Leadership
quality is reflected in bottom line results. Yet, a
leadership void is developing in Corporate
America.
Most executives and HR
specialists know a large percentage of Baby
Boomers
will retire over the next five to 10 years — and
with them, 50% of the CEOs of major companies. The talent
to replace them will be chosen from the next generation
of only 45 million available workers. Globally, with
economies growing rapidly, the demand for leaders is
outstripping the supply.
Ultimately, the
stakes and costs will be daunting. Most organizations are
not yet facing the problem because it hasn’t hit
them. Luckily, it’s not too late to develop
a healthy supply of
leaders. Time,
however, is running out, as CEO and top-level
talent require
development.
Top 20
Companies for Leadership Development
To answer questions
about who’s doing it right and the leadership
development practices that should be implemented, the Hay
Group, in partnership with Chief Executive
magazine, surveyed 1,279 top companies worldwide. Of
these, 564 completed the survey.
The top
20 companies for leaders in 2006 were:
General Electric,
Procter & Gamble, PepsiCo, Citigroup, Johnson &
Johnson, HSBC Holding, BASF, Home Depot, IBM, Coca-Cola,
Dell, Microsoft, Novartis, Verizon Communications,
Nestle, Lockheed Martin, GlaxoSmithKline, Amgen,
Hewlett-Packard, BAE Systems.
Research conducted
over the last 60 years shows good leadership is reflected
in bottom-line results. In the top 20 companies cited,
each had more leaders than the average, were happier with
their quality and were more committed to leadership
development.
Bottom
Line Impact of Effective Leadership
Astonishingly, the
five-year shareholder return for the top 20 versus their
peer groups showed the best companies for leaders
outperformed the S&P significantly. The companies
that excelled at leadership development showed a return
of 4.07% versus the peer group at
0.54%.
Leadership
itself has
risen in value, too. The value of “intangible
assets,” including everything from skilled workers
to patents and branding, has ballooned from 20% of
companies’ value in the S&P 500 to 79%
today.
Homegrown
Versus External Imports
The Hay Group’s
research shows the most successful companies develop
their own leaders. Recruiting from the outside is a risky
strategy.
The Harvard Business
Review states “top performers who join new
companies…are unusually slow to adopt fresh
approaches to work, primarily because of their past
successes, and they are unwilling
to fit easily into
organizations…”
Furthermore, a recent
study of 1,000 U.S. companies showed annual turnover
among senior managers jumps dramatically when a new CEO
takes the helm, especially when he or she comes from the
outside. There’s a 17% turnover with a new CEO
appointed from within the firm, as opposed to a 25%
turnover among all executives with a new CEO from outside
the organization.
The Hay Group research
shows it takes around 10 years to develop the skills
needed for a senior
leadership role.
The top 20 companies were
more likely to have a formal process for identifying high
potentials. They don’t necessarily rely on line
manager nominations; rather, they collect and debate
benchmarking data, which enables them to select
according to best in
class.
The top organizations are
also likely to have separate
career tracks for high-potential
professionals
and formal programs designed to accelerate their
development.
Three
proven leadership development practices help ensure
success for high potentials:
In a recent survey,
nearly one in five managers ranked
getting a promotion as their most challenging life
event.
One big reason, say
researchers at Development Dimensions International
(DDI), which conducted the poll of 785 business leaders,
is that 40%
of managers get little or no support as they enter their
new jobs,
according to the survey. "It's sink or swim," says
Matthew Paese, vice president at the Bridgeville,
PA-based human resources consulting firm.
Even more managers may
express such fears in the near future, as
many Baby Boomers retire
and leave an even bigger mentoring void for executives on
the move.
The business leaders
surveyed by DDI ranged from line supervisory
staff to those
in executive suites, including 400 managers outside the
U.S. Promotion was ranked as "most challenging" by 19% of
respondents, followed by bereavement (15%), divorce
(11%), moving (10%) and managing teenage children
(9%).
Source: BusinessWeek,
May 14,
2007
2.
Mentoring by a senior manager/executive
Across the country,
senior managers are influencing young talent by being
matched up with junior staffers interested in the
opportunity to understand the corporate culture.
The
mentor and mentee
relationship is
one of mutual benefit. The mentor gains the satisfaction
of helping develop the talent and mentees get access to
"someone who has been there" as knowledge and experience
is shared from one generation to another.
Last year, American Axle
& Manufacturing (www.AAM.com)
received an award for Best Practices in Mentoring in
Southeastern Michigan by the Greater Ann Arbor Society
for Human Resource Management (www.GAASHRM.org)
in partnership with the American Society of Employers
(www.ASEonline.org).
The automotive industry
supplier began its mentoring program in 1999 with several
goals: to retain associates (as they call their
employees), train and attract green talent, use mentoring
as a recruitment tool, prepare participants for executive
roles and to broaden and diversify the executive group.
Mentees can develop corporate competencies and assist in
greater leadership roles, learn intricacies of working at
the company, develop work/life balance, navigate company
politics...or...in the words of one mentee, have "a safe
and confidential source to talk about
problems."
In addition, mentees learn
conflict resolution, develop resource networks, acquire
skills and training, and even discover the best schools
and shopping in the area. The mentors take pride in
assisting new staff members and in helping them solve
problems, including helping staffers who are having
conflicts with their supervisor to transfer to another
department instead of leaving the company.
American Axle employs
approximately 11,000 worldwide associates and has had 181
mentors and 142 mentees in the history of the program
with 84 pairs working together today.
Source: HR News, April
2007,
www.SHRM.org
3.
Rotational job assignments
The top 20 companies
believe it’s more effective to expose high-potential
candidates to a broad range of hands-on experiences with
real responsibility. Stretch assignments provide a
breadth of experience and greater perspective.
In and of themselves,
however, job rotations are not developmental experiences,
unless the individual is provided the framework for what
he or she is supposed to learn. There must be some kind
of mentoring
or coaching to
provide this framework.
The
research also highlighted two specific activities focused
on mid-level managers:
Web-based
self-study programs
Executive
MBA programs
Organizations should
take into consideration growth factors and derailers to
identify high-potential talent. Certain deep-seated
traits can affect a person’s ability to learn and
develop over time. Here are four identified by the Hay
Group:
Beyond-the-boundaries
thinking
Curiosity
and eagerness to lead
Social
understanding and empathy
Emotional
balance
Preparation is the key
to filling the leadership void. Time may be slipping
away, but the steps organizations can take to
implement
effective leadership development
programs are
clearly defined. Implementing them will yield results
quickly.
"I'm most effective with one-on-one coaching. I
would guess I coach 100 to 200 employees in a given
month. I don't really think you can do the kind of
leadership I do on a formal basis.
It
has to be
genuine.
I don't think you can force a human
connection."
Brad Anderson, CEO
of Best Buy
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