Utilities see limited success in developing leaders, study says

LINCOLNSHIRE, Ill., Sept. 10, 2002 — Hewitt Associates, a human resources outsourcing and consulting firm, found that while top utility companies have formal processes to attract, develop and retain leaders, few believe these efforts are resulting in effective leadership programs.

Hewitt’s recent Leadership Study of CEOs and HR executives representing 240 major U.S.-based, multi-national companies included 15 of the nation’s leading utility companies.

Study results show that although 93 percent of these utilities have formal processes to develop leaders, none believe their efforts have been very effective, 27 percent think they’ve been effective and 73 percent of these companies would classify their programs as only somewhat or slightly effective in achieving the desired objectives.

“Although companies may have programs in place to attract, develop, assess and reward leadership talent, it’s the integration and execution of these programs that make the most difference,” said Marc Effron, practice leader, Leadership Consulting Services at Hewitt Associates. “The top companies for leaders differentiate themselves by the breadth of their leadership practices and how well these programs are implemented and integrated with each other.”

Attracting Leadership Talent Means First Establishing Criteria

The Hewitt study shows that 80 percent of the utility companies surveyed have a defined set of qualities they look for when hiring leadership talent. Less than 10 percent use this criteria consistently, 66 percent of these organizations use it on a somewhat consistent basis and 25 percent rarely use this criteria when hiring leaders from outside the company. Meanwhile, 92 percent of these businesses use the criteria when selecting leaders from within the organization.

“Attracting leadership talent is the critical first step in an executive life cycle,” said Effron. “Obviously, companies want to make sure they not only hire quality leaders, but the best leaders for their particular organization. Companies need to take the time to define the leadership competencies required to meet an organization’s business strategy. It’s then important that each candidate is assessed using these competencies to ensure the highest degree of success. In fact, Hewitt found that companies with these defined competencies have a higher return on sales than those without.”

Companies Use Range of Tactics in Developing and Assessing Leadership

When asked how their organizations develop high-potential leaders, 93 percent of the respondents mentioned early identification of leaders, followed by internal leadership training at 86 percent.

Meanwhile these utilities are employing a variety of methods to assess leadership behavior and ability. For example, 87 percent said they use 360O feedback and 80 percent mentioned manager-assessment tools. As for the success of these programs in determining an appropriate leader for a position, 13 percent of the respondents stated that they are very effective and 53 percent said they were effective.

Companies Link Pay to Performance but Have Limited Pay Differential

Additionally, the Hewitt study reveals that all utility companies in this study believe they are clearly linking leaders’ pay to their individual performance. Specifically, 80 percent of these organizations are connecting annual incentives and 73 percent are linking base pay. However, only 14 percent of these respondents say that there is a significant pay differential between high and average performers in the same type of leadership role, while 86 percent indicate there is noticeable or moderate pay difference.

“Pay and opportunity are the two biggest factors in motivating and retaining quality leadership,” said Effron. “It’s important that the leaders who are key to the success of a company realize their role within the organization, and are there to guide the company for years to come, while the executives a notch or two below them understand that there’s room for improvement.”

About Hewitt Associates

Hewitt Associates (www.hewitt.com) is a global outsourcing and consulting firm delivering a complete range of human capital management services to companies including: HR and Benefits Outsourcing, HR Strategy and Technology, Health Care, Organizational Change, Retirement and Financial Management, and Talent and Reward Strategies. The firm provides services from 91 offices in 39 countries.

Source: Hewitt Associates

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