Click here for mentoring and coaching.Leadership Quality

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.

Best Practices

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.

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Three proven leadership development practices help ensure success for high potentials:

1. Coaching by a leadership coach

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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