National Academies Press: OpenBook

Developing Transportation Agency Leaders (2005)

Chapter: Chapter Seven - Private-Sector Leadership Development

« Previous: Chapter Six - Succession Management
Page 27
Suggested Citation:"Chapter Seven - Private-Sector Leadership Development." National Academies of Sciences, Engineering, and Medicine. 2005. Developing Transportation Agency Leaders. Washington, DC: The National Academies Press. doi: 10.17226/23300.
×
Page 27
Page 28
Suggested Citation:"Chapter Seven - Private-Sector Leadership Development." National Academies of Sciences, Engineering, and Medicine. 2005. Developing Transportation Agency Leaders. Washington, DC: The National Academies Press. doi: 10.17226/23300.
×
Page 28
Page 29
Suggested Citation:"Chapter Seven - Private-Sector Leadership Development." National Academies of Sciences, Engineering, and Medicine. 2005. Developing Transportation Agency Leaders. Washington, DC: The National Academies Press. doi: 10.17226/23300.
×
Page 29

Below is the uncorrected machine-read text of this chapter, intended to provide our own search engines and external engines with highly rich, chapter-representative searchable text of each book. Because it is UNCORRECTED material, please consider the following text as a useful but insufficient proxy for the authoritative book pages.

27 The challenges facing state DOTs in the 21st century are not unique to the public sector. Issues previously mentioned— including leadership development, customer expectations, workforce aging, recruiting, retention, and others—are also part of the environment facing private-sector companies in this first decade of the new century and its economic challenges. In addition, both domestic and foreign market forces are making profitability ever more difficult. Leadership dynamics became even more complicated as our nation experienced the market uncertainties in recent years, slower than expected job growth, and worries about national and world security. If there was ever a time for strong leadership in the private sector, it is now. One objective of this synthesis is to present an overview of leadership development and succession management pro- grams in the private sector. The motive behind this investi- gation was to determine if any of the approaches, programs, or activities in the private sector might also be useful in state DOTs. Various means were used to investigate these private- sector programs, including literature reviews, journal profiles of companies, and personal interviews with involved individ- uals. The review determined that many successful programs are being used by private-sector companies; a few will be highlighted in this chapter. The observations offered at the end of the chapter will, hopefully, be of value to STAs. Initially, this synthesis was to focus only on transporta- tion-related firms or others whose business activities are sim- ilar to state DOTs. Subsequently, several others were also analyzed whose business practices are not similar to trans- portation agencies but whose programs have attributes worth emulating. Leadership training is an area of organizational development and management where methods of application transcend traditional boundaries. One private-sector firm with an excellent program is Gen- eral Electric (GE). GE has made a significant commitment to leadership development and training. Its efforts begin with newly hired individuals and proceeds through to the senior management corps. At each level, an individual is groomed and prepared to receive the skills and training needed to fill successively higher positions in the organization. It is a delib- erate and expansive effort with strong management support. According to the literature available, GE reports an invest- ment of approximately $1 billion per year in this endeavor. The entry-level program is aimed at recent graduates who focus on five areas, three of which are engineering, opera- tions, and finance. The objective of this future leader program is to ensure that these individuals gain a broad perspective on the company and do not focus solely on the engineering, although there is still a significant emphasis on technical skill sets, including systems, analysis, design, quality, reliability, integration, and testing. Those who participate in this pro- gram are ultimately assigned to one of GE’s priority areas, where they can immediately apply what they have learned in their first developmental training program. GE recognizes that leaders need to be well rounded and offers a variety of instructional opportunities in other business fields, including presentation skills and risk management. Some of the train- ing counts toward a master’s degree. In addition to its new recruit programs, GE also has an extensive leadership devel- opment initiative that extends the emphasis on broad skill development to the highest levels in the organization. In a review of GE’s leadership program, the analysis must go beyond the formal side of the organization’s efforts and consider the informal element. This informal development initiative is perhaps the most legendary famous portion of its program and has received substantial comment. In the 1980s and 1990s, GE’s CEO, Jack Welch established a leadership style and approach that has been much analyzed. Although a complete review of the man and his particular approach to leadership is not possible here, a few observations may be made. His leadership culture had some unique attributes: Leaders were hand selected as trusted and loyal members of the team. They exhibited leadership traits, style, and man- nerisms similar to those of the CEO. Those who did not fit the desired mold were passed over and others appointed in their stead. This approach has become well known in the business world. At one point, this model elevated GE to the position as the world’s most valuable company. So successful was this model that many of Jack Welch’s trusted lieutenants became captains of industry in their own right. Another private-sector company with focused leadership development elements is Home Depot. In their book, Built from Scratch (Marcus et al. 1999), Bernie Marcus and Arthur Blank, cofounders of this home improvement giant, articu- late their culture and leadership style; it includes many valu- able lessons. At Home Depot, leaders are cultivated with care and generally come from within the ranks of the organiza- tion. This policy of promoting from within allows Home Depot’s management team to create a leadership mindset that is focused on meeting customer needs and on the company’s CHAPTER SEVEN PRIVATE-SECTOR LEADERSHIP DEVELOPMENT

specific business approach. Outside hires in key positions at Home Depot are required to work for at least 2 months “on the floor,” to ensure that they are fully aware of the basics of what makes the company work. Even the corporate attorney, hired to deal with complex legal initiatives and elements, filled this requirement before beginning legal duties. Home Depot offers a 2-year leadership program that focuses on store operations, business activities, and mer- chandising. Additionally, promising individuals go through its Future Leadership Program, which includes rotations into many roles in the organization. This program provides for about 250 h of classroom training and uses an assigned men- tor program. Another element of Home Depot’s quest for strong lead- ership teams is an internship program that focuses on college seniors and graduate students. This program lasts from 10 to 12 weeks and provides students with the opportunity to learn all aspects of the company. Many, following graduation and at least a beginning organizational knowledge, return and rise to become effective leaders at Home Depot. It is a highly suc- cessful program by which Home Depot and these rising lead- ers have both benefited. Lockheed Martin Corporation, a major national defense contractor, has a leadership training program for its new employees called the Leadership Development Program. This program focuses on individuals who will obtain a grad- uate degree and involves 3 years of intense leadership expe- rience for all participants. During this period individuals are regularly brought together in person or by means of telecon- ferencing for specific leadership and management training in a group setting. Additionally, each participant has a specific plan for working in a variety of operating units to ensure that their experiences have the depth and breadth needed for future leaders. Although many other elements of their lead- ership development initiative exist, the Leadership Develop- ment Program is an important part of Lockheed Martin’s overall effort to ensure global leadership and profitability. Another private-sector firm worthy of note is Johnson & Johnson. This company, which has 112,000 employees world- wide, averages 10% growth each year and had about $40 bil- lion in sales in 2003. It espouses the philosophy offered by Peter Drucker, who stated that “Leadership must and can be learned.” Driven by this conviction, Johnson & Johnson focuses its leadership program on assisting bright and promis- ing leaders by giving them the skills they will need to lead their company in the future. The Chairman and CEO of Johnson & Johnson offered this statement about leadership, which provides insight into the passion it has toward developing individuals for promo- tional opportunities: 28 Johnson & Johnson is well positioned in the global health care industry, and our organization is primed for future growth. Our Credo firmly establishes our values, and our Standards of Lead- ership set the behavior, character, and commitment we expect from those who will lead us to greater achievement. The Credo Values include the following: • Organizational and people development, • Customer and marketplace focus, • Innovation, • Collaboration, and • Complexity and change. In attempting to instill these values, it has tailored a pro- gram that has significantly contributed to its overall business success in challenging economic times. The program includes informal mentoring, hiring approximately 80% of its posi- tions from within, developing breadth of experience in its leadership team, attracting and retaining individuals with high values (e.g., integrity and work ethic), and specialized “Action Learning” opportunities, during which individuals work on specific projects in close collaboration with senior Johnson & Johnson leaders. In addition, it has a disciplined succession management program that surveys the likelihood of future vacancies occurring and takes deliberate action to prepare individuals for those positions. Contractors make up a large segment of the state DOT world, with many daily interactions between the agency and the contractors. When discussing leadership programs sev- eral contractors stand out. Peter Kiewit and Sons, Granite Construction, and Granite Rock all focus extensive resources on leadership training and development. Granite Construction Company, Inc., headquartered in Watsonville, California, is ranked by Engineering News Record as one of the largest transportation contractors in the country. Although they have millions of dollars in cap- ital assets, including large amounts of heavy equipment, it knows its greatest asset is the people who have made Gran- ite successful. Some years ago it launched a program called Employee Development Initiative, which focuses on advanc- ing the leadership skills of its field supervisors, office man- agers, and other leaders. The Employee Development Initia- tive program is led by a group of Employee Development Leaders from each branch of the company, including the Heavy Construction Division Regions. Project managers, engineers, estimators, and field supervisors take 2-year sabbaticals from operational or day-to-day activities to build their leadership and organizational skills. They are given opportunities to apply these newfound skills on specific projects throughout the organization. The key themes for these groups include sharing knowledge and connecting people to learning oppor- tunities so that Granite remains their employer of choice.

29 On the engineering side, many good examples exist of firms that invest heavily in the leadership development and succession management activities associated with their busi- nesses. HDR has a well-developed initiative that includes mentoring, formal skill assessments, and development plans for participants. Training includes classroom instruction and work assignments geared toward cultivating future leaders in their organization. The program includes both rigor and dis- cipline in its implementation. HNTB, another national engineering firm providing a wide variety of services to the transportation industry, also has an aggressive program. Recently impressed by the pres- ence and leadership exhibited by young military leaders asso- ciated with the war in the Middle East, senior leaders at HNTB have deliberately crafted its program after the mili- tary’s model. The initiative included hiring former military leaders to duplicate the training and skill development activ- ities that have resulted in many fine young men and women leading their units through challenging circumstances. HNTB’s program includes training by key members of the senior lead- ership team as well as specific assignments geared toward developing important skills in their future leaders. The HNTB effort (as well as the HDR program) is supervised by the CEO, whose involvement explains the high profile their pro- gram enjoys in the organization. In reviewing the issues surrounding leadership develop- ment and succession management in private organizations a number of key issues emerge. The first is the profitability issue: companies are usually either publicly owned and traded or are privately held by employees of the organization through a direct shareholder program or an Employee Stock Option Program. Ultimately, whether the company is publicly or pri- vately owned, shareholders focus on company profitability and are motivated to endorse efforts that will positively affect the balance sheet. Many private firms have clearly deter- mined that profitability is directly affected by both their lead- ership and the effectiveness of their efforts to develop future leaders. A second area that should be mentioned is slightly differ- ent, but related. Senior leaders in a private company likely hold substantial shares of stock and have a significant portion of their retirement tied up in the value of that stock. Depend- ing on company policies, these individuals will either sell their stock on retirement and accept a note for their repay- ment or continue to hold onto the majority of their stock and sell it at a specific rate over their retirement years. In either case, they have a vested interest in the value of the stock and in the continued viability of their company. Thus, private- sector leaders seem particularly focused on the future lead- ers of their companies and in ensuring that the succession management program allows the finest individuals to rise to the top and ensure the financial viability of their future retire- ment. It is an important motivation found in the private sec- tor that is missing from public-sector programs. Leadership training and succession management in the private sector is taken very seriously owing to its value to the company and, therefore, the shareholders. Although only a few firms have been highlighted in this report, some key attributes emerged, which seem to be common among all of the programs reviewed and deserve mention in summarizing this discussion: • Leadership is values based. • Leadership is fundamental to future company profitability. • Leadership programs are either led or strongly influ- enced by the chairman, president, CEO, or some com- bination of the three. • Private companies do not differentiate leadership devel- opment from succession management—they advance together. • Private companies have programs that develop leaders with a wide variety of skills, including those for which they have received no formal education (e.g., engineers working in finance, marketing, or research). • Leadership development programs within private com- panies are structured, have definite objectives, involve specific activities, and almost always include skill assess- ments and development plans. • Private companies use a variety of classroom and on- the-job training opportunities to develop the desired skills in future leaders. • Private companies start early in developing leaders. • Private companies believe that the first step in devel- oping future leaders and having an effective succes- sion management plan is to hire the right people in the first place. • Most companies promote the majority of leaders from within. • Leaders are hand-selected based on their ability to be successful in achieving the operating and profit objec- tives of the company. Longevity is not an issue— performance is what counts. Leadership development in the private sector is an impor- tant subject. Private-sector leaders see their programs as an investment and not as an expense. They take their initiatives seriously and, in many cases, are personally involved in lead- ing the programs and even providing actual training. The public sector would benefit from emulating private-sector counterparts when it comes to developing future leaders for their organizations.

Next: Chapter Eight - Conclusions »
Developing Transportation Agency Leaders Get This Book
×
 Developing Transportation Agency Leaders
MyNAP members save 10% online.
Login or Register to save!
Download Free PDF

TRB’s National Cooperative Highway Research Program (NCHRP) Synthesis 349: Developing Transportation Agency Leaders examines practices and innovative approaches that address the development of transportation leadership in today’s work environment. The report covers demographics, recruitment and retention, leadership training, and succession management.

READ FREE ONLINE

  1. ×

    Welcome to OpenBook!

    You're looking at OpenBook, NAP.edu's online reading room since 1999. Based on feedback from you, our users, we've made some improvements that make it easier than ever to read thousands of publications on our website.

    Do you want to take a quick tour of the OpenBook's features?

    No Thanks Take a Tour »
  2. ×

    Show this book's table of contents, where you can jump to any chapter by name.

    « Back Next »
  3. ×

    ...or use these buttons to go back to the previous chapter or skip to the next one.

    « Back Next »
  4. ×

    Jump up to the previous page or down to the next one. Also, you can type in a page number and press Enter to go directly to that page in the book.

    « Back Next »
  5. ×

    To search the entire text of this book, type in your search term here and press Enter.

    « Back Next »
  6. ×

    Share a link to this book page on your preferred social network or via email.

    « Back Next »
  7. ×

    View our suggested citation for this chapter.

    « Back Next »
  8. ×

    Ready to take your reading offline? Click here to buy this book in print or download it as a free PDF, if available.

    « Back Next »
Stay Connected!