Top Companies for Leaders in Europe

A major survey, involving 110 of Europe's largest companies, has revealed the Top Companies for Leaders in Europe. The study, which was carried out by global HR outsourcing and consulting firm Hewitt Associates, identifies the leadership practices that differentiate the most effective organisations for developing talent and which can be linked to financial success.

The Top 10 Companies, as selected by an independent judging panel from 35 finalists, are: L'Oréal SA (France), BMW AG (Germany), Nokia Corporation (Finland), Vodafone Group plc (UK), Nestlé SA (Switzerland), AstraZeneca plc (UK), Tesco plc (UK), UniCredito Italiano S.p.A (Italy), Banco Bilbao Vizcaya Argentaria (BBVA) (Spain) and Pearson plc (UK).

Mark Hoyal, leader of Hewitt Associates European Leadership consulting practice, said: "The research to identify Europe's Top 10 Companies for Leaders covered a huge number of issues, from the evaluation and compensation of leaders and high potentials to a commitment to developing great leaders from the board level down. The Top 10 really shone through in their approach to developing and rewarding leadership talent. Most importantly, these companies also achieved greater financial success than organisations that don't have the same level of commitment to leadership -- a key factor that is missing from most existing research in this area'.

Hewitt's survey found the three main factors that differentiate the Top 10 Companies from others: CEO involvement and investment in developing leaders; a strong commitment to developing and rewarding talent; and the relationship between financial performance and the organisations' approach to developing leaders.

According to Hewitt's research, a strong indicator of a successful leadership programme is the buy-in of the CEO. Of the Top 10 Companies, 90% stated that their CEOs are actively involved in leadership development and the same number felt that their CEO provides sufficient resources to develop quality leaders. By comparison, only 69% of other organisations said their CEOs are actively involved in this area and 60% thought their CEO allocates sufficient resources for effective leadership development.

The level of board involvement also differentiated the Top 10 Companies. Whereas 80% of them reported that their board of directors is both actively involved and invests sufficient resources in developing leaders, only half of the other organisations could make the same claim.Worryingly, one in 10 organisations outside the top 10 reported that their CEOs did not actively review talent at all and only 42% considered themselves to be effective in developing leaders.

Hewitt's research also showed that the Top 10 Companies share a clear corporate focus on identifying, developing and rewarding high-potential leaders. All reported having a specific strategy for developing leaders, compared to three quarters (76%) of other companies.

For example, all Top 10 Companies have a formal succession planning process in place, which includes the preparation of successor lists for select positions and a review of talent at least once a year. By contrast, just under three quarters of companies outside the top ten (73%) have set succession planning processes, with 68% preparing successor lists for key positions and less than two thirds (65%) reviewing talent on an annual basis. Interestingly, all Top 10 Companies also appointed their current CEO from within the organisation, while only two thirds of other companies recruited their CEO internally.

At a tactical level, the Top 10 Companies also offer a greater range of developmental opportunities to leaders compared with other companies. All provide both external and internal leadership training compared to 76% of other companies which provide internal training and 70% which include external training. Evaluating the effectiveness of leadership practices is vital, with 70% of the Top 10 Companies having metrics in place for doing this, compared to 29% of other companies. Seven of the Top 10 Companies also hold existing leaders accountable for developing talent, compared to half of other responding organisations.

A further distinguishing factor for the Top 10 Companies was their 100% commitment to compensating for job performance, with half also linking compensation to a leader's potential to advance. Only 30% of other respondents reported any link between compensation and potential for leadership development.

The Top 10 Companies have clearly adopted strategies for growing leaders. They all report having a specific strategy for development, compared to 76% of other companies. Moreover, 90% of the Top 10 Companies have a specific strategy for both selecting leaders internally, and for rewarding leaders within their organisations. In contrast, only 68% of other companies report specific strategies for selecting and rewarding leaders.

Hewitt's study revealed a clear relationship between a company's financial performance and its approach to building leaders. Among top-quartile performers in industry-adjusted Total Shareholder Return (TSR), 89% reported a strong to very strong focus on developing leaders and leadership skills, compared to only 36% of poorer performing organisations.

In addition, all of the Top 10 Companies performing at or above their industry median in TSR have a succession plan, including a specific CEO succession plan, in place. By contrast, 73% of non-top 10 companies have a formal succession plan, and less than a third (29%) have a specific CEO succession plan.

All of the Top 10 Companies performing at the 50th percentile or higher for TSR have performance management processes that clearly differentiate high potential leaders, as opposed to 55% of companies performing at or above the medians. Furthermore, leaders are held accountable for developing leaders in 75% of Top 10 Companies where TSR is at or above the 50th percentile, compared to 45% of other companies.

Mark Hoyal added "We feel the research has presented a strong business case for committing time and resources to leadership development. For these processes to work, it is vital that the full buy-in of the CEO and board members is achieved in order to identify and incentivise high potentials and to keep the leadership development process under regular review'.

Hewitt began regional Top Companies for Leaders studies in the United States, Europe, and Asia-Pacific in 2003. In Europe, Hewitt surveyed HR executives representing 110 major public and private companies, in 13 European countries. In the US, 320 companies participated in 2003, and more than 200 companies participated in the Asia-Pacific region. The results for each region are published in separate reports. The list of possible European finalists was narrowed to approximately 35 companies and then an independent panel of judges selected and ranked Europe's Top 10 Companies for Leaders.

All articles 2006-23 written and edited by Mel Crowther and/or Nick Thomas unless otherwise stated.