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Technocrats make CEO too often, new research suggests

Friday 7th October 2011

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Too many quick decision-making finance and technical experts are becoming chief executives when the best leaders excel at team-building skills and empowering decision-making by others, a new survey shows.

Conducted for the global HR consultancy Right Management, the research found that “failure to build relationships and a team environment was by far the most dominant factor” in corporate leadership failure. The global study covered more than 1,400 chief executives and 700 human resources professionals.

“Often, organisations will choose a leader based on his or her ability to think quickly and make tough decisions,” said the head of the New Zealand arm of the consultancy, Nick Grage-Perry. Yet poor decision-making comprised just 3.4% of the cited reasons for leadership failure.

“We may be picking our leaders for all the wrong reasons,” Grage-Perry said. “The survey results are surprising in that they show poor decision-making rarely contributes to leadership failure as much as the inability to form broader relationships.

“Relationships, not reflexes, are what we should focus on first when weighing up candidates for leadership positions.”

Yet the ease with which financial and operational successes can be measured tended to favour executives with responsibilities in those areas.

The Right Management research found an overwhelming expectation among CEOs that they would be picked from the ranks of finance and operations professionals.

Yet finance and operational capability were not what those surveyed thought was important in a CEO, where by far the most important competency, at 92%, was judged to be “creating a strategic vision” a trait that rated only 16.8% for the Chief Financial Officer role and 24.1% for Chief Operations Officers.

Decision-making ability was the fourth-ranked most important trait for CEOs, behind “inspiring others and maintaining leadership responsibility” (61.2%), and “developing an accurate and comprehensive overview of the business” (54.5%).

“The results suggest that many organisations suffer from a critical but hidden weakness in terms of leadership ‘bench strength’…the depth and quality of emerging or next-generation leaders that the firm has available in the talent pool.

“Considering that essentially all execution will demand accomplishing the corporate goals through others, it may be telling that less than half of all respondents cited ‘selecting and developing successors and key reports’ as a critical strength for any role.”

“It’s difficult to achieve but I think they should consider it,” he said, with evidence showing more positive reporting among companies that nurtured future leaders within their organisations rather than hiring externally.

The issue is a particular challenge for boards, says Grage-Perry, particularly where choices of chief executive risked a loss of consistency in leadership style.

While an internal appointment could lack a fresh perspective, “the benefit of the internal appointment is that if you are paying attention properly to talent internally, you will now more about that person than you’ll know about any external candidate.”

Similarly problematic could be the expectation that a newly appointed chief executive, especially an external appointment, should swiftly make significant changes, “rather than thinking about we need to do to support this person” as they come into a new leadership role.

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