The Talent Masters, page 27
Recognizing and Retaining Leaders
1. Tell people how they fit in.
Don’t assume your stars know that you know who they are. Remind people that their contributions are recognized and how you see their potential. People deserve to know how you see their future. That will give leaders with the highest potential more reason to stay. Money is just one of many ways to tell people they are valued, and in today’s environment, there’s not much of it to spread around. Words and public recognition are powerful supplements. Telling someone they’re doing a great job doesn’t cost a penny. Virtually all the masters of talent give frequent, positive reinforcement, and they make it personal.
2. Spread financial rewards throughout the year.
Salary reviews are great opportunities to sit down with leaders eyeball to eyeball and reinforce their motivation and commitment. Increase the opportunities for those candid personal interactions by having separate discussions around bonuses and other forms of compensation. GE spreads the financial rewards given to its top six hundred or so leaders by giving salary increases at various intervals based on the person’s assignment starting date, bonuses in February, and stock options in September. Leaders at GE also step outside the schedule when they see the need to reward extraordinary work or to retain someone. GE doesn’t hesitate to grant off-cycle raises or restricted stock units in the midst of Session C. That puts spice in the game as word spreads through the informal network that exists in every organization. A side benefit of discussions at frequent intervals: no one gets an unpleasant year-end surprise.
3. Allow for judgment when compensating leaders.
Make compensation rigorous but not overly formulaic. Beware that efforts to make compensation objective often have the opposite effect. Formulas are no substitute for good judgment and knowing your people well. GE uses judgment to factor in the “difficulty of the dive”—in other words, how effectively the person performed versus the industry competition. That’s why leaders of the low-margin, slower-growth industrial division could get greater percentage boosts than those who run flashier, high-growth businesses. Just be sure your thinking is rigorous and fair and provides additional upside for achieving stretch goals.
4. Differentiate.
All people may have been created equal, but they don’t perform equally well. Allow those differences to surface and give greater rewards to the leaders who make bigger contributions. Did the person make an individual contribution or make the team more effective? Did she take the viewpoint of the corporation as a whole despite the fact that it affected her area adversely? Differentiation forces candor, as in “Tell me again why I’m getting this and Sharon is getting that. What am I doing wrong?” Don’t back off from a merit-based performance management system, even if people gripe. Your hope is that it will force candid discussion on performance. Make your judgments and stand behind them.
Driving Differentiation
This is a mechanism to help you drive differentiation around rewards and recognition. The percentages are something to aim for. They should not be used so mechanistically or formulaically as to cause inequity. Feel free to customize it for your own business.
FAQs and Answers
Q: My company isn’t big on developing leaders. Can I develop myself?
You must. While talent masters continuously seek ways to develop their leaders, they expect those leaders to take responsibility for their own growth. In fact, a drive to continuously learn and improve oneself is an indicator of leadership potential. Ask for input from bosses or peers and look for ways to build on your talents, at work or even outside of work. Volunteer for projects to gain experience and expand your perspective. Look for a mentor to help you build capabilities you need to move ahead. Don’t rely only on performance evaluations for what to work on; at many companies, they are backward-looking and not developmental. Solicit help or do your own assessment and decide whether to work on skills, personality, relationships, or judgment. Read books, take classes, ask questions. Work to excel in your current job, then ask for more challenges. Make it clear that everybody must grow and everyone should bear accountability for personal growth. CEOs aren’t exempt; in this highly volatile and fast-changing external landscape, it is imperative for them to grow too.
Q: We’re a small company. How can we give younger leaders learning experiences without putting the company at risk?
You can easily expose leaders to other functions, other parts of the business, higher levels of decision making, and even externalities just by getting them in the room with other people. For example, a manufacturing person will benefit tremendously from direct contact with customers. Creating advisory boards or arranging for leaders to participate in industry associations outside the company can expand their view. But leaders do need practice running a P&L. Consider creating a small one, and if the leader is successful, expand its scope. It’s also a good idea to use high-potential people in a consultative role, seeking their inputs on things that are not part of their day job. And have them lead cross-functional teams on projects that can take the small company to the next level.
Some small private-equity companies, such as Baltimore-based Sterling Partners, recruit young graduates and have them sit in on reviews of portfolio companies in addition to carrying out their usual entry-level tasks. The young leaders learn by observing the partners in action, asking questions, linking numbers with operations, and comparing people among the portfolios. This exposure accelerates their development.
Q: What’s the trick to finding HR people who have a grounding in business operations?
Break the hiring mold by looking for people who are already in a business leadership job and have good instincts about people. Dick Antoine, former head of HR for P&G, was running the supply chain before he was running HR. Bill Conaty spent five years of his career in operations before making the shift to HR. For people who have spent their careers in HR, consider rotating them to assignments elsewhere in the company. Working with finance people, for instance, will broaden the HR person and build credibility. Meanwhile, the numbers people will become more aware of people issues, and the match-up becomes mutually beneficial. At GE, Conaty made sure people in human resource leadership training spent one full assignment outside the HR function, preferably on the corporate financial audit staff to gain business partnership experience.
Q: What can a midlevel HR person do differently?
People issues are the downfall of many leaders. To be a successful partner to business leaders, you have to work on improving your judgment in dealing with these issues. They will run the gamut. Just when you think you’ve seen every situation possible, something else comes along. The more you test your judgment, the better it will be. The good news for HR people not in the top job is that they can offer a perspective or possible solution to a problem and test it with someone more experienced. That is, once you have an action in mind, you can huddle with more experienced HR people. Go up a notch in the organization and ask, “What would you do?” or “What do you think of this plan of action?” By listening to those whose judgment you trust, your own judgment will improve, and you’ll feel more confident as a problem solver. That’s great training to be a future partner to the CEO.
Q: How can I make a sound judgment on a person’s personality and values?
The best way to inform yourself about another person is through close observation. Watch how the person handles herself in a group or dealing with a tough issue. If you can’t observe directly, ask questions and get 360-degree input from others closer to the person. In reference checking, for instance, ask for examples of how the person might typically handle a particular situation, such as a peer or a boss contradicting her viewpoint. Is she open to others’ views or stubborn and defensive about her opinions? Actions speak louder than words; look closely at what he’s actually accomplished versus what he plans to do. HUL’s three-day mentoring session is a chance to observe leaders’ actions and behavior. Its length and intensity make it impossible for people to mask who they really are and what is most important to them.
GUIDELINES FOR YOUR NEXT TALENT REVIEW
Whom to include:
The seniormost leader, ideally the CEO, who will lead the discussion
The head of corporate HR
The leader of the particular business, unit, department, or function you are reviewing
The HR person who works with that leader, if any
How to schedule it:
Hold it at the leader’s site, not headquarters.
Schedule it before your annual strategy and budget reviews.
Schedule a follow-up session no more than three months later, perhaps by phone.
Plan to spend a few hours to start. Don’t rush; allow extra time when the process is new.
What to bring:
Up-to-date and background files with summary evaluations, detailed assessments, and photos of each group leader being reviewed and each of the leaders reporting up to him or her from one and two levels below. An employee database will make access to this information much simpler.
How to set the tone:
The best way to get candor is to ask questions and challenge people’s statements. They will soon realize that you are seeking honesty and directness.
What to talk about:
Don’t jump into the specifics of any individual until you’ve been updated on the business. Unless this is your first such session, remind yourself ahead of time what issues to follow up on. Ask what the current challenges are, what external or internal issues people are worried about, and what might arise in the next twelve to eighteen months. A good opening question is “Do we have the right leadership team in place to execute the business strategy?”
Look for linkages between those business issues and people. Is the business changing in ways that demand different capabilities? Are competitors making moves that affect talent—shedding employees or making a hiring push? Does this business unit contemplate a change in organization structure? Why or why not? How well prepared is the team to play the game two years out? What gaps exist? What actions will be taken?
Make explicit who could replace the leader now and in the coming years.
As you discuss each individual, probe for specific facts and evidence and ask the group to consider what pattern is emerging. What talent is this person demonstrating? Where might this person really shine, and what would she need to do to get there? Don’t limit your focus to high performers. An average performer in one job could be a higher performer in a different job.
Use an agenda, but deviate from it for the sake of fruitful discussion.
A Typical Agenda
1. Business Leadership
Business priorities
Current organizational chart with names, faces, positions, and time in job
Matrix of ratings on performance and values for high-level leaders
Succession plan for direct reports
Any anticipated restructuring or leadership changes
2. Pipeline
Broad list of leaders one and two levels below CEO direct reports
Overall ratings for these leaders
Diverse best bets for promotion
Nominations to attend executive education courses or other developmental actions
Review of entry-level recruiting for corporate training programs
3. Growth and Culture
Describe the way you are driving the business goals and priorities in your organization
Review plans to accelerate business and talent growth in key areas, such as emerging markets
Discuss results from discussions about top company priorities
Discuss feedback from employee opinion surveys or social audits
CROTONVILLE ON ANY BUDGET
Continuous learning is a given for masters of talent. They emphasize experiential learning, and enhance its value by giving their leaders intellectual stimulation and training on specific topics through in-house or external educational programs. The educational piece helps leaders understand nuances they might not be aware of when they have their heads down doing their jobs. It helps leaders learn tools and concepts that may be too new to have been tested, and exposes them to thought leadership, which often stimulates new ideas and leads to innovation, particularly around management.
Not every company is big enough or prosperous enough to support a training facility like GE’s John F. Welch Learning Center (otherwise known as Crotonville) in Ossining, New York, or UniCredit’s UniManagement facility in Torino, but they don’t have to be. Here are other options and things to keep in mind.
Turn leaders into teachers.
While it’s important to have some outside teachers who bring an external perspective, you already have a great educational resource on your payroll: your existing leadership talent. Establish programs in which senior leaders teach other leaders. At P&G, the CEO, vice chairs, and business presidents teach in education programs for general managers and other top talent. At GE, too, senior leaders conduct teaching sessions, along with outsiders. At Intel, former CEO Andy Grove made it a rule that all officers, including himself, must teach at least one week a year. When leaders teach, topics are guaranteed to be relevant, and discussions will broaden people’s understanding of the business. Yes, it takes time, but the time is well spent to build the organization’s leadership bench. In the process you will also be developing the top leaders who conduct those classes, because teaching tends to sharpen a person’s thinking. Leaders will benefit more if they do fewer PowerPoint presentations and deliver less company PR to the attendees and conduct more interactive teaching in which people can challenge the teacher’s thinking. Leaders can hold classes online via webcasts.
Localize learning.
Large, dispersed companies could set up internal programs at their various sites to give promising leaders frequent exposure to top executives in the company. A customized leadership assimilation or development program might include the top twenty to thirty leaders at a location, who would gather for two to three hours a week over a six-month period with a different member of the company’s senior management each time. During that period, the younger leaders would be exposed to various functional or business perspectives, and those senior leaders would get to know the up-and-coming ones. Some time might be spent getting up to speed on hot-button issues or specialized topics. Occasionally an outside expert could be brought in. Costs would be low, yet people who want to learn would get a lot of mental stimulation. Such a program is a great development tool and also a great retention device for people who feel they’re running out of opportunities to grow. One CEO instituted a practice in which some fifteen to twenty upper-level high-potential people meet with him quarterly from 4:00 to 10:00 p.m. with no preparation or set agenda. The CEO throws out for discussion a very important current topic having to do with the external environment, and sometimes it is only indirectly relevant to the company. People do their own original thinking and at the same time bond with each other. The practice encourages them to keep up to date on important current topics.
Use technology to facilitate learning from peers.
One of the real advantages of Crotonville is the social exchange. People learn as much from their classmates as they do from their instructors as they get exposed to different business issues and practices. Their view of the business and the external world expands. It doesn’t cost a lot to gather a cross section of people to participate in an exercise or engage in a discussion on an important topic. These exchanges can occur in the company cafeteria or across oceans virtually, perhaps with occasional face-to-face group meetings. Once social relationships get established, communication across distances is easier, and learning is ongoing.
Work with local universities.
Many schools will customize development programs to be taught on campus or at the company site. The key is to get your high-level leaders involved as a tag team with professors, so the learning is relevant to the business. Many CEOs are teaming up with a university professor to co-teach in the university and even to do research and write papers. Andy Grove joined with a professor at Stanford, and together they wrote a groundbreaking paper on cross-industry disruption.
Differentiate and educate.
If you are willing to differentiate among your leaders, chances are you will have a very small percentage of people who truly have the potential to rise to the highest level. Tuition for executive education programs at business schools or leadership training centers might be affordable for those select few. The issue is selecting who should attend. Not every great GE person goes to Crotonville. You’ve got to be willing to make those calls for your best people, and not use the educational training class as the consolation prize for coming in second on a missed promotion.
SIX WAYS HR LEADERS CAN BECOME MORE EFFECTIVE BUSINESS PARTNERS
1. Understand your business and industry dynamics.
Know the financials and key operating levers that affect your business. In order to get respect from the CEO and senior business team, you need to understand the business issues and challenges that are confronting them on a day-to-day basis. When you can effectively focus your attention on HR issues that impact their business issues, you will find a much more receptive audience.
