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Strategy Talk: How Do I Build a Strong Pipeline of Future Leaders?

The next generation of management needs to build its strategic acumen through real-world practice.

Dear Ken,

For several years, the board has been after me to put in place a plan for my successor. As chief executive, I agree in principle; we absolutely need a pipeline of strong leaders, not just for me but for my entire top management team, including the CFO and the COO. But when I look at the people in our ranks, I’m not confident they’re well prepared. They’re excellent at their positions, but they don’t have much strategic acumen. I’d really like to give them more experience in strategy, for instance, by taking some big bets and seeing whether they pay off. But we can’t afford to risk any part of our business that way. What do you advise?

—Lonely at the Top

Dear Lonely,

You are right to prioritize strategic acumen in building a pipeline of strong leaders. But asking your people to be more strategic can feel like telling them to get taller. What can you — or they — really do to make that happen?

Fortunately, strategic acumen is not like one’s height. The ability to think, act, and lead strategically is a skill, and anyone can become better at it. But no one can develop a skill without practicing it, and few executives have the opportunity to practice strategic leadership before they are thrust into a position, such as CEO or business unit head, that demands it. That makes succession more of a crapshoot than it needs to be. Moreover, it deprives you of the ability to call on your team members (and their teams) to help you steer the company’s strategy in a complex, competitive world. No wonder it’s lonely at the top.

The ability to think, act, and lead strategically is a skill, and anyone can become better at it.

How do you give executives the opportunity to develop their strategic acumen? There are two approaches that work well. The first is to regularly engage top people in “zero-basing” your strategy. Just five strategy choices determine the performance ceiling for your company: what business (or businesses) you are in, how you add value to that business, who your target customers are, your value proposition, and the three to six capabilities that make you better at what you do than anyone else. The more specific, complete, and unique these choices are, the higher the ceiling on your company’s ability to execute.

Roundtable discussion is the best way to organize a forum for zero-basing your strategy. Keep it to no more than 10 future leaders and potential successors. Ask them to write down their thoughts privately before the meeting takes place, which discourages people from changing what they say in response to what they hear from those speaking before them. Give each participant a maximum of three minutes to articulate his or her understanding of the company’s five strategy choices. Methodically circle the table and allow for clarifying questions along the way. Then let the discussion flow by minimizing challenging questions until after everyone has had his or her three minutes. Close by taking stock of what you’ve heard, identifying where there’s common ground and where there’s misunderstanding or disagreement that needs to be ironed out.

You should hold such a zero-based strategy forum at least annually. Some CEOs do it with different groups during the year to touch a broader, deeper cross section of their leadership pipeline. Your people will find it liberating the first time, but the impact will have a short half-life. Doing it twice will help them see that you are taking it (and them) seriously. And making it a regular routine will start to change their wiring.

It may seem like a burden given how busy you already are, but you will greatly streamline your organization’s decision making and execution: Your people will be able to speak more consistently about your company’s strategy and take actions more coherently on behalf of it. And it’s amazing what you learn about people (and yourself) when you spend time with them in this way. In fact, I guarantee this exercise will be an eye-opener. You will see firsthand that your leaders do not speak with one voice about the five seemingly simple choices outlined above. I also guarantee that the very act of leading your people through this exercise will condition them to think and act more strategically about your company. You may even find that it sharpens your own strategic thinking as well.

The second approach to building the strategic acumen of your leaders is to recruit them into strategic agenda management. You create virtual strategy teams comprising a mix of line and staff executives, each charged with tackling a live issue or opportunity on the company’s strategic agenda. Some examples from companies I’ve worked with include:

  • “Online ride-hailing services are making us obsolete while also creating a new growth avenue.”
  • “Our government business is highly relevant to corporate clients but we lack the people and capabilities to win in the enormous commercial sector.”
  • “Our products are increasingly stigmatized because of the obesity epidemic.”

Each of these items demands a decision — one that could meaningfully change one or more dimensions of the company’s strategy. The stakes are high (and should be), but the risks are controllable because each team reports directly to you, with two or three touch points to discuss the issue/opportunity itself, alternative responses to it, how to evaluate the alternatives, and ultimately, which one to choose. Any big bets are ones you are willing to make because they are the best response to an issue or opportunity that must be addressed. Along the way, your leaders learn from you while getting to practice being in your shoes before anyone is asked to fill them. Moreover, your strategy stays current because it evolves with the never-ending stream of big issues and opportunities that will continue to challenge it over time.

These two approaches — the zero-based strategy forum and strategic agenda management — have one other enormous advantage: They mirror exactly the way you should engage your board in the company’s strategy. In fact, instead of having the ritual dog and pony show in which you roll out your leaders to present their businesses or functions so they can impress the directors, have them lead your board through their strategy projects. That’ll give the directors much better insight into the leadership pipeline, and give your leaders priceless experience. Their strategic acumen will be all the richer for it.

Ken Favaro

Ken Favaro is a contributing editor of strategy+business and the lead principal of act2, which provides independent counsel to executive leaders, teams, and boards.

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