How Companies Rebuild Competitive AdvantageJoseph Daniel McCool
As they say in sports, 2010 will indeed be a major rebuilding year for companies across nearly every industry. As the U.S. economy moves from recession to recovery (notwithstanding the ongoing challenges of unemployment and underemployment), businesses are obsessively focused on risk management, cost containment, supply-chain sustainability, resource efficiency, and maintaining their competitive edge.
Yet a company's success—or lack thereof—in any or all of these areas will be moot unless it recognizes and deals with its vulnerabilities related to retention and succession. Business results in this critical year will be predicated by an organization's approach to executive talent management.
Bill Conaty, who spent four decades in human resources leadership roles at General Electric (GE), effectively synthesized this agenda at last fall's World Business Forum. He stated that gaining a decided advantage over the competition starts with attracting the right talent to the organization.
He added that companies must also invest in executive talent development, assessment, and retention because they're just as critical to business performance. The market leaders in any industry recognize that attracting and developing the best executive talent is a continual, institutional priority, no matter what the economic environment, Conaty said. He pointed out that development needs—even for people at the most senior management level—are not fatal flaws for a corporation or an individual unless they go unaddressed.
Attracting Superior Executives
With this in mind, I sought the perspectives of other business leaders with equally well-honed views on the critical areas of executive talent management: attraction, development, retention, and succession.
Claudio Fernández-Aráoz of Egon Zehnder International, author of Great People Decisions, says that despite the unemployment numbers, companies still need to focus on attracting superior executives because demographics already indicate that the number of managers in the right age bracket for leadership roles will drop by 30% in just six years.
"Companies need to beef up their ability to attract great leaders," Fernández-Aráoz contends. "While over the long run companies should focus on becoming more attractive by developing the type of culture, environment, and team that outstanding executives want to join, they also need to immediately focus on winning the coming fight for executive talent one leader at a time." And that's not just about money.
Companies can attract superior talent by demonstrating active support for the candidate's interests, describing the role realistically, and involving the hiring manager (not just HR) in closing the deal, he adds. Further, by enlisting the involvement of C-level executives while recruiting for top positions and ensuring that compensation for a new recruit is fair to current employees, companies can more effectively integrate new leaders.
Assessing Executive Talent
When it comes to assessing executive talent, Sumner Redstone, majority owner and chairman of the board of his family-controlled National Amusements Inc. and majority owner of CBS Corp. (CBS) and Viacom (VIA), told me recently during an exclusive interview that it all comes down to his "Three C's."
"I insist that anyone I'll hire, particularly an executive, bring what I call the 'Three C's.' That's competence, commitment, and the most important one, character," Redstone said. "Without character, I'm not interested in their competence or commitment."
Redstone, whose plans for his own succession are secured in the construct of an irrevocable trust, contends that assessing the critical ingredients for internal succession candidates and potential external recruits alike requires a sense for surfacing their management tendencies in good times and bad.
"My view has clearly been that it's about the assets the management brings to a company that sets the winners from the losers," Redstone said. He makes no secret of being thrilled that both Viacom, headed by Philippe Dauman as president and CEO, and CBS, headed by Les Moonves, are regarded by analysts as among the best-managed media companies in the world. "The investors believe in what we're doing," said Redstone, who views that as the ultimate vindication of his "Three C's" strategy.
Retaining the Best
The final piece, then, of building, rebuilding, or maintaining a company's prized management advantage over the competition is retaining the best executives.
Former Medtronic (MDT) CEO Bill George, now a Harvard Business School professor and author of True North and the recently released book 7 Lessons for Leading in Crisis (and a contributor to BusinessWeek.com), offers his own advice about getting executive talent management right. To keep your top business leaders onboard, George says you have to challenge them. "Put them in tough jobs. Make them responsible for something. Promote young people; flatten the organization; and give people opportunities to lead right now and they'll stay with you and be true to you."
Exceptional companies, he believes, must reward business leaders for their performance and not simply reward their decision to stay with the company.
Companies with bold ideas and big growth plans in 2010 must institutionalize equally ambitious and, in some cases, truly innovative and disruptive plans and processes to attract, develop, assess, and retain their most valuable and differentiating resource—world-class executive talent—and plan for smooth successions.