When the founder and president of Westmed Practice Partners in Purchase, N.Y., retired two years ago, the company’s senior team members wanted to ensure that the organization was prepared for the challenges ahead.
So they implemented a leadership development program to strengthen the skills of their current executives—and ensure a steady pipeline of future leaders. The goal is to enhance strategic and creative thinking so that leaders can focus on how to better position the company for success in a fast-paced business climate.
“I think it will allow them to expand their critical thinking and allow everyone to be less reactive and more proactive,” says Joseph DiCarlo, who was until recently chief talent and engagement officer at Westmed, which provides health care management services to 1,900 physicians and clinical professionals. “In today’s competitive health care landscape, you really have to differentiate your brand and your services from the competition.”
That’s true for many industries. Change is happening fast, and many companies don’t have multiple layers of management expertise to deal with such issues as fast-emerging competition, globalization, technological advances and shifting business models. These factors are all contributing to the anxiety-filled, complex world in which company leaders must manage.
And, in the future, those changes and challenges will only come faster.
Lack of Bench Strength
Top-level executives today are uneasy about their organizational leaders’ ability to handle unexpected challenges.
Fewer than half of 1,000 C-suite executives recently surveyed ranked their organization’s overall leadership quality as “excellent” or “very good,” according to the DDI Global Leadership Forecast 2018. Asked to name their biggest challenges, the executives’ top choice—identified by 64 percent—was “developing next-gen leaders.”
There's a lot at stake. New executives already have a high rate of failure. In the first 18 months of being promoted to an executive role, 30 percent to 70 percent of senior leaders fail, various surveys show.
“What’s interesting is that, in a lot of cases, these are leaders who demonstrated prior success. They showed high intelligence, appropriate initiative, good business savvy, but they’re still failing,” says John Scott, chief operating officer and co-founder of APTMetrics, an HR consulting company based in Darien, Conn.
‘In the current environment, past behavior is not necessarily the best predictor of future behavior.’
In a wildly fluctuating business climate, these leaders “are having a hard time both assessing the demands of the new environment and then adapting to it,” Scott says.
Those failures are expensive. The cost of replacing a senior executive can range from $750,000 to $2.5 million, and up to $52 million for a chief executive officer. Indirect costs from a leader’s failure include employee stress and decreased engagement, according to a review of existing research by Scott and other authors of a 2017 SHRM Foundation report, Selecting Leadership Talent for the 21st-Century Workplace.
New Focus Needed
Those statistics suggest that organizations must improve the way they select and develop future leaders.
“We need to be thinking differently about how we assess leaders in this rapidly changing work environment,” Scott says. “In the current environment, past behavior is not necessarily the best predictor of future behavior.”
For example, 360-degree feedback tools and in-person interviews can provide insight into a leader’s current behavior. However, to assess leaders’ ability to adapt and solve future problems, he recommends immersing them in business case simulations that apply to their organizations.
New technologies are available to help provide new ways of learning. Traditional classroom-based lectures, long the foundation of many development programs, impart information that frequently gets forgotten soon after participants return to their jobs.
“There tends to be a one-size-fits-all approach to development, so every leader gets exposed to exactly the same thing rather than having a more personalized development experience,” says Mark Busine, vice president of product management at Development Dimensions International’s (DDI’s) global headquarters in Pittsburgh.
To be more effective, Busine says, leadership development programs should:
- Offer personalized learning. Tailor development opportunities to a leader’s particular needs.
- Focus on the business context. Identify the strategic and cultural priorities of the organization. What global and economic market challenges will the company and the industry face in the future? Ensure that development opportunities are tied to those.
- Provide relevant learning. Ensure that what participants are learning can be used immediately to address the situations and challenges that they’re facing. One way to add relevance is to spend less time telling potential leaders what to do and more time immersing them in situations where they can get needed experience.
An effective leadership development program can help an organization achieve its business goals and financial success. Companies in the top third in terms of financial performance are twice as likely to have high-quality leaders as those in the bottom third, according to the DDI report.
Furthermore, when companies expand their leadership development programs to lower levels within the organization, they are four times more likely to financially outperform those that don’t, the DDI research shows.
“The reality is if you’re trying to change behaviors and mindsets at a very senior level, or late in somebody’s career, it’s much more difficult than getting to them earlier,” Busine says.
By using objective, validated assessments, organizations also can often reveal “hidden talent” who will provide fresh perspectives and insights. Such assessments eliminate unconscious bias and politics that infect many high-potential programs, blocking women and minorities.
“In today’s business environment where we’re constantly seeking new ideas and new approaches and new thinking, if we keep going to the same type of people, we’re not going to drive the kind of innovation that we need,” Busine says.
Upping the Game
Food and beverage giant PepsiCo has adopted these approaches in its new global leadership development program, which was created to help build a cadre of leaders who can guide the company into the future.
“Over the past 10 years, PepsiCo has been transforming the way in which we manage our talent,” says James A. Scrivani, director of global talent and development at PepsiCo headquarters in Purchase, N.Y.
Its Leadership Assessment & Development (LeAD) program provides advanced leaders with stretch assignments and other opportunities so they can help transform the way the company operates and navigates change. It also seeks to identify potential future leaders early in their careers, so they can be given the right combination of training and experience to help propel the company forward.
PepsiCo’s program, developed in partnership with APTMetrics, won several awards last year for its evidence-based approach and its leadership simulation tools.
The company prioritizes developing leaders from within over hiring externally. With more than 260,000 associates in 200 countries, it needed a talent management process that focused on the company’s future leadership needs and that could be applied across all parts of the business. The LeAD program launched in 2015 in 11 languages to more than 3,300 early career professionals globally.
The program seeks to build leadership capabilities at four levels: potential leaders (associate managers), emerging leaders (managers and directors), advanced leaders (vice presidents and senior directors) and senior leaders (the president and senior vice presidents).
It’s unique because it takes a multitrait, multitier approach to identifying high-potentials.
“At any given tier, we give people four assessments,” Scrivani says. “It’s a more holistic approach to assessing our talent.”
As a foundation, individuals are given cognitive and personality assessments. To measure how they’re performing today, they’re given a 360-degree multirater feedback survey. To assess how they might perform in the future, those in the top three tiers participate in business case simulations, either online or in person, depending on the tier.
“By using more than one tool, we’re getting a better picture of the employee’s potential,” Scrivani says.
In the first tier, individuals are invited into the program based on their performance and tenure, rather than a predetermined level of potential. Participation is voluntary, but 85 percent of those invited opt in.
‘In today’s business environment where we’re constantly seeking new ideas and new approaches and new thinking, if we keep going to the same type of people, we’re not going to drive the kind of innovation that we need.’
Individuals are assessed against PepsiCo’s leadership excellence framework, which is future-focused. The company has identified competencies that future leaders need to ensure the company’s success going forward, including strategic mindset, smart innovation, talent development, global acumen, inclusive culture, collaborating beyond boundaries and delivering the right results.
Every participant receives a custom report containing the results of their assessments and key development areas recommended for them. After that, the onus is on the individual to create a development plan, which must be approved by a supervisor.
“Assessment results don’t dictate promotions,” Scrivani says. “They’re an extra data point that we can use when discussing our talent, but it doesn’t override judgment.”
However, promotion rates are one measure of the program’s success. The highest-scoring individuals are promoted 1.5 to 2.5 times faster than those in the lowest-scoring group, which suggests that the results are being used to influence promotions, he says.
The company also studies performance evaluations before and after an individual has participated in the program.
“Those who do better on the assessment suites also are consistently better performers over time for the future,” he says.
All the data collected from LeAD is included in PepsiCo’s people planning process, which includes succession planning. The program, which was designed by industrial and organizational psychologists, has been validated to ensure a correlation between results and performance. The results are monitored to ensure that there are no systematic differences in overall assessment scores by gender and that there is no adverse impact on minorities and other protected groups, Scrivani says.
Make It Meaningful
Finding more-relevant ways to help potential leaders stretch and try new ideas was a main goal of Waters Corp., which has 7,000 employees in 31 countries. The company launched a program in late 2017 that requires its high-potential employees to find solutions for real-life problems.
“They had some very meaty projects they were tasked to work on within the context of this program,” says Valerie Marquet-Wessler, learning and development manager at the company’s Europe headquarters near Paris. The company produces specialty measurement instruments.
The Wings program, which targets senior managers who are ready to move into director-level positions, includes three weeks of classroom learning over a span of two years. But the most significant learning has come from the group projects that require participants to work together to improve work processes and products.
“It wasn’t just something to keep them busy and reinforce learning,” Marquet-Wessler says. “There were high expectations.”
The first 18 participants, from the U.S., Europe and the Asia-Pacific region, have already drawn up a new sales process that the company has implemented.
Participants are identified by senior leaders but must complete a selection process, which includes a leadership assessment, a presentation to senior management and an interview, before they’re chosen for the Wings program. Their participation requires a significant investment of time for them and other members of their departments, who must fill in during their absence, she says.
“One of the nice side benefits is that it’s created a real buzz and energy in the company,” Marquet-Wessler says. “It’s quite visible. It’s not hush-hush. It’s not like we’re doing this secret work with selective high-potentials. They go back to their workspace, and people ask them about it.”
The company partners with DDI for another new program—a management theories class that is offered to employees in their first manager position. DDI provides instructors in other countries who speak the local language.
All Waters Corp. employees are measured against the company’s Employee Success Model, a framework that was developed in-house. It promotes “outside-in thinking,” encouraging employees to adopt a global perspective of markets, technologies and trends.
But developing leadership skills is neither fast nor easy, cautions Sandra Kassing, principal talent development consultant at Waters. It takes sustained commitment on the part of the employee and employer.
“You cannot develop these things in 10 or 20 minutes or even two hours,” Kassing says.
Use Validated Assessments
In choosing assessments to identify and evaluate high-potentials, make sure to select ones that have been professionally validated, says John Scott, chief operating officer and co-founder at APTMetrics, based in Darien, Conn.
Beware of some game-based assessments and off-the-shelf assessments that promise to predict an individual’s success on the job.
Employers can get into legal trouble if they can’t demonstrate that an assessment is related to the job and measures important dimensions that are required for success on the job at that company, Scott warns. Employers that use employment tests must comply with the federal Uniform Guidelines on Employee Selection Procedures.
At Westmed, the new leadership program is aimed at promoting critical-thinking skills.
DiCarlo created the program for senior executives with real-world practicums, using the Socratic method of teaching.
They discuss how to develop strategic thinking, how to build coalitions and how to strengthen emotional intelligence. The six weekly, one-hour sessions culminate with a final case study and practicum. The program received such positive feedback that it will be offered to other Westmed leaders, including the physicians who chair departments and others down to the director level.
Westmed, which provides health care management services for 375 physicians and 1,500 clinical professionals in southwestern Connecticut, has always preferred to promote from within because current employees understand the fast-moving entrepreneurial culture, says DiCarlo.
“You take such a chance when you hire from outside, especially in management and leadership, that our leaders are generally more successful when they come from within,” he says.
Developing potential leaders internally also allows the company to offer a career pathway for employees, which helps boost retention.
By developing their critical-thinking skills, he’s confident that the organization’s future leaders will be able to handle whatever challenges arise.
Small Companies Ramp Up Leaders’ Training
The Granite Group, a plumbing and heating supplies wholesaler based in Concord, N.H., began providing leadership training for its branch managers last year after an uptick in “people problems.”
More branch managers were asking HR for help with uncomfortable conversations that they needed to have with employees, says Tracie Sponenberg, SHRM-SCP, senior vice president of human resources. The company has about 500 employees in 40 locations.
She brought in an outside facilitator to meet with the branch managers every six weeks for training. While the training has been beneficial, the relationships that have developed bring an even greater payoff.
“Somebody from Auburn, Maine, might never have met our manager from New London, Conn.,” she says. “Now, they’re able to collaborate and bounce ideas off each other.”
Developing their leadership skills is critical not only for day-to-day operations, but also for the future of the business. In the next decade, as many as half of the 40 branch managers could be ready to retire. The percentage of executives retiring could be even higher,
Later this year, Sponenberg plans to launch a program for emerging leaders—those in nonmanagerial roles who are nominated by their supervisors. The company doesn’t yet have a formal succession plan.
“But this is a way to see these are people who are involved, volunteering, stepping in and taking charge and may at some point be ready for the next step,” she says. “So, we’re keeping an eye on that.”
Dori Meinert is senior writer/editor for HR Magazine.
SHRM provides resources that can help organizations better develop leaders.
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