Latest / Fit Happens: Why CEOs and Leaders Succeed or Fail / The Hidden Science Of Leadership Potential (And Why Most Companies Get It Wrong)
Transcript
- Jason Baumgarten 00:00 I'm Jason Baumgarten and you're listening to Fit Happens, the podcast where top leaders, investors and board directors share the stories, surprises and hard earned lessons behind finding the right fit. Let's get into it. Jason Baumgarten 00:17 I'm Jason Baumgarten and you're listening to Fit Happens, the podcast where top leaders, investors and board directors share their stories, surprises and hard earned lessons behind finding the right fit. I also share my lessons around leadership careers and executive performance and selection. So let's get into it. Two finalists are reading for the same senior role in front of a panel on the same afternoon. The first one walks in and owns the room. Jason Baumgarten 00:49 She's fast on her feet and answers come easily with clear numbers attached to it. Everybody leans forward. What a show. The second candidate is quieter, a little less certain under pressure, and about halfway through, a board member asks him a hard question about a market the company's never entered. He thinks for a second and then he says something that lands a little strangely. I don't know the answer to that yet, but here's how I'd find it out. Jason Baumgarten 01:18 So which candidate would you bet on? Now, let's be honest, you're in for the first one. Most rooms would, and frankly, so would I. Now, one of those two people is running a business. Now that's four times the size of the one they were interviewing for that day. Jason Baumgarten 01:34 I'll tell you which is which. But first, I have to admit something. A lot of people get this wrong. What does potential actually mean? And why do so many of the people we label as the future turn out to be the past? Jason Baumgarten 01:50 I'm Jason Baumgarten and you're listening to Fit Happens. This is a solo episode and I want to talk to you about the most overused word I hear in succession planning, potential. It shows up on every slate and every talent review. It sits in a corner of every nine box grid. By the end of this episode, I hope that I can give you some questions that change how you think about every interview. Jason Baumgarten 02:17 And it's a question that you can even turn on yourself. Before we launch in, let me ask you something. At some point in your career, did somebody decide whether you were high potential? Were you on that exclusive list or were you not? And you found out later, we'll come back to that. Jason Baumgarten 02:40 Now, most organizations use the word potential to mean impressive right now, and that's literally backwards. The whole reason the word exists is to predict something you haven't entirely seen. About 20 years ago, two industrial psychologists went to study how large companies actually decide who has potential. What they found is that companies didn't agree on what the word even meant. In one survey of 20 companies, there were four different definitions in active use. Jason Baumgarten 03:11 Sometimes the definition wasn't even written down. Sometimes it was written down and contradicted itself in the same HR policies. And when they dig deeper and they looked at what companies were actually measuring, it was mostly all this stuff you can already see. Every company in that survey did what many of us do. They leaned on past performance. Jason Baumgarten 03:37 Only 1 in 10 looked at how a person handles ambiguity. But think about that. The defining condition of your next job is often ambiguity. It's what makes it the next job. And 90% of those companies weren't even checking for it. Jason Baumgarten 03:53 Now, a company had a group of people it had already designated as high potential. One of them had been picked largely because he was eager. He was willing to relocate, to do anything. Within a year, he derailed. He struggled to adapt and keep his composure under stress. Jason Baumgarten 04:09 And he was eventually let go. Interestingly, a person at that same company ranked really low on its internal leadership surveys. Left. And another company identified that person as high potential. Same person, different ways of measuring and defining it, and totally opposite verdicts. Jason Baumgarten 04:32 Now, the reject pile at one company was literally the high potential list at another. You could assume the second company was just a lesser company, but it turns out it wasn't. Now, you might think this is just some sample of 20 companies with lousy processes, but that's not true. If you look at decades of leadership data, high potential programs often have people who shouldn't be in them. More than 40% of the people in those programs often don't belong there. Jason Baumgarten 05:01 And those are the people that the company signaled out as for its future. When you look at what those programs actually screen for, it may have been technical expertise or taking initiative, delivering some results, or just fitting into the culture. And those are all great things about right now, but they're not really about what comes next. In 2021, a team of researchers reviewed 35 years of academic studies on leadership potential. They found that in roughly seven out of ten of those studies, the measure of potential had past performance mixed into it. Jason Baumgarten 05:38 So this confusion reaches past corporate talent reviews into the science that's supposed to fix them. Now, I know what you're thinking right now. Doesn't past performance predict the future? Kind of. We'll come back to that. Jason Baumgarten 05:52 When we say potential, what we're really measuring is how impressive somebody is at a job they already know how to do or have been doing for years. So if current performance aren't the answer. What is now the strongest answer in the academic research goes by a general concept and name called learning agility. It's knowing what to do when you don't know what to do. The research can make an even finer point. Jason Baumgarten 06:22 You can't fully see somebody's potential in what they already do on the job. To see it, you have to see them do something new. Sometimes it's in a new environment, sometimes it's literally just a new job. They laid out learning agility in four parts. Let's walk through them. Jason Baumgarten 06:39 The first is mental agility. That's somebody's ability to take a messy problem with no template, make it simpler, clarify it without oversimplifying. You see it when someone explains a new situation to you in a few minutes and you come away understanding it better than people who've been living with it for a year or two or 10. They just have that ability to frame it up. The second is people agility. Jason Baumgarten 07:04 That's some self awareness plus the ability to adjust when people who work for it differently from you or when there's real conflict. Being well liked is something else. You see people agility when someone can tell whether they have to change their own style to work with a colleague that they found difficult. And understanding when that was worth it. It's not just being liked. Jason Baumgarten 07:25 It's actually the ability to self moderate and understand your setting. The third is change agility. It's a genuine curiosity about being a beginner. You see it when someone lights up describing the part of the job they didn't understand, but they loved the unpacking. And the fourth is results. Jason Baumgarten 07:45 Agility. That's delivering when the conditions are new rather than rerunning the same playbook that worked for them the last time. Somebody's ability to tune what they do and to measure what isn't working just as well as to measure what is. You see it in what actually got done while they were still figuring things out. It's not just the results, but the results combined with the process of learning and changing to get there. Now, the researchers who defined those four areas pointed out something else. Jason Baumgarten 08:15 People who are highly learning agile tend to underrate themselves. People who are low in learning agility tend to overrate themselves. Think about that in the interview. The format itself rewards the person who rates themselves highly and has strong conviction about how great they are, which means it can quietly favor exactly the wrong person. Now, one firm looked at tens of thousands of leadership assessments and leaders who greatly overstated their own abilities were six times more likely to be a derailment risk. Jason Baumgarten 08:51 Roughly a quarter of the leaders that their bosses rated as high potential were at the very same time rated as high derailment for this same characteristic. So they were very confident and very confidently to fail. The Center for Creative Leadership studied executive derailment for decades, and one of its findings has always stuck around in my mind. The executives who went on to succeed and the ones who derailed looked very similar on paper. They were all bright, they were all ambitious, and they all had good track records. Jason Baumgarten 09:27 The difference actually showed up when something went wrong. The ones who succeeded handled failure and adjusted. They found a new way to get to the results. The ones who derailed got defensive. They blamed others when some external condition shifted. Jason Baumgarten 09:42 They didn't learn and try something new. On paper, though, you can't really tell these people apart. The difference shows up in that first time, something new, something hard happens again. It's that ambiguity. Now, the structural problem, and that's the reason I'm talking about it, is that these qualities are really close to invisible. Jason Baumgarten 10:04 In a normal interview, a conversation about a candidate's career is super rehearsed. They've told these stories dozens of times. They know where the punchline is. So the format that we rely on to reveal the way a candidate deals with these new and different ambiguous situations often hides it from you. Now, research on interviews makes you even wonder. Jason Baumgarten 10:27 More information from loose, unstructured interviews can actually make decision makers more confident in their own judgment. And that extra confidence can lead to even worse hiring decisions. In mock job interviews, observers rated more confident candidates as smarter and more hireable, with no evidence that those candidates were, or were likely to be, more capable. So we all walk out feeling really good with absolutely no reason to be. There's a plain definition of learning agility, knowing what to do when you haven't done something before. Jason Baumgarten 11:03 My father always had a saying, everything's impossible when it's never been done. And easy once it's been done once. And I think about that a lot, because once we've done it, it doesn't seem very hard. If you've never done it, it takes a while. Now think back to that very first quiet candidate who said, I don't know the answer to that, but here's how I'd work it out. Jason Baumgarten 11:28 That's actually the definition of understanding how to cope with ambiguity. It's said out loud in an interview. But we all recoiled. We all had the same reaction, which is, what is this guy doing? He's taking the interview. The room hears it as a weakness. Jason Baumgarten 11:42 So let's go back a bit. Most companies define potential as how impressive someone is today. The research says the better signal is how somebody behaves when they're dealing with something new. And the interview, as most people run it, is set up to show you the first and not the second. So go back to those two finalists. Jason Baumgarten 12:06 At the beginning, you've probably guessed it by now, but it was the quiet one who's running the business four times the size. The one who owned the room had a great start, knew the playbook cold, and in the first stretch, the playbook fit. Then a few years in, the business moved into a territory and an environment that the past didn't really cover. The fluency that had been so persuasive in that interview was fluency in the past. And when the test changed, they didn't do so well. Jason Baumgarten 12:35 Now, I want to be fair. Fluency is a real skill. It's got a place. Doing something in the same organization has a real place. Plenty of roles need that. Jason Baumgarten 12:44 But many jobs, particularly the jobs I deal with, CEOs, boardrooms, are at the pinnacle of uncertainty. They're at the pinnacle of the playbook not working. And in those cases, the problems are almost always going to be new. So it's very easy for us to read somebody who's not high potential, somebody who isn't that exciting in an interview, somebody who admits not knowing things. But I had this happen early in my career. Jason Baumgarten 13:11 I just had one of those interviews where they weren't great. They kept pointing out what they didn't know. They kept not filling the silence in with some great story. They weren't very polished. But I took a reference call, something we do a lot of, and I was talking to someone who had worked for this person years before, and I asked, what was this candidate like when they started this specific job that was brand new to them? Jason Baumgarten 13:40 And the reference lit up. He told me about the first few weeks, and in those first few weeks, this candidate spent them asking questions of people up and down the organization, learning how the work actually got done, what was a known outcome from an unknown outcome, what was deterministic or probabilistic in today's AI world. And within months, this candidate started to fix problems that the predecessor had lived with for a long time. People on the ground noticed an actual difference. Jason Baumgarten 14:14 It wasn't just slideshows and town halls. It was real change that made a difference on the ground. And I remember feeling a little embarrassed that I hadn't sort of picked this up in the interview. My interview notes didn't tell me any of this. Jason Baumgarten 14:29 And what I realized is while the person wasn't hiding it, they didn't understand that they had to showcase it. And that reference call has changed my habits. Now, I always talk about the role that was ambiguous. The role in a new company, the role in a new function, the role with increased scale and scope, or in a different country. And I really dig into how somebody behaves when they don't know the answer. Jason Baumgarten 14:56 I also focus on when it's going well and when it isn't. Now, a leadership professor named Margarita Mayo and a colleague studied how people inside an organization judge confidence. Their paper opens with a story that I love. An engineering manager whose colleagues rated her as highly competent and whose supervisor saw her as lacking confidence. She was passed over for a top leadership role. Jason Baumgarten 15:23 But then the organization looked at the data. For the men in their study, being competent translated fairly directly into being seen as confident. For the women, competence only read as confidence when people also happened to like them. And being seen as confident is what predicted influence in the organization. So the quality a room rewards as presence was handed out quite unevenly. Jason Baumgarten 15:51 And this quiet, capable person lost on presence while actually winning everything that mattered in the job, the actual results. Now, a study of newcomers in their first months on the job found that curiosity, helping people frame unfamiliar situations, predicted how well they performed and how much they took charge in their new roles. That's the person in my reference call. So the real question is, what are you measuring when you let someone impress you? Jason Baumgarten 16:22 Now, there's a tool I sometimes use. It's called the first time test. Most evaluations ask how good someone is at what they already do. What were their results? Did they get incrementally more impact in the role, more sales territories, more marketing budget? Jason Baumgarten 16:39 But the first time test asks what happened the first time they did something they've never done before. Now, more simply, you can skip to the highlight reel. In an interview, it sounds like this. Tell me about the first time you ran something you had no experience running. Take me back to that first week. Now, ideally, you want to anchor on something fairly recent so it's not rewritten history. Jason Baumgarten 17:03 But most people try and skip to the answer of how well they did. You really want to get into that beginning story. There's two ways it can get answered. The rehearsed version we've all heard. Well, my predecessor really left me in a bad way. Jason Baumgarten 17:18 I took over a struggling division. Things were a mess. But I put the right team in place. We had a clear plan and within a certain amount of time we'd doubled the margin, grown the top line. It's all about the outcomes. Jason Baumgarten 17:30 There's nothing about the inputs. There's nothing about what the person didn't already know how to do. Now, here's the version I'd like you to listen for. Well, the first month was tough. I didn't really understand how the plant scheduled the work. Jason Baumgarten 17:44 So I spent a few weeks on the night shift with the supervisors. I got some calls wrong and had to walk them back in front of my team. And then I realized I needed a regular session where a bunch of the front line could help me see what I might have been missing. After a few months, we realized there were some key levers to pull. And those levers, some of them worked, some of them didn't. Jason Baumgarten 18:06 The ones that didn't work, we refined until we got them right and we started to drive great outcomes. In a few years, we doubled the business and tripled the bottom line. Hear the difference? The second answer has a learning curve in it. It has some mistakes, some humility, and it has a very specific approach to learning. Jason Baumgarten 18:26 Actually, several of them still have some good outcomes. But it walks you to why. Now, if I told you that the first person was in a market where every company was growing, you'd have even less insight into how they did. And that's where these four parts of learning agility show up. Mental agility is how somebody describes making the unfamiliar problem simpler. Jason Baumgarten 18:49 Change agility is where there's real discomfort in the story. A first time story with no discomfort in it, I'd question whether it was really a first time. We've all had those awkward moments of whether it's setting up a new technical device, walking into a room of people who don't speak the language you speak, or tackling a functional problem you've never seen before. It's awkward. Jason Baumgarten 19:10 It takes a bit of time to unpack. People agility shows up in who they went to for help. And results agility shows up in what they actually delivered while learning, what they were delivering, not just celebrating wins, which relatively could be losses. And listen to how they talk about the mistakes. Remember that derailment research? Jason Baumgarten 19:33 The people who succeed handle failure and learn from it. Setbacks are just a way to learn if the setback was just someone else's fault or the market shifting. You've gotten some pretty important data on reference calls. You ask those same things. From the outsider point of view, most reference calls are really about how good the person is and somebody's opinion of them. That's actually not fact, it's opinion. Jason Baumgarten 20:00 And everybody's got one. And we've learned over time that they don't always align. And frankly, in new situations, sometimes they align less well. So ask instead how the person faced something new. What did they do? Jason Baumgarten 20:12 What did they learn? What did they shift? Who and what data did they put around them? And then what were the outcomes? Most companies handle transitions in leadership through sort of a Darwinian evolution, sink or swim. Jason Baumgarten 20:27 And a lot of promising leaders sink when they don't need to. Those first weeks in that new thing, that ambiguous thing, are some of the most revealing evidence you'll ever get about a person. And the reality is that everybody's had a first time doing something. Everybody's had that new ambiguous role. It might have been the first time you had a direct report to manage a crisis. Jason Baumgarten 20:48 You never planned for a long tenured insider who didn't want to listen to you. Or you are the long standing insider when the business changed around you, because that's a first time too. Even when you didn't change, the environment around you did. And if you really can't find any that's informative in and of itself, it might mean the organization never stretched that person. Jason Baumgarten 21:14 Or it might mean that person never stretched themselves. Now here's something you can try on yourself. When was the last time you did something meaningfully hard for the first time? What did it look like? Did you get better? Did you learn? Jason Baumgarten 21:25 Did you make mistakes? Now if you have to reach back a long way to answer that, ideally in your work life, it might be worth asking what that says about your potential. Getting potential wrong is expensive. The first cost, everyone sees, you elevate someone who stalls because they just didn't have it. Jason Baumgarten 21:46 But between 30 and 50% of high potential managers and executives eventually derail. Half of high potential managers and executives are often gone involuntarily within five years of being put onto those lists. Half. And those were the ones that were the future of the company. But the other cost is actually a lot larger. Jason Baumgarten 22:08 You lose that person who actually has high potential because they didn't shine in that format to get them on the list. Maybe they quietly leave, maybe they stay, but just never get the chance to shine. But either way, you never see what they could have done. You never see their potential. And the more senior somebody is, the stakes and the impact get higher. Jason Baumgarten 22:31 They compound. Many executive transitions don't go according to plan. And one of the traps we see is the similarity bias, where people choose a successor because they're kind of like them. And it turns out that boards do this. They search for a new leader who tends to look like the current leader and prize some of these factors the same way that the high potential list in your company might be running. Jason Baumgarten 22:59 So if you sit on a board, you're a CEO, or you're a manager of one, or you're a new employee, this should concern you, because you have to understand how you're defining potential and how you're deciding who's got it. And in most companies, it's not very well tested. So the next time you're in some sort of talent or succession review, go down the potential list and for everybody on that list, ask for some piece of evidence from that moment when they did something they've never done before. And what can you learn? Jason Baumgarten 23:38 Now, right now, if you're a manager, I'll give you a 24 hour homework. Pick somebody on your bench, somebody that you're developing to bigger and better things. Call someone who's watched that person the first time they did something genuinely new. Ask them to unpack what they did in that first week. Don't ask how good they are. You might be surprised that there's somebody out there, the quietest one of all, that is really the one learning how to do things better. Jason Baumgarten 24:04 So whether you were on that list or you were left off it, somebody's made that call about you. And most likely nobody asked about your learning agility. Potential is a claim. It's a specific claim organizations and leaders make about how people will behave in a role, in a room they've never been in, they've never done. And most organizations make it poorly. Jason Baumgarten 24:28 So skip the highlight reel, avoid the charisma, and ask about that first time somebody stepped into something new. Thanks for listening. I'm Jason Baumgarten and this is another episode of Fit Happens.