The 2015 Best Companies for Leaders

2015 Top 40 Public Companies

2015 Top 10 Private Companies

In the leadership pipeline, management advisors Ram Charan, Stephen Drotter and Jim Noel deplore “the lack of effective talent development within organizations.” Today’s companies need effective leaders at every level and in every location. To deliver on results, CEOs can’t do it on their own. They need more fully performing leaders than ever before.

Each year since 2005, Chief Executive has sought to identify those companies that excel in leadership development. In partnership with Chally Group Worldwide (chally.com), a sales and leadership research and consulting firm headquartered in Dayton, Ohio, we canvas world-class companies through a questionnaire and interviews to learn what they are doing to identify and nurture people three or more levels down the chain from the CEO.

The final, top-40 ranking consists of public companies with more than $1 billion in revenue, and the top 10 on the list scored within several points of one another. Rankings are affected by a company’s reputation among its peers as a source for well-rounded talent. The percent of senior management recruited from internal talent pools is another criterion. Similar to 2014, some attrition among last year’s winners accounts for why previous winners did not appear on the 2015 listing. Because it would be inappropriate to compare private companies with larger, public companies that enjoy greater resources, we list separately the ranking of large, private organizations with in-depth, leadership-development programs.

Of the companies surveyed, 85 percent have headquarters in North America and 64 percent have international operations. The majority of industries represented included professional, scientific, and technical services (20 percent); manufacturing (18 percent); information, media & telecommunications (16 percent); and finance, insurance, real estate (10 percent).

GE tops the 2015 list as the “Best Company for Leaders” with IBM coming in just a fraction below. P&G moves to No. 3, ranking at a very close range. In the top 10, moving up from the 2014 list are EMC Insurance (No. 4), Verizon (No. 5), VF Corporation (No. 6), Southwest Airlines (No. 7), and The Cooper Companies (No. 9), all of which reported impressive leadership-development
processes. New to the top-10 rankings this year is Wipro (No. 8), which made the list in prior years.

Except for 2009, where 3M led the list, and 2010, when the nod went to JPMorganChase, the top honor has been a back-and-forth contest between P&G and GE. After a three-year run, P&G has again been toppled by its GE rival. The difference, narrow as it is, lies in the number of other companies that report recruiting from these leadership incubators. (See Criteria No. 4.) For its part, developing people is embedded in GE’s culture and is integral to its growth.

“It’s how we’ve sustained a 130-year record of innovation and reputation for leadership—and how we solve the toughest challenges for our customers and society. We invest significantly in our employees to meet the needs of those we serve,” according to Susan Peters, GE’s SVP, human resources. The Fairfield, Connecticut conglomerate spends more than $1 billion on learning and
development each year to help employees at every level and career stage.

Crotonville, its global leadership institute, serves at the forefront of thinking in leadership, strategy and innovation; is the first corporate university in the U.S.; and is the epicenter of GE culture. Some of GE’s best-known initiatives—WorkOut, CAP, Six Sigma, Lean Six Sigma—took shape at Crotonville. Today, GE leaders are focused on speed, simplicity and impact. It offers multi-year rotational programs for emerging and experienced leaders to build functional expertise, global experience and a strong foundation for future leadership roles. Some 4,000 next-generation leaders are in the program today. One-third of GE’s senior leaders are program graduates.

Clearly, a CEO will reap the benefits of an organization that enjoys superior leadership development. But this opportunity does not depend on having one’s own Crotonville. Part of the challenge is that organizations don’t know their people well enough to understand the strengths and weaknesses of their bench. But CEOs who take it upon themselves to tackle this challenge will realize the benefit in better, overall performance.

Companies were scored on five key criteria:

1. Having a formal leadership process in place

2. The commitment level of the CEO to the leadership development program as measured by the percent of time spent

3. The depth of the leadership funnel as measured by the percentage of senior management positions filled by internal candidates

4. The number of other companies that report recruiting from the company being evaluated

5. A shareholder value performance metric based on 10-year growth or decline in market capitalization

Best Practices for Identifying and Developing Leaders

How do leading companies make the most of potential talent within the organization? Nearly every organization today espouses some version of the mantra, “our people are a critical, competitive asset.” The most successful ones tend to take that statement literally, making sustained efforts to assess, manage and increase their stock of employee talent. In particular, many maintain formal programs to develop high-potential individuals for future leadership roles. But companies follow a range of approaches in choosing to adopt these programs and in the ways they implement them. What did the best companies identify as best practices for corporate high-potential programs?

High-Potential Programs
Because creating and maintaining a formal program represents a substantial investment of resources with largely long-term benefits, the study looked at smaller firms (under $1 billion in revenue) and larger ones separately. Specific, high-potential programs prove to be not very common among smaller companies, with only 8 percent reporting them among the top three types of options favored for leadership development. In contrast, 56 percent of larger firms rank them in the top three.

For reference, the most common categories overall are coaching and mentoring, action learning, assessment and high-potential programs.

Defining Potential
High-potential programs can vary widely in their scope, approach and degree of success. The initial challenge in making any program succeed is simply having a clear definition of “high potential.” Seventy-one percent of all companies surveyed and 83 percent of larger ones reported having a definition for the term.

While the study did not investigate approaches taken by the firms that have not defined the concept, establishing a definition of “high potential” offers numerous benefits. Besides helping make the process fair to potential candidates, a formal definition provides a foundation for designing an effective program and makes it possible to measure results in a meaningful and consistent way.

Among all the companies studied, those whose leadership development efforts ranked in the top 15 percent grew their market capitalization by 122 percent over the 10 years ending in 2014—while those in the bottom 15 percent grew by only 37 percent. Given these figures, a closer investigation of how high-potential leadership programs are best implemented promises to pay substantial dividends for talent-focused organizations.

Kenneth W. Carroll is CEO of Chally Group Worldwide. J.P. Donlon is Editor in Chief of Chief Executive magazine.