2007 Volume 10 Issue 3

Strategic Leadership – Part Two

Strategic Leadership – Part Two

Part 2: Developing strategic leadership with "lessons from the best."

In Part 1, “Applying Lessons Learned from Research about Strategic Leadership Development,” we discussed the “perfect storm” of problems today’s business and governmental organizations face and their profound implications for current and future leaders. Part 2 discusses what lessons can be learned on developing strategic leadership from a recent study of five benchmark organizations, Caterpillar, Cisco Systems, PepsiCo, PricewaterhouseCoopers (PwC) and Washington Group International.

In this article the authors will report on their recent research about strategic leadership development along the four dimensions listed below, including what they found as “best practices.” The benchmark organizations were subjected to deep, detailed study through structured data collection and site visits.

Illustration: Nicholas Monu

Building 2020 Leadership Vision

High potentials in many leadership development programs will be at the very top of their organizations in 10 to 15 years. The challenge of developing leaders with 2020 vision thus becomes more than a double entendre. The results of our research confirm in many important ways much of the work on leadership development to date, while also making important additions and clarifications. They fall into four broad themes:

  1. Developing Leadership Strategy
  2. Building an Integrated Architecture for Strategic Leadership Development
  3. Implementing Successful, Strategic Leadership Development
  4. Evaluating Success

Within these broad themes, we have broken out the key findings from the research into several more specific messages.

1. Developing Leadership Strategy

Organizations have teachable moments too.

Much has been written about the importance of providing developmental opportunities for individuals at the appropriate “teachable moment.” There is ample evidence that managers benefit more from educational experiences that are “just in time” for them to use them rather than “just in case” they eventually need a new set of skills. These moments often occur when individuals have just been asked to change their identities-i.e., become managers rather than individual contributors, managers of managers, or general managers with overall operational responsibility for a business unit.

Similarly, organizations seem to have moments when the development and articulation of a leadership strategy are especially appropriate. In our research, it appears that these opportunities generally occur when there is a new CEO who wishes to align the organization around a new strategy, when two organizations have merged, or when there is a significant organizational crisis.

For example, when Jim Owens became CEO of Caterpillar in 2004, one of his early decisions was to empower the Leadership College of Caterpillar University to create a “Leadership Quest” program for the firm’s high potentials. This program built on an earlier initiative that created the firm’s “leadership framework” or competency model and was intended, according to Owens, to “give our next generation of leaders an infusion of ‘yellow blood’.”

In 2002, Washington Group International (WGI) emerged from Chapter 11 with a four-person “Office of the Chairman” headed by Stephen Hanks as CEO and a new three-fold mission statement that identified “people” and their development as first priority. According to Hanks, “The company that develops talent the fastest will take the hill.”

Each benchmark company used a key organizational transition to develop, articulate, and align a new leadership strategy with the strategic direction of the firm. These transitions became teachable moments for the organization and formed crucial starting points for achieving excellence in leader development.

Linking corporate strategy and leadership development strategy creates winners.

The direct link between a leadership development strategy and corporate strategy provides great benefit to an organization and its employees. Alignment with the corporate strategy is clearly a key concept for successful leadership development. Organizations that realize this establish a leader development philosophy that permeates all levels of the organization and is meaningful to all employees.

At Caterpillar, alignment is achieved by receiving input from the executive office, business units, and process owners of the critical success factors. To further embed leadership development into the business strategy, metrics were established to connect leadership to the business. PwC links development activities to its strategy to become the “distinctive firm.” Programs that are successful are designed to reinforce corporate strategy, thus ensuring linkage and success. PepsiCo’s leadership development strategy is grounded in the belief that strong leaders are needed for success in the marketplace.

As these short examples show, each benchmark company worked hard to ensure that emerging leaders are prepared for the future and its realities and not bogged down with the past.

Executives use leadership development as a powerful tool to formulate, translate, and communicate strategy.

While education is a relatively small portion of the entire developmental process for leaders, carefully crafted learning initiatives can be important in providing input from throughout the organization, effectively communicating the reasons for and implications of corporate strategy to managers who will need to translate the strategy for employees throughout the organization so they understand their role in making it happen.

Various studies have concluded that 60 to 70 percent of all strategies fail to be successfully implemented.[1] Our benchmark companies seem to have discovered that one way to beat these odds is to ensure that everyone in the organization understands the strategy, the reasons for it, and their role in making the strategy happen. These companies also understand that effective developmental activities can be an effective means of sharing the information and providing some of the tools for successful implementation.

Lean competency models and values are the foundations of strategic leadership development.

A simple leadership model with a concise statement of values serves as an important point of focus in leadership development. None of the best practice partners had a “scientifically valid” competency model; most had created their own or adapted it from a set of competencies developed by an outside firm.

The benchmark companies in our research kept their values and competencies simple and straightforward, understanding that competencies should apply at all levels within an organization and directly lead to better performance.

2. Building an Integrated Architecture for Strategic Leadership Development

Strategic leadership development is a partnership between senior executives and multiple human resource systems.

Senior executive support, usually starting with the CEO, is vital for success in strategic leadership development. Yet, even the most effective CEO cannot assure success without the involvement of the entire human resource system. Conversely, training and education professionals will not be successful unless they reach out and collaborate with their colleagues in line positions and in other human resource specialties.

For example, within Cisco’s HR function, the organization’s Worldwide Leadership Education group works with leaders to identify candidates for its leadership development programs. Executives then help to design the programs, ensuring that the program meets business needs and aligns with strategy.

At Washington Group International, corporate leadership and the business units share responsibility for leadership development. The development and strategy office is responsible for the design, development, implementation, and maintenance of the programs while the office of the chairman reviews, approves, and provides feedback on moving forward with development. The 14-member senior executive leadership team meets regularly to discuss leadership development.

As leadership development increases in importance in corporations, partnerships with executives and HR must continue to be strengthened in order for these efforts to succeed.

Strategic human resource development (HRD) is a key part of the corporate planning cycle.

Another test for determining if developing leaders is a strategic priority for a company is whether there is a HRD component to the planning cycle. The benchmark companies in this study make people planning something that every key executive is expected to address in concert with their human resource partners (usually including succession planning) and their immediate superior. In other words, it makes sense to consider what key players are expected to implement the strategy and what assistance they need to enhance the probability of success.

Washington Group International leverages its annual strategic and business planning sessions to discuss employee development and leadership development needs for the organization. Similarly PepsiCo’s career growth model aligns with the organization’s annual operating calendar.

These last two findings lead to a strong conclusion that the successful development of leaders requires a strategic alignment of planning and all human resource systems.

HRD can win the support of top management by involving them in strategic learning initiatives and by knowing the business.

Most of the exemplars in this study have a high degree of executive involvement in the delivery of key corporate programs. Similarly, executive involvement in programmatic design can ensure that program content addresses topics of genuine concern to this key constituency and can contribute to higher levels of support for the ongoing initiative.

At Cisco Systems, each program has an established cross-functional steering committee that ensures linkage between the program and the business. The business leaders on the steering committees help drive the design of the programs and recruit appropriate executives into the classrooms

A Board of Governors for Caterpillar University includes the CEO and senior executives who approve learning budgets and priorities as well as determine policy. An advisory board for each college includes senior leaders from business or “user” groups. This group has a geographic and subject matter mix and membership from most of CAT’s business units.

While it is important to involve line executives who have a deep understanding of the business challenges facing an organization, this is not enough to ensure programmatic success. Successful HRD partners must also understand the business as well as leading edge leadership concepts.

Photo: Bart Sadowski

Leaders who teach are more effective than those who tell.

One of the surprising findings of this project was the degree to which senior executives practice the concept of “leading by teaching.” At PepsiCo Paul Russell, Senior VP of Corporate Training & Development, speaks of “the magic of leaders developing leaders.”

According to Russell, the missing adult learning principle is that, “People learn best when they get to learn from someone they really want to learn from! At PepsiCo, the ‘teachers’ our executives want to learn from are our own senior leaders. They are world class, widely respected and have proven that they can do it HERE!”

Senior executives are asked to share their personal perspectives, build participant confidence and skills while demonstrating support for their growth. Of equal importance, senior leaders get greater teamwork from participants and get to know key young leaders, while developing more loyalty, motivation, productivity, and better alignment around vision and key strategic initiatives.

Corporate learning initiatives tend to focus on high potentials.

Substantial organizational impact can be gained by involving small numbers of people with high potential who will return to their regular jobs and translate their learning for others in various operations. Similarly, many key corporate programs can be adapted by business groups who wish to provide a similar experience for their key people that align with the corporate emphasis.

While PricewaterhouseCoopers designed its PwC University experience for 2000 U.S. partners, and Caterpillar involved all managers in their 2005 strategy rollout, most key corporate initiatives in our study were focused on high potentials. Caterpillar’s Leadership Quest involves approximately 50 key mid-level leaders per year. PepsiCo’s CEO program involves approximately 40 high potentials each year. Washington Group International’s Leadership Excellence and Performance (LEAP) project began in 2002 and had graduated 48 participants by mid-2006. Cisco’s Executive Leader Program focuses on the company’s strategic intent and serves approximately 40 top leaders annually. This program was designed for employees who are newly promoted to the vice-presidential level, or who are filling a vice-presidential role.

3. Implementing Successful, Strategic Leadership Development

HRD owns the process and maintains strategic control.

A somewhat surprising finding was the degree to which the exemplar firms maintained control of the design and delivery of their leadership development programs while leveraging input from trusted outside partners or advisors. All had relatively small staffs for the HRD function, yet had delegated relatively little control to outsiders.

Since PwC is a professional services firm, it has a greater involvement with outside professionals-it believes their partners’ time can be better spent on helping their own clients than trying to become experts in HRD. PwC’s Learning and Education Group has a very small group involved in leadership and partner development, which is totally involved in every aspect of their programs but relies on external vendors for some design and most delivery.

Caterpillar works closely with the Hay Group and Duke Corporate Education in key programs, but leverages the input from outside specialists to provide the latest thinking in leadership initiatives while maintaining a specific business focus for both design and delivery.

Human resources departments leverage their talents with the judicious use of consultants.

While leadership development remains firmly under the control of the company, the lean corporate staffs in these benchmark companies leverage their time and talents with the judicious use of outside expertise. Because of the emphasis on knowing the business and on lead staffing, most of the benchmark companies involve outside firms or specialists in both the design and delivery of their learning initiatives. Yet, no matter how busy they are, they never completely turn over either challenge to others.

Integration of leadership development with other talent management systems creates synergies.

Organizations committed to leadership development understand its relationship with other talent management systems and practices. The best-practice partners incorporate their leadership development programs with others, such as performance reviews, management development, and succession planning.

Washington Group International is such a strong proponent of this mindset that they integrate every aspect of talent management. This process begins with establishing a vision of what positions will need to be filled and then forecasting, identifying, and preparing candidates for these positions. Subsequently, employee development plans are carefully crafted for each employee. An overall employee development strategic plan then feeds the succession planning process, which in turn is used in the leadership development program.

Cisco uses executive coaches to accelerate development as part of its high potential program. In this program, high potentials are paired with an external executive coach for a year and even though the coach is an external resource, he or she is fully trained and knowledgeable in “the Cisco way” prior to the assignment.

4. Evaluating Success

Developing people is a growing measure of executive success.

Best practice partners take the development of people very seriously. They seem to believe that financial results are a “lagging indicator” of organizational success, while people development is a “leading indicator.” Consequently, people development is becoming an important part of the assessment of executive performance.

PepsiCo has historically allocated one-third of incentive compensation for developing people with the remainder for results. In 2007, the company is moving to an equal allocation of incentive compensation for people development and results. Pepsi also utilizes the results from its semi-annual climate survey and 360 degree feedback as part of the performance review process.

Caterpillar found that their managers were superb at the “execution” portion of their leadership framework and satisfactory in the “vision” category, but needed to pay more attention to the “legacy” (developmental) set of behaviors. Consequently, they have begun to focus on this theme in learning programs and in performance assessment.

Return on learning is increasingly measured by corporate success rather than individual performance.

Among our best practice partners, Caterpillar was, perhaps, the most rigorous in attempting to measure the return on its learning investment. Since Caterpillar University was established during a recession, this may have forced them to establish the value proposition for learning early in their history. As part of this proposition, Caterpillar University created a document called the “Business of Learning” where each college developed a value proposition for key initiatives based on net benefits, ROI, and other standards. This later evolved into the enterprise learning plan, a 161-page document that discussed the state of learning at Caterpillar, articulated the value proposition for learning, and estimated the ROI for Caterpillar University at 50 percent. Caterpillar does not repeat this process for all subsequent iterations of a program and are beginning to speak about “Return on Learning” (ROL) rather than the more formalized process for ROI.

Cisco collects both quantitative and qualitative measures. Worldwide Leadership Education has a formal system for measuring the outcomes of leadership development strategy. Examples of metrics include “price range for a one week course,” “customer satisfaction scores,” “percentage of class graduates who have used learnings in their jobs and had a positive impact,” and “percentage of learners who stay with the company.”

Successful programs are a process rather than an event.

At one time, corporate educational programs were a disconnected series of independent events. Today, they are typically part of an integrated career development plan that is tied to strategic objectives with specific, actionable objectives.

The Cisco Leadership Series operates in a three-phase structure that facilitates the employee’s ability to put learning into action. It is an “events-to-process” model. Employees involved in the various programs progress through each phase: preparation, program, and application on the job. While the face-to-face portion of Cisco’s programs may only be five days, the participant is involved in the process for eight to ten months.

Caterpillar’s core leadership programs leverage key transition points in its leaders’ careers and build on one another in a building-block fashion. These transitions take place as individuals move from supervisor (i.e., frontline leader), to manager (leader of leaders), to department head, and finally to executive. A person’s movement through these programs and transitions is all part of his or her developmental journey at Caterpillar.

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Author of the article
Dr. Robert M. Fulmer
Dr. Robert M. Fulmer, was academic director of Duke Corporate Education and has held endowed professorships at Trinity University, the College of William & Mary and Pepperdine University. He is author or co-author of over 150 published articles and 40 books, monographs and editions. He has conducted executive programs or coaching assignments in 25 countries.
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