Does leadership matter for performance

1. Does Leadership Matter for Performance?
John Colvin
July 2015

2. Contents
• John Colvin background
• Data on link between performance and leadership
• What are the key ingredients of leadership?
• The turbo charging effect of culture
• How do you assess these leadership and cultural qualities?
2

3. Central Theme
Poor leaders lose money
Good leaders make profit
Extraordinary leaders double profit
Extraordinary leaders build great cultures
3

4. Central Theme
PE firms generate great financial data on most deals
How good is the data on the most important asset of any firm?
Leadership quality and culture
4

5. Central Theme
Can PE firms do a better job on assessing leadership and culture?
5

6. Central Theme
Can PE firms do a better job on assessing leadership and culture?
Everybody can
6

7. John Colvin Background
• 25 years management consulting – CEO APAC of PA, and on the international board for 10 years
• Built highest profit business in PA global firm
• Spent 15 years working on large scale transformation assignments for major global banks
• LEK was part of PA – brought Tim Sims to Australia in 1987 – sold first 4 major jobs
• 7 years as CEO of Blake Dawson Waldron
• Tripled revenues
• Tripled PEP
• 5 years partner at Heidrick & Struggles
• Now in own business - practice mix for past 10 years
• 50% CEO & board practice
• 15% strategy & board consulting
• 35% working with three major relationships
• M&A work in PS markets
• Team of 4 – plus collaborate with another dozen people
7

8. Data on Link Between Performance and Leadership
8

9. Every 5% points of Employee Sat Delivers .5% Increase in Revenue
9

10. Analysts can see the Impact of Leadership on Share Price
10
Average premium and discount placed on
effective/ ineffective leadership

11. Leadership Competencies
11

12. Leadership Competencies
1 strength = 60th percentile
3 strengths = 80th percentile
4 to 5 strengths = 90th percentile
One competency has the greatest impact on getting into 90th percentile
Inspires and motivates others to high performance
12

13. The Turbo Charging Effect of Culture
• It is possible to have great individual leaders in the top team who totally underperform as a
team
• The organization is dysfunctional – despite good people everywhere
• Lots of reasons
• Poor leadership skills of CEO
• Rem system not aligned to desired cultural values
• Measures not appropriate
• Badly designed structure
• Lots of politics – people fighting each other
• What a difference you get with a great CEO getting everybody on the same page – all the arrows
are pointing north – all the energy is focused on delivering against agreed client needs
13

14. The Turbo Charging Effect of Culture
• I’m convinced that the greatest predictor of a company’s future is its culture
• The best firms have a strong culture that endure through different leadership eras
• The best firms endure through major market upheavals
• Why do some firms get things done, where other firms just can’t
• The “Jaws of Culture” chew up most initiatives – over 80% of major change programs fail
• The single biggest factor in successful cultures is the CEO
• The board has a key role to play in sustaining healthy cultures
• Succession planning
• Adapting the culture to changed market conditions
• The impact of disruptive technology on business models
14

15. How Do You Assess These Leadership and Cultural Qualities?
• Surprisingly easy
• Talk to lots of people
• In a structured way
• That’s relevant to the needs of the business
• Talk to lots of people
• Bosses – peers – subordinates – secretaries – customers – major suppliers - analysts
• In the work we do – we talk to around 12 referees for about an hour – using a very structured
questionnaire focused on the very specific needs of the job
• Plus very in-depth interviewing of candidates – spend up to 15 hours with CEO candidates
• There are no short cuts in really getting to know what makes people tick
15

16. How do you assess these leadership and cultural qualities?
16
• The end result is incredible data on each candidate to allow decisions to be made with precision
• This data is as rigorous as any financial analysis that you would do routinely

17. Contact Details
17
John Colvin
Principal
E: jcolvin@johncolvin.com.au
M: +61 409 183 174
S: +61 2 8823 3485
Level 36, Governor Phillip Tower
1 Farrer Place, Sydney NSW 2000, Australia
Sian O’Shaughnessy
Research Analyst
E: sian@johncolvin.com.au
D: +61 2 8823 3485
Level 36, Governor Phillip Tower
1 Farrer Place, Sydney NSW 2000, Australia
Sandra Heinig
Senior Associate
E: sh@johncolvin.com.au
M: +61 416 731 897
S: +61 2 8823 3485
D: +61 2 8823 3487
Level 36, Governor Phillip Tower
1 Farrer Place, Sydney NSW 2000, Australia