We heard recently from C-Suite leaders in many industry segments and tech companies, in particular, about a challenge. One of their greatest barriers to growth is a perceived or real lack of leadership talent.

Technology demands exceptional leaders like no other business sector. That is why investment into accurate and early career identification of leadership talent is at the top of every tech executive’s agenda. In fact, tal ent scarcity is the chief limiting factor in tech growth.  

The tech talent shortage landed as the industry’s top emerging risk in Gartner’s 2019 Emerging Risks Survey. In 2020, despite an increase in job applicants, it’s taking employers an average of 69 days to fill a tech role, which is 70% longer than the average 41 days needed to fill a non-tech role, according to iCIMS, a recruitment software company.

How many of these statements have you made or heard recently?

  • We are placing people in supervisory or managerial roles without an understanding of their actual capacity for leadership.
  • We are struggling to know who our best future leaders are due to geographically dispersed people and operations.
  • There are few viable internal candidates for important leadership openings.
  • We are not confident we can identify the skillsets our managers and leaders will need to thrive in this new world of work.
  • We don’t have any real insight into the organizations’ leadership bench, especially at the lower levels.

Tech Demands Exceptional Leadership

Amid the Fourth Industrial Revolution, the tech industry is on the cusp of changing our lives in radical ways. Rapid advances in areas like therapeutics, genomics, agriculture, healthcare, nutrition, biofuels, and more provide novel solutions to complex problems and increase sustainability across all aspects of human life. It requires higher-level human capabilities to operate in this complex space as we accelerate toward breakthroughs enabled by sophisticated new technologies.

As Deanna Petersen, Chief Business Officer of AVROBIO, shared, “Biotech is an industry that … requires people who are willing to take risks, conquer new science, and have endurance for the many years it takes to develop a new medicine. In addition, professionals who thrive in biotech have the know-how, confidence, and guts to tackle business goals that are covered in uncertainty and complexity. These are ‘hardcore’ leadership traits, and they are highly valued in biotech companies at all levels of job responsibilities.”

This truth extends beyond biotech. We hear these statements frequently — “professionals who thrive have the know-how, confidence, and guts to tackle goals shrouded in uncertainty and complexity.” The pandemic, social unrest, and other global challenges we’ve seen in 2020 necessitate two additional traits – resilience and adaptability. These crises have highlighted those who can rise to leadership and those who struggle.

Maximizing explosive growth opportunities in the tech industry requires new ways of leading, which are discovered and developed most effectively today at lower levels of the organization. Emerging tech leaders must exercise these skills with greater speed and flexibility, learn and relearn their disciplines as they increasingly combine science and technology, and effectively collaborate across a widening number of disciplinary fields and industry ecosystems. Furthermore, these leaders must help their teams develop and apply these skills, as well. No wonder four out of ten tech leaders are failing—the highest leadership failure rate of any field! Clearly, these businesses need to put greater effort into accurately identifying and developing tomorrow’s leaders.

Tech’s Growing Need to Identify and Retain Emerging Leaders

Given the fierce competition for critical skills, and the complex requirements of leading effectively in tech, the costs of losing talent are high. Developing and retaining in-house talent is the smartest investment an organization can make in these circumstances. While many companies focus on high-potential talent development solely at senior levels, those that extend the development of high potential below senior levels are 4.2 times more likely to outperform financially those that don’t. Organizations need diverse talent, both by promoting from within and hiring new perspectives and skillsets from the outside.  

However, research reveals that the benefits of developing and promoting from within versus hiring from the outside are plentiful, including significantly decreased costs and significantly increased productivity. Put succinctly: a wisely promoted insider will typically outperform an outside hire for at least three years and substantially lesser cost (see Wharton professor Matthew Bidwell’s Paying More to Get Less: The Effects of External Hiring Versus Internal Mobility).
This presents one of the most powerful research-backed arguments for promoting versus hiring only externally.

The Challenge of Accurately Identifying Leadership Potential

We find that many organizations lack a clear understanding or measure of leadership potential. The distinction between high performance and high potential is critical. We expect you can think of individuals who were stellar performers at one task, but they actually failed when tapped for leadership. Several studies estimate that only two or three out of ten high performers are also high potentials in leadership. As recent neuroscience studies have demonstrated, managers are notoriously bad at identifying leadership potential in the ranks since their judgment is influenced and marred by various hardwired biases.

We understand the dilemma. If your data predominantly reveals today’s performance, what can you depend on to evaluate someone’s potential? The most common error is believing that someone is “just like me” or that the individual is reminiscent of what you were like earlier in your career. When you feel that bias, you are more likely to believe someone has potential. Or the opposite—you may inadvertently overlook someone’s capabilities if they are unlike you.  

While these are problems in every industry, the tech sector adds additional complexity, uncertainty, and challenge. The introduction of new technologies, agile methods, and experimental work arrangements accelerate the way work gets done in the tech sector, arguably more than in any other industry. That means predicting someone’s leadership skillset for future success is even more problematic.

Identifying Leadership Potential Through Three Elements

Accurate identification of leadership potential is difficult, but not impossible. Three primary elements underlie leadership potential, plus an absence of “watch out” factors. These are practical intelligence, personal effectiveness, and aligned motives
and values. We want to look at each one and share some behavioral cues you can use to identify real potential beyond the performance you see.  

Practical intelligence. This includes how well someone thinks and considers data in decision making, their tolerance of ambiguity, what capacity they have to deal with complex problems, to what degree they are curious about the world around them, and their openness to new learning experiences. This person is a good problem solver and always eager to learn or to entertain innovative ideas.

Personal effectiveness. Others want this person on their team and often go to them for advice or ideas. This is someone who collaborates and listens to all points of view and dares to stand up for what they believe.

Aligned Motives and Values. While this may seem intuitively obvious, it helps to ask – is this someone who really believes in the organization and its purpose, products, or people? High leadership potential exists in a person who takes the initiative to see issues and correct them (whether they have the authority or not). They want and accept the responsibility of leadership when it is offered. However, notice that we did not say—does this individual want to lead? We often find that individuals who keep raising their hands to lead are not the only ones who can lead effectively. Don’t get too captivated by someone who is overtly ambitious.

An Absence of “Watch Out” Factors. This one is a little more difficult to assess, but think about someone you know who had a personal characteristic or flaw that stood in the way of their being effective. The micromanager, the “it’s all about me” personality, the individual who is scared of making a mistake—each of these individuals has a derailer that could curtail their success. The best candidates for future leaders aren’t in danger of derailing.

Benefits of Strengthening Your Internal Bench

Job satisfaction correlates strongly with work productivity. Research studies conclude that job satisfaction is enhanced when organizations demonstrate structural commitments to employee development and career advancement. As the editorial staff of BioSpace recently summarized in their review of work culture factors most attractive to top talent, “Job satisfaction is closely tied to opportunities employees have for growth, advancement, learning, promotion, and expanding their skill set. Organizations with strong infrastructures that support employee growth—both in philosophy and also literally with actual resources and budgets—validate their commitment to each employee’s professional development and foster a strong sense of culture and community.”

Demonstrating this commitment is an essential component of a company’s employer value proposition (EVP) and the key to attraction and higher retention rates. With intense competition for top talent, tech companies must do a better job of showcasing their workforce development, career path opportunities, and high internal promotion rates.  

The unsatisfied desire for career advancement remains at the top of the list of reasons employees cite for changing companies. Therefore, efforts to identify and promote the right talent pay off in long-term employee commitment to the organization.  

Like no other business sector, tech demands exceptional leaders. Investment in accurate, early career identification of leadership talent should be at the top of every executive’s agenda. What are you and your organization doing to strengthen your leadership bench and ensure strong future growth?

MDA Uses Data to Measure Potential

Our colleagues at MDA Leadership created a validated assessment and development experience called Bench Strength. The Bench Strength Experience™ helps organizations identify and accelerate talent development for roles at the Leading Others (front-line supervisor) and Leading Leaders (manager) level. These talent analytics allow organizations to gain critical insights into the breadth and depth of future leadership talent among individual contributors and early-career supervisors already in the organization. Insights guide differential investments in leadership talent. At the individual level, emerging leaders obtain detailed insights and feedback regarding their leadership potential and immersive development experience to strengthen and accelerate their readiness to lead at the Leading Others and Leading Leaders levels.

The Bench Strength Experience™ bases results on several scientifically-validated inventories. These tools work in conjunction to measure an individual’s unique combination of motivators, personality characteristics, watch-out factors, and problem-solving capabilities. To learn more about effective succession management at all levels, join us for our upcoming webinar series at: www.mdaleadership.com/events.