Succession planning and leadership development play a significant role in the selection process for the Top 100 ranking. Once considered beyond the remit of "the training department," the development of senior managers and future leaders has become a mainstream activity. The extent to which many companies in the Top 100 go to build bench-strength and stock the ubiquitous "talent pool" is a lesson in best practice that no company can choose to ignore.
When Capital One Financial Corp. (ranked 2) set forth an imperative focused on developing its leadership team, its Competency and Development Unit responded by creating an entire team whose only focus is to provide opportunities to accelerate development within the company's executive ranks.
The ensuing Executive Development Center provides Capital One's 400 top executives with assessment center experiences, relevant education, one- on-one senior coaching, skill practice and support for continued learning and reinforcement. A similar center exists for leadership development (ldc) and is aimed at Capital One's upper managerial ranks.
The edc and ldc help associates target development strengths and opportunities through intensive, real-time encounters. The centers stretch participants beyond their current skills repertoire by assuming leadership roles in a fictitious company that mirrors the challenges and opportunities Capital One faces today and in the future.
The make-believe company extends to fictitious direct reports, managers and vendors all while balancing a demanding number of voicemails, e-mails and "emergencies." During their time at the center, participants have personal coaches who provide feedback along the way and help craft individualized development programs for participants upon their departure.
Additionally, Capital One offers an academic curriculum through what it calls a "one-of-a-kind" mba partnership with the University of Richmond. Part of its uniqueness is in the study pattern: 50 percent of a student's participation in the program takes place during regular business hours. Adding to the educational experience, each student undertakes a two-week international internship during which he or she conducts research and formulates a proposal on a specific and timely business initiative.
Footstar (ranked 53) undertakes a formal succession planning review each year to ensure talented associates are recognized and receive the appropriate development. HR team partners, business leaders and the chairman/ceo discuss all director-level and above associates (with a special focus on minorities) to ensure pipeline candidates are following through on their personal development plans.
The board of directors also reviews the succession planning process to ensure that bench-strength is maintained and that people on a leadership track are growing within their current jobs and are on target for the next level.
Part of the succession planning strategy comprises job rotation assignments (see "A Little Help From Your Friends," page 18) that not only further development, but also create opportunities for internal promotions and cross-divisional transfers.
In the mid-1990s, the executive committee of Advanced Micro Devices (ranked 50) recognized that the company had insufficient leadership and management strength to run the company it aspired to become. So it initiated a process to identify, grow and manage the supply of leadership into key roles. The Leadership Supply Process, the company says, serves as a roadmap for these efforts. There are five core principles of this effort: amd's values and leadership model (comprising 24 competencies in all) serve as a foundation for all work; leaders will develop other leaders; special attention will be paid to those employees designated as "top talent;" all leadership efforts will be diversity-focused; and the company is committed to a philosophy of "global focus and local implementation."
From this foundation, amd agreed on a global development curriculum for all levels of management through the formation of the Global Leadership Advisory Council. While this formal succession planning strategy was initially targeted at vice presidents, plans for next year include rolling out the process to director-level employees.
Managing the leadership supply chain is carried out through Managers.Compass (sic), which all managers access through the company's intranet. Managers.Compass provides a central management/ leadership resource that integrates skills assessment, job aids, training opportunities and individual development plans.
Succession planning at Intel Corp. (ranked 6) has been gaining momentum in recent years, driven by growth and an aging leadership team. Its methodologies are shaped by two prominent cultural factors: the belief that experience is the best teacher and that meritocracy, meaning performance and skills, determine fit for a position.
The executive staff primarily decides about its future members, however, movement of high-potential candidates across business groups has been discussed, and some grassroots efforts are underway to move in this direction. Outside of the executive staff, succession planning is largely decentralized, with each Intel business unit maintaining and managing its own pool of candidates.
Numerous tools and systems have been designed and deployed at the business group level to support the process. For example, one group uses a performance-to-values matrix to evaluate candidates prior to the formal succession planning meeting. Candidates are evaluated on how well they exemplify Intel values in their day-to-day performance and are given that feedback. In addition, their top areas for development are identified.
Edward Jones' rapid growth—from 244 offices in 1988 to more than 7,500 today—creates a real need to cultivate future leaders. Indeed, the firm is growing so fast that in the next three years it will need 1,000 new managers. The company (ranked 10) began tackling succession issues in 1991 when three-deep succession planning prompted managers to identify individuals who could replace them in their current job duties, determine when those individuals might be ready for leadership roles and examine the appropriateness of their current job placement.
A 17-member Management Committee also identified 100 "key associates," people who the company believes will play vital roles in Edward Jones' future in the United States and, increasingly, in the international arena. Committee members informally discuss associates' development, but a more formal assessment is built into the company's week-long, off-site meetings, which are held three times a year.
Additionally, during a two-day session, about 12 Edward Jones leadership candidates role-play, work on case studies, make presentations and develop projects addressing actual business challenges. Observers—from inside and outside the firm—provide feedback based on the company's leadership competencies. At the end of the session, observers discuss leadership prospects for each participant and share those results with Edward Jones' leadership corps.
Practical experimentation and on-the-job experience are backed up by a sound academic curriculum delivered through courses designed by some of the leading academic institutions around the world. For example, one Edward Jones course was developed jointly by Harvard University, the Peter F. Drucker Graduate School of Management at Claremont University and the London Business School.
Like Edward Jones, Scientific Atlanta (ranked 62) manages the development of its future leaders through a program called the Leadership Series, which comprises 17 courses, exercises and business tools designed to "provide our company with the depth and breadth of operational, personal, team and strategic leadership that is critical to our sustained success in the near- and long-term."
The program is part of the company's effort to identify and develop high-caliber managers by focusing on core competencies that include change leadership (helping others to adapt to new ideas and attitudes) and strategic planning and implementation (mastering the concepts required to move the organization toward future goals). The Leadership Series also incorporates a mini-mba that explores the basics of accounting, finance, operations, marketing and strategy.
In common with most mega-corporations, General Motors (ranked 51) uses a multitiered approach to leadership development under the guise of the gmu Leadership College. The curriculum consists of four courses (or layers) focusing on senior executives, executives, managers and experienced supervisors. Participation is open only to those who the company has deemed "high-potential." Each layer of development includes an appropriate business simulation, an action-learning component, a series of e-learning experiences and instruction by GM's senior leaders and managers.
Within the Leadership College, GM also operates the Global Task Team program. GM's top corporate strategy board identifies current strategic challenges and one member of the board sponsors an action-learning team made up of seven to eight high-potential middle managers from GM units around the world. The team is given seven weeks to come together, discuss the topic, carry out a discovery mission and report its recommendations to the strategy board. Each teams' recommendations directly influence the shape and direction of GM's corporate strategic actions.
J.D. Edwards (ranked 32) accrues similar benefits from its leadership program. High-potential managers are invited into the program, which includes a one-on-one session with a consultant to provide the company with an accurate assessment of an individual's potential. Next, participants develop a business case study to identify J.D. Edwards' strengths, weaknesses and organizational challenges. The process continues with a retreat aimed at driving the development of key performance priorities and initiatives.
At these functional retreats, teams consolidate individual business cases into team summaries to formulate an integrated action plan. The action plan identifies and ranks measurable, time-specific objectives intended to drive organizational change. The final output of this process is a strategic plan for organization structure realignment and revenue growth that is revisited six months later by team leaders and the executive board to monitor progress and celebrate successes.
The Ritz-Carlton Hotel Co. (ranked 8) runs its leadership development initiative as a profit center developing not just its own talent pool, but helping other organizations develop theirs as well. In fact, more than 80 organizations worldwide have enrolled managers into the program, and since opening in 1999, more than 3,000 senior executives and mid-managers have been through the program.
The Ritz-Carlton Leadership Development Center also has flourished as a resource center for leading organizations interested in benchmarking many of the business practices—customer service, employee morale and total quality management—that led to the company's two-time receipt of the prestigious Malcolm Baldridge National Quality Award.
Leadership isn't just a single skill. Rather, it's a complex array of personal qualities, knowledge and the experience of knowing what action to take in any given situation. It's this last part that often distinguishes the merely good from the truly effective leader. Consequently, Wal-Mart Stores (ranked 57) uses a computer-based learning module that allows leadership candidates to test their leadership and decision-making abilities.
The module comprises a variety of real-life, in-store situations; progress through the module is dependent on choosing the appropriate response to each scenario. Through this process, Wal-Mart's leaders-in-the-making can test their capabilities, repeatedly if necessary, in a safe, risk-free environment.
Leadership development comes in many different flavors, but it is evident from the variety of approaches cited by the Top 100 companies that not all efforts to grow talent need a multimillion dollar budget. Low cost initiatives make their mark too.
Bill Maxwell, senior vice president of human resources for Cendant Mobility (ranked 75), uses dialogue to develop a conceptual framework around leadership. He begins the process by circulating an article to each of Cendant's U.S. facilities. He follows this up with a roundtable discussion about key concepts and learning points of that article.
The roundtable is a structured event—a member of human resources and learning writes a facilitator guide for each article—that Maxwell chairs on his once-a-quarter tour of Cendant's regional offices. Often, he will invite another business leader from the company to join him and co-facilitate the roundtable discussions.
The 90-minute sessions are limited to the first 20 managers who enroll—and there is always a waiting list—and comprise discussions on classic management theories (such as the Pygmalion Effect) and how such theories apply to the management of people in the workplace. Aside from the formal learning experience, participants gain new perspectives and benefit from exchanging ideas with their peers.
The readying of future leaders is a concept that dates back thousands of years. And, as demonstrated by 97 of the Top 100 companies, the methods are various and diverse. But whether it's uncomplicated book-reading sessions, sophisticated stretch-assignments, fast-track programs, retreats or executive summits, the core message is the same: Clever companies lay their own path to the future.