global leadership research project

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The Global Leadership Research project will be expanded to collect data from organizations on a continuing basis. Each year, the survey will be refined to collect additional data on issues that previous surveys have identified as important. As such, the research process will be a continuing process.

We are seeking participation once annually from those leaders and HR executives most involved in leadership development and succession planning.

The Global Leadership Research Project will be periodically updated as various academics and research partners complete more in-depth analyses of the massive database begun in 2010.

We thank you in advance for your interest, and look forward to your future support and participation.

Join The Effort

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Why Organizations May Want To Join The Global Leadership Research Project

We will also be expanding the concept of Leadership Development ranking beyond the concept of “Corporate Olympics” (see page 10) to establish a rating process to document classes of effectiveness. We will recognize all the companies that have established successful processes, based on the practical principles that Leadership Devel-opment is not a zero sum game…and that many companies rated as excellent but not ranked as number one are equally effective in developing their future leadership, as witnessed by their ability to return substantial benefit to all their constituencies. The ratings will provide identification of specific areas of strength or opportunity for improvement.

This leadership project also will establish multiple categories of excellence so that we are evaluating comparables and identifying and recognizing the different processes that may be appropriate for different organizational circumstances. Preliminary findings suggest that “leadership” is a broad term that actually includes several types of leadership appropriate for different situations.

The Future Plan

The Global Leadership Research Project will be expanded to collect data from organizations on a continuing basis. Each year, the survey will be refined to collect additional data on issues previous surveys have identified as important. As such, the research process will be a continuing process, seeking participation once annually from those leaders and HR executives most involved in leadership development and succession planning.

The Future: Understanding Leadership Requirements in the emerging #1 global economy, China, with Criteria such as:

• Guanxi:an obligation of one party to another, built over time by the reciprocation of social exchanges and favors.

• Longtermism: the creation of a sustainable organization for the future.

• Mentoring:personal, contin-uous coaching tailored to the needs of a specific individual that’s more encompassing in what is imparted, since tacit knowledge, relationships, and intimacy with values and informal social structure can be imparted only through mentorship.

• Parsimony:economy in the use of means to an end.

• Collectivismandharmony:pride in the community and concern with one’s reputation in the community.

• Ambiculturalsensitivity:taking the best from Eastern and Western philosophies and business practices while avoiding the negatives.

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Table of Contents

ResearchTeam,Sponsors,ParticipatingOrganizations 6

ExecutiveSummary 8

TheFirstAnnualGlobalLeadershipResearchProject 13

TheInitialProjectAnalysis 29

Leadership Roles 30

The Leadership Paradox 32

The Leadership & Succession Planning “Risk Factors” 34

The CEO’s Role in the Depth of the Leadership Pipeline 38

Leadership for the Future 39

GlobalLeadershipResearchProjectParticipatingPartners 41

GlobalLeadershipResearchProject2010SurveyResponseSummary 45

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Research Team

Ken Carroll Chally Group WorldwideJenna Filipkowski M.A. Christopher Holmes Ph.D.Scott Hudson James Killian Ph.D. Bart Mosele Scott RunkleHoward Stevens M.A.Sally StevensPeter Tassinario M.A. Brett Lippencott Chally International

J.P. Donlon Chief Executive Group

Sandi Edwards American Management Association (AMA)

Jean-Francois Jadin Imperial ConsultingJohn Read

Marjorie Woo MBA Keystone Group, Inc.

Karen Lindquist MBA Management Centre Europe (MCE)Erick Myers

Sanja Licina Ph.D. Personified (a Division of CareerBuilder)

Stephan Rantela ProActive Oy AbSanna Salmela

Michael Haid Right Management Gerald Purgay Deborah Schroeder-Saulnier

Shi Bisset Shi Bisset & Associates

Satyan Menon Turning Point Ajay Namboodiri

Fu Yan (Laura) Hauzhong University of Science & TechnologyTina Iansisi Hauzhong University of Science & TechnologyJason Jordan University of Virginia’s Darden School of BusinessCorey E. Miller Ph.D. Wright State UniversityDas Narayandes Ph.D. Harvard Business SchoolWu Bin (Julie) Hauzhong University of Science & Technology

Barry BreigCindy Burgess Trisha Lamb Deb Tackett Heath Wilkins Dean Wright

Research

Academic

Production Team

7

Sponsors

Research Partners and Participating Organizations

8

Bringing More “Analytics” to Leadership Development, in lock step with talent management, has seemingly become the primary focus of this millennium’s business consultants, business oriented authors, and business associations, and for good reasons!

1. The total quality management(TQM)“revolution” of the ‘60s and its evolution through Six Sigma, ISO standards, and other efficiency and quality methods, has essentially eliminated a competitive edge through better product quality, for any serious business competitor. And differing global standards for the protection of intellectual capital have reduced innovation advantages…or at least sustainable advantage.

2. Ubiquitous global access to raw materials, components, and even labor and more advanced professional services made available through supply chain management, digitally based communication, and access to information have tended to standardize costs across those same serious business competitors. Another competitive strategy defused!

3. The speed of change in product life cycles and the rise of new competitors, as well as emerging new productivity, communication, and distribution systems lessen the old long-term advantages of size, capital investment, and even real estate.

The Global Leadership Development Project Executive Summary

Executive Summary

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Sowhat’sleft?People! That is, having better people, because they innately have more ability, can be deployed to their best utilization, are receptive to training and develop-ment to maximize their capabilities, and can be nurtured and supported to maintain their, and therefore your, sustainable competitive advantage.

The World Class Sales Research Benchmarking Project, ongoing since 1992 (see chally.com), demonstrates, quite powerfully, that even sales growth has less to do with quality, price, marketing, etc., than the effectiveness of the salesperson interfacing with the customer.

And people, be they employees or customers, bring us to the need for leadership. The art and science of organizing, directing, and motivating people, directly as in employee, or indirectly as in customer (or voters for that matter), is the sole domain of a leader. And while the particular skills may differ by the type of organization, public or private, big or small, fairly stable or rapidly changing, the common thread is what we call Leadership.

ButwehaveneverappliedTQMtopeople,nottomentionSixSigmaorISO…So we are still operating primarily through tribal wisdom, personal experience, or collections of anecdotes to help us figure out what to aim for, who to use, and how to channel their efforts toward the goals we have aimed for. Most recently there is a movement toward the same kind of “analytics” used in other business functions, but is indeed nascent.

There has also been research on applying the principles of TQM to the human side of an organization. TQM or TQTalentM(see chally.com) with the somewhat surprising but irrefutable evidence that our old “star” mentality of attempting to select the right people, motivating them with exceptional rewards, and supporting them with all the other non-stars…just doesn’t work for long in organizations with more than one top performer. TQM teaches us that business stars are exciting, praise worthy, and often great authors, but overrated as business resources. Jim Collins has documented the flaws of the well positioned, flamboyant types, who are indeed very good, but who are also out performed by the less flamboyant, often invisible (outside their own organizations). Jack Welsh, for example, led GE from $26.8 billion (the year before he assumed leadership) to over $150 billion the year before he retired. However, under the leaders he put in place, GE has lost over $300 billion in the last 10 years. While companies reported by Collins such as Walgreens, with a much less visible leader, have continued to grow through leadership succession.

Executive Summary

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The Trouble with “Corporate Olympics”

The Olympic model for identifying the “best” athletes has become one of the most successful financial and marketing promotional events in the world today.

As a business, it’s phenomenal. As an accurate measure of athleticism, the competition itself is somewhat dubious. There is little doubt that being selected to participate in the Olympics does put an athlete in an elite class. But “winning the gold” on a given day is often almost an accident. The difference between a medal winner and “losing” is so trivial as to be essentially meaning-less. Nevertheless, winners achieve world recognition, greatly enhanced financial prospects, and at least their 15 minutes of fame.

In business, this type of ranking may have attractive PR value, but the practical implication of im-proved business performance is not in the rank…but being in that “class” of companies, or within the broad range of companies who are legitimate candidates for consideration. The research on financial performance suggests a rough correlation for the top quar-tile versus the bottom quartile…but absolutely no correlation with rank within the quartile.

So we enjoy the competition, and enjoy learning who won…it is indeed an honor…for at least 15 minutes!

Chally Worldwide and its partners believe it is time to move past “research for marketing value” to research to advance our organizational effectiveness. We are focused on three differentiators from the typical annually published corpo-rate Olympics ranking through a panel of experts as if this were figure skating or diving.

First, we have assembled a broad team of both academic and business experts… to design the data collection…and analyze the data collected. This does not remove the problems of self-reported data, but does insure that the data is provided by individuals who have firsthand knowledge versus outsiders who may or may not have intimate knowledge of the companies involved.

Second, this research project will become an ongoing progression of data and analysis with each year building further insights on the previous years’ findings, and tracking changes in leadership devel-opment techniques.

Thirdly, we’ll develop “categories” or levels of leadership develop-ment effectiveness since the economic indicators suggest that there are little to no effective differences between companies within the same quartile.

Executive Summary

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Brief Findings:

1. Top-ranked companies for developing leaders produce substantially better financial performance than bottom-ranked companies.

• Top-ranked companies had a 10-year growth of market cap of 17% while bottom-ranked companies lost 2%

• Top-ranked companies produced 5% total returns to shareholders, while the bottom-ranked companies lost 39%

2. The required competencies for different “C” Level positions are substantially different.

• Only CEOs are seen as having responsibility for Strategy

• Only COOs had as many as two of the four most important competencies in common with the CEO, Finance CFOs who are also likely to succeed to CEO, had only one

• This suggests that job rotation may be invaluable for understanding the business but be less helpful in preparing high potentials in planning strategy for the future

3. The most frequent sources of succession failure or “leadership risk factors” are related to people skills.

• This was amplified if the promotions were internal

• The leading “Leader Failure” cause was reported as “failure to adapt to the culture”

4. The Data is insufficient, but here are strong indicators supporting the fact of real differences in required competencies in Asia and the Far East.

• Non-Western companies are more likely to share strategic responsibility across several “C” Suite leaders

• Less “personal profit” driven economies, such as China, seem to have dramatically different leadership requirements

5. The extent of the CEOs personal involvement in the Leadership Development Process, is a critical key to the program’s overall effectiveness.

Executive Summary

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The First Annual Global Leadership Research Project

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The efforts to identify the companies who are best at developing leaders have become a major business media topic for most of this decade and in academic research for decades earlier. Fortune and Hewitt likewise have promoted their research. Today, there are three publications that feature these surveys, now including Bloomberg BusinessWeek in cooperation with The Hay Group.

The previous research has been valuable, especially in focusing on the processes and procedures that are most effective and most commonly used by top ranked companies, these include:

• Having a formal process that involves the active participation of the CEO

• A development program for a wide funnel of high potentials in the formative years of their careers.

There is also a reasonable consensus on a variety of developmental techniques, including “action learning,” monitoring and coaching, formal classes, etc. identified across all the research that will assist any company trying to develop or refine its “talent management” regimen.

Taking the Research to the Next Level

Chally Group Worldwide is pleased to introduce the First Annual Global Leadership

Research Project overview results.

The First Annual Global Leadership Research Project

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We have engaged:

Multiplebusinessandacademicpartners who are committed to expanding our global knowledge base, in order to transcend concerns of results being driven by any one organization’s marketing needs

A blue-ribbon team of research analysts from Harvard, the University of Virginia’s Darden School of Business, Chally Group Worldwide, Right Management, Personified/CareerBuilder, Wright State University, Huazhong University of Science and Technology, The American Management Association, Turning Point and more.

We have investigated key trends in effective leader development with analysis of differences found in functional roles, organization types, and with consideration of the impact of geo-cultural variations.

Research Goal:

To establish broadly recognized and ongoing thought leadership research documentation outlining global standards in Leadership Practices, Leadership Development, and Succession Planning.

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1. Does leadership development really drive better business performance?

All the research assumes that leadership development is important, but there is less understanding of the actual ROI that can be attributed to these efforts. Without a mean-ingful calculation of long-term return, it is difficult for companies to expand their invest-ment consistently, especially in trying economic periods. In fact, almost two-thirds of responding companies listed “financial limitations” as their number one challenge in achieving their leadership development goals.

2. Does leadership development actually produce higher quality leaders who drive better organizational performance, and if not…What goes wrong?

For several decades there has been significant business and organizational emphasis on developing leaders. We’ve seen substantial investment, research, consulting activity, reporting, and books published on the “State of the Art”. So, why has the CEO turnover (failure) remained as high as it has and even deteriorated over the decades? And why is there relatively so much less research on the causes of failure. In other important aspects of business, the principles of Total Quality Management (TQM) are routinely applied to identify and correct sources of troubling issues. We propose to identify and establish the principles of “Total Quality Talent Management (TQTalentM) by identifying Leadership Development and Succession “Risk Factors” and ultimately document the approaches of organizations that are successful at minimizing those.

3. Is leadership development effectiveness more subject to external factors outside an organization’s control?

And if not, how can companies rated as BEST in Leadership Development drop out one year later, or be high on one research list and not even appear on another in the same year?

4. How do we separate the marketing hype from the Critical Success Factors (CSFs)

Since resources are limited, which are the most important factors influencing Leadership Development, and ultimate business success, and how good is good enough?

Several key questions, previously unanswered in these studies, have been addressed:

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In order to establish more empirically based findings, the research defined multiple qualifying criteria for inclusion and final ranking in The Best Companies For Leaders. These included:

• The existence of a formal development program

• The percentage of time the CEO was personally involved

• The percentage of both senior leadership and middle management recruited internally

• The frequency of being cited as a recruiting target by other organizations

• The long-term growth of market capitalization and shareholder value

These measures will be consistently applied across time.

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Annual Revenue of organizations in US$

Revenue CEO(%) HR(%)

Less than 25 million 49.4 20.1

25 to 50 million 8.0 13.6

50 to 100 million 6.1 10.0

100 million to 500 million 13.5 14.1

500 million to 1 billion 3.6 8.2

1 to 5 billion 10.7 12.4

5 to 10 billion 3.6 11.3

Over 10 billion 5.5 10.5

Number of Employees

Employees CEO HR

Fewer than 500 62.0 34.4

500 to 1,000 8.4 11.3

1,000 to 2,500 7.3 13.5

2,500 to 5,000 5.0 9.6

5,000 to 10,000 5.3 7.9

10,000 to 25,000 3.1 7.6

25,000 to 50,000 4.5 5.9

50,000 to 75,000 0.8 3.1

75,000 to 100,000 0.1 2.8

More than 100,000 3.1 3.9

Organization Size

The following information provides a high-level summarization of the research sample. This research represents responses from C-Level and Senior Human Resources and Development leaders from over 1,000 global organizations.

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Location of Company Headquarters

CEO80.9

HR74.6

CEO0.5

HR0.4

CEO7.0

HR14.0

HR0CEO

0

HR1.7

CEO0.3

HR1.5 CEO

7.8

HR3.4

CEO1.0

CEO1.8

HR1.5

HR2.3

CEO0.5

Regions

North America

South & Central AmericaMiddle East / Africa

EuropeSouth Asia

Southeast Asia

Asia

East AsiaOceana and Australia

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The Initial Project Analysis:

Leadership Roles

The Leadership Paradox

Leadership and Succession Planning “Risk Factors”

The CEO’s Role in the Depth of the Leadership Pipeline

Leadership for the Future

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Leadership RolesWhere Leaders Come From

Leadership development would be infinitely simpler if leader-ship were a singular, finite competency or set of competencies that applied in all situations. However, the facts loudly refute this perhaps naïve, hope. Leaders evolve from a wide variety of backgrounds, experience, and job functions. Western corporate CEOs are most likely to come from Operations and Finance. When asked what functional areas are most likely to produce your C-level executives, Operations was the most likely to be indicated (68%) and Finance was second ranked (56%) with Sales third (49%). The more specialized functions were less likely to provide the career path to the top. Marketing was less likely at 34%, Human Resources, 24%, Engineering 22% , IT 13%, and Research and Development only 8%. “Other” was indicated by 2% of respondents.

What functional areas are most likely to produce your C-level executives? (check all that apply)

Operations 68.4%

Finance 55.6%

Sales 48.6%

Marketing 34.0%

Human Resources 24.1%

Engineering 22.0%

Information Technology 12.8%

Research & Development 8.2%

Other 1.7%

Differences are evident in:

• Functional responsibility.

• Career path opportunities: The more broadly one’s career exposure across busi-ness units, product/market segments, or customers (Operations, Finance, and Sales), the higher likelihood of selection for the senior leadership positions.

• Geo-cultural environment: India and the Far East have meaningfully different views of leadership development than the “West”.

• Size of the organization: Where there is a tendency to manage/lead directly (and personally) rather than through layers of subordi-nates, dictates whether there is a need for different skill sets.

• Type of organization: Public, Private or Governmental/Charity: Where the responsi-bilities of different functional leaders, as well as the con-stituencies they must serve, may differ substantially.

Factors That Drive Effective Leadership

To date, survey respondents have supported the premise that leadership, while often thought of as a singular capability, is actually several variable sets of skills. Leadership development, therefore, should include differing practical experiences (often referred to as “Action Learning”) and training/education oppor-tunities unique to the requirements of a specific leadership role.

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Leadership Roles Differences in Leadership Roles...

In trying to determine the lessons behind the wide disparity between functional roles as career paths, it is only partially clear why most CEOs come from Operations and Finance. If all leadership roles required the same skill set, we would expect all functional areas to be equally represented. If all positions required the same skill set as the CEO position, then all individuals from all the functions should have similar skill sets. We would assume that people are promoted to CEO from Operations and Finance because they are perceived to have developed competencies that are important for the CEO role. It is possible that Financial people in their rise to the top are exposed to all the business functions or divisions within the company.

Possibly Operations people are at least familiar with all the products and services and salespeople are familiar with all the customer segments. Alternatively, it might be argued they were rotated through these functional management roles because they were originally chosen for their “C” suite potential. In either case, there is strong evidence that suggests that different leadership roles require a different set of competencies and experience in func-tional roles in itself does not prepare one for succession to CEO particularly well.

We asked respondents to rate which of the most commonly suggested critical competencies were the four most critical for several typical C-level positions. Taxonomy Table 2 presents the results. The top four competencies for CEO were Creating a Strategic Vision (91.7%), Inspiring Others and Maintaining Key Leadership Responsibility (62.3%), Developing an Ac-curate and Comprehensive Overview of the Business (56.9%), and Decision Making (54.5%).

This analysis helps explain why CEOs are more likely to come from Operations and sec-ondarily from Finance. The CEO role shared two critical competencies with the COO and one critical competency with the CFO position. The COO position emphasizes “Developing an Accurate and Comprehensive Overview of the Business” and “Decision Making”, which are two of the four critical CEO competencies. The CFO position had only “Developing an Accurate and Comprehensive Overview of the Business” as critical. The fact that only one or two competencies overlap may also suggest why succession, even from these “closest” functions, may fail.

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HowwouldacompanydevelopleadersthathaveademonstratedtrackrecordofCreating a sound Strategic VisionandInspiring Others and Maintaining Leadership ResponsibilitywhentheserolesaremorelikelytobeafairlyexclusivedomainoftheCEO?

The CEO role seems to be positioned almost as royalty. By achieving that position they seem to be almost exclusively responsible for creating the strategic vision and inspiring others to achieve it.

Functional leaders are unlikely to have had a chance to practice those key CEO skills, or demonstrate competence. If the organization’s strategy is to promote successful people from the lower levels, might not the wrong person be pro-moted? Someone may be successful in the COO role because they had Techni-cal and Business Expertise, and skill at Directing, Delegating, and Establishing Monitoring Systems. These competencies are seen as least important to the CEO role.

It is likely that all too often, someone may be promoted because they had a mix of competencies that lead to success in their functional role, for example, but may actually lead to failure in the CEO role. Those promoted from the COO role, which emphasizes Identifying and Focusing on Critical Priorities and Technical and Business Competence/Expertise may be less prepared to plan, lead, and monitor long-term strategy.

The Leadership Paradox

Paradox 1.

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Paradox 2. The results also suggest that many organizations may suffer from a critical but hidden weakness in terms of bench strength. Considering that essentially, all execution will demand accomplishing the corporate goals through others, it may be telling that less than half of all respon-dents cited “Selecting and Developing Successors and Key Reports” as a critical strength for any role.

C-Suite Executive Competencies

Least Critical For the Role

Most Critical For the Role

Table 2. Taxonomy CEO CFO CIO CLO COO

Creating a Strategic Vision 91.7 16.8 22.0 23.2 24.1

Developing an Accurate & Comprehensive Overview of the Business 56.9 56.1 31.2 9.7 56.1

Politically Astute 31.9 10.3 10.7 27.4 16.3

Selecting & Developing Successors and Key Reports 40.4 21.1 19.9 41.1 27.5

Inspiring Others & Maintaining Leadership Responsibility 62.3 15.6 15.8 35.8 33.4

Decision Making 54.5 42.7 31.8 30.5 51.8

Initiative to Produce Appropriate Change 29.9 18.2 29.8 37.9 36.0

Identifying and Focusing on Critical Priorities 34.4 51.6 44.6 37.5 50.5

Technical & Business Competence/Expertise 18.1 61.4 70.5 40.7 49.7

Directing, Delegating, and Establishing Monitoring Systems 13.4 53.0 43.8 26.7 33.2

Objective Self-Assessment of Own Limitations 19.6 15.1 16.4 20.0 18.4

Timely/Effective Execution 17.0 41.0 56.5 35.8 54.7

Collaborative 18.5 29.5 44.6 48.8 30.3

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The Leadership and Succession Planning “Risk Factors”

40.2%

32.4%

Fails to Build Relationships and a Team Environment

A Mismatch for the Corporate Culture

Failure to Deliver Acceptable Results

Unable to Win Company Support

Lack of Appropriate Training

Egotistical

Lack of Vision

Not Flexible

Poor Management Skills

Poor Communication

Lack of Political Savvy

Lack of Organization

Given no Clear Direction

Job Mismatch

Lack of Drive/Motivation

Lack of Business Acumen

Poor Decision Making

Lack of Honesty

Left the Business

25.1%

25.1%

23.5%

15.1%

14.5%

13.4%

12.3%

11.2%

11.2%

8.4%

7.8%

6.7%

6.1%

3.9%

3.4%

2.8%

1.1%

Percentage of those who responded

High Risk

Moderate Risk

Low Risk

Leadership turnover, for non-performance, or other leadership dissatisfaction issues continues to be higher than planned, especially since choices regarding senior leadership could be considered the most important corporate decision a company could make.

To gain some insight as to possible sources or “Succession Risk Factors,” we asked for the perspective of the Senior HR Executives who responded to our survey. Arguably, they have a unique vantage point as insiders (with a more intimate view) but still somewhat external to the risk factors they may observe.

Of the HR executives eligible to provide this data, 63% responded. The table to the right ranks the factors believed to contribute most to the failure of senior leaders in their organizations.

Since the survey included diverse HR Executive responders from multiple situations, it is more help-ful to identify differences within different classes of companies.

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Our hypotheses regarding critical leadership competencies included anticipating differences according to:

Different Succession Practices:

Percentpromotedinternallyversusexternallyrecruitedexecutives

• Senior level

• Mid level

Thesizeandtypeofcompany

• Over 1 billion in revenue versus smaller

• Publicly held versus private or non-profit

• Geo-cultural differences

We present initial findings across source of promotion and difference by size of company.

33%

3% 30%

Failure to Execute

17%

4%13%

Didn’t get Clear Direction

13%

4% 9%

Poor Organization

The Risks of Low Internal Promotion“Bringing In Outsiders Who Don’t Know the Business”

34%

7% 27%

Didn’t adapt to culture

17%

7% 10%

Lacking Political Savvy

11%

6% 5%

Mismatch Role

The Risks of High Internal Promotion“Promoting the Anointed who Haven’t Learned Humility”

Low Internal Promotion

High Internal Promotion

The advantages and disadvantages of internal promotion

Many CEOs as well as HR

executives identified a

corporate preference either

to promote:

• Almost exclusively from within

• Externally, but from their own market vertical (or closely related)

• Externally from outside their market vertical (for a “fresh” perspective)

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40%

Lower Levels of Internal Promotion

Higher Levels of Internal Promotion

Do leaders need a deliberate and effective “on-boarding” process to integrate them into a new level of responsibility even if they are internally promoted…much as new employees often benefit from well-conceived integration into a new company and position?

We were surprised to see that HR Executives across the board identified lack of company support as a leading new leader “Risk Factor” regardless of where that individual was recruited or promoted from. Companies that emphasized on internal promotions, however, were less than half as venerable than orga-nizations that recruited outside candidates. This may suggest a “sink or swim approach” or that some organizations assume that selecting the right indi-vidual is sufficient. They may assume that if they made the right selection the individual will immediately assume responsibility for his or her own success. It may also mean that the selection criteria were inadequate and focused too much on experience and job knowledge with too limited a concern for readi-ness from the “people management” side of the leader’s new responsibilities.

19%

24%

Moderate Levels of Internal Promotion

The Surprise! Lack of Support by the Company was Significant Across all Succession Sources

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There may be several explanations for these findings.

First, the fewer responses cited by the smaller companies could indicate that smaller organizations are “easier “to lead. Possible, also, is that smaller organizations are less likely to attract such “accomplished” recruits so that, as Jim Collins pointed out in Good to Great, “Some more effective leaders but less “self promoting” are more humble and sensitive to the need to acclimate with the staffs of their new organization or role.”

11%

4% 7%

Lacked Clear Direction

11%

2%9%

Not Organized or Prioritized

Disadvantages of Smaller Organizations (Under $1B in Revenue)

51%

24%27%

Didn’t Fit Culture

22%

13%9%

Egotistical

20%

11%9%

Not Flexible

Disadvantages of Larger Organizations ( Over $1B in Revenue)

20%

8%12%

Lack of Political Savvy

High

Low

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Activity

Percent CEOs Involved

Top Companies

Percent CEOs Involved

Bottom Companies

Coaching and Feedback 53 54

Appear in Training Classes 51 30

Informal Information Exchange Sessions 80 73

One-on-One Mentoring 71 58

Formal Training Classes 35 29

To evaluate the possible consequence of having, or not having, a sufficient leadership pipeline, we split our sample into three groups - focusing on top and bottom groups. The top group featured those that were among the top 20% in filling senior level leader-ship positions and the management levels below by promoting from within (80% or higher internal promotions). The bottom group features those with the fewest internal promotions (40% or less).

We found that companies that filled a higher proportion of positions from promotion from within had significantly more personal involvement of their CEO in their leadership development system.

• The personal involvement of the CEO has sig-nificant benefits; companies that have a higher proportion of promotions from within were less likely to suffer from a lack of qualified candidates.

Disadvantages of Lower Levels of Internal Promotion

Disadvantages of Higher Levels of Internal Promotion

Failure to Execute 33% (v.3%) Didn’t adapt to culture 34% (v.7%)

Didn’t get Clear Direction 17% (v.4%) Lacking Political Savvy 17% (v.7%)

Poor Organization & Priorities 13% (v.4%) Mismatch for Role 11% (v.6%)

The Surprise! Lack of Support by the Company across All Succession Sources

Higher Levels of Internal promotion 19%

Moderate levels of Iinternal promotion 24%

Lower Levels of Internal promotion 40%

The CEO’s Role in the Depth of the Leadership Pipeline

• 48% of respondents from companies with a high percentage of promoting from within agreed, or strongly agreed, that his or her company had a sufficient number of qualified candidates ready to assume senior leadership positions. In comparison, only 24% of the bottom companies agreed that they had a sufficient number of se-nior management candidates, and none of them strongly agreed with the statement.

• 55% of the top companies agreed, or strongly agreed, that they had a sufficient number of qualified mid-level manager candidates, while only 31% of the bottom-performing companies agreed or strongly agreed.

The converse was also true.

While only 39% of top companies disagreed or strongly disagreed that they had sufficient quali-fied mid-level leadership positions, 53% of the bottom-performing companies did. While only 28% of top companies disagreed or strongly dis-agreed that they had sufficient qualified mid-level leadership positions, 43% of the bottom-perform-ing companies did.

It appears that in the war for talent, those CEOs who invest more of their personal time in developing leaders enjoy a better likelihood that they can fulfill the company’s leadership needs from within.

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Research focused on Geo-cultural differences suggest the Multinational companies will require a New Global Leadership profile: the ideal ambicultural leader, will be an enlightened citizen/businessperson with competencies such as:

• Cross cultural insight: the wisdom and strength to integrate other cultural and business paradigms

• Recognition of the shortcomings of other business models to meet the complexities presented by globalization and emerging markets

• Openness to new ways of thinking

• Balancing the diverse needs of social, geopolitical, environmental, and human needs, and the ability to transcend divisions around the globe

A dedication to integrating global awareness into everyday actions:

• An emphasis on unity and morality

• An ability to balance social good and self-interest

• An emphasis on trust-based and legal relationships

• An equal appreciation for teamwork and individual stars

• A commitment to continued learning, sharing knowledge, and experience in the interest of mutual improvement, and reaching the pinnacles of professional achievement and humanity

The ability to appropriately integrate:

• Social good and self-interest

• Trust-based and legal relationships

• Teamwork and individual achievement

• Risk taking and caution

• Business and society

• Locally and globally sensitive

Leadership for the Future

33

The Global Leadership Research Project Participating Partners

34

ChallyGroupWorldwide is a sales and leadership talent management company that was founded in 1973 through a grant from the United States Justice Depart-ment. The grant funded the creation of actuarial assessment techniques and a validation technology that accurately predicts on-the-job effectiveness. Chally’s talent analytics has been improving productivity and reducing turnover for customers in over 49 countries. Customers choose Chally’s talent measurement process for improved candidate selection and employee and organizational development. Chally continues to fund and develop comprehensive research in sales and management development including the Best Companies for Leaders and World Class Sales Research, which has been conducted for several years.

RightManagement(www.right.com) is the talent and career management expert within Manpower, the world leader in innovative workforce solutions. Right Management helps clients win in the changing world of work by designing and executing workforce solutions that align talent strategy with business strategy. Our expertise spans Talent Assessment, Leader Development, Organizational Effectiveness, Employee Engagement, and Workforce Transition and Outplace-ment. With offices in over 50 countries, Right Management partners with compa-nies of all sizes. More than 80% of Fortune 500 companies are currently working with us to help them grow talent, reduce costs, and accelerate performance.

Personified, a division of CareerBuilder, is the leading business intelligence consulting firm focused on talent. We specialize in job seeker and employee research, human capital consulting, and talent sourcing and screening. Our real-time access to job seekers, employees, and employers helps us deepen talent acquisition strategies and swiftly implement recruitment tactics so companies of all sizes realize the best return on their people.

TurningPoint has been addressing various needs in Sales, Customer Service, Leadership, Vision-Mission, Balance Score Card, Reengineering, and Implemen-tation in different organizations since 1999. The company’s international pool of consultants in India and the Middle East have specialized capabilities in the above-mentioned segments. Over the past several years, Turning Point has es-tablished a name for itself in achieving levels of excellence for its clients.

35

ProActive is a Scandinavian based company that offers customers a broad and diverse professional expertise to help enable strategic development. Pro-active focuses on competency assessment, strategic planning, management issues, and strengthening the corporate image. We help organizations clarify needs and initiate the evaluation and development process.

ImperialConsulting represents the American Management Association (AMA) in Singapore, Malaysia, Philippines, Indonesia, India, and Australia. In partnership with AMA, our mission is to provide managers and their organizations with the knowledge, skills, and tools they need to improve business performance, adapt to a changing workplace and prosper in a complex and competitive business world.

MCE was established in Brussels in 1961 as the European headquarters of the American Management Association (AMA), and provides high quality and consistent management development solutions across Europe and globally. We cover the three areas of leadership, managerial, and business functions.

AmericanManagementAssociation is a world leader in professional development, advancing the skills of individuals, teams, organizations, and government agencies. With over 85 years of experience delivering 140+ training seminars throughout the country, AMA has refined their training programs to meet today’s challenges. AMA promotes the goals of individu-als and organizations through a comprehensive range of solutions, including business seminars, blended learning, Web casts and podcasts, conferences, books, whitepapers, articles and more.

37

Global Leadership Research Project 2010 Survey Response Summary

38

Doesyourorganizationhaveaformalprocessfordevelopingleaders?% %

Formal Process CEO HR

Yes 52 54

Whatdevelopmentopportunitiesareincludedinit?

Opportunity CEO HR

Coaching and mentoring 94 93

Action learning/developmental assignments 77 77

Assessment and feedback 84 89

High-potential programs 1 65

International assignments 30 44

Cross-functional team projects 69 72

Exposure to senior executives 77 76

Exposure to internal and external thought leaders 59 51

Formal classroom training 69 79

External workshops and training 69 79

Tuition Remission 52 52

Other: please specify 8 14

Doesyourcompanyhaveinternationaloperations?

CEO HR

39 52

Whatdoesyourcompanydotoensureithasagoodleaderpipeline?

Action CEO HR

Provide informal development opportunities to key internal people 80 74

Rigorously recruit and hire external candidates who have the potential to become top-level leaders to fill specific position openings 37 45

Maintain a network of potential external leadership candidates 30 22


Whatarethegreatestchallengesindividualsfaceinbeingsuccessfulleadersoutsideoftheirhomecountry?

Response HR

Adapting business practices to local conditions 48

Cultural assimilation 80

Family issues 7

Global Leadership Research Project 2010 Survey Response Summary

39

Language barriers 19

Disconnect with domestic organization 8

Whatpercentofyourcurrentseniormanagementteamwasrecruitedinternally?

CEO HR

54 52

Whatpercentofyourcurrentnextlevelunderseniormanagementwasrecruitedinternally?

CEO HR

52 55

WhatfunctionalareasaremostlikelytoproduceyournextC-levelexecutives?(ChoosethetopFOUR)

Functional Group CEO HR

Engineering 16 28

Finance 50 62

Human Resources 26 23

IT 12 13

Operations 67 69

R&D 9 8

Sales 48 49

Marketing 36 32

Other 11 13

Inyourlocation,howdotheskillrequirementsdifferamongvariousleadershiproles?(PickthetopFOURmostimportantskillrequirementswithineachjobtitlecategory.)

CriticalSkillsforCEO

Skill CEO HR

Developing an Accurate and Comprehensive Overview of the Business 58 55

Creating a Strategic Vision 92 92

Technical & Business Competence/Expertise 18 19

Objective Self-Assessment of Own Limitations 21 17

Decision Making 57 50

Timely/Effective Execution 18 16

Politically Astute 29 37

Collaborative 23 13

Initiative to Produce Appropriate Change 30 31

Inspiring Others & Maintaining Leadership Responsibility 63 62

Identifying and Focusing on Critical Priorities 33 35

Directing, Delegating, and Establishing Monitoring Systems 15 11

Selecting & Developing Successors and Key Reports 40 40

% %

40

CriticalSkillsforCOO

Skill CEO HR








Collaborative 33 27






CriticalSkillsforCFO

Skill CEO HR








Collaborative 30 28






CriticalSkillsforCIO

Skill CEO HR








Collaborative 48 40




% %

41



CriticalSkillsforCLO

Skill CEO HR








Collaborative 50 48






Doyoureservekeytop-levelmanagementpositionswithinforeigncountriesforlocallyrecruited/developednationals?

CEO HR

49 43

Howwouldyourateyourorganization’sabilitytodevelopleaders?

Response CEO HR

Poor 9.3 13.8

Average 25.2 30.4

Good 28.9 30.4

Very Good 24.8 19.2

Excellent 11.8 6.3

Whatchallengesdoyoufaceindevelopingleaderswithinyourorganization?

Response CEO HR

Limited financial resources 57 60

Difficulty balancing long-term and short-term business requirements 57 53

Rapidly changing business requirements so criteria for success is fluid 36 34

Difficulty identifying high potential development prospects 15 25

Difficulty retaining top talent 10 20

Difficulty attracting top talent 21 26

No systematic process for identifying and developing talent 35 41


% %

42

Describetheprocessesyouusetoidentifytopinternaltalent(e.g.,successionplanning,talentpoolplanning,potentialidentificationandtracking,etc).

Response HR

Have no formal process 21

Succession Planning 39

Performance Reviews/Development plans 19

Identification and Tracking of hi-potentials 18

Coaching/mentoring 4

Annual talent review 22

360 Feedback 5

Nomination by boss 1

Assessment Results 8

Leaders pick next leaders/hi-potentials 8

Doyouhaveaformaldefinitionofhighpotential? HR

HR 34

Whatarethetwobestwaystoidentifyhi-potentialtalent?(ChecktheTopTWO.)

Responses HR

Credentials 24

Recommendations from superiors 75

Peer Nominations 22

Completion of minimum identified assignments or course work 19

Assessment Tests 21

Assessment Centers 20

Other: please specify 20

Howfardowninyourorganizationdoyougoinidentifyingandtrackhighpotentialleaders.

HR

Individual Performers with no Management Experience 35

First Level Supervisor 14

Middle Managers 32

Upper Level Managers 13

Other 5

Whatpercentofyourtimeisspentengaginginother’sdevelopmentactivities?

CEO HR

28.8 16.9

%

43

Inwhichofthefollowingdevelopmentactivitiesdoyougetpersonallyinvolved?

Response CEO HR

Teaching formal training classes 43 14

Guest appearances in training classes 45 48

Mentoring one-on-one 82 38

Coaching and feedback for skill development 79 45

Informal information exchange sessions 81 75


Whatpercentofyourtimeisspentonyourownpersonaldevelopmentactivities?

CEO HR

19.2 15.3

WhatdevelopmentalexperiencesweremostimpactfulinpreparingyoufortheroleofaCEO/C-Levelexecutiveduringyourcareer?

Response CEO

Sitting on Boards 2

Cross-functional responsibilities 21

Formal education/advanced degree 13

Experience at multiple organizations 21

Given stretch goals 26

On-the-job training, hands-on learning 34

Service roles outside of work 11

Formal training 14

Othercompaniesactivelytrytorecruitourorganization'sleaders.

Response CEO HR

Strongly Disagree 5.6 4.3

Disagree 12.8 13.5

No Opinion 27.0 28.0

Agree 40.5 40.1

Strongly Agree 14.1 14.0

Retentionofkeytalentisaformalperformancemetricforourmanagers

Response CEO HR


Disagree 20.4 32.4


Agree 36.8 26.1


% %

44

Mycompanyhasasufficientnumberofqualifiedinternalcandidatesthatarereadytoassumemid-levelmanagerpositions

Response CEO HR


Disagree 29.9 27.9


Agree 36.2 37.5


Mycompanyhasasufficientnumberofqualifiedinternalcandidatesthatarereadytoassumeseniormanager/executivepositions

Response CEO HR


Disagree 36.8 39.5


Agree 27.8 25.4


Upper-levelmanagersrecruitedexternallyhavebeensuccessful.

Response CEO HR


Disagree 11.9 9.2


Agree 47.6 54.9


Mid-levelmanagersrecruitedexternallyhavebeensuccessful.

Response CEO HR


Disagree 8.8 5.3


Agree 51.2 66.5


HRisaneffectivepartnerintheleadershipdevelopmentprocess

Response CEO

Strongly Disagree 4.1

Disagree 10.2

No Opinion 23.8

Agree 35.0

Strongly Agree 26.9

% %

45

Sector:

Sector CEO HR

Publicly Traded 22.0 36.4

Privately Held 72.0 56.4

Government Entity 5.9 7.2

Whatprocessesdoyouusetorecruitandhiretopexternalleadershiptalent?(Checkallthatapply.)

Response HR (%)

Use specialized recruiting firm 66

Recommendation from internal managers/executives 65

Recommendation from external executives 47

Networking at industry events 47

Assessment Process 31

General Interviews 44

Structured Interviews 60


Whaton-boardingprocessesdoyouusefortop-levelleaders?(Checkallthatapply.)

Response HR

Assigned a mentor 31

Planned rotation of meeting key individual 70

Short-term assignments in different functional areas 23


Whichofthefollowingaremostpredictiveofleadershipsuccess?(Checkallthatapply.)

Response HR

Previous experiences 73

Educational background 18

Interpersonal skills 86

Fit with company values and culture 90

Motivation to lead 81

Lack of derailers 29


% %

46

Listthethreegreatestcausesofleadershipderailmentorfailure.

Response HR

Lack of business acumen 4

Not flexible 13

Poor communication 12

Cultural mismatch 32

Poor decision maker 3

Given no clear direction/expectations by superiors 8

Arrogant attitude 15

Fails to execute 26

Lack of honesty 3

Mismatch with role 6

Left the business 1

Poor management skills 13

Lack of personal drive 6

Lack of organization 8

Lack of political savvy 11

Fails to build relationships/team 40

Not supported by the company 25

Lack of training 24

Lack of vision 15

Describethebestprocessestominimizeleaderderailment.

Response HR

Provide clear goals and expectations 14

Improve communication 7

Allow person latitude to fail 13

Provide regular feedback 28

Hire good match 29

Be honest about the position’s requirements 3

Provide a mentor 28

Mgt/Corp should support the person 9

Encourage teamwork 10

Provide training and development 47

Whatarethemostcriticalskillstobeaveryeffectiveupper-levelmanager?

Response CEO HR

Business acumen 16 19

Resilient to change 17 13

Communicates well 33 28

Makes good decisions 14 15

% %

47

Good talent management (hires and groom well) 7 7

Honesty 10 12

Knowledgeable/experienced 15 10

Leadership skills 38 47

Listens 18 19

Management skills 23 25

Motivated to be successful 24 20

Organized 12 12

Builds Relationships/good interpersonal skills 32 37

Sales skills 6 5

Builds teams 16 21

Analytical thinker, technical competence 20 17

Has vision 42 38

AdditionalComments

(Thefollowingalsoappearattheendwiththe%foreachresponseonthe5pointscale)

Question CEO HR

How would you rate your organization’s ability to develop leaders? 3.05 2.24

Retention of key talent is a formal performance metric for our managers. 3.34 2.84

Other companies actively try to recruit our leaders. 3.45 3.46

My company has a sufficient number of qualified internal candidates that are ready to as-sume mid-level manager positions.

3.15 3.12

My company has a sufficient number of qualified internal candidates that are ready to as-sume senior manager/executive positions.

2.90 2.73

Upper-level managers recruited externally have been successful. 3.49 3.50

Mid-level managers recruited externally have been successful. 3.53 3.70

HR is an effective partner in the leadership development process. 3.70 N/A

% %