Want to innovate? Develop top leaders

(MoneyWatch) If you want to make your company more innovative, focus on developing better leaders.

That is a key finding of a new study by the Hay Group, a talent management consulting firm, that identified the best-managed U.S. companies for 2011.

The top 20 highest-rated companies for leadership development included corporate stalwarts such as General Electric (GE), Procter & Gamble (PG), IBM (IBM) and Microsoft (MSFT). One common ingredient -- these businesses all place a premium their leaders emphasizing flexibility, customers, new ideas, and collaboration. It is in this last category where leaders show their stuff because as the study concludes, "collaboration is the process that brings [people and resources] together."

For example, nearly 90 percent of employees surveyed in the top 20 companies said that their company "evaluates and rewards our leaders based on their ability to build excellent relationships with their peers." Nine of 10 workers also said that their employers "take clear action when a leader is not collaborating (even if he/she has strong business results)."

Collaboration fosters innovation. As the Hay Group notes, the top 20 companies for leadership spend time on customer needs. They also value a getting a range of ideas from all levels of the organization, encourage employees to think broadly, and invest in leadership development.

Collaboration within a company emerges from bringing people of different mindsets together in ways that allow them to respond to emerging customer or market needs. Employees also need the freedom to try new solutions -- even if such remedies do not turn a profit. For example, over 85 percent of employees surveyed at the top 20 companies said their company "runs unprofitable projects to try new things."

Collaboration is also essential to teamwork, something that most companies preach but not all value when it comes to making it work. Although rank-and-file employees often embrace the idea of working as a team, individual managers commonly sidetrack it. Sometimes, that's because they are pushed and pulled in different directions by their bosses. But it's also often because of their own negligence.

Managers fail to set the right example by putting themselves before the team when it comes to workload, appreciation, and even compensation. In such a corporate culture, there may be two sets of standards -- one for managers and one for employees. That double standard erodes respect, undermines trust, and leads to disengagement. Employees lose heart and end up just going through the motions.

Of course, leadership is vital to a company's bottom line. It is no coincidence that over a 10-year period, the top 20 companies as ranked by Hay outperformed the S&P 500 at twice the rate as other companies.

That underscores the pragmatic focus on effective leadership, which at its core is about achieving intended results. Not all results are quantifiable, but good results from a leadership perspective are when employees know their jobs, are valued for their contributions, and are rewarded for their efforts.

That only occurs when men and women of good intention get into a position of authority, insist that employees have a voice in their work, and provide them with the resources and support they need to succeed.

Image courtesy of Flickr user seth1492

[Anthony_Attan]

John - This is a great study to highlight from Hay Group, as leadership development can often times be overlooked or dismissed altogether, as a legitimate business initiative. This brings to mind a chapter in a book I just finished reading called The Zen Leader by Ginny Whitelaw, which had a chapter that discussed how important it is for business leaders to switch there thinking from controlling to connecting. Whitelaw's message was very much inline with much of what you say about collaboration and thinking in terms of the customers needs and how this can lead to innovation. Leadership development efforts can certainly help leaders in making this switch from a style that controls their people and the processes of their organizatons to a style that rather connects deeply with the people they work with and the purpose of the organization.

[LisaDeAngelis]

John - Thank you for sharing your perspective on the findings from the 2011 Hay Group study. The Center for Collaborative Leadership was founded more than a decade ago on the same business principles outlined in the 2011 Hay Group leadership research summary report that you've highlighted in your article. The cultivation of authentic collaborative leadership skills is the foundation of our emerging leaders curriculum. We stress sharing of resources, networks, intelligences, assets and the inclusion of diversity of perspective as the pathway to innovation and market leadership. When the evidence is so compelling that companies investing in these specific leadership skills outperform the S&P 500 at two times the rate of their competitors, one needs to wonder why more organizations aren't focused on building this skill sets.

[adam_hartung]

Your conclusion may have merit, but your opening salvo makes me concerned. Regardless of who did the study, it is clear that GE, P&G and Microsoft are far from leaders in innovation - or success for employees and investors.

Under Mr. Immelt GE's shares have fallen the last 6 years. The company has introduced no breakthrough technologies, or game changing products in existing markets. It has not created any new markets, yet has exited businesses at a loss which deeply need innovation - such as NBC. The company has downsized, and shifted jobs offshore to cut costs - yet profits have not grown and investors have punished the company. There is a dearth of innovation, and return.

At P&G the company's great inability to innovate was icon-ized when they committed a 2 year program to launching a series of less good products, at cheaper prices, using historical brand names but adding the word "basic." There was nothing innovative about this - and to the contrary was "basically" a price reduction effort that hurt margins and brand reputation. What was the last major new, innovative product you remember from P&G? Tableted laundry detergent? Despite a lot of corporate PR to try making the previous CEO sound like an innovator, he was not. And now the new CEO is being forced to lay off employees and managers to cut costs - as well as attack historical ad budgets - in an effort to save the P&L.

But nobody has "blown it" more than Microsoft. Microsoft was early with smart phones, and just 4 years ago had over 50% market share. It's Zune was a potential rival to iPods, but the company let the product line fail. And even though it was first with tablets, now it has none in the market. Universally Microsoft has not pursued the development of innovative, game changing products and markets - instead pouring billions of dollars into efforts at defending and extending Windows and Office, while the entire market is shifting to mobile where Microsoft does not compete. It's share price has gone nowhere for over a decade, and the company is now an industry laggard likely to be the next Research in Motion.

If you want to persuade us how to be innovative, it is critical you hold up examples that at least pass the "smell test" of even the average business leader and investor.