Leadership in firms should be measured in the same way as their credit rating so that it has a clear predictive value for investors. This is the view of Dave Ulrich, recently published on the HR Magazine 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. He is currently working on the"Leadership Capital index", which is to be introduced in autumn 2015.
The Leadership Capital index of a company will assess five personality traits and five systems of leadership management. "We surveyed investors and found about 30% of their decision-making is tied to leadership, but they don’t know how to do it," Ulrich told HR Magazine. He thinks that now the time has come to connect investors' knowledge with the knowledge we have about leadership and create a new indicator of the risk of investing in companies. This will be on the same level as assessing companies' finance, sustainability and credit ratings.
Managers have to be accountable
Ulrich sees the main problems of leadership in too much focus on personal characteristics such as authenticity, charisma and the like, to the detriment of the outcomes reached by applying these traits in practice. We also put too much focus on individual leaders at the expense of leadership as a system. That is what the Leadership Capital index should change: it should help mainly to hold managers accountable for how their companies are led.
More about Ulrich's perspective on leadership appears in his book from last year entitled Sustainability Leadership: Seven Disciplines to Achieve the Changes Great Leaders Know They Must Make. He also talked about leadership in the context of the future development of HR at a recent The Art of HR conference organised by the Cotrugli Business School in Croatia. The presentation is available online here.
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