An Essential Step in Increasing the Effectiveness of Your Human Capital Approach

Too many companies waste their resources— their people and their financial leverage — by perpetuating outdated approaches to talent management. They structure jobs rigidly, forcing many people to work a 9 a.m. to 5 p.m., Monday through Friday, workweek. They focus their training on functional skills, not on aligning employees’ capabilities with the strategic objectives of the business. For leadership development and career advancement, they rely on long-standing training courses not reflecting the contributions that people can make in today’s organizations. And their compensation systems are not adequately linked to performance and neither do they hold managers accountable for developing the talent of their staff and their direct reports. In short, the talent management in these companies does not arm them with what a business needs at every level.

It’s not that talent is unimportant to corporate leaders. Many of them see that people are the only asset that innovates, and that innovation is the only path to sustained breakthrough performance. As these leaders read about companies such as Google that are known for their creative and attractive work environments, they feel like wanting to provide the same. And they know, from these examples and others, that the investment needed to improve is relatively small, and the paybacks are relatively high. But they are held back by an old model of talent management.

Limits in competency frameworks”, Karen timed in.

“She developed a reasoning distinguishing between admission, level-up and best-practice competencies. “Admission competencies” are minimum competencies that must be definitely present to succeed in the “next” role. In her company these were ‘result orientation’, ‘customer focus’, ‘interpersonal skills’ and ‘action orientation’. When a future manager didn’t attend a basic level on these competencies, he or she would really have a problem in a future leadership role. However, the presence of these competencies, didn’t differentiate good or excellent performance at a managerial level. The more important “level-up competencies” seemed to be ‘Process Management ‘,’ Political Savvines’ and ‘Managing Through Systems’. Developing these competencies was, according to a consultant they worked with, absent in 79% of the development programs. She advised to make the differentiation between admission and level-up competencies in our own competency framework”, Karen stated.

“What you are saying Karen is in line with my own experience.” Ian said. “There is probably a good explanation for the focus on the ‘Admission’ competencies. A very large majority of executives is an expert and has no managerial profile. Several researches point out that ‘people skills’ are not developed amongst 54 % of the managers. It seems as if they got stuck in a professional expert position. But what is interesting in what you say is that the “Level-up” skills become important in making the transition from a First line to a Second Line Management role. The contribution then shifts to rethinking practices, processes and systems throughout the organization. This requires that one can think transversally by means of front-to-end models, build cutting-edge solutions, and bridge apparent contradictions between disciplines. To state it very boldly, you need different kinds of thinking at different levels.

At a certain moment, best practices in a company will be past practices. What was once a competitive advantage is no longer. Developing a new set of practices requires for instance considering alternative pathways, seeing that issues cannot be dealt with in isolation and being able to identify ambiguities. Research at the Mind Brain Education Center at Harvard showed that a lot of developmental programs that focused on strengthening one’s competencies often ignored the natural growth in one’s thinking capacity.

In this respect, a difference is often made between transactional and transformational leadership. In transactional leadership, leaders are very close to groups of customers, meet their ‘needs’ and create immediate value from known solutions. They focus on the immediate direction of operations, continuous improvement and efficiency and motivate mainly through mutual support, clear commitments and rewards. Transformational leaders focus on rethinking the way work is organized, innovation and higher efficiency by simultaneously solving multiple problems and the search for ‘new’ solutions. They motivate through a shared value system and shared commitment to creating the future. Transactional and transformational leaders simply approach reality from another mindset. The ‘transactional’ mindset is not predictive for the ‘transformational’ mindset.“

“So our ratings on the potential axis have considerable estimation errors?” Norman asked.

“There are a lot of ways of avoiding these estimation errors. One is to structure the talent identification around a different set of questions. You could for instance ask in what way the latest achievements of a staff member demanded a different kind of thinking? Or: what was the nature of the (more complex ?) decision making and how did this staff member’s thinking of the staff member evolved over the last years? Or: what this person’s precise contribution to the creation of added value for the future for the company in the assignments we him/her? Since there is a relation between the development of a more ‘complex’ mindset and the ability to add value at a higher levels we can plot the scoring in a different table. Given someone’s cognitive development, age and added-value level, we can predict the future growth path.”

Visualized it looks like this:

“The chart gives a picture of the assessed mental frameworks of an available talent pool in a company. The red lines visualize natural growth curves. These lines came out of the research of Elliot Jaques. They allow us to see all at once the development of the thinking capacity of the individuals involved. Tim is 35, is judged to have a mental framework that enables him to contribute at a breakthrough level. He is judged as high-mode, which means that he will probably make a transition into the higher level mental framework in the next one to three years. Mark, on the other hand, is 43, is judged to be able to operate at the same level as Tim, but as low-mode. He is at least 10 years away from making a transition towards a higher mental level.

Since there is a direct relation between one’s natural growth and the kind of added value, such a table will help you focus on the right developmental tasks or opportunities for individual staff members and on the interventions that will have a maximum impact in helping them realize transitions – those who are naturally aligned with one’s individual growth path. The composite chart shows who is ready for a challenge at a higher level of complexity now, in a year or three, or even further in time. It also shows where the talent pool riches are and eventually where there are too many people pressing into the next level of complexity.

The basic question we need to ask is how does every initiative we take contribute to support a transition into a next level in order to solve the specific challenges of leadership at the that very level.”

“Doesn’t this presuppose that we have a clear idea of how this mental framework is developed ?” Norman asked.

  1. Competency framework : Upgrading to version 2.0

“Karen, I can hear you think ‘Too few leaders have the right combination of skill and experience’”, Ian continued. “I hope I haven’t made the impression that leadership development is about developing thinking alone! One thing is sure. Leaders need to act. They have to do what they ‘know how’ best at any given moment. The basic question is how aligned our competency models are with the kind of added value we expect people to deliver.

You see, Karen, competency dictionaries. Have you ever wondered how they are created? Imagine: there are hundreds of possible behavioral indicators. Well, scientific research has shown that they can hardly be recognized as independent from each other. Most companies combine behavioral indicators and label them as part of a competency, for instance : ‘communication’. This combining and labeling is however an arbitrary process based on logical links that are believed to be seen but do not necessarily exist. The competency is in fact an arbitrary competency construct.

You know, Karen, that most organizations establish fairly narrow and non differentiated checklists of executive competence. In my view, most competence frameworks have four weaknesses:

  1. The defined behaviors appear on the first two to three complexity levels, but not on higher ones.
  2. Building proficiency in a certain competence follows a path starting from a junior position towards mastery, which is often equated with being able to pass the competence on to another person. This assumes that the definition of a competency remains the same on the different levels of complexity. But that isn’t so.
  3. There is another important but tricky issue. Let’s imagine two sequences : the first is the sequence of behavioral competences organized according to growing difficulty: the second is the sequence of levels of thinking in a ‘personal knowledge system’ organized according to growing complexity. Not only do we observe that those sequences cannot be mapped one to one upon each other, but the orders of the sequences themselves are different. Let’s look at the following real-life competency examples where different behavioral indicators are given for the different levels of excellence.

For both competencies, the behavioral indicators are organized to growing difficulty. Actually the level of difficulty of the behavioral indicators do not correspond one to one to the complexity levels of the personal knowledge systems. Within the competency ‘achieving results’ the first three levels of behavioral indicators are in fact nuances of functioning within the quality and service excellence domain (level 1). Within the competency ‘nurturing internal and external relationships’ the first two column’s behavioral descriptions correspond with quality and service delivery (level 1), while the third corresponds with optimizing (level 2) and the fourth with system re-engineering (level 3). As getting a score ‘3’ or ‘4’ on both competencies refers to functioning on different levels of complexity, one cannot infer from a person reaching a difficulty ‘4’-competence that that he/she will have the behavioral strengths to add value at complexity level 3.

  1. Competency models do not make it clear how one can develop a certain competency. They just establish a theoretical link between competencies and developmental tasks. As we know that a lot of growth assignments are unsuccessful, insights from developmental psychology show that they can’t be carried out because the ‘size of the person’ (‘thinking capabilities’) is presently too small for the ‘size of the task’.

For all these reasons, behavioral competency assessments have very limited predictive power for Senior Management and/or CEO-functioning whose complexity level is high.

“How then should one proceed in re-designing competency based modeling with the inclusion of cognitive-developmental insights from the social sciences?” Karen asked.

“It seems to me that a fundamental idea for such a redesign must be that stance and tools (thinking) precede behavior. Changing one’s personal knowledge system will create changes in behavior, and hence in competences, needed at higher levels of work complexity and managerial accountability. Developing a broader definition set of leadership competencies, taking into account the developmental levels of individuals, will make it easier to cultivate senior leaders who can both navigate complexity and serve the longer-term best interests of shareholders, boards, and employees.

Let me illustrate this with the following table. The table below is built on a horizontal and vertical axis. The vertical axis increases in complexity from the ‘lowest’ level 1 at the bottom to the level 5 at the top. The horizontal axis shows two ‘classic’ competency dimensions, namely, (1) ‘Thinking strategically’ and (2) ‘Supporting productive working relationships’. The leitmotiv elements that appear in the mindset at each level are put in bold. The new behaviors to be introduced following the Personal knowledge System are shown in italic in the table below.

One can do this exercise for most of the competencies. The added-value model functions as a guiding model to link content to behavior and process and to enable us to select what comes to one’s mind and gets translated into behaviors when operating at a certain level of complexity.

This redesign is highly insightful and particularly useful in guiding leadership development for:

  • Those aspiring to leadership positions at all levels
  • Those transitioning to the next level, or to a new role
  • Those who want to be more effective at their current level

Reviewing competency models has implications for managerial training and development programs. Most important is the realization that competence-based training programs are not likely to have a significant impact. Traditional instructional methods typically fail. They are typically such a small part of the individual’s experience, and consequently can compartmentalize the resulting dissonance without opening up their fundamental conceptual orientation to their larger world. Only when one experiences a failure to master one’s larger world one’s views of the world may expand.

The heart of managerial development, therefore, should be the planned assignment to high-potential leaders and managers of successively more challenging work roles, where a mentor is present who can help the individual better understand the new, more comples world in which s(he) must now operate as a manager. Mastering the thinking tools (thought forms) will also enable managers to discover that another’s point of view, while seemingly opposed to theirs, is a fruitful antithesis, and can be used as a launching path for synthesizing opposing views.

Here again, the organization must have on one hand the expertise needed to assess the manager’s current level of conceptual capacity, social emotional developmental stance and relevant behavioral strengths, and on the other hand the conceptual, social emotional and behavioral requirements of the proposed developmental position. Too often, job changes intended to be “developmental” are just changes in the nature of one’s responsibilities (e.g. a move from logistics to personnel) without any change in the level of conceptual requirements for the new position. Such job transfers will not invite the individual to learn a new job content, but they will not require a more complex mode of thinking or a transition towards mastering the different behaviors necessary to operate more effectively on a higher level of complexity. Accordingly, little managerial development will result. The above exercise helps in identifying the different sides of effective managerial leadership at each corresponding level in the organization.”

“I can see your point”, Norman reacted. “Upgrading our competency system means carefully integrating it with our business strategy and grounding it in the added value we expect at each level. Then we should select the variety of developmental experiences accordingly: cross-functional opportunities, global assignments, and opportunities to manage change and develop other talent themselves, etcetera.“

“Yes, and if we are talking about developmental experiences, it will be important to reflect upon how and what kind of objectives we set!” With this remark Ian made a bridge towards a brief discussion on performance management. What follows in the next point is a brief summary of the ideas Ian bought forward.