Recent research confirms what many HR professionals have known for years. Employees with strong leaders are significantly more productive than those with weak leaders. Teresa Russell talks to three companies that have invested heavily in leadership development programs and discovers some of the benefits and problems associated with growing your own leaders
Development Dimensions International (DDI) recently published an international leadership benchmarking study of predominantly large-sized private and public organisations across a range of industries.
Its 2003 Leadership Forecast found that that successful organisational leadership is a function of many factors such as selection, development, succession management and performance management – however there is no single solution that is right for every situation. It found that work groups with strong leaders are about 37 per cent more likely to outperform other work groups with weak leaders. Also, half of those leaders who are internally sourced and placed in top management positions fail when there is no succession management system (versus 30 per cent failure with succession plans).
Succession management is a critical factor in many leadership development programs where ‘growing your own’ is of prime importance, as is the case with Integral Energy.
Integral Energy is the second largest state-owned energy corporation in New South Wales and runs two leadership development programs for its 2,200 employees. The recently introduced leadership development centre uses an outsourced assessment process for its senior managers (CEO, general managers and branch managers) and its management development program is run in-house for its middle managers.
Jenny Redpath, Integral’s learning and development manager says there were several reasons why the company embarked on a new formal program to identify and develop its senior leaders. “Integral Energy has an ageing workforce, with more than half our employees in the 40 to 60 age bracket. We knew we needed to stop relying on hiring new talent, because that’s getting harder each year, so a succession plan was required. Being an energy supplier, we also had a history of promoting people with great technical expertise, who were not necessarily broadly developed leaders,” she says.
Integral Energy defined six leadership capabilities that should be present in its general managers, branch managers and section managers. They are to: maintain a business focus; demonstrate and promote the corporate values; inspire and motivate others; take accountability for results; manage effective change management, and communicate effectively and appropriately. Current managers are assessed against these criteria, while behavioural-based interviews for new hires focus on these capabilities.
It took Redpath eight months to get the senior team’s leadership development centre operational. “The benefits have been that there’s now a greater sense of openness in the organisation and it has removed the historical bias (towards engineering) in our development plans. It identifies people’s strengths and weaknesses, giving us a better idea of what areas need further development before promotion,” she explains.
But it hasn’t been plain sailing. “The hardest thing has been getting the engagement of managers to provide development opportunities when they don’t think they have enough time in their day. Also, some people have had to be reassured that if an area of development [a weakness] is identified, that we’re not going to kick them out of their job,” Redpath points out. She has countered this by sharing her own assessment results with all the participants. “It removes the fear factor. They can see I’m still in my job, even though I have identified weaknesses!”
Redpath says she will look at the ROI when the program has been going a little longer than six months. She will include the cost of putting 74 managers through the assessment centre, as well as money saved on recruitment at a senior level. She will also review all the development plans every six months to see that they are being actioned and not just filed.
Sinclair Knight Mertz
Sinclair Knight Mertz (SKM) employs 2,500 people in Australia and another 1,000 globally. A professional services consulting firm operating across a broad range of markets, it employs scientists, engineers, architects and planners. Its CEO and board of directors recently recognised that the company’s growth could be restrained if it didn’t develop its own future leaders.
SKM identified a number of leadership roles and identified success profiles for each role, according to employee services manager, Simon Hamilton. “To date, SKM has identified three types of leadership roles within the organisation. They are business leadership, technical leadership and major project management leadership,” he explains. The elements of each success profile are competency, job challenges (that people should have met and overcome), organisational knowledge and personal style. The general profile of leaders is that they must have global business acumen, be able to coach, delegate, develop a strategy, sell the vision, get buy-in from stakeholders and communicate effectively.
Hamilton says that SKM prefers to develop leaders, but is still prepared to recruit if required. It uses some components of leadership assessment during recruitment. He asserts that it costs much more to recruit someone than to develop them and promote internally. “Our program has been running for just over 12 months, but we’ve only recently introduced the full-blown program across the organisation. Our staff turnover has already dropped as a result,” he says. Hamilton is still working out the metrics for a formal ROI, but says the real return has been that they now have a “pipeline of future leaders”.
The hardest thing about developing leaders at SKM has been “finding a rigorous process and then maintaining the process tension”, Hamilton believes. The key challenge has been maintaining momentum. Its leadership review panel (which includes the CEO and six general managers) meets every six months to review the program and ensures that milestones have been met, demonstrating its importance to senior management.
Unisys Australia is part of the global information technology services and solutions corporation, which employs 37,000 people globally. Helene Egan, learning and development manager Asia Pacific has responsibility for 6,000 people in 10 countries. In 2001–02, it introduced an executive development program for 20 staff who were identified as potential successors to VP positions in three to five years time.
“Without a doubt, the trigger point for introducing our executive development program was the cost of hiring senior people from outside the organisation. But there was a cultural aspect as well. Hiring new senior people gave a poor message to our current employees. We had special people on the inside too and when you grow your own leaders, you know the cultural fit will be right,” Egan explains.
Unisys global identified 16 core competencies in its successful leaders, encompassing commitment to corporate values, current performance and potential performance. Following identification of a potential candidate, the executive team had to unanimously agree that an individual merited inclusion in the program. As a result, just 13 of the 20 positions were filled. The executive team presented the group with the challenge of working out how to construct a high performance culture. They were told they were expected to do 20 per cent more work than they were currently doing and were placed in accelerated learning programs.
In the past two years, two people from the group have left the company (one to a competitor and one for a major career change). The rest are positive stories. Unisys identified its legal counsel as a high potential leader. One of her development goals was to become a leader and move away from the legal side of the business. Her work on the high performance culture project demonstrated her skills and abilities and raised her profile across the organisation. She has just been appointed manager of the shared services centre, Asia Pacific, responsible for 200 people.
Egan says that an “ouch point” with the program was that communication with employees who didn’t make it into the high potential leaders pool could have been better. “We should have been more transparent about the selection process and communicated better to all employees about what they needed to do to get on the program. The accelerated training we provide is available to all staff as well,” she said.
Egan developed the program using a combination of Unisys’ global program for leadership development and an external provider. “Our corporate philosophy is to use external providers only when they have something unique to offer and can do something better than we can do it ourselves,” she said. Although the cost of using an external provider is high, Egan calculates that she will just have to make five internal executive placements in a year to break even.