40 Best Companies for Leaders 2013 (Part 1)

by JP Donlon for Chief Executive Magazine

Warren Bennis once observed that whether or not leadership is well understood, its impact on performance is dramatic and unmistakable. An Accenture study several years ago noted that the share price of companies perceived as being well led grew 900 percent over a 10 year period, compared to just 74 percent growth in companies perceived to lack good leadership. Bennis points to Fortune’s roundup of most admired companies, quoting Fortune’s Thomas Stewart: “The truth is that no one factor makes a company admirable; but if you were forced to pick the one that makes the most difference, you’d pick leadership.”

Since 2005, Chief Executive has sought to identify the top global companies that seek to develop talent—beyond the CEO’s direct reports—with the view that every CEO, regardless of the size of the company he or she leads, can learn to be a better nurturer of talent and builder of teams. Few firms have the budget for a Crotonville, GE’s storied management retreat or Clay Street, P&G’s converted brewery in Cincinnati that former CEO A.G. Lafley once described as a combination think tank and playground. But the methods and principles of the companies ranked here can be scaled and applied to any firm wishing to hone a differentiator that will boost performance. Note also that we list the top ten private companies, most of which are much smaller than the global ones in the top publicly traded list.

Returning to first place is P&G, a company now celebrating its 175^th year. Bob McDonald, its CEO attributes its longevity to close attention to leadership development at all levels of the company—not just the top ranks. “To tap the full potential of our employees, we have developed a rigorous and disciplined approach to leadership development at every level of the company,” says the former West Point graduate who favors a rigorous development process. “We systemically build multiple generations of leaders by developing them throughout their careers with varying experiences across businesses and geographies.

This has created a very strong pipeline of globally capable and mobile leaders.” GE moved into second place from third last year with IBM following right behind. Dow Chemical jumped from 11^th in 2012 to 4^thand is followed by Verizon, up from 13^th place last year.

Researching the Ranking

The annual ranking of the Top Companies for Leadership is based on a survey of leading organizations globally, which is conducted in partnership with Chally Group Worldwide (www.chally.com), a sales and leadership talent management firm headquartered in Dayton, Ohio. Of the companies surveyed,

• 84 percent have headquarters in North America
• 57 percent have international operations
• The majority of industries represented included Professional, Scientific, and Technical Services (21 percent); Manufacturing (19 percent); and Finance, Insurance, Real Estate (14 percent).

Companies were scored on five key criteria:

1. Having a formal leadership process in place
2. The commitment level of the CEO to the leadership development program, as measured by the percent of personal time spent in these activities
3. The depth of the leadership funnel as measured by the percentage of senior management positions filled by internal candidates, as well as the percentage of middle-management positions filled by internal candidates
4. The number of other companies that report recruiting from the company being evaluated
5. A shareholder value performance metric based on 10-year growth or decline in market capitalization.

The final top-40 ranking consists of public companies with more than $1 billion dollars in revenue. The top 10 on the list scored within few points of one another, but the difference between the bottom and top company was substantial, at 29 points.

Rankings are affected by a company’s reputation among its peers as a source for well-rounded talent. Verizon moved up on this year’s listing because of the number of times it was cited as a company from which others recruit. The percentage of senior management recruited from internal talent pools is another criterion. This accounts for Hitachi’s and Monsanto’s rising in the rankings. Similar to 2012, some attrition among last year’s winners accounts for why previous winners did not appear on the 2013 listing.

Because it would be inappropriate to compare private companies with larger, public companies that enjoy greater resources, we list separately the ranking of large, private organizations with in-depth leadership development programs. The following pages offer a look at the top-five companies on this year’s list, highlighting some of the reasons they secured their top positions.

40 Best Companies for Leaders

2013 (rank previous year)			2012
1	P&G Robert McDonald	(1)	P&G
2	General Electric Jeffrey Immelt	(3)	IBM
3	IBM Virginia Rometty	(2)	General Electric
4	Dow Chemical Andrew Liveris	(11)	3M
5	Verizon Communications Lowell McAdam	(13)	Southwest Airlines
6	Caterpillar Douglas Oberhelman	(9)	ADP
7	Hitachi Data Systems Jack Domme	(16)	PepsiCo
8	Arthur J Gallagher J. Patrick Gallagher		Cardinal Health
9	The Boeing Company W. James McNerney, Jr.	(12)	Caterpillar‚ Inc.
10	3M Inge Thulin	(4)	Discovery Communications
11	Monsanto Hugh Grant	(40)	The Dow Chemical Company
12	PepsiCo Indra Nooyi	(7)	The Boeing Company
13	Royal Caribbean Cruises Richard Fain		Verizon Communications
14	The Cooper Companies Robert Weiss	(21)	CRH plc
15	General Mills Kendall Powell	(15)	General Mills
16	Sprint Nextel Daniel Hesse		Hitachi Data Systems
17	Bridgestone Americas Gary Garfield		International Paper
18	McDonald’s Corporation Donald Thompson	(19)	Manpower
19	ADP Carlos Rodriguez	(6)	McDonald’s
20	Shoppers Drug Mart Corp. Domenic Pilla		Stanley Black & Decker
21	Bayer Patrick Thomas		The Cooper Companies
22	Barnes Group Gregory Milzcik	(30)	Sealed Air
23	NOVA Chemicals Randy Woelfel		El Paso Corporation
24	Bristow Group William Chiles		National Australia Bank Limited
25	Cardinal Health George Barrett	(8)	David Jones Limited
26	BP China Robert Dudley		Stryker
27	Dimension Data Brett Dawson		Wolverine World Wide‚ Inc.
28	Ecolab Douglas Baker, Jr.		Konecranes
29	Johnson Matthey Neil Carson		Unilever Plc
30	Konecranes Pekka Lundmark	(28)	Barnes Group Inc.
31	Olympic Steel Michael Siegal		Aggreko plc
32	Philips, N.V. Frans vanHouten	(35)	PwC
33	Autoliv Jan Carlson		Dominion
34	Hyatt Mark Hoplamazian		DuPont Canada
35	EMC Insurance Companies Bruce Kelley		Philips‚ N.V.
36	Harman International Industries Dinesh Paliwal		Saudi Basic Industries Corporation
37	Maxim Integrated Tunc Doluca		American Axle & Manufacturing
38	Libbey Stephanie Streeter		DuPont
39	ResMed Peter Farrell		Faurecia Holdings‚ Inc.
40	Kelly Services Carl Camden		Monsanto