CEO Voices: Building Better Leaders In 2019

This article is the ninth of a series sponsored by PNC Bank engaging with CEOs from around the U.S. on some of the most important topics facing business leaders today. Part one focused on tax reform and global competitiveness, part two looked at technology transformationpart three examined strategies for growth, part four discussed cost-cutting, part five covered cybersecurity, part six covered talent-related challenges, part seven focused on healthcare and part eight on digital transformation.

In a corporate world with ever-shrinking tenures for CEOs, developing other leaders in the organization is an imperative for prosperity for tomorrow as well as success for today. Smart chiefs recognize its importance: Leadership development is one of the top 10 issues on the plate of company leaders today, according to a CEO Roundtable study.

“We take leadership development very seriously,” says Ravi Saligram, CEO of Ritchie Bros., the world’s largest auctioneer of big equipment such as bulldozers, trucks and oil rigs. “The job of the CEO – and every level below – is to allow for people to reach their full leadership potential. That leads to fulfillment for the employee, and it also drives succession planning.”

Unfortunately, CEOs by and large are dissatisfied or frustrated with the quality and effectiveness of leadership-development efforts at their company and yearn for better. Only 11 percent of more than 500 executives polled in 2017 by McKinsey around the globe strongly agreed with the statement that their leadership-development efforts achieve and sustain the desired results.

And a 2018 study by Egon Zehnder, a prominent leadership-advisory firm, revealed that 47 percent of responding CEOs believe developing their senior leadership team was more difficult than anticipated.

Here’s how three CEOs use financial incentives, development programs and other initiatives to boost the leadership quotient of their top people:

Tyrone Johnson, CEO, Select Interior Concepts: Presiding over an IPO and the creation of a holding company for the interior-design services company based in Anaheim, California has required Johnson to focus intensively on making sure he’s got the right leadership to help him.

“We don’t have the luxury of being able to forget about leadership,” he says. “It’s critical to our success right now.”

A lot is on the line for leaders at Select Interior Concepts, including what Johnson calls “a nice variable component [financially] for people when they achieve outside their goals. There’s a chance to realize what I’d consider a significant upside as a result of delivering numbers. Our salary and bonus are fair for the market and KPIs, but where people get really excited is the potential to realize life-changing equity by accomplishing some goals here.”

“We’re compensating people well and giving them a chance to really earn if the performance is there,” he says. “We’ve put together a plan that rewards and recognizes great output.”

Johnson is trying to help his leaders do just that with a multi-pronged approach to leadership development. It includes “forced communication.”

“It’s imperative that [leaders] get together on a routine basis and talk about our challenges and opportunities, at a specified time, even if we don’t think we have a lot of material to share,” Johnson says. “We need to force collaboration and communication, make people engage.”

Second, Johnson has incorporated “routine” coaching. Rather than quarterly or annual coaching sessions, “I like to give feedback immediately, and regular feedback is what the new generation of leaders coming up expects. Whether it’s an accolade or constructive criticism, I try to do that in real time, and I expect others to do the same.”

And third, Johnson tries to create “trust” and “transparency” among his leadership team in “an environment where people can go do their jobs and be leaders themselves, without feeling like someone is standing over them all day long.”

Ravi Saligram, CEO, Ritchie Bros.: It’s all about the team for the chief of the Chicago-based, U.S. arm of the company headquartered in Vancouver, British Columbia. Ritchie Bros. is evolving, as a result of a large acquisition in 2017, from a bricks-and-mortar focus into one of the biggest B2B e-commerce sites in the world, and if they’re going to succeed, Saligram’s leaders will do it together.

“I’m a big believer that teams win, and individuals contribute,” he says. “You want the power of the team to go up exponentially, so their strengths complement one another and weaknesses are offset.”

So Saligram insists on a few things in developing his leaders. First, each member endures an assessment by an external firm of organizational psychologists who assess strengths and weaknesses. Second, they’re assigned an internal coach from HR because, as Saligram puts it, “every senior executive needs a sounding board.

Third, Saligram probes his senior leaders “for their motivation to leave a legacy. In the people I promote, there is a noble purpose that galvanizes them, and then I give them the opportunity.”

And, fourth, Ritchie Bros. executives are encouraged to seek external and complementary development opportunities such as speaking engagements and seats on other companies’ boards.

But Saligram realizes that leaders need financial incentives “that are performance-driven and also allow them to create wealth.” He favors long-term incentives such as “performance shares” which have long-term vesting, and stock options.

John Petrie, CEO of the Americas, NTT Security: After he was appointed to the job in September, leadership development quickly became one of his top priorities. NTT Security is a large company that resulted from the 2016 combination of four others, and Petrie began as its global chief information-security officer.

“Then as CEO I had the challenge of combining my direct reports together because we were now a large company out of what had been primarily entrepreneurial companies,” Petrie says.

One focus is to prepare occupants of director-level positions to advance to the vice-president level of the company, which is based in Omaha, Nebraska, and is part of the Tokyo-based telecommunications giant, Nippon Telegraph and Telephone. Petrie can send candidates to corporate leadership training in Switzerland for that.

But in leading the U.S. arm of a global NTT Security organization with 1,500 employees, Petrie also is emphasizing leadership development in the lower ranks of the company, especially among its many millennial employees who have been recruited largely for their technical expertise.

“We’re training those folks to step into roles that require more strategic thinking and less tactical-level decision-making,” he explains. “We’ve got to make sure there are career paths for them and the ability for them to become leaders.”

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About PNC

For more than 160 years, PNC has navigated a steady course while growing in size, sophistication and service. Today, we’re one of the largest, most highly-regarded and well-capitalized financial services companies in the country. We’ve added thousands of corporate clients in the last few years and are expanding our geographic franchise with offices in 36 states, and in select regions around the globe. 

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The opinions expressed in this article are not necessarily the opinions of PNC or any of its affiliates, directors, officers or employees. This article was prepared for general information purposes only and is not intended as legal, tax or accounting advice.