GE: best for fostering leadership

Good leadership is good business

New research by the Hay Group has identified the top 20 companies for leadership in 2006 and found that shareholder return in those companies had outperformed the S&P 500 by an average of 3.53% over a five-year period.

by The Hay Group
Last Updated: 23 Jul 2013

Unsurprisingly, the vast majority of this league table is from the US, but the research's conclusions are wide-ranging. It highlights best practice for identifying and fostering leadership talent, a challenge relevant to companies in mature and emerging markets alike.

The study also identified what practices did not assist in developing leadership. These included outdoor activity-based programmes; paper-based self-study leadership modules; job shadowing for senior managers; and executive MBAs and web-based self-study modules that came too late in an executive's career.

Perhaps surprising was the No. 8 position for Home Depot, given the recent slide in its share price and the shareholder revolt over corporate governance and compensation issues related to CEO Robert Nardelli, who agreed to resign this week. The former GE executive will take a $210 million severance package following six years at the top, during which time he has been criticised for his autocratic leadership style and a falling share price. 

As the Wall Street Journal reported this week, Nardelli has become something of a 'posterboy' for the excesses of CEO compensation and stock options, having received $245 million in five years, most of it in options. At Home Depot's May annual meeting, angry shareholders were not able to put their criticisms directly to the board as Nardelli had ordered all board members not to attend. In Nardelli's favour, he had nearly doubled sales at the retail chain since he took charge in 2000 with earnings per share more than doubling over the period.

The No 1 position in the Hay survey went to General Electric, which has also recently seen its share price decline. Its leadership history is intertwined with Home Depot's, with Nardelli taking the CEO role after being passed over as successor to Jack Welch at GE in 2000.

The Hay study identifed best practices as followed by the top companies. These included: having leaders who focus on creating a motivating work environment for employees; ensuring the company and senior management make leadership development a priority; providing training and coaching to help existing leadership teams and individual leaders to work more effectively.

"Those companies not already preparing the next generation of leaders are putting their futures at risk," said Emmanuel Gobillot, Hay Group director of leadership services. In the western world, the concern is that the ageing baby boomer generation is fast approaching retirement. In emerging markets, the challenge will be to bring in and develop enough leaders to maintain their economies' momentum.

"Organisations which identify, develop and promote leaders from within will find themselves with a competitive edge. Recruiting externally is a more expensive and less reliable option," says Gobillot. "This research demonstrates the power - but also the shareholder value - of sound leadership development practices."

2006 Top 20 Companies for Leaders
1) General Electric - US  
2) Procter & Gamble - US   
3) PepsiCo - US   
4) Citigroup - US   
5) Johnson & Johnson - US     
6) HSBC Holdings - UK   
7) BASF - Holland   
8) Home Depot - US   
9) IBM - US  
10) Coca-Cola - US  
11) Dell - US  
12) Microsoft - US  
13) Novartis - Switzerland  
14) Verizon Communications - US  
15) Nestlé - Switzerland
16) Lockheed Martin - US  
17) GlaxoSmithKline - UK  
18) Amgen - US  
19) Hewlett-Packard - US  
20) BAE Systems - UK

Source: The Hay Group

Review by Emilie Filou

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