General Electric ranks number one in the 2006 Best Companies for
Leaders study, conducted by Hay Group in partnership with Chief
Executive magazine. The study highlights the best practices for
identifying and fostering leadership talent.
"An estimated 75 million workers will retire in the U.S. in the
next 5 to 10 years(1), including 50% of CEOs from major corporations,"
said Mary Fontaine, vice president and general manager of Hay Group's
McClelland Center for Research and Innovation. "There's an urgent need
for leadership with only 45 million younger workers available to fill
those roles. Some sectors and markets are already battling for talent
and leaders. Within a few years it will be a full-scale war. Those
companies that are not already preparing are putting their futures at
risk."
The concern is not isolated to the U.S. and Western Europe where
aging Baby Boomers are readying to retire. In emerging and developing
countries - particularly in China, Eastern Europe, Brazil, and
elsewhere - the need is to bring in and develop enough leaders to
maintain their pace of growth.
Focusing on identifying and managing the talents of high potential
candidates will rise to the top of the agenda, predicted Fontaine.
"Organizations that are able to identify, develop, and promote their
leaders from within will find themselves better positioned than their
peers to win the war for leaders - and to safeguard their
organizational futures. The top companies are already focused on this.
Those companies which are not prepared will be forced to rely on
external recruitment - which is usually much more expensive and less
dependable than internal promotion."
Who are the best companies?
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The 2006 Top 20 Best Companies for Leaders
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1) General Electric 11) Dell
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2) Procter & Gamble 12) Microsoft
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3) PepsiCo 13) Novartis
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4) Citigroup 14) Verizon Communications
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5) Johnson & Johnson 15) Nestle
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6) HSBC Holdings 16) Lockheed Martin
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7) BASF 17) GlaxoSmithKline
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8) Home Depot 18) Amgen
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9) IBM 19) Hewlett-Packard
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10) Coca-Cola 20) BAE Systems
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These companies are a worthy benchmark group for our analysis:
Their average five-year total shareholder return beat the S&P 500 over
the same period by 3.53%. This period covers both the bleak years
following the downturn and 9/11 as well as the recent surge in the
S&P.
And what do they do?
The study identified the practices followed by the Best Companies
for Leaders. The top three of the six best practices in 2005 were also
the top three for 2006 and account for 68% of the variance in the
number and quality of leaders as reported by each organization.
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2006 Best Practices for Leadership Development
1. Having leaders at all levels who focus on creating a work
climate that motivates employees to perform at their best.
2. Ensuring that the company and its senior management make
leadership development a top priority.
3. Providing training and coaching to help intact leadership
teams, as well as the individual leaders, work together more
effectively.
The remaining best practices highlight the need to start early on mid-
level managers and high potentials:
4. Rotational job assignments for high potentials.
5. External leadership development programs for mid-level
managers.
6. Web-based self study leadership modules for mid-level managers.
7. Executive MBA programs for mid-level managers.
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"The Top 20 companies are far more likely to use the top practices
than their peers," said Fontaine. "And, while many of the companies we
looked at employ all of the practices, the top ones use them by a much
wider margin."
In addition to identifying the practices that companies should
focus on to develop their next generation of leaders, the study also
flagged activities that do not add value - at least not if your goal
is to identify and develop leaders.
Practices that waste resources include:
-- Outdoor activity-based programs
-- Paper-based self-study leadership modules
-- Job shadowing for senior managers
-- Executive MBAs and web-based self study modules became worst
practices when implemented too late in the executive's career.
"These practices may achieve other objectives, such as personal
rewards or short-term team building," continued Fontaine. "But they
don't help companies develop more, better leaders."
The shortage of talent and leaders will inevitably cause ripple
effects elsewhere in business, particularly in placing inevitable
further upward pressure on salaries and work/life balance issues. It
will force organizations to pay a premium to hire talent from the
outside, which is financially costly, takes time, and often fails.
Fontaine provides this analogy: "Imagine a game of musical chairs.
Those companies that are proactively dealing with the crisis now will
be seated in the chairs (with leaders intact). The ones that are too
late will be left standing - watching. Where will you be when the
music stops?"
About the Study
For the Best Companies for Leaders study, Hay Group surveyed 564
companies with at least $8 billion in revenue from around the world.
Data were collected from three sources: surveys of leaders within the
companies, surveys of leaders from peer companies, and interviews with
relevant academics and search firm executives.
Hay Group is well positioned to understand leadership traits with
over 60 years of experience in the field, along with a database
comprised of over 4.8 million assessments of 471,544 employees at
4,279 organizations. Over 38,000 of these individuals are at the
executive level.
"Hay Group research shows it takes about three years to identify a
high potential, and another 10 to prepare them for the executive
suite," observed Fontaine. "The costs and risks of recruiting from the
outside can be even higher. Yet how many major companies have a
13-year horizon in place for their talent development programs?"
More information on the Best Companies for Leaders can be found at
www.haygroup.com.
(1) US Census Bureau data.
About Hay Group
Hay Group is a global management 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. Our focus is on making change happen and helping people
and organizations realize their potential. We have 2000 employees
working in 88 offices in 47 countries.
For more information please contact your local office through
www.haygroup.com.
