How Top Companies Develop Their Leaders

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In a marketplace with rapidly changing business requirements, where quality, service and innovation have become mere "tickets to play," and disruptive technology, global competitors, and the rate of change itself create powerful and conflicting pressures for business leaders, how are organizations addressing leadership development needs? How are those companies deemed the "Best Companies for Leaders" generating 200 percent growth over ten years?

First, they're taking a serious look at the competencies their leaders need to demonstrate. These include:"Adaptability to change." This the most important quality for a leader according to a global survey of 300 CEOs and senior HR leaders conducted by the Chally Group Worldwide.

Communication, vision, and strategic thinking (also highly-rated skills in the Chally survey).

The ability to balance short-term needs (e.g., communicating among customers, senior leaders, and employees) with long-term goals (e.g., optimizing employee engagement, shareholder returns, and long-term competitive sustainability). This has become a differentiating competency for top-tier companies.

As they define the leadership competencies they need both today and down the road, these high-performing organizations are also considering the most effective ways to develop the competencies. Here are some of the tools they're using.

According to the Chally survey, the most widespread leadership development practices are "high-touch, hands-on coaching and mentoring" (including the use of professional coaches, peer-to-peer coaching programs, and informal as well as formal mentoring programs). Fifty-six percent of companies surveyed had the same response four years in a row as part of this ongoing survey.

The survey also indicated that 49 percent of respondents favor action learning and developmental assignments, while 45 percent use assessments and feedback. Larger organizations tend to more frequently use exposure to senior executives and high-potential development programs. Smaller firms report using cross-functional team projects, external learning opportunities, and tuition reimbursement as development tools.

One of the keys to successful leadership development is CEO involvement. CEOs can take part in a number of ways: by sharing insights at training events, serving as a sponsor for action learning teams, communicating to employees about the value of leadership, and more. The Chally survey reveals that large-company CEOs spend an average of 29 percent of their time on employee development and 18 percent of their time on their own development. Altogether, CEOs spend approximately half of their time on development activities—and those from higher ranked companies spend even more of their time.

Does such a significant investment in defining and developing leadership competencies pay off for the company? Yes! In a study of shareholder value created by the companies in the Chally survey, data showed the Best Companies for Leaders generated greater market value between 2003 and 2013 than their peers, growing by 200 percent. They also did a better job of retaining talent; the average tenure of CEOs in the highest-performing companies was 4.1 years versus 3.5 years.

The best of the best companies do not depend on old rules for success or silver bullets to grow their bottom lines in unpredictable times. Instead, they look ahead and prepare their leaders and successors with the competencies, experiences, and resources they'll need in order to succeed at whatever the future holds.

Nancy Ahlrichs is business development consultant for global talent development consulting firm FlashPoint.

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