13

BUILD GLOBAL LEADERS

Developing Agile Leaders to Drive Business Results

This chapter discusses the importance of developing global leaders and the human resources role in that challenge. Few things are more important to an organization than having great leadership, as leaders make the difference in the organization’s success, sustainability, and impact on shareholders, customers, employees, and the community.

Opening Stories

Investment in leadership development is at a all time high. Here are three examples of leadership development approaches.1

Agilent Technologies

This manufacturer of instruments and equipment for life sciences, healthcare, and the chemical industry has introduced a leadership effectiveness analysis program, which has led to improvements across a number of key business outcomes. Introduced by incoming chief executive Bill Sullivan, the program has changed the strategic intent of the company through leadership excellence and created a set of expectations for leaders to fulfill.

The analysis takes the form of a leadership audit, with the questions adjusted over time to reflect not only changes in the business but also changes in leadership measurements. The results of the surveys are measured against external norms rather than against previous survey results. Once scores for particular traits have reached a level that is considered top quartile and it is clear that a particular leadership quality has become embedded in the company, new questions are introduced.

This leadership effectiveness analysis has enabled Agilent to develop different expectations of leaders at different levels, based on a “core” of expectations running all the way through the business. The analysis has become part of the DNA of the company and has a participation rate of 89 percent.

The program was implemented from the C-suite downward in order to ensure that when leaders began participating in the program, their own managers were already fully supportive of it. The analysis provides Agilent’s twelve thousand employees with a reliable, consistent understanding of what leadership is and ensures that every business leader is following the same path. This has helped Agilent, which operates across many sites and has made a number of acquisitions in the past six years, ensure that its leadership is aligned across the company.

In addition to surveying its employees, Agilent also surveys its customers, and it has found that customers and employees give similar feedback, underlining the value of the program. It should come as no surprise that Agilent’s customer loyalty and customer satisfaction ratings are better than those of its best-in-class competitors.

In addition, the program has helped to create a company-wide understanding of the direction of the company, as set out by the chief executive, and employee retention is better than the market average. The program has also helped Agilent attract new talent, with acceptance rates now above 90 percent. Ultimately, Agilent has seen a marked improvement in the leadership of the company, as the analysis has helped identify managers who are struggling to lead their teams effectively and the specific areas in which they are struggling. This has enabled HR to provide targeted support for these leaders, pairing them with mentors, teaching best practices, and working closely with them to improve their leadership skills.

PepsiCo

This food and beverage company based in New York is focusing heavily on leadership development programs to support its managers. While the company generally takes a top-down approach to training, the company found that new managers have a high risk of failure without the right support. This led PepsiCo to begin its leadership program with individuals assuming a management role for the first time.

The First Time Manager program was implemented because new managers benefit from greater support following their promotion. The program is a global one, and as the company works on a governance model, all the company’s sector chief HR officers were in favor of initiating the leadership transition suite of programs by first focusing on the transition from individual contributor to manager. In addition, a global task force was set up to assist with the design of the program. It takes the form of a two-day residential course, followed by eighteen months of continuous learning, with participants undertaking regular tasks, readings, and so on to provide a combination of both active and passive learning.

The course focuses on teaching newly promoted managers the value of the role of a manager and adapting to a “manager mindset,” and it provides guidance on how managers should adjust their time usage to ensure that they are properly delegating while at the same time building on the talent within their team.

PepsiCo has also introduced a Leaders of Managers program, as the second offering in its leadership-transition suite of programs, for the managers of managers. It covers a number of core skills, including business acumen, strategy, collaboration, talent management, and global mindset, and the course is a combination of leader-led learning and business simulation.

As a highly diverse company, both geographically and sectorally, with twenty-two billion-dollar brands, PepsiCo believes that the biggest impact of its leadership programs has been in helping managers to take a more global and cross-functional approach—giving them a greater understanding of the impact of decisions made at the local level on the rest of the company. The program has also assisted managers in building networks throughout the company outside of their own region and line of business.

IAMGOLD

IAMGOLD Corporation is a midtier Canadian gold mining company engaged internationally in mining and the exploration of gold. IAMGOLD has operations in North America, South America, and West Africa. The foundation of the company’s culture is a belief in engaging, empowering, and supporting employees to build a company where the pursuit of excellence and an industry-leading vision of accountable mining exist in harmony. IAMGOLD was facing a typical challenge. Survey data taken from its employee engagement survey was much lower than expected, indicating that the first level of management needed leadership help and pointed to a need for formal leadership development.2

In response to this, IAMGOLD Corporation designed and implemented its comprehensive Supervisory Leadership Development Program (SLDP). The objective was to build a leadership pipeline while developing supervisory capabilities to engage, empower, and support employees. The program was highly visible, linked to key business objectives, and required substantial resources for the design and implementation, which covered a three-year timeframe. The project involved fourteens days of leadership development coupled with 360-degree feedback processes and a team of individuals to make it successful. In all, nearly 1,000 managers would be trained at a cost of more than $6 million. These factors and a need to measure program success and improvement opportunities led to an evaluation study using the ROI Methodology.

It is important to note that many of the supervisors in West Africa and South America lack formal education and many even have literacy problems. Consequently, SLDP was experiential in nature and offered creative, engaging activities for learners to explore and arrive at new meanings. Transfer of learning was built into the program, and each activity seamlessly linked to the next segment of learning. The program was delivered in three languages to meet the specific linguistic needs of each site.

The evaluation study found that the SLDP favorably impacted several of IAMGOLD’s key business measures, and a positive ROI of 46% was realized. Other intangible benefits not converted to monetary value included improving supervisory effectiveness, which ultimately impacted employee engagement. From a program perspective, this evaluation highlighted the importance of top-down leadership development. With all of this in mind, IAMGOLD is now pursuing the development of a Manager Leadership Development Program (MLDP). As the MLDP is implemented, pieces of SLDP will also be redesigned for use with the general employee population, ensuring effective sustainability of the program.

Global Leadership Is Crucial

In a world of strident shareholder demand, shifting business priorities, disruptive innovation, rapidly changing demographic and geopolitical forces, regulatory changes, and increasingly competitive business environments, leaders who envision and execute today’s strategy as well as anticipate and prepare for tomorrow’s challenges are more critical than ever. Leaders are expected to demonstrate a deep understanding of their organization’s business as well as its products and services, master the nuances of global markets, and conduct themselves in ethical ways. They must respond quickly to competitive maneuvers, foster innovation, communicate a compelling vision, and develop not only their globally distributed teams but also the next generation of leaders, all while delivering long-term value measured by short-term results. Becoming such a leader is like reaching the Mt. Everest of leadership development—and attainment is elusive. The results of failure to produce such leaders are often public, usually pronounced, and always profound.

Yet strong leaders can be developed if organizations, business leaders, and those who head leadership development functions create the systems, processes, involvement, and accountability that are crucial to success. Some organizations seem to have reached the summit. Others struggle against the vertical climb. Still others remain unable to gain a foothold. It’s not going to get any easier.

Global Leadership Defined

What makes an effective, successful global leader? What does it take to be successful, and how is that success determined? Is the success to be evaluated quarterly and based on results delivered to the satisfaction of analysts and shareholders? Is it to be judged by results delivered during the tenure in the role, over the course of a lifetime of leadership, or ultimately by the future success of the company, business unit, or team after the leader has departed? What role does character play in this examination of business impact? What characteristics and competencies of a leader distinguish the “best” from the merely “very good”?

As a core criterion, the expectation of leaders has always been to “get the job done” by managing assets and people in a complex global environment. Often missing has been a more holistic view of the process in terms of how to motivate, engage, reward, and lead employees.

Twentieth-century research began to crystallize the way effective organizational leaders are viewed and subsequently developed. Few depictions of effective leadership have withstood the test of time as well as that of Peter Drucker, who articulated the eight core practices of the effective leaders he worked with over his sixty-year career. According to Drucker, effective leaders do the following:

As he saw it, these questions “gave them the knowledge they needed . . . helped them convert this knowledge into action . . . [and] ensured that the whole organization felt responsible and accountable.”3

Jim Collins offered that in addition to IQ and technical skills, these five emotional intelligence attributes characterize the true leader:

“Level 5 leaders,” as he described them, credit others with success yet assume personal responsibility for failure. These leaders are characterized by humility and a will to succeed that does not tolerate mediocrity; they are quietly and calmly determined to succeed.

Over the years, we’ve seen the “one-minute manager” joined by the “situational leader” and the “servant leader” and by those leaders who are “values driven,” “principle centered,” and searching for “true north” or “multipliers.” While definitions will undoubtedly continue to evolve, the fundamental description of a leader as one who delivers results in a way that affirms, engages, inspires, and respects others is unlikely to fade from view.

The Forces for Effective Global Leadership

Effective global leadership is critical to the success, and often the survival, of corporations. In recent years, we have witnessed the demise or serious crippling of companies because of the inability of leaders to competently and ethically lead, creating a breach of trust with the public as well as with employees. Newspaper headlines and, in some cases, high-profile trials remind us of the failures of leadership. They are not confined to a particular region or industry, as scandals surrounding such companies as WorldCom, Satyam Computer Services, Adelphia, Parmalat, Tyco International, Clearstream, Enron, Global Crossing, and Arthur Anderson can attest. While most companies do not make the headlines for their leadership failures, they are all accountable for business results.

CEOs Care About Leadership

In the years since the global financial crisis, companies and their leaders have been shifting from survival mode to a business growth approach. It is no wonder that leadership development was on the minds of CEOs around the world when they responded to The Conference Board’s annual CEO Challenge survey.5 When asked to rank their top challenges for the coming year, they ranked business growth first. The surprise was that, after an absence from the 2009 and 2010 “top ten” findings, talent emerged as the second-most important global challenge; Asian CEOs ranked it number one, ahead of business growth. CEOs thought talent, innovation, and cost optimization would fuel business growth. When asked about the strategies CEOs would implement to address the talent challenge, these were the top ten:

Even a cursory read of the top strategies indicates a focus on internal leadership (improving the existing internal leadership base, especially at the top of the house; up-skilling all employees; improving leadership succession) before fighting for talent in the open market. In Asia, where talent was scarce before the global financial crisis, “hiring more talent in the open market” was ranked eleventh, with an internal development and retention focus being preferred, as qualified talent is both scarce and expensive. Asian leaders understand that they must build leaders faster than the global competition. Two things distinguish the approach of Asian companies: (1) attention to the specific developmental needs of the individual leader and (2) the speed with which they accelerate the development of key talent through experience, exposure, and customized training programs.6

Customers and Consumers Care About Leadership

We live in an age when maintaining an organization’s reputation and brand management is a constant challenge. Of the many ways corporate reputations are made and lost, few factors are more important than the quality of their leaders. Consumers are negatively influenced by headlines of errant and unethical behavior and positively influenced by lists of most-admired companies, especially those touted for their strong managerial practices. Consumers and customers have strong brand affiliations, product dependencies (e.g., prescriptions or replacement parts), and business affiliations that would be difficult to replace, and they take note of leadership behaviors. Knowing that raw materials are harvested in a sustainable way, that clothing is not manufactured by the use of child labor, that executives are not “tone deaf” to the average citizen, and that the stock market is still a fair and level playing field is important to consumers. In a world of choices, they will provide feedback by remaining loyal to a brand or by choosing a competitor for essentially the same product. They often share their thoughts and feelings among the members of their social networks with messages and postings that seem to never fade from the Internet.

Shareholders Care About Leadership

Those shareholders whose investment dollars and pension funds balance on the edge and are subject to mismanagement, lost revenue, and missed opportunity costs pay close attention. They are looking for superior returns and believe that those returns are the result of well-run companies led by ethical leaders. Analysts agree. There is mounting evidence of a direct correlation between effective leadership and business results. In their examination of CEO performance at publicly traded companies, researchers found that the “best-performing CEOs in the world” came from many countries and industries, and on average, those CEOs delivered a total shareholder return of 997 percent (adjusted for exchange-rate effects) during their tenure. On average, these top fifty CEOs increased the wealth of their companies’ shareholders by $48.2 billion (adjusted for inflation, dividends, share repurchases, and share issues). Compare that to the fifty CEOs at the bottom of the list, who delivered a total shareholder return of −70 percent during their tenure and presided over a loss of $18.3 billion in shareholder value. Industry, country, and economic factors were accounted for, and each CEO’s background and the situation he or she inherited were certainly factors in judging success. Many on the list of successes are familiar names; numerous others are relatively unknown but tend to have been selected internally and have served longer in the role than the current average tenure of CEOs.7

Internal Stakeholders Care About Leadership

In an era of increased scrutiny of virtually all expenditures, accountability for the development of leaders, particularly at the top, will only increase. Significant resources continue to be devoted to developing leaders. The Association for Talent Development (ATD) estimates that, even in the midst of the global financial crisis, U.S. companies alone spent just under $126 billion per year on employee learning and development; slightly more than 10 percent of that expenditure was devoted to developing leaders and managers, and an additional 4 percent was expended on executive development.8 The inability to determine whether or not resources have been expended wisely cannot be sustained in most corporate environments, even when we intuitively believe that leadership development (along with all employee development) is a noble pursuit.

Current and Prospective Employees Care About Leadership

Effective leaders create a culture that serves as a magnet for attracting top talent. With each generation entering the workplace, a greater emphasis is placed on continual development, as these new employees know that they are unlikely to stay more than a few years; it’s about what they can develop, acquire, and take with them to the next stop in their career journey. We know that effective leaders are one of the most important influences on levels of engagement. Recent research reaffirms the correlation between engagement and leaders’ ability to do the following:

Higher rates of engagement translate into higher rates of retention, an important factor in retaining talent in an increasingly competitive job market.9 In a world in which fewer than one in three employees are engaged, trust in executives can have a significant impact on engagement.10

Other Stakeholders Care About Leadership

In an increasingly interconnected world, there are many stakeholders whose fortunes and fates are inextricably linked to successful leaders and the leadership development (LD) programs that create and support them:

Current Status of Leadership Development

There is no doubt that leadership development is important, and it has changed dramatically in the past decade. Starting many years ago as typical classroom training on the principles of leadership, it has evolved into a critical part of organizational growth and development. How leaders are selected for programs and the specific ways in which programs are offered and structured are significant issues that define the current status.

How Leaders Are Selected for Development

Because leadership development can be one of the most expensive types of development (it is not uncommon for it to be four or five times the expenditure made for other employees), selection is usually a thoughtful process.

At higher levels in the organization, participants in LD programs are often selected by one or a combination of the following methods:

At lower levels, participants are often “selected in” versus “screened out” and enter into an LD program by virtue of a promotion or a change in job title. For example, all new supervisors may be automatically enrolled in a particular program.

How Leaders Are Developed

Lewis Carroll, in Alice’s Adventures in Wonderland, wrote, “If you don’t know where you are going, any road will get you there.” This is also true with leadership development. Unless there is a clear road map, it is indeed a lovely journey but one without a destination or committed travelers. The methods for development are varied, and many are combined into programs and initiatives of infinite variety:

Years ago, researchers created assignmentology, a way of mapping standard leadership competencies to specific opportunities for development, such as serving on a task force, chairing a major initiative, or assuming a role with a greatly expanded scope. The science of knowing what developmental experiences will result in specific competency improvements (and, by extension, what will not) is an extraordinary global positioning system in a world of increasingly fewer marked paths.11

The Myth of 70–20–10

The time devoted to learning about leadership is a critical issue. For decades, there has been an assumption that 70 percent of the time should be spent on the job with actual experiences, 20 percent learning from others (usually through coaching, mentoring, shadowing, and role modeling), and 10 percent in formal leadership development programs (in the classroom, e-learning, or blended learning). This ratio comes from leaders who were asked to reflect on how they learned effective leadership. As you can imagine, there has always been a small amount of time in classroom leadership development, so their input naturally reflected a small amount in the formal learning category. The rest of it was their best guess of what has happened—it was never meant to be a prescription of what should be done! It’s safe to assume that there is not enough formal learning provided during a person’s career, at least in most organizations. A better approach is to ask leaders how they want to learn—what their preference is. A recent study by The Conference Board and Development Dimensions International (DDI) involved more than 13,000 leaders, 1,500 global human resources executives, and 2,000 participating organizations.12 Figure 13.1 shows the results of this study. The 70–20–10 ratio is the perception, but the reality in terms of time spent for this group in learning about leadership is closer to 55–25–20. When this data was sorted for those individuals who have the highest-quality leadership, the ratio is 52–27–21. While this reflects the reality of what is happening in organizations, the important issue is what is preferred. This same group was asked to indicate how much additional time they would like to spend on leadership development per month. The average response was that they spent 5.4 hours per month now, and they desired 8.1 hours, with a difference of 2.7 hours, almost an additional week for a year. When asked how they would prefer to spend their time, 76 percent of them said on formal learning, whereas 71 percent said learning from others. Only 26 percent said they wanted to spend it on the job. These data clearly show what many have experienced: that the 70–20–10 rule does not reflect reality, and it should not be used to prescribe a process; it is merely a reflection on what has occurred in the past. It is much better to plan the proper mix around the needs of the organization and the needs of the leaders.

How Leadership Development Programs Are Structured

There will always be a need for a structured process of developing leaders. Simply dropping talented and successful individual contributors into the “manager’s chair” robs them of the opportunity to continue to be successful in a completely new situation. It also runs the risk of doing not only professional harm to the individual but also organizational harm to those he or she impacts. This critical juncture in a career should be carefully managed, and all stakeholders need to be involved for mutual success to occur. Deploying new leaders to different environments or challenging situations without careful planning and support is not a recipe for success. Simply hiring a new CEO from the outside without considering the cultural assimilation challenges, as well as the internal communications and talent implications, is terribly shortsighted.

Most programs have one or more of these goals in mind for their leadership development programs and initiatives:

The structure and effectiveness of LD programs is highly variable and, on the whole, disappointingly ineffective. Research indicates that these programs are “immature,” according to a leadership development maturity model:

So is anyone implementing leadership development well? Research by the Hay Group highlights many companies and their “best practices” approaches to leadership development, characterized by the following:

These findings are echoed in Fortune magazine’s list of the world’s most admired companies, which provides insight into the choices these companies make about leadership development. The Hay Group’s research also reveals the following about successful organizations:

The structure of leadership development will naturally shift to reflect the organizational models it supports. As command-and-control hierarchies intersect with social networks and team organizational structures, so will formal, rigid development programs morph into more flexible, customizable solutions for developing leaders. Rick Lash, director of the Hay Group’s Leadership and Talent Practice and coauthor of the “Best Companies for Leadership” study, notes the “significant shift away from hierarchical organizational operating models. . . . Leadership in the twenty-first century is about leading at all levels, not restricting it to title. As organizations become flatter, the best leaders are learning they must check their egos at the door and become increasingly sensitive to diversity, generational, and geographical issues.”16

One such customized approach can be seen at Bristol-Myers Squibb, which has found ways to customize leadership development through the use of blended learning, coaching, mentoring, and social networking.17

Managing Versus Leading

An important challenge in organizations is to increase the amount of time leaders actually spend on leading instead of managing. Leaders spend much of their time on classic management activities of planning, organization, and control. For example, developing plans, controlling the budget, and handling administrative work are all more managerial activities. Leading involves skill sets that include interaction with employees. Figure 13.2 shows a list of the critical skills identified in The Conference Board/DDI study mentioned earlier.18 These are very powerful skill sets that can make a huge difference in organizations. The study found that leaders who spent more time interacting are more effective at these skills:

This has been a classic issue with organizations that value spending more time on managing and less time on leading. In this particular study, 41 percent of leaders’ time spent was spent on managing versus 25 percent on leading. However, leaders preferred to spend 22 percent on managing and 40 percent on leading. The challenge for organizations, therefore, is to encourage, and build environments to support, spending more time on leading, which is where most of the payoff will be.

Global Versus Local Leadership Programs

For global organizations, an important challenge is to determine who controls the leadership development and talent development programs. In some organizations, the programs are dictated by the corporate headquarters to ensure consistency with the mission, vision, and values of the organization. At the opposite extreme, programs all are locally owned, developed in the countries where their leaders reside to address the needs and cultural issues in that area. Both of these extremes are not ideal. The better approach is to have a good balance of both corporate and local control. Certainly, corporate should be more involved in mid- to high-level leadership development, whereas frontline leadership development should typically be a balance between local and corporate control. Succession planning, on the other hand, is a local issue, involving candidates in specific areas, and local leaders often know their areas best. Balancing leadership development is an important consideration in the human capital strategy.

Common Challenges in Implementing Leadership Development

For those of us who have labored in the leadership development field for years, the challenges of getting it “right” at any company are at once unique and yet quite common. The details may be different at each organization, but these common challenges are ubiquitous:

The Success and Failure of Leadership Development

The success factors for leadership development are identified from the barriers and enablers of successful leadership development. When leadership development is successful, the enablers to that success are identified and isolated. When leadership development fails, the barriers that caused the failure are isolated as well. A failure does not necessarily mean that the program did not deliver a positive return on investment or even influence significant business impact measures. A failure is described as a program not living up to its expectations—not achieving the established impact or ROI objectives. It could have been more successful if adjustments or changes had been made; it will achieve success if changes are made going forward.

The data for the success factors are identified in a variety of sources. The most important sources are the ROI studies conducted by the officers, consultants, associates, and partners of the ROI Institute. Each year, this team is involved in approximately 100 to 150 leadership development studies, and each study reveals important issues about failure and success factors. In the case of disappointments, the data show the cause of the disappointment (i.e., barriers that must change in the program to generate more success). From time to time, the ROI Institute conducts reviews of these studies to determine the general barriers and enablers to success. Failure is divided into three categories. In the worst-case scenario, the studies are negative, delivering less value than the cost of the program. These are failures that present serious disappointments, and the lessons learned are very clear. The second category is when success has not been achieved at the minimal targets defined by the impact and ROI objectives. While these programs have positive results, they do not meet expectations; there are opportunities for improvement that will drive more success. A third category consists of programs that exceed the objectives and show additional potential. While these programs are successful, if adjustments are made, they can be more so. These adjustments are vital because maximization of the value delivered is always a goal of success.

These distinctions are made because the impact of leadership development, when properly designed and implemented, can be considerable, sometimes ranging from 300 to 1,000 percent return on investment. Consider the impact created when a leader changes his or her behavior and it affects the entire team. For example, for a first-level team leader in a call center with twenty direct reports, the impact would be the improvement of the team. If productivity (e.g., call volume) improves because of the leadership development, the team’s productivity is measured. When the monetary value from the team’s improvement is compared to the cost of the formal learning for the team leader, the ROI value can be significant. In our experience at the ROI Institute, when this leverage or multiplicative effect is explained to chief financial officers, they understand the value of leadership development. Consequently, we should expect high returns on investment from leadership development; if they are not there, we should determine what can be done to improve them.

In addition to examination of ROI studies, research began with an examination of the literature, probing into both the failures and the success factors of leadership development. Next, a survey was conducted with LD organizers: those who organize, coordinate, or facilitate leadership development and are often aware of the causes of failure. The survey data from 232 respondents are presented in Table 13.1. Barriers are ranked from most significant to least significant. For the most part, these results parallel what the ROI Institute team has uncovered in the analysis of its studies.

Table 13.1. Reasons for leadership development program failures.

Reason cited	Ranking	Percentage
Not building data collection into the process	1	74
Not using the data routinely for process improvement	2	53
Failure to create application and impact objectives	3	51
Not assessing current leader behavior	4	49
Failure to secure commitment from participants	5	48
Not identifying the right data for analysis	6	47
Failure to secure management support for the program	7	46
Failure to remove or minimize barriers to application	8	43
Not assessing learning needs properly	9	42
Lack of business alignment	10	39
Improper program design	11	24
Taking all the credit for an improvement in business impact	12	17
Waiting for the request for impact and ROI analysis	13	16
Not including the right participants	14	13

Table 13.2 presents the success factors for leadership development in checklist form, in the order in which they normally occur in the LD process. Leadership development facilitators, developers, organizers, and supporters can use this checklist to ensure that the proper processes are in place for success. These factors are developed from literally hundreds of studies on leadership development and through other research. Usually, three to six items are missing for any given program design, and these are often critical enough to inhibit the results.

Table 13.2. Success factors for leadership development.

What Does the Future Hold for Leadership Development?

The ability to develop leaders more quickly and efficiently will become a competitive advantage for those companies who do this successfully. This concept of flexible and adaptive leadership is well suited for our turbulent times. One of the best crucibles for developing adaptive leaders is the military. Four principles have served military leaders well:

Another core skill for future leaders will be the ability to thrive (not simply survive) in a permanent crisis; this VUCA world (VUCA is a term that originated in military circles, which means volatile, uncertain, complex, and ambiguous) means a never-ending series of strategy refreshes, setbacks, and unexpected opportunities. Many believe that effective leaders in this environment will need to foster adaptation, embrace disequilibrium, and generate leadership at all levels of the organization.20

Where will we find such leaders? Some suggest that we expand our search to include different markets, emerging economies, and differing cultural values—finding leaders who have forged their leadership skills in the crucible of resistance to apartheid, the growth trajectory of emerging markets, or during stints with mission-driven entities addressing humanitarian crises around the world.21 The models are there; the largest India-based companies provide leadership lessons in terms of where and how they focus their energy and their emphasis on being transformational leaders.22 So many types of experiential learning are finding their way into corporate leadership development programs at industry-leading companies such as UBS and IBM.

Leadership development will morph and adapt, just as the leaders it attempts to create must do. But one thing will remain constant: the need to articulate the impact of such a major investment. The journey is always the same for leadership development; at the end of the day, learning to effectively lead people remains a transformational process. It is always about how willing someone is to make himself or herself the lesser so that someone else can be the greater.

Many approaches can be successful, given the right support, the right timing, and the right alignment with corporate imperatives. While setting the course is difficult, attaining the results is even more challenging. One study of leadership competencies that matter most for growth (which, according to the authors, constitute “the Holy Grail of corporate strategy”) reveals that great leaders are very rare indeed.23

Some companies have found a way. There is no one path; there is no one correct answer. There are, however, correct questions:

Measuring the Impact and ROI of Leadership Development

In a survey of leadership development practitioners, 368 surveys were sent out and 232 were received, for a response rate of 63 percent.24 Several lists of current practitioners were used to choose recipients who were actively involved in leadership development. In every case, the job title included leadership development or reflected a manager or director responsible for leadership development. Most of the organizations were global, representing both public and private sectors.

Table 13.3 shows where leadership development is being evaluated, using the levels of evaluation as a reference. These levels are described in more detail in Chapter 14. As this table shows, a surprising number of these evaluations are at the business impact and ROI levels, exceeding expectations. Part of this could be a function of the global recession. The recession has led some organizations to step up their evaluation efforts, pushing evaluation up the chain of impact to the impact and ROI levels.

Table 13.3. Levels of evaluation for leadership development.

Level of evaluation	Percentage of programs evaluated at this level
1. Reaction—Measures reaction to, and satisfaction with, the experience, contents, and value of the program	88.9
2. Learning—Measures what participants learned in the program: information, knowledge, skills, competencies, and contacts (takeaways from the program)	59.1
3. Application/implementation—Measures progress after the program: the use of information, knowledge, skills, competencies, and contacts	33.9
4. Business impact—Measures changes in business impact variables such as output, quality, time, and costs linked to the program	21.3
5. Return on investment—Compares the monetary benefits of the business impact measures to the costs of the program	11.3

N = 232.

Figure 13.3 shows today’s ROI reality, as recipients responded to the question, “Is there an emphasis on ROI?” Surprisingly, 88 percent said yes. This dramatically underscores the concern about ROI during a global recession.

Figure 13.4 shows the drivers for ROI evaluation and represents data only from those who indicated there is a current emphasis on return on investment. Perhaps as anticipated, increased pressures for cost efficiencies dominated the rationale for ROI evaluation, which for the most part is a function of the current global competitive situation and the remnants of the economic recession. The cost of the program is the second driver, which is consistent with the work at the ROI Institute. An impressive 29 percent indicated that top executives are requiring this now, which is also consistent with ROI Institute data. This survey clearly shows that the need for ROI evaluation is here, and many organizations are stepping up to the challenge of showing the value of their programs up to the impact and ROI levels.

Can the Impact of Leadership Development Initiatives Be Measured?

We believe the impact of LD initiatives can and should be measured. What counts, however, are not our opinions but those of the business leaders who support all the human capital programs that professionals need. Increasingly, C-suite leaders such as CEOs and CFOs want to know the return on their investment in leadership development, particularly the most expensive and higher profile LD programs. In a recent survey of Fortune 500 CEOs, 92 of 96 said that they wanted to see the business impact of learning programs, but only 8 percent see that happening at their companies now.25 In the same survey 71 of 96 (74%) wanted to see the ROI, but only 4% see it now.26 Other business leaders are increasingly interested in “people metrics” and the alignment between people-related data and business priorities, sales performance data, and revenue.27

Early research in human capital analytics paved the way for its application in the workplace. Some studied the impact of the consulting psychologist as a path to developing leaders who impact business results.28 Others found that without the ability to articulate the business impacts of programs and initiatives, the human resources function would have a very difficult time playing a strategic role.29 One study conducted research for The Conference Board with leading multinational firms, including BP, Colgate-Palmolive, Bayer, Unilever, AstraZeneca, and UBS, to determine the ways in which the profession could articulate the business value of leadership development. Two others state that even intangibles can be measured and used to support the impact discussion.30 Research supports the critical need to demonstrate the return on investment of LD initiatives.31

This shift to analytics is well under way. At UPS, the use of metrics and data have driven decision making about programs and their effectiveness, as well as business impact.32 Google’s metrics-driven approach and analysis have helped create the culture-specific leadership model that is now the foundation for leadership development.33 Companies as varied as Harrah’s Entertainment, Starbucks, Procter & Gamble, Limited Brands, and Best Buy have determined that they can compete on talent analytics and win.

Measuring Progress

An important step is to assess where the organization is now regarding the measurement of leadership development and where it needs to be. Figure 13.5 shows the maturity stages for measuring the success of leadership development. Stage 1 focuses on measuring internal processes to make the leadership development more effective from the perspective of the designers, developers, or participants. The focus is on measuring who is attending, what topics are explored, and the time that they are allocating to the process (Level 0). This also includes measuring reaction to leadership development, ensuring that it is relevant, needed, and necessary (Level 1). It also measures the extent of learning of new skills and new approaches (Level 2). Most organizations are moving beyond stage 1 and are at stage 2.

Stage 2 is where the focus is on measuring behavior change. Typically, the approach is to use 360-degree feedback, where the current levels of behavior are measured going into a particular program and the changes are measured at some point later. This can also involve an organization-wide measurement, where the 360-degree assessments provide a profile of how others are perceiving the leadership behavior of managers and executives.

Some organizations have moved into stage 3, which connects leadership development to important intangible measures such as teamwork, communication, cooperation, and decision making. These are not necessarily business measures in the organization, but they are actual concepts. These perceptions can be very important. However, for most executives, this is not enough to see the value from their perspective.

Many organizations have migrated to stage 4, where leadership development is connected to standard HR metrics of retention, absenteeism, job satisfaction, job engagement, complaints, grievances, accidents, and other HR-related measures. This is pursued under the assumption that leadership development is more likely to translate directly into these “people-related” measures.

The ultimate approach, taken by a few organizations, is to connect leadership development to business unit measures. This measurement is based on the assumption that if leadership capability is enhanced, the team performance measures will improve. In essence, the programs start with the end in mind with clearly defined business needs. In the beginning of major leadership development programs, key business measures are identified that need to improve or change, using the leadership competencies with the team. Then it is the new leader behavior that drives up performance. This is a very powerful process and will be a major trend in the future. More detail on measurements are provided in Chapter 14.

Implications for Human Capital Strategy

This chapter identified issues that are critical for developing global leaders. Every human capital strategy should have a major component addressing the need for global leaders. This strategy should develop these key issues: