The document discusses the importance of leadership assessment in organizational value, proposing a Leadership Capital Index to evaluate leadership rigorously rather than relying on intuitive methods. It highlights the experiences and insights of investors and leaders, emphasizing the critical role of genuine leadership in transforming companies and achieving market success. The author also reflects on the learning experiences through coaching with horses, drawing parallels to authenticity and trust in both leadership and coaching relationships.

1. M
ost thought-
ful investors
recognise that
l ead e rsh ip
matters, but
are not sure how to assess
or create it. My latest work
aims to help them do just
that. Over the last decade, I
have developed a leadership
capitalindex,whichdrawson
a useful metaphor for how to
include, conceive, and audit
leadership in the assessment
of firm value.
A leadership capital index
is like a financial confidence
index. Rather than assessing
a firm’s likelihood of paying
its debts, however, it offers a
morethoroughwaytoassessa
firm’spresentandfuturelead-
ership.Mostacknowledgethat
leadersaffectanorganisation’s
value, but they use simplistic
and intuitive approaches to
applythatinsight.Myresearch
offers a more rigorous way of
evaluating leadership as part
of a firm’s value.
The need for such an in-
dex is clear. This was brought
home to me a few years ago
when I attended the annual
conferenceofamajorprivate
equity group. The conference
wasforthechiefexecutivesof
companies it had acquired,
where it would share advice
on what these independent
chiefexecutivesshouldfocus
oninthenextyear.Soonafter
worldmarketscollapsed,this
conference focused for two
days on leadership.
The group executives had
discovered that it often took
five to seven years to turn
aroundadistressedcompany
–andthatin60to70percent
ofcases,thebiggestchallenge
wasthequalityofleadership.
Oftentheleaderswho’dgotten
the company into a position
whereitwaspurchasedbythe
privateequitygroupwerenot
abletomaketheboldchang-
esneededtoturnaroundand
transform their company to
prepare it to be repositioned
inthemarketplace.Thegroup
leaders felt that if they could
prepareacquired-firmleaders
tobemorecapable,theycould
turn the companies faster.
The group decided to hire
a talent czar, someone who
could assess leadership tal-
ent in companies likely to be
acquired, then develop lead-
ershipinacquiredcompanies
to be more able to transform
their company and prepare
it to be resold. These private
equity investors recognised
thatleadershipmattered–and
that they were not in a po-
sition to perform thoughtful
or thorough assessments of
leadership – so they retained
a specialist to do so.
Investorswhoworryabout
discovering full firm value
should pay attention to the
leadership within the firm.
Even though senior leaders
essentially work for the in-
vestors, investors with deep
expertise in industry and fi-
nancial analytics often lack
the skills to assess the quali-
ty of leadership. My new re-
search proposes some very
specific and applicable tools
thatinvestorscanusetoassess
and anticipate the quality of
leadership.
Investinginleadershipcap-
italmayresultinaleadership
premiumordiscountdepend-
ing on the outcome of the
assessment. The importance
of valuing leadership comes
from and extends the work
on intangibles. Two firms in
the same industry with the
same financial results may
have dramatically different
marketvaluations.Thisdiffer-
entiated market valuation is
oftenattributedtointangibles,
which show up in business
byboosting–orundercutting
– investors’ confidence in a
firm’s performance. Leaders
architect intangible value.
When investors accurately
assess leadership, they are
indirectly, but accurately, as-
sessing the future intangible
valueofafirm.Nowtheycan
dothatmorerobustlyandac-
curately.
Dave Ulrich is Rensis Likert
Professor of Business at the Ross
School of Business at the Univer-
sityofMichigan,andtheauthorof
LeadershipCapitalIndex(Berrett
Koehler, September 2015). He re-
cently addressed members of the
Irish Management Institute at
their practitioner network event
in Dublin
H
orses don’t talk back,
buttheycansurelylet
you know when they
don’t trust you.
What better client than a
horse to learn the subtleties
of executive coaching and
leadership.
Inmyworkwithexecutive
coaches and leaders alike I
tend to see both roles as
strongly linked. Leaders and
coaches share the privilege
toimpactandguideothersto
achievedesiredoutcomes.In
the case of a leader, the out-
come is shared, in the case
of the coach, the outcome is
personal and individual.
Intheprocessofdeveloping
people in these two roles, I
findthatcoachingwithhorses
isoneofthemosttransforma-
tive events that leaders and
coachesalikecanexperience.
Entering an arena with a
horse in it for the first time
causesallsortofassumptions
and limiting beliefs to rise.
“This animal is dangerous”;
“I’mafraidofhorses”;“What
canahorsepossiblyteachme
aboutcoachingoraboutlead-
ingmyorganisation?”;“Why
did I get myself into this?”;
“What do I do now?” and
many more.
Yetcoachingthroughhors-
escanofferverydeepandin-
sightfullearningaboutmany
aspectsofbothbeingacoach
and being a leader.
Authenticity
The fact is that to earn a
horse’s trust and lead them
toperformaspecifictask,we
need to be true to ourselves
first. In the same way, to be
excellent coaches and great
leadersweneedtobeauthen-
tic first. Once we are true to
ourselves,ourwords,actions
and intentions become clear
anddecisive–notonlytoour-
selves,buttheyalsohelpusto
inspire others.
Purityofintent
Horses trust only someone
who has their best interests
at heart. In the same way,
when we engage with others
in a coaching relationship, it
is critical they feel and un-
derstand the intention of the
process. A student must be
comfortablethatthecoachis
there to guide them in find-
ing the best they can be for
themselves.
When we lead others to-
wardsacommonvision,pu-
rity of intent is instrumental
inbuildingtrustandcommit-
ment towards it.
The coaching relationship
aswellastheleader-follower
relationshipisboundbytrust.
IfItrustmycoach,Idon’tneed
to worry and I can focus on
searching for my best course
of action.
If I trust my leader, then
I’m comfortable in follow-
ing, knowing they act with
thebestinterestofthegreater
good at heart.
Observingthe
subtleties
To work with horses it is im-
portant to pay attention to
the subtleties of their body
language:theylickandchew
when they are relaxed, they
turn their ears towards what
catches their attention, and
they fold them back when
they are annoyed. Paying
attention to such subtleties
allow a horseman to guide a
horse with ease.
In the same way, a good
coach must pay attention to
their student’s physiology to
notice how consistent they
arewiththeirthoughtprocess
and provide them vital feed-
backtohelpthemnoticewhat
they cannot normally see for
themselves.
Leaders also must always
pay attention to the subtle-
ties of body language, facial
expressions, voice tone and
use of words.
These subtleties provide a
leader with a clear under-
standing about the follow-
er’s uncertainties, beliefs
and commitment towards a
course of action. They, too,
need to become aware of the
inconsistency between body
languageandwordsandhelp
followers find the courage to
bethebesttheycanbeforthe
good of the group.
Horses are great teachers;
theyofferusawonderfulmet-
aphortothedeepestmeaning
of leadership and coaching.
They can help coaches and
leaders experience what it
means to be authentic, have
purityofintent,andtobeob-
servant in a way that tran-
scendsordinarylearningand
rational thinking.
Butdon’tbelievemyword,
why not experience it first
hand?
30 Management matters: in association with IMI
TheSunday BusinessPost
June28,2015
Usingdatatomake
decisions:aseasy
asridingabike?
By Fergal Carton
T
hecyclistinthepelo-
tonusesaspeedome-
ter to judge instanta-
neousspeed,average
speedforthejourney,
distancetravelledand
variousotherparam-
eters to help manage
performance. Good performance
mightbetoarriveattherightdestina-
tion,withinanallottedtimeframe,and
with all working parts, both physical
and mechanical, accounted for. The
trusty speedo can therefore support
decisions relating to what is happen-
ing in real time, through a quantified
awareness of both real time and past
performance.
Butthespeedoisnotabletopredict
whatisabouttohappen,whetherthat
is related to traffic, road surface con-
ditions, or microclimatic conditions.
Thecyclistthereforekeepsbothhands
firmly on the handlebars, listens for
traffic,andkeepsfocusedontheroad
immediately ahead.
Decision-making for the cyclist
thereforeinvolvesprocessinginforma-
tionofmanydifferenttypesinparallel.
Structured data is being transmitted
via the speedo. Physiological data is
being processed by eyes, hands and
legs,whichareadjustingcontinuously
andautomaticallytothequalityofthe
road surface, the gradient, the pres-
ence of obstacles, and state of energy
reserves.
Organisations,too,juggleinforma-
tion of many different types when
making decisions. Hard data regard-
ing the supply of goods or services is
balanced with softer data regarding
demand. Thus, decisions regarding
the deployment of resources have an
element of risk
The traditional use of information
technology (IT) in organisations was
togivemanagersthe“speedometers”
they need to make informed deci-
sions. Enterprise processes are de-
signed and implemented to collect
data on the use of resources, thereby
giving remote visibility of immediate
and past performance. As with the
cyclist, these decisions cannot ignore
thelessquantifiable,moreuncertain,
orjustplainunknowableexternalfac-
tors that influence the organisation’s
performance. A competitor’s future
position with respect to product or
price, a regulatory change in reaction
to a market condition, or unexpected
customerchurn,thesearefactorsthat
haveprovedmoredifficulttoquanti-
fy and incorporate into management
decision-making.
However,theincorporationoftech-
nology into daily life has evolved to
a point where “digital disruption” is
challenging the way we think about,
and interact with, the world around
us. The ability to render the physical
world “smart” by equipping it with
sensorsandcommunicationcapabil-
ities, the data science capabilities to
identify patterns across increasingly
complex data sets, and the ability to
access infinitely scalable computing
powerviaanyconnecteddevice,have
spawned a digital revolution that is
similar to the industrial revolution of
the 19th century.
However, the different social, eco-
nomic and prudential aspects of the
resulting progress are not yet clear.
Notions of identity and privacy are
surfacingascontrolandownershipof
the resources that provide transpar-
ency are questioned. Organisations
– both public and private – are con-
cerned about their digital strategies,
andsocialenterprisehascometosig-
nifyhowconnectivitycancreatevalue
at a community level. In all sectors
of economic and social activity, the
democratisationofinformationaccess
hasunleashedwavesoffreshthinking
that aren’t limited by how things are
done today.
A key capability for competitive
differentiation, therefore, will be in
the design of new business models
aroundtheseemergingtechnological
capabilities.Ratherthanbecomingab-
sorbedinthespecificsoftheenabling
technologies, managers need more
thanevertofocusontheorganisation’s
strategic goals and the orchestration
of resources to achieve those goals in
a sustainable and profitable manner.
Organisations need to understand
the value of information as a key re-
source in the business model in the
samewaytheyhaveaninnatesenseof
ownershipofotherresources,suchas
inventoryorfinances.Thus,exploring
cloud strategy models has become a
key driver of innovation in organisa-
tions today.
FergalCartonisprogrammedirectorfor
the IMI diploma in cloud strategy
Wheninvestorsaccurately
assessleadership,theyare
indirectly,butaccurately,
assessingthefuture
intangiblevalueofafirm,
writesProfessorDaveUlrich
What is your career back-
ground?
I started my career in the telecommu-
nications industry working with AT&T
in Northern California. I moved back
to Ireland in 2004 and joined Microsoft
in 2007 working in a variety of roles
around our infrastructure and produc-
tivity solutions. For the last three years
I have been the technology strategist
for public sector and education. My
role is to understand our customer’s
priorities and advise how alignment
with Microsoft and our partners’ solu-
tions can accelerate the business im-
pact of those priorities.
Why did you choose
the cloud strategy pro-
gramme?
In our industry you always have to be
learning and be naturally curious to
know more and do more. In Microsoft
that attitude is actively encouraged
and supported.
A lot of my customers and partners
struggled to lift cloud from a “buzz-
word” conversation to a practical busi-
ness case that really justified adopting
cloud. I wanted to change my conver-
sations around cloud and be regarded
not just a subject matter expert but be
a true trusted advisor. I selected the
cloud strategy programme from the
IMI as it was the most complete and
focused programme.
What were the highlights?
I would highlight three things from my
time on the programme:
The business models concept was
invaluable. Cloud is a disruptive and
transformative business model. I use
learnings from the programme every
day to better communicate business
value. I now build business models
with our customers and partners.
The collegial atmosphere was brilliant.
I got to appreciate different perspec-
tives from a variety of backgrounds.
We all had a common curiosity to
learn.
My blueprint business model, ‘Video
Surveillance Analytics via Cloud Bro-
kerage’ won the Joe Ráylands Blueprint
Merit prize, a really proud moment for
me.
What were the challeng-
es?
Stepping back into that classroom
was a big challenge, but the format of
the programme, my fellow students,
faculty and staff quickly helped me
overcome that. I needed to revert to
thinking and responding in an aca-
demic format, something that I hadn’t
done in over 25 years, and if I am being
truly honest, I didn’t do it when I first
went to college .
Building a business model blueprint
was very challenging. Initially I was
expecting a template from our tu-
tors. But the programme effectively
coached me to leverage the skills I had
learned, giving me the environment to
really be practical with the theory.
What impact has the di-
ploma in cloud strategy
had on your career?
The course has allowed me to translate
cloud into business value and appreci-
ate that that value needs to incorporate
different viewpoints and different
frames of reference.
What impact has the di-
ploma in cloud strategy
had on your organisation?
I now have the ability to engage on
behalf of Microsoft in richer business
enablement conversations with our
customers. A lot of the people I work
with noticed that change and have fol-
lowed my lead and it sparked them to
be more curious and learn.
What is your advice to
people planning further
study?
Be able to answer the following ques-
tions: Are you clear about what you
want to achieve from further study?
Can you really commit to the time and
participate fully in the programme?
The courses are business-driven, so
you don’t need to be a technical guru
to engage. Sometimes I think a clean
slate is an advantage in this learning
environment.
Be ready to keep learning, as I have
just started another diploma in data
management at the IMI, sparked by
the great experience I had on the cloud
strategy programme.
A clean slate can be an advantage
Denis Condon, technology strategist, Microsoft Feargal Ward
Being‘naturally
curious’and
havinganappetite
forlearningis
importantwhen
consideringfurther
study,accordingto
DenisCondon,a
technologystrategist
withMicrosoft.
Thevalueofleadership Horsesforcoursesinbusiness
Dave Ulrich
Fergal Carton
Coaching through horses can offer very deep and insightful learning
Organisations
needto
understand
thevalueof
informationas
akeyresource
inthebusiness
modelinthe
sameway
theyhavean
innatesenseof
ownershipof
otherresources
FabioGrassi