Approximately 30% to 50% of high-potential managers and executives derail at some time during their career [Lombardo & Eichinger (1995)]. This is backed up by further research published in July 2013 in the International Journal of Business and Management, finding that 30 to 67 percent of leaders fail. What’s the cost?
Gaddis & Foster (2013) found that 30%–60% of leaders act destructively, with an estimated cost of $1–$2.7 million for each failed senior manager.
Then there’s the cost of replacing someone. In 2014, replacing staff cost British businesses £4bn each year. 20% of annual salary for mid-range positions (earning $30,000 to $50,000 a year). Up to 213% of annual salary for highly educated executive positions. For example, the cost to replace a $100k CEO is $213,000. On average, new workers take 28 weeks to reach optimum productivity. longer for more expert land senior roles.
Other studies show that consequences of derailment include low staff morale, low productivity, inhibition of leader’s career progression and loss of organisational reputation.
It’s a pretty compelling argument to pay attention to leadership derailment but it doesn’t appear to be front of mind. It has been called the elephant in the boardroom and it’s relevant that while Remuneration and Audit committees have been developed greatly over the last ten years, the Nominations Committee seems to have stayed still.
We need to talk much more regularly about leadership derailment. Leadership has been studied for over 50 years and organisations spend an estimated $50 billion a year to develop leaders. Decades of leadership study have produced over 50,000 books with ‘leadership’ in their title but almost none on leadership derailment or failure.
It is possible to take action on derailment however. It should be on the board’s agenda and preventative measures to insure against derailment should be built into our processes. How do we identify potential derailers? What can we do to protect ourselves against leaders failing with the resultant damage and costs? Who is accountable?
In line with Google taking hiring out of the line manager’s remit, preventing derailment should sit with a single executive, probably the role accountable for talent. It can’t sit with managers themselves due to cognitive dissonance and confirmation bias.
You can imagine the internal dialogue of hiring and promoting managers:
“I made that hire. She’s great like I said so. I don’t want to admit that she’s arrogant, doesn’t listen and has been making some bad calls. I’d look like an idiot.“
“I recommended that promotion. I really thought that they had it in them but this just isn’t good. I’d better get some help for them. If it goes on like this it will really damage my reputation.”
And then there are all the example is when poor behaviour is tolerated because someone gets results. Doesn’t mean to say that they’re not also a jerk that will cost the company more in the end.
The critical element in fighting derailment is remaining vigilant. The warning signs are there if we stay aware and pay attention. We disregard warning signals at our peril. Just like with those derailing train drivers, the consequences of ignoring the warning signals can be catastrophic.
Those that derail are very unlikely to self-identify as they nearly all suffer from ‘illusive superiority’. No one thinks they’re going to derail just like 80% of drivers think that they’re better than average!
So what are some of the warning signs?
Research from Personnel Decisions Inc. (PDI) on ‘career jeopardy’ highlights how an over-reliance on past competencies, combined with an inability to take action on feedback, are primary sources of executive derailment and failure. Further research from the Centre for Creative Leadership show leaders who derail have five key characteristics [CCL]:
Difficulty in changing or adapting – resistant to change, learning from mistakes and developing.
Problems with interpersonal relationships – difficulties in developing good working relations with others.
The failure to build and lead a team – difficulties in selecting and building a team.
Failure to meet business objectives – difficulties in following up on promises and completing jobs.
Having too narrow a functional orientation – lacks depth to manage outside of one’s current function.
Of the factors listed above the most obvious and easiest to test is the inability to take action on feedback. That’s one we can easily monitor. Aside from this I think the researchers have missed some obvious clues.
The most conspicuous is simply an inability to manage their emotions, particularly in times of stress or when under a heavy workload. This is clearly a failure of self/other awareness and why emotional intelligence is an important attribute to look for in our leaders, and should be part of any leadership development program.
Another is hubris. Mark Twain allegedly said, “It ain’t what you don’t know that gets you into trouble. It’s what you know for sure that just ain’t so.” I’m sure Fred Goodwin really thought he couldn’t fail.
Hubris is often indicated behaviourally by being a poor listener and this is easy to measure from feedback. A leader who fails to listen to his followers, colleagues and stakeholders will end up isolated, eventually leading to derailment. Another indicator of hubris is when leaders are fine until they have to live in the same room with someone else with the same ego strength. An intense need to win and beat others can indicate a narcissistic personality. Sadly not uncommon amongst senior leaders.
Another indicating factor of derailment is that it occurs most often at certain times. Career transitions are key events. In particular a job transition to a new organisation is one of the highest predictors of leadership derailment.
Although both successful and derailed leaders shared many of the same skills and flaws, those who remain successful share five common characteristics:
Diversity in their career paths.
Maintain composure under stress.
Handle mistakes with poise.
Focused problem-solvers; and
Get along with all kinds of people.
So what are some practical steps we can take?
Recruitment is an obvious place to start. Better not to employ potential derailers in the first place.
Jean Martin of CEB tells us that leading companies are adopting two new approaches for recruiting that may help solve this problem. The first is to change hiring criteria to highlight ‘network fit’, how well someone fits in with the way their new co-workers operate. Their research shows that hiring for a more colleague-centric type of fit can improve performance two years by 30%. It has more than double the impact of assessing only for general culture fit.
The second is to think about what recruiters are doing the assessment. Usingg in-house recruiters gives a much better chance of correctly assessing network fit. Consider your recruitment strategy and consider internal recruiters more, and look to develop the necessary skills internally.
Psychometrics are a key tool in recruiting. I’m concerned that while psychometric tests are used among 89% of senior managers, they are only used for 65% of board-level roles. Where does it say that board members aren’t susceptible to derailment? All of the examples at the beginning of this article were board members.
I believe there is a big opportunity to use psychometrics much more to inoculate against derailment. The same survey as above tells us that only 26% of organisations use psychometrics for talent management. The lack of psychometrics being used for talent management is a massive missed opportunity.
The most obvious tool here is the Hogan Development Survey though HDS is often used as an acronym for the Hogan Dark Side. It works with both bright side and dark side qualities and that’s its beauty. The key to this tool is that it identifies those strengths that can easily become derailing factors under changed circumstances. As high profile cases demonstrate, technical brilliance often sits side by side with self-destructive and other destructive traits.
It is important we have a more open dialogue to highlight weaknesses as well as strengths in talent development and executive coaching interventions. This is one area where a purely strengths based approach falls down.
The HDS is well suited to being used alongside executive coaching with well-crafted coaching interventions being shown to boost critical leadership competencies by about 20%–30%. The important thing here is to get coaches involved much, much earlier.
It’s a false economy not to employ a coach to support leaders early on on their transitions, even before the transition starts. This is especially true for talent new to the organisation, especially through their first 90 days. I’m not the only coach that finds it frustrating when we get brought in after the damage has already begun. Ultimately, of the 40% of leaders who are hired from outside each year, nearly half fail within the first 18 months.
This is also where team coaching can play a large part. It’s not only the new entrant to the team that matters, but the system into which they come. The CEB research mentioned earlier also found a surprising answer to why leaders hired from outside fail so often. Studying more than 320 leaders in 36 organisations, they found this: External leaders fail because they just don’t work well with the people on their teams. Maybe you’re bringing in new talent because they have complimentary skills or experience and because of this they have different backgrounds an approaches?
Entrances and exits to leadership teams are often missed opportunities for incredible learning for that team and it is learning that ultimately drives team performance. Team coaching as an intervention not only supports the new entrant but the team as a whole.
My experience of team coaching also shows me that when a team develops towards high performance those disruptive, toxic leaders that have been tolerated in the past are no longer accepted.
Part of the role of an executive coach is to speak truth to power. What is the truth apart from own experience of the leader? Truth is also present in the form of feedback if used. One of the clues to potential derailment is the inability to take action on feedback. Most of my executive engagements, and ALL of them involving a risk of derailment involve taking feedback from key stakeholders. Helping the leader accept this feedback and take action is a critical role for the executive coach. Coaches in general don’t teach, but this is one exception where teaching the leader to actively seek input from stakeholders and take action is a critical role for the executive coach.
I’m convinced that organisations can take the steps to avoiding and preventing leadership derailment if it gets high enough on the right agendas. It takes work and courage but the result is increased productivity, engagement and profit. The secret is to be on the front foot, actively searching for derailers because they are lurking there. By adapting recruitment and using psychometrics more, alongside engaging coaches much earlier companies can not only safeguard themselves from damage, they improve their chances of a more successful future.