Ram Charan What Every Company Should Know

In the estimation of many, including yours truly, former General Electric CEO Jack Welch stands as one of the greatest CEOs of the 20th century.

His incredible track record over his 20 years at the helm of GE, increasing the market capitalization of the company by more than $400 billion and the formidable legacy he left behind, place Welch on any short list of truly great business leaders.

Letting Talent Expand

Jack Welch wasn't always the Jack Welch we know today. In fact, he was once a young Ph.D. with one foot out the door, looking for greater responsibilities. Frustrated because he didn't get the job he wanted, he resigned from GE's plastics division. He even attended his farewell party.

Then a forward-looking leader at the GE corporate office intervened. He knew Welch's potential and convinced the powers to be to take a risk on him.

This paved the way for Welch to land a role with bigger and broader responsibilities, going from the technical area to include marketing and sales. With that, Welch was on an upward trajectory and he excelled in every job he had.

Welch got the opportunity only because that leader at GE took the long view, understood that the organization needed to identify and develop its future leaders, and was willing to personally go on the line and persuade others to take a risk on him.

Growing Leaders Involves Risk

An often-overlooked trait of great leaders is that while they grow their business, they also grow their business' future leaders. They are always on the lookout for leadership talent, and when they find it they give those talented people opportunities to develop, finding ways to test them and expand the breadth and depth of their capabilities.

They dig in to get to know as much as they can about the talented leaders they encounter and then think imaginatively about where each individual might go next. They may put a person with limited marketing experience in charge of a new product launch, or move a star financial analyst into a management role, or promote a successful U.S.-based product line manager up two organizational levels and send her to Asia to take a challenging assignment with significant P&L responsibility.

Giving leaders stretch assignments outside their comfort zone is an important part of helping them reach their full potential. When I was working as an engineer in a 4,000-person Australian gas and light utility company, a fellow named Len Bleasel was a young dispatcher there.

When I happened to cross paths with him recently, he told me how John Robinson, who was CEO back then, had spotted him, taken a risk on him, and moved him into sales management in a subsidiary outside the core business. Len had no sales or management training at the time. But he learned what he had to learn, flourished in a series of challenging jobs, and eventually became the company's CEO, transforming a small town gas company into a mega-utility company. Today, he is one of Australia's shining stars and serves on several boards.

Of course, not all leaders rise to the challenge and live up to the expectations others saw in them. So leaders must have a methodology for wrestling with two key questions: If I take a risk on this person and provide development opportunities, is the person likely to grow? And if not, can I live with the consequences?

Taking Sensible Risks on People

Identifying and growing leaders requires highly developed instincts that allow you to make accurate judgments about an individual's capabilities and potential. It also requires the confidence to give individuals assignments that will test and hopefully expand their skills and capabilities, knowing full well that some of the risks you take on people won't pay off.

Some of the specific risks to be on the lookout for include:

• Failing to understand the job.
  

  You increase risk by failing to clearly define the specific success factors for the job you're putting the person in. This is especially critical for those roles where the individual must succeed for the good of the organization, whether it's turning around an underperforming division, negotiating a favorable new contract with a major supplier, or getting a new product on store shelves in time for the holiday shopping season. Most such jobs have high visibility.
  

  Be sure whomever you assign to a mission-critical job meets the most crucial criteria. Wherever there are gaps between a person's talents and capabilities and the requirements of the job, define the gaps and challenge the person to demonstrate the personal growth to fill them.
  

• Failing to understand the person.
  

  You won't be able to define the gap between a person and a job unless you get an accurate read on the person. What is his natural gift? What has he really demonstrated?
  

  You have to do more than rely on your nose for talent and intuition about an individual's potential. Gather as much -- and as much specific -- information as possible about the person. Be sure to do your own reference checking, and ask pointed questions when you do. Likewise, ask incisive questions in the interview.
  

  In one situation I witnessed, an executive search committee opted against hiring a senior executive candidate who had many attributes of a terrific leader. Incisive questioning revealed, though, that over the course of his career the individual had produced flat margins and only modest return on invested capital. Results are what the search committee was after, and this candidate, it turned out, was unlikely to be the right person to deliver them.
  

• Playing to weakness, not strength.
  

  Some leaders give people assignments intended to strengthen an area where the person is known to fall short. But if the person has already demonstrated that she has no natural talent in that area, such moves are needlessly risky. Don't blame the person for failing in such situations; blame the choice of assignment.
  

  True, a leader who's never had an overseas assignment might benefit from a job that immerses her in a different culture, but only if you believe the person has an aptitude for it. So look for a person's natural gifts and choose positions that allow them to flourish, or that test to see if a latent talent exists.
  

  If a leader has a narrow perspective, is it the result of limited experience or is it something more deeply rooted? A person who's naturally open and collaborative and a fast learner might be a better choice to run the Asia division, even if it's a two- or three-level jump and requires expanding from managing sales to running a P&L.
  

• Not staying involved.
  

  You can mitigate the risks you take on people by staying involved after you've placed your bet. Provide coaching and support, including perhaps giving the person some freedom to make mistakes. If he appears to be floundering, be sure to dig into the root cause.
  

  If, however, the person simply cannot grow into the job, don't hesitate to make a change. Hopefully, an occasional failure won't stop you from taking risks on other promising individuals.
  

It's Not Just Personal

Remember that you wouldn't be where you are today if someone hadn't taken a chance on you. But don't take risks on people only out of personal obligation. Do it because it's part of being a great leader.

Welch took risks on up-and-coming leaders throughout his career and encouraged other executives at GE to do the same. He is legendary in part because he made GE into a talent machine that produced the very best and largest number of CEOs in the world during his tenure.

Do you take risks on people? Do you give leaders opportunities even when you're not sure they can grow to fill the gaps? You can't build your own capacity, let alone a powerful organization, unless you do.