> 40% of leaders fail

… 5 reasons they veer off course

how to get back - and stay on course

By: George Gilraine

GWG Consulting Services

Published on LinkedIn - 2018

Are failure rates really that high?

I have spent my last 10 years with global healthcare leader, Novo Nordisk assessing the organizational and leadership effectiveness of various General Managers (GMs), Business Region VPs and other business unit VPs. I now deliver a version of these assessments through my own consulting firm, with the important addition of follow-on executive coaching both within and beyond the realm of Novo Nordisk. Working with other organizations and looking at trends within business in general, I am surprised to find the general business ‘executive’ failure rates so high:

Harvard Business School reported a 40 to 60% failure rate of U.S. executives in 2003.
Korn Ferry found CEO failure rates of 40% in 2005.
A-Right Management Consultants showed in a 2005 report that 30% of new managers and executives fail at their jobs and leave within 18 months.
McKinsey Leadership Transitions paper of 2014 shows that the failure rate among newly hired or promoted executives has stood at 40% over the past 15 years.
And that 40% of corporate officers (across 77 companies) said ‘they can’t pursue business opportunities because they lack the right leadership’.

Furthermore, the Corporate Executive Board (now Gartner CEB) stated in 2013 that: based on data from nearly 30,000 leaders (including hundreds of interviews with recently transitioned leaders at large companies), 50% of executives fail within the first 18 months of promotion into an executive role, either from within or coming from outside the organization.

This is further broken down to show that while 3% of transitioning leaders fail outright in their new roles, 47% underperform during the course of their transitions. Further ramifications were observed in 2016, when they showed that direct reports of successful new leaders are 15% more effective and 21% less prone to attrition than the average direct report.

Imagine, 5 out of 10 leaders today are struggling and there’s a very good chance that one of those is at the point of failure. Of the remaining 5; four are doing good to very good, and maybe one of them is doing great. Yet, if you ask leaders how they are doing, the answer from most of them is typically “great”. They are quick to rhyme off all the activities they have initiated and can quickly explain how all the good management practices are underway in their organization.

I’ve had the privilege of working with a variety of business leaders both within and outside Novo Nordisk. They are bright, committed, hardworking, confident and ambitious. All of them know and understand very well the elements of good organizational and leadership effectiveness. However, it’s easy to talk the talk, but as Steven Covey said, it is not easy to put the ‘Seven Habits of Highly Successful People’ into actual practice.

Why do so many leaders fail?

Five of the most common factors that lead to leaders ‘veering off course’:

1. Candid feedback

Some call it altitude distortion; while many leaders try to be open to candid feedback, they seldom actually get it. How feedback gets to you changes as you move up; it is often sanitized to the point of telling you what you want to hear. Even when those around can plainly see the potential improvement areas. It can often be difficult and risky for staff to offer up ‘criticism’ or seem out of sync. The biggest need is for the leader to truly want feedback, repeatedly say it, and act in a consistent way when it’s received. I’ve noticed that units with an open and candid culture, are usually high performing and the most difficult for an external consultant to add value in. Every great idea or concern has already been raised up the flagpole, discussed and relevant action plans put in place.

2. Communication

Disconnects between what the leadership team intends and how the organization perceives a change or strategy is often a barrier to clarity, effectiveness and engagement. Clear and consistent communication is critical as is ensuring that the leadership team members are all singing from the same songbook. A strategy that takes months to develop, can’t be as well understood by staff who have been briefed on it during a half-day session.

This applies to any changes and at times, even some well-established processes within the organization. As David Marquet says in his book ‘Turn the Ship Around’, “Clarity means people at all levels of an organization clearly and completely understand what the organization is all about. This is needed because people in the organization make decisions against a set of criteria that includes what the organization is trying to accomplish. If clarity of purpose is misunderstood, then the criteria by which a decision is made will be skewed and suboptimal decisions will be made.” This requires a close connection with staff (and candid feedback as above) to identify what needs clarification, so that efficiency and engagement can emerge.

3. Performance management

In most companies there is a clear performance review process in place. Despite this, a common issue across organizations is that they lose focus on real honest discussions around employee performance and their development plans. The boxes get checked off but there is little value noted by staff. Regular one-on-one discussions with employees to address the good, the bad, the ugly and their future, are so important to maintain alignment, engagement and value adding effort. If done well, this is also where candid feedback and communication can be productively clarified, and actions initiated. The good is important to quantify and recognize. The rest can be challenging and the ability to have those tough discussions is so important for the employee involved but also for everyone around them in the organization. Handling low performers is therefore value-adding but not pleasant in the moment. Managers must recognize and have the courage to effectively and fairly address the misguided and the poor performers. Grandparent meetings are often a positive addition, when in line with the Manager’s actions. In short, if you really take care of your people, then they will take care of and commit to you.

4. Reluctant to make tough decisions

Especially common with newer leaders (but not always). There is often a general sense of staff performance issues at the leadership team level or with key staff in the organization. Balancing the need for success and fear of losing a key employee, the leader holds back on dealing directly with performance issues and preparing to make changes. This can quickly have a detrimental effect on the entire team (as with Performance management above).

In 1999, CEO consultant Ram Charan and Fortune’s Geoffrey Colvin studied over 40 failed CEOs from Fortune 500 companies to see what went wrong. Execution was the problem, but the reason for it was not having the right person in the right job. They either held on to some for too long or were unable to guide them in the right direction.

5. Micro managing

Leadership teams at times come under pressure to increase short term performance. One consequence that these demands can cause is the leader micromanaging their organization. Under such pressures, a leader can feel that they will do it faster themselves and consequently can’t trust, empower or develop their staff. They begin to worry more about managing up rather than aligning with their boss. Agreeing on how to best drive their business for the short term while also keeping their long-term success in mind. If left unchecked this can quickly lead to staff disengagement, poorer performance and leadership overload. A quick fix maybe, but not sustainable and with a big price to pay in terms of losing top staff and long-term effectiveness.

Executive recruitment firm Egon Zehnder International, looked at successful leaders and found a consistent pattern around the world. “Those who failed were hired on the basis of their drive, IQ, and business expertise – but fired for lack of emotional intelligence. They simply could not win over, or sometimes even just get along with, their direct reports or others on whom their own success depended.”

Organizations, where staff are trusted and given the clarity, skills and freedom to act (some call that empowerment) are much more successful and happy organizations. Senior leaders should be cautious when rolling down short term targets, together with strict demands. There is the risk that ‘the baby gets thrown out with the bath water’.

What can leaders do to improve?

Novo Nordisk has long been a successful, high performing and recognized company due in large part to its considerable focus on organizational and leadership effectiveness. Many dedicated, hardworking and qualified people are united together behind solid leadership and an internal guideline called the Novo Nordisk Way, which is at its roots, good management practice. This was noted by the CEO in 2015, as one of the key contributors to earning the Harvard Business Review - CEO of the year award.

It is in that high caliber environment where an organizational and leadership effectiveness assessment program (or Facilitation as they call it in Novo Nordisk) was developed and has been refined and improved over the past 15 years. This program assesses how each affiliate or business unit operates against good management practice and value-based leadership. Of the 114 assessments I have conducted - in over 40 countries and in organizations from 50 to over 2,000 employees - just 2% were at outright failure, (versus 3% as shown by Gartner CEB) and only 10% were struggling and underperforming (versus 47% as shown by Gartner CEB). These are significantly better performance levels than in business overall. Walking the talk, and assessing, to ensure it is implemented, clearly pays dividends. Yet still, in such higher performing units, I identified >450 key improvement opportunities and numerous suggestions.

Assessment outcomes:

Low performing affiliates are supported with action plans to help them turn their ship around. While poor leadership cannot always be remedied, the assessments clearly define the critical improvements required.
On average most of the assessments reflect fair to strong performing business units. These units are provided with constructive, challenging input, including suggestions and actions which are all discussed. The action points are agreed upon, have broad plans developed with specific people responsible and target dates identified. Better practice sharing is also discussed to support moving from good to great
On the great side; fewer than 2% of units I assessed were so great that no improvement actions could be identified. Even in these units however, the unit head commented that they valued the assessment, discussions and suggestions. They felt that these served to confirm their thinking on various key issues and help secure the direction of their high performing unit with the entire organization. This clearly reflects a key trait of strong leaders, who welcome input and other perspectives.

Ideally, strong leaders spend the time needed to coach their team. Good coaching leads to open dialogue and a clear understanding of where staff stand on many issues. This is of course a positive contributor to an aligned, engaged and productive workforce. However, with ever increasing amounts of data and KPIs to monitor, fewer staff and ongoing pressures, it is often difficult to carve out the time needed to coach effectively. Execs just can’t find the time to do enough of it themselves, so more and more they outsource to external coaches. This is supported by the fact that executive coaching has been the fastest growing consulting field over the past 10 years. Coupled with the general lack of candid communication upwards, it’s no wonder that it’s so easy to veer off course. As McKinsey’s Global Institute report of 2015 noted, “there is no leadership effectiveness without personal mastery and the most important ingredient of personal mastery is self-awareness.” Staff want the boss to like them, they defer quickly, don’t always say what they mean and the boss’s self-awareness starts it’s decline.

To gather this important candid feedback, strengthen employee alignment and engagement, climate surveys are often implemented. These are especially important in places where leadership is struggling, and the climate is suffering. However, it’s in these very places where they are implemented so poorly. This is certainly a key element in factor 1 above. I have so often seen climate survey implementations that just scratch the surface as to what is really going on in an organization. These surveys are often not implemented or followed up on effectively, given lip service and consequently, the outcome can even create discouragement and frustration with staff. This is not one of the more damaging findings but is a common one. Here’s an example:

Finding: While recent climate survey results for the unit are generally good, there is an inconsistent approach to following up on the results. Numerous employees could not recall having discussed or created any actions for improvement. Several of the Directors take an active role in ensuring that their teams conduct a formal follow-up session, where they discuss the climate survey scores and develop actions to maintain and improve the working environment. However, other Directors have done nothing or considerably less than what the climate survey process requires. Furthermore, some interviewees perceived that sending numerous emails to employees with the intention of achieving a 100% response rate and encouraging good scores compromised the intention of the survey process and encouraged them to score higher than they might normally.

Action: Ensure climate survey process is consistently implemented across all departments in accordance with the prescribed procedures.

A good executive coach, particularly one who bases their work on a solid and well delivered organization and leadership assessment process, can provide value adding insight into how their style and organization are perceived by staff. This will at the very least, provide supportive confirmation that the organizations initiatives and processes are working as planned and are in top shape. My proven GOaL-e process gets to the root of staff sentiments toward the organization, leadership and processes. Interview results are filtered through key criteria which reveals the habits and beliefs that determine employee behavior. The results will identify opportunities to improve processes, culture, effectiveness and ultimately, success for the organization and the leader. Beyond a climate survey, this connects leadership with the heartbeat across all parts of the organization.

Successful assessments require the assessor to be able to ask the right questions, listen, analyze the input, consolidate and present the improvement opportunities, all of which are trainable (with the right model to train against). The rubber hits the road though, when tough feedback needs to be presented to the business unit head. This requires the assessor to have not only assessor experience and inter-personal skills, but also their own executive experience levels that the GM can relate to and respect. Without this, the hard feedback can be easily dismissed, or the assessor may unconsciously not even put the tough feedback forward in the first place. For me, that moment when I contribute to a leader realizing an opportunity to improve and then start formulating action with their leadership team, is the best and most rewarding part of my GOaL-e process. (GWG Consulting Services, Organization and Leadership effectiveness) For more insight into my GOaL-e process, see my web-site at https://www.executivecoach.guru/what-is-goal-e

A significant impact study on executive coaching, included 1200 senior managers, assessed over two consecutive years. Multi-source feedback from clients, supervisors, peers, subordinates, as well as evaluations by independent researchers, was more positive for those managers who worked with a coach. The specific areas of improvement were goal-setting, soliciting ideas for improvement, and overall ratings from direct reports and superiors. (Smither et al, 2003)

So, be real, be open, be courageous, make the time to get out there and coach your direct reports, or, outsource to an executive coach. A good coach who has the process to identify what reality is within the organization, before asking a lot of open ended questions. A coach with assessment and executive experience. You’ll be glad you did and so will your staff and stakeholders. Wishing you all success in staying on track to the successful ‘course’ you have plotted.

Published on LinkedIn, April, 2018

by George Gilraine, Principle of GWG Consulting Services