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

How Companies Develop Great Leaders

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Three Types of Corporate Culture

Not only are the best-in-breed companies more urgent about leadership development; they also spend more time on it—and more money, too. In the survey, respondents from the Best Companies for Leadership were more likely to say that they invest in the development of even their mid- and low-performing employees. And when asked about time spent developing leaders, once again, the Best Companies for Leadership report investing more time than peer organizations in developing future leaders. While 16.4% of all respondents report spending 25 or more days per year developing senior leaders, 22% of the Best Companies for Leadership spend 25-plus days developing their top talent.

In an analysis of how survey respondents described their companies' cultures, three categories of organizations emerged. Some, such as Zappos.com and Southwest Airlines, are modern, learning-oriented, fun workplaces. Other large, global giants, such as P&G and GE, are complex companies with cultures that are more traditional. And some, including ABB, are known as "collaboration for innovation" companies that accomplish work though self-organizing project teams and encourage employees to seek new approaches to solving problems.

According to Elizabeth Bryant, senior director of talent management at Southwest Airlines, the leadership-development process reflects the company culture. "It goes beyond formal training and is part of everyday life at Southwest, where employees at every level are exposed to leaders so they get to see how the leaders think," she says. "Even informal mentoring and exposure to company executives helps to broaden people's perspectives and stimulate their passion about the job."

A Hunger to Learn

According to Jeff Lamb, Southwest's chief people officer, the culture in which Southwest's employees work every day is no different from the culture in which the airline develops its future leaders. "This kind of thing happens organically. There's no course on how to get so engaged that you volunteer to come in on a weekend."

Lamb insists that what makes the airline a great place for leaders is the same thing that makes it a great place for employees: "the freedom to be yourself … a lack of pretense; the hunger to learn." He says it's not about any kind of program or leadership training, or how well the company develops talent, but in "allowing people to enjoy their work."

Concludes Hay Group's Mary Fontaine: "The real thing leaders do is create environments that drive performance. Leaders engage and enable people. It's that simple, but it requires a shift of focus from solely outcomes, production numbers, and revenues to motivating people so they're passionate about helping the company achieve its goals." Another key aspect of leadership, she says, is removing the obstacles that hinder them. She likes to quote a senior client at IBM, who says, "My job is to take the rocks out of the campers' knapsacks so that they can run faster and further."

METHODOLOGY

To conduct the 2009 Best Companies for Leadership study, Hay Group and Bloomberg BusinessWeek.com invited organizations from around the globe to participate. The survey was open to all employees of any organization and asked respondents to rate the leadership-development practices at their own organization. Separately, respondents were asked to nominate three organizations, regardless of size and industry, that they believed are the best at developing leadership at all levels.

A total of 1,869 individuals from 1,109 organizations completed the survey. Only responses on behalf of a parent organization were considered in the ranking process, resulting in a total of 740 organizations considered in the final ranking. In the case of multiple respondents on behalf of a parent organization, responses from those self-identified as "leaders" were combined, and responses from those self-identified as "employees" were combined, to allow comparative perspectives on the same organizations. For an organization's final score, we calculated an average of the two group scores.

Respondents that completed the survey were from 98 countries, with 45% from North America, 27% from Europe/Middle East, 16% from Asia, 6% from South America, 3% from the Pacific, and 2% from Africa.

About Hay Group

Hay Group is a global strategic-consulting firm that works with leaders in the private, public, and not-for-profit sectors to transform strategy into reality. With 85 offices in 47 countries, we work with more than 7,000 clients across the world.

Learn more about our Best Companies for Leadership research

Editor's Note: The following companies who ranked in the 20 Best Companies for Leadership according to survey respondents are clients of Hay Group: 3M, Procter & Gamble, Wal-Mart, Nestlé, Coca-Cola, McDonald's, IKEA, and Unilever

Patricia O'Connell is Management Editor for BusinessWeek.com.