Rate the Quality of Your Leadership Skills

If you’re a leader, how do you like the idea of people being able to rate you – giving you a mark out of 10 for your strategic thinking or your people management skills? Initially, it might sound a bit alarming but, in the cut and thrust of business, a company’s success depends largely on its leaders' abilities. So isn’t it fair enough for stakeholders to rate them?

Dave Ulrich thinks so. The author and leadership expert works with investors seeking to weigh up companies' potential before investing in them. In his experience, prospective investors look at a company’s income, strategy, brand, global position – of course – but they also place great store by its leaders. In fact, leadership usually takes up a quarter of their consideration, Ulrich says.

"But here's the problem: it's hard to track. How do you know somebody's a good leader?" he asks, in our Expert Interview podcast.

"Sometimes investors go on instinct. They say, 'Oh this person's great! They dressed well. They wore a great suit. They had great temperament.' But that's not real leadership, and we wanted to come up with a way to more rigorously define what investors can look at in [assessing] the effectiveness of a leader."

And so the Leadership Capital Index was born. Ulrich and his colleagues use it in their consultancy work with investors, and now it's available for general use too, via Ulrich's new book titled, "The Leadership Capital Index, Realizing the Market Value of Leadership."

The index lists characteristics in two broad domains: the individual domain, looking at the personal qualities of a leader, his or her strategic prowess, execution proficiency, interpersonal skills, and leadership "brand" or style; and the organizational domain, covering the leader's ability to nurture an appropriate culture, manage talent, inspire accountability, communicate information, and create work processes that align with the company's strategy.

Each of these 10 elements is given a mark out of 10 for the leader, and another mark out of 10 for the senior leadership team. So you end up with percentage indicators of the effectiveness, or "leadership capital," of the top executive and his team.

That's helpful but you can drill further down into each of these 10 elements to get a more detailed view. In fact, Ulrich has identified five or six items per element that may indicate the quality of leadership. As an example, "personal proficiency" breaks down into six items:

• Relevant past experience and performance.
• Physical presence and vitality.
• Sense of personal wellbeing and identity.
• Ability to make others feel better and multiply their work.
• Strong values and ethical judgment.
• Ability to learn, be resilient, grow, and show grit.

Ulrich offers 250 "indicators" in his book, phrased as questions, which can help to assess these characteristics. Looking at the last item in the list above – the ability to learn, be resilient, grow, and show grit – some suggested indicators are: How does the leader handle failure? How flexible is the leader in addressing problems? How able is the leader to accept new ideas or approaches?

There's a mathematical formula that takes the scores for all the items in all the elements of the index and delivers new percentage scores, in the individual and organizational domains. This is clearly helpful for potential investors, but it's useful to lots of other stakeholders too, from boards of directors to the leaders themselves.

Ulrich stresses the importance of being able to rate several senior people within a company, not just the CEO. That, he says, would be "like looking at the coach to judge whether a team is effective."

He suggests scrutinizing at least three levels of leaders: "One is obviously the senior manager and his or her team. Second is their direct reports, and third is what we call the leadership cadre. This is often the square root of the number of employees. So if you have an organization with 100 people, it's 10. If you have an organization with 1,000, it's 30 to 35."

In this audio clip, from our Expert Interview podcast, Ulrich reflects on the difference between leaders and leadership, and why it pays to consider both when assessing an organization.

Listen to the full Expert Interview in the Mind Tools Club ¦ Install Flash Player.

Ulrich admits that the Leadership Capital Index is a "minimum viable process" that will develop and become more accurate as it is refined.

How would you rate your leaders, or your own leadership? Join the discussion below!