Some Problems of Current and Future Leaders
- Competition is now coming from unexpected quarters. Because the rules of the business game are changing with this competition, current leaders represent what the business needed in the past not the present or the future.
- The talent pipeline often lacks sufficient numbers to replace leaders that are or soon will be leaving—often due to the increasing “war for talent” that increased competition has sown.
- The organization’s expansion goals outstrip the amount of internal talent needed to support them.
- Globalization and increasing technological demands make the leader’s job more difficult than ever.
- Problems with strategic direction, organizational alignment, and employee commitment (e.g., unclear direction, poor alignment, and little commitment) continue to exist and are exacerbated in the current competitive environment.
- Human resources and those responsible for leadership development feel increased pressure to demonstrate value, particularly in terms of return on investment for leader development, and other education and training initiatives.
- Leadership development initiatives are not integrated with business needs, and consequently, are of questionable value to internal customers.
The “perfect storm” of organizational challenges and leadership pressures has prompted study after study hoping to determine a key to survival. And in study after study superior financial and organizational performance (or otherwise) have been linked to insights and inspiration of effective leadership. This comes as no surprise to those who have worked with or for a great leader. Good results follow good leadership. We are motivated by good leadership, guided by good leadership, and even held accountable by good leadership. In fact, employees who are led by strong leaders are more satisfied, engaged, and loyal than employees with weak leaders. Most of all, we are often developed into good leaders ourselves as a result of being taught by and following the example of leaders who were role models, mentors, and teachers.
These findings have been confirmed across different dimensions of leadership development. For instance, the Corporate Leadership Council found that organizations with strong leadership bench strength have approximately 10 percent higher total shareholder return than their weaker peers. Similarly, companies with above average financial returns have more comprehensive succession planning processes and are more committed to developing future leaders.
What brings these results? Previous research in leadership development has yielded five guiding principles for leadership development in general. Companies have shown that by following these principles they can effectively improve their leadership development results and streamline their organization’s focus on leadership development.
These principles are:
- Start with the Top
- Link Leadership Development Directly to the Business—and Deliver Results
- Build an Integrated Leadership Strategy
- Drive Consistency in the Execution of Leadership Programs and Practices
- Hold Leaders and the Organization Accountable for Results—Both Developmental and Business
The research has shown that individually each of these principles will yield positive results; however, practiced together, they can propel an organization to new heights in leadership development.
1. Start at the Top
The engagement of CEO support for leadership development is often what separates the top performing companies from the rest. In a study of the top 20 companies for leaders, Hewitt found that 100 percent of these top companies involved the CEO in leadership development and many initiatives were sponsored directly by the chief executive, compared with 65 percent of other companies studied. Similarly, board level involvement also makes a difference in leadership development. A majority of top companies (65 percent) involved the board in leadership development activities and processes, compared to only 31 percent of other companies.
However, involvement of senior leaders does not just stop with endorsing and sponsoring programs. A current trend is to use top leaders as teachers in developmental programs as well as coaches and mentors to high potentials. In fact, 75 percent of leading learning and development organizations identified the use of senior executives as faculty in programs as the leading trend in the near term. In addition, just over half of the respondents from this same group noted that the use of executives as coaches would also be a significant trend.
GE’s Crotonville became a household name because of the importance placed on it by Jack Welch. And not only did he espouse the strategic importance of learning and development, but he modeled it by staying deeply involved in the company’s efforts. Other examples of executive involvement at the very highest levels include PepsiCo’s Roger Enrico in the past decade and Caterpillar’s Jim Owens in this one. Both these leaders have been intimately involved in their organization’s leadership development strategies and have seen great results from their efforts.
To avoid frustrating senior executives and disillusioning developing leaders, coaching should be given to senior executives to allow them to improve their teaching and mentoring skills.
2. Link Leadership Development Directly to the Business—and Deliver Results
Leadership development should begin and end with the business objectives as well as personal development needs in mind. Hewitt found that the top 20 companies in the U.S. in leader development closely linked development strategies with business strategies. Alignment with business strategy and priorities was seen to win out over a hodgepodge of benchmark programs.
As companies become more concerned with measuring the impact of leader development activities on business success, they are developing better methods of assessment. For instance, 70 percent of corporate universities measure improved product/service quality as well as improved customer service. And 59 percent measured reduced operating costs as a result of leader development. Other measures include increased revenues (51 percent), improved sales efficiency (49 percent), and increased profits (48 percent).
Yet with solid measures available (such as savings generated by actions initiated as a result of program learning) , less than one company in five currently tracks business results from leader development activities as compared to over three of four companies that measure participant satisfaction and learning.
The difficulties associated with measuring business impact explain much of the difficulty of the task. These include creating a common language that defines value, gaining access to appropriate business data, and finding matched samples to contrast against leader development participants.
3. Build an Integrated Leadership Strategy
Perhaps the most significant, overarching trend in leader development is the pressure and need to organize development activities and initiatives into an integrated strategy. In a 2004 study, 69 percent of respondents noted that the “creation of an integrated strategy and system for all executive development” was the leading priority of their learning and development organizations. This result replicated a 2000 study as well. Of course, these results show that this is a key priority of learning and development organizations, and that it is difficult to measure and to show causality to the recurring results.
Many organizations see leadership development as a bunch of puzzle pieces representing initiatives and programs that somehow fit together but do not seem to come together in the right way. These pieces include competency models, 360ºs and other assessments, developmental job rotations, experiential and action learning, talent management, succession planning, rewards and recognition, and coaching and mentoring.
A leadership development architecture can bring these often disjointed elements together into a consummate whole that has a greater chance of delivering real results This architecture must be integrated and linked to the strategy and needs of the business in order to increase the potential for real impact and then communicated widely to engender support
4. Drive Consistency in the Execution of Leadership Programs and Practices
The best companies for leaders consistently execute on the strategies that make for good leadership development. They create enterprise wide standards, practices, and metrics for leadership; cascade programs and processes down through the organization to improve impact and drive cultural change; include flexibility in centralized leader development programs in order to address specific business needs; and customize developmental solutions for business units in order to better ensure senior management support and engagement.
An important leverage point in leadership development efforts is the high-potential leader population within companies. Accelerating the development of high potentials was listed as a key objective by 62 percent of learning and development professionals. However, even with this objective in mind, 46 percent of companies have no systemic process for identifying and developing candidates for key leadership positions, including high potentials. And 37 percent of companies see their ability to identify leadership potential as a serious weakness. Among the top companies in leader development, 95 percent identify high potentials as compared to 77 percent of other companies. Additionally, 68 percent then inform those high potentials of their status and 72 percent track their progress and turnover systematically.
Even greater differentiation in the development of high potentials can be seen in the techniques and methods used. Ninety-five percent of top companies provided increased access to senior leaders for their high potentials as compared to 45 percent of other companies. Similarly, top companies provided internal training (90 percent vs. 51 percent), developmental assignments (89 percent vs. 43 percent) and mentoring and coaching (58 percent vs. 24 percent) at a much higher rate than did companies not considered benchmarks for leadership development.
An equally effective succession management strategy and process must also be in place. Overall, half of internal candidates selected for leadership positions fail when there is no succession management system in place. And, if they had the opportunity, organizations would rehire only 62 percent of their executives.
To increase the odds of success, an effective succession management process should include visible support by senior management and line leaders who are involved in identifying and developing succession candidates, a time frame for achieving planned development actions, flexibility to change in response to strategic needs or competitive pressures, and the sharing of information with candidates.
5. Hold Leaders and the Organization Accountable for Results—Both Developmental and Business
Holding people and the organization accountable for developmental efforts is a trend that continues to gain momentum, especially in an increasingly competitive environment where any investment or outlay is carefully considered and monitored for a return. In fact, 52 percent of learning and development professionals planned to use systematic measurement/evaluation to measure the impact of their development efforts.
Best practice firms anchor their leadership development efforts with lean competency models that are tied to performance and reward systems. A clear, lean set of competencies was heralded as top companies in leadership development integrate their competencies into succession planning (100 percent of top companies vs. 78 percent of others) and make the competencies a baseline for identifying and then developing high potentials as part of succession planning.
In the top quartile of leadership development companies identified by Hewitt, metrics were integrated with succession planning 71 percent of the time, versus only 45 percent of the time in companies in the bottom quartile. These companies also more fully integrated competency measures into formulas for base pay (60 percent vs. 30 percent), annual incentives (60 percent vs. 31 percent), and long-term incentives (65 percent vs. 23 percent).
Top leadership development companies also use competencies as metrics in the performance management processes. They are set as behavior standards for leaders and managers and pay is influenced by performance against them.
Even with these results, many companies do not measure results in learning and development as they should. In a study that looked specifically at European-based multi-nationals, 63 percent reported never measuring return on investment in learning and development, even though these same firms reported that the importance of learning and development was higher than ever before. There is clearly more work to be done in holding people and organizations accountable for learning and development results.
A decade ago, there were only isolated bits of research information available about what makes leadership development successful. Today, a growing consensus is emerging about what is required for success in this arena. Unless senior executives see the potential value of learning and development as a business tool, it is difficult for programs to have enough impact to bring about organizational change. Human resource professionals can often win support by pointing out the contributions to business success that can come from programs that are aligned with and support strategic objectives. Moreover, alignment of various human resources systems (performance management, succession planning with competency models and incentive compensation) helps to increase both the efficiency and impact of these activities. Finally, establishing the link between leadership development and business success is a powerful tool to get the attention of leaders throughout the organization and establish the creditability of leadership development activities. All together, the bottom line seems to suggest that seeing links between components of the business system helps them all work more effectively to accomplish the strategic objectives of the organization. In the next issue, we will explore these insights with five leading exemplars to see what additional insights can be garnered in the search for greater success in leadership and organizational development.
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 Ibid, 44.