Leadership and learning play a critical role in enabling organizational growth and transformation—and ultimately strategic success. Good strategy identifies an organization’s current reality as well as its desired destination—what it needs to develop and how it needs to change in order to successfully compete and achieve its business objectives. The gap between current reality and desired destination can be filled by increasing individual competency as well as building organizational capability. A complete and well-developed competitive strategy includes direction on the steps to be taken to develop leaders and the skills and the behaviors these leaders need in order to fill the gap and propel the organization to its desired future destination (Figure 4.1).

Realizing strategic direction requires organizational capability. It is increased capability ultimately that provides the bridge from current reality to the desired destination and is driven by individual competency. Focusing on increasing organizational capability requires developing the collective capabilities of various groups and teams in the organization.

Today’s (and tomorrow’s) leaders must be flexible, collaborative, able to leverage subject-matter expertise, and willing to continue learning. Learning organizations must be able to support leaders as they develop those characteristics. For an organization to be successful, its leaders must not only act as architects of the strategy, setting the best course for the company in the marketplace, but must also continually work to implement strategic directives while also acting as translators of the strategy to the rest of the organization: the leaders who will actually be the doers of the work (see Figure 4.2). Of course, this occurs at different leadership levels within the organization, but underscores the fact that leadership is needed throughout an organization for strategic and business success.

Astute line executives use leadership development as a powerful tool to create, translate, and communicate strategy. Carefully crafted leadership and learning strategies can assist in providing help to leaders in their roles of architect, translator, and doer. This is done by effectively communicating the reasons for and implications of corporate strategy in learning programs to managers, who will need to translate the strategy for employees throughout the organization so they understand their role in making it happen.

Various studies have concluded that 60 to 70 percent of all strategies fail to be successfully implemented. Top leadership development companies seem to have discovered that one way to beat these odds is to ensure that everyone in the organization understands the strategy, the reasons for it, and their role in making it happen. These companies also understand that effective developmental activities can be a means of sharing the information and providing some of the tools for successful implementation.

The pressure and need to organize development activities and initiatives into an integrated strategy is perhaps the most important, overarching trend in leadership development. In a 2004 study, 69 percent of respondents noted that the “creation of an integrated strategy and system for all executive development” was the leading priority of their learning and development organizations (Bolt, 2004). These results replicated an earlier study as well (Bolt, 2000).

Many corporate learning and development organizations see leadership development as a set of puzzle pieces representing initiatives and programs that should somehow fit together but never seem to come together in the right way. These pieces include competency models, 360-degree and other assessments, developmental job rotations, experiential and action learning, talent management, succession planning, rewards and recognition, and coaching and mentoring. A leadership development architecture can bring these often disjointed elements together into a whole that has a greater chance of delivering real results. This architecture must be integrated and linked to the strategy and needs of the business in order to increase the potential for real impact and then communicated widely to engender support (Bolt, 2004).

The best companies for leaders consistently execute the strategies that lead to good leadership development. They create enterprisewide standards, practices, and metrics for leadership; cascade programs and processes down through the organization to improve impact and drive cultural change; include flexibility in centralized leader development programs in order to address specific business needs; and customize developmental solutions for business units in order to better ensure senior management support and engagement (Council, 2004; Fulmer, 2005; Salob and Greenslade, 2005; Saslow, 2004a).

Even greater differentiation in the development of high-potential leaders can be seen in the techniques and methods used. Ninety-five percent of top companies provided increased access to senior leaders for their high-potential leaders as compared to 45 percent of other companies. Similarly, top companies provided internal training (90 percent versus 51 percent), developmental assignments (89 percent versus 43 percent) and mentoring and coaching (58 percent versus 24 percent) at a much higher rate than did companies not considered benchmarks for leadership development (Salob and Greenslade, 2005).

Even when a good high-potential development program is in place, these efforts can end in frustration without an equally effective succession management strategy and process. Overall, half of internal candidates selected for leadership positions fail when no succession management system is in place (Bernthal and Wellins, 2004). And if they had the opportunity, organizations would rehire only 62 percent of their executives (Rioux and Bernthal, 2006). To increase the odds of success, an effective succession management process should include visible support by senior management and line leaders who are involved in identifying and developing succession candidates, a time frame for achieving planned development actions, flexibility to change in response to strategic needs or competitive pressures, and the sharing of information with candidates (Fulmer and Conger, 2004).

Best practice firms anchor their leadership development efforts with lean competency models that are tied to performance and reward systems (Salob and Greenslade, 2005) and ultimately address the skills, behaviors, and mind-sets needed to meet strategic goals. A clear, lean set of competencies was heralded as top companies in leadership development integrate their competencies into succession planning (100 percent of top companies versus 78 percent of others) and make the competencies a baseline for identifying and then developing high-potential employees as part of succession planning. In the top quartile of leadership development companies identified by Hewitt, metrics were integrated with succession planning 71 percent of the time versus only 45 percent of the time in companies in the bottom quartile. These companies also more fully integrated competency measures into formulas for base pay (60 percent versus 30 percent), annual incentives (60 percent versus 31 percent), and long-term incentives (65 percent versus 23 percent) (Salob and Greenslade, 2005).

Even with these results, many companies do not measure results in learning and development as they should. In a study that looked specifically at European-based multinationals, 63 percent reported never measuring return on investment in learning and development (Saslow, 2004b), even though these same firms reported that the importance of learning and development was higher than ever before. There is clearly more work to be done in holding people and organizations accountable for learning and development results, even when strategy depends on these results.

The following lessons were taken from our own experience in working with many different corporations over the years and as part of the work of Duke Corporate Education, but also from a recent study where we looked closely at five best practice leadership development companies: Caterpillar, Cisco Systems, PepsiCo, PricewaterhouseCoopers, and Washington Group International. We selected these companies because of their success in four areas:

We discuss four broad themes in strategic leadership development:

Under the umbrella of these themes, we have articulated several key concepts in more specific messages.

Similarly, organizations seem to have moments when the development and articulation of a leadership strategy are especially appropriate. In our research, it appears that these opportunities generally occur when there is a new CEO who wishes to align the organization around a new strategy, when two organizations have merged, or when there is a significant organizational crisis.

For example, when Jim Owens became CEO of Caterpillar in 2004, one of his early decisions was to empower the Leadership College of Caterpillar University to create the Leadership Quest program for the firm’s high-potential leaders. This program built on an earlier initiative that created the firm’s leadership framework, or competency model, and was intended, according to Owens, to “give our next generation of leaders an infusion of ‘yellow blood.’ ”

After the merger of Pricewaterhouse and Coopers and Lybrand, a significant teachable moment occurred. Differing cultures needed to be reconciled, and leader behaviors and mind-sets needed to shift. PricewaterhouseCoopers (PwC) used this event as the starting point for leadership development and overall firm strategy.

In 2002, Washington Group International, an engineering, construction, and management solutions firm, emerged from Chapter 11 with a four-person “office of the chairman” headed by Stephen Hanks as CEO and a new threefold mission statement that identified people and their development, as well as profitability and performance, as top priorities. According to Hanks, “The company that develops talent the fastest will take the hill.”

Each benchmark company used a key organizational transition, the teachable moment, to develop, articulate, and align a new leadership strategy with the strategic direction of the firm and formed crucial starting points for achieving excellence in leader development.

At Caterpillar, alignment is achieved by receiving input from the executive office, business units, and process owners of the critical success factors. To embed leadership development into the business strategy, metrics were established to connect leadership to the business. PwC links development activities to its strategy to become a “distinctive firm.” Leadership development programs are designed to reinforce corporate strategy, thus ensuring linkage and success. PepsiCo’s leadership development strategy is grounded in the belief that strong leaders are needed for success in the marketplace.

Within Cisco’s HR function, for example, the organization’s Worldwide Leadership Education group works with leaders to identify candidates for its leadership development programs. Executives then help design the programs, ensuring that they meet business needs and align with strategy. Each Cisco program has an established cross-functional steering committee that ensures linkage between the program and the business. The business leaders on the steering committees help drive the design of the programs and recruit appropriate executives into the classrooms. During the design phase of the program, the steering committees meet often, approximately once a month. In addition, the programs employ the role of executive faculty—people who bring participants a strategic perspective.

A board of governors for Caterpillar University includes the CEO and senior executives who approve learning budgets and priorities as well as determine policy. An advisory board for each college includes senior leaders from business or user groups. This group has a geographical and subject matter mix and membership from most of Caterpillar’s business units.

At Washington Group International, corporate leadership and the business units share responsibility for leadership development. The development and strategy office is responsible for the design, development, implementation, and maintenance of the programs, while the office of the chairman reviews, approves, and provides feedback on moving forward with development. The fourteen-member senior executive leadership team meets regularly to discuss leadership development.

Similarly, organizations that are committed to leadership development understand its relationship with other talent management systems and practices, such as performance reviews, management development, and succession planning. Washington Group International, for example, integrates leadership development with every aspect of talent management. This process begins with establishing a vision of what positions will need to be filled and then forecasting, identifying, and preparing candidates. Subsequently, employee development plans are carefully crafted for each employee. An overall employee development strategic plan is then created and fed into the succession planning process, which is used in the leadership development program.

Cisco uses executive coaches to accelerate development as part of its high-potential program. In this program, those with high potential are paired with an external executive coach for a year, and although the coach is an external resource, he or she is fully trained in “the Cisco way” prior to the assignment.

Although PwC designed its PwC University experience for two thousand U.S. partners and Caterpillar involved all managers in its 2005 strategy rollout, we have found that most key corporate initiatives are focused on those with high potential. For example, Caterpillar’s Leadership Quest involves approximately fifty key midlevel leaders each year. PepsiCo’s CEO program involves approximately forty high potentials each year. Washington Group International’s Leadership Excellence and Performance project began in 2002 and had graduated forty-eight participants by mid-2006. Cisco’s Executive Leader Program focuses on the company’s strategic intent and serves approximately forty top leaders annually. This program was designed for employees who are newly promoted to the vice-presidential level or are filling a vice-presidential role.

The connection between thought and behavior is important. Although it seems logical that behavior follows thought, this connection often works in the other direction. In fact, at Duke Corporate Education, where we have developed many successful programs focusing on changing both behavior and thought or mind-set, we believe that leaders often must change behavior first in order to change their thinking. In other words, we cannot ask leaders to think their way to acting differently. We have to ask them to act first, and then they will start thinking differently. In this way, leadership development, especially to develop more strategic thinkers, is more about helping a leader see herself acting differently and then a change in her beliefs will follow.

Consider the set of practices that follow when working to develop a leader’s ability to think and act strategically.

The power of using metaphor in development is found in the ability to reach leaders at a deeper level, with more impact. Metaphoric experiences put leaders in a context and position to think very differently about their work while still allowing them to draw important lessons. They are memorable, change the frame on problems leaders face so they can be seen in a new way, and lead to consideration of new behaviors and mind-sets that would never have been possible through a traditional classroom experience. However, these experiences will be nothing more than an entertaining diversion if they are not carefully designed to meet the expected business outcomes of the company and learning needs of the participants. After the experience, it is essential that the metaphor and experience be tied back to the business and learning outcomes. A rigorous debriefing that explores implications, challenges, and insights is crucial to this method.

These games, both multiplayer and individual, provide leaders and learners a practice field where risk taking is encouraged and different behaviors and strategies can be employed. Multiplayer games can help prepare leaders to function better in a corporate world of virtual teams where influence and authority operate differently. In games, leaders are forced to make decisions quickly and operate at a different speed—an environment more akin to the increasingly fast-paced, competitive environment of most industries. In addition, games provide leaders the chance to gain experience more quickly and in a different time frame—to finish whole projects and live an entire life in the game environment. They give leaders the chance to experience leadership and make mistakes in a place where the consequences are mild and easy to recover from.

Will games work to develop better leadership skills in everyone? The answer has to be no, but for many, this is the new frontier for leadership development breakthroughs.

To remain successful, these companies employ a wide range of learning methods driven by a clear focus on intended business outcomes. Informal learning opportunities are more highly developed in these firms. Most have deliberate routines that bring learning closer to work (for example, after-action reviews and rounds), create opportunities for practice that are oriented to the needs of individuals, and employ techniques such as shadowing as an investment in staff development.

Using debates, simulations, group activities and projects, facilitated discussions, and other pedagogical techniques expands the impact of the classroom and increases the challenge for developmental impact and learning. We have had firefighters and ballerinas in the classroom to help participants feel and experience leadership in a new way and from a new perspective. We have used naturally occurring problems and challenges leaders face in their everyday work as the teaching material in the classroom in order to create appropriate context and make the learning real and helpful. These methods stretch and engage to a greater extent than lecture does, demanding participants to think and behave differently than they typically do.

Of course, using these and the other techniques may move learning away from the safe environment that is often spoken of, but safety is not in fact the goal; rather, it is development. Changing the nature of the classroom and using different teaching methods will help learning move from being safe to being developmental.

At PepsiCo, senior leaders speak of “the magic of leaders developing leaders.” According to one executive, “People learn best when they get to learn from someone they really want to learn from! At PepsiCo, the ‘teachers’ our executives want to learn from are our own senior leaders. They are world class, widely respected and have proven that they can do it HERE!” Senior executives are asked to share their personal perspectives and then build participants’ confidence and skills while demonstrating support for their growth. Of equal importance, senior leaders get greater teamwork from participants and get to know key young leaders, while developing more loyalty, motivation, productivity, and better alignment around vision and key strategic initiatives. PepsiCo leaders are encouraged to think of learning as an important “arrow in their quiver” for helping to drive strategic change. At PepsiCo, leadership development and learning become something to live, not just another thing to endorse.

PepsiCo has historically allocated one-third of incentive compensation for developing people, with the remainder for results. In 2007, the company moved to an equal allocation of incentive compensation for people development and results. Pepsi also uses the results from its semi-annual climate survey and 360-degree feedback as part of the performance review process.

Caterpillar found that managers were superb at the execution portion of their leadership framework and satisfactory in the vision category, but they needed more attention to the legacy (developmental) set of behaviors. Consequently, it has begun to focus on this theme in learning programs and in performance assessment.

That Caterpillar University was established during a recession may have forced its leaders to develop the value proposition for learning early in its history. As part of this, Caterpillar University created a document, “Business of Learning,” where each college developed a value proposition for key initiatives based on net benefits, return on investment (ROI), and other standards. This evolved into the enterprise learning plan: a 161-page document that discussed the state of learning at Caterpillar, articulated the value proposition for learning, and estimated the ROI for Caterpillar University at 50 percent for 2003. This was then followed by seven detailed ROI studies. These leveraged focus groups, surveys, and in-depth discussion with participants and identified the benefits, dollar benefits, costs, net benefits, and ROI. Having established the value proposition, Caterpillar has not repeated this process for all subsequent iterations of a program and is beginning to speak about return on learning rather than the more formalized process for ROI.

PepsiCo does not attempt to measure the value created by a program, but the CEO attends each of the major high-potential programs and is the primary facilitator. Since she is intensely involved with program design and delivery, ratings are less of an issue. At the end of each program, participants are asked to send the CEO an e-mail indicating what they will be doing differently as a result of attending the session. Six months later, they are asked to send the CEO another e-mail reporting on how well they have done in meeting their commitment.

Cisco collects both quantitative and qualitative measures. Worldwide Leadership Education has a formal system for measuring the outcomes of leadership development strategy. Examples of metrics include “price range for a one-week course,” “customer satisfaction scores,” “percentage of class graduates who have used learnings in their jobs and had a positive impact,” and “percentage of learners who stay with the company.” The team concentrates on metrics showing the application of learning to jobs and changes in business results. An example is the retention percentage for employees going through the programs compared to the general employee population, which has turned out to be quite favorable for Cisco: approximately 93 percent across the organization.

The Cisco Leadership Series operates in a three-phase structure that facilitates the employee’s ability to put learning into action. It is an events-to-process model. Employees who participate in the various programs progress through each phase: preparation, program, and application on the job. Although the face-to-face portion of Cisco’s programs may be only five days, the process for the participants extends over eight to ten months.

Caterpillar’s core leadership programs leverage key transition points in its leaders’ careers and build on one another in a building-block fashion. Underlying all of its programs is its foundational Making Great Leaders program. These transitions take place as individuals move from supervisor (frontline leader), to manager (leader of leaders), to department head, and finally to executive. A person’s movement through these programs and transitions is all part of the developmental journey at Caterpillar.

Best-in-class strategic leadership development companies have understood these principles well and created best-in-class leadership development strategies, practices, and measures that have contributed to their overall financial and strategic success. They know that great leaders develop great strategies and then deliver on these visions as architects, implementers, and doers.

Fulmer was previously the W. Brooks George Professor of Management at the College of William and Mary and a visiting scholar at the Center for Organizational Learning at MIT. He also taught organization and management at Columbia University’s Graduate Business School. For six years, he was director of executive education at Emory University, where he directed the Executive M.B.A. program as well as public and customized programs for general and functional managers.

He earned his M.B.A. from the University of Florida and his Ph.D. from the University of California at Los Angeles.