Some research suggests that Asian corporations have surpassed European ones in the ability to create great leaders
Posted on Harvard Business Review: March 8, 2010 3:08 PM
A shift in leadership development has occurred. While it used to be that American and European companies had cornered the market on developing the leaders of tomorrow, our latest round of research shows that Europe is now second to organizations in Asia Pacific, with India making the fastest progress. And while US companies still excel at leadership development, companies from South America are developing homegrown models that chip away at North America's dominance of the field.
As with my last post, I'm going to dive deeper into the Top Companies for Leaders research that my firm, The RBL Group, along with Hewitt, publishes in Fortune magazine every two years.
How the Top Companies are Selected
First, HR executives from around the world are invited to participate in the study, which highlights companies that have gone beyond the basics of grooming strong leaders and have come up with new ways to test their employees in the global marketplace. It's open to organizations of all types (public, private, nonprofit) and sizes and from a variety of locations. From those invitations, 537 companies participated in the 2009 study.
To participate, each company completes a detailed 88-item questionnaire examining a variety of factors related to their depth and quality of leadership. Based on this preliminary analysis, 217 global finalists are identified. Each finalist company is interviewed to provide greater clarity about specific practices. In addition to HR and senior executive interviews, CEOs are interviewed in most finalist companies as well. All finalists are also screened for financial performance relative to their industry.
Armed with this common data set, a panel of judges is selected for each region. These judges are authors, academics and journalists from around the world who rank the companies for their region—North America, Asia Pacific, Europe and Latin America. The judges consider variables including the survey and interview data, company reputation, leadership culture and values, and business performance over a five-year period. Finally, a separate panel, comprised of one representative from each regional panel, selects the Top Companies for Leaders list.
The Geographic Breakdown
Making the global top 25 list is no easy feat. During the 2009 judging, one criteria was that "leaders from this company would need to be candidates for senior leadership positions within any global top company." There was little sentiment for trying to balance the results. Even so, the 2009 results continued the trend of more companies from outside of North America and Europe making the global top 25 list of Top Companies for Leaders. Regionally, North America led all regions with 16 companies with headquarters within their boundary. In the past, Europe has been second, but in 2009, Asia Pacific came in second with five companies; followed by Europe in third (with three) and Latin America in fourth (with one company on the list). Since most of us in North America are more familiar with North America and Europe, I'm going to focus more on Asia Pacific and Latin America.
Within Asia Pacific, India had three companies in the top 25. Two of these—ICICI Bank and Hindustan Unilver—were in the top 10, and the other company, Infosys, came in at #24. For the first time, China had a top 10 company on the list: China Mobile Communications in Shanghai, which was rated #9. The final candidate from Asia Pacific to make the global list was Olam, based in Singapore and ranked #18. Within Latin America, one company, Brazil's Natura Cosmeticos, made the global list, coming in at a very respectable #11.
What the Asia Pacific Companies Get Right
Because it's the fastest growing region in the world, Asian companies recognize the need for building leaders fast. Much of the focus in this part of the world is in developing and preparing the next generation of leaders through selection, talent development, and accelerated development opportunities.
Top companies for leaders in Asia are more intentional in who they hire—they have specific selection strategies directly tied to business needs. One hundred percent of the top companies in Asia Pacific have a specific strategy for developing leaders from within the company, compared to 89 percent of other Asia Pacific countries. Even more pronounced is that 100 percent of the top companies in Asia have a specific strategy for selecting leaders from outside the company compared to 70 percent of other Asian companies. The result of this is that all of the top companies in our Asian group report having a sufficient talent pipeline to be successful in the future, compared to 50 percent of other Asia Pacific companies.
When it comes to how they develop those hires, two things distinguish the top companies in Asia Pacific. The first is the attention to the specific development needs of the individual leader coupled with corporate needs to produce an agenda that generates strong leaders. The second is the speed with which the top companies accelerate the development of key talent through experience, exposure and custom training programs. The aim is to move leaders quickly through the right portfolio of development experiences.
What Sets Latin American Companies Apart
The need for Latin American leaders to help companies rebound from the global downturn and drive sustained growth is among the top issues for the region. Much of the focus in Latin America is similar to Asia Pacific's around developing the next generation of leaders through selection, assessment and development. The top five companies in the region were: Natura Cosmeticos (Brazil), Bancocombia (Colombia), WEG Equipamentos Eletricos (Brazil), CPFL Energia (Brazil) and Wal-Mart de Mexico (Mexico).
Top companies in Latin America have selection strategies tied to business strategy. One hundred percent of the top companies have a specific strategy for hiring from within, vs. 91 percent of others. Eighty percent of the top companies have a specific strategy for hiring outside of the company compared to 67 percent of the others. And 80 percent of the top companies in Latin America reported having a sufficient talent pipeline for the future, compared to 49 percent of other companies.
The top companies set clear expectations for their developing leaders. One hundred percent of top companies in Latin America have a common leadership competency model, compared to 76 percent of other companies. More importantly, they apply these competencies to select leaders from within the company compared to 39 percent of other Latin American companies.
Finally, the top companies here practice what we've called "leadership brand." One hundred percent of Latin America's top companies have a deliberate process to build reputation for strong leadership, vs. only 52 percent of other companies. This serves to attract top talent and ensures a steady supply of future leaders. It also includes an emphasis on values, ethics and contributing to the community at large.
In summary, this data supports the hypothesis that as the global economy shifts, so do the sources of strong leadership. It will be very interesting to repeat this analysis after the next round in 2011. I predict an even higher representation from the fastest growing regions of Asia and Latin America.