Developing leadership pipeline
Companies advised to leverage power of diversity in leadership
By Ajay Soni and Jennifer An
Organizations incorporating great leadership practices demonstrate strong ﬁnancial results over the long term. It not only helps in gaining an edge over competition, it proves to be even more valuable as economies go through ups and downs.
These were found in global consulting firm AonHewitt’s latest study on corporate leadership. Globally, 478 companies participated in this study, of which 152 companies were from Asia Paciﬁc.
Our evaluation process included a scan of the participating organizations’ leadership practices and policies; in-depth interviews with participants’ HR leaders, CEOs and senior leaders; and ﬁnally, blind judging from the shortlist, which culminated in the naming of the Global Top Companies for Leaders (TCFL).
In this article, we are going to share the business challenges that companies are facing in Asia Pacific and how Top Company for Leaders are using Leadership Development to combat these business challenges.
Business Challenges in Asia Pacific
Business leaders in Asia Pacific are witnessing paradoxical times. On one hand, the region is full of opportunities. On the other hand, the global business scenario throws up significant challenges. In course of the TCFL research 2011, the companies shared their top challenges as follows:
1. Business growth: In these times of economic uncertainty, managing business growth is the most pressing challenge for organizations. Growth continues to be the primary strategy for this region.
2. Margin pressure: As more and more companies vie for the same opportunity, margin pressure is a big challenge that business leaders are facing. Post 2008, companies no longer want growth at any cost and therefore productivity and profitability are cornerstones of the growth strategy for corporates today.
3. Increased competition: As large parts of the globe witness continued economic uncertainty and more companies look at Asia for growth, Asian companies see increased competition as inevitable.
4. Globalization: Local businesses are either going global or are facing increased competition from global firms. Globalization is a pressing challenge for both local as well as multination companies (MNCs) in Asia Pacific today.
5. Quality of leaders: In a way this challenge emerges out of the four business challenges above. Companies are realizing that they need to develop quality of leaders who can grow the business profitably, create distinctive competitive advantage, and manage cross-cultural operations
What do top companies do differently?
The winners of the Top Companies for Leaders study are well positioned to address the aforementioned challenges. They do this by developing a robust leadership pipeline: 95 percent of top companies have sufficient pipeline to meet their future needs.
These leading organizations ― through a mix of focus, diligence, perseverance, diversity, creativity and innovation ― are not shying away from their leadership agenda amid the complexities of a rapidly growing economy. They recognize that building top leaders requires a long-term commitment, which cannot be derailed by short-term distractions.
When compared to other organizations, the top companies have a strong focus on developing and preparing the next generation of leaders through smart selection, robust assessment, rich talent pipelines, and accelerated, customized developmental opportunities with emphasis on the art of execution.
Our research has identified five key differentiators that enable top companies to build a distinct competitive advantage over other organizations.
1. Building a leadership brand: All of the top companies intentionally build a strong leadership brand. This leadership brand encompasses much more than just the disparate charismatic styles displayed by individual leaders. Rather, these organizations take considerable effort to define what a leader in their organization should look like.
They are conscious of only bringing in those leaders that display these characteristics. Leaders of top companies invest significant time and effort in cascading this leadership brand internally through various institutionalized processes. In order to attract top class talent from the marketplace, Top Companies ensure significant external visibility of their leadership brand.
In one of the participating companies in the Korea study, the leaders are expected to be custodians of company value, culture and leadership brand. The senior leaders live the brand. They are not entitled to rewards and recognition if they do not follow business ethics and compliance rules, despite achieving a terrific business performance.
2. Unrelenting focus on talent assessment: In order to live the leadership brand, an organization needs to identify the right talent who not only live the brand, but also pass on the legacy from one generation to another.
With a deep commitment to identify and develop the best talent to run future businesses, Top Companies in Asia adopt robust and deep talent assessment processes as part of their high potential identification.
Our study suggests that organizations adopt a comprehensive, three-pronged approach for talent assessment:
The talent review process goes much beyond discussing and normalizing performance. In these forums each employees gets discussed on competencies, values and potential. The talent assessment in these companies happens through various lenses and with great rigor.
On top of this, more and more organizations are now looking closely at the third pool of talent ― young and emerging leaders. Efforts are being made to identify leaders early and to do everything to ensure their development, engagement and growth.
3. Customized learning opportunity: There are two changes taking place at the workplace. One, employees are becoming much more discerning and demanding about their careers. Two, companies need to significantly accelerate the development of their leaders in the scenario of high trajectory of business growth.
These two changes are forcing organizations to change the way they look at developing leaders. More and more companies are realizing that leadership development needs to be done one person at a time.
The comparison of the Winning Companies in 2009 and 2011 shows that there’s a significant growth in use of individual focused one-on-one development processes such as coaching and mentoring in these organizations.
4. Taking top talent out of their comfort zone: Senior leaders encourage their top talent to take up new challenges outside of their comfort zone in order to create additional long-term value for the organization. They strive to foster a “creative tension” in the organization that will bring out the best in their talent. Companies in Korea also make an effort to develop their top talent with various opportunities such as different business or function management and challenging assignments across the region etc.
Additionally, the senior leadership at top companies is willing to take risks with their top talent. The organization create an environment where top talent, once identified is provided with challenging opportunities, even if they are not completely ready for it. Most of the business leaders mentioned that the best business opportunities were given to the top talent of the organization even if they were only seen to be only 60 percent ready. This leap of faith by the organization went a long way in motivating the top potentials to strive even harder to achieve business goals.
5. Diversity of thought: Top companies work toward increasing the diversity of their leadership group as a key part of their leadership strategy. These organizations make conscious efforts to build an inclusive workplace promoting cultural agility, a global mindset, and offering diverse experiences.
Eighty-five percent of top companies in Asia Pacific have diversity as a core element of their overall leadership strategy. These organizations understand that diversity in a leadership team is about the differences and similarities that people bring to an organization, and leveraging the power of these to create positive business impact.
Companies in Korea also realize the need for this and are working towards increasing the diversity of their leadership team. This would imply diversity in talent selection, talent development and creating an environment which encourages diverse thinking.
Despite the paradoxical business realities of the region’s high growth amid the added pressure of increasing competition, quality leadership remains the solution for sustainable growth. It is also a difficult-to-replicate competitive edge for organizations.
Our study in Korea reveals that there is a strong emphasis around selecting leaders, developing and retaining them. Companies focus on strengthening leadership competencies in senior leaders through customized learning opportunities, coaching, mentoring and action learning projects. This is coupled with strong commitment from the Board, CEO and Management.
The three areas which do not feature in the top priority for companies are performance differentiation, identification of high potential and development of leadership succession pipeline. There is a lack of a formal system and communication around identifying high potential talent, developing and rewarding them.
The process of developing leadership pipeline by identifying successors for leadership roles and drawing a development roadmap for successors is limited. Our research confirms that companies that focus on identifying, developing and rewarding high performers early on and building leadership pipeline better equipped to leverage growth opportunities.
Thus, the leadership development teams in Asia Pacific have their work cut out for them: grow and attract high performers, build and engage leaders. In order to achieve profitable high growth in this increasingly competitive and global business scenario, finding and grooming your best talent will no longer be enough; they will need to become world’s best talent.
In this testing business scenario, it’s not about right sizing, but it’s about bright sizing your talent.
Ajay Soni is the Regional Leadership Consulting Practice Leader at Aon Hewitt. Ajay is based in Mumbai, India and can be reached at email@example.com. Jennifer An is a senior consultant for Talent & Rewards at Aon Hewitt Seoul Office.