Developing Leaders: How Winning Companies Keep On Winning
Last June, as the business world watched expectantly, General Electric (GE) promoted three key executives (David Calhoun, Joseph Hogan and John Rice). Each would report to one of the three potential candidates to succeed CEO Jack Welch (James McNerney, Jeffrey Immelt and Robert Nardelli). Thus, if one of the latter moves into Welch’s office, another seasoned GE professional will be ready to assume his role. Where do GE leaders come from? They do not spring up out of the earth overnight. For many years the company has worked hard to develop ongoing sources of leadership talent — not only to prepare for Welch’s retirement next year, but also to enrich every level of the organization with strong leaders. When Ronald Reagan was spokesperson for GE, their slogan was, “Progress is our most important product.” Today the mantra could be, “Leaders are our most important product.”
Leaders who keep learning may be the ultimate source of sustainable competitive advantage. With that understanding, many companies are investing in leadership development (programs that help key executives learn leadership skills). As early as 1993, Business Week estimated that $17 billion was being spent annually on helping managers develop the thought processes and company-specific skills that could enable them to move up and lead their business areas. Training magazine estimates that in 1998 U.S. companies spent $60.7 billion on training.1 But spending isn’t the only commitment. World-class executives are investing significant amounts of their time personally guiding and mentoring future leaders.2 To them, leadership development is not a luxury but a strategic necessity.
What processes transform managers into strong leaders ready for strategic action? How do the best leadership-development organizations design, manage and deliver world-class programs?
In January 1998, the nonprofit research group American Productivity and Quality Center, based in Houston, the American Society for Training and Development, based in Alexandria, Virginia and author Robert Fulmer set out to find the answers. The group developed a study to investigate best practices in leadership development; in 1999, they expanded the study to explore the challenge of developing leaders at all levels of an organization.3
Thirty-five organizations participated as sponsors. (See “Benchmarking Methodology.”) They sent representatives to a planning session, completed data-gathering surveys and attended or hosted on-site interviews. (See “Study Sponsors.”) The consortium identified six companies as having a strong or innovative leadership-development process.
1. “Industry Report 1998: Training Budgets,” Training, October 1998, 47. See also:
J. Reingold, M. Schneider and K. Capell, “Learning To Lead,” Business Week, Oct. 18, 1999: 76.
2. John A. Byrne, “PepsiCo's New Formula,” Business Week, Apr. 10, 2000, 172; and
T.A. Stewart, “How to Leave It All Behind,” Fortune, Dec. 6, 1999, 345–348.
3. G. Hollenback and W. Vestal, eds., “Developing Leaders At All Levels” (Houston:
American Productivity & Quality Center, 1999); and R.M. Fulmer, J. Camillus and J. McMorrow, eds., “Leadership Development: Building Executive Talent” (Houston: American Productivity & Quality Center and American Society for Training & Development, 1999).
4. A.A. Vicere and R.M. Fulmer, “Leadership by Design” (Boston: Harvard Business School Press, 1998), 218–223.
5. Arthur Andersen uses the term “450-degree feedback” to emphasize that feedback from clients is included in the process. Technically, 360-degree feedback is feedback from four quadrants of perspective: boss, subordinates, peers and customers. Respondents rate themselves.
6. For example, see:
M.A. Hammer, “The Power of Reflection,” Fortune, Nov. 24, 1997, 291–295.
7. G. Hamel, “Strategy as Revolution,” Harvard Business Review 74 (July–August 1996): 69–81; and G. Hamel, “Leading the Revolution” (Boston:
Harvard Business School Press, 2000).
8. R.M. Fulmer and S. Perret, “The Merlin Exercise: Future by Forecast or Future by Invention?” Journal of Management Development 12 (no. 6, 1993): 44–53.
9. For example, see:
Stratford Sherman, “How Tomorrow’s Leaders Are Learning Their Stuff,” Fortune, Nov. 27, 1995, 90–98; and
Thomas A. Stewart, “Telling Tales at BP Amoco,” Fortune, June 7, 1999, 220–223.
10. “General Electric: The House That Jack Built,” The Economist, Sept. 18, 1999, 23–27.
11. D. Kirkpatrick, “Evaluating Training Programs: The Four Levels” (San Francisco: Berrett Koehler, 1994).