OVERVIEW Background “In 2004, it has become obvious that an organization’s executive and leadership talent is its greatest and most sustainable source of competitive advantage. Furthermore, many companies are approaching a crossroads: they face increasingly complex strategic and managerial challenges even as current executive teams are nearing retirement. Cultivating the next generation of business leaders is imperative.”1 Jim Bolt - Chairman Executive Development Associates The Australian Executive Development Trends Research Report 2007 (“the Report”) is the product of a collaborative partnership between Executive Development Associates Inc (EDA), The Leadership Consortium and Dr Scott M. Bourke of SRD Consulting (“The Research Partners”). The Leadership Consortium is Australia’s foremost member based leadership development organisation. The members of The Leadership Consortium are sixteen (16) of Australia’s premier organisations from across the private and public sector. The purpose of the Consortium is to work collaboratively with its members to design and deliver an outstanding of leadership programs and initiatives that contribute to the personal and professional development of senior executives and the business performance of its members. EDA has conducted executive development trends surveys in the United States, and more recently on a global basis, for the past twenty (20) years. The firm’s research is designed to heighten awareness of the critical trends in executive development within the global context for the benefit of its clients. EDA’s US and international executive development trends research arguably represents some of the deepest and most comprehensive investigations and analyses of executive and leadership development practices and related trends that has been conducted to date. In translating EDA’s research approach and methodology to the Australian context, the involvement and support of The Leadership Consortium – Australia’s premier member funded leadership institute has been invaluable and demonstrates the growing importance of practical business focused research in understanding and then shaping executive development strategy and practice for large Australian organisations. The Leadership Consortium has previously sponsored research in the area of leadership aspiration and organisational commitment and has the promotion of collaborative knowledge development as a central pillar in its strategic development platform. The questionnaire employed in the Australian research represents a customised version of, and is substantially similar to, the survey instrument developed and deployed by EDA as part of its most recent executive development trends research, conducted in 2004. One of the main benefits of a substantially similar survey instrument was the opportunity this approach afforded for direct comparative analysis of EDA’s 2004 survey findings with those of the present study.
Findings In the Australian context, the ‘investment’ and ‘strategic’ are commonly used by senior executives in connection with building executive and organisational capability. However the hard evidence that the sentiments implicit in the use of these terms is actually being reflected in practice has to date been limited. For the first time respondents to this survey have provided the strongest possible indication – with reference to the broadest range of issues and factors defining executive development policy and practice – that rhetoric and reality may be converging. If there is one theme defining and linking the study’s major findings it is that large Australian firms are increasingly focused on making their executive development investments strategic. This is consistent with the longer term global trend, identified by EDA in its 2004 study, “toward a more strategic use of executive development”2. The major findings by report section are as follows: The Future of Executive Development in Australia Influences: The overwhelming majority of respondents identified changing business strategies (87.5%) as the major influence on their organisations’ executive development efforts. This perceived need for greater strategic agility was balanced by the importance of increasing collaboration (75%) and reinforcing corporate culture (57%). Objectives: To respond effectively to these key influences, executive development programs and activities are being designed to accelerate the development of ‘high potential’ managers (82.6%), improve the capability of individual leaders (74%) and increase bench strength3(65%). Hot topics: The hot topics in executive development – managing human performance (83%), building leadership capability (78%), leading / managing change (70%) and strategy execution (70%) – reflect a balance between addressing the practical ‘people challenges’ of modern organisational life and making investments in professional development payoff through delivery of improved ‘bottom-line’ business performance. Learning methods: Action learning (74%) – learning through working in on current business problems or opportunities – and externally sourced executive coaching support (74%) emerge as the most popular learning methods. This is consistent with the need for learning and development delivery mechanisms to evolve in response to the more, complex, dynamic and unpredictable internal and external organisational environments confronting
An Advisory Group of leading industry practitioners, management consultants and researchers provided assistance by reviewing EDA’s 2004 survey questionnaire and suggesting enhancements, reviewing and analysing the survey results and helping to determine the most important findings and implications of the research6. In of the profiles of the representatives of respondent organisations, the survey instrument targeted completion by senior executives from within the fields of human resource management, learning and development, executive development, change management and organisational development. Definitions For the purpose of the survey, executives are defined as anyone who falls into one or more of the following groups: Members of the Board of Directors; The Chairman of the Board, the Chief Executive Officer, the Chief Operating - Officer, and the President; All Elected officers; Executive General Managers, General Managers and Corporate Vice Presidents; Heads of/Presidents of groups, divisions, business units, or profit centres and their direct reports; All people included in an executive compensation High-potential managers (a manager who has been identified as having the potential to fill an executive level position in the future) Development is defined to include any activity that is aimed at broadening executives' knowledge and experience and enhancing their leadership, managerial or technical capabilities. Report Structure & Presentation The research analysis and findings are presented in three (3) main sections. Part I, The Future of Executive Development, examines the emerging conditions influencing executive development efforts, the key objectives and pressing topics likely to be emphasized in coming years, the learning methods employed, and participation in executive development activities or initiatives. Part II, Executive Development Operations, shows how companies organize, plan, design and evaluate their executive development programs. Part III, Best and Next Practices, captures the activities and approaches that have been identified as best practices, including respondents’ ideas about innovative practices in the field of executive development that they have engaged in, observed or are aware of having been implemented in other organisations.
vision and executing strategy was on building the individual leadership capability to undertake these initiatives, whereas the US/International respondent focus was on the communication of these organisational foundations. Clearly at the heart of the US/International response on this question was the requirement for executive development activities to support and reinforce organisational alignment. This in turn emphasises the strategic nature of executive development activities for US/International firms, a point noted in the 2004 Trends Report9: “…communicating vision and strategy and creating alignment is a major objective of executive development in all regions. It is consistently among the top objectives in our past surveys and unchanged in its ranking since 2000. This is encouraging as it reinforces the unmistakable march over the last ten or more years toward a more strategic use of executive development” Develop HPMs 83 62 Leadership capability 74 53 Execute vision & strategy 74 44 Benchstrength 65 80 Action learning 61 48 Comm. vision & strategy 52 62 Support change 48 56 0 18 36 54 72 90 Australian data - 2007 US/Intern. data - 2004 Figure 1.7: US/International versus Australian data – Key objectives of executive development in the next 2-3 years. Section 3 – Hot Topics When asked to identify the hot topics that would be most important to their executive and leadership development efforts in the next 2-3 years, respondents highlighted (see Figure 1.8 below) managing human performance (83%), building leadership capability (78%), leading / managing change (70%) and strategy execution (70%) as the most important. Complete responses are included in Figure 2.3 (Appendix 2). The Top 5 ‘hot topics’ selected would seem to reflect a balance between addressing the practical ‘people challenges’ of modern organisational life and making investments in professional development payoff through delivery of improved ‘bottom-line’ business performance. In contrast, those topics which have in the past attracted significant attention in the media as key drivers of business performance such as Re-engineering / Process Management (13%), 9 Key Trends in Human Capital 2006 p5.
Total Quality Management (4%) and Six Sigma (13%) were not considered by respondents to be of great relevance in the executive development space. The Top 5 rankings from the Australian survey are quite similar to those of the US/ International survey (see Figure 1.9) on this topic, but for the stronger Australian emphasis on human performance management, strategy execution and general management skills. Another similarity between the survey results is the fact that in both surveys “Creativity / Innovation” (Aus. - 35%: US/Int. - 36%), “Becoming customer/market focused” (35%: 25%), and “Entrepreneurship / Intrapreneurship” (17%: 9%), did not rate highly with senior HR/OD practitioners. The low level of interest of Australian respondents to innovation generally is also consistent with their attitude to knowledge sharing and innovation within the field of executive development: “Advances in executive / leadership development in other companies” (11%) received little interest as an influence on developments in practice (for further clarification on this point see Section 1). Managing Human Performance 83 Leadership 78 Leading & Managing Change 70 Strategy Execution 70 General Management Skills 57 0 15 30 45 60 75 90 The survey results surrounding creativity and innovation are surprising and somewhat anomalous the centrality of these particular capabilities to building sustainable competitive advantage in most modern organisations. This is particularly true for service based organisations, whose competitive advantage in today’s complex and globalising business environment derives ostensibly from the capability and innovation of their people. As PwC note in recent report on global human capital trends10: “One of the key drivers of innovation is the development of employee’s skills and talents. The survey shows that relative levels of spending on training are higher in the US than in Europe – where they have in fact declined year-on-year. Though there is no established causal link between training spend and innovation there is a clear and consistent relationship between those companies that invest in learning and development and competitive business results”. 83 Managing Human Performance 58 78 Leadership 80 70 Leading & Managing Change 67 70 Strategy Execution 58 57 General Management Skills 46 39 Business acumen 57 0 18 36 54 72 90 Australian data - 2007 US/Intern. data - 2004 Figure 1.8: Australian data – Hot topics emphasised in executive development
Section 4 – Future Learning Methods Having established the important influences, key objectives and topics of particular interest in the Australian executive development field in the short to medium term, we next sought respondent’s views on the most effective learning methods that would underpin their development aspirations. They indicated that Action Learning (74%) – by which we mean learning through working in teams on current business problems or opportunities – and External Executive Coaches (74%) are likely to be the most popular methods through which their organisation’s learning would be supported (see Figure 1.10). Overall what this comparative analysis suggests is that for Australian and US/ International the emerging importance of executive coaching as a future learning method may reflect a more general and consistent trend. Explaining this trend, at least in part, is a perceived increase in the need for independent expert support at the top of many organisations and the increasing remoteness of top managers from the more traditional organisations support mechanisms that they could have drawn on in eras past. It is plausible that this is also partly explained by the shorter duration for most executives in top and mid level roles (changing 2-3 years) and the more Action Learning External Executive Coaches Outside Speakers Internal Experts Outside Experts 74 intensive, complex and challenging business 74 environment they are operating in today 57 requiring more direct and timely access to 57 48 external counsel about their organisational 0 16 32 48 64 80 Figure 1.10: Australian data – Learning methods emphasised in executive development programs in the next 2-3 years Although externally sourced coaching and action learning figured prominently in the US/International survey response on this question, there are a number of distinctions with the Australian survey response that are worthy of highlighting. The massive difference – almost 45% – in respondent attitudes around the involvement of Senior Executives as Faculty in executive development activities is unquestionably the most significant divergence between the two survey groups (see Figure 1.11
below). and personal career challenges, which in many situations may overlap. 43 Internal Leadership 53 30 Senior Execs as Faculty 75 74 Action Learning 73 74 External Executive Coaches 56 57 Outside Speakers 67 57 Internal Experts 50 48 Outside Experts 63 0 16 32 48 64 80 Australian data - 2007 US/Intern. data - 2004 Figure 1.11: US/International versus Australian data – Learning methods emphasised in executive development programs in the next years 3
Section 5 – Development Activities To gain greater insight into who participates in executive development activities within respondent organisations, at what level this participation occurs, the extent of that participation and its focus, we asked respondents a series of questions around these issues. The objective with this line of questioning was to forage a little deeper into respondent organisation perspectives and practices to obtain a more nuanced understanding of the types of activities occurring across and down the organisational hierarchy. Developmental Job Assignments (48%) also identified as being of significance (see Figure 1.12). The trend for the US/International counterparts of this group was somewhat similar with an equivalent, though less substantial, reliance on Executive Coaching but with a greater emphasis on what might be regarded as a number of the more traditional forms of structured learning (see Figure 1.12). 81 Executive Coaching 70 56 Mentoring 26 48 Developmental Job Assignts 33 48 Customized Programs - Ext. 43 Specifically we asked respondents to estimate the percentage of each of three groups (CEO/Senior Executive Team members, EGMs and the like and High- Programs - International Unis Customized Programs - Int. 37 33 37 39 0 18 36 54 72 90 Potential Managers) in their organisation that are likely to participate in formal executive development activities; the number of days these individuals in each group were likely to spend on average in development activities per year; and the three or four types of development activities in which the members of each group are most likely to participate in during the course of the next 2-3 years. Complete responses to these questions are presented in Figures 2.4.1-2.4.9 (Appendix 2). In summary, far and away the most important and popular form of development activity for Australian CEOs & Senior Executive Team members was Executive Coaching (81%) with Mentoring (56%) and Australian data - 2007 US/Intern. data - 2004 Figure 1.12: US/International versus Australian data – CEO/Senior Executive Team executive development activities In Figure 1.13 we can see that for Australian firms, the popularity of Executive Coaching (68%) as a development method is not limited to the top stratosphere, with its identification as
As the data in Figure 1.17 the most common method of evaluation (80%) is to capture participant’s reaction to a particular program. The lack of emphasis on the measurement of learning, behaviour and results is by contrast surprising given the significant size of most respondent organisations executive development budgets (Figure 2.13.1, Appendix 2). Planned methods of assessing individual performance varied considerably with respondent comments, illustrative examples of which are listed below, demonstrating little commonality around particular assessment approaches: “Track through development plans, followed by review of plan outcomes (linked with performance) 360 feedback Peer review Outcomes - leader performance and team satisfaction. Effectiveness in work deliverables.” “360 Employee Pulse” “Performance ratings of individuals and re-assessing individuals on baseline diagnostics.” “Surveys and qualitative feedback and review from the managers of participants. There is linkage of number of succession participants who gain lateral or vertical moves in the organisation.” “One on one interviews providing development feedback against actual performance.” “Pre and post use of 360 degree feedback tools. Focus on leadership behaviours 'ready now' replacements for critical positions in quarterly talent reviews; % female leaders in critical positions.” “Multi-rater tools, individual self assessment of performance against KPIs.” In addition to planned approaches, respondents were to describe their current and likely proposed methods of executive development assessment. The range and diversity of comments suggest a breadth of approaches are being and will in the future be employed to measure the impact of executive development on individual and/or business performance. Illustrative responses included: “KPI and scorecard tracking key business outcome indicators, key culture and leader satisfaction indicators.” “Corporate Learning Evaluation Framework to be developed in late 2006.” “KPI's are to be set and measured. Rewards link into performance for most senior managers.” “Brinkhoff's Success Case Method.” “We do not formally measure.” “This has not been a focus of the organisation - (although it is) in development.”
momentum is lost. In many cases it is program over a long period of time that works even though the program itself may not be best in class.” “Top management driven to me the critical element in building and maintaining momentum. As soon as it becomes a 'nice to do' in the minds of senior management, it is the first thing to be dropped when business pressures increase.” One powerful technique or method through which the commitment and involvement of top management in executive development initiatives can be increased is through their participation as faculty. The marked difference 15 Cohn, Jeffrey; Khurana, Rakesh and Reeves, Laura. Growing Talent as if Your Business Depended on It, 24 Harvard Business Review, October 2005, p1. implement
CONCLUSION The principal objective of the Australian Executive Development Trends 2007 research project, has been to identify, explain and contextualise the important trends in Australian executive development, such that the insights produced could inform and guide improvements in organisational practice and in turn in organisational performance. The general conclusions of this study - highlighting the factors and trends shaping Australian executive development - can stand alone as guidance for top managers within large Australian companies. The principal research findings are that Australian organisations believe that over the next 2 to 3 years: Business strategy, collaboration and reinforcing or changing corporate culture will be the most influential factors shaping executive development; The key objectives of executive development strategy will be developing high potential managers, leadership capability, executing vision and strategy and managing human performance; and “Warren Bennis and James O’Toole ...argue that business schools are in a self-defeating feedback loop that has resulted in a model of education in which research and practice have become increasingly disconnected and that most of the research conducted in business schools is irrelevant to managers. Relevance .....applies both to the practical implementation of and to insight into the underlying forces that shape business, markets and behaviours.” 16 This report provides significant insight into the pressures that impact on senior executives who are working within Australian organisations that operate in an increasingly globalised and rapidly changing world. The findings provide Australian organisations with high level insight into the challenges and trends shaping Australian executive development within an international context, thereby establishing the opportunity to understand better these challenges and to compare them to the challenges faced by both US based and non-US based organisations. It is hoped that these insights will assist organisations in developing more contemporary and effective executive development strategies and practices that can meaningfully contribute to sustainable improvements in organisational performance. The most commonly utilised learning methodologies used in executive development would be Action Learning and external executive coaching. If we were to summarise the overall theme of the Australian Executive Development Trends 2007 research findings it would unquestionably centre on the emergence of executive development as a much more strategic organisational concern that it perhaps has been in the recent past. It appear from respondent feedback that questions around executive development are more often today being framed strategically by organisational leaders charged with generating adequate investment returns on their firm’s capital. That is, there is an emerging imperative for executive development activities to more closely and directly support the execution of an organisation’s business strategy.
This in the strategic relevance of executive development has shown through in respondent feedback in most survey topics from Major Influences on the Future (Business Strategy - 1st ranking: 86%) through to Hot Topics (Strategy Execution - 2nd ranking: 70%) and Best Practices (Linkage to Strategy - 2nd ranking: 68%) . The key influence of changing business strategies, the need for greater collaboration across organisations and the reinforcement of corporate cultures together suggest a pressing need for executive development processes to be more effectively aligned with strategy and the strategy development process. The emphasis on learning methods more closely connected with pressing business development support requirements such as coaching, mentoring and action learning also support this conclusion. With this increasing strategic focus, linking investment in organisational development initiatives and business impact ROI is becoming more important to respondent organisations. It must also be true that sustainable support for OD investment requires a more fundamental acceptance and buy-in from both top management and the operational functions within organisations. Respondent feedback suggests this connection is recognised by senior HR/OD practitioners in that their responses highlight an increasing focus on demonstrating the executive development investment ‘business case’ - the tangible financial return or benefit accruing to the business. At the same time organisations appear to be interested in developing a more sophisticated approach to measuring the impact of their OD investment by looking at the effectiveness of learning outcomes and in turn endeavouring to assess – through macro and micro metrics – in a more nuanced way the impact that learning has on business performance. Companies are no longer satisfied with measuring the reaction of participants to programs and the effectiveness of associated learning outcomes; greater emphasis is now being placed on measuring behavioural impacts and the linkage if any between executive development investments and resulting linkages to improved business performance. As PwC identifies17: “….it is clear that human capital issues have a powerful impact upon all businesses’ competitive abilities. However, there is little evidence to suggest that the HR role is similarly developing to a higher level of strategic influence within business organizations. The challenge for HR executives is to demonstrate to
CONCLUSION (continued) Using incisive data and analysis, the HR function can begin to develop the tools and policies that should help place them at the centre of corporate strategy”. The research findings should speak profoundly and persuasively to the respondent organisations and more broadly to executives operating in corporate HR/ OD functions and to providers of executive development programs and support. For the respondents, it should be clear from the findings that many of the more traditional approaches to executive development are outmoded and are rapidly being replaced by newer less well defined methodologies, practices and value equations. The challenge for respondent organisations - and perhaps more broadly for all Australian firms - is in crafting and integrating an executive development strategy that addresses issues such as: Creating and promoting ‘strategic alignment’; Increasing ‘speed to market’ for new products and product innovations; Increasing line management ownership of and active support (for executive development strategy and activities); Building the business case and measuring the performance contribution/impact of new executive development strategies and initiatives; Building ‘benchstrength’, filling the internal leadership pipeline and achieving the true potential of succession management; and Developing and implementing an integrated Talent Management System. In relation to the OD/HR function the research findings that there is an opportunity, if not a pressing need, for HR/ OD executives to evolve and expand their role – playing more of a facilitative strategic advisory role in what might be regarded as an evolution in executive development for Australian organisations. However to take advantage of the opportunity afforded by any revolution, along with the requirement for the development of new competencies for example in the areas innovation and performance evaluation, Future research could build valuably on the present research through a deeper exploration of the more significant trends highlighted in the findings including: Influences and objectives: How are the leading Australian firm’s
executive development programs building individual and team competency in business strategy development and implementation? What approaches are most successfully pioneered in the area of intra- and inter-organistional collaborative knowledge development communities of practice)? How can executive development programs most effectively reinforce and shape corporate cultures?
SURVEY RESPONSE SUMMARY DATA APPENDIX 2 Figure 2.1: Factors / conditions influencing executive development activities Other 18 Strategic alliances 32 Corporate governance 25 Customer requirements 54 Globalization 36 Collaboration 75 Corporate social responsibility 25 Diversity 36 Speed and simplicity 46 Political unrest Shareholder value 50 Lack of benchstrength 54 Attraction / retention challenges 50 Downsizing 11 Advances in practice 11 Growth 50 Social / demographic change 29 Executive needs 50 New IT 29 Change corporate culture 54 Reinforce corporate culture 57 Business strategy 86 Productivity 54 Economic conditions 50 0 10 20 30 40 50 60 70 80 90
Figure 2.3: Australian data – Hot topics in executive development in the next 2-3 years Other 13 Corporate Social Responsibility 17 New product/service development 4 Reengineering/process management 13 Systems thinking 4 Environmental and safety issues 9 Workforce diversity 30 Regulatory issues 13 Manufacturing/Operations 4 Marketing 17 Public relations Entrepreneurship/Intrapreneurship 17 General management skills 57 Developing others 48 Business ethics 22 Corporate values 26 Creativity/innovation 35 Becoming customer/market-focused 35 Total Quality Management 4 Leading/managing change 70 Global trends 22 Teambuilding 48 Six Sigma 13 Globalization 4 Strategy execution 70 Productivity improvement 39 Information Technology 9 Managing human performance 83 Leadership 78 Basic management skills 43 Communication skills 43 Stand-up presentation skills 17 Quantitative decision-making 9 Business acumen 39 Financial management 26 Sustainability 17 0 10 20 30 40 50 60 70 80 90
Figure 2.4.1: Australian data – Development activities for CEOs / Senior Executive Teams Action learning 33 Teaching 19 Boards 26 Community service 11 Mentoring 56 Executive coaching 81 programs - External programs - Internal 26 Other external programs 33 Programs at International Universities 37 Programs at Australian Universities 22 Customized programs - Universities 11 Customized programs - External 48 Customized programs - Internal 37 Developmental job assignments 48 Off-the-shelf programs - Tailored 15 Off-the-shelf programs - Standard 4 4 0 10 20 30 40 50 60 70 80 90 Figure 2.4.2: Australian data – Development activities for EGMs, CVPs & Business Unit Action learning 48 Teaching 12 Boards 12 Community service 8 Mentoring 56 Executive coaching 68 Web-based/on-line programs - external 12 Web-based/on-line programs - internal 28 Other external programs 40 Programs at International Universities 20 Programs at Australian Universities 36 Customized programs - Universities 28 Customized programs - External 44 Customized programs - Internal 36 Developmental job assignments 64 Off-the-shelf programs - Tailored 20 Off-the-shelf programs - Standard 4 Other 4 0 10 20 30 40 50 60 70
Figure 2.12.3: Australian data – Confidence levels around OD/HR resource sufficiency Pessimistic Lacking confidence 16 Optimistic 37 Confident 42 Extremely confident 5 0 5.556 11.111 16.667 22.222 27.778 33.333 38.889 44.444 50.000 Figure 2.12.2: Australian data – Period OD/HR Leadership Team members in present role More than 8 years 5 5 to 8 years 5 3 to 5 37 1 to years 42 Less than 1 year 11 0 5.556 11.111 16.667 22.222 27.778 33.333 38.889 44.444 50.000 Figure 2.13.1: Australian data – Annual expenditures for internal and external "classroom" programs Greater than $5,000,000 6 $1,000,000-$5,000,000 13 $250,000-$1,000,000 44 $50,000-$250,000 38 Less than $50,000 0 5.556 11.111 16.667 22.222 27.778 33.333 38.889 44.444 50.000 Figure 2.13.2: Australian data – Annual expenditures for "non-classroom" programs and activities Greater than $5,000,000 13 $1,000,000-$5,000,000 20 $250,000-$1,000,000 13 $50,000-$250,000 27 Less than $50,000 20 0 5 10 15 20 25 30