Leadership Development - Yenra

Few companies effective at developing leaders


While most companies have processes in place to develop leaders, only a handful are effective at doing so, according to Hewitt Associates.

In a new study, Hewitt analyzed and compared leadership initiatives from 300 U.S. companies to those of the "Top 20 Companies for Leaders," recently selected by Chief Executive magazine (see attachment). It found that while most companies have processes to develop leaders, only 32 percent believe those processes are effective, compared to 85 percent of the Top 20 Companies. In addition, Hewitt's study showed that most companies lag behind the Top 20 Companies in three key areas: effective leadership programs, high-potential leadership development and senior-level support.

"The bottom line is that most companies aren't executing their leadership programs effectively in one, or in some cases, all of these three key areas," said Marc Effron, global practice leader, Leadership Consulting at Hewitt Associates. "Great leadership is critical, given the ever-changing nature of today's corporate environment. Now more than ever, companies need to focus on leadership development by aligning their initiatives to business goals, identifying and developing future leaders, and eliciting support from senior management."

Hewitt's study found that most companies' leadership initiatives lack the strategy, programs and measures to be successful. For example, only 61 percent said they have a strategy for building their leadership, tactics compared to 100 percent of the Top 20 Companies. What's more, only 57 percent of these organizations have a strategy for selecting, developing and rewarding leaders, versus to 88 percent of Top 20 Companies. They also don't offer nearly the amount of programs to develop their leaders as the Top 20 Companies.

Finally, less than a third of companies (29 percent) measure their leadership programs' effectiveness, compared to 79 percent of the Top 20 Companies.

"It's clear that companies need to make better choices about their leadership programs, but that's only the beginning," said Effron. "More importantly, these initiatives need to be strategic and in line with corporate goals and objectives, and measured on an ongoing basis. Otherwise, companies won't know if their leadership practices are effective and can't hold anyone accountable for their success."

Another significant gap for most companies is developing their high-potential leaders. Less than half (44 percent) of companies identify their high-potential leaders through their performance management process, versus 74 percent of the Top 20 Companies. Only 43 percent of organizations track their high-potential leaders' turnover, compared to 74 percent of Top 20 Companies. Less than half (40 percent) of companies link pay to a leader's potential to advance, versus 68 percent of the Top 20. And, even more telling is the fact that 64 percent of companies source their CEOs internally, compared to 95 percent of Top 20 Companies.

"It pays dividends for companies to invest in their high-potential leaders, as they won't later have to go outside the organization to 'buy' leaders, which is an increasingly expensive and challenging proposition," said Effron. "Companies that clearly identify, aggressively grow and properly compensate their high-potential leaders will see a handsome payoff from that investment."

Another key area where most companies are losing ground in their leadership initiatives is support from senior management. While nearly all of the Top 20 Companies (95 percent) said their CEO is actively involved in developing leadership talent, only two-thirds of the other companies said the same. Additionally, 95 percent of Top 20 Company leaders are held accountable, through performance management processes, for developing leadership talent, compared to 43 percent of leaders from the other organizations.

"A company could have the best programs and processes in place to develop leaders, but without support and resources from senior management, these programs are destined to fail," said Effron. "The fact is a leadership program with several flaws can succeed with support from the CEO and board of directors. However, an extraordinary leadership program won't get very far without support from the top."

Chief Executive is a magazine that provides ideas, strategies and tactics for top corporate leaders seeking to build more effective organizations.