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Hiring Great Leaders, Retaining Great People, & How They're Connected

What makes a good leader

The characteristics that make someone a strong leader have been discussed for centuries. For as long as there’s been power dynamics, there’s undoubtedly been philosophers, sojourner soldiers, and disciples ruminating over the merits of those they (or others) chose to follow. One can almost imagine the neanderthals grunting their approval as one of their own stepped up to lead their tribe through the day’s next danger.

Fast forward a few thousand years and science has given us data on what gives great leaders that certain magnetic quality. Leaders have an innate ability to stay calm & collected–even in the most stressful situations. They keep their eyes fixed on accomplishing the goal but retain the ability to act nimbly in achieving it. Beyond this, there is a myriad of other requirements that make someone an effective leader, of course. Job-specific expertise, strategic understanding, the list could go on forever. But while these are all incredibly important, ultimately, they are secondary to what science tells us is one of the most important qualities effective leaders possess: Empathy.

Research has proven that physiological and psychological safety are paramount to performance. In order for employees to truly thrive, they need to feel respected, to feel that they’re empowered to bring their full selves to work every day, to innovate, to be listened to. Employees want to be empowered (and not always with cash. Oftentimes, compliments are just as–if not more–effective). Empathy is key to building trust and empowering employees to do their very best every day.

In an analysis of top CEOs’ and global leaders’ communication styles, there’s an overwhelming preference to appeal to emotion and intuition as opposed to logic. In fact, these top leaders appealed to emotion and intuition almost three times as much as they referenced data, facts, and figures. This is because, as humans, we desire a common purpose. We like to feel a strong sense of belonging. Emotion and intuition, somewhat surprisingly, are far better at building social cohesion and alliance to a cause than logic. And if a leader wants to gain buy-in with not only their team but other influencers in an organization, they’d better understand how to effectively do so.

What a good leader can do for your people

Everyone knows what bad management is. Any senior-level professional has encountered one or two managers in their career that, while perhaps not rising to the level of “bad”, did not positively affect their performance in any meaningful way. It can be a painful experience to work under a leader who is inconsistent, uninspiring, apathetic, or worse. Research shows a correlation between perceived leadership faults and employee performance and departures. The old business adage: “People don’t leave bad jobs; they leave bad managers” is true. And at no time has that been more true than right now. After the great resignation, employees have proven that they simply will not tolerate poor management.

Not only will bad leadership stifle innovation and productivity, it can also lead to a business having to shell out thousands in turnover costs. The average cost of turnover is conservatively estimated at ~20% of an employee’s annual salary. This factors in the cost to re-post the role and re-train a new hire, but also the increased stress and lack of efficiency on an overworked team, loss of institutional knowledge, and so on. Suddenly, bad leadership becomes even more costly.

The purpose of a leader at any company should be to remove obstacles and enable people to do their best. They should be advocates for their team, encourage collaboration, and be an asset to the company’s culture. This becomes doubly important in small and high-growth stage companies. After all, the impact of a single employee at a company of 5 people is immense. The same goes for companies with 30 people, 60 people, or even 200. Good managers create good teams and good teams tend to do great work.

What a good leader can do for your business

Study after study has proven that happy teams with strong leadership are not only more successful (and thus have a higher ROI), but also cost the business less money in the long run. Leaders who are encouraging, inspiring, and create a strong sense of belonging, can increase employee job performance by 56%. That’s a whopping number. The impact of that kind of performance is immense by any measure. On the cost savings side, good leadership can reduce turnover by 50% and sick day usage by 75%.

For smaller companies that are pre-IPO, the incentive for leaders who are great trust and community builders is even greater. Between 1994 and 2000, 175 pre-IPO tech companies with around 70 total employees in Silicon Valley were studied by the Stanford Project on Emerging Companies (SPEC). The study analyzed these companies along three categories of management:

  • How were the companies attracting employees?

  • How were companies selecting employees?

  • How were companies controlling employees?

What they found was that there were five employment models that companies generally followed.

Of these models, the Commitment archetype was the most successful pre-IPO. In fact, not one Commitment-modeled company failed in its pursuit of a successful IPO. What made this one model that much more successful than the others for small, pre-IPO stage companies? People management and leadership in this archetype are focused solely on trust, transparency, and common purpose.

The attraction of working with Commitment model employers is the employee’s sense of purpose and belonging. They maintain a great culture by selecting employees who are a strong fit from a personality perspective. Employees are controlled not by a top-down approach but by their peers' social rules and expectations. And isn’t that the dream scenario for any business owner–to make it so that managers don’t have to manage? With great leaders who set a good example, it’s not only possible; science tells us it works best for smaller companies.

How to identify a good leader

So, we know what makes a good leader and how they can help employees and the business level up, but that doesn’t make them easy to find. On the contrary, truly great, highly impactful leaders are actually rarer than they should be.

Unfortunately, it’s very commonplace for business leaders to have gotten to a high level organizationally without any true management training or support. More often than not, good employees are selected because of their acumen as individual contributors. It’s assumed that because they’re high performers in their current role, they’ll be successful in people leadership, as well. The majority of managers will be thrust into their first people leadership role with very little support and even less formal management coursework. Good managers, as it turns out, often end up that way in spite of the systems that got them there.

So, how do you separate a good leader who does as they say from one who sweet talks their way through an interview with all the right keywords and jargon?

At found.Consulting, we’re big fans of behavioral-based interviewing. After all, past behavior is indicative of future behavior. Knowing that great leaders are effective communicators who build trust, encourage innovation, enable collaboration, and drive vision and purpose, we can ask questions that help identify examples of when they’ve done this in the past. For example;

  • For strong communication: What is your approach to communicating important milestones for the company? How has this approach worked in the past?

  • Building trust: Tell me about a time when you knew that whatever you said or did, it would anger people.

  • Encouraging innovation: Can you tell me when you allowed an employee to try a new idea or pursue their own project?

  • Collaboration: What is your approach to integrating new members into your team? How do you get them to feel included? How do you ensure they get up to speed quickly?

  • Drives vision & purpose: Tell me about a time you lead an organization through a tumultuous period. How did you keep employees focused? What was the outcome?

How a candidate answers questions like these will be illuminating. Are they clear and specific with their examples or do they talk around and answer in hypotheticals? Are they forthright in acknowledging when they’ve messed up and does it appear they’ve learned from those mistakes? Is the language they use to describe particular situations charged and emotional? Are they conflict-avoidant or do they address problems head-on? Do they cast blame or point fingers or feel the buck stops with them?

The good news is that, once all of the interview data has been collected, there are opportunities to validate what they’ve said about the things they’ve accomplished and their style of leadership. Not only are formal references an opportunity to dig in deeper (references for any high-level management professional should include a mix of their supervisors, peers, and direct reports), but backdoor references should be utilized whenever possible, too. References should be able to confirm that the situations the candidate said happened actually did in the way the candidate said they did. In order to be truly useful, reference check questions should be specific and also follow a behavioral-based model. If there are particular concerns about a candidate through the interview process, then questions to references should be tailored to address them.

Ultimately, finding and selecting an amazing leader is just the beginning. But getting the right person in place is the most vital step. Once a company has the right leadership, the fun of taking the team, the culture, and the business to the next level really begins.

Ready to hire your next great leader? Get in touch with the experts at found.Consulting today.

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