Human Capital Early Warning Systems (Copy)
Satya Nadella
Ultimately, what any company does when it is successful is merely a lagging indicator of its existing culture.
― Satya Nadella
“We knew there would be some risks hiring him; now we have to do something about it. Do you think you can help?” A top executive was struggling, and company performance was showing warning signs. As coaches we both hate and love these assignments. There is challenge, immediacy, and the possibility to make things for owners, the executive, and employees.
The challenge with derailing executives is that once they start going off the rails, the pileup gets big, fast. Often the cleanup involves rebuilding trust—trust of the board, his/her team, and employees throughout the organization. Trust takes time to build but only moments to break. And, trust might include beliefs about the executive’s competence, goodwill for others or reliability.
Earlier intervention is better. An early warning system can help. We are often surprised that action takes a long time to start. This post is about early warning signs of derailment and what to do about it.
Everyone loves the idea of a leading indicator. We look at bond-yields and think about the stock market. Often, but not always, we can gauge the future stock market performance from yield.
We have leading indicators of human capital. As consultants and coaches, we find these indicators are often overlooked and the early opportunities to manage risks are lost. Ultimately, the future of a company can be understood by the executives, executive team and culture of a company.
Executives tend to derail in two ways: operationally or interpersonally. Operational derailing happens when the executive operates either too much within or too outside the lines of nitty gritty involvement and micro-managing. Great executives know the details of their organization but empower others to make decisions and direct their functions. Watch out for:
Consistent use of the pronoun I (vs. we)
Direct reports that are not willing or able to make independent decisions
Executives that are surprised by events that should have been predicted
Executives that cannot clearly describe the processes and operations of the organization
Interpersonal derailing happens when executives have a negative impact on others: when the executive withdraws from challenge or conflict, dominates/leaves no space for other’s contribution, or when the executive fails to take an independent stand with decisions or values. Said another way, look for these red-flags, which are actually interpersonal defense mechanism:
Withdrawal, when executives are not present to make decisions or give confidence that matters are being attended to
Dominance, when executives become the center of things and do not make space for others to contribute
Alliances, when executives are too concerned with board or other perceptions to take a stand
The clues are abundant. It is just that we often do not pay attention. Many firms do pre-hire assessments and do not provide feedback to the newly hired executive. Just as newly merged or acquired firms develop an operational plan within the first 100 days of acquisition, we encourage developing a talent or human capital plan. Several private equity firms we work with are starting to do this as a matter of good-business practice. A well-done executive assessment is a very good working document to support executive success.
Having great top leaders makes everything work better. But, human capital is not just important to the top executive. Talent across the organization matters; top-level team work and key organization functions provide opportunities and challenges to company success. In a future blog post we will address early warning systems for executive team performance and functional company performance.
― CHARLEY MORROW