In the company of leaders (page 1 of 6)

Like many companies throughout the world, Albertsons valued GE's reputation for grooming effective, tough-minded leaders who could deliver results and lead through change.

Albertsons landed Larry Johnston, one of Jack Welch's right-hand men, whose arrival at Albertsons was greeted with much fanfare and an immediate jump in stock price. But since then, the transition has been challenging, according to the Wall Street Journal. Not only has Johnston faced a steep learning curve in a new industry, but also his managerial methods have been a shock to the Albertson culture.

He and Albertsons are not alone, however. As the Journal reported, a number of senior GE executives recently have had difficult transitions into new corporate cultures, finding that what worked for them in their old organisation does not necessarily work for them in their new ones. Moreover, many of the executives have found that their new companies lack the deep reserve of talent to which they had become accustomed - and on which they relied - while at GE.

Albertsons' story, complete with an initial stock price jump upon the announcement of Johnston's hiring, confirms the high value both corporations and shareholders place on skilled leadership. According to Bain & Co., companies with strong leadership development systems create roughly 10 times the annual shareholder value that companies with weak leadership development systems do. At the same time, the recent experiences of GE's executives also confirm another truth:

Transplanted leaders, despite promise and pedigree, experience high failure rates - as high as 40 percent, according to one study. The lesson: Plucking a leader from even the best executive grooming grounds, such as those at GE, does not guarantee immediate success for the transplanted executive when entering a new corporate culture. As a result, there are not only great financial incentives but also great strategic motivations for companies to create their own productive leadership pipelines.

Companies today are struggling with the consequences of a leadership gap more than ever before. In a recent Conference Board survey of global companies, only 36 percent of respondents rated their company's leadership capacity as good or excellent in meeting today's business challenges, down from 50 percent only 5 years ago. A separate survey by McKinsey & Co. found that 40 percent of corporate officers in 77 companies said they could not pursue most of their companies' growth opportunities because they lacked the right leaders.

As a result, the question for most companies is no longer whether to create a strong leadership
development system, it is how to create a system that guarantees the development of leaders at all levels of the organisation, generates improved leadership today, and creates a supply of effective leaders for tomorrow. In fact, while companies were quick to eliminate leadership development programmes during the recession of the early 1990s, they by and large have
protected those systems during the current economic downturn, evidence that leadership development has graduated from a perceived cost liability to a perceived source of competitive advantage.

... a recent Conference Board survey of global companies found that only 36% of respondents rated their company's leadership capacity as good or excellent ...

Five Critical Success Factors
The process of creating such systems, while demanding, is also rewarding, as evidenced by the
successes of a number of innovative businesses that have put them in place.