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Best Companies for Leaders

Peter Drucker was quoted as saying that “the army trains and develops more leaders than do all other institutions together-and with a lower casualty rate.” Not to be outdone, some corporations have developed good leadership programs that are the equal of those in the services because they retain an essential principle.

To win, one needs leaders to perform and inspire at all levels-not just at the top. Strategy, though important, is meaningless without motivated and qualified people carrying it out. Technology and money are fungible; performance capability is not. Leadership development has always been important. Today it has become a competitive differentiator. Those that do it well will win more often than not. Those that do it poorly or not at all will lose. Bank on it. Also, the impending shortage of leaders as a result of the pending retirement of baby boomers now underway, and combined with the continued growth in emerging markets, begs the question of how does one develop the right kind of leaders?

The Hay Group, in partnership with Chief Executive, has conducted its third annual study that attempts to shed light on this urgent need. A total of 790 public companies were considered. More than 47 percent are headquartered in Europe, 31 percent in North America, 15 percent in Asia/Pacific, and the remainder in the Middle East/Africa and South America. The full spectrum of industries is represented, with the most coming from financial services (12.5%), manufacturing (10.4%), consumer products (5.8%), and pharmaceuticals (5.2%). Data for the rankings were collected from three main sources: survey self-scores, in which companies rated extent and effectiveness of leadership development on a variety of measures; survey peer scores, in which companies were asked to name three organizations from which they would like to hire; and academics and experts who were queried on the best companies for leadership development.

For the year 2007, General Electric and Procter & Gamble again rank atop the best companies-and by a comfortable margin-ahead of the remaining 18 on the list of 20. (P&G edged GE for the top spot in 2005; then GE moved ahead in 2006.) This year’s ranking also sees Johnson & Johnson, Coca-Cola, Hewlett-Packard and GlaxoSmithKline climb in the standings and makes room for several newcomers to the list, such as Unilever, Toyota, McDonald’s and Vodafone. Citigroup has had the most precipitous relative decline since 2005. Royal Dutch Shell is conspicuous by its absence.

Why GE and P&G consistently outpace others as leadership academies has less to do with money spent than with what Rick Lash, Hay Group’s North American talent practice leader, reckons is their ability to create “action learning”-the concept of developing leadership skills in the context of the work situation to solve mission-critical business problems-something that GE pioneered. The differences among the remaining 18 rankings are not huge and are best explained by peer group perception, feedback from academic experts, and improved data from the companies themselves. In play also is the fact that for talented younger people some industries are more (and less) attractive than others. For the latter, oil and gas and retail come to mind. It doesn’t help that companies in these industries don’t manage the perception very well.

How do the best companies keep their leadership pipelines filled with ready-to-go executives to succeed their current teams? In the course of the study, a number of HR leaders of CE‘s “20 Best Companies for Leaders” were asked what they thought their companies did right to make the list. In addition, CE spoke with a number of CEOs whose companies are represented, including GE’s Jeff Immelt and P&G’s A.G. Lafley. At the core of most companies’ approach is an assiduous involvement of the boss, screening and identifying of high-potential employees, and a rigorous feedback and assessment process that’s done early and often.

About JP Donlon

JP Donlon is the Editor-in-Chief of Chief Executive magazine.