Do you have the right
leaders for your growth strategies?
It takes a mix of
leaders and talent to pursue a variety of growth strategies simultaneously. Few
executives can do it all.
Is
there a link between growth and
specific leadership traits? We’ve tried to shed some light on this question by
integrating two unique databases: McKinsey’s granular-growth database, with
information on the growth performance of more than 700 companies, and a
database created by the executive search firm Egon Zehnder International that
contains performance appraisals of more than 100,000 senior executives (see
sidebar, “Two unique performance databases”). The overlap between the two
databases—a group of 5,560 executives1at 47
companies across a broad range of industries2—allowed
us to examine in detail the relationship between leadership competencies and
revenue growth. We found that leadership quality is critical to growth, that
most companies don’t have enough high-quality executives, and that certain
competencies are more important to some growth strategies than to
others. Companies that know how they want to grow can use these insights
to cultivate the right skills in top executives.
Great leaders are hard to
find but vitally important
Excellent
leaders are few and far between. Only 1 percent of the executives in our sample
achieved an average competency score of 6 or 7 out of 7 (although excellence in
a single competency was more frequent). Just an additional 10 percent had an above-average
score of 5.
That’s
a challenge for growth-oriented corporations because leaders with high
competency scores appear to make a difference: for every competency we
reviewed, executives at companies in the top quartile of revenue growth scored
higher than their counterparts at companies in the bottom quartile.
Executives in
top-performing companies scored higher than those in lower-performing companies
across all competencies.
Similarly,
companies where the top teams as a whole had excellent scores (that is, 6 or 7)
on the various leadership competencies were also those with strong corporate
revenue growth. On the other hand, we found no measurable correlation between
revenue growth and teams with solid but unexceptional leadership.3
Since
such a small percentage of executives had above-average scores across all
competencies, trying to jump-start growth by looking for great “all-rounders”
is a risky bet. An alternative approach is for companies to cultivate specific
competencies correlated with growth in their existing teams or to seek new
talent with the needed skills.
Customer focus first
If your
company is seeking a launching pad to improve performance, the analysis shows
that one competency drives the greatest gains: delivering customer impact
(defined as the capacity to understand customers’ evolving needs). Companies
that had a critical mass of executives who got excellent (6 or 7) scores in
this competency recorded superior growth consistently—both organically and
through acquisitions.
What
constitutes critical mass? Companies where at least 19 percent of the senior
executives excelled at customer impact were also the most likely to achieve
above-average revenue growth (in the top half of our database). For a company
to be highly likely to have superior growth (the top quartile), 40 percent of
its senior executives needed to be highly skilled in that area.4So allof
an organization’s leaders don’t need to be top flight at customer impact, but
when a substantial number are, the impact on growth can be significant.
Tailor talent strategies to
growth priorities
At most
large companies, of course, there isn’t just one growth strategy. Rather,
companies rely on a diversity of approaches that vary by business segment and
by circumstance: at times executives might place more weight on acquisitions,
while at others they focus on stealing share from competitors, for example. Our
analysis shows that high growth rates for these different strategies are
associated with excellence in a range of leadership skills wielded by managers
at various levels of the organization.
Consider
portfolio momentum growth, which flows from market growth across a company’s
existing business segments. To drive this type of growth, senior managers
beyond the top team typically need to execute a strategy effectively across
often far-flung organizations. Senior managers at companies in the top quartile
of this growth category were highly rated in competencies relating to dynamic
people and organizational leadership: developing organizational capability,
change leadership, and team leadership.
By
contrast, companies in the top quartile of M&A-driven revenue growth had
top-leadership teams that excelled at a broad range of skills. The first is
market insight—in other words, looking beyond a company’s current business
landscape to discern future growth opportunities. That competency no doubt supports
the identification of deals, while another competency crucial for
M&A-driven growth—a well-honed orientation toward achieving results—helps
in postmerger integration.
If your
company pursues multiple growth strategies, the talent bar is even higher. Our
study shows that the average skill level of top teams at companies with a
dual-growth strategy—defined as top-quartile performance in two of the three
strategies (portfolio momentum, stealing share from competitors, or growth
through acquisition)—was almost one and a half times that of their
single-growth-strategy counterparts on key competencies .
Pursuit of
more than one growth strategy requires leaders with higher skill levels.
In
short, to achieve stronger growth, companies must not only assemble a critical
mass of talent, which will require attracting and retaining an “unfair” share
of excellent leaders, but also align these leaders’ roles and skills with the
companies’ growth strategies. In our experience, the best companies conduct
detailed assessments of the talent required—across the organization and by
business unit and geography. They then create clear leadership-development
targets for executives and managers and incorporate these targets into
performance-management, recruitment, succession, and reward processes. In this
way, top companies systematically build excellent leaders with the skills
needed to drive growth.
By Katharina
Herrmann, Asmus Komm, and Sven Smit
https://www.mckinsey.com/global-themes/leadership/do-you-have-the-right-leaders-for-your-growth-strategies?cid=other-eml-cls-mkq-mck-oth-1711&hlkid=35ff9c219b574184bc6e8161beb2e180&hctky=1627601&hdpid=2b3b9e04-9669-465b-88cd-77d98203b3b2
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