making leadership development a source of competitive advantage october, 2007 robert m. fulmer

Making Leadership Development a Source of Competitive Advantage

October, 2007

Robert M. Fulmer

2

09.12.05.WachoviaLeadershipBenchmarkingv1

Session Overview

• Highlights of Previous Studies

• Action Principles From Research on Trends and Best Practices

• Linking The Growth of Leaders to Business Growth and Profitability

• The ABC’s

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Growing Great Leaders Delivers Great Results!

Organizations with strong leadership bench strength have approximately 10% higher total shareholder return than their weaker peers (Corporate Leadership Council, 2003)

Companies with above average financial returns have more comprehensive succession planning processes and are committed to developing future leaders (Hewitt, 2003)

Employees with strong leaders are more satisfied, engaged, and loyal than employees with weak leaders (DDI, 2003)

A conscious partnership between line execs and HR drives strategic leadership success (APQC 2005)

Accelerated development for global high potentials can be a powerful lever to develop, communicate and implement strategy (Fulmer & Bleak, 2007, Hewitt, 2007

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Five Principles That Can Streamline Your Organization’s Success in Growing Leaders—and the Bottom Line!

# 1: Start with the top Build C level commitment and passion for leader development through partnership and results Engage senior management as champions, role models, and faculty

#2: Directly link to the business --- and deliver results Integrate and align leader development practices with business strategy & priorities Demonstrate value in business terms and develop metrics that reflect business goals

#3: Build an integrated leadership strategy Create a compelling vision, business case, and strategy for leader development Design a mosaic of the “targeted” programs and development solutions for maximum impact

#4: Drive consistency in the execution of leadership programs and practices ' Cascade programs to improve reception and drive cultural & strategic change

• Customize solutions for business units to win strong senior management buy–in • Leverage key career transition points—’teachable moments’—especially for HiPos

#5: Hold leaders accountable for results—development and business results Differentiate and actively manage the development of high potential talent Anchor all talent and performance management practices with a lean competency model linked

to strategic, reward and performance systems

Source: Adapted from: Duke Corporate Education, “Leadership Strategy Project” (2005); Hewitt, “The Top Companies for Leaders – (2005, 2007); : ExecSight, “Current Challenges in Leadership Development” (2004), Growing Your Company’s Leaders, 2004, The Leadership Advantage, 2007

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How Well Does Your Organization Follow Each Key Principle?

Idea # 1: Start at the top

Idea #2: Directly link to the business – and deliver results

Idea #3: Build an integrated leadership strategy

Idea #4: Drive consistency in execution of leadership programs and practices

Idea #5: Hold leaders accountable for results including development

4We are a

benchmark in this area

3We execute elements of this guiding

idea well

2We are beginning

to introduce elements of this

guiding idea

1We would like to follow this guiding idea

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CEO Level Involvement and Sponsorship Is Absolute In Top Companies

Source: The Top Companies for Leaders – Hewitt

100%

65%65%

31%

0%

20%

40%

60%

80%

100%

120%

CEO Involved Board InvolvedNon Top CompaniesTop Companies

Principle 1

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It All Begins… And Ends With the Business

All of the “Best Practice” Companies Have:

Leader development strategies that are closely linked to their business strategies, rather than popular “best practices”

Strategies for selecting, developing and rewarding leaders, most of which are anchored by a lean competency model

Source: The Top Companies for Leaders – Hewitt, The Leadership Advantage

Principle 2

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There Are Some Solid Measures Of Business Impact Available…

Measures of Business Impact

Improved product/service quality 70%

Improved customer service 70%

Reduced operating costs 59%

Increased revenues 51%

Improved sales efficiency 49%

Increased profits 48%

Source: Corporate University XChange 6th Annual Benchmarking Report, 2005

Guiding Idea 2

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Developing an Integrated Leadership Strategy is a Top Priority --- Yet Many Challenges Exist

69

52

52

50

41

0 10 20 30 40 50 60 70 80

Creation of an integrated strategy& system for all executive

development

Use of systematicmeasurement/evaluation tomeasure impact of efforts

Creation of an integrated strategy& system for all HR activities

Creation of core corporatecurriculum (required courses)

Creation of milestone/transitionsystem for right learning for

career progression

% Respondents

Source: Executive Development Trends; EDA Inc.

EDA’s 2000 study reported the same No. 1 priority with the caveat that it is difficult to achieve !EDA’s 2000 study reported the same No. 1 priority with the caveat that it is difficult to achieve !

Top Priorities for Leading L&D OrganizationsPrinciple 3

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High Potentials Can Leverage Developmental Efforts

79

62

61

56

53

48

0 10 20 30 40 50 60 70 80 90

Increase bench strength/ensurereplacements for key jobs

Accelerate development of high-potentials

Communicate vision and strategyand create alignment

Support organizationalchange/transformation

Develop the capabilties ofindividual leaders

Address key businessissues/challenges

% Respondents

Source: Executive Development Trends EDA Inc.

Key Objectives of Executive Development Activities in Next 2-3 Years

Principle 4

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Yet, Most Companies Worry About Identifying and Helping High Potentials

46% of companies have no systemic process for identifying and developing candidates for key leadership positions

Half the candidates selected internally for leadership positions fail when there is no succession management system

Source: Leadership Forecast: A Benchmarking Study 2003; DDI; Growing Your Company’s Leaders, 2004, Leadership Advantage, 2007

Guiding Idea 4

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If You Can Identify Your High Potentials, What Do You Communicate?

Source: The Top Companies for Leaders ; Hewitt

0

20

40

60

80

100

Identify High Potentials Tell them of their status Track Their Turnover

Non-Top Companies Top Companies

77%

95%

53%

68%

60%

72%

For Your High Potential Population, Do You:

Principle 4

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…How To Develop Them

All of the Top 20 Companies also link compensation to a leader’s future potentialAll of the Top 20 Companies also link compensation to a leader’s future potential

43%

24%

95% 90% 89%

58%51%

45%

0%10%20%30%40%50%60%70%80%90%

100%

IncreasedAccess To Sr.

Leaders

InternalTraining

DevelopmentalAssignments

Mentoring orCoaching

Non Top Companies

Top Companies

Developmental Techniques Used To Develop High Potentials:

Source: Top Companies for Leaders –; Hewitt

Guiding Idea 4

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Best Practice Firms Anchor Their Leadership Development With A Lean Competency Model Tied to Performance and Reward Systems

31%23%

100%

60% 60% 65%78%

30%

0%

20%

40%

60%

80%

100%

120%

SuccessionPlanning

Base Pay AnnualIncentive

Long TermIncentive

Non Top Companies

Top Companies

Leader competencies are integrated into:

Source: The Top Companies for Leaders – ; Hewitt

29%71%Metrics from performance management process are integrated into succession planning

Top Quartile

Metrics Integrated

NotIntegrated

45% 55%

Bottom Quartile

Metrics Integrated

NotIntegrated

Principle 5

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Organizations have teachable moments, too.

Leadership development can

be a powerful tool to help formulate, translate, and communicate strategy.

Linking corporate strategy & leadership development strategy creates winners.

Lean competency models and values

are the foundations of strategic HR & leadership development.

I. Developing a Strategic HR Architecture

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VISION 2020

STRATEGIC GOALS

Our Values in Action – INTEGRITY, EXCELLENCE, TEAMWORK, COMMITMENTWORLDWIDE CODE OF CONDUCT

ENTERPRISE STRATEGIC AREAS OF IMPROVEMENT

STRATEGIC PROFILE

New Product Introduction

Order-to-Delivery

Encoding 6 Sigma

Sustainable Development

Growth Beyond Core

CRITICAL SUCCESS FACTORSPEOPLE QUALITY PRODUCT VELOCITY DISTRIBUTION CHINA TROUGH

People Performance Product & Process

Profitable Growth

MAKING PROGRESS POSSIBLE

Caterpillar’s New Strategy

Engagement Index 90% by

2010

Leadership Index 80% by

2010

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Strategic HR is a partnership between senior line executives and multiple human resource systems.

Strategic HR (especially HRD) is a key part of the corporate planning cycle.

HR can win the support of top management by involving them in strategic learning initiatives and by knowing and advancing the mission.

Leaders who teach are more effective than those who tell.

Strategic leverage comes from a focus on high potentials.

II. Aligning Strategic HR Systems

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Leaders in HR maintain control of custom design and delivery of their programs.

Lean HR groups leverage their talents with the judicious use of consultants and outside service providers.

Integration of leadership development with other talent management systems creates alignment and synergies within the HR function.

III. Implementing a Successful HR Strategy

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Developing people is a growing measure of executive success.

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

Successful programs are a process rather than an event.

IV. Assessing Success in Strategic HR

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Alignment

Business Focus

Collaboration

Success Factors for Future Leadership in Strategic Human Resources: The ABCs

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Reflect on the best practices/principles you just heard about and then discuss What best practice or principle is most important for the overall

success of leadership strategy? What will be most important in 2010? What is the one additional question you would most like to ask of Best

Practice partners?

Leadership Best Practices Dialogue

Individual Review (1’) – write on post –it or notebook Small Group (5 – 7”) – develop list for your group Large Group (5”): Report out

Process

Task

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Referenced Reports

• James Bolt, "Executive Development Trends 2004: Filling the Talent Gap,” (survey of 101 global companies) Executive Development Associates (EDA) Inc.

• Corporate Executive Board: Driving Performance and Retention Through Employee Engagement (September 2004)

• Corporate University XChange 6th Annual Benchmarking Report, 2005• Robert M. Fulmer & Jay A. Conger, Growing Your Company’s Leaders,

AMACOM, 2004• Robert M. Fulmer & Marshall Goldsmith, The Leadership Investment, AMACOM,

2001 • Robert M. Fulmer SME, “Next Generation HR Practices,” APQC, 2005• Robert M. Fulmer & Jared Bleak, “The Leadership Advantage, 2007• Hewitt & Associates, “The Top Companies for Leaders,”2005, 2007• Andre Martin, “Differences in the Development Needs of Managers at Multiple

Levels,” Center for Creative Leadership, 2005.• Mark Nevins and Stephen Stumpf, “21st Century Leadership: Redefining

Management Education,” Business & Strategy, 1999.• Scott Saslow, “Transforming Corporate Leadership: Best Practices in

Executive Education,” ExecSight, (April 2004).• Training Magazine’s 2005 Survey of Top 100 Companies• Training Magazine’s Annual Comprehensive Analysis of Employer-Sponsored

Training in the US , October 2004• Watson Wyatt," Maximizing the Return on Your Human Capital Investment”2005

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Key Takeaways From Skil

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Key Takeways from Skil

Create a (simple) Formal Pocess

Involve a Multi-Functional Team

(Over) Communicate the Strategy

Be Consistent Over Time

Establish Balanced Measure

Review Strategy Regularly

making leadership development a source of competitive advantage october, 2007 robert m. fulmer

Documents

leadership development

leadership advantage

leadership strategy

growth of leaders

leaders accountable

business growth

leader development practices

business strategy priorities