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Changing the Currency: New Research on How Businesses Calculate the ROI of Executive Development
 

Changing the Currency: New Research on How Businesses Calculate the ROI of Executive Development

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  • Our 2011 research found that organizations that use collaborative and peer-based methods of executive development are more satisfied with their leaders than those who rely only on more traditional training methods. While the 2011 research gave us a broad perspective into the what and how of executive development, it also raised more questions around investment in executive development and how strong executive leadership influences other areas of the business.Subsequent industry research such as the 2012 Chally Global Leadership Project further reinforced how impactful leadership development ties to business performance, though, particularly in times of economic challenge, it can prove difficult to justify the expenditure without the ability to demonstrate a direct return on investment. Companies continue to cite financial limitations as a competing pressure against leadership development initiatives.So what are the key drivers of ROI for executive development and how can HR executives further align development initiatives in a manner that deliver results in measurable ways that are tied to what is critically important to the business? The 2012 IBM CEO study shone a light on how critical collaboration, communication and shared vision are in today’s competitive environment and how it must start at the top. So, what development methods are driving results in these key areas of focus?Chally Group / Chief Executive Magazine’s 40 Best Companies for Leaders (Jan / Feb 2012)The best companies for leaders generate dramatically greater market value over time than the weakest companies for leadership development.Leading public company CEOs commit to a higher priority to leadership development in spite of the added burden of more complex and “distracting” environments with added pressures for short-term financial results.Smaller and private company CEOs spend more of their personal time on both developing others and themselves, but are less likely to install systematic processes for leadership development.IBM Study:The 2012 IBM Global CEO study found that in order to draw out the best in their workforces, CEOs are most focused on three organizational attributes:Ethics and valuesCollaborative environmentPurpose and missionCreating a collaborative environment is key and starts at the top. As a healthcare CEO from Australia explained, “Today’s connected economy is full of ambiguity, and the characteristics required to navigate that ambiguity are collaboration, creativity and communication.”
  • Embarked on research this year with HCI to better understand what development methods organizations employ, which are considered most effective and what impact are these efforts having on their organizations and their leadersHybrid approach allows a company to continue with effective traditional methods
  • Traditional executive development methods have not been phased out.Some companies have integrated a larger number of non-traditional methods to supplement, reinforce, and maximize investment in traditional methods.Learning (traditional) vs. Doing (Non-traditional, collaborative)
  • It’s not surprising that internal peer group meetings and cross-functional team meetings are used most often as they represent a low-cost, high-impact, method for aligning teams. Peer group meetings provide a forum for open dialogue where group members can present challenges and collaborate on solutions. Vistage members speak often about the broadened perspective and new ideas they get from their groups because it allows them the opportunity to think differently based on the input they get from their peers.These methods also offer participants an opportunity to implement their own solutions, which they are then committed making work for their organization because they were part of the process.
  • Slightly more than half the organizations surveyed are taking a blended approach to executive development,.52% of respondents are Hybrid Development organizations or HDOs, meaning they use at least four or more non-traditional methods for executive development annually, in conjunction with various traditional training methods. HDOs make best use of all methods for exec development
  • Changing the currency of ROI for Exec Development:Financial return on exec dev efforts is important and 2011 research reinforced this is an area organizations continue to struggle in measuring.We conclude that while the dollars and cents of ROI of exec dev is an important metric, that we may need to also change the mindset around the measurements and currency of exec dev ROI.This year’s research sought to better understand what other areas of the business that executive development influences and confirmed that there are 5 key metrics that exec development drives which effect the success and bottom line results of organizations (Alignment, Collaboration, Execution, Retention and Succession)
  • Executive Development efforts in HDOs drive Alignment and Shared VisionNearly 90% of execs in HDOs share a common vision (compared with only 62% for TDOs)Corporate examples: Zappos, OracleFrom the SCI interview (Katie Rials), “Aligning the most senior leaders helps HR support the business more effectively.”Priority for SCI is aligning the human capital strategy with the organizational strategy; taking a look at talent across the organization to raise the bar.
  • Greater collaboration is a key outcome for orgs who are taking a blended approach to exec dev. Across a variety of measures, HDO’s outperform TDO’s in this area:It’s engrained in their cultureIt extends beyond formal team meetingsThey have open dialogue and common languageBusiness units supportive of each other
  • As a result of this collaborative approach, significant differences exist related to conflict resolution. HDOs are simply better equipped to discuss and productively solve challenging issues.HDO respondents report that their leaders are 16-23% more effective than TDOs at exercising conflict management/ resolution behaviors.
  • Collaboration leads to more buy-in and ownership and as a result, improved execution results are realized.21% more HDO respondents agree that executives in their org feel a sense of ownership in determining the strategic direction of the companyHDOs are nearly 20% more likely to determine the strategic direction of the company collectively and collaboratively as a group.
  • HDOs are making strategic decisions faster, implementing faster, and course-correcting faster.Covey’s Four Disciplines of Execution:Focus on the wildly importantAct on the lead measuresKeep a compelling scoreboardCreate a cadence of accountabilityDiscipline 1 is about what to do; Discipline 2, how to do it; Discipline 3, what success means; and Discipline 4 (which circles the others), an ongoing cycle of accountability that drives success.BENEFITS OF IMPLEMENTING THE 4 DISCIPLINES OF EXECUTIONClarifying the goals, priorities and organizational directionAll employees at all organizational levels know what they need to do to achieve wildly important goalsEvery team identifies the most important activities that will lead to achieving those goals and focus on themEvery leader has at his/her disposition simple and proven system for building mutual accountabilityEmployees have mutual accountability within the teamExecution of each individual becomes transparent and as such can be rated or improved
  • Our research did not uncover any key differences regarding retention among HDOs and TDOs (likely due to the positioning of the questions around retention). – This could be an area that warrants additional research.However, “Organizations that have exceptional leadership development offerings likely have increased retention. If you are getting the best development and potential in reaching your goals as a leader in business, you’re probably going to stick around longer.” – Ulrich Nettesheim, Haas School of Business (UC Berkeley)Harvard Business Review, May 2010 “How to Keep Your Top Talent”“High performing and extremely talented people do not quit their jobs – they quit their leaders. Influential leaders are essential in every organization for hiring exceptional talent, retaining exceptional talent, and releasing that talent throughout the organization to produce high levels of performance excellence.”The idea of better leadership development programs leading to retention is especially important among high potential leaders, as new attitudes about loyalty to one’s employer / organization have emerged and continue to evolve.
  • HDOs are 30% more prepared with ready replacements for key positions51% vs 27% can identify bench strengthHDOs are 23% more likely to promote the internal high potential population
  • Impact of stronger execution is seen in financial performance. While differences are narrowed, slightly more HDO’s realized 10%+ growth and significantly fewer realized flat or negative growth.
  • Key takeaways:HDOs Better Positioned for Business SuccessRespondents leveraging a blended approach that includes collaborative and peer-based development methods are experiencing the best results across a variety of measures. This approach enables organizations to build the capabilities of the entire organization, not just development of individualsROI is being realized in five key areas of: Alignment, Collaboration, Execution, Retention and Succession
  • Vistage is in the executive development category and is the world’s leading peer advisory company. We have been helping business leaders harness the value of professionally facilitated peer advisory groups since 1957.Our leadership community includes 16,000 members, over 1,000 world-class speakers, and more than 700 Vistage Chairs (professional facilitators) across 15 countries - all of whom contribute to enhancing the lives and increasing the effectiveness of CEOs and business leaders around the world. We put together and professionally facilitate peer advisory groups where executives help each other process and solve their most critical issues and opportunities.We exist to increase the effectiveness and to enhance the lives of executives and business leaders around the worldVistage-member companies:Generate nearly $300 billion in annual revenueEmploy approximately 1.8 million employees worldwideOutperform their competitors and, on average, grow their revenues at three times the percentage growth rate after joining the Vistage Executive Leadership Programs.

Changing the Currency: New Research on How Businesses Calculate the ROI of Executive Development Changing the Currency: New Research on How Businesses Calculate the ROI of Executive Development Presentation Transcript

  • Changing the Currency New Research on How BusinessesCalculate the ROI of Executive Development Vistage International November 2012
  •  How do businesses measure ROI on executive development efforts? What methods of executive development are most used? What methods are most effective?
  •  Who We Talked With… • Ulrich Nettesheim, Lecturer, UC Berkeley’s Haas School of Business • Steven Stripe, Senior Vice President of Finance, Equifax • Katie Rials, Director of Human Capital Development, SCI Companies What We Created… • 31-Item Survey • August 2012 • 346 responses representing more than 175 organizations worldwide
  • Some Participant Organizations 4
  • State of Leadership • Impactful leadership development directly tied to business performance • Financial limitations continue to put competing pressure on development initiatives • Collaboration, communication and shared vision are key area of focus
  • State of Executive Development Traditional Non-Traditional Executive Development Executive Development Hybrid
  • Defining DifferencesTraditional Non-TraditionalLeadership Retreats Internal Peer Group MeetingsWorkshops Regular Cross-functional team meetingsE-learning/Online Training Custom-designed development plansClassroom Training Executive CoachingUniversity/Advanced Degree Programs External Peer Group Meetings Internal Leadership Meetings facilitated byOff-site Seminars/Speakers external consultant Rotational Assignments
  • Most PopularTraditional Non-TraditionalLeadership Retreats Internal Peer Group MeetingsWorkshops Regular Cross-functional team meetingsOff-site Seminars/Speakers Custom-designed development plansE-learning/Online Training Executive CoachingUniversity/Advanced Degree Programs External Peer Group Meetings Internal Leadership Meetings facilitated byClassroom Training external consultant Rotational Assignments
  • Traditional vs. Hybrid TDO HDO* 48% 52%* Hybrid development organization = those that use four or more peer-based / collaborative(non-traditional) executive development methods annually
  • Changing the CurrencyCutting-edge collaborative executivedevelopment methods require leaders toexamine how they measure success– Financial metrics remain important– Research revealed additional metrics that help business leaders measure effectiveness
  • New Measures: 5 Key Drivers of ROI Alignment Succession Collaboration Growth Retention Execution
  • Alignment HDOs are more aligned to a common vision 85% Across business units, goals are aligned 64% 84% Executives frequently work together 56% HDO TDO 89% Executives share a common vision for the organization 62% Executives are more informed about the goals/processes of the 87% organization 64% Q: Please describe how your organization’s approach to executive development affects the alignment between Execs and overall business strategy. (% strongly or somewhat agree)
  • Collaboration HDOs are more collaborative 55% Senior leaders are comfortable having difficult conversations 35% 52% Business units fully support decisions made by other business units 39% 73% HDO My company has an open dialogue & common language 49% TDO 91% Group conversations take place outside of meetings 78% 73% Collaboration is part of our company culture 59% Q: How much do you agree/disagree that the following practices related to collaboration are exercised in your organization? (% strongly or somewhat agree)
  • Collaboration HDOs are better at resolving conflict 63% All parties relevant to a conflict are given equal opportunity to share 43% 69% When faced with a conflict, leaders calmly & collectively face issues 46% HDO TDO There is a clear understanding of who is best positioned to solve 56% problemss 37% 59% People rely on open dialogue & communication to discuss conflicts 39% Q: As a whole, how effective is your organization at the following conflict resolution methods? (% very or somewhat effective)
  • Execution Executives in HDOs feel more ownership of the strategic direction Executive team determines the strategic direction of the 83% company as a group 66% HDO TDO 87% Executives have ownership of the strategic direction 66% Q: How much do you agree/disagree that executives at your company feel like they have ownership of the strategic direction of the company? (% strongly or somewhat agree)
  • Execution HDOs make strategic decisions faster 56% Speed of necessary course correcting 36% 54% HDO Speed at which new initiatives are implemented 40% TDO 69% Speed at which strategic decisions are made 50% Q: How effective is your organization at the following: (% very or somewhat effective)
  • Retention Keys to Increased Retention • Leadership • Aligned Rewards Systems • Culture • Development / Growth Research did not uncover any key differences regarding retention among HDOs and TDOs. This could be an area that warrants further research.
  • Succession HDOs have greater bench strength 71% My organization promotes the internal HiPo population 48% 51% HDO My organization is able to identify bench strength 27% TDO 44% My organization has ready replacements for key positions 14% Q: How much do you agree or disagree with your organization’s approach to succession planning? (% strongly or somewhat agree)
  • Growth HDOs achieve better growth rates 15% 10% + growth 11% HDO TDO 36% Flat or negative growth 43% Q: Please describe the growth rate of your organization’s revenue in the last fiscal year:
  • The Payoff: HDOs Better Positioned for Business Success and Stronger Growth• Blended approach – it’s the mix that matters• Collaborative methods build the capability of the organization, not just the individual• Collaborative, peer-based models drive best results
  • Visit us at www.vistage.com/hci to download the entire research report and for more information oncollaborative, peer-based executive development programs
  • World’s Leading Peer Advisory Membership Organization16,000 Members in 15 CountriesVistage member companies generate nearly $300 billion in annualrevenue, employ 1.8 million people worldwide, and outperform their