Strategic - Hay Group transformation uk.pdf · and their ongoing operational excellence. >> ......

Strategic transformation is an ongoing state of being for the world’s best led companies. Hay Group’s 2013 Best Companies for Leadership study reveals how those at the top simultaneously excel at both innovating for the future and their ongoing operational excellence. >>

How the Best Companies for Leadership excel at both innovation and operational excellence

transformationStrategic

2 Strategic transformation

Contents

Executive summary

Global Top 20 Best Companies for Leadership

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5

6 The era of continual strategic transformation

8 Different industries, identical issues

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10

The traps in neglecting ambidexterity

Doing things differently

13 What the ambidextrous leader looks like

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Executive summary

The Best Companies for Leadership identified in Hay Group’s 2013 survey avoid intermittent revolutions that are normally forged by periodic strategic reviews.

Instead, these companies are as adept at innovation as they are at operational excellence. These are the twin peaks they must ascend simultaneously – a feat that requires an unusual but crucial mix of leadership skills.

Recognising that strategy development is both ongoing and subject to sudden seismic shifts, leaders must create a culture in which new ideas are incubated safely until they can be integrated into the organisation (or terminated). Differentiation of existing products or services is too subtle. Too incremental. When the world is turbulent,

when the environment is disruptive, only innovation keeps the enterprise competitive.

At the same time, organisations must enable employees to reach the heights of operational excellence in all its facets – customer service, product development, logistics, accounting, marketing and so on. They must operate at the top of their game now and build the future so that the organisation maintains its preeminence. It is far from easy and it requires a new type of leader who possesses high levels of emotional intelligence and exceptional cognitive ability.

The Best Companies for Leadership operate at the top of their game now and build the future so that that they maintain their preeminence.

©2013 Hay Group. All rights reserved

Strategic transformation

Global top 20 Best Companies for Leadership

1 Procter & Gamble

2 Microsoft

3 General Electric

4 Coca-Cola

5 Unilever

6 IBM

7 Wal-Mart

8 McDonald’s

9 Telefónica

10 Facebook

11 Intel

12 Samsung

13 3M

14 Nestlé

15 Siemens

16 Oracle

17 Citigroup

18 Caterpillar

19 Toyota

20 Ford Motor

TOP20 GLOBALOOOOOOOOOOOOOOOOOOBBBBBBBBBBBBBBBBBBGGGGGGGGGGGGGGGGG LLLLLLLLLLLLAAAAAAAAAAAAAAAAAALLLLLLLLLLL

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The era of continual strategic transformation

Strategic transformation is now an ongoing state of being for the world’s best led companies.


In a turbulent world in which the rate of disruption is quickening, these companies have developed the capability to transform at will while growing their core business. It is no accident that they are as adept at innovation as they are at operational excellence. They have leaders with an unusual skillset.

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 companies’ 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.

This year’s results highlight the dual impetus of innovation and operational excellence 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.

The top 20 Best Companies for Leadership exhibit an ability to innovate while being operationally excellent


These leaders exhibit exceptional levels of emotional intelligence and cognitive competencies. They are able to flex their use of power, influence and leadership style; making instantaneous switches in their approach so they can attend to operational issues or areas of innovation as the situation demands. 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.

A new type of leaders is emerging: people with exceptional levels of emotional intelligence combined with unparalleled cognitive competencies.

The world is changing fast and we have to manage ambiguity in the midst of a complex global environment.Laurie BevierSenior Human Resources Manager General Electric

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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.

� 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 tested 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 skillset. Not every leader possesses the temperament, outlook or emotional intelligence to succeed when strategic transformation is constant.

We need people who are adept at thinking through complex scenarios, and who are able to handle ambiguity and complexity.Richard FloerschExecutive Vice President and Chief Human Resources Officer McDonald’s


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 It’s easy to say that collaboration and innovation is important, but harder to deliver – especially when many companies still reward on results achieved, on hard numbers now, not softer concepts like collaborating for a brighter future. But the best companies put their money where their mouth is. They reinforce collaborative behaviours. And they do that through formal rewards and

recognition programmes.

It is no surprise that these same companies purposely drive innovation. They 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 too, 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 – 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 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.




We actively recruit from cultural minorities

Everyone at every level has the opportunity to develop and practice the capabilities needed to lead others

We provide 360 degree feedback to assess and provide feedback on leadership attributes, skills, and traits

We provide mentoring by senior executives

We view employees in new start-up or innovation areas as having equal importance to those driving operational improvement

We use rewards to stimulate collaboration across business units to develop new lines of business

We provide incentives to encourage operational efficiency

Our leaders are advocates for environmentally responsible business practices

Leaders are change agents who initiate change towards higher environmental standards

The company uses corporate social responsibility to recruit employees

0 20 40 60 80 100

� Top 20 � All companies


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Leaders are expected to both build the business and also the people within our organisation – it is the greatest part of our performance evaluation. Mark BieggerChief Human Resources Officer Procter & Gamble


This necessitates a fundamental change from the leadership types and behaviours of old. Historically in a traditional business environment, the organisation searches for cost efficiencies, builds the sales funnel and improves products incrementally. Here, quite possibly, established leadership styles may continue to work. Indeed command and control may be effective for delivering cost savings, and inspiring visionaries can lead sales teams to greater successes. But neither of these approaches necessarily creates an environment conducive for innovation.

Conversely, visionary leaders who drive innovation at the expense of continuing operations risk the enterprise they are striving to transform. When innovation leads to revolution – rather than transformation – the enterprise can struggle to catch up. While the leader with a defining talent – the smart operator, the turnaround specialist, the great motivator – may work for a specific challenge, today the cycle is so rapid that the specialist can be out of date before the work has begun.

A new style of leadership 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 that 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; 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. While collaboration is critical, these managers have their own objectives – and so instead must master complex post-heroic skills sequentially as their careers progress.

What the ambidextrous leader looks like

Ambidextrous organisations require post-heroic leaders; collaborators not controllers for whom soft skills are as important as hard numbers.

� Leading an ambidextrous organisation focused simultaneously on innovation and operational excellence is fundamentally different from leading on 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.

What the ambidextrous leader looks like Continued


Mary FontaineGlobal managing director, key client accounts Hay Group

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.

Hay Group is a global management consulting firm that works with leaders to transform strategy into reality. We develop talent, organise people to be more effective and motivate them to perform at their best. Our focus is on making change happen and helping people and organisations realise their potential.

We have over 2600 employees working in 85 offices in 48 countries. Our clients are from the private, public and not-for-profit sectors, across every major industry. For more information please contact your local office through www.haygroup.com.

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Strategic - Hay Group transformation uk.pdf · and their ongoing operational excellence. >> ......

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