we are working on establishing a way to assess leadership performance since leaders have the biggest impact on employee and company performance. More on that shortly.

The leadership and recruiting literature is full of advice on “how to select managers who can engage people” or “top qualities to look for in selecting the ideal manager.” Entire industries are based on finding people who can motivate, inspire, and lead others. Teams regularly outsource the job of selecting the next generation of leaders to headhunters and executive search firms, or they leave it to in-house recruiting.

But are those traditional practices the ones that will carry enterprises through what futurists are calling the next industrial revolution? As exponential new technologies like machine learning, Big Data, and the Internet of Things begin to shape the workplace, organizations are starting to question key mainstays of their human resource practices – even such holy grails of recruiting, like leader selection.

As complexity within and between enterprises increases, people are recognizing that today’s rules don’t apply to the future of work, and adapting to future challenges means exploring approaches for working in more self-managed ways. Future-focused leaders are recognizing the limits of their ability to oversee work. And they are beginning to let go of some things leaders have traditionally done. They are recognizing that 21st century business challenges require an entirely new level of agility and resilience. One that develops when people are enabled to understand the business strategy, think deeply about their personal responsibility for achieving it, and empowered to contribute directly with their unique skills and talents.

It’s exactly what I am doing in my role as head of SAP’s Future of Work team. I am exploring new approaches and putting empowering leadership principles into practice to begin our journey to become a self-managed organization. Here’s the first part of our story, which begins with enabling my teams to select their own direct managers.

Three reasons why you need to rethink leadership selection

We know that an employee’s relationship with their direct manager has a huge impact on engagement. Some research even cites that 80% of employees who were dissatisfied with their direct manager were disengaged. Given how strong that driver of engagement is, why wouldn’t we give people more say in determining whom they will follow? Second, who is better at determining whether a manager is truly engaged than the people they lead? Employees who are supervised by highly engaged managers are 59% more likely to be engaged than those supervised by disengaged managers. So, creating a selection process with engagement – both employee and leader engagement – in mind is one big reason to enable teams to select their manager.

Trust is another reason.

As remote work increases in our digitized workplaces, existing corporate control mechanisms no longer work like they used to. Today’s leaders can’t walk down the hallway to the next office and check on progress of a critical project. They need to trust that their team member, sitting half a world away, has it covered. In an environment like this, trust becomes a substitute for control. And trust grows when people have a say in things that are important to them.

Trust is reinforced by transparency.

As people understand and can participate in the way important decisions are made, they contribute more, think more, and step-up more. It’s not about blindly sharing information or decision-making powers, rather about being transparent for the purpose of making better decisions. It’s about building a culture that respects the connection between transparency and effective decision-making. That requires practice. Teams don’t hit the ground running and make smart decisions on day one. They need to create decision-making protocols. Enabling teams to select their own leaders challenges them to hone their decision-making skills.

It’s time to get out of your team’s way

So, that’s why I think it is important to empower teams to select leaders.  But how can they do it and what are potential pitfalls? In our case, we had a couple of fast-growing teams that were getting ready to launch products that were expected to become key parts of our product portfolio. We needed managers with the insight, passion, and discipline to lead the teams forward. Sure, I could have selected the people myself. It would have been the fastest option. But I decided to empower the team to make the decision.

Team members who would be reporting to this person were asked to nominate the candidate from their own ranks they thought could lead the team forward. Those candidates were then asked if they wanted to lead the team. If they said yes, the entire team was asked to vote on the decision.

Was it easy? Certainly not. The team had to think deeply about the team’s goals and the requirements of an effective leader who could help them achieve those goals. They had to explore ways to stay objective and to consider diversity. Was everyone thrilled about this approach? Again, not everyone was ready or willing to take on the responsibility. Not everyone demonstrated patience to ride out the conversations that needed to happen.

Working in self-managed ways creates more options, and that leads to more expectations about how things should happen – and not all expectations can be fulfilled. Decisions may take longer when we work in self-managed ways, but the decisions have more “stickiness.” That is, people respect them more, understand them better, and line up behind them.

Today, four of my leaders have been elected by their teams. One has served as a leader for five years. We have completed this leader election process in Germany and in China, taking into account cross-cultural differences – and it works. How do we know? Our trust score and employee engagement score is extremely high.

People have a very keen sense of who a natural leader is. And letting them elect who they want to be led by seems quite natural as well. But electing a leader is just the first step. Currently, we are working on establishing a way to assess leadership performance since leaders have the biggest impact on employee and company performance. More on that shortly.