Libbey Inc. is a successful middle market company, with sales of $818.8 million in 2013 and a net income of $28.5 million compared to $7 million from the previous year. But one of its biggest challenges is finding people with leadership qualities. "Anybody can have a great strategy, but if you don't have the right people to execute, it won't matter," said CFO Sherry Buck. That means not only having the right people for today but for tomorrow, too.

 

Overnight sensations in business are almost nonexistent. Most companies take years to enter the middle market and then need time to grow larger (if that's one of their goals). At a fundamental level, a sustainable business depends on three factors:

  • sustainable markets
  • sustainable operations
  • sustainable talent

Having sustainable talent requires filling the so-called skills gap, or the distance between the knowledge and abilities that employees need and what they have. Seventy-five percent of middle market executives identify attracting, training, and retaining talent as a top challenge for their companies, and that includes management.

By the nature of the long-term view, a company cannot be satisfied with the same type of managerial talent it has recruited in the past. Markets and business conditions have changed. A company needs to look for the proper leadership qualities in the next generation of managers.

Soft Skills

People coming out of MBA programs have learned about finance, accounting, supply chain management, marketing, and other areas that have become "standardized in management education," according to Garth Saloner, dean of Stanford University's Graduate School of Business. What don't they know? Soft skills - that is, people skills. "Those are the things that are in short supply in managers who [employers] want to rise to the most important and significant ranks in their companies," he said to the McKinsey Quarterly. "And the implication is that they're looking for judgment, and they're looking for the ability to really do critical thinking - which is one of the reasons that we have emphasized critical, analytical thinking in our own curriculum."

The problem is that such skills aren't typical classroom fare. People need to learn them experientially in small groups so they can develop the necessary capabilities, along with the expected mistakes and stumbling, before the application is critical. That's an approach middle market companies can take on their own, creating teams of younger employees with coaching from more experienced ones to work out the necessary dynamics. The skills to look for, according to a piece Dave Power wrote for the National Center for the Middle Market, are the ability to communicate vision so that others understand and can act on it, self-knowledge to improve and lead by proper example, the willingness to challenge the status quo when necessary, and the ability to build trust within a team.

Collaboration

In an increasingly interconnected world, communication is clearly important. Communication becomes even more pressing as CEOs react to the change in how business is done, according to a 2012 survey of 1,700 chief executives by IBM. Three-quarters of the CEOs saw collaboration as a key driver of employee success. By extension, it's a key driver to business success. As true as that may be for industrial giants, it is even truer for middle market companies. They must find ways to compete in a global market even though they lack the massive resources of the world's largest companies.

Being competitive means using partnerships with other companies, working with suppliers along with customers, and ensuring that all employees take corporate strategy seriously and incorporate it in everyday practices. Next-generation leaders will need to use collaboration deftly to keep their companies moving ahead.

Technology

The use of technology of all sorts - computation, materials science, biochemistry, electronics, communications - has become an inherent part of life and of business. Technology lets middle market companies compete with larger ones. For example, Sunstar's GUM dental product line has used social media to successfully drive conversations about oral health without the influence of its main competitors, giants Procter & Gamble and Colgate-Palmolive.

Technology impacts all aspects of a business. Robotics and automation boost productivity, new materials make products stronger and lighter, and electronics are increasingly integrated into almost any type of product, from a car to a greeting card. Next-generation leaders must have an intrinsic understanding of these technologies and how they can be used to leverage business, rather than exhibiting the casual relationship often evident in older leaders to whom technology is a strange new world.

Conservation

In a world of limited resources and growing population, efficient use of what's available is vital, whether it involves materials or energy. Middle market companies want to move forward but cautiously, according to a KeyBank survey. About 62 percent of polled companies said that they expected to expand in the next six months and 69 percent plan to add staff, but they want to manage incremental expenses.

That is a practical example of how companies need a frugal and thrifty approach to virtually everything: avoiding waste of electricity, designing more easily manufacturable products, and retaining customers instead of replacing them with an expensive acquisitions process. Future leaders need to grasp how to make the most of all of their resources, because finding more may not be a practical option.

Of course, looking for leadership qualities is important, but equally important is developing leadership from within. Ensure that these leadership qualities are part of your company culture. Nurturing talent is much more efficient and cost-effective than always trying to hire it from somewhere else.

Erik Sherman is an NCMM contributor and author whose work has appeared in such publications as The Wall Street Journal, The New York Times Magazine, Newsweek, the Financial Times, Chief Executive, Inc., and Fortune. He also blogs for CBS MoneyWatch. Sherman has extensive experience in corporate communications consulting and is the author or co-author of 10 books. Follow him on Twitter and circle him on Google+.