One of the most important questions any large company can face is how to identify and nurture the best leaders. Taking the right approach is critical to the success of any long-term strategy, but there are those who think that most large organisations approach the issue in the wrong way. Robert Hogan, founder of Hogan Assessment Systems, tells Jim Banks that it may be time to rethink what makes a good leader.

When we are asked to think of a good leader, we might naturally look to the people who are already in charge of large organisations or to heads of state. What we would in fact be doing is looking to the people who have the reins of power in their hands, but not necessarily those who have the right qualities to make good decisions in tough circumstances.

If we believe that the cream always rises, then looking to an incumbent CEO, a president or a prime minister as an example of a good leader is natural. The problem, however, is that there are many things besides cream that float. ‘What’s leadership? Well, it is usually defined by who is at the top. Some US presidents get to the top by playing politics, not by being real leaders. Some have never had real jobs in their lives,’ says Robert Hogan, founder of Hogan Assessment Systems and a world-renowned expert on personality psychology and leadership.

‘65% of the top guys in the US will fail because they are deeply flawed in some way. The proportion is so high because of the way people assess leadership.’ Hogan Assessment Systems advises businesses on hiring the right people, developing key talent and evaluating leadership potential. The core of its mission is to help companies realise that they derive their competitive advantage from their people regardless of the economic climate or the challenges of the marketplace. The company sets out to ensure that its clients embrace the importance of the role played by their leaders and invest in growing their talent to meet the needs of the future.

The first step, Hogan believes, is to accurately gauge an individual’s performance as a leader, and his advice is to start with the right criteria, which for many companies may well mean a dramatic rethink of their approach. ‘The most important leadership quality is the ability to build and maintain a high functioning team. That means you judge a leader not by his or her individual qualities, but by the performance of their team. There are a number of things that can be said to make a good leader, based on data, and one of the most important is how a person is perceived by the people who work for them,’ he says.

‘One thing you should look at is integrity. You don’t want someone who is asking where’s mine? You want someone who doesn’t lie, who doesn’t play favourites and doesn’t play politics. Some people, including past US presidents, have status but no integrity. You also need to look at decisiveness, the ability to make good decisions quickly with little data. You need people who can identify what to do and who should do it. They need good judgment in a short time span.’ Another key quality Hogan identifies is competence, by which he means the ability to bring something useful to the table and solve problems.

‘You can’t afford to have empty suits as leaders. You need someone with vision. That person can tell people why what they are doing matters. Some US presidents have been very smart, but also profoundly anti-intellectual, and they have had no vision. Of all the leadership qualities, the killer ones are integrity and decisiveness. Winston Churchill is an example of someone who had great vision.’

Spotting talent

Companies that get the right idea of what good leadership means will do well. Hogan picks out organisations such as Xerox, Ford Motor Company and AOL as having the right kind of leaders to drive them forward, and he backs them to succeed. He also notes that other companies have made some big mistakes.

‘There are notable examples in the technology sector and in investment banking that have been ruined because they hired the wrong CEO. It proves that defining leadership in terms of who is at the top is the wrong approach. On the other hand you have AOL CEO Tim Armstrong who has properly looked at the vision and strategy of the company,’ comments Hogan.

‘Leadership goes wrong if a team is performing poorly. Employee ratings of their bosses are a good proxy for the performance of a team. We will survey the workforce for any company that has the balls to ask those questions. The behaviour of the boss drives the morale of the team, which drives performance and improves customer service ratings,’ he adds.

Predicting the performance of a good leader is about the continuous assessment of an individual that is responsible for a team. It is about asking the right questions and homing in on the right issues. This is where Hogan’s company can help.

‘You need to know whether a person is interested in the fate of their career or the fate of their organisation. If they are worried about the organisation then they are focused on leadership. If not, they are self-aggrandising. In the current economy you need good leadership more than ever, but big companies are often run by accountants, so things are done just on the basis of cost-cutting,’ Hogan remarks.

‘Leadership is about getting a group to work, so it means empowering employees, not alienating them. You need to show people how their jobs affect the performance of the organisation. You can’t judge people on quarterly earnings performance, and you can’t put quotas on people – that is how you alienate them – although I’m not sure that many finance people would agree with that.’

High intelligence and humility

Hogan understands that in every human being there is a tension between selfishness and altruism, but how an individual balances these two innate drives is what determines their abilities as a leader.

‘All good leaders must want to be a leader, but the notion of the charismatic or narcissistic leader is a myth. People want humility in their leaders. A good leader must have the heart of a servant in order to make good decisions and put the right people in the right place within their business,’ he stresses. Hogan also raises the issue of ‘followership’, which may obscure some of the data that enables sound judgments about leadership to be made.

Only in a context where employees are free to express their opinions or have the choice to defect can a clear view of leadership be derived. ‘Think of a mercenary army,’ says Hogan. ‘Those soldiers can leave, so leadership in that context is very important. In a corporation, people are not free to defect as they want to hang on to their jobs.’

Another important factor of a good leader, Hogan believes, is a breadth of understanding, which often comes from a wide experience in a number of business contexts. Narrow thinking in just one discipline can often neglect the needs of other parts of a large organisation, which by its very nature will need to harness a broad range of skills in order to succeed in the marketplace.

‘Look at Enron. Everyone there was an MBA or a finance person, and look what happened to that. The military is a good example of an organisation where people are focused on their own careers, which means they won’t make good leaders,’ Hogan comments. There seems little doubt that the Hogan approach to identifying and nurturing the successful leaders of tomorrow is at odds with how the majority of companies approach those issues, but few can doubt the accuracy of his comments.

Hogan Assessment Systems’ tools have been used by over half of the companies in the Fortune 500 and, as the bodies of corporate failures continue to pile up by the side of the road to success, it may not be long before its model for predicting leadership potential becomes the norm rather than the voice of revolution.