Leadership pipeline: Stepping stone to startup success

Can failures create leaders?

The kind who challenge the norm, who experiment. Who innovate and adapt. Leaders who learn? 

It did for Qualcomm. The wireless technology firm uses an unconventional means to nurture leaders by fabling the failures of its employees. For them, each blunder is not a missed opportunity but an insightful teacher. So why not share the lessons with all?  

Through a company link on the firm’s website, the employees share stories of slips and misses with the learning and development team, which circulates them along with lessons with other employees. This has built a community of coworkers (co-learners) and nurtured risk-taking: ingredients to make a leader.  

Thanks to its battery of agile leaders who believe in taking “meaningful risks”, Qualcomm could invent the underlying technologies that made 5G work and is now researching 6G.  

Most mature companies encourage risk-taking to grow leadership capability, suggests a Deloitte study. Further, cultures that enable it are five times more likely to anticipate change and respond to it effectively. They are seven times more likely to innovate than others.  

In fact, Andrea Derler in ‘High Impact Leadership’ suggests that assessing and taking appropriate risks is a personality trait associated with leadership potential.  

Classroom training? That’s too mainstream 

Such norm-defying techniques to create leaders, can they help startups, and small and medium enterprises weather the looming uncertainty? The COVID-19 pandemic has upended lives and the Ukraine war choked global supply chains. Moreover, Industry 4.0 begs an approach that goes beyond classroom teaching to create leaders.  

But more pressingly, the leadership conundrum is unnerving startups founders as they scale businesses. No more can they remain on the frontline fighting every battle. They must delegate tasks, identify leaders and assume the function of a planner – they must prepare for the future.  

Although sales may seem to be the greatest growth challenge for a growing venture, organizational issues often eclipse it, the Harvard Business Review Entrepreneur’s Handbook points out.  

“You and your startup team must periodically reinvent your organization to cope with changing circumstances…change your mode of working from doing things yourselves to doing things through other people”. A robust leadership pipeline is the answer.   

But how to pick the ideal candidate to groom as a leader? Do technical skills matter more than empathy? Who to trust? Can David, the diligent employee, also be David, the inspiring leader? Is situational learning better than formal training? 

In the next five to 10 years, a majority of startups will engage in leadership development programs, suggests research in Journal of Business Venturing Insights. 

To remain sustainable, capabilities of the firm have to be developed, suggests Amar Bhidé of the Fletcher School at Tufts University.   

These can include:  

• More qualified personnel   
• Increased specialization of functions  
• Decentralized decision making  
• Systems to cope with a larger and more complex organization 
• Orientation of employees towards a common long-term purpose. 

Yet leadership development is still given a short shrift. Only a third of 14,000 leaders and HRs felt their organizations’ leadership development programs were highly effective, a 2011 study found.  

What’s more? Deloitte’s 2016 Human Capital Trends study has shown that 30% organizations had weak or very weak leadership pipelines and 90% percent viewed this as a critical business challenge. 

The north star(s) you need 

As the guiding light, entrepreneurial leadership is able to foster the performance of IT small and medium enterprises firms via critically organizational factors like team creativity, dynamic capabilities and competitive advantage, according to a study in Heliyon, a peer-reviewed journal.  

There are few traits in a leader that attract followers, according to Ben Horowitz in ‘The Hard Thing About Hard Things’. Do you or your managers have them? 

• The ability to articulate the vision 

 Steve job best exemplified this trait, writes Horowitz, who is a technology entrepreneur-turned-venture capitalist. At Apple, Steve offered a compelling vision to employees, made them stay and work relentlessly despite the company being weeks away from bankruptcy.  

• The right kind of ambition 

 Bill Campbell, a businessman who’d coached Jobs and Jef Bezos among others, demonstrated this. He created an environment where employees felt he cared more about them than about himself. And he actually did, Horowitz believes.  

• The ability to achieve the vision 

Will I follow them into the jungle with no map forward or back and trust that they will get me out of there? asks Horowitz. Former Intel CEO Andrew Grove, despite reservations of many employees, pivoted the memory business firm to the microprocessor segment. This became possible as the company trusted him and his ability to realize his vision.  

What do leaders think the most important qualities are? The Society for Human Resource Management has listed the most important traits based on the information gathered from more than 3,00,000 business leaders by consultants Jack Zenger and Joseph Folkman:  

• Inspires and motivates others 
• Displays high integrity and honesty 
• Solves problems and analyzes issues 
• Drives for results 
• Communicates powerfully and prolifically 
• Builds relationships
• Displays technical or professional expertise 
• Displays a strategic perspective 
• Develops others Innovates 

More crucially, research by psychologist Daniel Goleman suggests that most effective leaders are similar in having a high degree of emotional intelligence. However, this doesn’t discount the role of IQ and technical skills which matter, but majorly as entry-level requirements for executive posts.  

Change style as you grow 

What’s the best way to manage a startup? None! according to the Harvard Business Review’s Entrepreneur’s Handbook.  

It’s best to pick the style(s) that suits your organization at a given point in time. Michael Roberts, professor at Harvard Business School, has identified four different approaches to leading a startup faced with rapid growth:  

1. Managing content 

This usually suits young, small and simple firms. It involves the manager on the frontlines, directly involved in tasks themselves or directly supervising others. Subordinates are incapable of making decisions independently. With expansion of operations and challenges, a transition in leadership style may be needed. Roberts cautions that a failure to recognize the need for a transition may cause a business to fail.  

2. Managing behaviors 

 The leader here specifies how employees should behave and codifies this. They may employ rules, procedures and auditing systems to drive results. And employees work independently within a prescribed framework. For example, at a KFC restaurant, each employee is bound by a set of procedures.  

3. Managing Results 

The leader of a large, complex organization may outline results for employees to achieve. She may focus on upskilling and motivating workers to reach their goals.  

4. Managing context 

Leaders here focus on results but create an enabling culture or environment for their achievement. The mantra is – the right people in the right environment with the right mission will succeed. This involves leadership by example and wide communication.  

Roberts points out that as the volume and scope of work grows, the leader has less time for hands-on involvement. “Be alert to your current needs, and understand how they are changing,” the handbook says. 

But what is the ideal roadmap for potential management? Based on a global study, Claudio Fernández-Aráoz, Boris Groysberg and Nitin Nohria, associated with Harvard Business School, suggest three sets of activities: 

1. Establishing clear strategic priorities. 
2.  Careful selection of high-potential candidates—and communicating who they are to others in the organization. 
3. Management of talent including developing, rewarding and retaining them.  

Pick buds not flowers  

Just 15% of firms in North America and Asia felt they had enough qualified successors for key positions, claims research in Harvard Business Review.  

In addition, the Boston Consulting Group has revealed 56% of executives see critical gaps in their ability to fill senior managerial roles in the future. This points to a lack of efficient leadership development systems.  

Picking the right – and the courageous – candidate is crucial but challenging. B.S. Cooper, L.D. Fusarelli and V.A. Carella in research point out that the public perception of organizational leadership positions is that of a daunting job that just a few individuals desire to pursue the challenge.  

Perhaps, you need to redefine how you identify talent.  

Fernández-Aráoz  believes as businesses become more volatile and complex, organizations must transition from identifying talent on experience, knowledge and competencies to spotting it on potential.  

“The question now is not whether people have the right skills; it’s whether they have the potential to learn new ones,” he writes.  

‘Potential’ is a person’s ability to grow and to handle responsibilities of greater scale and scope, describes Harvard Business Review.  

In order to assess executive potential, Egon Zehnder international, a management consultancy firm, has developed a model. There are multiple indicators of potential:  

• Motives: These generally don’t change and individuals are not always conscious about them. A Harvard research has illustrated that the motivation for ‘socialized influence’ (having a positive impact on others for the good of the larger organization) signifies potential.  
• Curiosity: Eagerness to learn new knowledge and experiences and seek feedback, and adjust behavior accordingly. 
• Insight: Making sense of a variety of information, draw unique linkages and suggest creative ideas.  

• Engagement: Employing both logic and emotion to persuade people and connect with them. 
• Determination: Going forward relentlessly despite challenges.  

Further, it’s essential to identify potential candidates based on their alignment with the company tradition, vision, strategy and story. This can be built into the employees at an early stage itself by involving them in strategic deliberations (until now a domain of senior leaders only), as suggested in the book ‘Open Strategy’. 

Locate ‘opinion leaders’ 

Locating ‘opinion leaders’ is also important. They are the key to everyone else within the organization, and can help influence behaviors. “Listen to their concerns. Build trust with them. Be open to their ideas. Rely on them to share your ideas, and you’ll gain a source of influence unlike any other.” (Influencer: The power to Change Anything) 

To make the first cut of candidates, you can rely on annual appraisals, supplemented by a subjective view of candidates, advise Fernández-Aráoz et al.  

Next, you must assess potential, but personality tests are not always the best for this owing to low validity. Rather, you may use references, behavioral interviews and external assessments.  

The paper in Journal of Business Venturing Insights suggests small and medium enterprises will now aim to develop the leadership abilities of all employees, not only budding leaders. Yet identifying potential candidates can help hand over the helm to the right people in the future.  

But be wary of nurturing ‘laissez-faire leaders’, first described in 1938 by Kurt Lewin, Ronald Lippitt and Ralph White in Journal of Social Psychology. Such leaders are uninvolved with their followers and make no policies or group-related decisions. “Instead, group members are responsible for all goals, decisions, and problem-solving.” This leadership style works only under very narrow circumstances, the authors claim.  

If you’re young and an entrepreneur, the Young Entrepreneur Council, an association of entrepreneurs, has listed key traits to look for in potential leaders in interviews with Forbes: 

• Independent development  
• Responsibility 
• Bringing solutions to the Conversation 
• Keeping cool in a tough situation 
• Active listening 
• Initiative 
• Introspection 
• Going beyond what is necessary 

The Google Way: spot a leader in 5 minutes 

As part of Project Oxygen, which began in 2008, Google has identified 10 behaviors that are common to the best managers.  And based on a few questions to team members, the firm can identify efficient leaders. Members are asked to answer questions on a scale of 1 to 5.  

The 13 questions, as reported by Inc., include: My manager does not “micromanage”, they show consideration for me as a person, they have had a meaningful discussion with me about career development in the past six months and their actions show that they value the perspective I bring to the team, even if it is different from their own. 

Just one question asks the member to rate the technical expertise of the manager. “Communicating, delegating, creating a sense of autonomy and purpose…that matters a lot more for Google,” Inc says.  

A pipeline to your dream team 

Potential is situational, and programs that manage it should be aligned with a company’s strategy, believes Fernández-Aráoz.  

An approach that considers the different requirements at distinct leadership levels is viable to build your ‘leadership pipelines’, according to Ram Charan, Stephen Drotter and Jim Noel in ‘The Leadership Pipeline: How to Build the Leadership Powered Company’. 

Building a leadership pipeline can ensure a steady supply of skilled leaders at various levels of the organization.  

The pipeline, described by Charan et al, is bent in different places which represent changes in the organizational position depending on the hierarchy. Each change demands a corresponding change in skills, time applications and work values.  

“The challenge for organizations is to make sure that people in leadership positions are assigned to the level appropriate to their skills, time applications, and values,” write Charan et al.  

Unfortunately, in some companies, around 50% of leaders are operating far below their assigned layer. This clogs the pipeline.  

For small businesses, they have imagined a four layered model. You can plot different leadership roles in your company along these passages:  

1. Managing self 
2. Managing others – the leader here must learn skills such as coaching, planning and rewarding employees. Otherwise, workers will quit or perform poorly. 
3. Functional manager – As the organization scales, the leader must appoint other managers and make the enterprise integrated. “She must make sure the total effort is profitable and sustainable.” 
4. Business Manager  

In a study, the authors found that the companies that failed to handle the increased size were led by those reluctant to change their working styles. It was difficult for them “to give up their hands-on involvement or trust a new layer of management,” the authors say. Thus, they were unable to make a leadership pipeline passage. 

Keep it running 

So, how do you fill the leadership pipeline? Charan et al suggest a stepwise model for this:  

1. As you appoint leaders to new passages, performance gaps are created as they don’t possess the required skills, time applications and values for that level. 
2. Here, to close the gap, you must train and coach individuals until they achieve the full performance level. 
3. After closing the gap, reward performers appropriately and test them to see whether they can handle additional tasks and demonstrate excess capacity. 
4. You can then move the exceptional performers to the next leadership level, where again they face a performance gap, recreating the situation in step 1. So, you train them again and the cycle continues.  

The experts caution that moving full performers too far or too fast can be disastrous. “It turns a full performer into something less valuable and it is almost impossible to reverse the process,” they write. 

Have you already set up your pipeline? Here are ways to improve the flow in it:  

• Start with the Boss and not the subordinate: Bosses must ask themselves how they could change their approach in a bid to boost performance. They may be the reason for problems such as the failure to fix broken equipment, poor job definition, poor communication, inadequate resources, lack of performance standards and favoritism. Others include poor job design, broken or nonexistent processes and misallocation of power or authority.  

• Search for evidence of an appropriate values shift: Mere verbalization of new values is not sufficient. In order to better gauge whether budding leaders have shifted their values, look for evidence in the following ways:  

Conduct “lessons learnt” discussions after both successes and failures 

Examine managers’ calendars 

Listen carefully to how managers evaluate subordinates 

Look at plans managers submit from a values standpoint 

• Use action learning as a primary vehicle for development: General Electric, Arthur Andersen, and Johnson & Johnson have used this method. It involves “setting up teams of leaders who are all on the same leadership level and assigning them a highly challenging task related to a significant business objective”. These may prompt a shift in time applications, values and development of new skills by creating a “parallel world”, thereby closing performance gaps.  

• Address inappropriate performance immediately: Charan et al claim the pipelines clog when performance gaps are allowed to exist for a long time, and no one takes leadership development seriously as a result.  

Enrich your pond for better fish  

Experiential learning and developmental relationships will be the pivotal startup learning development methods, says the research in Journal of Business Venturing Insights. Further, such learning will take place in a largely informal set up. Digital experiential learning programs, such as serious games or simulations, will be used by most of them.  

Up until now, companies have focused primarily on training the ‘fish’— the individual leader or high-potential candidate—but have neglected the ‘pond’—the company culture and context—in which the fish swims, points out the Deloitte report  – ‘Better pond, bigger fish’ 

The report suggests that leadership development happens most effectively in a business context, not just in training sessions. This involves embedding development activities in leaders’ own business environments.  

“Leaders tend to learn best with other leaders and from other leaders—inside or outside of their organization,” the authors believe.  

Compared to companies that rely purely on leadership programs, those that have leveraged an ecosystem approach had 37 % higher revenue per employee and 9 % higher gross profit margins. They are also three times more likely to be market leaders.  

Five practices that can help you create the leadership development ecosystem are:  

1. Communicating the leadership profile 

You must at all leadership levels in the organization communicate what capabilities, behaviors and attributes leaders should display. The study has found that companies that effectively communicate their leadership profiles were five times more likely to excel at identifying and developing leaders. Along with HRs, business leaders must help in the communication.  

For instance, IBM recognizes 50 “leader champions” every year. They demonstrate, coach on and advocate for what leadership at the organization is about.  

 2. Fostering a climate of risk-taking 

As illustrated in the beginning, this is one of the ways how Qualcomm nurtures leadership. In fact, advertising firm Grey has instituted the “Heroic Failure Award” which is given to someone involved in a blunder which has lessons for everyone, Fast Company has reported.

3. Using knowledge-sharing for leader development 

The authors found companies that engaged in effective knowledge sharing were four times more likely to improve processes to increase efficiency.  

Telling workers about the organization history can instill a “sense of purpose” among them and help in defining leadership along those lines.  

An executive of Meta, the parent company of Facebook, at a summit said the organizational hierarchy was flat and everyone learnt from one another.  

“What we like to do is see people move around, across, up, down, all over the place. Career development is like a jungle gym. Our feeling is ‘I can learn from everyone around me’. She adds that everyone is expected to be a leader, to be able to lead within their space. “Becoming a manager at Facebook is not a promotion. It’s a choice.” 

 4. Exposing leaders to other leaders, new contexts and novel challenges

The study cites the example of Xerox which exposes leaders from various life stages and generations to one another. This helps in creating a learning environment and aligning strategies. To gain external exposure, ‘leadership consortiums’ are a good means.  

5. Creating strong ties between HR and business leaders 

Around 41% of business leaders said they were mainly responsible for leadership development, but only 16% of HRs agreed with this, says the study. This is despite organizations having a strong collaboration between the two functions being six times more likely to excel at identifying and developing leaders.  

Such organizations have HRs as strategic partners of business leaders. While HRs can use their expertise in leadership development, leaders can model and apply leadership learning. 

A leader’s 6th sense: organizational intelligence 

Even if high potentials are groomed for leadership positions, they require organizational intelligence, believe Nelson Phillips and George S. Yip who teach at Imperial College London.  

According to them, ‘organizational quotient’ has five competencies: fostering an ethos, sending messages that reinforce strategy, rebelling from the top, using “action strategy” and staging moments of theater.  

In order to develop OQ, Phillips and Yip advise three steps:  

• Embrace bureaucracy rather than rail against it 

• Develop an organizational persona for yourself so coworkers treat and interact with you a certain way 
• Follow the small rules so that you can break the big ones

Best leaders are real – and kind 

 The first responsibility of a leader is to define reality. The last is to say thank you. In between the two, the leader must become a servant and a debtor. 

 -Max De Pree in ‘Leadership is an Art’ 

In essence, you must create ‘authentic leaders’ as suggested by Bill George in  ‘Authentic Leadership: Rediscovering the Secrets to Creating Lasting Value’. And there is also the need for ‘digital leadership’ which can drive digital transformation of firms as around 90% of executives believe their companies are not going the digital way fast enough, shows Deloitte’s research with MIT. 

Authentic leadership is more about discovering yourself, your true potential. As  

Young & Rubicam chairman and CEO Ann Fudge told Bill George, Peter Sims, Andrew N. McLean and Diana Mayer in a study: “All of us have the spark of leadership in us… The challenge is to understand ourselves well enough to discover where we can use our leadership gifts to service others.” 

 Inspiration is within you  

Authentic leaders look within, derive inspiration from their own life stories to create impact and lend meaning to their lives. 

For instance, Horowitz, an achiever in school, credits his being part of the school football team of not-so-studious members for his ability to view the world through different prisms, to separate facts from perception. Later as an entrepreneur, he could always look at alternative scenarios when ‘facts’ seemed to dictate an outcome. This helped keep the hope alive among a worried workforce.   

This can also be alternatively termed ‘servant leadership’, first conceptualized by Robert Greenleaf. He describes such leaders as – “it begins with the natural feeling that one wants to serve, to serve first. Then conscious choice brings one to aspire to lead. The difference manifests itself in the care taken by the servant – first to make sure that other people’s highest priority needs are being served”.  

Such leaders are also self-aware, which makes them humane and willing to be vulnerable. Stanford Graduate School of Business’s Advisory Council holds self-awareness to be the most important capability for leaders to develop. Yet, denial can be a great obstacle in achieving this. “Authentic leaders realize that they have to be willing to listen to feedback – especially the kind they don’t want to hear,” say George et al.  

In addition, authentic leaders practice their values and principles. And often, leadership principles are derived from challenging situations when values are required to be put into practice. They also balance their extrinsic and intrinsic motivations. And have a support team by their side.  

But the most crucial aspect is their ability to create more leaders. “They know the key to a successful organization is having empowered leaders at all levels, including those who have no direct reports,” the authors write.  

Former Xerox CEO and chairperson Anne Mulcahy has demonstrated this by enabling a turnaround of the company, which had $18 billion in debt and was battling a falling share price.  

Although having no financial background, Anne was brought in to lead. “She bled for Xerox, and everyone knew it. Because of that, they were willing to go the extra mile for her,” the study says.  

She is what R Likert in The Human Organization: Its Management and Value describes as a ‘benevolent leader’ – appointed to make peace, restore morale and good relations and bring back the focus of the organization on its purpose. They also pick leaders the best.  

Owing to her credibility as an authentic leader and the relationships she had built in the company over 25 years, Anne pulled up her team and empowered them to lead. This helped Xerox avoid bankruptcy, restore its revenue growth. And the stock price tripled.  

Authentic leaders go beyond conventional rewards. To them, crossing the finish line together by empowering others and making the world a better place is the biggest trophy.  

But in the desire to be authentic, be careful not to shun traditions altogether. Eighteenth century British theorist of leadership Edmund Burke has said, “Traditions are the storehouse of the organization’s collective wisdom.” New leaders who don’t take out time to pick the essential traditions can destroy the positive aspects of an organization’s traditions.  

Thus, as Sun Tzu puts it: “When one treats people with benevolence, justice, and righteousness, and reposes confidence in them, the army will be united in mind and all will be happy to serve their leaders’.