Leadership changes often come with great fanfare but how successful is that new leader going to be? It’s a question addressed recently by McKinsey’s Scott Keller and Mary Meaney and here’s an extract from their article.
‘Leadership changes are more common and important than ever. But most companies don’t get it right’
Every leadership transition creates uncertainty. Will the new leader uncover and seize opportunities and assemble the right team? Will the changes be sustainable? Will a worthy successor be developed? These questions boil down to one: will the leader be successful?
Why are leadership transitions important?
Hardly anything that happens at a company is more important than a high-level executive transition. By the nature of the role, a new senior leader’s action or inaction will significantly influence the course of the business, for better or for worse. Yet in spite of these high stakes, leaders are typically underprepared for—and under-supported during—the transition to new roles.
The consequences are huge.
Executive transitions are typically high-stakes, high-tension events: when asked to rank life’s challenges in order of difficulty, the top one is “making a transition at work”—ahead of bereavement, divorce, and health issues.
If the transition succeeds, the leader’s company will probably be successful; nine out of ten teams whose leader had a successful transition go on to meet their three-year performance goals. Moreover, the attrition risk for such teams is 13 percent lower, their level of discretionary effort is 2 percent higher, and they generate 5 percent more revenue and profit than average. But when leaders struggle through a transition, the performance of their direct reports is 15 percent lower than it would be with high-performing leaders. The direct reports are also 20 percent more likely to be disengaged or to leave the organisation.
Successful or not, transitions have direct expenses—typically, for advertising, searches, relocation, sign-on bonuses, referral awards, and the overhead of HR professionals and other leaders involved in the process. For senior-executive roles, these outlays have been estimated at 213 percent of the annual salary. Yet perhaps the most significant cost is losing six, 12, or 18 months while the competition races ahead.
Nearly half of leadership transitions fail.
Studies show that two years after executive transitions, anywhere between 27 and 46 percent of them are regarded as failures or disappointments.
Leaders rank organisational politics as the main challenge: 68 percent of transitions founder on issues related to politics, culture, and people, and 67 percent of leaders wish they had moved faster to change the culture. These matters aren’t problems only for leaders who come in from the outside: 79 percent of external and 69 percent of internal hires report that implementing culture change is difficult. Bear in mind that these are senior leaders who demonstrated success and showed intelligence, initiative, and results in their previous roles.
It would seem that Marshall Goldsmith’s advice—“What got you here won’t get you there” —is fully applicable to executive transitions.
Leadership transitions are more frequent, yet new leaders get little help.
Newly appointed leaders should take stock of their situation in five areas and then take action to deal with them. They should also clearly state not only what they will do but what they won’t, as well as forget the idea that they have only 100 days to make an impact.
Take stock and take action in five areas.
… every leader should mount a transition in two equally important stages: first take stock and then take action by asking questions about five basic dimensions of leadership—the strategy and operation of the business or function, the corporate culture, the team, the leader herself or himself, and other stakeholders that need to be managed.
Beware of generic answers because every leader’s starting point is different. For some, the starting role is to maintain and improve steadily what they inherited in each of these dimensions. For others, transformational change in all the dimensions is necessary. Still others face a mix of requirements.
Simultaneously managing the five focus areas isn’t easy. As with spinning plates, do it too slowly, and they lose momentum and crash to the ground; do it too quickly, and they spin out of control. Get this right, and you can succeed spectacularly.
Be clear about what you won’t do, not just what you will.
When Alan Lafley took over Procter & Gamble, in June 2000, the global consumer-goods giant had become the worst-performing company in the Dow Jones Industrial Average. Lafley increased P&G’s profits by 70 percent and its revenues by almost 30 percent in his first five years. His success was as much about what he stopped as what he started. Lafley and his senior team quickly ended almost $200 million of experimental technology projects and regional marketing campaigns. They prioritised four core businesses and ten countries.
As Lafley says, “be clear on what you won’t do—what needs to stop…. Most human beings and most companies don’t like to make choices, and they particularly don’t like to make a few choices they really have to live with.” Along the same lines, management thinker Jim Collins notes that great companies create “stop-doing” lists to complement their “to-do” lists.
So, as leaders in a transition take stock, they should ask what they can delay or terminate—for example, initiatives, meetings, process steps, reports, and rituals. As leaders take action, they should not only be clear about what will stop and start but also adopt a philosophy from the world of good housekeeping: one thing in, one thing out. When people propose new initiatives, leaders should ask what the company will stop doing to free up the time, money, resources, and focus needed to implement them well.
This full article can be found here.