Article: Are we producing enough business leaders?

Learning & Development

Are we producing enough business leaders?

Lead.er.ship [lee-der-ship]: “The process of social influence in which one person can enlist the aid and support of others in the accomplishment of a common task”
 

While the western consumer is deleveraging quickly, there are protectionist pressures on the global supply chain and labor costs are no longer that low

 

"Leadership development is required but that does not mean that it can all be digitized and computerized" - Chanda D. Kochhar, MD & CEO, ICICI Bank Ltd

 

Lead.er.ship [lee-der-ship]: “The process of social influence in which one person can enlist the aid and support of others in the accomplishment of a common task”1

Are we producing enough business leaders? As India takes its rightful place among leaders of the global economy, this is a question that needs to be asked by corporate heads, HR and educationalists alike. Leadership cannot follow growth and these are critical years when companies will need to look inward and evaluate their leadership pipeline.
Over the last year, People Matters has come up with pertinent topics on leadership development including the cover stories on Top Companies for Leaders2 in February and on CEO Succession in October

1. ^ Chemers, M. M. (2002). Meta-cognitive, social, and emotional intelligence of transformational leadership: Efficacy and Effectiveness. In R. E. Riggio, S. E. Murphy, F. J. Pirozzolo (Eds.), Multiple Intelligences and Leadership.
2. Based on Hewitt Associates’ fifth “Top Companies for Leaders” (TCFL) study in partnership with RBL Group and Fortune magazine.

Next Generation of Asian Growth
People Matters, October Issue - 2010

The last two decades have shown an unprecedented growth in the APAC region despite the brutal recession since 2008 whence Western economies have plummeted. The three stable pillars of Asian growth have been: i) Western consumers who have willingly imported products from Asia since the early 90s on experiencing a major downfall in their household savings; ii) the global supply chain through large amounts of work moving to Asia and lifting its GDP growth; and iii) the lower cost of labor and resources in Asia that led foreign businesses to depend on its production and servicing facilities, and giving rise to jobs and income in Asia.
If Asia has witnessed a frenetic business activity, it has come to it from both its out-bound or in-bound businesses. The former sought to replicate the local success into developed or under-developed markets. Examples of such out-bound business being Samsung, LG, Tata Group, Infosys and Huawei. Conversely, in-bound businesses from companies in the west, or other developed markets such as Japan or Australia, have attempted to establish their presence in Asia to take advantage of lower production costs or availability of skilled labor and have, in return, brought in earnings. Some of such in-bound businesses have come from Cisco, IBM, Novartis, HSBC, Unilever, GE etc. While both these business strategies have been to Asia’s benefit, a common thread that has impacted them significantly has been the talent used by them as both categories of businesses targeted the same pool of Asian workforce thereby necessitating corporate leaders who have high appreciation for different economies, multiple stakeholders and diverse cultures. As out-bound businesses are acquiring brands in developed markets or assets in under-developed markets to build a global-brand business and in-bound businesses are attempting to understand the Asian consumer and to moving their global headquarter roles to Asia, it is interesting to note that both seem to be targeting Asian leaders to further growth in the coming decades. Asian leaders of today have to increasingly cope with pressures on the three pillars of Asian growth. While the western consumer is deleveraging quickly, there are protectionist pressures on the global supply chain and labor costs are no longer that low. This has called for a new growth model for along with a growing realization of the short-supply of leadership talent.

We’re more ready in India than elsewhere in Asia
Indranil Roy, MD, APAC Leadership & Talent Consulting, Korn/Ferry International

A new set of leadership capabilities and styles will be needed to meet the challenges of Asia 2.0. From the four leadership styles of global leaders as Executor, Controller, Energizer and Integrator, the first two have been in predominant use so far. Asia 2.0 would require leaders to have a mix of the next two styles that are characterized by being responsive to the market, using human interaction and networks, having social skills to build coalitions and being team leaders of diverse teams and promote inclusion. Research is telling us that we’re more ready in India than elsewhere in Asia. About 8% of the executive talent pool in India is 2.0 ready as it is found to lead in a global management style. Currently, China has 1% of such global leadership. These numbers are low, but if companies invest in building this talent over the next three-four years, they’ll bridge the gap. There is a massive focus from the Chinese government to attract talent of the Chinese origin currently elsewhere back into the country to take its growth forward. Companies must shift their developmental focus away from training towards deploying talent to challenging assignments and providing active coaching support to build Asia 2.0 leaders.


Talent development will be a big challenge                                                                                                                                Gautam Thapar, Chairman & CEO, Avantha Group

In terms of the type of leadership that companies in Asia require today, it depends on where you’re anchored really as that impacts your leadership selection. For example, in the Avantha Group for our CEO search for Crompton Greaves, we looked globally. We have a defined strategy and need the best talent to do the job. The CEO should build an organization capable of executing at that level and drive the development of business with products and technology to take advantage of globalization. Talent development will be a big challenge in times to come. CEOs for businesses like IT, Financial Services and Medical Services are considerably easier to find. For Manufacturing businesses, there is little talent available in India that can scale the business, deal cross-culturally or put a team together across geographies.

 

The Leadership Factory
For India to be at the forefront of this Asian dominance, it is imperative that Indian organizations invest in leadership development at all levels, including identifying the leadership potential of candidates as soon as they are hired. As per Hewitt Associates’ fifth “Top Companies for Leaders” (TCFL) study in partnership with RBL Group and Fortune magazine, India’s top companies for growing leadership - ICICI Bank, Hindustan Unilever, Aditya Birla Group, Infosys Technologies and Wipro Technologies are spearheading leadership development programs in their respective organizations. People Matters spoke to the leadership team of these five companies to understand the leadership development mechanics followed by them.

ICICI Bank Ltd.
With around 35,000 employees in ICICI Bank and more than 80,000 across the group, the process of identifying leaders starts with the Performance Management Process, wherein only those who are consistently on the 25% percentile mark are considered for the talent pool. These employees in the top performing category are then profiled on the basis of nine leadership anchors, known internally as the ‘ICICI DNA’. All information is compiled into a one-page profile, which highlights the areas that the panel should be focusing on and gives a cue for potential development areas. The final step is a panel assessment, which is a combination of process, technology and intuition that identifies the employee’s leadership capabilities. For junior level employees, the panel looks for consistent passion and strong problem solving abilities; for middle levels, the ability to build internal capabilities; for senior level employees, the focus is on the agenda for change that the employee has set in the last two years and achieved successfully by mobilizing people and resources. The employee is then categorized under ‘A’ List – ready to move to next role immediately; ‘B’ List – ready to move in the coming two to three years and ‘C’ List – high performing individuals with potential for a specialist role within that area of work without any emphasis on leadership development. Development plans are drafted with a combination of ongoing training, rotations and coaching. Results themselves show the success of this plan – more than 10 CEO and board level positions were filled by internal staff in 2009.

We depend on people for growth                                                                                                                                                       Chanda D. Kochhar, MD & CEO, ICICI Bank Ltd.

Leadership is the ability to handle the job at the next level with comfort and being able to perform your future role in the present. It is especially important in an industry like ours where people are our most important assets and we depend on people for growth. When businesses focus on growth, grooming talent is crucial. Leadership development is required but that does not mean that it can all be digitized and computerized. In the process we follow at ICICI, there is an element of personal judgment at the stage of performance management and also at the stage of panel assessment. Professional aptitude, ability to generate business, ethics, ability to groom others, retaining poise under severe stress, et al, are all very important aspects for ICICI Leadership and are defined as ‘ICICI DNA’ anchors; they are an intrinsic part of our culture and ethos and future leaders are profiled and assessed on these anchors.

 

Hindustan Unilever Ltd.
HUL uses a ‘70-20-10’ model for developing its workforce: 70% of learning happens on the job, 20% through mentoring and 10% through training and coursework. In every fortnightly management review meeting, talent review session is an integral part of the overall agenda. Top management at HUL gets involved at various stages – from redefining the talent identification process to identifying talent, grooming and coaching, creating opportunities for growth and exposure, et al. In the process of identifying leadership talent, Performance and Behavior, called ‘Standards of Leadership’, are considered as equally important elements. HUL uses the Leadership Differentiation Tool (LDT), a 3x3 grid of performance versus potential to differentiate amongst its talent pool. These principles are applied to around 5,000 people as part of talent assessment across the company. Information on performance is taken from the appraisal review process and KRAs on the job, while information on behaviors and potential is taken from multiple sources: a 360 degree profiling, behaviors demonstrated on the job and Global People Survey results. LDT and the assessment of future potential of employees lead to identifying High Potential (HP) and Sustained High Performers (SHP), which comprise of 15% and 10% of the talent pool respectively. From this point onwards, this select pool receives differentiated inputs when it comes to training and development, career opportunities, coaching, compensation, et al. Senior leaders, identified as HP have access to training at Unilever’s exclusive training center in London; the process also incorporates job rotation. There is another interesting concept at HUL called ‘Hot Jobs for Hot People’. Every year, the management committee identifies around 50 jobs that could be the most impactful jobs for the year, either because they are areas of growth or strategic pursuits for the group. Hot Jobs provide a chance to the employees in HP / SHP pool to create an impact at the organizational level. The success of the organization’s efforts in leadership development is evident in its 80%+ succession plan compliance for key roles; 90% of HUL’s senior leaders are groomed internally.

Young talent is honed to take up challenging assignments                                                                                                                 Nitin Paranjpe MD & CEO, Hindustan Unilever Limited

All the new recruits at HUL are taken into our Business Leadership Trainee (BLT) Program, which is a robust one year training program post in which they are placed as managers in their respective functions. The BLT program is an extremely comprehensive training module designed to groom young talent for taking up challenging roles ahead. They get in-depth functional as well as cross-functional exposure through various stints, travel through the length and breadth of the country and outside and understand company values and ways of working while they undertake live projects in each stint. There are senior coaches, mentors and tutors assigned to each intern, ensuring that the learning objectives of each stint are met and suggesting any course correction, which may be required for a particular intern. All this ensures that our young talent is honed to take up the challenging assignments in the later stages of their career.

 


Aditya Birla Group

The process of leadership development at ABG starts by identifying a talented leadership pool based on both performance and potential. Performance is assessed during the annual appraisal process in three levels. Firstly, the managers are requested to rate all the high performers in their teams based on a defined set of competencies. ABG has defined a set of nine competencies as part of their leadership definition, which include competencies like ‘vision and strategic orientation’, ‘business acumen’, ‘developing self and others’, ‘promoting team work’, ‘innovation and improvement’, among others. Secondly, the high performers go through a ‘Development Assessment Centre’ that provides additional data about those competencies.
Thirdly, the business team looks at all inputs and provides a final classification for the employees based on a team consensus. For ABG, no one source of data is final when it comes to leadership identification, business management looks at each individual input (manager, development assessment centre, performance, et al) and only then decides on the employee’s position in the talent pool through the ‘process calibration’ discussion. The output of the overall process of identification of talent is an ‘Individual Development Plan’, which is drafted for every person identified as part of the talent pool (which is around 20% of the workforce at any given point) and has a time frame of three years. This plan includes a combination of interventions that the employee undergoes during this period – around 10-15% training interventions, 80% on the job learning experience with exposure to different rotations and the rest through coaching and mentoring.
Being a conglomerate, ABG offers different learning environment to employees to develop their potential as a ‘Profit and Loss leader’, ‘Functional leader’ or a ‘Specialist’. The effectiveness of the leadership and development program is assessed on the basis of how many critical positions the group has been able to fill internally. In the last year, out of 40 key positions at very senior levels, ABG has filled 30 positions from within.

Leadership development is customized to each employee’s potential                                                                                 Santrupt B. Misra, Group HR Head, Aditya Birla Group

The ABG leadership development program is based on the belief that leadership capability can be developed by providing diverse kind of exposure; this could be on-the-job training, educational programs, coaching sessions or even assignments in fields outside of the organization. For example, we have given an assignment to some employees to work with an NGO for two years teaching children, as part of their leadership development. For other senior roles, the exposure could be in the form of attending leadership courses at top global schools like Harvard Business School or to lead a cross-functional project at the group level. Leadership development is customized to each employee’s potential and drafted based on programs that will help in maximizing this potential.


Wipro Technologies
At Wipro, the foundation of talent and leadership identification is built on the group’s vision and goals and reflects individual and collective behavior that will help the organization achieve these goals. Critical roles are then identified within the organization to achieve those business objectives. Today, leadership and succession planning consists of a systematic 4-step process that is designed to align the organizational leadership and its skills with core corporate strategy and goals. At the outset, there is an articulation of the company’s central beliefs, values and strategic vision, followed by a clear definition of what collective behavior will help achieve the vision in a manner compatible to the core values. The next crucial step is to identify critical roles within the organization and create a process to ensure solid succession planning for those roles. The third step is to decide on the ‘build v/s acquire’ dilemma. Given Wipro’s scale, the decision is normally tilted towards building capability internally, but the company regularly brings in talent from the outside too, which creates an opportunity to get on board unique skills not available internally and also creates an opportunity to learn from other companies. Finally, Wipro has a very robust process called the Talent Review and Planning exercise that is conducted annually. In this process, all employees with managerial roles, approximately 12,000 globally, undergo a 360-degree assessment of their capabilities based on individual and collective behaviors that the organization has identified as key qualities for a leader.
In terms of career development, there is a clear linkage with opportunities for progression and growth for those in the talent pool. And in terms of leadership development and training, people identified in the leadership talent pool have access to leadership development programs — both in-house and global programs. Finally, people identified in the talent pool also have the opportunity to participate in strategic review meetings.

Leaders need to manage the change with sensitivity and confidence                                                                                         Azim Premji, Chairman, Wipro Industries

Leadership at Wipro means the ability to win the hearts and minds of all our stakeholders whether internal or external. It means leading others with humility and yet having big dreams. It means the self confidence to accept that you are wrong and resilient to fight back. Leaders also need to challenge themselves and their team members to surpass the best. The leaders need to manage change with sensitivity and confidence. Sensitivity towards building an organization where people dare to dream big and yet find their own path of reaching their goals. Leaders need to manage many elements that seem like contradictions – for instance, being able to think strategically and yet being able to operationally execute the plans by empowering people whether they are in their team of those who need to influence.

Infosys Technologies
At Infosys Technologies, which has 100,000+ employees with an employee growth rate above 25%, leadership development plan based on the Infosys brand of values led to the creation of the ‘Leadership Institute’ based in Mysore. The identification of leaders starts at identifying the critical roles in the organization at different levels. Employees who are playing a critical role and have been top performers for at least three years regardless of when they joined the organization are considered for this elite pool. To be selected, each employee is interviewed by a panel consisting of board members. The panel assesses candidates for leadership capabilities demonstrated and the potential of the employee. The leadership pool is structured into three different levels. Tier 1 leaders are the top 50 people in the organization, including heads of business units who have excess of 20 years of experience and are mentored by the board; Tier 2 consists of roughly 150 leaders and typically are mentored by Tier 1 leaders. Tier 3 represents 300 people with an average of 10 years of experience and mentored by Tier 2. This structure, by construct, defines the training and development program for individuals from each tier and also the mentoring process to be assigned. There is also a coach from the Leadership Institute who tracks the action plans and the development of the employee. The linking between the tier leadership and other HR processes happens in two ways: access to career development opportunities and access to leadership training and coaching. Employees on the tier leadership have priority access to openings in critical roles.
Infosys measures the success of the leadership programs in terms of achievements in succession planning. With a strong culture of operational excellence and customer orientation, succession planning plays a very important role at all levels. The target here is to fill critical positions internally. Infosys has a 70:30 ratio of positions filled in leadership roles from within and as lateral hires.

Succession is not accidental but very much a planned activity                                                                                                            Kris Gopalakrishnan, CEO, Infosys Technologies

Leadership at Infosys means taking on the next level of growth. This has three implications. Firstly, this growth needs to happen at all levels of the business and the organization and not just at the top level. Secondly, this growth needs to stem from a vision that is common across the organization and thirdly, employees, teams and individuals need to go that extra mile to reach full potential. Leadership development is important for Infosys because of business sustainability and long term growth. We look to create sufficient pipeline of leadership to cater to the needs of the business. Succession is not accidental but very much a planned activity. In 1999, we realized that we did not have a robust process to identify and groom the leadership pipeline. The process was happening in an ad hoc manner and even though it was working at that time, we took a conscious decision to look at best practices in the industry and adopt a new plan based on the values and cultures of Infosys. The process today is very mature. It has, of course, evolved over time – how we identify leaders, how we give feedback, how we mentor future leaders and how we use training and development to enhance their capabilities.

 

Succession Planning
As India readies itself for a decade of Asian dominance, one of the most overwhelming challenges it faces is that of CEO Succession Planning. As pointed out earlier, companies like Wipro Technologies, Infosys, et al, are investing heavily in creating a pipeline of leadership to sustain growth. In a well-funded, high growth economic environment, it is imperative for India Inc., which is run by the Triumvirate – family-run businesses, PSUs and professionally-managed companies to craft effective leadership transfer mechanisms.
Without doubt, family-run businesses make for a huge percentage of business houses in India. Family-run companies account for roughly 50%* of the market capitalization of publicly traded companies in India and contribute to around 55%* of GDP; hence, the relevance of these companies for the overall economy. While traditionally, family-run businesses were evasive of the concept of leadership development, organizations are now beginning to realize the criticality of this aspect and are turning their heads towards creating a strong leadership pipeline, either by grooming and developing the family scion or bringing talent from outside. Companies such as Ranbaxy, Murugappa Group and Eicher have set a precedent in this regard. At the Future Group, Ashni Biyani, daughter of founder Kishore Biyani has been involved with business for the past couple of years and contributes passionately in new business ideas thereby undergoing her practical training and development to take on the scepter in future.
In the case of PSUs, many of the appointments are guided by political considerations. In spite of the political stifling, some PSUs have formulated very strong succession planning practices. Companies like Indian Oil, Bharat Petroleum, Hindustan Petroleum, BHEL, NTPC, ONGC, State Bank of India have worked on establishing leadership competency frameworks, assessed managers for development and taken follow up actions in terms of internal training and developed courses in collaboration with the IIMs. Some of these practices can be compared to the best in the private sector. For instance, ONGC conducts succession planning three levels below the board and NTPC conducts rigorous succession planning two levels below the board. NTPC has constituted a high level Succession Planning Committee (SPC) comprising of the Chairman and the Functional Directors to own the process of succession planning. NTPC has identified 28 unique leadership positions for succession planning. Most of the positions fall under the two top executive levels – General Managers and Executive Directors. Against each position, at least three potential successors are identified for grooming. This is done to ensure that sufficient depth is maintained in the leadership pipeline at all times.
Professionally-run companies in India, mostly MNCs and a handful of home-grown companies like Infosys, are more forthcoming when it comes to chalking out a strategic succession planning process. Professionally-managed companies have definite processes and employ latest techniques while identifying potential successors. Take for instance Larsen & Toubro (L&T). Well before two years of current Chairman A. M. Naik’s retirement, the organization has systematically and strategically put in place a succession planning process and will announce the name of the new Chairman six months before Naik retires so that s / he is able to get proper handholding. In certain other professionally-managed organizations, senior leaders have the responsibility to design their own succession planning process, as in Lucent Technologies, where senior managers are expected to develop at least two potential successors using job rotations, challenging work assignments, special projects and executive coaching.
At the end of the day, the crux of the issue lies in the fact that Corporate India is placed at such a critical juncture where there is no alternative to investing in creating global leaders who can take the challenge of taking India to the forefront of the growth trajectory Asia is poised to tread on.

*Source: www.capital4.com

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Topics: Learning & Development, Leadership

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