MANAGEMENT/ LEADERSHIP SPECIAL......................Unlocking the Three-fold Secret to Great Leadership

Unlocking the Three-fold Secret to Great Leadership

After analyzing data from more than 15,000 interviews with CEOs and other business leaders, executives from management consulting company ghSMART found that three fundamental factors drive leadership success. In their book, Power Score: Your Formula for Leadership Success, Geoff Smart, Randy Street and Alan Foster describe what they learned.

In this interview with Knowledge@Wharton, co-authors Street and Foster talk about the formula for management success, the hardest things for executives to get right and how teams can use the PWR formula within their own organizations.

An edited transcript of the conversation appears below.

Knowledge@Wharton: Randy, you describe PWR Score as a “grand unified theory” of leadership, boiled down to a single number. What exactly does that mean?

Randy Street: We’ve been on a journey for the last 20 years, as a firm and as individuals, thinking about leadership. Boards and CEOs would call us and say, “Hey, we’re about to make a big change or a decision, and we need help to figure out how to get the right people.” Our day jobs have been interviewing CEO candidates and senior leaders for organizations of all shapes and sizes. Each interview has been a five-hour interview or so, and then 15 hours of analysis around that.

Over the course of the last 20 years, we’ve interviewed more than 15,000 people, and it occurred to us that there is probably something to learn from that in terms of, what do successful leaders really do? And over the last five years, we’ve been digging deep into that data to understand it. What we have found is there are, in fact, three factors that drive success and leadership. Physicists have been looking to figure out a Grand Unified Theory that describes how the universe works. We figured if they can describe the universe, surely we can describe leadership. In fact, we have three factors that describe what success looks like.

Knowledge@Wharton: Alan, could you describe what the PWR score is and how it is calculated? How did you come up with this concept? What kind of research did you put into it?

Alan Foster: “PWR” is an acronym. The “P” stands for “priorities,” the “W” stands for “who” and the “R” stands for “relationships.”

We got a phone call about five years ago from professor Steve Kaplan and a colleague of his at the University of Chicago. He said, “Aren’t you sitting on what’s probably the world’s most valuable database of leadership? I have an army of PhDs who would love to pore over it, code it and analyze the heck out of it — I bet we could learn something. Are you up for that?” We said, “Sure,” and they have been kicking the tires on what really makes the difference.

We actually had a whole different theory of leadership when we started writing the book, but the data didn’t match it, it didn’t pan out. We had to say, “What do leaders do differently?” What we found is that they go about accomplishing three things: They set the right priorities, they get the right people in the right roles, and then, they make the relationships work.

What we do with the teams and with the executives we work with is to say, “On a scale of one to 10, to what extent do you have the right priorities? Give yourself a score out of 10. To what extent do you have the right who, [i.e.] the right people in the right roles? A score out of 10. And to what extent do the relationships work? Again, a score out of 10.”

Then, you have three numbers out of 10. Multiply them together and you obtain a score out of 1,000. That is the score we have been calculating with thousands of executives to find out to what extent they run at full PWR.

Knowledge@Wharton: What have you found so far when you talk to executives? Do you find that executives are good at all three? Or are there some that they are better at than others?

Street: All three matter. It’s something like a triathlon: If you can’t swim, you will not win the triathlon. The same is true with the PWR score — P, W and R, you have to be able to do all three. Most leaders only do one, or maybe two, of those really well. Very few actually think to do all three, much less are really good at all three. But the statistics are amazing. Those who do all three well are easily twice as successful as the average leader, and 20 times more successful than leaders who don’t do any of those three things.

Knowledge@Wharton: Which of the three is the easiest for most leaders to manage? And which element do they have the most trouble with?

Street: The easiest is definitely the “R,” relationships. Most leadership theories focus on behaviors and traits, and how you should show up as a leader, and that’s all very important in leadership, of course. About half — 47% — of the leaders in our data set were reasonably good at building the relationships that make a team function.

On the flip side, the hardest one is the “W,” the who, which is hiring the right people, removing people, shifting people around on your team to make sure you’ve got the right people matched to the right priorities. Only 14% of leaders were excellent at that, which means 86% of all leaders are completely ignoring one of those important factors of being a successful leader.

Foster: I was at a conference last week with about 150 CEOs, and we were going through, “Do you have the right priorities? The right ‘who,’ the right relationships?” And at the end, I said, “OK, a show of hands: If you think about your score in each of those dimensions, the score you’ve given yourself, which is the lowest? Which is pulling your overall score down the most? And show of hands.” About 80% of the audience put up their hand for the who — as in, they struggle the most with getting the right people in the right roles.

Knowledge@Wharton: Let us start with the priorities. Alan, are priorities the same as goals? If not, what is the difference?

Foster: We had one client, and I said to the chief operating officer, “To what extent do you have the right priorities?” And he said, “Absolutely we do. We set goals.” And I said, “Well, how many do you have?” And he said, “I have 164.” And I said, “That must keep you quite busy.” He goes, “Yes, we have a very inclusive culture, we are very bottom up, we like people to set their own goals.”

It was a high-achieving environment, but they had no focus at all. We find the best leaders are very good at setting priorities, which actually means saying no to things. It’s looking at all your potential goals and saying, “Which are the three, four or five that really matter?”

Street: Goals are what needs to happen and that’s great, but they don’t give you a sense for which ones actually tie back to your mission and why they are important, or how they relate to one another. So you can have 164 goals, no sense of priority, and a lot of diffused focus through the organization.

Knowledge@Wharton: How can leaders become better at setting priorities?

Foster: You can obviously hire consultants for millions of dollars, and I’m sure they’ll come up with a great presentation. We have a slightly simpler way. We encourage leaders and leadership teams to write what we call a scorecard: Given the mission and vision of what you are trying to do, what are the five priorities? If you fast-forward two or three years, and you are thrilled with what you have got done, what will you have delivered?

It forces people to talk in numbers, it forces people to have trade-offs. Then, we get the CEO to share that with their leadership team. And then, we find everyone has a different point of view. Then you just lock the door, and you don’t let them out until they have actually had some of these tough conversations about “What are we not going to do?” versus just “What are we going to do?”

Knowledge@Wharton: How are priorities linked with purpose? Can you give examples of leaders who are able to tie their priorities to the reason why the organization exists?

Foster: We have been working with a leader, Atul Gawande, who is a surgeon and a great writer. He is using a lot of his thinking around the checklist manifesto to apply to some complex diseases and health care issues. When we very first spoke to him, we said, “Why do you exist?” He said, “I am trying to save harm or suffering for more than a million lives over the next three years.” He has written about that, and he has founded a laboratory and innovation lab called Ariadne Labs. We find it is like putting up a beacon into the sky, like the Bat Signal: Surgeons and medical professionals flock from all over the world because his mission resonates with them. He then goes to say — what are his three to five priorities. But it all links back from that sense of purpose, his mission of what he is trying to do.

Knowledge@Wharton: How can you decide if your team’s priorities are clear and effective?

Street: It’s one thing to think you have the right priorities, but then, to make sure that you transmit them through the organization is another challenge. I had a client recently share with me that he had a senior team get together and think through priorities, and they all patted each other on the back and said, “Oh, we’ve got our priorities, we all agree.” Then they had a conversation with the next level down in the organization and there was a little more debate: “What are our priorities? I’m not sure. Are we aligned here?” Then they took the conversation to the next level down, and that group of people basically said, “What priorities?” So there’s definitely a challenge in organizations as you go through to create clarity. The first thing you need to do is limit yourself to three to five. Five really is the absolute limit of priorities that we as humans can process and remember.

The second piece is communication — just constantly communicating, “These are the five things.” Whenever something comes up that is outside of those priorities, calling it out and saying, “You know what? That’s interesting, that might even be important, we should look at that, but not now, it’s not part of our priorities.” I had another client say that whenever someone comes to her with something that’s off the list, she replies, “Make me care. If you can show me how that connects to and supports one of our five priorities, then we should think about doing it. But if you can’t, we’re not going to do it, we’re not going to put resources behind it.” So it’s a combination of shortening the list from 164 down to five, and then communicating it constantly throughout the organization.

Knowledge@Wharton: Let us come to the difficult part of the PWR equation, which is the “who” part. How can a leader select the right people for her or his team and make sure that they are focused on the right priorities?

Street: Well, you’ve actually begun to answer the question right there with that second piece, which is to make sure they’re focused on the right priorities. The first mistake leaders make when it comes to hiring and thinking about their team is they haven’t even thought about their priorities in the first place.

Assuming you have thought about your priorities, the next question should not be, “How do we accomplish these priorities?” but rather, “Who should accomplish these priorities?” — which is where the next big mistake comes. Most leaders don’t think that. They think about the “what” questions and the “how” questions — “What do we need to do? How do we need to do it?” — rather than “Who do we need on the team to do it?” So question two is all about that “who.” Once you understand the priority, who do we need on the team to accomplish it? From there, it’s about following a structured process. Most leaders don’t, because they’re not asking the right questions in the first place, and because they’re distracted with all the noise and the meetings and the conference calls and the 200 emails a day, and all the other things coming along. They don’t put the actual energy into hiring the right people, thinking about mapping their team to the right priorities.

Knowledge@Wharton: You write in your book that this aspect of management gives leaders the most heartburn. How can leaders become better at selecting the right people?

Foster: It probably begins by acknowledging the mistakes they typically make. On average, nearly all the research proves that leaders are making mistakes about 50% of the time. Half the time, the toss of a coin, they’re getting it wrong. And they use just a lot of ill-informed techniques — we call them voodoo hiring tricks. For example, if I was interviewing someone who is British and balding and has a slightly quirky sense of humor, I’ll probably think, “You know what? They’re really smart. I can’t put my finger on it, but I really like that guy.” We tend to project ourselves onto the people we see.

Yet we don’t realize we have all these unconscious biases. So the very first part — before you even get to asking the correct questions — is to acknowledge the mistakes that you’re making right now.

Knowledge@Wharton: How do you go about removing under performers and getting “A players” on your team?

Street: The first thing is understanding where you’ve got A, B and C players — if you want to use a classification system of your team — and that goes back to the priorities. Alan mentioned a little earlier a tool that we call a scorecard, which basically documents your priorities, your mission and then the key priorities that you’re pursuing. The best leaders actually take some time, maybe once a quarter, to sit down, look at the priorities, map the team against them, and ask the question: “How comfortable am I that these people are going to accomplish these things?”

If you have any doubt in your mind, if you think, “Well, maybe it’s 50/50,” that’s not very good. You’re looking for a much higher degree of confidence, a 90% or even 100% degree of confidence, that those people will accomplish those priorities.

Foster: I’m thinking of a client…who took Randy’s advice and did exactly that. He emailed us about a year and a half ago and said, “You know what? I have been following your advice. Every quarter I sit down and I map out who is on my team and ask, “If I was only allowed to have 50% of my people, who would be on my boat?” And then, he goes, “Okay, now if I was allowed 75% of my people, who would I add to the team?” Then he goes to 85%. And then at 85%, he goes, “Who is not on this team? Who is not on this boat?” And he goes, “At that point, I need to look in the mirror and ask myself some pretty tough questions about whether or not these are the right people moving forward and to make some tough decisions.”

Knowledge@Wharton: Do you have examples of leaders who do a really good job of managing the who? What do they do differently than other leaders?

Street: From a process perspective, the best leaders we work with start by thinking about their team against the priorities. The second thing is they do remove the weaker people — and in some cases, that means moving them to a different place in the company or the organization. Then, third, they get very aggressive about hiring.

Kristin Russell comes to mind. She is the former head of IT for the state of Colorado, and she had some big jobs at Oracle, I believe, and a couple of big IT shops. She considers herself a chief recruiting officer. She says, “You know, I may be a CIO, but my real job is CRO, chief recruiting officer.” She’s constantly on the hunt for great talent, constantly sourcing interesting people that she may be able to bring into her organization, or maybe refer to other people within the organization or other organizations. Then she follows a structured process to actually hire those people, as well, which is the other piece of the magic. It’s about having an understanding that you need to have these people, it’s putting that chief recruiter hat on at all times, and then following a structured process to hire them against the priorities.

Foster: If you look at every single executive we’ve ever interviewed, and we look at what’s the No. 1 risk or regret of that executive — the thing they wish they had done differently — by far, the No. 1 is, “I wish I had moved faster on the people I knew deep down weren’t the right people on the team.” But we feel conflicted. We feel like, “Well, maybe it’s my fault they’re not performing, maybe I should give them one more chance, maybe it will look bad — it will look bad on me.” We’re very good at justifying why tomorrow will be different, we’ll take action, but just for the moment, let’s keep the team as it is.

Knowledge@Wharton: Could we talk a little more about the interview process and what are some of the most common errors you find — the voodoo hiring errors that people make. How can you eliminate those errors?

“Five really is the absolute limit of priorities that we as humans can process and remember.”–Randy Street

Street: Sure, so we can maybe banter back and forth on this, because this is a rich territory. One that comes to mind that I think is very, very common is the hypothetical question, and we call it the fortune-teller. “Nicole, what would you do if you joined our team, which is right now a little dysfunctional, how would you fix it?” It’s a forward-looking question. The problem is, you get hypothetical answers. If you were to ask me, “You know, Randy, I understand that you followed the space shuttle and the Apollo program when you were a kid. How would you get to the moon?” I could actually answer that question. I know how to get to the moon. But I couldn’t get you to the moon. And the same is true here. Based on your education, based on examples you’ve seen, you could make things up. Unfortunately, that’s not really a predictor of how somebody will behave. Their past performance is a predictor, but not some projection of the future. So don’t ask hypothetical questions.

Foster: Another voodoo technique we see is what we call “the suitor.” This is when you know you’ve got a good candidate in front of you and you feel immense pressure to try and impress them, and to somehow make them join your company. So you talk and you tell them how great it is and why you joined and you’re just trying to sell them. Then you get to the end of 40 minutes and you’ve forgotten to ask them any questions, and you’re like, “Well, I quite liked them, but I probably should have got a bit deeper.”

Street: Again, we’re trying to get the data to understand — what’s this person really about? And does that mean they are going to be able to accomplish my priorities or not? One last one to mention, it’s what Alan said about that strange attraction he has to balding, British men [like himself] — “I think we’re going to be really good in the job.”

We tend to be art critics. You know, you see the painting on the wall, you like it for some reason, you can’t really tell why, it’s just something you like. So, you end up hiring that person. It could be a common interest or a common background or something and you end up hiring people not based on what they’re able to do for you and with your team, but based on some gut feeling that’s not substantiated by any real data.

Foster: I had a client last week, and I said, “Well, why did you give the offer to the CFO?” And the CEO said to me, “He was reassuringly tall.” That may be true, but that’s not the same person who can close the books on time, execute on the M&A or the things you actually need them to get done.

Knowledge@Wharton: Let’s turn now to the “R” part of the PWR score. How can leaders develop relationships that deliver results?

Foster: I don’t know about your calendar, but mine is full of meetings, and it always has been, and they seem to be getting more frequent and longer. We find that this is true across America and around the world. What we’re finding is, often, the wrong people are coming together at the wrong time to talk about the wrong things in an unstructured way. And meetings lack healthy conflict, they lack any sense of coordination and forward progress. So one of the No. 1 things that we do is explain that having good relationships isn’t about just liking one another, it’s about — how do we get coordinated here? How do we bring the right people together at the right time? Probably, half your meetings should be 30 minutes shorter, and some of them should be much longer. Most of our calendars look kind of the same as they did two years ago. We don’t update who we are talking to, and when, and why.

Street: Getting coordinated is one of the key thrusts. The other two big ones are building commitment with your team and challenging your team. This is where most leadership theories and leadership books and programs really focus their energy — on these two things. Building commitment is all about mutual commitment with one another, commitment to the organization and the cause, commitment to the leader — and there’s obviously a wide range of things that you as a leader can and should do. Chief among those is how you show up as a leader. This is where role modeling comes in, and following through on commitments, and getting things done as a leader. And how you set the stage to enable that team to create mutual commitment.

The challenging piece is, how do you challenge the team to be the very best? This is where motivation and inspiration comes in. This is where you begin to push people beyond what they think they can do on their own, and to see what’s possible to do when you bring the collective talents together in a group. Getting coordinated, and then working to help the team commit, and challenging them — those three levers really seem to be the big ones that form the relationships where one plus one equals five, and you get that multiplier effect in terms of results.

Knowledge@Wharton: Many meetings simply are about status updates. Can you suggest some ways that meetings can become more meaningful?

Foster: We believe in healthy conflict. We think that if you’re not feeling slightly awkward or if you can’t feel you’re leaning forward, then you’re probably talking about the wrong things. This is not about process updates and scheduling and the rest of it. This is about — how do we cut to the thing where we fundamentally disagree, where reasonably smart people disagree? Let’s talk about that. You want to see drama. If it’s not memorable, then you should probably shift the agenda.

Street: What Atul Gawande, whom we spoke about earlier, did — he blew up the status meeting, completely threw it out and basically said to everyone, “You have to submit a problem that we’re going to solve, and this is going to be a problem-solving meeting rather than a status update.” At first, people were very uncomfortable with that. Over time, it has become electrifying for the team, I think, because now they’re coming together to actually tackle real issues, solve real problems, not give each other status updates.

Knowledge@Wharton: How important is commitment to a team’s success? Do you think it’s inborn or can leaders create it?

Foster: We believe commitment is really important. If you don’t feel like your colleagues have your back, then you’re really going to be floundering. We see the most committed teams have actually really gone through some pretty tough times. They haven’t just been out on a Sunday drive with the sun shining, they’ve actually been to hell and back. As Winston Churchill said, “If you’re going through hell, keep going.”

We find the most committed teams have had this incredible crucible moment, where they’ve learned to work together, but we also find other leaders — they try and accelerate that process and that discussion. Some of the best leaders we know say, “At some point, this project, this team, it’s gonna suck, it’s gonna be terrible, it’s gonna be — we don’t know what it’s gonna be.” Now when that happens, what can we rely upon in each other? Having that conversation ahead of time, almost like rehearsing for the bad times, can really make the difference.

Street: Two leaders come to mind. One is Caperton Flood, who is a former colleague of ours at Bain & Company, and he actually has that conversation up front. When the case team comes together, [he asks,] what mutual commitments are we willing to make to each other as we do this project? And this is when people will say, “Well, you know what? I prefer not to work past 8 p.m., because I’ve got children, and I want to be putting them to bed.” Well, what happens if the client calls and there’s an urgent matter? So they actually problem-solve that before they even get into the real-life scenario, so that’s the rehearsing that Alan was sharing. And they drafted up and signed this document, “This is what we’re committing to.” So that’s one version.

Another example that comes to mind is John Zillmer. He, at one point, was in charge of a division of Aramark, and when he inherited it, his boss said, “Hey, John is taking this on, he’s going to be the caretaker of this business.” And John thought, “Caretaker? I don’t want to be a caretaker.” It was a poorly performing business, and he didn’t want to care-take this poorly performing business. So he took his new team offsite and basically, shared all of the results from the past year, which weren’t particularly good, and then he said, “All right, I want you to come back tomorrow at 8 a.m. and we will do something — and wear your gym shorts.” And the leaders were thinking, “Gym shorts? Uh-oh.” They show up the next day — in their gym shorts — and a van takes them out to a race track. So this was that classic team building, and they have a wonderful day racing cars together. When they come back, John said, “All right, it looks like you can learn new tricks. So what I want to know is, what are you willing to do as a team? What’s possible here?”

Over the next few hours, this group of people actually began to challenge one another, and they came up with goals that were greater than what John had envisioned. Over the course of the year, he fostered it. He said, “All right, here’s the deal — if we can accomplish these goals, we will come back next year, we’ll do the three-day racing course.” So first quarter, they were making their numbers, John sent them racing gloves and a note that said, “Congratulations.” Second quarter, they’re still making their numbers, he sends them the racing suits with their names on them. Third quarter, they’re making their numbers, he sends them helmets. And sure enough, they make it, and they show up the next year and they did this wonderful three-day program. It was just a wonderful testament of how a leader almost manufactured commitment in a team that didn’t have it by creating a shared experience. Building on that shared experience that they took ownership and ultimately, delivered the results.

Knowledge@Wharton: As the last question, let’s try to put it all together: If you look at all the three elements that you talked about, the P, the W and the R — how can leaders improve the PWR score of their teams?

Foster: What we find with a lot of our clients is they sit down and they have a conversation with their team and they say, “What’s our PWR score?” To which the team says, “What on Earth are you talking about?” And then, the client explains it: “Okay, everyone, get out a piece of paper, get out a pen, and now write down a number between one and 10 as the answer to these questions: To what extent do we have the right priorities? Do we have the right people in the right roles, and do the relationships work?” And then, they all hold up their scores and —

Street: And multiply your three numbers together.

Foster: All the scores are different and it fosters a lot of curiosity and puzzlement and, like, really? You scored that a four? I scored that a nine. Then, it leads to the right discussion. And what our best clients do is, they don’t just have that as a one-off conversation. It becomes something they actually begin to track monthly or on a quarterly basis.

Street: The beauty of the PWR score, going back to the Grand Unified Theory, is it does highlight where you have an issue. So if your overall PWR score is 432 — what are you going to do about it? Where are you weaker? Is it that the priorities aren’t clear? Is it that the “who” aren’t right? Is it that the relationships aren’t working? It very quickly allows you as a leader, and as a team — this is, by the way, a leader with his or her team exercise, not something you do in a vacuum — to look at that and say, “What do we need to do? How do we go from 432 to 500, to 600, to 700 and up?”

It becomes an enormously clarifying vehicle for identifying issues and focusing in on those issues that will drive results. The beauty of it is, the research shows if you can drive the P, the W and the R, you will get results, you’ll be more successful than the average leader and the average team by orders of magnitude. That’s where the fun starts.

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