Q. What is the primary capability that organizations look for in leaders?

A. CEOs and organizations should always consider the “impact” – the capability of a leader to inflect business outcomes – a leader brings to the organization. Hence, companies have started realizing that having great leadership within the company does not simply depend on hiring great leaders from outside. A balanced leadership selection process is the one where internal candidates are at par with external prospects during the assessment process, thereby implying that success profile of a leader goes beyond past credibility and competencies.

While assessing a leader and predicting probability of future success, many only analyze past records and objective competencies. While competency assessments are important, two very important aspects actually determine the difference between successful and unsuccessful leaders — culture fit and network fit. While they are difficult to assess and measure, a company can greatly increase its chances of hiring the right leaders.

Q. What is the importance of culture and network fit?

A. Recent events across local and global corporations reveal that highly successful and prolific leaders have failed to make an impact in some of the most organized and successful companies in the world. If leadership decisions have failed in companies with established people processes, the cause of such failure is deep-rooted in the culture. An external leader may come from successful companies with remarkably different growth approaches, work cultures and leadership precedence. Such leaders face resistance from their teams or other leaders because they differ in their approach and vision. As a result, they are unable to adapt and ultimately end up unsuccessful.

A culturally-fit leader, on the other hand, is the one whose management style and vision is aligned with others in the company. A culturally-fit leader takes less time to adapt and faces much lesser change resistance. It is also easy for such a leader to convey his/her vision to the team and the organization and make people believe in that vision.

Besides assessing if a leader is culturally fit, it is also important for an organization to assess the effectiveness of the leader’s network fit. In the current operating environment with constrained budgets and greater output expectations, effective leadership depends greatly on how a leader is able to leverage connections to create fruitful outcomes. Again the strength of a leader’s external network may not be the only factor in determining the probability of success. Network fit refers to a leader’s capability to build strong and credible networks within and outside the organization. A leader’s ability to find solutions from within or outside greatly influences the speed of decision-making.

Q. What is the role of an external advisor?

A. Having a trusted advisor helps an organization greatly increase its chances of hiring good leaders. It is very important for an organization to think creatively during a succession planning or leadership development process. It is important to look beyond the organization and the leadership consultant while building a succession pipeline. For example, a great leader may come from a different functional role or even a different industry. A trusted external advisor helps an organization think beyond narrow definitions of leadership and success profiles.

Q. Is there any variance in the availability of leaders in various industries?

A. Some industries have a natural advantage when it comes to finding suitable leaders with the right cultural and network fit. Companies in those industries with globalised human resources and clients have an inherent advantage over those that do not. For example, in the technology services industry, most companies have multi-geography operations and have a globalized client base. In addition, owing to the nature of the business, leaders have a natural predisposition for networking. Thus, it may be easier to find leaders externally in the technology services industry with the right cultural and network fit compared to less globalised industries.

Q. What are the leadership challenges among PSUs in India and how are they coping with them?

A. When the senior leadership line starts retiring, it creates a sense of urgency within the organization to put together a leadership and succession strategy. PSUs traditionally have been closely guarded and leaders never had any real need for cultural adaptation or expand their networks. The senior line of leadership in PSUs is due to retire across the next three to five years and this has created a sense of urgency among them to build their leadership pipeline. They, however realize that in order to keep up with global competition, it is important for them to identify leaders who are capable of handling global perspectives.

A positive trend seen among PSUs in India is that they are open to the idea of hiring external advisors and consultants. This will potentially give them an edge over the others in the competition for talent.

Q. What separates an organization with great leaders from an average one?

A. Talent is ultimately a CEO agenda and the vision of a CEO separates organizations with great leaders from the average ones. A smart CEO is the one who can sense trouble and prepare the organization to shield itself against market fluctuations and aligns the company’s leadership strategy to such conditions. Precedence has shown that a smart CEO is able to hire leaders at a 25 per cent discount compared to the rest of the market. In a global organization, with several leaders spread across various locations, the resulting cost savings can be substantial.

Another sign of a smart organization is one that has a talent segmentation plan. An organization should be able to differentiate, at any point of time, between talent pools within the organization, which are “must have” and “must keep” from the rest. It is also important for an organization to keep an eye on the evolution of the customer market because segments tend to shift very quickly and hence, talent management needs to adjust accordingly.

In the current economic conditions, cost of monetary capital is increasing. Profitable organizations are able to offset the increasing cost of monetary capital with a proportionate decrease in human capital costs. Decrease in human capital costs does not imply retrenchments all the time. Smart organizations are able to affect an overall decrease in per employee cost without any decrease in motivation or engagement.

Eric Olson is Global Managing Partner, Leadership Consulting, Heidrick & Struggles