• Reinforce meritocratic pay and promotion decisions. Recognize and reward merit rather than mediocrity. Set up well-defined competencies and standards, so that individuals who excel when measured against them are consistently developed, promoted, and compensated accordingly. Align the performance acceleration process with career planning and learning and development, so that employee capabilities and outcomes are continuously improved.
The health-care products company Novartis AG tracks 14,000 high-potential individuals through its Organization and Talent Review (OTR) system, which rates each person’s potential, learning agility, people skills, and ability to drive results and change. The OTR system enables business leaders to assess individuals on a company-wide basis, illuminates gaps in skills and experience, and provides a list of qualified internal candidates for every critical position in the company. Where bench strength is lacking, the generalizability of OTR benchmarks makes it easier to identify individuals from the outside who might be recruited. (For some jobs, where specialized scientific expertise is required, only 20 people in the world may be qualified.) This rigorous and forward-looking system helps Novartis maintain a distinct competitive edge.
• Measure outcomes. Companies can’t accelerate what they don’t measure. Capture performance through well-targeted metrics based on relevant results rather than activities (for example, tracking the percentage of people “ready now” to succeed their bosses, rather than the number of people trained). Other useful measures might be promotion rates, retention statistics for top performers versus average performers, and performance rating distributions by gender or ethnicity.
The qualities and requirements that define a world-class senior executive have evolved significantly over the last 10 years. Some traditional leadership characteristics, such as a strong sense of vision and the ability to inspire others, are still important. But leaders today must first and foremost be able to master enormous complexity. They must appreciate and accommodate different perspectives and interpersonal dynamics, integrate multiple disciplines, work across cultures, and interpret diverse and multiple streams of information.
Too few leaders have the right combination of skills and experiences. Companies that want to improve their leadership development practices should take the following steps.
• Evolve the executive leadership competencies model. Most organizations have established fairly narrow and nondifferentiated checklists of executive competence. A broader set of leadership competencies, taking into account the goals of the enterprise and the capabilities of the individuals, makes it easier to cultivate senior leaders who can both navigate fast-breaking crises and serve the longer-term best interests of shareholders, boards, and employees.
• Promote and develop people who match those competencies. Even when they profess to support broad leadership, many companies continue to select leaders almost solely on the basis of technical and professional capability. Executives should stop moving people to the senior ranks of an organization simply because they hit revenue or other financial performance targets; they should instead take into account such factors as the performance of those candidates’ direct reports.
• Build the leadership bench. Senior management, including the CEO, needs to help conceptualize, craft, and deliver leadership programs. These should be carefully integrated with the business strategy and grounded in a business case. High-potential leaders should receive a variety of developmental experiences: general management experience, cross-functional opportunities, global assignments, and opportunities to manage change and develop other talent themselves.
At the global bank HSBC Holdings, HSBC Chief Executive Michael Geoghegan holds his group management board accountable for leadership development; each member oversees the talent pools of a region, customer group, or product line. Business unit leaders collaborate with local human resources coordinators to identify and assess promising candidates from local talent pools. High performers are given new assignments in their region or line of business; they then cross boundaries to take on new positions in other functions or business areas. The local managers recommend individuals for the corporate talent pool, which is overseen centrally. These individuals are expected to work in at least two very different cultural environments before ascending to the highest levels of management, and this expectation is clearly communicated.