Tuesday, May 8, 2012

New Study IDs Best Companies for Leadership​, Innovation

Hay Group just released its seventh annual Best Companies for Leadership Study.

Is this just another one of those touchy-feely, nice to do awards? Not at all. The Best Companies for Leadership consistently outperform their peers. Over a 10 year period, the Top 20 companies produced a 5.39 percent shareholder return, compared to a 2.92 percent shareholder return generated by the S&P 500.

Each year, I publish the list of companies and a summary of the findings (see below). This year, I also interviewed Susan Snyder, senior principal in Hay Group's Leadership & Talent Practice and co-leader of the Best Companies for Leadership Study, to discuss the findings.
Note: I've paraphrased Susan's responses.

Dan: What's new in this year's findings? I don't remember seeing innovation highlighted in previous results - were those new questions?

Susan: Yes, there was a new set of questions added this year around the theme of innovation, based on what we're hearing and seeing about it's importance. We were pleased with the findings - there are very actionable take-a-ways for both organizations and individual leaders (see below).

Dan: Over the years, what seems to be the foundation for great leadership development? In other words, what doesn't change?

Susan: Over the last few years, I've seen three consistent themes:

1. The Top 20 connect leadership development with the business strategy. It's not a "nice-do-have", it's a business imperative, with tangible results.

2. The use of "stretching" to develop leaders - assignments, roles, projects, etc.. that take someone out of their comfort zone.

3. The importance of collaboration. Not just words on a values poster - it's seen treated as a critical leadership competency required to drive results.

Dan: I was surprised to see that 100% of the top 20 thought "There are a sufficient number of qualified internal candidates who are ready to assume open leadership positions". Really?! I've never seen responses like that - even the best companies never seem 100% comfortable with their bench situation. Any idea what's going on with that?

Susan: Well, you have to take these answers with a grain of salt, but the response to this question was the same as last year. So we are seeing an increase in the confidence level of Top 20 companies in their bench strength.
Dan's commentary: To all the naysayers that like to point out the lack of results for all of our leadership development efforts..... nah nah nah nah nah nah! Seriously, it's not rocket science - it just takes commitment, focus, and the disciplined use of tried and true best practices.

Dan: I always wondered if CEO commitment was a must when it comes to strong leadership development programs. Yet, the same companies keep coming out on top, even as the CEOs have turned over. How do they do it?

Susan: Even with a new CEO, great talent management leaders seem to be able to maintain the momentum and commitment. They may also be able to point to studies like ours to build the business case.
Dan's commentary: It's hard to create commitment to leadership development - but once it's there, it would take a succession of 2-3 really bad CEOs and talent management leaders to screw it up.

Dan: Is there any correlation between the $$ spend on leadership development and the results?

Susan: We don't ask that question, but I would guess there are certain things that the best invest more heavily in, like technology to manage their talent. Or, there's the company that allows it's managers to take time off to manage a non-profit for a stretch assignment. Now that's an investment!

Dan: It looks like "nice" leaders do finish first. True?

Susan: Sort of. I would push back on the term "nice" - however, yes, the Top 20 place a high value on the ability to collaborate, build relationships, and create a culture that fosters development and innovation.


The Global top 20:


Key Findings:

1. Leadership Development: Companies are better positioned for talent now and in the future:

- 100% of the Top 20 companies actively manages a pool of successors for mission-critical roles (vs. 60% of all other companies).

- 100% say they have a sufficient number of qualified internal candidates who are ready to assume open leadership positions (vs. 44% for all other companies).

- 95% of the Top 20 companies (vs. just 48% of all other companies) reported that senior leaders personally spend time actively developing others.

2. Innovation: Leaders set the context for smart innovation:

- 94% of the Top 20 companies run unprofitable projects to try new things, vs. 49 percent of all others.

- 90% say their employees spend much time discussing customers’ future needs, vs. 47 percent of all others.

- 90% said employees are encouraged to learn in areas outside of their expertise, vs. 48 percent of all others.
 
- All of the Top 20 companies (vs. 68% of all other companies) say they provide structured opportunities for younger employees to promote innovative ideas.

- 94% of the Top 20 companies (vs. just 49% of all other companies) say they run unprofitable projects to try new things.

- 90% of the Top 20 companies (vs. 63% of all other companies) reported that if individuals have an excellent idea, they can bypass the chain of command without the threat of negative consequences.

3. Leaders encourage collaboration and reward it accordingly (Dan: yes, the soft stuff really does matter, you can take it to the bank!):

- 100% of the Top 20 companies take clear action when a leader is not collaborating, vs. 59 percent of all others.

95% of the Top 20 evaluates and rewards leaders based on their ability to build excellent relationships with their peers, vs. 46 percent of all others.


What's your reactions to this year's study?


About Hay Group’s Best Companies for Leadership Study
Hay Group has researched the Best Companies for Leadership since 2005.  This year’s survey includes responses from nearly 7,000 individuals at more than 2,300 organizations worldwide. The survey was based on the organization’s response to an online questionnaire and peer nominations. Respondents that completed the survey were from 103 countries, with 11 percent from North America, 35 percent from Europe, two percent from the Middle East, 21 percent from Asia/Pacific/Africa and 31 percent from Latin America.  To see the Top 20 list from 2005 through 2011, please visit the Best Companies for Leadership microsite at http://bitly.com/Imm26t.

About Hay Group
Hay Group is a global consulting firm that works with leaders to transform strategy into reality. We develop talent, organize people to be more effective, and motivate them to perform at their best. With 85 offices in 48 countries, we work with over 7,000 clients across the world. Our clients are from the private, public, and not-for-profit sectors, across every major industry and represent diverse business challenges. Our focus is on making change happen and helping people and organizations realize their potential.

6 comments:

Jim Taggart said...

Dan,

Thanks for sharing. Great to see innovation noted. Time that this got more attention in U.S. industry, given that it's the cornerstone of American competitiveness and wealth generation. Also interesting that Susan pushed back on the use of the word "nice." I recently read a paper on that topic, which shot down the view that leaders have to be nice to be effective.

Duncan Brodie said...

Excellent insights Dan and thanks so much for sharing. Personally not surprised to see innovation becoming more of a feature as clearly organisations globally are having to find new ways of tackling challenges.

Mary Jo Asmus said...

Thanks Dan for the recap. I feel very grateful to have assisted in the design of a coaching program (a cornerstone of their leadership development program) and actually coaching extensively in one of these companies. I think we're reaping the results of the large scale work there with honors such as this one.

And for the record, internal metrics do indicate great results. Qualitatively, there is no doubt in my mind that this company's leaders are very skilled.

business cycle said...

Interestingly that the top 3 companies in the list, GE, P&G and IBM have all had a tremendous turnaround of fortunes due to leadership in the 90s.. I guess that have learned the lesson and are keeping the leadership aspect close to their culture.

John Murphy said...

Thanks, Dan. One question - why is it that when publicly quoted companies come under pressure that the reaction is to replace their CEO with an outsider rather than an internal candidate?

Dan McCarthy said...

Love these comments - Great Leadership leaders are the BEST!

Jim -
Thanks - yes, Innovation is the only way we will get ourselves out of this economic mess.
Leaders may not have to be "nice", but they sure do need to know how to collaborate and build strong relationships. Hard to do that if you're a jerk.....

Duncan - thanks!

Mary Jo - Thanks, and kudos to you for the great work you did.

BC -
Thanks, it sure is encourgaing.

John - Great question! I'd reccommend reading "How the Mighty Fall" by Jim Collins. He calls it "grasping for salvation".