Chapter 9

Getting Results: Our Journey to Turn Leadership
Competencies into Outcomes

Dave Ulrich and Norm Smallwood

In This Chapter

• How to turn leadership competencies into results by considering the “so that” aspect.
• How leaders define and accomplish four specific results—related to employee competence, commitment, contribution; to organization capabilities that help deliver strategy; to customer share through leadership brand; and to investor confidence through intangibles.
• What leaders can and should know and do to make results happen—the leadership code.

 

In the thicket of works on leadership, we too often overlook an obvious fact: Leaders must deliver results. All the emotional intelligence, judgment, empathy, vision, or ability to learn does not matter much if leaders cannot deliver results. For the last 12 years, we have been working to define more clearly the results leaders should deliver to employees, organizations, customers, and investors. When these results are clearly defined, then we can identify the knowledge and skills leaders must demonstrate to make results happen. This chapter reviews our journey to turn leadership competencies into meaningful outcomes. If you Google the words “leader” and “leadership,” there are more than 420 million hits. That’s an awful lot of information. Clearly, much has been written about leaders and leadership. In the last decade, we have addressed the issue of how leaders make an impact by contributing to this huge volume of work with four books and many articles. In this chapter, we review this work and synthesize how we believe we’ve contributed a unique perspective with respect to four ideas:

1. Leadership is about more than individual, psychological competencies; it’s also about delivering results. An effective leadership formula is leadership = attributes 2 results (Ulrich, Zenger, and Smallwood 1999).
2. Leaders must focus outside the firm on investors and customers as well as inside because results are tied to multiple stakeholders both inside and outside the organization. When this is done well, greater market value occurs (Ulrich and Smallwood 2003).
3. Individual leaders matter, but leadership matters more. It’s critical to pay attention to leadership as an organization capability, not just to leaders as individuals. When this capability ensures the desired customer experience, both customers and investors are served (Ulrich and Smallwood 2004, 2007).
4. There are two kinds of individual leader competencies; one is a set of fundamental competencies, the leadership code; and the other is a set of unique competencies that relate to how leaders connect employees with customers, the differentiators (Ulrich and Smallwood 2008).

Let’s review the evolution of these ideas.

Results-Based Leadership: The Kickoff

In the late 1990s, we had a simple insight: Much of the practice of leadership was focused on individual, psychological competencies. Practically every book we could find then, and to a great extent now, was aimed at individual, leader competency development (what we called the attributes of leaders). Popular examples include

• seven habits of highly effective people
• authenticity
• leadership secrets of . . . Attila the Hun, Thomas Jefferson, Buddha, Santa Claus, and so on
• emotional intelligence
• the extraordinary leader
• and so on.

In seminars, we frequently ask “What makes an effective leader?” The response is often the same: setting a vision, having integrity, communicating, being bold, making things happen, and other personal attributes. Frequently, leadership development experiences are organized with a day on each attribute.

We proposed that this approach was half right. Leaders do need to have effective attributes, but leadership is also about getting results. So in our book Results-Based Leadership (Ulrich, Zenger, and Smallwood 1999), we explored four results that leaders need to deliver:

• Investor-leaders must build investor confidence in the future as seen in intangible value.
• Organization-leaders must build sustainable capabilities that shape an organization’s identity.
• Customer-leaders must ensure customer delight as seen in share of customers.
• Employee-leaders must increase employee competence and commitment as evidenced in productivity and retention.

It was at this time we realized the importance of the relationship between attributes and results. Neither alone is enough; it’s the virtuous cycle between them that makes all the difference. We connect attributes and results with so that and because of (figure 9-1). One simple application is that when a leader receives 360-degree feedback about his or her individual competencies, the leader must ponder the “so that” query: I must improve this competency “so that” I can deliver a particular result to one of my stakeholders. Alternatively, another leader delivers results and should consider the “because of” rationale: I delivered this result “because of” this competency I have (or lack).

Figure 9-1 has guided the last 10 years of our writing and applications for leadership. To turn this simple idea into a tool, have participants think of several leaders. For convenience, we’ll pick a few Democratic presidents—Jimmy Carter, Bill Clinton, and Barack Obama. On a scale of 1 to 10 (1 is low and 10 is high), rate each leader on attributes and results. Most will score Clinton and Carter exactly the opposite—Clinton high on results and Carter high on attributes, giving them both a similar score. Obama tends to score high on both.

Let’s quickly overview each of four results, and then show how we have explored each of them in the last decade:

• Investor results: What happens inside the organization also affects investor confidence for the future. Investors invest based on industry favorableness, firm performance, and the quality of leadership and organization. We believe that the leadership and organization dimension is often the most difficult to specify, but also one that may hold a key to a firm’s overall market value.
• Organization results: Organization theory has shifted the focus from structure, shape, and morphology to capabilities. Capabilities are the DNA of companies and determine how things are accomplished. Sample capabilities include speed of change, learning, collaboration, innovation, service, efficiency, and culture or shared mindset. These capabilities become the key to sustained strategy execution, the deliverables of human resources (HR), and the core identity of the organization.
• Customer results: Ultimately, what happens inside an organization needs to deliver value to customers outside the organization. The tag line being “the employer of choice” makes more sense if we are the employer of choice of employees our customers would choose. Using customer criteria as the filter for internal management actions validates those actions.
• Employee results: We have articulated a simple formula for employee results: competence x commitment x contribution. Leaders must enable employee results in all three areas. Employee competence means that the individual has the skills to do the job. Commitment or engagement is about investing discretionary energy to do what it takes to get things done. Contribution is about finding meaning in work.

Investor Results: Why the Bottom Line Isn’t (or How Leaders Add Value)

We began with a very simple question: “Which of the four result areas are senior executives most interested in?” With a few notable exceptions, senior executives tend to be interested in what investors want because it aligns with the executives’ personal interests and because it sustains the longevity of the firm. So we began to read and ask questions about how market value was derived. Pretty soon we were reading the work of Baruch Lev, an economist at New York University who was the world’s expert on intangibles. At about this time, we felt as though our approach to leadership was going in a very different direction than what we knew our colleagues were studying, and we were excited about what we were learning.

Since 1990, financial results have played a decreasing role in market value, so that across industries, by 2008, market value was half earnings and the other half intangibles (figure 9-2). Intangibles are the factors that give investors confidence in the future of your company versus other competitors in the same industry. These intangibles determine why two companies in the same industry with similar earnings might have vastly different market values. We synthesized a number of studies on intangibles into an architecture for intangibles that explains how leaders increase confidence in future earnings (figure 9-3).

These intangibles define what leaders must do to build capabilities that investors value. We found that intangibles exist in both up and down markets:

• Keep our promises: The organization has a track record of delivering earnings in a consistent manner.
• Create a clear, compelling strategy: There is a shared direction with which we will win in our industry.
• Align core competencies: We have developed targeted core competencies that are consistent with our strategic direction.
• Enable organization capabilities: We have distinct social capabilities that allow us to win through our people and organization.

Organization Results: Capitalizing on Capabilities

About a year after the publication of How Leaders Build Value, we published an article, “Capitalizing on Capabilities” (Ulrich and Smallwood 2004), that defined, identified, and operationalized organization capabilities. Organization capabilities are the fourth level of the architecture for intangibles. We had a fondness for these issues because we realized that organization capabilities are the deliverables of strategic HR and because they have a direct line of sight to improving market value. Leaders at companies like GE, Singapore Airlines, P&G, and many others discovered how to increase investor confidence by building capabilities of leadership, talent, culture, and customer connection. In this work, we suggested that once leaders have defined strategy, they should create organization capabilities that enable and sustain that strategy. These capabilities outlast any individual leader, management event, or HR practice.

In particular, we wanted to examine internal organization capabilities from the outside/in. For example, HR at Intercontinental Hotels sponsored an “Organization (or intangibles) Audit,” in which they solicited feedback from not only employees and leaders but also franchisers, key customers, analysts, and institutional investors. The process of obtaining this organization-level feedback and determining how to act on it was new ground. The results spoke for themselves—Intercontinental fought off a hostile takeover and was able to convince analysts that it should not continue cost cutting but invest in customer service.

We continue to reflect on the capabilities organizations have required to achieve sustainable success. In our recent writing, we have added to our original list the capabilities of simplification, social responsibility, and managing risk. When capabilities integrate diverse HR practices and when they are linked to customer expectations, they build long-term sustainability.

Customer Results: The Leadership Brand

As we turned to the customer results, we focused on the importance of a brand that distinguishes a firm by making and acting on promises to customers. We liked the metaphor of brand because it is so clearly tied to business results. As a marketing concept, brand starts with the customers. Traditionally individual competencies for leadership are defined exclusively inside the company by interviewing high- versus low-performing leaders and then linking the identified competencies to strategy execution.

The more we started with firm brand and the identity of the firm in the mind of the customer then worked to identify leadership behaviors consistent with that external brand, the more we were sure that we had struck gold. We captured our thinking with two conceptual shifts:

1. individual (focus on the leader as a person) versus organizational (focus on leadership as a capability)
2. inside the firm (focus on what happens inside the person or the firm) versus outside the firm (focus on customer and investor expectations.)

These two shifts are shown in figure 9-4.

• Competent leaders: As we’ve pointed out before, this is where most companies spend their time and it’s an important quadrant, trying to determine the knowledge and skills of the individual leader:
• Leadership systems: Aligning selection, development, compensation, and retention systems so integrated and helpful to leaders.
• Celebrity leaders: Famous leaders who are known to customers and investors help by drawing attention to the firm—think Steve Jobs or Bill Gates.
• The leadership brand: Leaders at every level who are recognized both by employees as well as customers and investors for their ability to deliver results in a manner consistent with the firm’s brand identity. Confidence in the future drives the price; earnings multiply and a higher market value results.

 

The leadership brand is created when external customer expectations are translated into internal leadership behaviors so that leaders ensure that employees deliver the desired customer experience whenever they touch the customer. To do this, the firm must not only build good individual leaders but must also develop leadership as an organization capability, recognized inside the firm and also by the market (figure 9-5).

An early adopter of these ideas was a global financial company, which identified three elements describing its desired firm brand:

• effective collaboration
• prudent innovation
• disciplined execution.

This perspective guides HR practices and leadership development initiatives. HR practices such as selection, development, performance management, and retention must all be integrated with effective collaboration, prudent innovation, and disciplined execution. As action learning projects are identified for emerging leaders, they are also structured to deliver the firm brand elements:

• Effective collaboration: Each project will be sponsored by a member of the administration committee and staffed by two to three participants in the cohort. In this way, collaboration occurs among the people on the project and between the project team and senior executives. In addition, projects are identified that cross departments to ensure collaboration across organization boundaries.
• Prudent innovation: This cultural capability can be developed by scoping the project so that it delivers a level of impact on the numerator or the denominator, for example, a $150,000 impact.
• Disciplined execution: Tight time frames ensure disciplined execution. Therefore, each project must be completed in eight, 10, or 12 weeks. Each project must also be measured for impact and a short white paper written that describes what the project intended to accomplish and key learning by the team. This information is made available to future cohorts.

In our consulting practice and in our research with Hewitt on Top Companies for Leaders (published by Fortune every two years), we discovered that the leadership brand may be created through the six integrated steps shown in figure 9-6. We attempted to link customer expectations to leadership actions so that employees can see a line of sight from what they did to what customers expect.

Employee Results: Managing Talent and Abundance

We have written indirectly about employee results by helping frame the ways in which the HR function can deliver value (Ulrich and Smallwood 2005). When HR departments, practices, and professionals align their work with the goals of the company and with the preferences of customers, HR builds employee commitment.

We are currently working to further understand employee results in two ways. First, we have synthesized the key insights that general managers should know about talent. To do this, we have created a “talent menu” of 10 things that a general manager needs to understand to build better talent. These include defining, assessing, and investing in talent, as well as managing diversity, matching people and position, and measuring talent. Second, we are working to further clarify how people create meaning at work. Though employees may be competent (able to do their job) and committed (willing to work hard), when they also feel a sense of making a contribution or creating meaning, they are more productive. We call this “creating the abundant organization” and draw insights into this phenomenon from multiple disciplines like positive psychology, demographics, high-performing teams, commitment, and social responsibility; see The Why of Work (Ulrich and Ulrich 2010).

We clearly believe employee results matter and deserve attention, but we have focused on leadership for achieving investor, organization, and customer results.

The Leadership Code: Back to the Basics

During 2008, we realized that we really had not affected how the majority of firms pursued leadership development. Rather than fight this tide, we decided to do integrative and synthesizing research on attributes that would allow leadership practitioners to move on and join us in our quest to integrate attributes with results.

Faced with the incredible volume of information about leadership, we asked our colleague Kate Sweetman to join us and then turned to recognized experts in the field who had already spent years sifting through the evidence and developing their own theories. These thought leaders had each published a theory of leadership based on a long history of leadership research and empirical assessments of what makes effective leadership. Collectively, they have written more than 50 books on leadership and performed well over two million leadership 360-degree assessments. They are the “thought leaders” of this field. In our discussions with them, we focused on two simple questions whose answers had always been elusive:

• What percentage of effective leadership is basically the same?
• If there are common rules that all leaders must master, what are they?

We wanted to understand if an effective leader at, say, Wal-Mart in any ways resembles an effective leader at Virgin Airlines. Does an effective leader in a bootstrapping nongovernmental organization in any way resemble an effective leader at the famously bureaucratic United Nations? Does an effective leader in an emerging market resemble an effective leader in a mature market? Does an effective leader in organized crime in any way resemble an effective leader in organized religion? Does an effective leader in a Swiss pharmaceutical company share any underlying characteristics with an effective leader at Google?

To the first question, the experts’ answers varied as they estimated that somewhere in the range of 50 to 85 percent of leadership characteristics were shared across all effective leaders. The range is fairly broad, to be sure, but consistent. From the body of interviews we conducted, we concluded that 60 to 70 percent of leadership effectiveness would be contained in a leadership code—if we could crack it. Synthesizing the data, the interviews, and our own research and experience, a framework emerged that we simply call the Leadership Code.

In an effort to create a useful visual, we have mapped out two dimensions (time and focus) and placed what we are calling personal proficiency (self-management) at the center as an underlying support for the other two. Figure 9-7 synthesizes the Leadership Code and states the five rules of leadership that capture leadership DNA. These five rules can be readily applied to any group of leaders. Let’s briefly look at each.

Rule 1: Shape the future. This rule is embodied in the strategist dimension of the leader. Strategists answer the question “Where are we going?” and make sure that those around them understand the direction as well. They not only envision but also can create a future. They figure out where the organization needs to go to succeed, they test these ideas pragmatically against current resources (money, people, organizational capabilities), and they work with others to figure out how to get from the present to the desired future. Strategists have a point of view about the future and are able to position their organization to create and respond to that future. The rules for strategists are about creating, defining, and delivering principles of what can be.

Rule 2: Make things happen. Turn what you know into what you do. The executor dimension of the leader focuses on the question “How will we make sure we get to where we are going?” Executors translate strategy into action. Executors understand how to make change happy, to assign accountability, to know which key decisions to make and which to delegate, and to make sure that teams work well together. They keep promises to multiple stakeholders. Executors make things happen, and they put the systems in place for others to do the same. The rules for executors center on the disciplines for getting things done and the technical expertise to get the right things done right.

Rule 3: Engage today’s talent. Leaders who optimize talent today answer the question “Who goes with us on our business journey?” Talent managers know how to identify, build, and engage talent to get results now. Talent managers identify what skills are required, draw talent to their organizations, engage them, communicate extensively, and ensure that employees turn in their best efforts. Talent managers generate intense personal, professional, and organizational loyalty. The rules for talent managers center on resolutions that help people develop themselves for the good of the organization.

Rule 4: Build the next generation. Leaders who are human capital developers answer the question “Who stays and sustains the organization for the next generation?” Talent managers ensure shorter-term results through people, while human capital developers ensure that the organization has the longer-term competencies required for future strategic success. Just as good parents invest in helping their children succeed, human capital developers help future leaders become successful. These developers, throughout the organization, build a workforce plan focused on future talent, understand how to develop the future talent, and help employees see their future careers within the company. These developers ensure that the organization will outlive any single individual. And these developers instill rules that demonstrate a pledge to build the next generation of talent.

Rule 5: Invest in yourself. At the heart of the Leadership Code—literally and figuratively— is personal proficiency. Effective leaders cannot be reduced to what they know and do. Who they are as human beings has everything to do with how much they can accomplish with and through other people. Leaders are learners—from success, failure, assignments, books, classes, people, and life itself. They are passionate about their beliefs and interests, and they expend enormous personal energy and attention on whatever matters to them. Effective leaders inspire loyalty and goodwill in others because they themselves act with integrity and trust. Decisive and impassioned, they are capable of bold and courageous moves. Confident in their ability to deal with situations as they arise, they can tolerate ambiguity.

As we have worked with these five rules of leadership, we have learned enough to make some summary observations:

• All leaders must excel at personal proficiency. Without the foundation of trust and credibility, you cannot ask others to follow you. Though individuals may have different styles (introvert versus extrovert, intuitive versus sensing, and so on), any individual leader must be seen as having personal proficiency to engage followers. This is probably the toughest of the five domains to train, and some individuals are naturally more capable than others.
• Effective leaders have one towering strength. Most successful leaders have at least one of the other four roles in which they excel. Most are personally predisposed to one of the four areas. These are the signature strengths of leaders.
• All leaders must be at least average in their “weaker” leadership domains. It is possible to train someone to learn how to be strategic, execute, manage talent, and develop future talent. There are behaviors and skills that can be identified, developed, and mastered.
• The higher up the organization that the leader rises, the more he or she needs to develop excellence in more than one of the four domains.

It is very bold to say that these five domains synthesize and summarize leadership, but we continue to believe that we have captured the essence of the attributes that effective leaders need.

What’s Next?

After a decade, we are more confident than ever about our balanced formula for leadership: attributes x results. This simple formula allows us to organize the theory, research, and practice of leadership. A summary of our publications on leadership is given in figure 9-8.

We know there is more to do. As we look ahead, there are more stakeholders that have results for which leaders can build value. For example, we are interested in communities and how leaders can ensure social responsibility. We’re also interested in how investors, venture capitalists, private equity funds, sovereign wealth funds, and others determine quality of leadership during due diligence processes. Our initial research in this area and on global economic conditions suggests that current approaches are relatively primitive. This future work will continue to flesh out the mix of attributes and results that characterizes effective individual leaders and organization leadership capabilities.

As we have done this body of work, we have better defined the importance of both leaders as individuals and leadership as systems, of both attributes of effective leaders and results of effective leadership, and of leaders serving stakeholders both outside and inside their organizations. We have many ideas for continuing to build on this logic over the next decade and hope to use fewer words to have more impact.

Further Reading

Dave Ulrich and Norm Smallwood, “Building Your Leadership Brand,” Harvard Business Review, July 2007.

———, “Capitalizing Your Capabilities,” Harvard Business Review, June 2004.

———, Leadership Brand: Developing Customer-Focused Leaders to Drive Performance and Build

Lasting Value. Boston: Harvard Business Press, 2007.

———, The Leadership Code: Five Rules to Lead By. Boston: Harvard Business Press, 2008.

———, Why the Bottom Line Isn’t. New York: John Wiley & Sons, 2003.

Dave Ulrich and Wendy Ulrich, The Why of Work: How Great Leaders Build Abundant Organizations That Win. New York: McGraw-Hill, 2010.

Dave Ulrich, Jack Zenger, and Norm Smallwood, Results-Based Leadership. Boston: Harvard Business Press, 1999.

References

Ulrich, Dave, and Norm Smallwood. 2003. Why the Bottom Line Isn’t: How to Build Value Through People and Organization. New York: John Wiley & Sons.

———. 2004. Capitalizing On Capabilities. Harvard Business Review, June.

———. 2005. The HR Value Proposition. Boston: Harvard Business Press.

———. 2007. Leadership Brand: Developing Customer-Focused Leaders to Drive Performance and

Build Lasting Value. Boston: Harvard Business Press.

———. 2008. The Leadership Code: Five Rules to Lead By. Boston: Harvard Business Press.

Ulrich, Dave, and Wendy Ulrich. 2010. The Why of Work: How Great Leaders Build Abundant Organizations That Win. New York: McGraw-Hill.

Ulrich, Dave Jack Zenger, and Norm Smallwood. 1999.Results-Based Leadership. Boston: Harvard Business Press.

About the Authors

Dave Ulrich is as a professor of business at the University of Michigan and a partner in the RBL Group, a consulting firm focused on helping organizations and leaders deliver value. He studies how organizations build capabilities of speed, learning, collaboration, accountability, talent, and leadership by leveraging human resources. He has helped generate award-winning databases that assess alignment between strategies, human resource practices, and human resources competencies. He has published more than 100 articles and book chapters and 22 books. He has won numerous lifetime achievement awards and has consulted with more than half the Fortune 200 companies.

Norm Smallwood is a recognized authority on developing businesses and how their leaders can deliver results and increase value. His current research centers on increasing business value by building organization, strategic human resources, and leadership capabilities that have a measurable impact on market value. He is cofounder, with Dave Ulrich, of the RBL Group. He has coauthored six books and hundreds of articles, book chapters, and newspaper columns. For several years, Leadership Excellence has ranked him one of the Top 100 Global Voices in Leadership.