Special Report February 16, 2010, 11:35PM EST

How Companies Develop Great Leaders

Creating a culture of leadership even during crises, chaos, and an economic downturn

At first glance, Zappos.com, the online retailer, appears to have little in common with General Electric (GE), the multinational conglomerate. Hit hard by the recession, GE is in the throes of scaling down its financial services subsidiary, GE Capital, by an estimated 40%. Zappos, on the other hand, is tapping into changing consumer habits and ramping up for 30% growth over the next 12 months.

Yet surprisingly, these two organizations with their rapidly shifting environments face similar challenges in motivating and engaging their employees. For Zappos, it's about creating and maintaining passion in a call-center culture. For GE, it's about keeping people engaged in a changing climate.

Named among the 20 Best Companies for Leadership in a recent BusinessWeek.com/Hay Group survey, both GE and Zappos put a premium on selecting, developing, and retaining strong leaders at every level. What sets them and the other companies on the list apart, however, is not just their emphasis on good leadership, but also how they approach it. They carefully tailor their developing leaders to fit their unique business strategies and organizational cultures.

In Bad Times As Well As Good

While the data suggest there is no one best way to grow leaders, the companies that do it best share certain key characteristics. The top 20 companies address leadership development on multiple fronts, from articulating how leadership behavior needs to change to meet the challenges of the future to managing their pools of successors for mission-critical roles. And, despite the chaotic, crisis-strewn atmosphere of the past year, they've continued to make leadership a top priority.

"The best companies for developing leaders recognize the value of strong leadership in both the good times and the bad," says John Larrere, who heads Hay Group's leadership and talent practice in the U.S. "Culturally they just cannot do away with leadership development, even in a recession. They don't see it as a perk but as a necessity."

People at the Best Companies for Leadership sense the urgency to develop leaders more than their industry peers. In fact, while 94% of respondents among the Best Companies for Leaders say their organization actively manages a pool of successors for mission-critical roles, only 68.6% of the other organizations surveyed report the same.

"Positioning for the Future"

Indeed, leadership feels different at the Best Companies. In the survey, more than 64% of respondents from the top 20 say people in their companies are expected to lead even when they are not in a formal position of authority. At other companies, that figure hovers around 35%. And respondents from the Best Companies for Leadership are significantly more likely than those from other companies to believe they will emerge stronger from tough times. They say their leaders are more likely to be involved in leadership development. And they are twice as likely to say that everyone at every level of their organization has the opportunity to develop and practice capabilities needed to lead others.

In the survey, respondents were asked about their companies' current focus. Among all the respondents, 65.1% said, "positioning for the future." Among the Best Companies for Leadership, the figure was 81.9%. Executives at the Best Companies for Leadership confirmed this in follow-up interviews. "Our culture is committed to leadership development," says Jayne Johnson, GE's director of leadership education. "Crotonville [the site of GE's corporate university] opened in 1956. Today more than ever, we need our leaders going to Crotonville. It's these very leaders who will make us successful today and in the future."