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30 OCTOBER 2013
The Best Companies for Leadership 2013

Hay Group’s eighth annual survey highlights how the Best Companies for Leadership excel at both innovation and operational excellence.

In a turbulent world in which the rate of disruption is quickening, the Best Companies for Leadership have developed the capability to transform at will while growing their core business. These companies are as adept at innovation as they are at operational excellence - a feat that requires an unusual but crucial mix of leadership skills.

At the same time, organisations must enable employees to reach the heights of operational excellence while operating at the top of their game and building the future so that the organisation maintains its preeminence. It is far from easy and requires a new type of leader who possesses high levels of emotional intelligence and exceptional cognitive ability.

These are among the key findings in Hay Group’s eighth annual Best Companies for Leadership survey. In the largest global survey project of its kind, more than 18,000 qualified individuals in 2,200 organisations rated their own company’s leadership practices and then nominated three global firms they most admire in terms of leadership. From the research data, Hay Group has identified the top 20 Best Companies for Leadership in the world.

In an era that requires continuous strategic transformation, the top 20 Best Companies for Leadership exhibit an ability to innovate while being operationally excellent, even in tumultuous times when they must steer the organisation through an increasingly disruptive business environment. Unrelenting and accelerating change, volatile world economies, technological transformation, demands for greater corporate accountability and solving complex global problem are just some of the challenges leaders today face. It makes leadership more complex than ever and demands skills that are very different from those that CEOs have traditionally exhibited.

These leaders are able to flex their use of power, influence and leadership style; making instantaneous switches in their approach, shunning the traditional ‘command-and-control’ style, they are change agents; building the necessary bridge between the core business and the new, emerging businesses that will secure the organisation’s future.

Different industries, identical issues

Whatever the business sector, and wherever in the world organisations operate, key issues arise time and time again. The 2013 Best Companies for Leadership intuitively understand the issues and organise themselves to take advantage of them. Strategic transformation is now an ongoing state of being for the world’s best led companies.

  • Customers are storming the citadel. By creating their own experiences and developing their own products, customers increasingly demand to be actively involved in product design, delivery and after-sales. Nike is the prime example.
  • Commoditisation in consumer electronics means companies must create new elements within the value chain, especially in services. Now it is affecting every industry, not least consumer electronics. For example, Sony was once a pioneering gadgets company, now most profits in its Japanese home market come from insurance products.
  • Access to information reduces brand influence. Because customers can read reviews online, they are reassured when buying from companies with low brand awareness. Ratings matter.
  • Sustainability and high environmental standards are now critically important. Corporate social responsibility is no longer something that can be delegated to a department or individual, nor should the ‘green agenda’ be addressed through standalone projects or something that is just there to be ‘managed’. Sustainability must be part of corporate culture and led from the top.
  • Employees want to be in control of their own destinies. At all levels, people want and deserve to reach their potential, while balancing other parts of their lives. Increasingly, employees – not just managers – expect to be trusted to work where they want, when they want and provided with the tools and support that enable them to do so.

The traps in neglecting ambidexterity

Through its work with clients across the world, Hay Group has seen the traps into which those who lack the necessary ambidexterity fall.

  • The ‘lock-in’ – leaders get trapped into doing business in tried and test ways – until suddenly they no longer work. It is not sufficient to relive successes of old.
  • Overlooking sales innovation – for example, pharmaceutical companies that rely on traditional direct sales to clinicians and hospitals overlook the criticality of innovation in sales channels. They must open conversations with new gatekeepers to procurement decisions.
  • Believing technological innovation lasts forever – customers are now much more likely to switch allegiances once technology is no longer a differentiator, so organisations must become strategic business partners, not simply technology providers. Sales directors have particular difficulty in making this transition.
  • The incubation conundrum – innovative products, services and processes may need incubating. When incubation remains separate from the main business, integration is challenging and less likely to succeed.

Leading an organisation that is both highly innovative and operationally excellent requires an unusual skill set. Not every leader possesses the temperament, outlook or emotional
intelligence to succeed when strategic transformation is constant.

Doing things differently

The ambidextrous organisation that excels at innovation and is simultaneously operationally excellent is notably different from its peer companies in a number of key areas.

Moulding and mentoring
The Best Companies for Leadership pay particular attention to employee engagement. To mould leaders of the future, they create opportunities at all levels for people to develop their leadership capabilities, actively managing a pool of successors for mission critical roles and personally spending time coaching and mentoring others.

While all companies focus most of their development attention on senior management and high potential talent lower in the organisation, the Best Companies for Leadership go further. They give extra consideration to the middle management pool, ensuring that the emerging leadership pool can simultaneously focus on innovation and operational excellence. The biggest difference between the top 20 companies and their peers is that the former are much more likely to provide web-based, self-study leadership modules, have 360-degree feedback mechanisms and provide mentoring programmes by senior executives.

Rewarding strategically
Many companies still reward on results achieved, on hard numbers, not softer concepts like collaborating for a brighter future. But the best companies reinforce collaborative behaviours. And they do that through formal rewards and recognition programmes.

These companies purposely drive innovation and understand that the innovative approaches they need will not magically happen, unless the structures and rewards are in place that ensure people collaborate, such as rewarding collaboration across business units. They also reward operational excellence, and are much more likely than their peers to incentivise operational efficiency.

Future focus
Some of the most striking differences between the top 20 companies and their peers are based around contemporary business issues, such as global awareness, leadership development and environmental sustainability – which are among the megatrends identified in Hay Group’s Leadership 2030 research. Overwhelmingly, their leaders are change agents for higher environmental standards, not simply sponsors of projects within in the business. Sustainability is of concern to broad stakeholder groups - critical in the value chain and increasingly noted by customers when they make purchasing decisions, or employees when they choose who they wish to work for. In short, staff care more about just their salary. Corporate ethics matter to employees, customers and stakeholders.

A new style of leadership

This necessitates a fundamental change from the leadership types and behaviours of old. The future calls for the ego-less leader; someone who can orchestrate and get the best out of everyone, the change agent, the bridge builder. The person with the emotional intelligence to influence – not control or bully – and who can exert that influence simultaneously with people and teams who may have conflicting agendas. As such, the post-heroic, ambidextrous leader requires a broader repertoire of skills than those who would have been the foundation of their success in the past. These leaders cannot just sit at the top of the organisation. Their skills need to be replicated and competencies developed. At some levels, it is an impossible task. Business unit heads and the middle management population cannot necessarily simultaneously innovate and be operationally excellent.

Leading an ambidextrous organisation focused simultaneously on innovation and operational excellence is fundamentally different from leading an enterprise focused solely on one or the other. It is imperative that:

  • Senior management articulates a clear vision and strategy, including a common set of values and shared meanings that provide a common identity.
  • Attention is paid to the behavioural integration of the top management team, its unity of purpose and its ability to synchronise actions. This determines successful ambidexterity and subsequent performance.
  • The senior team has a consensus about both strategy and the importance of ambidexterity; reflected, for example, in a common incentive scheme.
  • General management, which remains important, is overlaid with an ability to manage chaos. Managers must act cohesively and decisively when there is no stability, while exploring new opportunities that arise from the chaos, despite the uncertainties.
  • Leaders handle volatility, uncertainty and ambiguity, thereby creating an environment that enables people to get things done, while also incubating new ideas. This requires a thinking pattern that is conceptual, strategic and pragmatic.
  • Responsibility for transformation sits at the very top of the organisation: it cannot be delegated.

Senior leaders need to be able to conceptualise where they are taking their organisation and effectively communicate that direction in order to make transformation happen.

Procter & Gamble reclaimed the number one spot it last held in 2005. As the number one 2013 Best Company for Leadership, it takes the top spot from General Electric, the holder of the spot for five of the past seven years. Yet General Electric can, as always, hold its head high - the company has never been out of the top three.

One big winner this year is Microsoft, which has stormed into the number two position. Microsoft dropped out of the Best Companies for Leadership global top 20 altogether in 2007. It returned three years later at number 12 and has been moving up the ranking since.

The 2013 top 20 list includes a number of industries with packaged goods companies, technology giants, heavy industry and motor manufacturing all represented. After a difficult few years in which the reputation of the sector has suffered, it is especially pleasing to see a financial services firm – Citigroup – back on the list.

For further information visit www.haygroup.com/BestCompaniesForLeadership/.


Korn Ferry
Hay Group is a global management consulting firm that works with leaders to transform strategy into reality. Everything we do supports our mission to ‘help organisations work’ through developing talent, organising people and motivating them to perform at their best. We are proud to be the only consulting firm of this kind in the world. With 85 offices located in 48 countries, we work with over 9 000 clients in 125 countries across the world. Visit our InfoCentre or website.

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