New assessment research reveals surprising findings about leader skills.
Leaders grow fastest when given accurate, detailed, and actionable information about the gap between their current skills and future potential. Companies seeking to create and channel development energy by providing this information often turn to assessment centers to gauge a leader's readiness for new job challenges. These assessment centers—which include "day in the life" simulations of what it's like to be a higher-level leader—are highly realistic, reliable, and predictive of future leadership success because they provide real opportunities to demonstrate leadership skills.
Assessment center data have benefited individual leaders who seek personal and professional growth. The data also benefit individual organizations that can look across a group of their leaders to pinpoint development needs or make placement and promotion decisions. However, for senior-executive and HR professionals, there has been an untapped need. By looking at a large body of aggregate data, encompassing a large number of leaders across multiple organizations, we can begin to "crack the code" to leader growth by providing useful insights about leaders and how organizations need to go about developing them.
That was our starting point as Development Dimensions International (DDI) recently undertook a research project integrating our assessment data from more than 15,000 leaders across 300 organizations. This data set allowed us to explore leader skill patterns and how these patterns intersect with the context within which these leaders operated, including economic forces such as the 2007-2008 global financial crisis and key facets of leader experience, such as function and level.
Our analyses drew on this expansive and varied data to reveal interesting answers to questions about the impact of having skilled leaders, where organizations can uncover leadership talent, and the varying skill requirements for leaders as they advance to higher levels. We will cover four of the 18 initial findings identified in our report, High-Resolution Leadership.
What's the organizational payoff of higher leader skill?
Before our detailed look at leader skill trends, we started by verifying the link between the leadership assessment and company-level outcomes. That is, were assessed skills related to organizational health?
We compared growth rates between organizations whose leaders scored at the highly competent (top-third), competent (middle-third), and less competent (bottom-third) level on the assessment, using a composite index of leadership skill. We found a significant link between a company's average leadership assessment scores and five-year revenue growth: Companies whose leaders scored in the highly competent range increased revenue by 45 percent, compared with just a 20 percent increase when a company's leaders scored in the competent range and a 4 percent contraction for leaders scoring in the less-competent range.
How has the past decade reshaped leader skills?
Our data set reached back almost a decade, which means that it includes data from both before and after the most critical economic event of the past nine years: the 2007-2008 global financial crisis. The occurrence of the crisis in the middle of the timespan for the data we examined provides a unique perspective on how leader skills have shifted alongside economic pressures. We ranked leaders' skills based on their average assessment scores at five points: 2006, 2008, 2010, 2012, and 2014, shown in Figure 1 ("Leader Skills Ranked by Average Skill Level, 20016-2014").
Four major trends were clear from this view of leader skills over time. First, the crisis' turmoil dramatically reshuffled leader skills (as shown by the many intersecting lines between 2006 and 2010). Second, the average leader's strongest two skills, operational decision making and customer focus, were consistent across the entire time period. Third, leaders became more adept at taking personal accountability by leading change and establishing strategic direction, while at the same time, they more often involved others via empowerment and delegation. And fourth, skills related to the longer-term components of leadership slipped, as driving execution, coaching, and building organizational talent all slid.
What does this tell us about the changing state of leadership and the most pressing targets for leadership development? As businesses have adapted to a new economic reality, so too have their leaders, becoming more adept at doing more with less. However, this unfortunately has come at the expense of growing talent and taking risks.
To counteract these trends and avoid having an excess of leaders unprepared to step into new roles, organizations should restore their focus on building talent, and should push leaders to pair their stronger ability to delegate decisions (which has increased over time) with high-quality coaching and a talent development focus (which have decreased). Only through this combination—increasingly rare in recent years—will employees be armed with the guidance and know-how to take action successfully, locking in the benefits of empowerment. Delegation without coaching is simply not a sustainable approach for organizational health.
Where are an organization's untapped talent pools?
In considering emerging leader skills gaps, we also examined the question of where companies can turn to deepen and replenish their leadership talent pools. As organizations increasingly take a strategic approach to talent planning, they can't risk neglecting pockets of leaders who either have the skills they need now, or who can be developed as promising leaders for the future. Though all organizations have well-worn paths to the top of the leadership ranks, often through core business functions such as finance and operations, our data allowed us to determine whether these historical patterns accurately match leader skills, or instead if pockets of leader skills are hidden in functions that are less conventional sources for higher-level leadership talent.
In our research, we examined leaders from seven major functions found in most organizations. All leaders completed the rigorous assessments described above, providing a direct comparison of their strengths and deficiencies on a wide range of leader skills (we limited our analysis to the 10 skills that varied most among functions). As illustrated in Figure 2 ("Top- and Bottom-Ranked Functions Across Leaders Skills"), for each skill, we identified the strongest two functions, weakest two functions, and the functions that were midrange (neither strongest nor weakest).
Leaders from two functions distinguished themselves as particularly well-rounded: marketing/advertising and sales. Leaders across both functions excelled in communication, selling the vision, and entrepreneurship, while marketing/advertising leaders additionally outperformed other functions in financial acumen and business savvy, and sales leaders were strong in building talent and global acumen. Leaders in the oft-maligned function of IT were in the midrange for most skills while being particularly adept in leading teams. Engineering and operations leaders were similar to each other in their weak communication, financial acumen, and executive disposition.
Finance, the function found to be the most common source of candidates for senior leader roles, did excel in the core business skills of financial acumen and business savvy, but these strengths were counteracted by notable gaps in building talent, leading teams, and customer focus. HR leaders, often responsible for setting up talent programs, were expectedly strong in building organizational talent, but struggled to demonstrate their skills in business savvy, customer focus, entrepreneurship, and global acumen. Some of these latter skills are crucial for the increasing need of HR to become adept at talent analytics.
It's worth pointing out that no one function shows mastery across the full range of leadership skills. This being the case, inclusive, development-focused organizations should recognize both the vastly varying skill development needs across functions and the risks of a learning model that neglects these distinctions by myopically applying the same development curriculum regardless of a leader's functional background. In most cases, it will be best to target function-specific skills gaps first (including for the HR function itself), and to then integrate learning cohorts once the largest between-function gaps have been closed.
Organizations also can use information about complementary skills to design cross-functional development assignments and informal mentoring pairings to take advantage of function-based pockets of credibility and expertise (for example, pairing marketing leaders with those from engineering, or sales leaders with operations).
How do leaders' skill profiles change as they rise through the ranks?
Lastly, we examined how the typical leader's skill profile changes at higher levels of leadership. In one specific area, we grouped skills into two essential clusters: executing and engaging. Leaders who execute well excel in getting tasks done and driving courses of action for employees. Leaders who engage their employees ensure that they are fully absorbed in their work and inherently committed to the organization's purpose and values.
We created two assessment score indexes, one for execution behaviors (for example, determining actions required to implement an initiative; measuring progress and evaluating results) and one for engagement behaviors (for example, creating shared purpose for a team; convincing others to commit to a vision and set of values). We then calculated the percentage of candidates for each of four leader levels—midlevel, operational, strategic, and C-suite—who scored notably higher in execution behaviors, notably higher in engaging behaviors, or about the same in both.
We found that leader skill patterns shifted dramatically when comparing leader candidates across levels. Overall, we saw no evidence that higher-level leaders can remain balanced, with similar skill levels for execution and engagement. Instead, as leaders entered into higher-level roles, their balance consistently shifted toward execution and away from engagement, while the "about the same" group plummeted from 48 percent at the midlevel to just 17 percent for C-suite candidates. Ambidextrous leaders, those who show similar levels of strength for both engaging and executing, become increasingly rare at the senior-most levels of leadership.
We see several risks of poor skill balance in the top ranks of leadership. It's unlikely that even the best organizational strategy will survive if senior leaders lack the will or ability to appropriately involve employees, who may begrudgingly comply but eventually resist. From a development viewpoint, this skewed skill pattern also leads to a progressive atrophying of engaging skills for the senior leaders who need it the most, given their span of leadership accountability.
Though execution skills are far from irrelevant, we know from the leader skill trends identified above that they're also a much more common strength for leaders of all levels, and have remained so for many years. Organizations can restore balance by considering strong engagement behaviors in promotion decisions and by holding leaders responsible for engagement and culture survey metrics. Interaction skills that induce employee engagement (empathy, involvement, communication, and esteem-building) also should remain foundational targets for leadership development programs across all leader levels.
The value of large-scale, cross-organizational assessment data
Leadership assessments, including assessment centers, are already in heavy use for many organizations, and justifiably so. The research we've described here adds to the multitude of studies showing a close connection between stronger assessment performance and key organizational outcomes.
Less well-recognized, however, are the insights that large-scale, cross-organizational assessment data can offer for diagnosing past and projected skills gaps and for precisely guiding leadership growth. The findings summarized in this article can be paired with in-house data to identify high-value targets for inclusive leadership development and to elevate the role of proactive, long-term talent planning in organizational strategy.