building trust and commit-ment towards it.

The coaching relationship as well as the leader-follower relationship is bound by trust. If I trust my coach, I don’t need to worry and I can focus on searching for my best course of action.

If I trust my leader, then I’m comfortable in follow-ing, knowing they act with the best interest of the greater good at heart.

Observing the subtletiesTo work with horses it is im-portant to pay attention to

the subtleties of their body language: they lick and chew when they are relaxed, they turn their ears towards what catches their attention, and they fold them back when they are annoyed. Paying attention to such subtleties allow a horseman to guide a horse with ease.

In the same way, a good coach must pay attention to their student’s physiology to notice how consistent they are with their thought process and provide them vital feed-back to help them notice what they cannot normally see for themselves.

Leaders also must always pay attention to the subtle-ties of body language, facial expressions, voice tone and use of words.

These subtleties provide a

leader with a clear under-standing about the follow-er’s uncertainties, beliefs and commitment towards a course of action. They, too, need to become aware of the inconsistency between body language and words and help followers find the courage to be the best they can be for the good of the group.

Horses are great teachers; they offer us a wonderful met-aphor to the deepest meaning of leadership and coaching. They can help coaches and leaders experience what it means to be authentic, have purity of intent, and to be ob-servant in a way that tran-scends ordinary learning and rational thinking.

But don’t believe my word, why not experience it first hand?

30 Management matters: in association with IMI The Sunday Business PostJune 28, 2015

Using data to make decisions: as easy as riding a bike?By Fergal Carton

The cyclist in the pelo-ton uses a speedome-ter to judge instanta-neous speed, average speed for the journey, distance travelled and various other param-eters to help manage

performance. Good performance might be to arrive at the right destina-tion, within an allotted time frame, and with all working parts, both physical and mechanical, accounted for. The trusty speedo can therefore support decisions relating to what is happen-ing in real time, through a quantified awareness of both real time and past performance.

But the speedo is not able to predict what is about to happen, whether that is related to traffic, road surface con-ditions, or microclimatic conditions. The cyclist therefore keeps both hands firmly on the handlebars, listens for traffic, and keeps focused on the road immediately ahead.

Decision-making for the cyclist therefore involves processing informa-tion of many different types in parallel. Structured data is being transmitted via the speedo. Physiological data is being processed by eyes, hands and legs, which are adjusting continuously and automatically to the quality of the road surface, the gradient, the pres-ence of obstacles, and state of energy reserves.

Organisations, too, juggle informa-tion of many different types when making decisions. Hard data regard-ing the supply of goods or services is balanced with softer data regarding demand. Thus, decisions regarding the deployment of resources have an element of risk

The traditional use of information technology (IT) in organisations was to give managers the “speedometers” they need to make informed deci-sions. Enterprise processes are de-signed and implemented to collect data on the use of resources, thereby giving remote visibility of immediate and past performance. As with the cyclist, these decisions cannot ignore the less quantifiable, more uncertain, or just plain unknowable external fac-tors that influence the organisation’s performance. A competitor’s future position with respect to product or

price, a regulatory change in reaction to a market condition, or unexpected customer churn, these are factors that have proved more difficult to quanti-fy and incorporate into management decision-making.

However, the incorporation of tech-nology into daily life has evolved to a point where “digital disruption” is challenging the way we think about, and interact with, the world around us. The ability to render the physical world “smart” by equipping it with sensors and communication capabil-ities, the data science capabilities to identify patterns across increasingly complex data sets, and the ability to access infinitely scalable computing power via any connected device, have spawned a digital revolution that is similar to the industrial revolution of the 19th century.

However, the different social, eco-nomic and prudential aspects of the resulting progress are not yet clear.

Notions of identity and privacy are surfacing as control and ownership of the resources that provide transpar-ency are questioned. Organisations – both public and private – are con-cerned about their digital strategies, and social enterprise has come to sig-nify how connectivity can create value at a community level. In all sectors of economic and social activity, the democratisation of information access has unleashed waves of fresh thinking that aren’t limited by how things are done today.

A key capability for competitive differentiation, therefore, will be in the design of new business models around these emerging technological capabilities. Rather than becoming ab-sorbed in the specifics of the enabling technologies, managers need more than ever to focus on the organisation’s strategic goals and the orchestration of resources to achieve those goals in a sustainable and profitable manner.

Organisations need to understand the value of information as a key re-source in the business model in the same way they have an innate sense of ownership of other resources, such as inventory or finances. Thus, exploring cloud strategy models has become a key driver of innovation in organisa-tions today.

Fergal Carton is programme director for the IMI diploma in cloud strategy

When investors accurately assess leadership, they are indirectly, but accurately, assessing the future intangible value of a firm, writes Professor Dave Ulrich

What is your career back-ground?I started my career in the telecommu-nications industry working with at&t in northern California. I moved back to Ireland in 2004 and joined Microsoft in 2007 working in a variety of roles around our infrastructure and produc-tivity solutions. For the last three years I have been the technology strategist for public sector and education. My role is to understand our customer’s priorities and advise how alignment with Microsoft and our partners’ solu-tions can accelerate the business im-pact of those priorities.

Why did you choose the cloud strategy pro-gramme?In our industry you always have to be learning and be naturally curious to know more and do more. In Microsoft that attitude is actively encouraged and supported.a lot of my customers and partners

struggled to lift cloud from a “buzz-word” conversation to a practical busi-ness case that really justified adopting cloud. I wanted to change my conver-sations around cloud and be regarded not just a subject matter expert but be a true trusted advisor. I selected the cloud strategy programme from the IMI as it was the most complete and focused programme.

What were the highlights?I would highlight three things from my time on the programme:The business models concept was invaluable. Cloud is a disruptive and transformative business model. I use learnings from the programme every day to better communicate business value. I now build business models with our customers and partners.The collegial atmosphere was brilliant. I got to appreciate different perspec-tives from a variety of backgrounds. We all had a common curiosity to learn. My blueprint business model, ‘Video Surveillance analytics via Cloud Bro-kerage’ won the Joe ráylands Blueprint Merit prize, a really proud moment for me.

What were the challeng-es?Stepping back into that classroom was a big challenge, but the format of the programme, my fellow students, faculty and staff quickly helped me overcome that. I needed to revert to thinking and responding in an aca-demic format, something that I hadn’t done in over 25 years, and if I am being truly honest, I didn’t do it when I first went to college . Building a business model blueprint

was very challenging. Initially I was expecting a template from our tu-tors. But the programme effectively coached me to leverage the skills I had learned, giving me the environment to really be practical with the theory.

What impact has the di-ploma in cloud strategy had on your career?The course has allowed me to translate cloud into business value and appreci-ate that that value needs to incorporate different viewpoints and different frames of reference.

What impact has the di-ploma in cloud strategy had on your organisation?I now have the ability to engage on behalf of Microsoft in richer business enablement conversations with our customers. a lot of the people I work with noticed that change and have fol-lowed my lead and it sparked them to be more curious and learn.

What is your advice to people planning further study?Be able to answer the following ques-tions: are you clear about what you want to achieve from further study? Can you really commit to the time and participate fully in the programme?The courses are business-driven, so you don’t need to be a technical guru to engage. Sometimes I think a clean slate is an advantage in this learning environment.Be ready to keep learning, as I have just started another diploma in data management at the IMI, sparked by the great experience I had on the cloud strategy programme.

a clean slate can be an advantageDenis Condon, technology strategist, Microsoft Feargal Ward

Being ‘naturally curious’ and having an appetite for learning is important when considering further study, according to Denis Condon, a technology strategist with Microsoft.

The value of leadership Horses for courses in business

Dave Ulrich

Fergal Carton

Coaching through horses can offer very deep and insightful learning

Organisations need to understand the value of information as a key resource in the business model in the same way they have an innate sense of ownership of other resources

Fabio Grassi