One promise of leadership is this: We shall lead effectively and seek to become more effective. Yet developing leadership effectiveness is rarely a leadership priority. It is often relegated to a staff function that struggles for attention and relevance amid competing priorities.
At the Leadership Circle we researched on the relationship between leadership effectiveness and business performance. We created a metric where we asked leaders to evaluate the performance of a business compared to industry standards on a series of performance criteria including revenue, market share, sales, profitability, quality of products and services, new product development, and business performance. We then used these criteria to construct a Business Performance Index and correlate the index scores with a measure of leadership effectiveness on our leadership circle profile.
We found a very strong and positive correlation between leadership effectiveness and business performance. Thus, if you can improve leadership effectiveness, you will likely see that improvement translate into higher business performance.
We also found that leaders in the highest performing businesses had effectiveness scores higher than 80% of our norm base, and that each 80th percentile leader outperforms those in the middle zoneby sixfold. Clearly, developing effective leaders deserves to be a key strategic priority. The most successful organizations are the best led.
What is your leadership quotient?
Is your leadership a competitive advantage? To answer this question, we created a metric called the Leadership Quotient (LQ)—Leadership Effectiveness divided by Leadership Ineffectiveness.
(LQ) = Leadership Effectiveness (LE)/Leadership Ineffectiveness (LI)
The LQ score for an organizsation measures the degree to which leadership is a competitive advantage or disadvantage. An LQ score of 1.0 means neutral impact (the leadership is competitive, but it is not yet a competitive advantage or disadvantage). The LQ for the highest performing businesses (top 10%) in our research is 4.0. In the lowest performing businesses (bottom 10%), the average LQ score is 0.4, suggesting a 10-fold difference between the LQ of the highest and lowest performing businesses!
What is your collective effectiveness?
Most organisations focus on developing individual leaders, ignoring the collective effectiveness (how leaders show up together to lead the organization) of the leadership system—all leaders and managers in formal leadership positions. Within this structure of formal leadership, we focus on the top four levels or the Extended Leadership Team (ELT). The ELT is responsible for providing leadership to the entire organization.
Collective leadership effectiveness is impacted by how well the ELT sets direction; aligns around vision and mission; agrees on direction, key strategies, and initiatives; develops a clear shared understanding of strategy; translates strategy into execution; understands each other’s roles; collaborates together; makes decisions; creates an accountable, engaged, performance-based culture; focuses on achieving results; mobilizes and engages all stakeholders to achieve those results; and develops leadership that can do all the above.
How effectively collective leadership is deployed differentiates organisations that perform optimally from those that do not. No organisation can perform at a level higher than the collective effectiveness of its leadership.
Individual effectiveness is necessary, but insufficient, for extraordinary business performance. Individual leadership effectiveness catalyses collective effectiveness. Collective leadership effectiveness drives organisational performance. Collective effectiveness and the success leaders have as a team results from the way they interact with each other—the quality of their communication, the level of alignment on vision/direction, the level of agreement on key strategies, the degree of trust and honesty, and how well they execute together. The quality of the leadership conversation largely determines the level of collective leadership effectiveness.
Leadership is a conversation. Leaders spend most of their days in conversation—meetings, phone calls, emails, and strategic communications. How you show up in these conversations determines your level of effectiveness. How we show up together in these conversations drives our collective effectiveness. The quality of our collective conversation largely determines our collective leadership effectiveness and business performance.
We usually dumb down when we come together, meaning that the collective intelligence and performance of most leadership teams is well below the average intelligence and performance of the members. The dynamics played out in most groups—overly aggressive advocacy of positions, poor listening, reactive responsiveness, political caution, ambitious self-interest, mistrust, withholding of opinions—subvert collective effectiveness. Collectively intelligent leadership teams consistently achieve breakthroughs—high-leverage actions, innovations, or changes that make them super-competitive.
High scores on Leadership Effectiveness correlate closely to positive outcomes such as strong bottom line performance, employee job satisfaction, high employee engagement, and low turnover. As a leader, you will not scale the organization unless leadership is collectively effective and until you invest in developing high potential leaders. This is what we call the Leadership Agenda. It is a business imperative.
Ask yourself these questions (and answer honestly)
We invite you to ask yourself six provocative questions: Is your leadership team comprised of extraordinary performers with LQ scores well above one? Are your key leaders functioning at or beyond the 80th percentile? How effective is your personal and collective leadership? How do you know? How does your leadership effectiveness compare to that of your competition? Are you tracking the effectiveness of leadership over time to gauge improvement? Is your leadership a competitive advantage or disadvantage?
If you do not know the answers to these questions, you probably are not serious enough about the effectiveness of leadership. You are likely not making the Leadership Agenda a key strategic priority.
Excerpted from Mastering Leadership: An Integrated Framework for Breakthrough Performance and Extraordinary Business Results, by Robert J. Anderson and William A. Adams (Wiley, 2015)
Bob Anderson is chairman and chief development officer and Bill Adams is CEO of The Leadership Circle and the Full Circle Group. They are co-authors of Mastering Leadership (Wiley) and will be in India between 23 and 27 November, addressing CEOs in Mumbai, Bangalore, and Delhi . Interested CEOs should mail: [email protected]