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HUMAN CAPITAL

New assessment research reveals surprising findings about leader skills.

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BY EVAN SINAR AND RICHARD S. WELLINS

to leader growth

Cracking

Leaders grow fastest when given accurate, detailed, and actionable information about the gap between their current skills and future potential. Companies seek-

ing to create and channel development energy by providing this information often turn to assessment centers to gauge a leader’s readiness for new job challenges. These assessment centers—which include “day in the life” simulations of what it’s like to be a higher-level leader—are highly realistic, reliable, and predictive of future leadership success because they pro-vide real opportunities to demonstrate leadership skills.

Assessment center data have benefited individual lead-ers who seek personal and professional growth. The data also benefit individual organizations that can look across a group of their leaders to pinpoint development needs or make placement and promotion decisions. However, for senior-executive and HR professionals, there has been an untapped need. By looking at a large body of aggregate data, encompassing a large number of leaders across multiple organizations, we can begin to “crack the code” to leader growth by providing useful insights about leaders and how organizations need to go about developing them.

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the C de

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That was our starting point as Develop-ment Dimensions International (DDI) recently undertook a research project integrating our assessment data from more than 15,000 lead-ers across 300 organizations. This data set allowed us to explore leader skill patterns and how these patterns intersect with the context within which these leaders operated, including economic forces such as the 2007-2008 global financial crisis and key facets of leader experi-ence, such as function and level.

Our analyses drew on this expansive and varied data to reveal interesting answers to questions about the impact of having skilled leaders, where organizations can uncover lead-ership talent, and the varying skill requirements for leaders as they advance to higher levels. We will cover four of the 18 initial findings identi-fied in our report, High-Resolution Leadership.

What’s the organizational payoff of higher leader skill?Before our detailed look at leader skill trends, we started by verifying the link between the leadership assessment and company-level out-comes. That is, were assessed skills related to organizational health?

We compared growth rates between orga-nizations whose leaders scored at the highly competent (top-third), competent (middle-third), and less competent (bottom-third) level on the assessment, using a composite index of leadership skill. We found a sig-nificant link between a company’s average leadership assessment scores and five-year revenue growth: Companies whose leaders scored in the highly competent range in-creased revenue by 45 percent, compared with just a 20 percent increase when a

Figure 1. Leader Skills Ranked by Average Skill Level, 2006-2014

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Global Financial Crisis

2006 2008 2010 2012 2014

Low

est R

anki

ngH

ighe

st R

anki

ng Operational Decision Making

Customer Focus

Cultivating Networks

Leading Change

Driving Execution

Empowerment/Delegation

Establishing Strategic Direction

Coaching and Developing Others

Entrepreneurship

Building Organizational Talent

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company’s leaders scored in the competent range and a 4 percent contraction for leaders scoring in the less-competent range.

How has the past decade reshaped leader skills?Our data set reached back almost a decade, which means that it includes data from both before and after the most critical economic event of the past nine years: the 2007-2008 global financial crisis. The occurrence of the crisis in the middle of the timespan for the data we examined provides a unique perspec-tive on how leader skills have shifted alongside economic pressures. We ranked leaders’ skills based on their average assessment scores at five points: 2006, 2008, 2010, 2012, and 2014, shown in Figure 1.

Four major trends were clear from this view of leader skills over time. First, the crisis’ tur-moil dramatically reshuffled leader skills (as shown by the many intersecting lines between 2006 and 2010). Second, the average lead-er’s strongest two skills, operational decision making and customer focus, were consistent across the entire time period. Third, leaders became more adept at taking personal ac-countability by leading change and establishing strategic direction, while at the same time, they more often involved others via empower-ment and delegation. And fourth, skills related to the longer-term components of leadership slipped, as driving execution, coaching, and building organizational talent all slid.

What does this tell us about the chang-ing state of leadership and the most pressing targets for leadership development? As busi-nesses have adapted to a new economic reality, so too have their leaders, becoming more adept at doing more with less. However, this unfortunately has come at the expense of growing talent and taking risks.

To counteract these trends and avoid hav-ing an excess of leaders unprepared to step into new roles, organizations should restore their focus on building talent, and should push

leaders to pair their stronger ability to delegate decisions (which has increased over time) with high-quality coaching and a talent development focus (which have decreased). Only through this combination—increasingly rare in recent years—will employees be armed with the guidance and know-how to take action successfully, locking in the benefits of empowerment. Delegation without coaching is simply not a sustainable approach for organizational health.

Where are an organization’s untapped talent pools?In considering emerging leader skills gaps, we also examined the question of where compa-nies can turn to deepen and replenish their leadership talent pools. As organizations in-creasingly take a strategic approach to talent planning, they can’t risk neglecting pockets of leaders who either have the skills they need now, or who can be developed as promising leaders for the future. Though all organiza-tions have well-worn paths to the top of the leadership ranks, often through core business functions such as finance and operations, our data allowed us to determine whether these historical patterns accurately match leader skills, or instead if pockets of leader skills are hidden in functions that are less conventional sources for higher-level leadership talent.

In our research, we examined leaders from seven major functions found in most organi-zations. All leaders completed the rigorous assessments described above, providing a direct comparison of their strengths and de-ficiencies on a wide range of leader skills (we limited our analysis to the 10 skills that var-ied most among functions). As illustrated in Figure 2, for each skill, we identified the strongest two functions, weakest two func-tions, and the functions that were midrange (neither strongest nor weakest).

Leaders from two functions distinguished themselves as particularly well-rounded: mar-keting/advertising and sales. Leaders across both functions excelled in communication,

IN MOST CASES, IT WILL BE BEST TO TARGET FUNCTION-SPECIFIC SKILLS GAPS FIRST.

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selling the vision, and entrepreneurship, while marketing/advertising leaders additionally outperformed other functions in financial acumen and business savvy, and sales leaders were strong in building talent and global acu-men. Leaders in the oft-maligned function of IT were in the midrange for most skills while being particularly adept in leading teams. En-gineering and operations leaders were similar to each other in their weak communication, financial acumen, and executive disposition.

Finance, the function found to be the most common source of candidates for senior leader roles, did excel in the core business skills of financial acumen and business savvy, but these strengths were counteracted by notable gaps in building talent, leading teams, and customer focus. HR leaders, often responsible for setting up talent programs, were expectedly strong in building organizational talent, but struggled to demonstrate their skills in business savvy,

customer focus, entrepreneurship, and global acumen. Some of these latter skills are crucial for the increasing need of HR to become adept at talent analytics.

It’s worth pointing out that no one func-tion shows mastery across the full range of leadership skills. This being the case, inclusive, development-focused organizations should recognize both the vastly varying skill develop-ment needs across functions and the risks of a learning model that neglects these distinctions by myopically applying the same development curriculum regardless of a leader’s functional background. In most cases, it will be best to tar-get function-specific skills gaps first (including for the HR function itself), and to then integrate learning cohorts once the largest between-function gaps have been closed.

Organizations also can use information about complementary skills to design cross-functional development assignments and informal mentor-

Figure 2. Top- and Bottom-Ranked Functions Across Leader Skills

Financial Acum

enBusiness Savvy

Leading Teams

Compellin

g

Communicatio

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mer Focus

Executive Dispositio

nSellin

g the Vision

EntrepreneurshipGlobal A

cumen

Operations

Sales

Marketing/AdvertisingFinance

Engineering

Information TechnologyHuman Resources

Building

Organizational T

alent

Strength Midrange Weakness

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ing pairings to take advantage of function-based pockets of credibility and expertise (for example, pairing marketing leaders with those from engi-neering, or sales leaders with operations).

How do leaders’ skill profiles change as they rise through the ranks?Lastly, we examined how the typical leader’s skill profile changes at higher levels of lead-ership. In one specific area, we grouped skills into two essential clusters: executing and en-gaging. Leaders who execute well excel in getting tasks done and driving courses of ac-tion for employees. Leaders who engage their employees ensure that they are fully absorbed in their work and inherently committed to the organization’s purpose and values.

We created two assessment score indexes, one for execution behaviors (for example, de-termining actions required to implement an initiative; measuring progress and evaluat-ing results) and one for engagement behaviors (for example, creating shared purpose for a team; convincing others to commit to a vision and set of values). We then calculated the per-centage of candidates for each of four leader levels—midlevel, operational, strategic, and C-suite—who scored notably higher in execu-tion behaviors, notably higher in engaging behaviors, or about the same in both.

We found that leader skill patterns shifted dramatically when comparing leader can-didates across levels. Overall, we saw no evidence that higher-level leaders can remain balanced, with similar skill levels for execu-tion and engagement. Instead, as leaders entered into higher-level roles, their bal-ance consistently shifted toward execution and away from engagement, while the “about the same” group plummeted from 48 percent at the midlevel to just 17 percent for C-suite candidates. Ambidextrous leaders, those who show similar levels of strength for both en-gaging and executing, become increasingly rare at the senior-most levels of leadership.

We see several risks of poor skill balance in the top ranks of leadership. It’s unlikely that even the best organizational strategy will survive if senior leaders lack the will or

ability to appropriately involve employees, who may begrudgingly comply but eventu-ally resist. From a development viewpoint, this skewed skill pattern also leads to a pro-gressive atrophying of engaging skills for the senior leaders who need it the most, given their span of leadership accountability.

Though execution skills are far from irrel-evant, we know from the leader skill trends identified above that they’re also a much more common strength for leaders of all levels, and have remained so for many years. Orga-nizations can restore balance by considering strong engagement behaviors in promotion decisions and by holding leaders responsible for engagement and culture survey met-rics. Interaction skills that induce employee engagement (empathy, involvement, commu-nication, and esteem-building) also should remain foundational targets for leadership de-velopment programs across all leader levels.

The value of large-scale, cross-organizational assessment dataLeadership assessments, including assessment centers, are already in heavy use for many or-ganizations, and justifiably so. The research we’ve described here adds to the multitude of studies showing a close connection between stronger assessment performance and key or-ganizational outcomes.

Less well-recognized, however, are the in-sights that large-scale, cross-organizational assessment data can offer for diagnosing past and projected skills gaps and for precisely guiding leadership growth. The findings sum-marized in this article can be paired with in-house data to identify high-value targets for inclusive leadership development and to elevate the role of proactive, long-term talent planning in organizational strategy.

Evan Sinar is Development Dimensions International’s (DDI) chief scientist and director of the Center for Analytics and Behavioral Research; evan.sinar@ddiworld.com.

Richard S. Wellins is a DDI senior vice president and heads up global research and marketing; rich.wellins@ddiworld.com.

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