Having survived the worst recession of our lifetimes, it’s now time to prepare for the better times that are now emerging. As your company had to change its focus to cope with a bad economy, so too will you need to change course to take advantage of better business conditions. What is the primary requirement necessary to ensure growth and reap its benefits?

In general the answer is leadership. Tomorrow’s economy will undoubtedly differ from yesterday’s. Continuing to run your business like you did in the past will probably fail to achieve the growth commensurate with the budding economic upturn.

Even if well managed, many companies suffer from a lack of leadership. Management and leadership are different yet complementary, and both are vital to business success. A company must balance and connect the two carefully or fail to achieve its potential. Leaders innovate, managers execute. One without the other is of little value. In most cases, strong leadership combined with weak management is worse than the opposite. It does no good to innovate without execution.


Seven competencies

More specifically, company-level leadership consists of seven competencies in three broad categories. Consultants at McKinsey & Company define those skills as follows:

•Thought leadership

 Market insight – looking beyond current channels and customers

 Strategic orientation – defining action initiatives for growth

•People leadership

 Change leadership – advocating and implementing change

 Team leadership – creating and involving teams

 Collaboration – motivating employees and suppliers to work together

•Business leadership

 Customer impact – creating new values for the customer

 Results orientation – driving for and achieving high performance

What’s the correlation between leadership and company growth? To find out McKinsey studied the financial results of 47 companies alongside the performance evaluations of 5,600 of their executives across a range of industries. Their finding: high growth companies employed executives who scored high in these leadership competencies. No correlation existed between revenue growth and unexceptional leadership.

Importantly the study found that very few executives excelled across all seven leadership competencies. Only one percent of the executives in the study achieved scores of 6 or 7 out of a possible 7 in all seven competencies. A total of eleven percent scored 5 out of 7 in all seven classifications. More typically, an executive scored above average in a single competency.

Where the top executives as a team earned scores of 6 or 7 across the seven competencies, their companies also experienced strong revenue growth. Given the scarcity of broadly-skilled executives, companies should focus on cultivating competencies within their senior teams combined with selective hiring of new talent offering expertise in their missing competencies.

Which of these competencies are most critical? McKinsey’s analysis revealed that one competency drove the greatest gains in revenue growth: delivering customer impact. That competency was defined as understanding the customers’ evolving needs and providing the required value proposition. Companies staffed with a critical mass of executives scoring 6 or 7 in this competency consistently realized superior growth.


Innovation and execution

The importance of market insight and customer impact on growth does not mean that a company should minimize the contributions of the other competencies to success. Targeting the correct markets and developing offerings that met customer needs only sets the stage for sustainable growth. As noted earlier, innovation must be followed with execution. Other senior level executives skilled in change management, team building, and attaining operating results are a must in sustaining exceptional financial results over time.

It goes without saying that executives across the senior team must be aligned with the overall company strategy. The correct balance of competencies within the team is dependent on that strategy and its emphasis on current and new initiatives. New action plans that entail entering new channels or developing new product offerings requiring unfamiliar capabilities obviously impact organizational development.

McKinsey emphasized that the best performing companies completed regular talent assessments. The goal is to identify gaps between current competencies and those required to man new initiatives. Once done, that analysis forms the foundation for a staffing plan that details the necessary education, recruitment, hiring, succession planning, and compensation.

Remember this – leaders are typically made, not born. Yes, there are leaders who are naturally charismatic and inspirational. But most leaders are normal people who have or can develop a leadership persona. A training regime for your most capable employees must be part of your organizational development.

Bottom Line: Leadership matters. Business in every industry and sector is simply more competitive and volatile than ever. Tomorrow will not be like yesterday. You cannot stick to tradition without risking extinction. Assess your company’s leadership competencies against your growth plan. Adjust your staffing accordingly.

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