Dave Ulrich: How to measure leadership capital of companies

Investors have already learned that the market value of companies can't only be measured in money. Financial indicators, in fact, predict only half of the market value. That is why investors' interest in intangible indicators such as strategy, brand, innovation, or collaboration, is growing. The next step for investors will be to analyze these factors, which means focusing on leadership. This is the view Dave Ulrich recently published on the Harvard Business Review website. Ulrich, a consultant and professor at the University of Michigan, is one of the most influential people in human resources management and author of the HR Business Partnership concept.

"What we need is a leadership capital index, similar to a financial confidence index (such as Moody’s or Standard & Poor’s)," explains Dave Ulrich. The index should inform investors about the ability of a company's management to predict and solve business challenges. Along with his colleagues from the consulting company RBL, Ulrich created an index based on interviews and surveys among investors and input from dozens of studies on the impact of leadership on the success of companies.

There are two components of the Ulrich's leadership capital index of companies, individual and organizational. The individual part evaluates personal qualities of the CEO and top managers. The organizational one focuses on systems these leaders create and apply. Each of these components consist of five factors.

Individual

1. Personal qualities to lead effectively

2. Strategic thinking

3. Ability to execute and fulfill promises

4. People management

5. Ability to adapt to customers' expectations

Organizational

1. Ability to create corporate culture focused on customers

2. Talent management

3. Performance accountability

4. Sharing information within the organization

5. Ability to adapt working practices to rapid changes

Leadership capital index will be explained in more depth in Ulrich's new book entitled The Leadership Capital Index: Realizing the Market Value of Leadership due out in October 2015.

-kk-