Building a strong pipeline of P&L leaders, people who can manage the generation of revenue and profits for the organization, is a constant focus and worry of CEOs, CFOs and CHROs. I’ve facilitated many talent management discussions with boards of directors, executive teams, and business unit leaders. Nothing gets more attention or generates more angst than identifying future P&L leaders and determining the right time to expand their scope of responsibilities. Promote too soon – growth stalls, operating results suffer, and talented employees can lose confidence. Promote to late – talented people leave the company or don’t have sufficient time to develop their operating skills.
Working with business leaders, talent management and development professionals help organizations identify future P&L leaders early in their career. Early identification gives you time to nurture their abilities, provide opportunities to run smaller operations that don’t jeopardize the health of the entire organization, and learn, grow, and make mistakes in a psychologically safe environment.
Identifying P&L talent early is as much art as it is science. I share three components for identifying talent. Each component has a business side and personal side.
Important note: you’ll have to observe or learn about some of these components over time as it would not be legal to asks questions directly in an interview.
A Strong Sense of Personal Accountability
This might seem obvious, but it is difficult to measure. Good P&L leaders have a very strong sense of accountability. It keeps them up at night when things are not going well. It drives them to think beyond themselves and reflect on how decisions impact others. Importantly, they have higher levels of integrity and will not shift blame on others when results don’t go as planned.
On the business side, look for the ability to overcome obstacles. Did they overcome learning or physical challenges as children or young adults? Did they devote significant time to become great athletically or musically? You are looking for GRIT as defined by Professor Angela Duckworth. In her book, Grit: The Power of Passion and Perseverance, she defines grit as passion and perseverance for long-term goals.
On the personal side, look for sudden or traumatic events that naturally increase an accountability mindset. Examples I’ve frequently observed include divorce, death of a sibling, or growing up in poverty or a war zone. These types of environments can cause children to grow up faster, take on more responsibility and focus beyond themselves.
Strong Business Acumen
This component of P&L leader development gets the most attention. I partnered with Acumen Learning for years to build the foundation for my early-in-career colleagues. Based on the book Seeing the Big Picture by Kevin Cope, it outlines the five drivers of business success and how to analyze the drivers using the statement of cash flows, income statement and balance sheet.
On the business side, look for the ability to understand the link between actions / decisions and operational impact. Can the person visualize both upstream and downstream impacts of decisions? Do they demonstrate an intuition about how well a business is doing, versus relying only on financial statements and metrics? As a loan officer trainee, one of the most effective skills taught to me was how to visit a place of business. A great mentor of mine, Marty Fein, would always challenge me evaluate if a business is profitable before looking at the books. Given the type of industry, would a profitable business be clean, quiet, and orderly, or would it be busy, noisy, and dirty?
On the personal side, look for people that grew up in a family business or their parents were executives. These environments naturally exposed future P&L leaders to the realities of running a business. They are also more likely to promote healthy money beliefs, where money is viewed as a tool or means to an end, and not the goal.
This component of P&L leader development gets the least attention but is crucial. Great P&L leaders creatively problem solvers. And many of those problems involve resources. This is the pivotal difference that separates competent managers and administrators from P&L leaders. Often, I find the former to be excellent stewards of resources given. They maximize the efficiency and effectiveness of budgets and work projects. They are rule followers. P&L leaders must know when to break the rules, be inefficient and/or experiment.
On the business side, look for the ability to garner and organize resources in creative ways to achieve goals. No leader has all the money and people they want. Look for people who forge unique partnerships, don’t wait for approval to tryout a new idea, or employ guerilla financing and marketing techniques.
On the personal side, look for talent that builds relationships across departments. They have a positive image / reputation beyond their department. They have a large, diverse, and interesting external network.
Look for and nurture personal accountability, business acumen and creativity to build your pipeline of P&L leaders. Keep an open mind because it is equal parts art and science. In my experience it is difficult to predict all the winners before the race starts, so focus on providing opportunity and observing who rises to the challenge.