40 Best Companies for Leaders 2013 (Part 2)

by JP Donlon for Chief Executive Magazine

Leadership Development ROI

The need to develop leaders is widely acknowledged, but the actual impact of these efforts is seldom quantified. Without meaningful expectation of a long-term return, it is more difficult to justify the investment—especially in trying economic periods. As with previous years, almost two-thirds of responding companies listed “financial limitations” as one of the top challenges to achieving their leadership-development goals.

Comparing the long-term growth in market capitalization of public companies with their ratings for leadership development offers solid justification for investment in developing leaders. The comparison covered the 10 years from 2002 to 2012, a period long enough to minimize short-term and situational fluctuations. The trend is substantial (see table below).

This year’s improved economy has driven greater growth potential than last year. Last year, the bottom 15 percent of the best companies for leaders had actually 23 percent loss of market capitalization. This year, both top- and bottom-rated companies grew, but the top leadership companies still produced significantly greater growth than the lowest as measured by market capitalization.

Reputational Leaders

Survey participants were asked to list the three companies they would recruit from when there are insufficient internal candidates for openings in their organizations. The reputational stars for leadership development are still limited to a few at the top of their game. Here are the top target companies and some of the reasons behind their status as perceived by respondents.

Company	Most Cited Leadership Strengths
GE	Disciplined approach to leadership development. Emphasis on cross-functional training. Comprehensive processes for assessment and feedback.
P&G	Strong training ground for GM bench. Variety of consumer goods and products. Global in scope and very process focused.
IBM	Technology and business solutions leader with excellent reputation for developing leaders, reinventing the business model profitably and sharing success with global communities.

Top 5 Best Companies for Leaders

#1 – P&G – Tackling Turnover

P&G again tops the list as the Best Company for Leaders. P&G stands atop an impressive list of companies well-known for their leadership development.

“I continue to be personally involved in all leadership decisions for our top P&G leaders,” says McDonald. In addition to our organization strategy reviews with our business leaders and function officers, I’m working with our next generation leaders, including those deeper in the organization, to help them grow and develop. I spend a significant portion of my time recruiting, teaching and coaching. Successful leadership development for a build-from-within company is a strategic imperative and a responsibility that I take very seriously for P&G’s current and future success.”

P&G feels their biggest challenge is the loss of an employee they have with whom they have made a significant investment. Because they have such a deep talent bench and are well-known broadly as an engine of leadership development, this often attracts other companies and executive recruiters who recruit their best talent. While their retention is very strong, even the loss of one person in a key market can be a setback in terms of the investment put into their training and development over 10, 15 or 20 years. P&G is committed to build from within, and seldom goes out to hire experienced talent unless there are unique qualifications required.

P&G screens over a half million candidates globally each year and hires less than 1 percent of applicants. They challenge these new leaders with meaningful work and great responsibility from Day One. Business and functional leaders actively recruit, teach and coach and they mentor more junior employees on-the-job, helping them to develop the skills they need to lead large, global businesses and organizations. P&G managers play a vital role in identifying and growing the company’s next generation of leaders. This starts at the top of the organization. Their CEO, vice chairs, presidents and functional officers recruit on college campuses and teach in their executive education programs.

They manage P&G talent globally—starting at mid-levels of management and higher—to facilitate career development and growth across businesses and geographies. They identify top talent early and groom people through a series of varied and enriching assignments that will prepare them for future roles—developing an extremely broad, deep pool of talented employees. Senior management assignments are planned monthly among the chief executive and vice chairs, quarterly with the presidents, and annually with the board of directors, who are all personally involved in the development of their top leaders. 

This planning ensures depth and breadth of experience. P&G leverages the scale of their unique organization structure, allowing employees to learn and grow from progressively broader and more challenging roles. This approach often occurs across functional disciplines, where leaders get experience in every facet of the business—often in wide-ranging geographies and markets. They focus on sustained results and the continuous capability improvement of leaders over time, with their most significant development occurring through on-the-job experience, feedback and coaching. 95 percent of hires are recruited from college campuses and begin their careers at P&G in entry-level roles. The remaining 5 percent come in at lower to mid-levels of management. The vast majority of recruiting efforts are focused on sourcing candidates from universities around the world.”

#2 – GE Rank: Continuous Adaptation

GE was cited the most times as the company from which others recruit talent. They have vigorous tools to support leadership-development activities, ranging from early career leadership-development programs and accelerators to on-the-job mentoring and stretch assignments to training through their Global Leadership Curriculum offerings, all supported by a robust talent management process. Developing leaders is integral to their company culture and long-term success.

GE has many well-established, formal processes for developing leaders, including annual talent-management programs, succession planning and training. However, because the world in which they operate is always evolving, they continuously adapt the way they develop leaders. Two recently developed programs are the Leader in Residence (LIR) Program and Leadership Explorations. They believe in leaders developing other leaders, which is why they launched the (LIR) Program in 2010. This innovative program was created to involve senior leaders in the development of younger, emerging leaders and to provide both groups with opportunities for continued growth.

During the week-long LIR Program, an officer of the company steps out of his or her regular job and teaches at Crotonville (their leadership institute located in Ossining, New York). This senior leader teaches classes (utilizing tele-presence to connect with their learning centers around the world). He or she also conducts mini-coaching sessions with program participants, networking dinners, fireside chats and reverse mentoring on technology and trends. They also share leadership stories through dialogues—both inside and outside of the classroom. During the week, the Leader In Residence also has the opportunity to reflect on his or her own leadership style.

GE established the quintessential executive-training ground at its world-famous Crotonville facility—on which it reportedly spends about $1 billion a year. General Electric’s John F. Welch Leadership Development Center marks its 56th anniversary this year. They have 13 offerings involving leadership skills that everybody should have, such as presentation skills, project management skills and understanding finance in a generic way.

These courses are managed through the Crotonville staff but are delivered at GE businesses around the world, including Shanghai, Munich and Bangalore, among other places. This is done through a Train-the-Trainer (TTT) concept. GE trains 50,000-60,000 people a year digitally and an additional 9,000 attend courses at Crotonville.

#3 – IBM Rank: Accelerating Growth

IBM has a long history of innovative leadership development and cross-discipline mentoring. IBM values people who apply innovation and imagination to make the world a better place. This is why they feel they need extraordinary leaders who can create high-performance work climates and foster employee engagement—people who not only succeed but enable others to do so, as well. At the core of the GM leadership development program is the ability to accelerate future leaders’ readiness to become integral parts of IBM. Throughout the program, in addition to formal world-class consulting and sales training, participants will be afforded key opportunities to develop and demonstrate the following leadership competencies:

1. Embrace Challenge: IBM gets energized by complex and challenging situations. They identify opportunities, take responsibility for solving problems and their positive attitude and confidence inspires others to do the same.
2. Build Mutual Trust: IBM builds “360 degrees of trust” across the full spectrum of their constituents—their organizations, clients and communities. They do this by acting with integrity, assuming positive intent, holding themselves accountable, trusting in the capabilities of others and by taking responsibility for remedying the situation if they see trust is eroding.
3. Communicate for Impact: IBM communicates to find mutual understanding. They listen to ensure others are heard, their deep expertise allows them to communicate complex situations clearly and simply and their authenticity enables them to convey difficult messages in a positive manner.

The programs include: Basic Blue for IBM Leaders, Shades of Blue and Accelerate Executive Leaders program for new executives and Executive Insights for newly hired or acquired executives. These are among the many examples that involve deeply integrated programs for identifying, assessing and developing some 60,000 high-potential leaders at all levels.

The planning process first defines all roles across IBM and creates “Success Profiles” for all leadership roles. This system is used to define demand for leadership roles by business unit or market and to identify critical gap roles (requiring accelerated development and recruitment). The second process focuses on pipeline identification and development. Leadership competencies of those currently in leadership roles are regularly evaluated to assess the leadership potential and functional skills of IBM globally. Guidance on potential career paths and personalized development plans is provided for each IBM leader, tracking progress through the IBM management system, including providing experiences and developmental opportunities.

Placement for each leadership role focuses on defining potential candidates, while considering diversity for each opening. Placement decisions are accomplished through Five-Minute Drills conducted at annual leadership reviews at all levels of the business. This company-wide process moves upward to high visibility Chairman’s Reviews with action follow-ups. At IBM, success has its roots in an adherence to core values, while embracing fast-paced global change. IBM’s succession process has been a major reason it is one of the few firms that has lasted a century. It has one of the most closely watched institutionalized succession plans of any company in the world. This was evidenced by the smooth transition of CEO responsibility to Virginia “Ginny” Rometty from Sam Palmisano. Rometty is the ninth CEO since the company’s founding and its first woman CEO. This was no exception, as Lou Gerstner’s handoff to Palmisano was another good case study on leadership transition.

#4 – Dow Chemical Rank: Crossing Functions

Dow has a long history of cross-functional and cross-business movement within the organization, as well as a focus on international development assignments. Dow offers various rotational programs in a number of disciplines. These programs offer different job assignments that provide diverse experience and opportunities including:

• Business Services Rotational Program: providing an opportunity to gain exposure and work experience in different types of effort within the Business Services organization.
• Commercial Development Program: providing an opportunity to participate in a variety of account-management experiences designed to build skills and familiarize employees with the resources available to help them manage Dow’s relationships with their customers.
• Finance Development Program for Accountants: provides diverse and varied working knowledge of Dow’s Finance organization.
• Human Resources Rotational Development Program: gives participants insight into the global Dow organization and culture.
• Finance Leadership Development Program: develops leaders with the skills and experiences needed to excel and to contribute to their global organization.
• MBA/General Management Program: creates an accelerated path to senior leadership for a few exceptional people, who can bring new ideas and insights to the opportunities and challenges facing Dow.
• Public Affairs Development Program (PADP): allows participants to develop and enhance communication skills, gain valuable insight into the different communication roles and build networks in the function and across the company.

#5 – Verizon Communications: Customer Credo

Verizon relies on a leadership team that lives their customer first commitment, their credo and core values—Integrity, Respect, Performance Excellence and Accountability—every day. The Verizon team is led by Lowell McAdam, a chairman and CEO who leads by example and serves as a role model for living the Credo every day. He launched a cross-enterprise Credo Recognition Effort to reinforce the behaviors expected of leaders at all levels of the organization. He continues to demonstrate strong personal commitment and engagement in executive-leadership development. In 2012, he was instrumental in the creation of learning experiences for directors and senior leaders in Lean Six Sigma, Shareholder Value and Emerging Technologies programs.

McAdam’s ongoing operations reviews, quarterly earnings broadcasts with employees, annual senior leadership meeting and cross-enterprise strategy retreat also allow him to be a visible leader teaching leaders. Periodically and at minimum twice per year, the CEO meets with business leaders to ensure effective and consistent talent identification, assessment and execution of development plans for top talent. In addition, the board of directors is engaged in a review of top talent, including interaction with top leaders during meetings and retreats, where they are concerned with clear, measureable annual performance agreement and laser-sharp priorities focused on:

• Well-defined leadership capabilities and expectations
• Ongoing feedback and coaching from supervisors
• External professional coaching and a 360-degree survey and feedback process