Almost every week we seem to hear of a beloved brand — once seen as formidable — that's facing bankruptcy. Recent examples include a bunch of retailers such as Toys R Us, Bon-Ton, and Sears, but no industry is immune.
Businesses often fail. In fact, 86 percent of companies that were on the Fortune 500 in 1955 no longer exist. More importantly, the pace of failure is accelerating. A study conducted by Olin Business School at Washington University in St. Louis projected that 40 percent of the current Fortune 500 companies will face extinction in 10 years.
As companies try to fight the sweeping tide toward failure, it's important to understand why they are failing. Are they choosing the wrong business strategies? Or are they choosing the right strategies, but have the wrong leaders in place to execute?
It's a tough question to answer because most companies aren't actually thinking about their leadership strategy at all. When we talk to senior executives, they're often not sure what we mean by leadership strategy. In short, having such a strategy means having a supply of capable leaders to meet both your short- and long-term business needs. A business strategy simply cannot succeed without an integrated, future-focused leadership plan to execute it.
There are four steps to creating an effective strategy:
- Clearly articulate your organization's business drivers, and define what success looks like, both for the organization and its leaders.
- Determine how your current leaders stack up against your future requirements, both in terms of the quality and quantity of your current leadership pool. This analysis should lead to clearly identifiable skills gaps, and reveal what actions will be required to close them.
- Begin accelerated development programs to build your current leaders' skills to meet future job needs. When necessary to fill a clear gap, recruit outside talent with skills matching your needs.
- Using analytics, capture data that enables you to evaluate the success of your initiatives and their return on investment.