Assessing Leadership Talent — What Causes Leaders to Fail?

Most Presidents, CEO’s and COO’s we talk with have plenty of scar tissue when it comes to hiring and promotion errors.

They admit to making hiring errors or to promoting a person they thought would be a good leader and that person did not work out. They asked themselves:

“Why did that person fail?”
“What did I do wrong in the selection or promotion process that caused me to make this mistake?”

In today’s brutal business climate, top management is also faced with a new series of challenges with their leadership team and are asking these questions:

Why are some of my leadership team not performing to expectations?
What do I have to do to assure my leadership team has the competencies to outperform our competition in this difficult business climate?

Failure Rates in Today's Difficult Business Climate

FAILURE RATES: Newly hired or recently promoted manager’s failure is averaging nearly 50% in the first eighteen months of employment.
FAILURE RATE EXPECTED TO GO UP: This failure rate is expected to be higher in today’s economy, some say as high as 75%, because many of today’s leaders have only managed in good economic times, not in economic uncertainty or turbulence.
WOMEN AND MEN ARE FAILING AT ABOUT THE SAME RATE

Costs of Leadership Failure

When managers fail, it cost time and resources to recruit, select and train new ones
There are the costs of golden parachutes
There is the cost of lost intellectual and social capital
There is the cost of missed business objectives and the cost of destroyed employee morale

Causes of Leadership Incompentence / Derailers

What causes leaders to fail or “derail”? What can we do to identify those possible failures before you promote or hire the person? Some recent studies reported that “difficulty making a transition” was the strongest predictor of derailment of a new hire or recently promoted executive/manager. Their lack of continued advancement was not voluntary. The following reasons were cited for their failure:

Not able to solve specific or complex business problems
Insensitive, abrasive, intimidating, bully [most frequently mentioned]
Failure to consider human needs; have troubled relationships
Cold, aloof, arrogant

Stanley O’Neil, formerly of Merrill Lynch, wrote down $7.9 billion in one quarter. The NY Times raised the question about his leadership ability to manage in tough times. A week later he was fired. However, another newspaper reported that a close analysis revealed that O’Neal’s cold, aloof and vengeful style had strained relationships with the Board of Directors and the financial losses gave the Board a reason to fire him! Those Board members obviously spent a lot of time evaluating his ability before they hired him. How did they miss these obvious characteristics?

Betrayed trust; lacked honor and integrity
Failed to influence or develop subordinates
Over managing – failed to delegate; can’t manage themselves
Inability to deal effectively with conflict or learn from their mistakes
Overly ambitious
Failed to make good staffing decisions; can’t build teams
Unable to think strategically
Unable to adapt to a boss with a different style
Overly dependent on an advocate or mentor
Derailed women executives paralleled findings with men
Family Businesses Issues - There are also similar and even more complex issues with siblings in the business or succession management where there are family members in the business.

Every person brings to the job

Business Skills
A “bright side” personality that we see in the interview.
A “dark side” personality that we do not see in an interview and seldom pick up in reference checks. This is how they behave when they are stressed, angry or tired. If we did not identify the “dysfunctional” side when we hired or promoted them, how do we identify the potential to “derail, which may be exacerbated by the stress of performing to expectations in today’s economy
Motivators and drivers that are “must haves” if the person is going to be happy and successful in their new role.

The question to be answered is “how do top executives learn about these traits before they hire or promote people to key positions”?

FOR A COMPLIMENTARY ASSESSMENT or more information about how to avoid costly hiring or promotion errors, please contact us.

Startling New Research Data

National Institute of Health

Manager’s cause great misery for their subordinates. 40% of American workers reported they are “very stressed”.
75% of working adults report the most stressful aspect of their job is their immediate boss.
66% reported that their boss was “insufferable”.
Problems at work are more strongly associated with health complaints than any other stressor including finances or family problems.
Bad managers are a major health hazard
38% of workers would not work for a former boss again.

STARTLING NEW RESEARCH DATA

National Institute of Health Reports on the Implications of Managerial Incompetence

Manager’s cause great misery for their subordinates. 40% of American workers reported they are “very stressed”.
75% of working adults report the most stressful aspect of their job is their immediate boss.
66% reported that their boss was “insufferable”.
Problems at work are more strongly associated with health complaints than any other stressor including finances or family problems.
Bad managers are a major health hazard; impose enormous medical costs and degrade the quality of life of many people.

Survey Question: “How many bosses have you worked for and how many of those bosses would you be willing to work for?”

38% of workers would not work for a former boss again.

This research was last year’s data but you can just imagine what it is going to be now or this year. With today’s recessionary climate, this will probably be worse in 2009

Causes of Leadership Incompetence

Not able to solve specific or complex business problems
Insensitivity [abrasive, intimidating, bully]
Failure to consider human needs; have troubled relationships
Cold, aloof, arrogant [Merrill Lynch Example]
Failed to influence or develop subordinates
Over managing – failed to delegate; can’t manage themselves
Inability to deal effectively with conflict or learn from their mistakes
Failed to make good staffing decisions; can’t build teams
Unable to think strategically
Unable to adapt to a boss with a different style

LEADERSHIP [IN]COMPETENCIES

CAUSES OF LEADERSHIP INCOMPENTENCE/DERAILERS

Some recent studies reported that “difficulty making a transition” was the strongest predictor of derailment of a new hire or recently promoted executive/manager. Their lack of continued advancement was not voluntary. The following reasons were cited for their failure:

Not able to solve specific or complex business problems
Insensitivity [abrasive, intimidating, bully]*
Failure to consider human needs; have troubled relationships
Cold, aloof, arrogant [Merrill Lynch Example]

Stanley O’Neil, with formerly of Merrill Lynch, wrote down $7.9 billion in one quarter. NY Times raised the question about his leadership ability to manage in tough times. A week later he was fired. However a closed analysis revealed that O’Neal’s cold, aloof and vengeful style had strained relationships with the BOD and the financial losses gave the BOD a reason to fire him!

Betrayed trust; lacked honor and integrity
Failed to influence or develop subordinates
Over managing – failed to delegate; can’t manage themselves
Inability to deal effectively with conflict or learn from their mistakes
Overly ambitious
Failed to make good staffing decisions; can’t build teams
Unable to think strategically
Unable to adapt to a boss with a different style
Overly dependent on an advocate or mentor
Derailed women executives paralleled findings with men
There are also similar and even more complex issues with siblings in the business, succession management where there are family members in the business. We see quite a lot of that in our practice.

* NOTE: Most frequently mentioned.

This was reported when business conditions were good. Now we are in un-chartered waters.

Business failure is often caused by a flawed business strategy, but the real problem is usually poor execution which is defined as “not getting things done, being indecisive, not delivering on commitments”.

Importance of the Selection Process in Reducing Leadership Failure

“How do we identify the qualities that may cause leaders/managers to fail before we hire or promote them?

Importance of On Boarding in Reducing Leadership Failure

Some recent studies reported that “difficulty making a transition” was the strongest predictor of derailment of a new hire or recently promoted executive/manager

Importance of Identifying Potential Derailers in Reducing Leadership Failure

How do we identify what would cause a person to under-perform when they are under stress, tired or angry before we hire or promote them? If we did not identify the “dysfunctional” side of the candidate when we hired or promoted them, how do we identify the potential to “derail”, which may be exacerbated by the stress of performing to expectations in today’s economy?

WE ALL KNOW THE REASONS WHY LEADERS AND MANAGERS FAIL – BUT FOR THE MOST PART WE KNOW IT AFTER THEY FAIL. THAT RAISES THREE IMPORTANT QUESTIONS

IMPORTANCE OF SELECTION IN REDUCING FAILURE
How do we identify the qualities that may cause leaders/manager to fail before we hire or promote them?

I can’t begin to tell you of how many hiring and promotion events I have observed where the person was hired because “I have a gut feeling”; “he has been a good employee, let’s give him/her a chance”; “I’ve known him for years and he has done a great job at XYZ company, we need to bring him/her into our organization because they can bring us skills we don’t have”. I suspect that 60-70% of leadership failures are the result of sloppy hiring practices.
IMPORTANCE OF ON BOARDING IN REDUCING LEADERSHIP FAILURE
Recent studies reported that “difficulty making a transition” was the strongest predictor of derailment of a new hire or recently promoted executives/managers.

I do not know if it is the “strongest predictor” but I do know that very few or no companies talked much about the importance of “on boarding” as a critical step in helping to reduce leadership failure. When we do “audits” on why managers fail, I cant tell you how many cases we see of [a] poor job specs about roles and priorities for the new leader [b] unclear expectation of the supervisor or BOD about what the critical success factors will be in the first 90 -180 -360 days [c] how to deal with different leadership styles of the boss and subordinates [ability to manage the boss and the bosses expectations] etc.
IMPORTANCE OF IDENTIFYING POTENTIAL DERAILERS IN REDUCING LEADERSHIP FAILURES
How do we identify what would cause a person to under-perform when they are under stress, tired or angry before we hire or promote them? If we did not identify the “dysfunctional” side when we hired or promoted them, how do we identify the potential to “derail, which may be exacerbated by the stress of performing to expectations in today’s economy

Other Observations/Conclusions about Leadership Failure

We have all observed examples of leadership failure.
We see leaders, responsible for these underperformers, “delay” or “hope” or “rationalize that the person will improve [most do not].
In most of the situations where managers are not performing, executives were not aware of the potential “derailers” before they hired or promoted the person.
In most situations, the new leader/manager did not have a structured or formalized On Boarding program that outlined roles, performance expectations, accountability, etc.
In most companies we audit, there are one or more leaders or managers who are holding the organization back from becoming a high performing leadership team that outperforms its competition in today’s economy. Executives know this fact but are not certain what to do to correct the situation.

OBSERVATIONS/CONCLUSIONS ABOUT LEADERSHIP FAILURE

We have all observed examples of leadership failure.
We see leaders, responsible for underperforming managers “delay” or “hope” or “rationalize that the person will improve [most do not].
In most of the situations where managers are not performing, executives were not aware of the potential “derailers” before they hired or promoted the person.
In most situations, the new leaders/managers did not have a structured or formalized On Boarding program that outlined roles, performance expectations, accountability, etc
In most companies we audit, there are one or more leaders or managers who are holding the organization back from becoming a high performing leadership team that outperforms its competition in today’s economy. Executives know this fact but are not certain what to do to correct the situation.