Aerodynamic leadership

Aerodynamic leadership is an untapped lever to success in high-growth companies 

Like precision engineering, scaling fast-growth businesses comes down to fine margins. Everybody is looking for the edge, and management, along with their private equity investors, will assess, calculate, and design a variety of strategies to drive long-term organizational value, whether from M&As, driving operating efficiencies, or expanding into new markets. 

But, as businesses and investors evolve, and valuation multiples increase, it has become increasingly difficult to find the edge that will set any company apart from the competition and deliver those consistently outsized returns. Optimising, and engineering, leadership – and the leadership team - is one lever that has yet to be fully exploited.  

A moment for great leaders

Great leaders have never been more important than in the current landscape. Having seen off the pandemic, businesses must now grapple with rising inflation, economic headwinds, and geopolitical tension. 

Plus, employee expectations are rising, with staff looking for more meaning from the work they do, along with flexibility about how and where they do it. Resignations hit a 20-year high at the end of 2021 and a recent survey found that one in five employees wants to quit this year. Fast-growth companies can only continue to attract and retain the best talent if they have effective, inspiring leadership at the helm. 

Yet, how often do firms engineer their leadership teams in the same way that they do other areas of the business, to ensure they are fully optimised for the challenges at hand? Instead, too often we find that leadership hiring decision are made based on that vague concept of “chemistry”, having a rough plan in place, or simply coming down to luck. This is the reason why so many leadership teams fail to achieve their potential. 

Building an aerodynamic leadership team 

The philosophy of “continuous improvement”, or kaisen, has been applied to numerous disciplines, spanning manufacturing, business, and even sport. One of the most famous proponents is David Brailsford, the former coach of Team Sky and British Cycling, whose philosophy on “the aggregation of marginal gains” – making 1% improvements across every aspect of a process - led to so much cycling glory.

Fast-growth companies and investors need to start thinking about their leadership teams in these terms, treating them as if they were a sports team or a complex engineering problem. We live in a data-driven world and, with the leadership tools available today, there is more scope than ever to engineer the optimal ‘aerodynamic’ leadership team, through focusing on the minute details that will add up to a significant advantage for the whole.

Four levers of leadership success

Through our research, we’ve identified four key factors that determine leadership success, each of which can be evaluated and optimised when engineering an aerodynamic team:

·      Functional competence: Does the team contain the right representation and depth within each of the key functional leadership areas, i.e., finance, operations, IT etc.? Beyond that, does the team’s functional experience provide a good balance of strategic and tactical expertise, as well as leaders who create value versus those who measure it? Finally, does this balance also suit the market that the business operates in, and the stage that the business is at? 

·      Situational competence: What situational challenges have leaders faced in the past and how well does that experience match the current challenges they face? For example, if a company is currently experiencing regulatory issues, a need for cost-cutting, or a transformation programme, is that something that they have overcome effectively before?

·      Behavioural competence: Is the team compatible at a behavioural level, based on the key behaviours of Pragmatism, Agility, Curiosity and Execution? Will they bring out the best in each other, to work in a streamlined way, or will incompatibility between different team members cause a drag on company success? We can even compare the behavioural makeup of current leaders to those who have had success in the past. 

Cognitive diversity: Finally, does the team include a wide range of perspectives? Research shows that a high level of cognitive diversity increases a team’s capability to problem-solve and get the big decisions right, through encouraging constructive discussions. There is also evidence that cognitive diversity increases creativity. Matthew Syed, a researcher in the field of high performance and himself a former elite table tennis player, argues that engineering cognitive diversity into a leadership team “can deliver a massive uplift in collective intelligence,” and by natural extension: an uplift in performance.

Leadership as a value-creation lever

Leadership teams frequently evolve organically, which means there are inevitably going to be gaps, clashes, and inefficiencies, which hinder their ability to be effective – or as effective as they could. Only through a deep dive into these four factors can you see the full picture of all the moving parts and dynamics at play, to identify where the gaps and the overlaps are, where change needs to be made, and how to fine-tune for optimal success. 

I’ve always found it strange that while leaders are almost always measured by how much value they create, it is still rare to consider leadership itself as a value-creation lever. But leadership is, in many ways, the ultimate value creation lever, being the primary control mechanism that owners, investors, and the board possess to effectively execute their value creation plans. It’s time to flip how we think about business leadership.