Think how much more effective your company could be if you could identify the best potential candidates for leadership and then fast-track them with training to enhance their skills. The question, of course, is what these skills might be. What is it that makes an effective manager? And are the required skills 'hard-wired', or can they be learned through appropriate training? These may not be million-dollar questions, but they probably get fairly close to it!
One of the ways of trying to identify the best managers is to use some sort of feedback from their direct reports. This usually involves obtaining 180 degree feedback based on a series of key questions, but which questions, and how many to include? The problem is that the lists tend to grow longer as more and more specific behaviours come to mind. Suppose you have a list of 31 behaviours, and each manager has an average of 10 direct reports who rate their manager on each behaviour using a 6-point scale. How can you possibly make sense of the enormous number of ratings, and how will you decide which are the most important? In contrast to gut-feeling and usually over-inclusive decisions about relevant behaviours, psychometric techniques (and indeed statistics generally) are aimed at reducing the wide range of potential variables to something that is inclusive but meaningfully interpretable.
The example above is not fictional – this was the structure of the feedback system we found being used in a large NZ corporate. To reduce the enormous number of ratings derived from the 180 protocol to something that could usefully be interpreted, an initial study was done on a sample of managers in which the behaviours were factor-analysed. Factor analysis groups behaviours together into common categories (or factors), and in the analysis just two factors emerged. The degree to which a behaviour belongs on a particular factor is indicated by the magnitude of the statistical loading, and the highest loadings for the first factor was on behaviours which were concerned with Relationship Skills, while the highest loadings for the second factor were on behaviours concerned with Task Skills.
Subsequent analyses on a separate sample of managers from the same company showed that the relationship skills were characterised in particular by two sets of behaviours from the Challenge of Change Profile: expressing rather than inhibiting emotion, and an index of 'detached compassion' (the extent to which people can relate to others' feelings without becoming identified with them, and equivalent to empathy). The results showed that the managers who attracted significantly more positive ratings from their reports were those who expressed emotion appropriately and could pick up quickly and accurately on how people feel while still keep issues in perspective – in other words, they were particularly high on people skills.
These findings have recently been augmented by a study of business acumen carried out by Cynthia Johnson, who is now an Associate of the Work Skills Centre and is accredited to provide the Challenge of Change Resilience programme. Cynthia brings to the Centre a wealth of experience from senior HR positions she held in a range of NZ corporates. As part of her role she has a particular interest in leadership, which led her to question the widely-held view that business acumen is solely about financial literacy. Cynthia began her study by carrying out in-depth interviews with a number of CEOs in prominent NZ organisations. She used the responses to generate a series of behaviours that might characterise people with business acumen, and these were then subjected to factor analysis to find out how they grouped together. The results were particularly clear: there were three factors, the second of which was all about people skills.
The first factor to emerge from her analyses corresponds closely to the conventional notion of business literacy, knowing how businesses work, and the third factor was about passion, enthusiasm and drive. What is important about Cynthia's work is demonstrating that business acumen is complex and multidimensional: the explicit inclusion of other factors than just business know-how doesn't in any way detract from the importance of knowing how businesses work, and business acumen is a combination of all three dimensions. In the same way, the analyses of the 180 degree feedback make people skills an explicit and often omitted factor in successful management, but not the only one that is required. Together, what these studies show is that using appropriate statistics to validate intuitions can provide a much richer but nonetheless interpretable approach to assessing leadership skills.