Wednesday, 9 January 2008

Best companies for Leaders

I’ve just been sorting out the various surveys I’ve reviewed during 2007. I think one of the best of these on leadership was conducted by Dave Ulrich’s consulting firm, RBL, together with Hewitt and Fortune magazine earlier this year. The survey finds that leadership development is increasingly important, particularly within what were identified as top companies for leadership. These companies make leadership a critical part of the company’s organisational fabric. So for example, they are more successful in attracting the quality of leadership talent they want (95% of top companies vs 57% of other companies say that they are successful or very successful in doing this). These benefits translate into higher company reputation and business performance. I particularly like this quote about Ken Chenault at American Express (number 19 in the North American list of best companies for leaders) published in Fortune this September:

"You couldn't be blamed for rolling your eyes when American Express chief Ken Chenault says, "People are our greatest asset." CEOs always say that. They almost never mean it. Most companies maintain their office copiers better than they build the capabilities of their people, especially the ones who are supposed to be future leaders, and for decades they've gotten away with it. But now their world is changing profoundly - and at long last we're going to find out which self-proclaimed people-cherishers actually mean it."

These changes mean that the bar to gain advantage through leadership development has been raised. Most companies do identify top talent, conduct talent reviews, do succession management, and develop talent in multiple ways. Top companies do more, and “although the gap between good and great is narrowing… the Top Companies continue to differentiate themselves”.

The survey emphasised that to move ahead, organisations need to do more that just develop individual leaders at all levels – they also need to create a differentiated model of leadership that is right for their organisation and which provides a common language and way of thinking for people within the organisation. Doing this also provides the basis for a leadership oriented employer brand .

I think two major paradigm shifts are required as well. Organisations must see leadership as a vehicle for enabling their organisation to move in a different strategic direction. So if their business needs to enter a new area, a key question needs to be whether the organisation possesses the necessary leaders to deliver this strategy.

To make this work, leaders need to demonstrate a passionate and unwavering commitment to leadership. And they must spend more than 30% of their time and effort directly on leadership issues. In fact CEOs at the top companies spend 60% of their time on talent. And at American Express, 25% of an executive’s variable pay depends on talent development.

And more generally, organisations need to understand the value of their human capital. As Fortune note: “Even given the credit crunch, money for investment is more abundant than ever. It isn’t the scarce resource in the business anymore: human ability is.” And Hewitt explain “Organisations need talented people a lot more than talented people need organisations.”.