A few weeks ago, Hay Group, a global management consulting firm, and Bloomberg BusinessWeek.com released the Best Companies for Leadership Study and Top 20 list. I got a chance to ask John B. Larrere of Hay Group some questions about the study. John is National Practice Leader for the Leadership and Talent practice of Hay Group. He works primarily with Executives and Executive Teams. He has a particular interest in international executive leadership.

1. Can you tell us a little about the design of your study? What kind of people responded to the survey, how were they contacted, and how did you use their responses to determine your results?

This year Hay Group opened the survey to all employees of an organization, to get a real sense of leadership across all levels of the organization. We looked not only at what organizations are doing to develop their leaders, but also the types of cultures they create to grow and sustain leadership over the long term. The study is truly global with a total of 1869 individuals from 1109 organizations and 98 countries completing a survey. As you can see from the below demographics, the study results apply to all organizations with response from all regions and sizes of organizations.

Regional distribution

Revenue distribution

Source: Hay Group/Bloomberg BusinessWeek.com, 2009 Best Companies for Leadership Study

2. How should we expect that being picked as a top company for leadership translates into sustainable financial performance or superior customer experiences?

When we looked at how the Top 20 organizations compared to the S&P 500 in terms of shareholder returns, we see that the Top 20 outperform in both the short term and long term. Part of this performance is tied to leadership. The Best Companies for Leadership have a consistent focus on leadership development in both good and bad times. Prior to and in the past downturn, the Best Companies for Leadership continued to develop and train leaders, which allowed them to be much more resilient going into the downturn and provided them with a stronger cadre of leaders to help lead their organization out of the economic challenges. We also found that leaders who develop an environment that is not only engaging but also enabling not only inspire people to do their best but also provide what people need to enable them to attain the success that they have been very excited to deliver. For example, giving people “battlefield promotions” but the past hard times when accompanied by leadership development opportunities both inspired and enabled people to succeed. Our best companies continued to help their leaders develop in hard times and this helped the newest leaders more than ever.

3. I notice that Wal-mart is on your list. Have you ever shopped at Wal-Mart? Based on your experience as a customer, would you have predicted this company would be an example of great leadership?

See my video Vodcast at http://www.haygroup.com/ww/Media/Details.aspx?ID=24306. Wal-Mart prospered because their strategic story, their brand story and their behaviors, in good times and bad, have been consistent. Their strategy has been one step ahead of their competitors in their sector and also made them a good alternative to consumers who would have been more likely to shop in a higher end store. Strategy is important but unless it is encapsulated in a memorable story it remains an untried solution. Wal-Mart has its own effective leadership culture that guides leadership behavior consistently but also turns strategy into action. Their leaders have made key marketing decisions because their key strategy is to provide “the good life” to all their customers regardless of income. So they have made forays into electronics, in light of the demise of big box electronics stores that have provided lower cost access to these products. It flows from the consistent story they tell one another and the marketplace.

4. All of the companies on your list are large companies. What if anything can the small to medium sized business owner learn from your study?

While the companies on the top 20 list are large, organizations of any size can learn from this study. As you can see from the demographics of the study, input came from companies of all sizes. Small and medium sized businesses can focus on the following:

• Bottom up and top down, get your leadership involved in addressing strategic, company-wide issues. Simplify it all into a short number of Must Win Battles that tell the “story” of how your organization will win, how it will turn opportunity into reality and how it can parry-off threats and challenges. Cf. Thomas Malnight, “Must Win Battles” (2006 Wharton School Publishing) that chronicles how Tom and I approached simplifying strategy into core factors around which leadership teams coalesce and bond.
• You may have had to put Talent Management on a back burner during the recession in a way some of the larger companies were able to avoid. Put it back in its rightful place ahead of the recovery, so you can position yourself for the opportunities that will come in the turn-around. If you don’t have resources now for training, make use of strategic movement of people into roles that will develop them. Make sure you tell them what this opportunity can teach them, what they will learn, and what you expect them to be able to demonstrate as a result of this movement. The top leadership can spend more time in mentoring people whose jobs have changed markedly whether they have moved to a new position or stayed in their old position with much wider responsibilities.
• Use your culture as an asset. Your culture has the power to clarify the behavior necessary to successfully apply your strategy. Your story can show how the strategic behaviors you require flow from a set of common values. Wal-Mart did it; you can also, if your story is consistent, engaging and inclusive.
• Strategy, the study reveals, is more important than ever as we enter the recovery period. Top leadership needs to take time, individually, to reflect on opportunities and challenges, so that they each can enter into more productive discussions and agreements on strategy. Schedule your strategic time as if it were a recurring client meeting. Prework and pre-thought are necessary to make good contributions to this process. Do you have a process? Determine how you want the strategy process to work. Who has primary responsibility for developing it? Who should contribute to it, even if they are not primary? How? Where do you get strategic data, intelligence, market insights? Do you have complementary skills involved developing strategy? Strategy requires good conceptual thinking and good analytical thinking. These two skills rarely get exhibited by the same person. Make sure your team has these complementary assets.
• Create a culture of leadership that rivals a marketing culture, a sales culture, a manufacturing culture. Leaders who “do” too much rarely lead effectively. “Getting your hands dirty” is only effective on the margins. If leaders are doing their associate’s jobs for them or are over-hyped sales people, R&D people, marketing people, your organization is running rudderless without leadership. A culture of leadership creates an environment which engages and excites AND also enables and empowers associates to succeed.

Bret Simmons is a professor at the College of Business at University of Nevada, Reno. He blogs regularly at http://www.bretlsimmons.com.