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Transitioning into a Leadership Role Successfully

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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 undersupported 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 (Exhibit 1).

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 organization.

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 organizational 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

The pace and magnitude of change are constantly rising in the business world, so it is no surprise that senior-executive transitions are increasingly common: CEO turnover rates have shot up from 11.6 percent in 2010 to 16.6 percent in 2015. Since 69 percent of new CEOs reshuffle their management teams within the first two years, transitions then cascade through the senior ranks. Sixty-seven percent of leaders report that their organizations now experience “some or many more” transitions than they did in the previous year.

Despite the increase in frequency, only 29 and 32 percent of US and global leaders, respectively, feel that their organizations appropriately support new leaders. As many as 74 percent of US leaders and 83 percent of global ones think they are unprepared for their new roles.

As CEB puts it, “most organizations approach new leadership transitions in the same way many organizations approach mergers and acquisitions: as one-off events…. The typical unsystematic ‘hands-off’ transition approach relies heavily on new leaders to self-manage their transitions. However, most leaders experience only a handful of transitions … so for them, each transition remains more art than science.”

Organizations most often try to help newly appointed leaders by supplying them with mentors or informal “buddy” networks. Yet only 47 percent of external hires and 29 percent of internal ones find these helpful. Standard orientation programs are the second most common approach, but only 19 percent of externally and 11 percent of internally recruited executives consider them effective.

Some methods—for instance, tailored executive coaching and customized assimilation plans—have been shown to double the likelihood of success, but only 32 percent of organizations use them. When companies are asked what additional support they intend to provide in the future, the commonest response is to have HR play a more supportive role. But HR departments already have a full plate.

What are the big ideas?

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

The great Spanish writer Cervantes once wrote, “To be prepared is half the battle.” What is the other half? A second famous Spaniard, the artist Pablo Picasso, said, “Action is the foundational key to success.” They were right, so 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 (Exhibit 2).

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

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. In our experience, too, senior executives in new roles must be clear not only about what they want to do but also about what they don’t.

Otherwise, when employees hear about the company’s new direction, they will reframe what they are already doing to show that this supports the changes, and many pet projects will crop up in the name of advancing them. Well-intentioned but fragmented and ineffectual efforts then proliferate, and momentum vanishes. Successful leaders are 1.8 times more likely than others to communicate explicit ideas about what to stop, not just about what to start.

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.

Be impact-driven, not calendar-driven

If you type “executive transitions” into Amazon, you will find a long list of books offering 90- and 100-day plans for success. These works say that you have a limited period to achieve full productivity as a leader and that if you don’t make it in time, you are doomed. The evidence doesn’t support these claims: 92 percent of external and 72 percent of internal hires take far more than 90 days to reach full productivity. Sixty-two percent of external and 25 percent of internal hires admit that it took them at least six months to have real impact.

In general, that delay isn’t a problem. Stakeholders typically expect a new CEO to propose a strategic vision within the first eight months, not the first 100 days (Exhibit 3). They give the CEO 14 months to get a new team in place and 19 months for an increase in share prices. This doesn’t necessarily mean that leaders shouldn’t move quickly—for example, 72 percent of them wish they had taken less time to reshape their teams. But stale formulas shouldn’t pressure leaders to act.

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Are we long—or short—on talent?

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  • By looking at their supply of skills and talent in a new light today, organizations can take actions that better prepare their companies for tomorrow’s challenges.

 

CEOs and HR leaders worried about the viability of their talent strategy may be excused an occasional sleepless night. After all, there’s a closetful of bogeymen to pick from as disruptive technologies such as digitization, automation, and artificial intelligence combine with demographic forces to continue transforming the nature of work, how it gets done, and by whom. The resulting job displacement could be massive—think Industrial Revolution massive—affecting as many as 800 million people globally by 2030 and requiring up to 375 million of them to switch occupational categories and learn new skills.

Companies are already feeling the heat. Fully 60 percent of global executives in a recent survey expect that up to half of their organization’s workforce will need retraining or replacing within five years. An additional 28 percent of executives expect that more than half of their workforce will need retraining or replacing. More than one-third of the survey respondents said their organizations are unprepared to address the skill gaps they anticipate.

The competitive implications are profound. Organizations that expect to benefit from a digital transformation or a promising new strategy won’t get very far if they lack the people to bring the plans to life. What might seem like an irritating talent gap today could prove a fatal competitive liability in the not-too-distant future.

 

How can organizations better prepare for what’s coming?

For starters, they should embrace a more expansive and dynamic view of their talent supply—one that tosses out the usual preoccupation with titles and traditional roles and looks instead at the underlying skills people have. Indeed, we find that when companies start with skills—the ones they need, the ones they have, and how the mix may change over time—they can free up their thinking and find more creative ways to meet the inevitable mismatches.

In this narrative, we’ll show how forward-looking organizations are grappling with these challenges and highlight ways that CEOs and senior leaders can spark progress that is tangible, practical, and quite often beneficial for both employer and employee alike. Oftentimes, taking the first step can be as simple as asking: For our five most important skills, are we long—or short—on talent?

 

Shift happens

Consider the European bank whose market position was threatened by new, more digitally savvy rivals. The shifting competitive landscape required action, but when the bank’s leaders compared their proposed strategic response with a three-year projection of the bank’s talent pool, they saw a mismatch. The plan made sense, but executives feared that their people couldn’t execute it.

For example, the bank would soon have serious skill gaps in its retail-banking unit, particularly among branch managers whose roles needed to change to encompass areas such as sales expertise, customer orientation, and digital capabilities, given the new strategy. Meanwhile, the bank’s IT group faced both undersupply and oversupply: programming skills would be too scarce, while IT infrastructure skills would be too plentiful. To complicate matters, the bank faced strict regulatory and labor restrictions that prevented most layoffs. Any solutions would require flexibility and creative thinking.

To respond to the imbalances, the bank developed a range of interventions. For example, the bank is rolling out upskilling programs to help prepare its retail bankers for the aspects of their jobs that are changing; elsewhere, reskilling and retraining programs (including new digital and analytical skills) are helping employees’ secure new roles in the company. Still other employees have been offered part-time positions, an option intended to appeal to those nearing retirement.

Finally, for some employees, the bank is exploring secondment opportunities with selected not-for-profit organizations. Under the arrangement, both organizations pay a portion of the employee’s salary. In principle, this benefits everyone: the not for profit (which gets a talented employee for less money), the employees (who are doing meaningful work using skills that are in high demand), and even the bank (which pays less for skills it already has in surplus, while potentially enhancing its visibility in the community).

While the bank’s overall approach is still a work in progress, its example is instructive not only for its breadth but also for the outlook of its leaders. Instead of just looking at its talent supply through the lens of its traditional jobs or roles, which after all are changing, the bank’s executives pushed themselves to take a more objective, skills-based look. Similarly, the bank’s experience underscores the importance of setting aside long-held assumptions about which roles are most important, as prevailing opinion may be outdated or biased.

 

Are we long—or short—on talent?

Adjusting the skills of a workforce requires a blend of rigor and creativity; it also requires dedicated commitment and attention from senior management. One way to spark a fruitful C-suite conversation about talent supply is to borrow a page from the dismal science and look at skills in the context of surplus and shortage.

Starting with a thought exercise such as this can help break down an otherwise intractable problem into smaller chunks that can be approached with discipline. At the same time, testing potential interventions using the logic of microeconomics can help managers see a wider portfolio of options beyond reskilling at one extreme, and layoffs at the other (exhibit).

 

The following snapshots highlight ways that organizations have addressed both talent gaps and overages.

 

 

We’re short on talent: Build, acquire, or rent?

While talent shortfalls arise for many reasons, the supply-side remedies can be summarized in just three watchwords: Should we build on our existing skills? Should we acquire them? Or should we “rent” them?

A global manufacturer investigated these options as it looked for ways to fill several looming skill gaps. One of the most acute shortfalls was in data science, a problem complicated by the company’s suspicion that it was losing ground to high-tech firms as an employer of choice.

On closer look, their fears were justified: a talent-supply forecast that used machine learning to predict the likelihood of employee attrition found the company’s data scientists would be eight times more likely to leave than other colleagues. Clearly, the company couldn’t simply hire its way out of the problem; filling the skill gap would also require better employee retention.

Subsequent analysis helped the manufacturer spot opportunities in both areas, starting with a plan for more meritocratic career paths and redesigned leadership tracks to keep employees engaged and happy. The company is now working on simple changes to its recruiting and interviewing processes, to be more responsive and to help make candidates feel more valued throughout the process.

Of course, another way that companies can acquire skills en masse is through M&A, an approach pioneered in the tech industry, where it was given the portmanteau “acquihiring.” It has since become more common in other industries. Walmart used it in 2011 when the company bought Kosmix, a social-media company, to form the nucleus of what would become Walmart Labs, the retailer’s digital-technology unit.

Companies can also start nurturing skills today that they may benefit from later. Programs such as this are intriguing to employers, because it lets them tap a new pool of talent and then create and shape the specific skills they need. The approach also holds considerable social promise, as it can be designed to support underemployed groups, such as young people or military veterans.

Finally, companies can obtain skills by “renting” talent; for example, through outsourcing partnerships that bring specialized skills or by tapping the gig economy, where the rise of digital platforms has rightly captured executives’ attention.

 

We’re long on talent: Redeploy—or release?

Invariably, the changing nature of work will create skill overages that even the most inspired corporate upskilling or reskilling programs can’t manage. In these cases, companies must choose whether to redeploy workers or to find thoughtful ways to let them go.

As the case of the European bank demonstrated, there may be regulatory reasons to consider the redeployment of workers by offering their skills to a third-party organization for a fee. There might also be cultural, financial, strategic, or even social reasons for redeploying skills.

In the private sector, meanwhile, the video-game industry has long “loaned out” the specialized skills of software engineers to other video-game companies, including competitors, when their own projects hit unforeseen snags. While the approach may seem counterintuitive, the arrangement helps the sponsoring company maintain ready access to skills that are particularly rare and hard to recover once lost. The engineers, meanwhile, appreciate the change of pace and the chance to work on high-visibility projects with talented counterparts.

To be sure, redeployment programs such as these tend to be the exception rather than the rule. And no program can forestall all the job separations that come with technological change.

 

Work, Adapt, Repeat

The nature of the evolving workplace confronts leaders with the need to think quite differently about people’s relationship to work. In this vein, we are particularly intrigued by concepts such as “lifelong employability” that prioritize helping people successfully adapt—again and again, if necessary—as the economy evolves.

Yet if companies are to bring ideas such as these to fruition, and truly reorient their organizations around skills and not just roles, they will need more than just a mind-set shift. Many, if not most, companies will find their people-operations infrastructure and talent-management system creaking under the strain of new challenges. Designing a winning employee value proposition, for instance, is much harder when career paths are themselves in flux.

Indeed, HR will need to sharpen its own skills, not only in traditional areas, like employee retention and performance management, but also in new ones, such as managing the risks associated with gig work. In this respect, HR leaders are no different from those in any other function—all of whom must be prepared to evolve if they are to be effective in helping the larger enterprise adapt to the changing nature of work.

 

  • By Megan McConnell and Bill Schaninger

 

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