Warren Bennis once observed that whether or not lead-ership is well understood, its impact on performance is dra-matic and unmistakable. An Accenture study several years ago noted that the share price of companies perceived as being well led grew 900 percent over a 10-year period, compared to just 74 percent growth in companies perceived to lack good leader-ship. (See “Leadership Development ROI,” p. 26). Bennis points to Fortune’s roundup of most-admired companies, quoting For-tune’s Thomas Stewart: “The truth is that no one factor makes a company admirable, but if you were forced to pick the one that makes the most difference, you’d pick leadership.”

Since 2005, Chief Executive has sought to identify the top global companies that seek to develop talent beyond the CEO’s direct reports, with the view that every CEO, regardless of the size of the company he or she leads, can learn to be a better nur-turer of talent and builder of teams. Few firms have the bud-get for a Crotonville, GE’s storied management retreat, or Clay Street, P&G’s converted brewery in Cincinnati that former CEO A.G. Lafley once described as a combination think tank and play-ground. But the methods and principles of the companies ranked

here can be scaled and applied to any firm wishing to hone a dif-ferentiator that will boost performance. Note also that we list the top 10 private companies, most of which are much smaller than the global ones in the top publicly traded list.

Returning to first place is P&G, a company now celebrat-ing its 175th year. Bob McDonald, its CEO, attributes its longev-ity to close attention to leadership development at all levels of the company—not just the top ranks. “To tap the full poten-tial of our employees, we have developed a rigorous and disci-plined approach to leadership development at every level of the company,” says the former West Point graduate, who favors a rigorous development process. “We systemically build multi-ple generations of leaders by developing them throughout their careers with varying experiences across businesses and geogra-phies. This has created a very strong pipeline of globally capable and mobile leaders.” GE moved into second place from third last year with IBM following right behind. Dow Chemical jumped from 11th in 2012 to 4th and is followed by Verizon, up from 13th place last year.

2013 best companies for leaders

by Dr. Jenna Filipkowski and J.P. Donlon

CHIEFEXECUTIVE.NET

JANUARY/FEBRUARY 2013

Researching the RankingThe annual ranking of the Best Companies for Leaders is

based on a survey of leading organizations worldwide, which is conducted in partnership with Chally Group Worldwide (www.chally.com), a sales and leadership talent management firm headquartered in Dayton, Ohio. Companies were scored on five key criteria:

1. Having a formal leadership process in place;2. The commitment level of the CEO to the leadership

development program, as measured by the percent of personal time spent in these activities;

3. The depth of the leadership funnel as measured by the percentage of senior management positions filled by internal candidates, as well as the percentage of middle management positions filled by internal candidates;

4. The number of other companies that report recruiting from the company being evaluated; and

5. A shareholder value performance metric based on 10-year growth or decline in market capitalization.

The final top 40 ranking consists of public companies with more than $1 billion dollars in revenue. The top 10 on the list scored within few points of one another, but the difference between the bottom and top companies was substantial, at 29 points.

Rankings are affected by a company’s reputation among its peers as a source for well-rounded talent. Verizon moved up on this year’s listing because of the number of times it was cited as a company from which others recruit. The per-centage of senior management recruited from internal tal-ent pools is another criterion. This accounts for Hitachi’s and Monsanto’s rising in the rankings. Similar to 2012, some attrition among last year’s winners accounts for why previous winners did not appear on the 2013 listing.

Because it would be inappropriate to compare private companies with larger public companies that enjoy greater resources, we list separately the ranking of large, private orga-nizations with in-depth leadership development programs The following pages offer a look at the top five companies on this year’s list, highlighting some of the reasons they secured their top positions.

P&G: Tackling Turnover P&G again tops an impressive list of companies well-

known for their leadership development. “I continue to be personally involved in all leadership decisions for our top P&G leaders,” says CEO Robert McDonald. “In addition to our organization strategy reviews with our business lead-ers and function officers, I’m working with our next gener-ation leaders, including those deeper in the organization, to help them grow and develop. I spend a significant portion of my time recruiting, teaching and coaching. Successful leader-ship development for a build-from-within company is a stra-tegic imperative and a responsibility that I take very seriously for P&G’s current and future success.”

P&G’s biggest challenge is the loss of an employee on whom they have made a significant investment. Because they have such a deep talent bench and are well-known broadly as an engine of leadership development, companies and exec-utive recruiters often seek to recruit their best talent. While

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their retention is strong, even the loss of one person in a key market can be a setback in terms of the investment put into his or her training and development over 10, 15 or 20 years. P&G is committed to build from within and seldom goes out to hire expe-rienced talent unless there are unique qualifications required.

P&G screens over a half million candidates globally each year and hires less than 1 percent. They challenge these new lead-ers with meaningful work and great responsibility from Day One. Business and functional leaders actively recruit, teach and coach and also mentor junior employees, helping them to develop the skills they need to lead large, global businesses and orga-nizations. P&G managers play a vital role in identifying and growing the company’s next generation of leaders. This starts at the top. Their CEO, vice chairs, presidents and functional officers recruit on college campuses and teach in their executive edu-cation programs.

They manage P&G talent globally—starting at mid-levels of management and higher—to facilitate career development and growth across businesses and geographies. They groom people through a series of varied and enriching assignments that will prepare them for future roles—developing an extremely broad, deep pool of talented employees. Senior management assign-ments are planned monthly among the CEO and vice chairs, quarterly with the presidents and annually with the board of directors, who are all personally involved in leadership development.

P&G leverages the scale of their unique organization structure to help employees to learn and grow. This often occurs across functional disciplines, where leaders get experience in every facet of the business—as well as wide-ranging geographies and markets. They focus on sustained results and the continuous improvement of leaders over time, with their most significant development occurring through on-the-job experience, feedback and coaching. Ninety-five percent of hires are recruited from college campuses and begin their careers at P&G in entry-level roles. The remaining 5 percent come in at lower to mid-levels of management. The vast majority of recruiting efforts are focused on sourcing candidates from universities around the world.

2013 best companies for leaders

Reputational Leaders

Survey participants were asked to list the three companies they would recruit from when there are insufficient internal candi-dates for openings in their organizations. The reputational stars for leadership development are still limited to a few at the top of their game. Here are the top target companies and some of the reasons behind their status as perceived by respondents.

Disciplined approach to leadership development. Emphasis on cross-functional training. Comprehensive

processes for assessment and feedback.

Strong training ground for GM bench. Variety of consumer goods and products. Global in scope and very process focused.

Technology and business solutions leader with excellent reputation for developing leaders, reinventing the business model profitably and sharing success with global communities.

GE

P&G

IBM

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