What Can CEOs Do to Develop Leaders?

Click on the below image to view video

Forget capital, strategy, R&D. In today’s fast-paced, global economy, the most important criteria for success may well be a robust, active process for identifying, developing and retaining leaders three or more levels below the CEO.

The role talent development plays in a company’s success is hardly news. After all, a smooth succession is the mark of a world-class chief executive and widely viewed as the most important duty performed by a leader and his board. But despite the intense attention paid to the selection of and transition to a new CEO, succession is a far from perfect science. In any given year, chances are good that you can find one or more headline examples of a troubled transition. Witness Howard Schulz, who recently returned to the helm at Starbucks to perk up the flagging coffee company. Or Michael Dell, who reclaimed the top seat at his namesake company early last year, looking to pull a Steve Jobs-style founder recovery effort. In fact, with Jack Welch ripping into his anointed successor for missed earnings, even the much-celebrated GE succession story is looking less than stellar.

That companies falter at even this most critical of leadership development endeavors underscores the challenge CEOs face in nurturing new leaders—whether for the CEO post or for leadership roles two to three levels down the line. What’s more, it’s a challenge growing ever more complex as global expansion both heightens the need for executives with transnational capabilities and brings potential leaders from different cultures and with different native languages into the talent pool.

While human resources and managers throughout the company play significant roles in developing talent, responsibility for meeting that challenge ultimately rests with the CEO, agreed business leaders participating in a roundtable discussion held in partnership with RHR International.

“Part of the CEO’s role is to ensure that the development of top talent fits the culture and values of the company—the culture as it is and the culture as it needs to be,” notes Tom Saporito, president of RHR International. “That’s a very sacred responsibility.”

What can CEOs do—what should they do—to influence the development of critical talent? Often, companies best known for producing leaders share a common trait: assiduous involvement of the boss. P&G’s A.G. Lafley takes time coaching regional leaders one-on-one to be “courageous and inspiring.” GE’s Jeff Immelt personally teaches up and comers on leadership style.

Personal involvement is also key for Ed Ludwig, CEO of Becton, Dickinson, who sees spending time with top employees at the company’s BD University as a way to both communicate the company’s values and to directly interact with potential leaders. “Our [high potential] employees attend a program called ‘Leaders as Teachers’ where top executives get involved in teaching the leadership development programs,” explains Ludwig, who usually spends four to five hours with each class himself. In addition to educating employees about the company’s expectations of leaders, the program serves to align employees strategically, adds Ludwig. “If you’re out there saying ‘this is what matters,’ chances are you’re going to walk that talk.”

Global, Mobile Talent

For an international company with a workforce spread out across the globe, building alignment is no easy feat, points out Bill Mitchell, CEO of Arrow Electronics.

Mitchell says uniting far-flung teams around a common goal is a crucial part of his role as CEO; he emphasizes that it requires nurturing a relationship of trust. “To do that, you’ve got to be out talking to people and having dinner with them,” he asserts. “You have to make it safe for them to tell you what’s really going on—the good and the bad. It can be complicated and messy, but if you can get alignment, a lot of good things start happening.”

At a time when people change companies more frequently than ever, alignment around a central culture and strategic mission is an increasingly elusive goal, agrees Saporito. “We are in a much more mobile society—there’s a whole new generation of people saying, ‘It’s about my career and where I want to move.’ How do you build a franchise when people are free agents willing to move from team to team?”

Some CEOs view a workforce of free agents as an opportunity. “The GE model—exporting four or five CEOs every year—does not work for most of us,” notes Sunil Kumar, CEO of International Specialty Products. “Most of us are importers of talent. To me the biggest aspect of leadership development is recruiting. There’s more risk, but it’s a bit like adopting grownup children. There’s some value to that.”

“I would argue that it’s a big risk, albeit a necessary one depending on your size and scale,” counters Saporito. “How do you have a high degree of confidence that the people you bring in will have the ability and the orientation and inclination to align with the philosophy, value and culture that make your company unique?”

At McCormick and Company, direct CEO involvement in both recruiting management talent and integrating that talent into the organization helps bring new hires into alignment. “I try to make sure that I’m personally connecting with high potential new hires really early on,” reports CEO Alan Wilson. “I go out and talk to every group of management hires about what it takes to be successful in our company. And I make an effort to reach out and help top talent with their experiences.”

Metrics and Incentives

Ideally, both managers and employees will also make development a priority, adds Glenn Fosdick, CEO of

The Nebraska Medical Center. “At our organization we started really making progress when the people at the level below me started looking for and attracting the best and brightest,” he says. “The whole program can’t depend on the CEO.”

By taking an active and visible role in nurturing leaders, CEOs can help inspire managers down the line to do the same. Several participants also reported that having a structured process in place to develop talent, using talent development criteria in performance evaluations and tying those criteria to compensation prove effective in instilling a culture that prioritizes development.

For Craig Rogerson, CEO of Hercules, a formal assessment process is the cornerstone of the specialty chemicals company’s ongoing effort to fix a “bench string” problem created when the company downsized several years ago. “We took a big head count reduction out of the middle layer, and now we’ve got to address that [gap],” he explains.

“We’ve got a lot of good technically trained managers, but there’s a big difference between good management skills and leadership skills. So assessing the next generation of leaders coming up is a real challenge for us. We’re using tools like 360-degree analyses and other metrics to address that.”

But metrics for evaluating development efforts can be murky, warns Mitchell. “We ask every senior manager in our company to identify what they will do in terms of talent development, and part of their compensation is based on how well they do that,” he says. “We try to hardwire it as much as we can. It doesn’t always work, but we have quarterly reviews with people about how they’re doing with those objectives. I find those to be very rich conversations.”

Leading Learning Helping high-potential employees grow is a complex endeavor, requiring exposure to the right experiences at the right times, as well as the necessary feedback to help them interpret and grow from those experiences.

“At the end of the day, there are three components to how talent gets developed in an organization,” points out Saporito. “First, people have to have the right experiences. Second, they need some kind of mechanism to process those experiences. And third, they have to have the inclination to learn.”

Sunil Kumar urges CEOs to provide growth experiences by moving high-potential employees into new areas of responsibility. “You tell a sales executive on Monday that he’s now responsible for manufacturing and place the manufacturing person in R&D or sales, then tell them to figure it out,” he explains. “It can be very effective.” Craig Rogerson recounts experiencing just such a move when he was taken from sales and given a group of plants to run at Hercules. “I was 31 and had never worked in a plant,” he recalls. “It was difficult for me, but good. It gives you a different perspective.”

Despite that positive experience, Rogerson sees the concept as potentially problematic. “It’s very tough to take that risk at a public company today, because if it blows up on you, how do you defend taking a sales executive and letting him run your most important plants?”

Bring in the Board

Calling upon experienced and involved board members can be a less risky way to provide growth experiences for up and coming leaders. Several CEOs reported making  a point of bringing senior executives in front of the board on a regular basis, both to familiarize board members with potential leaders and to give the executives board presentation experience.

At The Nebraska Medical Center, senior leaders are also encouraged to visit with board members outside of board meetings to discuss challenges and ask for feedback. “We urge them to meet one-on-one outside of the office,” reports Fosdick. “Our board members are willing to take that time and we’ve found that our managers enjoy it and really good things come of those meetings.”

At Vermont Electric Power, board members sometimes take on a more involved role, in one case even chairing a working unit assigned to address an operational issue. “I take issues that we have and send one or more executives out to visit a board member and discuss it,” says CEO John Dunleavy. “It’s good exposure for everybody involved.”