Taking a

new direction
Three leadership strategies for a rapidly evolving business landscape

Constant change is now a feature of the global marketplace. The Hay Group 2010 Best Companies for Leadership study reveals how the best are responding >>

The Best Companies for Leadership have consistently outperformed the S&P 500 and emerged more quickly from recession

Contents
Responding to rapid change: three leadership strategies 2

Strategy one: drive collaboration

Strategy two: gain value from diversity

Strategy three: build a sustainable workforce

Conclusion: leadership must keep pace with organizational change

2 Taking a new direction

Responding to rapid change: three leadership strategies

The current economic and business climate is uncertain, even volatile. In some parts of the world growth rates are still sluggish, and throughout the world competition for customers and talent remains intense.

Leading companies today are structured more like a neural network than a hierarchical machine
Rick Lash, director, leadership and talent, Hay Group

Despite theses challenges, some companies are taking decisive action to change their structures and strategies of leadership and taking the lead in positioning themselves for success.

Managing a revolution The results of the Hay Group 2010 Best Companies for Leadership survey show a fundamental shift in how large business organizations function. Leading companies today are structured more like a neural network than a hierarchical machine, say Rick Lash,

director of the Hay Group leadership and talent practice in Canada. They operate as a flattened matrix, where information and authority move in all directions through the organization and ad-hoc cross-functional teams are as important in achieving business goals as formal vertical structures. Managers are more likely to be facilitating diverse teams whose members come from different cultures and timezones and who report to multiple bosses than they are to serve as formal leaders of direct reports who all work in the same location.

Managers are more likely to be facilitating diverse teams whose members come from different cultures and timezones

2011 Hay Group. All rights reserved

The Best Companies for Leadership are moving more quickly and completely than others to implement this new organizational paradigm. These companies employ the following practices. 1 Drive collaboration Collaborative, cross-functional leadership enables flatter, less hierarchical business structures while encouraging innovation and initiative. Ninety per cent of the Top 20 Best Companies for Leadership reward collaboration with incentives. Gain value from diversity Greater cultural diversity helps organizations better meet the needs and norms of diverse global markets. All the Top 20 consider cultural diversity an enrichment rather than a threat. Build a sustainable workforce The new generation of leaders value work-life balance as well as social and environmental leadership. Ninety-five per cent of the Top 20 have a family friendly culture and use their socially responsible practices in recruiting.

I believe one of the keys to our success in offering our customers complete, integrated solutions that draw from our different product groups is the strong collaboration between our global and our local managers in their respective roles
Dr. Nicolas von Rosty, Corporate Vice President Executive Development, Siemens

4 Taking a new direction

You must have the right organization in place. But more importantly you must pick the right people, then incentivize the right behavior

2011 Hay Group. All rights reserved

Strategy one: drive collaboration

In a neural network, the functions and roles of each node shift constantly. To operate effectively with flatter business structures, the Best Companies for Leadership follow the same model: they expect everyone, at all levels, to exercise leadership and create value for the enterprise.

They seek out successful ideas and practices from all corners of their organizations, including local offices and subsidiaries. And they have established formal processes to disseminate them throughout their companies. When ideas and leadership can come from almost any direction, hierarchical leadership practices must be replaced by a collaborative approach. The best companies have structured rewards to encourage collaboration, while institutionalizing its practice. Dr. Nicolas von Rosty, corporate vice

president executive development at Siemens, one of the 2010 Best Companies for Leadership, believes that collaboration between the companys vertical product groups and horizontal local office structure is essential to the companys success in providing complex, integrated solutions. I think collaboration is the major leadership skill today, von Rosty says. Siemens has clearly acted accordingly having recently decided to link up to 20 per cent of discretionary bonuses of its top executives to collaboration.

When ideas and leadership can come from almost any direction, hierarchical leadership practices must be replaced by a collaborative approach.

6 Taking a new direction

Strategy two: gain value from diversity

Globalization is not new, but some of its implications are. The center of gravity for growth is shifting toward Asia, says Madeline Dessing, regional director leadership and talent, Asia, Pacific and Africa, Projected growth in India and China is double that of Europe and North America.
At the same time, individualism is surging in Asia and customers are demanding products and services tailored to their needs. Global companies seeking a share of this growth must meet those needs, while competing against increasingly capable and sophisticated local businesses. Leading companies have recognized that they can compete more effectively in these markets when their leadership includes people native to them. They see cultural diversity as an advantage, and tap local leaders to manage local offices rather than relying on expatriates. They also follow through with programs and practices to help all leaders manage diverse workforces more effectively. While Grupo Santander, parent of the Eurozones largest bank and one of the 2010 Best Companies for Leadership, has a clear global direction, local teams are empowered to apply it differently to meet the needs of their market, says Almudena Rodriguez Tarodo, learning knowledge and development corporate director, because they know their market. The company is positioning itself for future expansion in Asia by developing Asian managers, monitoring their progress through a range of positions in the organization. Rodriguez Tarodo explains, We know we will need leaders familiar with Chinese culture who also know our business culture and banking models.

2011 Hay Group. All rights reserved

Strategy three: build a sustainable workforce

The growth of individualism and changing values affect an organizations workforce as well as its products, particularly as younger generations step into the shoes of retiring baby boomers. These younger managers often hold family and career in equal regard, and they expect their employers to take the lead in social and environmental stewardship.
Forward-looking companies have broadened their view of a corporations responsibilities to its own workforce, and to the societies and environments in which it operates. They promote this attitude when it comes to recruiting. By becoming more flexible about work-life balance and adding a dimension of value and purpose to the leadership opportunities they provide, these companies are gaining a competitive edge in the battle for talent. The Coca Cola Company, one of the 2010 Best Companies for Leadership, regularly asks leaders to relocate to other countries to gain important experiences and offers a cornucopia of services to help employees and their families prepare, move, adjust and get settled. In the wider world, the company is working to help five million women in developing markets establish retail stores by 2020, providing equipment as well as leadership mentoring from its own mid-level women managers. We have deliberately tied leadership development to our sustainability effort, explains Terry Hildebrand, global director of talent and development. We believe its important to our business to do the right thing, and it will accelerate the development of our people.

We have deliberately tied leadership development to our sustainability effort

Terry Hildebrand, global director of talent and development, The Coca Cola Company

8 Taking a new direction

Conclusion: leadership must keep pace with organizational change

Over the six years that Hay Group has conducted the Best Companies for Leadership study, commitment to leadership development at all companies has steadily increased. Yet the Best Companies for Leadership have remained ahead of this growth curve.

In these organizations, leadership development is a priority at the highest levels. They have continually refocused their efforts to help leaders adapt in this changing environment: managing a diverse, global workforce, for example, and using collaborative strategies to tap resources across the company. At Cisco Systems, one of this years Top 20 Best Companies for Leadership, the principal development program is itself a collaborative enterprise, with senior line executives as advisors. Its programs involve the guided development of solutions for actual business needs, helping to align the companys leadership development with its fundamental business goals. Our goal is not only to develop leadership, but to help transform the company, says

Annmarie Neal, Psy D, chief talent officer and vice president. To be productive going forward, organizations have to be dynamic, creative and networked. And those organizations that get there faster will be the future icons of industry. The Best Companies for Leadership are distinguished by more than their leadership development efforts. They have consistently outperformed the S&P 500 in shareholder returns, and emerged more quickly from the recession. And with their forward-looking policies, they are poised to succeed in both emerging and mature markets. More importantly, they also provide examples that any motivated organization can follow to begin transforming its own operations charting a course toward success in a rapidly evolving economic landscape.

To be productive going forward, organizations have to be dynamic, creative and networked. And those organizations that get there faster will be the future icons of industry
Annmarie Neal, Psy D, vice president and chief talent officer, Cisco Systems

Global top 20 Best Companies for Leadership

1 2 3 4 5 6 7 8 9 10 General Electric Procter & Gamble Intel Corporation Siemens Banco Santander The Coca-Cola Company McDonalds Corporation Accenture Walmart Southwest Airlines 11 12 13 14 15 16 17 18 19 20 ABB Ltd Microsoft PepsiCo Goldman Sachs Hewlett-Packard Unilever Cisco Systems FedEx Pfizer Inc BASF

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Hay Group is a global management consulting firm that works with leaders to transform strategy into reality. We develop talent, organize people to be more effective and motivate them to perform at their best. Our focus is on making change happen and helping people and organizations realize their potential. We have over 2600 employees working in 85 offices in 49 countries. For more information please contact your local office through www.haygroup.com