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Making Leadership Development a Source of

Competitive Advantage

October, 2007

Robert M. Fulmer
Session Overview

• Highlights of Previous Studies

• Action Principles From Research on Trends


and Best Practices

• Linking The Growth of Leaders to


Business Growth and Profitability

• The ABC’s

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Growing Great Leaders Delivers Great Results!

 Organizations with strong leadership


bench strength have approximately 10%
higher total shareholder return than their
weaker peers (Corporate Leadership
Council, 2003)

 Companies with above average financial


returns have more comprehensive
succession planning processes and are
committed to developing future leaders
(Hewitt, 2003)

 Employees with strong leaders are more


satisfied, engaged, and loyal than
employees with weak leaders (DDI, 2003)

 A conscious partnership between line


execs and HR drives strategic leadership
success (APQC 2005)

 Accelerated development for global high


potentials can be a powerful lever to
develop, communicate and implement
strategy (Fulmer & Bleak, 2007, Hewitt,
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09.12.05.WachoviaLeadershipBenchmarkingv1
Five Principles That Can Streamline Your Organization’s Success in
Growing Leaders—and the Bottom Line!

# 1: Start with the top


 Build C level commitment and passion for leader development through partnership and results
 Engage senior management as champions, role models, and faculty

#2: Directly link to the business --- and deliver results


 Integrate and align leader development practices with business strategy & priorities
 Demonstrate value in business terms and develop metrics that reflect business goals

#3: Build an integrated leadership strategy


 Create a compelling vision, business case, and strategy for leader development
 Design a mosaic of the “targeted” programs and development solutions for maximum impact

#4: Drive consistency in the execution of leadership programs and practices


' Cascade programs to improve reception and drive cultural & strategic change
• Customize solutions for business units to win strong senior management buy–in
• Leverage key career transition points—’teachable moments’—especially for HiPos
#5: Hold leaders accountable for results—development and business results
 Differentiate and actively manage the development of high potential talent
 Anchor all talent and performance management practices with a lean competency model linked
to strategic, reward and performance systems
Source: Adapted from: Duke Corporate Education, “Leadership Strategy Project” (2005); Hewitt, “The Top Companies for Leaders – (2005, 2007); :
ExecSight, “Current Challenges in Leadership Development” (2004), Growing Your Company’s Leaders, 2004, The Leadership Advantage, 2007 4
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How Well Does Your Organization Follow Each Key Principle?

Idea # 1: Start at the top

Idea #2: Directly link to the business – and deliver results

Idea #3: Build an integrated leadership strategy

Idea #4: Drive consistency in execution of leadership programs and practices

Idea #5: Hold leaders accountable for results including development

4 3 2 1
We are a We execute We are beginning We would like
benchmark in elements of to introduce to follow this
this area this guiding elements of this guiding idea
idea well guiding idea

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CEO Level Involvement and Sponsorship Is Absolute In Top Companies
Principle 1

120%
100%
100%

80%
65% 65%
60%

40% 31%

20%

0%
CEO Involved Board Involved
Non Top Companies
Top Companies
Source: The Top Companies for Leaders – Hewitt

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It All Begins… And Ends With the Business
Principle 2

All of the “Best Practice” Companies


Have:

 Leader development strategies that


are closely linked to their business
strategies, rather than popular “best
practices”

 Strategies for selecting, developing


and rewarding leaders, most of which
are anchored by a lean competency
model

Source: The Top Companies for Leaders – Hewitt, The Leadership


Advantage
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There Are Some Solid Measures Of Business Impact Available…
Guiding Idea 2

Measures of Business Impact

Improved product/service quality 70%

Improved customer service 70%

Reduced operating costs 59%

Increased revenues 51%

Improved sales efficiency 49%

Increased profits 48%

Source: Corporate University XChange 6th Annual Benchmarking Report, 2005

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Developing an Integrated Leadership Strategy is a Top Priority --- Yet
Many Challenges Exist
Principle 3
Top Priorities for Leading L&D Organizations
% Respondents
0 10 20 30 40 50 60 70 80

Creation of an integrated strategy


& system for all executive 69
development

Use of systematic
measurement/evaluation to 52
measure impact of efforts

Creation of an integrated strategy 52


& system for all HR activities

Creation of core corporate 50


curriculum (required courses)

Creation of milestone/transition
system for right learning for 41
career progression

EDA’s 2000 study reported the same No. 1 priority with the caveat that it is difficult to achieve !
Source: Executive Development Trends; EDA Inc. 9
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High Potentials Can Leverage Developmental Efforts
Principle 4

Key Objectives of Executive Development Activities in Next 2-3 Years


% Respondents

0 10 20 30 40 50 60 70 80 90

Increase bench strength/ensure


79
replacements for key jobs

Accelerate development of high-


62
potentials

Communicate vision and strategy


61
and create alignment

Support organizational 56
change/transformation

Develop the capabilties of 53


individual leaders

Address key business 48


issues/challenges

Source: Executive Development Trends EDA Inc.


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Yet, Most Companies Worry About Identifying and
Helping High Potentials
Guiding Idea 4

 46% of companies have no systemic process for


identifying and developing candidates for key
leadership positions

 Half the candidates selected internally for leadership


positions fail when there is no succession management
system

Source: Leadership Forecast: A Benchmarking Study 2003; DDI; Growing Your Company’s Leaders, 2004, Leadership Advantage, 2007

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If You Can Identify Your High Potentials, What Do You Communicate?
Principle 4

For Your High Potential Population, Do You:

100

80 95%

77% 72%
60 68%

60%
40 53%

20

0
Identify High Potentials Tell them of their status Track Their Turnover

Non-Top Companies Top Companies

Source: The Top Companies for Leaders ; Hewitt

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…How To Develop Them
Guiding Idea 4

Developmental Techniques Used To Develop High Potentials:

100% 95% 90% 89% Non Top Companies


90%
Top Companies
80%
70% 58%
60% 51%
50% 45% 43%
40%
30% 24%
20%
10%
0%
Increased Internal Developmental Mentoring or
Access To Sr. Training Assignments Coaching
Leaders

All of the Top 20 Companies also link compensation to a leader’s future potential

Source: Top Companies for Leaders –; Hewitt


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Best Practice Firms Anchor Their Leadership Development With A Lean
Competency Model Tied to Performance and Reward Systems
Principle 5

120% Non Top Companies


100%
100% Top Companies

80% 78%
65%
60% 60%
Leader competencies 60%
are integrated into:
40% 30% 31%
23%
20%

0%
Succession Base Pay Annual Long Term
Planning Incentive Incentive

Not
Integrated
Metrics Not
Metrics from performance 71% 29%
Integrated Integrated
management process are Metrics 45% 55%
integrated into succession Integrated
planning

Top Quartile Bottom Quartile


Source: The Top Companies for Leaders – ; Hewitt 14
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I. Developing a Strategic HR Architecture

 Organizations have teachable


moments, too.

 Leadership development can


be a powerful tool to help
formulate, translate, and
communicate strategy.

 Linking corporate strategy &


leadership development strategy
creates winners.

 Lean competency models and values


are the foundations of strategic HR
& leadership development.
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Caterpillar’s New Strategy
MAKING PROGRESS POSSIBLE

VISION
2020

STRATEGIC PROFILE

Engagement Index 90% STRATEGIC GOALS


by 2010 People Performance Profitable Growth
Product & Process

Leadership Index 80% CRITICAL SUCCESS FACTORS


by 2010 PEOPLE QUALITY PRODUCT VELOCITY DISTRIBUTION CHINA TROUGH

New Product Introduction

ENTERPRISE Order-to-Delivery
STRATEGIC Encoding 6 Sigma
AREAS
Sustainable Development
OF IMPROVEMENT
Growth Beyond Core

Our Values in Action – INTEGRITY, EXCELLENCE, TEAMWORK, COMMITMENT


WORLDWIDE CODE OF CONDUCT

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II. Aligning Strategic HR Systems
 Strategic HR is a partnership between
senior line executives and multiple human
resource systems.

 Strategic HR (especially HRD) is a key


part of the corporate planning cycle.

 HR can win the support of top


management by involving them in
strategic learning initiatives and by
knowing and advancing the mission.

 Leaders who teach are more


effective than those who tell.

 Strategic leverage comes from a


focus on high potentials.
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III. Implementing a Successful HR Strategy

 Leaders in HR maintain control


of custom design and delivery
of their programs.

 Lean HR groups leverage their


talents with the judicious use
of consultants and outside
service providers.

 Integration of leadership
development with other talent
management systems creates
alignment and synergies within
the HR function.

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IV. Assessing Success in Strategic HR

 Developing people is a growing measure of


executive success.

 Return on learning (ROL) is increasingly


measured by corporate success rather than
individual performance.

 Successful programs are a process rather


than an event.

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Success Factors for Future Leadership
in Strategic Human Resources: The ABCs

 Alignment

 Business Focus

 Collaboration

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Leadership Best Practices Dialogue

Reflect on the best practices/principles you just heard about and


Task then discuss
 What best practice or principle is most important for the overall
success of leadership strategy? What will be most important in 2010?
 What is the one additional question you would most like to ask of Best
Practice partners?

 Individual Review (1’) – write on post –it or notebook


Process  Small Group (5 – 7”) – develop list for your group
 Large Group (5”): Report out

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Referenced Reports
• James Bolt, "Executive Development Trends 2004: Filling the Talent Gap,”
(survey of 101 global companies) Executive Development Associates (EDA) Inc.
• Corporate Executive Board: Driving Performance and Retention Through
Employee Engagement (September 2004)
• Corporate University XChange 6th Annual Benchmarking Report, 2005
• Robert M. Fulmer & Jay A. Conger, Growing Your Company’s Leaders,
AMACOM, 2004
• Robert M. Fulmer & Marshall Goldsmith, The Leadership Investment, AMACOM,
2001
• Robert M. Fulmer SME, “Next Generation HR Practices,” APQC, 2005
• Robert M. Fulmer & Jared Bleak, “The Leadership Advantage, 2007
• Hewitt & Associates, “The Top Companies for Leaders,”2005, 2007
• Andre Martin, “Differences in the Development Needs of Managers at Multiple
Levels,” Center for Creative Leadership, 2005.
• Mark Nevins and Stephen Stumpf, “21st Century Leadership: Redefining
Management Education,” Business & Strategy, 1999.
• Scott Saslow, “Transforming Corporate Leadership: Best Practices in
Executive Education,” ExecSight, (April 2004).
• Training Magazine’s 2005 Survey of Top 100 Companies
• Training Magazine’s Annual Comprehensive Analysis of Employer-Sponsored
Training in the US , October 2004
• Watson Wyatt," Maximizing the Return on Your Human Capital
Investment”2005

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Key Takeaways From Skil

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Key Takeways from Skil

 Create a (simple) Formal Pocess

 Involve a Multi-Functional Team

 (Over) Communicate the Strategy

 Be Consistent Over Time

 Establish Balanced Measure

 Review Strategy Regularly

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