The Top 20 Companies for Leaders-U.S.2005

The Top 20 Companies for Leaders − U.S. 2005 − M.E. Welcome to the Atlanta HRLF chapter of Leadership Anonymous 2 W.W.J.D? 3 Jack Welch, G.E. Free Jack Welch trading card in every box! 4 Why the Top Companies for Leaders? • To develop a fact-based way to grow leaders • Much leadership research is not: — Holistic — Financially rigorous — Based on proper selection (convenience sampling) — Linked to financial outcomes — Practical — Free • The Top Companies for Leaders research aims to correct all of that; to find the fact-basis for growing leaders 5 How the Research has Progressed 2002 220 U.S. companies 2003 320 U.S. companies 2005 2007 374 U.S. companies ? 203 AsiaPacific companies 110 European 200 AsiaPacific companies 125 European* Top Companies is the largest leadership study in the world 6 Why You Should Care • Our prior research found a clear link between great leadership practices and superior financial results (3T) • Top Companies . . . — Source more CEOs internally than other companies (85% vs. 68%) — Source more VP-level talent internally (74% vs. 59%) — Are consistently able to attract the external talent they want (95% vs. 59%) • Top Companies make more money than yours, have a better leadership brand than yours and will continue to outperform you until you can compete with them 7 The Top Companies for Leaders 2005 Overview • 374 companies completed a questionnaire (6,000 invited) — Likely upwards bias, so results worse then they appear — Many more mid-sized companies this year • Interviewed 75 companies based on select questions • Rigorous financial screen includes 3 different metrics • Independent panel of judges selects the Top 20 — John Byrne, Price Cobbs, Marshall Goldsmith, Jay Jamrog and Joe McCann 8 The Three Fundamental Leadership Truths CEO and Board Leadership and Inspiration Maniacal Focus on High-Potentials The Right Leadership Practices, Done Right A strong correlation between great leadership practices and great financial results 9 Fundamental Truth #1: CEO & Board Leadership and Inspiration 10 Truth #1: CEO and Board Involvement • Members of the board and senior team are active participants in assessing, selecting and developing leaders The Board of Directors Is Actively Involved in Developing Leadership Talent 100% The CEO Is Actively Involved in Developing Leadership Talent 100% 100% 80% 60% 40% 20% 80% 60% 40% 20% 0% Non-Top Companies Top Companies 11 65% 65% 31% 0% Board Support at Pepsico, GE and Cisco • Pepsico board members actively participate in PepsiCo's executive high potential courses at Darden; teach, challenge and interact; get to know on personal basis • They review high potential profiles regularly at board meetings; are actively involved in succession planning process two levels below the CEO • GE’s board members developed, on their own, a 2-hour meeting with new executives to familiarize themselves with the board • Cisco Systems board member Jerry Yang (CEO, Yahoo!) missed a board succession planning discussion, so requested a half-day private briefing on the latest succession book 12 Truth #1: CEO Actions What differentiates CEOs at the Top Companies? • They Invest the Time: —Wipro (India) CEO Azim Premji teaches in the leadership development programs offered to Wipro high potential leaders —Colgate Palmolive CEO Rueben Mark and senior team meets for a half-day every month to plan movement of high potential leaders • They Are Visible and Approachable: —CLP (Hong Kong), CEO Betty Yuen and the senior team conduct annual face-to-face meetings with all employees every year —Fedex Express CEO Dave Bronzcek steers his company through tough times by having the entire senior team visit locations around the world • They Model What They Want —Tata Steel CEO B. Muthuraman invests significant time reviewing leaders performance, focusing primarily on critical leadership behaviors —Dell Computers CEO Michael Dell shares the results of his 360º assessment with his senior team and explains what he will change 13 Fundamental Truth #2: A Maniacal Focus on High Potentials 14 Truth #2: Maniacal Focus POTENTIAL Issue Well Placed Expandable High Potential Of all leaders, what percentage are considered “high potential”? 50% Distinguished Performer LeFarge Roisseau Jones Miller Kade Kruesler Reiter Gordon Bezler Frank Smithers Dur Smith Huang Arial Billat P E R Excellent F Performer O R M Solid A Performer N C Needs E Improvement 40% Glowny 30% 20% 19% 10% 11% 0% Top Companies Non-Top Companies 15 Truth #2: Maniacal Focus For your high potential population, do you: 100% 95% 80% 85% 60% 77% 53% 68% 60% 72% 40% 20% Identify High Potential Tell them of their status Track their turnover Top Companies Non-Top Companies 16 Truth #2: Maniacal Focus Effectively use compensation to reward high potentials 100% Link pay to a leader’s potential 100% 80% 80% 95% 60% 75% 60% 40% 40% 20% 0% 38% 20% 0% 38% Non-Top Companies Top Companies 17 Truth #2: Maniacal Focus High potentials leaders’ pay is targeted at what percentile: 50% 47% 40% 30% 33% 33% 20% 27% 17% 11% 0% 50th – 59th 60th – 69th 70th – 79th 10% 17% 6% 80th – 89th 9% 90th – 99th Base Pay Non-Top Companies Top Companies 18 Truth #2: Maniacal Focus High potentials leaders’ pay is targeted at what percentile: 67% 50% 41% 40% 30% 20% 17% 17% 10% 17% 15% 0% 15% 0% 9% 90th – 99th 50th – 59th 60th – 69th 70th – 79th 80th – 89th Long Term Incentive Non-Top Companies Top Companies 19 Truth #2: Maniacal Focus We consistently develop high potential leaders using: 100% 80% 90% 89% 60% 58% 40% 58% 43% 20% 29% 22% 10% 11% 51% 24% 22% External Executive Mentoring Coaching Internal Developmental (Internal Training Assignments Degree Education Provider) Programs Non-Top Companies Top Companies 20 To Tell or Not to Tell? A Clear Answer • Many Top Companies tell • Not always a specific label, but hi po knows • Start with high engagement goal for all employees Tell Only If . . • You have correctly identified high potentials • There are meaningful consequences Balance the Conversation • Here's what it means to be a high potential • Here's what it doesn't mean If you don't tell them, someone else will . . . 21 Truth #2: A Colgate Example Maniacal Focus on High Potentials • High potential leaders are identified through both formal (monthly review sessions) and informal ("ride-alongs") processes • Monthly matching process ensures frequent movement through divisions and geographies, providing ample opportunity to test and prove potential • Assignments start early in career; multiple assignments by age 30 • 24 hour counteroffer when any hi po resigns • Rueben Mark, CEO, resigned from Citigroup board over lack of succession planning there 22 Truth #2: A Quick Audit Maniacal Focus on High Potentials • Do you know who your best talent is? Do they know? • Does your best talent get the best opportunities across the organization? • Do you understand which roles are most developmental in your organization? 23 Leadership Truth #3: The Right Practices, Done Right 24 Truth #3: Right Practices, Done Right • At Top Companies, they understand what their business strategy says about the types of leaders they need • What does your strategy say? Transformational Change Company X In 2 - 3 years Return Strategy Company X Today Growth Strategy Company X 2 - 3 years ago TM Transactional Change 25 Truth #3: Right Practices, Done Right • Different leadership capabilities are required for “fit” with different business environments Transformational Change Competencies may include: Vision, Decision-making, Financial Acumen, Managing Change, Risk Management, Cost Control Competencies may include: Risk Management, Process Management, Financial Acumen, Cost Control, Rule Orientation, Task Focus Competencies may include: Vision, Speed, Aggressiveness, Risk-taking, Innovation, Managing Change, Driving Sales Competencies may include: Speed, Aggressiveness, Process Management, Risktaking, Planning, Task Focus Return Strategy Growth Strategy Transactional Change TM 26 Truth #3: Right Practices, Done Right • Are your leaders where they need to be? • Can they change to meet the strategy? Transformational Change COO Return Strategy Your company in 2 - 3 years CEO Growth Strategy CIO CAO CFO Transactional Change TM 27 A Few Examples Transformational Change (Gerstner) Return Strategy (Daft) (Gates) (Goizueta)) Growth Strategy (Ballmer) (Ivester) (Akers) (Palmisano) (Isdell) Transactional Change 28 Truth #3: Right Practices, Done Right • • • • Where was your company 2 – 3 years ago? Where is your company today? Where will it be 3 – 4 years from now? Do your current leaders fit that with that future environment? Transformational Change Return Strategy Growth Strategy TM Transactional Change 29 Done Right 30 Accountability – For Programs Who is formally held accountable for the success or failure of leadership development programs? 100% 80% 85% 60% 75% 80% 40% 50% 39% 35% 20% 0% HR OD Sr. Mgmt. Top Companies Non-Top Companies 31 Accountability – For Their Own Growth Is 360º feedback used to measure leadership behaviors/ competencies in your organization? 100% 80% 60% 40% Is there a process in place to monitor the actions/accountabilities resulting from the 360 feedback? 100% 80% 95% 69% 60% 40% 20% 0% 90% 65% 20% 0% 45% measure and hold leaders accountable for behaviors 85% measure and hold leaders accountable for behaviors Non-Top Companies Top Companies 32 Accountability – For Others’ Growth Leaders are held accountable, through the performance management process, for developing their direct reports 100% 50% What % of their annual incentive is tied to this objective? 80% 85% 60% 40% 30% 40% 46% 20% 20% 0% 10% 0% - 5% Non-Top Companies <10% <20% 20%+ Top Companies 33 Accountability Colgate Palmolive: Leaders’ bonuses are impacted if less than 90% of high potentials are retained Avery Dennison: They formally measure the success of succession planning decisions 3 years after a placement American Express: 50% of their performance management rating is tied to 8 leadership competencies, which is tied to their bonus; 10% of their bonus is tied to the retention of high potentials Sonoco Products: Uses a scorecard to rate leaders on 6 dimensions of talent management and publicly posts the results of all leaders 34 Consistent Execution How often are Leadership Competencies included in: 100% 100% 95% 85% 80% 60% 78% 59% 67% 65% 40% 20% 23% Succession Planning Hiring Leaders from the Outside Selecting Leaders Inside the Company Determining LTI Non-Top Companies Top Companies 35 Consistent Execution How often is your Succession Planning process used to: 100% 80% 85% 60% 65% 40% 42% 20% 53% Select Middle Managers Non-Top Companies Select Senior Leaders Top Companies 36 Consistent Execution IBM develops their new Competency Model • Realized they need new competencies because — They have a new strategy – “On Demand” — Increasingly high ratings for leaders on old competencies • Develop new competencies to explicitly support the On Demand model and encourage growth behaviors • Assessed their 300 top leaders – found lots of “stretch” possible • Competencies were then integrated into: — Succession planning: (Evaluation of Top 300 this year; all others next year) — Assignment-based development: For every open job, all candidates are explicitly rated against these competencies — Performance management: These are the behavior standards for leaders and pay is influenced by performance against them 37 So Why Are the Numbers so Bad? Enabling Factors – Others • Support from CEO • Clear Competencies • Feedback About Performance Blocking Factors – Others • Availability of Resources • Lack of Feedback • Support from CEO Enabling Factors – Top 20 • Support from CEO • Company Culture • Clear Competencies Blocking Factors – Top 20 • Availability of Resources • Lack of Feedback • Company Culture So why are the numbers so bad? 38 So Why Are the Numbers so Bad? To build more Top Companies for Leaders, two groups need to take accountability and action Senior Leaders and Board Members Human Resource Leaders and Human Resource Consultants We are educated, intelligent, hardworking individuals, but . . . We are not forcing the accountability, execution or differentiation to allow our companies to grow great leaders 39 No Excuses • This is not about resources – what makes the Top Companies great isn’t how much they spend • This is not about practices – you have the knowledge about what really works in financially successful firms • This is not about big or small companies – in fact, the smaller firms don’t take advantage of their size • This is not about proving the business case – the facts are clear that better leaders deliver better results It’s time for action. There are no excuses why all of you shouldn’t be Top Companies for Leaders 40 The 2005 Top Companies for Leaders 1. 3M 2. General Electric 3. Johnson & Johnson 4. Dell 5. Liz Claiborne 6. IBM 7. Procter & Gamble 11. Capital One 12. Whirlpool 13. Colgate Palmolive 14. Pitney Bowes 15. Pfizer 16. FedEx 17. Washington Group International 8. General Mills 9. Medtronic 10. American Express 18. Home Depot 19. Avery Dennison 20. Sonoco Products 41 For More Information Marc Effron VP, Talent Management Avon Products marc.effron@avon.com 1-212-282-5503 42