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"Robert M. Fulmer (Williamsburg, VA/Santa Barbara, CA) is W. Brooks George Professor of Management at the College of William and Mary and Distinguished Visiting Professor at the Graziadio School of Business and Management, Pepperdine University. He is the author of Leadership by Design and other books.
Marshall Goldsmith (Rancho Santa Fe, CA) is founder of Keilty, Goldsmith & Co. He was ranked by The Wall Street Journal as a ""Top 10"" consultant in executive development, and has coedited many books, including The Leader of the Future."
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Chapter One
The Competitive
Advantage of Leadership Development
If the leadership development process is to be an effective part of the change process, it must be aligned with all of the strategic objectives of the organization. Successful leadership development initiatives have gone to great lengths to understand and help implement overall corporate strategy. Only by aligning with corporate strategy will new leaders be prepared to meet new business challenges and global market constraints.
Seeking Adjustment
To meet Arthur Andersen's (Andersen) needs to continue diversifying and globalizing, its Partner Development Program (PDP) links closely to its business strategy. PDP constantly reviews strategy documents from the business, as well as Andersen's Four Cornerstones model, which is to be "simply the best" in people, market share/growth, exceeding client expectations, and quality/risk management.
At Hewlett-Packard (HP), Carly Fiorina's appointment as CEO was evidence of the firm's commitment to creating a new generation of leaders that had many of the talents and values of founders Dave Packard and Bill Hewlett but with more diversity than the first generation of leaders who make HP great. In this context, she is both the "effect" of a commitment to leadership and the cause of its continuing evolution.
Johnson and Johnson (J&J) believes it is critical to start any education and development discussion with the business objectives of the company. The current chairman has focused on three basic objectives:
Top-line growth-- The company's history of double-digit, topline growth requires innovation, whether it be through heavy research and development investments, new alliances, or mergers and acquisitions.
Enhanced competitiveness--; This must come through aggressive cost-reduction, but without increased prices.
Organizational excellence--; To find and develop great people, or the other objectives become moot points.
Leadership development is closely aligned with, and is used to support, corporate strategy. Issues such as globalization, decentralization, and the rapid pace of today's marketplace have forced companies to evaluate the ways in which they operate. Paradigms that have worked for years suddenly become ineffective when an organization's largest customer is thousands of miles away. Realizing the need for change is an important first step. However, determining exactly how to turn the new challenges into opportunities keeps many a CEO awake at night. In many cases, bold, new strategic initiatives are under way to revamp the way organizations do business, while re-creating the workforce undertaking these efforts.
The best-practice organizations discussed in this book are no different. Each organization addresses business issues that have created needed changes. Their leadership development efforts reflect their responses to these opportunities. A majority of study participants reported the presence of a "defining situation" in their organization that led to the (re-)creation of the leadership development process. In this chapter, we present an overview of themes associated with the best practices in leadership development. In subsequent chapters, we develop the practices of the exemplar firms in greater detail.
In a sense, the best-practice organizations view the leadership development process as a way to increase their competitive advantages. For example, General Electric (GE) Crotonville, GE's central education function, is described as a "staging ground for corporate revolutions." From 1981 to 1997, GE more than tripled its revenues, while decreasing its worldwide employment from 404,000 to 240,000. Naturally, this type of growth caused an enormous cultural shift within GE, including the Crotonville operation.
James Wolfensohn joined the World Bank as president in 1995. Acknowledging both the internal and external challenges, he felt that the World Bank offered a number of great opportunities. The fall of the Berlin Wall in 1989 meant that many new clients and potential funders could join the organization. The information revolution meant that knowledge could be transferred at a much more rapid pace to the member countries and to clients of the World Bank. Wolfensohn saw new leadership development efforts as one of the tools he could use to reshape the culture of the organization.
About ten years ago, senior executives at J&J decided that the organization had to change its culture. J&J had more than 100 years of success operating in a decentralized manner. However, the decentralization inherent in its move into the global marketplace was leading to high overhead costs. Internal competition was actually becoming a roadblock to growth. As a result, the organization encouraged its 190 operating companies to partner with each other to compete on a global basis. Ralph Larsen, chairman and CEO at J&J, champions the Executive Conference program. He uses decentralized decision-making to flush out the details of conference themes, and then exercises his leadership by articulating concerns and themes that he feels the entire corporation needs to address.
Royal Dutch Shell/Shell International (Shell) has long understood that developing leaders is a significant source of competitive advantage. The foundations of its developmental planning lie within its core business strategies and values of integrity, professionalism, respect for people, long-term focus, and pride without arrogance. Shell's Leadership and Performance program (LEAP) used these business strategies as guidelines for its leadership development journey into undefined and uncertain territory. Shell admitted that it did not know exactly what its future leaders would look like. The company simply knew that a transformation had to happen for it to remain competitive in the constantly changing global economy. It dedicated itself to the pursuit of breakthrough performance in order to realize the full potential of its new opportunities.
Focusing on Core Issues
Corporate leadership development focuses on core issues, such as values and strategic change, that are vital to the entire organization. At the same time, the corporation's business units are focusing on challenges specific to their operations. All the best-practice organizations studied had created a separate corporate leadership development function that focused on leadership skills and usually left the management skills and business-specific skill development to the businesses themselves.
In the eyes of these organizations, management skills deal with the basics, with skills and behaviors that enable employees to make their numbers. Leadership development builds on these core attributes. For example, at GE, the ability to influence peers is critical. At J&J, building leaders involves giving employees the tools to make tough ethical decisions. Corporate leadership development efforts more often focus on applying corporate values to specific strategic initiatives. Teaching management and supervisory skills is usually handled at the business level.
This split of responsibility seems to work well. Corporate leadership efforts in best-practice organizations complement, rather than compete with, those within the business. Generally, the business operations are much better equipped to handle their own management and training needs. However, best-practice organizations saw corporate leadership programs providing the decision-making framework to effectively use the tools provided by the businesses.
J&J feels that the expertise for management development in a particular operating company often resides within that business. As a result, it makes no sense for the corporate division to have full responsibility for this activity. Top-level leadership development, on the other hand, is consistent across the company, and, as a result, it makes sense to have a central group take the lead on this issue.
Connecting Resource Development with Business Experience
Best-practice organizations carefully build leadership development teams by emphasizing the importance of both human resources development and business experience. Each of the study's best-practice organizations had key leaders with extensive line experience. At Andersen, J&J, and Shell, the heads of the leadership development process had senior-level business experience before assuming responsibility for this function. The use of business leaders in key human resource development positions does not imply a lack of respect for unique aspects of the discipline. Rather, it is based on a feeling that the presence of business leaders in the functions helps ensure the practicality of programs and buy-in from the businesses.
Building on the concept of "hiring from the field," a number of best-practice organizations have found innovative ways of bringing additional business experience on board. GE and Shell bring in high-potential individuals on two-year rotating assignments. HP recruits key people from line positions to ensure that knowledge of the HP Way (the company's values and objectives) and the pragmatic needs of the business are addressed in an adequate manner. These assignments help leadership development ground its efforts in business realities and also assist those individuals who come in from the business units. Often, a person will start an assignment with knowledge of only one line of the business but leave with an understanding of the entire organization.
While representation from the business units may be critical, best-practice organizations do not ignore experience in corporate education, human resources, or academia. The director of Crotonville came from a university setting. The World Bank's Executive Development Program (EDP) is run by someone with a background in corporate education. Creating a business and education mix seems to enable best-practice organizations to build programs based on sound theory, but focused on results vital to the organization.
Internally Focused, Externally Aware
Best-practice leadership development processes are internally focused and externally aware. New business demands dictated the need for change within each of the best-practice organizations but certainly did not provide a framework for how to create the change. Whether started by the CEO or bubbling up throughout the organization, the focus on building the skills of current and future leaders surfaced as a potential enabler of change. Creating a process to build leadership skills, abilities, and techniques has pushed best-practice organizations to look both internally and externally for answers.
The best-practice organizations realized that to enable change, the leadership development process must fit the culture of its organization. A first step for those designing the leadership development process was to ensure this linkage by soliciting the direct input of their customers. Input from key customers is an ongoing process for best-practice organizations.
To conduct a proper needs analysis, best-practice organizations rely on a number of tools, including:'
1. Use of line executives in key human resource development positions'
2. Program "steering committees"'
3. Formal links with strategic planning efforts'
4. Extensive conversations with business leaders'
5. Internal and external customer surveys.'
These formal needs assessments may seem like an obvious step in creating a leadership development process. Unfortunately, they are not done universally. All best-practice partners reported conducting formal business-unit needs assessments--;only about half of the sponsor group reported doing the same.
Identifying the Leadership Pool
A majority of the best-practice organizations have identified leadership competencies or, at least, tried to define characteristics and qualities of successful leaders. Any discussion of leadership competencies can easily become controversial. Many contend that the identification of competencies helps organizations to understand those qualities, characteristics, and skills that lead to outstanding performance and outcomes. Others question whether competencies can be defined at all.
Not all of the best-practice partners in this study define competencies, but each does try to define the characteristics and qualities of successful leaders within its particular organization. The same is true with the majority of study sponsors. However, partners were more likely to have developed their competencies internally or with a limited use of outside consultants than to have sponsored extensive, formal competency studies. Best-practice organizations also make sure that their competencies are kept up-to-date through both internal and external research.
The vast majority of organizations surveyed in the study believe that, once competencies are defined, the results should be consistent throughout the company, regardless of position, business unit, or geographic location. At best-practice organizations, all these variables were taken into consideration before the competencies were finalized. For example, J&J sent a team around the world to make sure that what made a successful leader in one country would translate to another country. Although J&J found that some of the wording for its competency model had to be changed from location to location, the behaviors were, in fact, globally consistent. Andersen defines a competency as a statement of the behaviors necessary to perform a job task. Competencies are composed of knowledge, multiple skills, traits, and attributes. GE's values play a key role in determining each person's performance. All employees at GE discuss their performance and career goals during a review meeting with their managers, and are then rated on a chart. One axis of the chart rates an employee's performance, and the other axis rates his or her adherence to company values.
Growing Leaders Instead of Buying Them
Best-practice organizations grow leaders as opposed to buying them. Best-practice organizations, such as those involved in this study, are often seen as large candidate pools for executive-level positions in Fortune 500 companies. Aspiring companies want to know the secret of making "leaders their most important product." Throughout the course of this benchmarking effort, best-practice organizations emphasized that their top leadership came from within the company. Senior executives tended to be products of the leadership development system, groomed from the beginning to take on increasing responsibilities.
In stark contrast to the situation in many companies today, buying top-level talent occurs occasionally. Best-practice organizations lean toward internal leaders because of the powerful and distinct cultures in which they work. These organizations see their strong cultures as critical to continued success. Still, they realize that not everyone can thrive in these unique situations. Executives brought in from other organizations may have all the right experience and skills, but they may not be a good fit with J&J's Corporate Credo or HP's decentralized structure. Leaders who have come up through the organization are a proven fit, because they have successfully accomplished assignments in the way that the organization has chosen for its leaders.
While a robust pipeline of talent helps to distinguish best-practice companies, these organizations also realize that some executive positions must be filled externally to avoid stagnation and "inbreeding." In some cases, buying talent is a competitive must. As organizations transform themselves to deal with new markets, technology, or customers, hiring externally is often the fastest way to expand the base of competencies and skill sets. When best-practice organizations do hire from the outside, they rely on the development function to fill the role of cultural assimilator by exposing learners to the organization's culture and values.
Ninety-five percent of Shell's current executives come from within the organization. Currently, the World Bank has only 23 managers who did not rise through the bank system, which makes its EDP a critical piece in the organizational puzzle for change. This means that the entire management team knows the traditions and culture of the organization, but it presents a major challenge when there is a perceived need to change the culture.
The Right People in the Right Programs
Best-practice organizations focus on getting the right people into the right programs. They are clear about the type of individual and the type of program they want for their leadership development processes. They look to the goals of their leadership development process to determine who will be selected as a participant. At Shell, the goal of the program is to create leaders at all levels. Therefore, its LEAP programs are open to anyone within the organization (even though certain programs are targeted for the highest potential individuals). The World Bank's EDP and Andersen's PDP focus only on those currently at the leadership level. Others, like GE and HP, are more selective about entrance into their key leadership programs. They focus on their "A players"--;those who have the potential to move up through the ranks quickly.
Diversity Is Critical
Whatever the specific criteria may be, best-practice organizations spend a great deal of time deciding who needs to be involved in leadership development. An increasing point of interest for best-practice partners is to bring a diverse population into the leadership development process. Each of the best-practice partners operates in the global marketplace and consequently must look to the leadership development process to help its organization build a more diverse workforce. Moreover, the diversity of the classes adds different perspectives that improve the learning. Most best-in-class organizations report trying to get a mix of different countries, cultures, and business-unit reports into their corporate development efforts.
Crotonville's leadership development offerings are for high-potential individuals, "A players" who have been identified through the succession-planning process. Philosophically, the organization feels that it should spend the majority of its time developing its best and brightest. The company employs approximately 240,000 people worldwide. Crotonville only trains about 10,000 (or 4 percent) of them a year.
At Andersen, each program team is responsible for managing vendors and working with them to modify existing courses. The team provides each vendor with a study guide and stated objectives before a course is designed and then works closely with the vendor in the program design phase. Arthur Andersen never uses 100 percent of anyone's off-the-shelf products.
At the World Bank, all of the modules of EDP are delivered by the university consortium (Harvard Business School, John F. Kennedy School of Government, Stanford Business School, INSEAD, and IESF). These programs have been tailored to meet the specific needs of the bank's managers, but all are influenced by the universities that deliver them. This was precisely what the bank had in mind when it decided on these universities as vendors. Since the World Bank operates in a culture in which many employees hold advanced degrees, the organization needed to provide a program delivered by highly regarded faculty.
Engaging Leaders in the Process
Action, not knowledge, is the goal of best-practice leadership development processes. In preparing their leaders to make critical decisions, these organizations have realized the need to do more than simply provide their leaders with knowledge and information. The right knowledge can build a strong foundation, but the leadership development process must also equip participants with the skills, qualities, and techniques to apply that knowledge in ambiguous situations.
Therefore, best-practice partners emphasize action learning --;the use of real-time business issues for learning and development. With such an approach, content cannot be sacrificed for simplistic solutions, and the answers cannot be found in the instructor's head or in the back of a book. Creative and realistic answers must be developed on the spot by the learners, and they must be answers that will work in corporate application. What's more, it is the leadership development participants themselves who are charged with the job of implementing their recommendations. They and their superiors are going to see clearly whether or not their proposals work.
It may sound complicated and costly for global corporations to turn their real-time challenges into "class projects," and it may be risky. More often, however, it is the one sure way to assay the ability of promising future leaders to solve actual business problems. Action learning is the best way to deliver a learning experience that is tailored to both the organization and the learner's own development. For organizations that are serious about producing meaningful results from their leadership development processes, it is often the most effective path.
Andersen uses a great many problem-solving activities with the small groups in its leadership development activities. Each course has a prescribed content, but the lecture is not emphasized. Other learning techniques include case methods, simulations, action learning, experiential learning, and executive coaching. Some of Arthur Andersen's courses involve a modified, action-learning approach that incorporates both pre- and postwork.
Some higher-level courses in the GE leadership development core curriculum are designed to help provide direction for the company--;from a regional strategic standpoint and even from a worldwide company standpoint. Chairman and CEO Jack Welch personally chooses the action-learning topics for each Business Management Course (BMC), of which there are three per year, and each Executive Development Course (EDC), of which there is one per year. As a result, when GE employees hear that a certain initiative was a recommendation from the BMC or EDC, they make every effort to ensure that it becomes a reality. In most instances, recommendations made by GE's leadership development participants have been implemented.
For example, students in the BMC recently went to Russia and developed a set of recommendations for GE's operations in this area. The students then shared their recommendations with top leadership and then decided on a course of action. A mid-1990's BMC report on quality spearheaded the Six Sigma initiative that drives GE today, one of the biggest changes to occur at GE (see Chapter 3).
To create the new style of "walk the talk" leadership, Shell's LEAP programs feature compressed action learning that empowers teams and individuals to resolve issues for themselves. Each program consists of a mix of classroom days and team-based projects that take place over a 90- to 120-day period. While the approximately 11 classroom days are tremendous for the purposes of networking and best-practice sharing, a majority of the learning takes place in the team-based projects. No more than nine teams participate in a program at one time, and depending on the specific program, the team can come from within a business or consist of individuals across businesses and functions.
Nothing Teaches Like Experience
Technology can be useful for knowledge dissemination, but it cannot replace the teaching power of putting leaders together to solve a real problem. Companies across the globe acknowledge that technology has enormous potential in creating a learning organization. Today, top companies use technology to disseminate knowledge, keep people connected throughout the organization, expedite and facilitate team learning, and allow access to the knowledge capital of the organization.
On the other hand, the experience of getting leaders away from their jobs and providing face-to-face exposure to colleagues from across the world is an essential part of the best programs. According to American philosopher and psychologist William James (1842--;1910) "genius is simply the ability to see the world from a different perspective." Corporate programs can provide learners with this opportunity.
Currently, best-practice organizations feel they cannot fully achieve the benefits of networking via technology. When asked about their favored methods of delivery, best-practice partners indicated that a majority of their programs were delivered face-to-face. At present, technology is often perceived as a plug to fill gaps in the learning process. For instance, part of J&J's strategy is to create an organization of 90,000 leaders. The company realizes that it cannot put 90,000 people through its top development programs. But it can provide the technology for employees around the world to interact and learn from each other. In this case, technology is seen as a potential bridge between leaders within the organization.
With the importance Andersen places on face-to-face interaction, technology-based education is not a big part of the PDP program but, rather, is primarily used for sophisticated leadership simulations (i.e., flight simulator work). PDP is also currently searching for software to facilitate precourse work and post-event follow-up. It is in these two areas that the organization believes technology can be most effective.
HP's emphasis on creating learning that takes place on the job has led the company to create an online learning resource. LeaRN is a Web-based database for locating pre-qualified development resources. These resources are either recommended by HP employees or identified by the Business Leadership Development (BLD) staff. The reference is listed within the Web site database. Employees drive their own education, but (BLD) has made it possible to search for solutions by topics, with links to competencies. This has helped tremendously, as (BLD) also has been marketing the concept of career self-reliance. The LeaRN system enables HP employees to build learning solutions that will help them develop the competencies HP has identified as critical to success.
In Executive Conference II (one of J&J's first, formal, corporate development programs), the company challenged senior managers with several exercises requiring the use of laptop computers. The benefits were twofold. The computers tabulated participant responses, data analysis, and information retrieval. These exercises provided leaders inexperienced with computer applications with non-threatening coaching and hands-on experience. Coincidentally, the exercises provided the leaders with the skill base they needed to move on to more sophisticated challenges.
As J&J moves toward using technology more in leadership offerings, it has created a four-point strategy for implementation:
100 percent access--; Every employee worldwide should have access to what he or she needs to know to be effective on the job.
Experiment--; Since it is not clear what the best educational technologies are, J&J must experiment with various design and delivery modes.
Benchmark and partner--; Internally, CED partners with the information technology function and the advanced communication group to leverage resources and determine the best strategies for using educational technology. Externally, the organization does a significant amount of benchmarking to keep up to date.
Business Value--; Learning and experience has to focus on compelling and critical performance issues.
Realizing constraints such as cost and time, Shell has begun to use existing technologies. The various teams throughout the 120-day period use laptop computers, e-mail, and Internet forums, but no effort has been made to replace the face-to-face workshops with distance learning. The most effective use of technology to date has been in collecting the knowledge generated by participants as a result of the LEAP programs. A knowledge-management tool called Silent Dialogue has been created to capture knowledge and is being used throughout the organization. This forum is a virtual magazine that not only discusses what LEAP is doing, but also highlights best practices discovered by the project teams. Silent Dialogue helps market the LEAP program, as well as provide solutions for Shell employees.
Connecting Leadership Development and Leadership Succession
The leadership development process is linked to the organization's succession-planning efforts. As part of the alignment between leadership development and other corporate systems, best-practice organizations have a tie between educational efforts and the formal succession process. A few of the best-practice partners have the leadership development function reporting to the same executive; others have a more informal relationship. Regardless of the method, the natural linkage is clearly present.
Top developmental functions all discussed the usage of 360-degree evaluations as a part of their leadership development process, whether it be simply for development or for actual selection purposes. In some cases, partners are open in discussing the fact that program participants are assessed. "Aren't top executives always assessing people?" they ask. "Surely, everyone understands that if they make a good impression on the CEO when he or she visits a program, that is going to be helpful when the CEO reviews their potential for promotion."
At J&J, the 360-degree feedback instrument was designed to reflect the characteristics of future leaders needed by the organization. Coaching and developmental plans growing out of this feedback are encouraged as part of the Executive Conference process, but the results of the assessment are not fed directly into the succession-planning process.
The leadership development process at GE is tied directly to succession planning. Each employee participates in a mandatory annual performance review with his or her manager. Each review includes a discussion about performance and adherence to GE values. To ensure fairness and accuracy, this discussion is later interpreted by someone at a higher management level. To prevent managers from holding back talented employees, GE's performance appraisals include a negative values variable.
Although the study data were not conclusive, it seems that leadership development is integral to ensuring that top talent is tracked and allowed to flourish. The best firms are beginning to formalize this linkage and tie together assessment, development, feedback, coaching, and succession planning into one aligned and integrated system.
Impact of Leadership Development
The leadership development process is a symbiotic tool of effective leaders. For the best-practice partners, top-level support was a consistent key to developing leaders and sustaining the process. Without that support the processes would flounder. Yet, the success of leadership development engenders even more high-level support. As top leadership development functions help their organizations meet current and future competitive demands, they win further support from the organization's top leaders. Corporate executives are more likely to support leadership efforts that are clearly helping them get results. Through monitoring the effectiveness of leadership development processes, capitalizing on quick wins, and communicating their successes throughout the organization, best-practice organizations keep this "virtuous cycle" going.
Groups such as Andersen's PDP and GE Crotonville remain successful with a customer-focused strategy, in which careful listening, diligent program crafting, and constant monitoring and communication play a role in creating senior-management buy-in. This makes it easier for senior executives to understand how the leadership development process helps shape and disseminate their organization's culture. It also helps executives overcome resistance to change and achieve their strategic goals.
To maintain a high level of buy-in, Corporate Leadership Development (CLD) surveys GE leaders around the world to ascertain future business needs and the requirements of future leaders. Additionally, CLD identifies and uses "early adopters" of the leadership process. Throughout GE, certain developmental initiatives excite some business leaders sooner than others. By identifying these champions and leveraging their support, the company has been able to attain a critical mass of support for its efforts. This early identification and rallying was used with both the Work-Out -- program and the Change Acceleration Process (CAP).
HP has garnered support for its leadership development process by involving both the CEO and senior management as participants in its programs. These executives serve as mentors, faculty, and sponsors for the design and process of these programs. For example, HP's former CEO, Lew Platt, opened and closed every Accelerated Development Program (ADP) with a dialogue session about the HP Way and the expectations of those participating in the process. CFO Bob Wayman sponsors a worldwide broadcast and facilitates a panel discussion.
From the outset, LEAP staff members realized that to effect and accelerate Shell's transformation, staff champions would be needed to communicate the program's value. The group looked inside Shell's business units to identify leaders and set about negotiating "contracts" that would bring together teams to participate in LEAP. Shell believes that as the process moves throughout the organization, the program's success will engender leader support, and leader support will, in turn, strengthen the process.
The World Bank's EDP was initiated after Jim Wolfensohn created the strategic compact with the board of directors. In the compact, he outlined a number of integrated initiatives, including increased focus on executive and management talent. This compact, which began the movement toward the present-day EDP, evidenced Wolfensohn's support from the beginning. Asinitial positive results have been attained, this support continues even though the program is costly. Senior-level support for EDP is further engendered by executives' participation as champions and coaches of EDP's project teams.
Assessing Success of Leadership Development Programs
Although the assessment efforts vary from company to company, all best-practice organizations assess the impact of their leadership development processes. For instance, Arthur Andersen, who puts strong emphasis on quantification, found that PDP graduates had more satisfied clients and higher per-hour supervised net fees than partners who had not attended PDP; at Shell, if team projects do not generate revenues at least 25 times the project costs, LEAP staff do not feel that their program is adding value; the World Bank hired an external consultant to perform an objective assessment of its efforts; and follow-up research conducted by J&J determines whether or not subordinates and peers see improvements after an Executive Conference.
Assessment is also seen as a means of generating buy-in and keeping efforts focused on the right objectives. The type and intensity of assessment depends on the objectives of the leadership development process and the culture of the firm. Of all the best-practice organizations, Andersen probably had the most dedicated assessment efforts, and it has certainly reaped the benefits. The vast amounts of data the firm collects not only helps to demonstrate the PDP's correlation with improved business results, but also shows in which direction the organization needs to head in the future. Though expensive and sometimes tricky, the benefits of measurement cannot be discounted.
To collect this vital information, best-practice partners use a number of tools and techniques. While the Four-Level Model of Evaluation (participant reaction, knowledge acquired, behavioral change, business results) is but one of the means organizations use to determine the impact of leadership development efforts, it is nonetheless common and important.
In general, best-practice partners are more aggressive about measuring and evaluating the effectiveness of their programs. The most striking difference between partners and sponsors is the greater use of customer- and employee-satisfaction information by best-practice partners. Andersen's evaluation system is composed of two parts and is more data-oriented than most other benchmark firms. Attendees in the partners' programs fill out forms before they go to class, right after the class is finished, and then again three months later. These forms contain both course evaluation and needs-assessment questions. After the course is completed, partners are asked to assess themselves in terms of knowledge gained from the course. Arthur Andersen has found this type of self-assessment to be very accurate.
The company has compared partners who have attended PDP with those who have not (on a course-by-course basis). The results show a link between PDP and both increased client satisfaction and higher per-hour supervised net fees. This impact research is done in a two-year cycle; information is gathered on partners a year before they enter the program and extends to a year after the program is completed.
The use of both participant satisfaction and impact research helps provide a balanced set of results. For instance, Andersen found that one of its programs was not getting a high participant-satisfaction rating, but an impact analysis report showed that the program was having greater impact than any of the other courses.
GE's leadership development process is not driven by typical measures, such as cost and return on investment (ROI). Steve Kerr, chief learning officer, suggests that "Crotonville may be the only unmeasured and uncontrolled cost center in GE." Instead of traditional attempts to measure impact, the organization relies on feedback from a number of sources to make sure it is staying on the right track. For example, more than half of the senior executive development courses at the company are run by the leaders of the corporation. They are a great source of feedback about the effectiveness of course design. The organization also relies heavily on student feedback.
GE is currently working on a number of initiatives to measure its learning. To establish a model that may be used across all courses, the organization is piloting a Level-Three analysis on one of its programs. The organization is using 360-degree feedback before the training, immediately after the training, and then six months later to see what the long-term effect of the course is. The 360-degree feedback method is used to start the participants on a development plan, for which they choose no more than two objectives for the year. The development plan drives their mentor match and the external university program that they will take.
In terms of measurement, Shell has a unique situation in that all of the LEAP programs have goals and real deliverables. During the initial contracting process, a member of the LEAP staff and the leader within the business determine project outcomes. As part of this discussion, the business leader expresses his or her objectives in sending the candidate to the program. In many cases, this discussion defines the program and the problem the team or candidate will address. The LEAP staff tracks these specific goals, and the teams report results to the business leader throughout the 120-day period. In addition to this, LEAP looks at the financials at the start and end of the program to identify any changes. It also scans for factors that may have played a role in any changes.
In early 1998, the World Bank asked an outside firm to conduct an interim evaluation of EDP, based on the experiences of the first two cohorts to participate in EDP. They found that, overall, EDP was effective, and that six to eight months after attending EDP, 20 to 30 percent of participants usually changed behaviors, policies, and procedures.
Worth Every Penny
Best-practice organizations see leadership development as a costly undertaking but also as a worthwhile investment. The old adage "you get what you pay for" seems to apply to the leadership development processes within best-practice organizations. As each of these best-practice partners encountered change, theysaw value in investing in their future leaders. Costs were considered in the process, but the larger focus was the value that the program could provide. When asked to rank the importance of certain criteria when selecting an outside partner or vendor for the leadership development process, "fees" tended to be ranked as one of the least important factors.
The key for best-practice organizations was viewing their leadership development process as a long-term investment. While each tried to ramp up quickly so the effects would be felt throughout the organization, they realized that major payoffs would take time.
This feeling was reflected when comparing the responses of the best-practice partners to questions in the detailed questionnaire. When asked if they attributed cost savings to the leadership development process, 60 percent said yes, as opposed to only 17 percent of the sponsoring organizations. Additionally, when asked if they attributed increased profitability or productivity to the leadership development process, 80 percent said yes, as opposed to only 17 percent of the sponsoring organizations.
Since 1997 Arthur Andersen has invested more than $300 million per year in education, approximately 6 percent of total revenue. The company spends this amount because it believes that to deliver a best-practice program, it must focus on value and not on cost.
Andersen operates a zero-based funding model--;all the program wants to do is recover its costs. Program development costs are allocated to each office based on that office's percentage of total partners. The delivery costs, which are usually $3,000 to $5,000 per partner, are charged back to the local offices, while transportation costs are adjusted to equalize costs across the globe. To ensure that offices send partners to PDP, they are charged for the slots they are allocated, whether or not partners attend.
GE has an extremely high level of buy-in for its CLD efforts. Crotonville has proved its worth time and time again, so the company has few qualms about investing in corporate training efforts.
To get LEAP off the ground, it was necessary for Shell corporate to fund the initial design and development of the program. LEAP needed to take strides toward the direction in which the organization wanted to go, not simply reflect the current needs of the businesses. Shell realized the initial costs would be considerable, but it believed strongly that creating leaders throughout the organization was essential to long-term success.
As LEAP has become more successful, being sought out by many of the businesses, it has moved to a joint funding process. If the CMD wants an addition to the LEAP offerings, it will fund it. The businesses pay for the regular offerings. However, Shell feels that the businesses should fund LEAP efforts, as this shows that they are truly deriving value from the process.
The World Bank realized that to foster a strategic cultural change and re-create a new language for leaders, the price would not be low. As Chairman Wolfensohn laid out the strategic compact to the board, he stated that creating real change would take a large investment. The World Bank has done just that with its EDP, as the initial investment for creating the program was approximately $20 million dollars. Maintaining the program is also not inexpensive. The cost-per-manager for EDP is approximately $22,000. It includes all travel, lodging, and business school fees for all three modules and the Grass Roots Immersion Program (GRIP). This fee is not charged back to the business groups but is funded centrally through the $12 million Executive Education budget.
Leadership Development Is Essential
Each of the leadership development efforts studied began with a commitment unique to the organization, and from that solid foundation the organization has built superb programs and processes. This excellence is based on two key pillars. First, an overall tone of quality is anchored to this commitment. Second-best is simply not acceptable. At the same time, good value for money expended is important. Second, the leadership development process is created to fit each organization. It is unthinkable that GE would spend as much time on measurement as does Andersen. Conversely, the senior partners at Andersen need more data to support the value of leadership development than is demanded of Crotonville, because of GE's long-standing success using education as a lever of strategic change.
The distilled experiences of these top practitioners of leadership development can provide a starting point for the development of a company program. None of these approaches will perfectly fit another organization, but they may suggest alternatives or stimulate new ideas that might fit specific business challenges
Copyright © 2000 Robert M. Fulmer and Marshall Goldsmith. All rights reserved.
