THE BUSINESS IMPACT OF CORPORATE EXECUTIVE …



THE BUSINESS IMPACT OF CORPORATE EXECUTIVE DEVELOPMENTBy: James F. Bolt, Chairmanand Kevin J. Sears, Research ConsultantExecutive Development AssociatesSignificant progress is being made in the measurement and evaluation of training. For example, a recent study by the American Society for Training and Development (ASTD) provided hard evidence that investments in workplace learning improve a company’s financial performance. The data came from a study that compared 540 companies’ expenditures on workplace learning with their performance. Those companies that spent more on workplace learning had:57% higher net sales per employee37% higher growth profits per employee20% higher ratio in market to book values.The Conclusion? The report stated that “companies that invest more heavily on workplace learning are more successful, more profitable and more highly valued on Wall Street.”Much less progress has been made in measuring the impact of executive development. The purpose of this study conducted by Executive Development Associates (EDA) was to find and present evidence of the impact of corporate executive education and leadership development programs. Our experience in working with CEOs in major corporations around the world is that they care much less about sophisticated measurements than they do anecdotal evidence. They know by what they see, hear and feel whether their executive development efforts are making a difference. Nevertheless, this report covers both measured impact, e.g., 16-1 ROI and anecdotal evidence.Eight examples of the business impact of corporate executive development are included in this study:AmeritechBellSouthCalPERS(CaliforniaPublicEmployees Retirement System)General Motors.IBMKodakSiemens Nixdorf InformationsSysteme AGWeyerhaeuserAMERITECH’S NETWORK LEADERSHIP DEVELOPMENT PROGRAM (NLDP)1Over 1,400 Ameritech managers completed the one- week long Network Leadership Development Program. The goals of NLDP included:Improving leadership skills.Improving ability to manage in a changing and competitive environment.Improving productivity and quality.The program administrators felt it necessary to evaluate NLDP with hard data even though the concept of leadership is often considered ambiguous. The newly developed evaluation strategy was made“Leading Strategic Change: Tools and Techniques”. Article from: Human Resource Planning; Tempe; 1998; Dina M. PasalisTHE BUSINESS IMPACT OF CORPORATE EXECUTIVE DEVELOPMENT October 1999up of 5 components; reaction, learning, transfer, results, and return on investment.Participant reaction was measured using program evaluation forms given prior to and at the end of the one-week course. Learning was assessed by comparing pre vs. post intervention performance on a work simulation exercise. The results were very positive; 97% of the participants agreed with positive statements about the program and 87% showed an average of 16% improvement in the simulation exercise by the end of the week.To determine if what was learned in the program was being transferred to the actual work environment, a 360? feedback survey was performed on each participant. Eighty percent of the participants were judged to have improved in the areas of productivity and quality of work.Other results attributed to this leadership development program included a 17% increase in productivity and quality, as well as a reduction in operating costs. These improvements translated into a substantial return on investment. For each $1 spent, Ameritech saved roughly $1.79 through the post- program changes that were implemented.BELLSOUTH’S WORK OF LEADERSHIP PROGRAMThe overall goal of BellSouth’s “The Work of Leadership” was for the participants (the top 50 officers at BellSouth) to better understand and practice the work of the new BellSouth leader. More specifically, BellSouth wanted their officers to:Better understand how to integrate services, offeringsand projects across internal boundaries.Decide upon and implement those actions that most added value to and supported BellSouth’s business strategy.Understand their role as leaders in achieving world-class financial performance.The workshop (developed by the BellSouth Leadership Institute) included two sessions of two- days each with ten weeks in-between. There were 25 Officers in each session. Team business projects(action learning) were completed within the ten-week period and were aimed at growing revenues or cutting costs.What were the results? Many of the business projects paid significant dividends. For example, a new line of business was created which was estimated as having a $500 million potential. In addition, just one of the projects that were implemented resulted in $28 million of incremental revenues. These provided a dramatic return on the cost of the workshop.The workshop also resulted in the creation of strategies and aspirations regarding revenue growth, return on assets and employee / customer satisfaction that have now become the measurements, which they believe, will drive BellSouth into the top quartile of S&P 500 companies’ performance.In addition to the hard evidence, according to Melanie Cadenhead, Director, Executive Education, workshop evaluations indicated anecdotal evidence such as the following:“Session and projects have highlighted and stimulated cross entity cooperation.”“My work with other affiliates has been more open and easier as a result of working together on our project.”“Created a stronger working relationship with officers.”While this anecdotal evidence is impossible to quantify, BellSouth believes that these factors will significantly affect the performance of the company in the future.THE CALPERS LEADERSHIP CHALLENGEOne of CalPERS (California Public Employees Retirement System) top five strategic initiatives is called “All Staff Training,” and is aimed at providing world-class training at all levels from unionized staff to senior executives. The initial effort within the All Staff Training initiative was the CalPERS Leadership Challenge workshop which was conducted top down throughout the organization. The first workshop participants included CEO Jim Burton and the top eleven executives at CalPERS.One of the key objectives of the three-day workshop was to “strengthen leadership capabilities”. The stated objective of this aspect of the Leadership Challenge was no less daunting than to “produce, positive, measurable change in leadership behavior”. To address this objective, a custom designed (based on interviews and focus-groups throughout CalPERS) 360? leadership feedback instrument was created and completed by each participant, their immediate manager, their peers and people who reported to them. The 360? instrument was directly linked to the strategic challenges and objectives of CalPERS. During the Leadership Challenge, participants received confidential feedback on their survey results, and 1 on 1 private coaching. Each participant also created an action plan to both leverage strengths and address areas to improve their leadership effectiveness.Keilty, Goldsmith and Company created and conducted this segment of the Leadership Challenge. Included as follow-up to the classroom event, they provided two four-month assessments of progress, using a “mini-survey” a small 3 – 5 item inventory distributed to the participant’s manager, direct reports and peers. The most critical question asked on the mini-survey was: “Do you feel this person has become more or less effective as a leader in the past four months?” Approximately 90% of the respondents indicated improvement in leadership effectiveness over the four-month time. After the second four-month time period min-survey, 87% indicated improvement.This use of 360? feedback is one of the few ways we have to measure leadership behavior change. Keilty, Goldsmith and Company has done several extensive before and after studies using the clients full 360? feedback instrument to determine perceived change in leadership effectiveness over time (12 – 18 months after the initial administration and training). In a study including over 8000 people in one of the 100 largest companies in the United States, 95% of respondents indicated that leadership effectiveness had improved.EASTMAN KODAK’S PROFESSIONAL DIVISION, BUSINESS ADVANTAGE PROGRAMKodak Professional, a division of Eastman Kodak Company, developed and conducted the Business Advantage Program as a leadership development effort. The program had as its core, a customized business simulation developed and conducted by BTS (formerly Business Training Systems), located in Stockholm with US headquarters in Stamford, CT. The Business Advantage Program goals included:Increasing profitability.Having participants better understand both the total business and the financial interrelationships of the business.Improving financial performance.According to David Lester, Human Resources Manager responsible for the program at Kodak Professional, they used several levels of evaluation including participant reaction, learning transfer, results and return on investment. Participant reactions as measured through a traditional end-of-program process, were extremely positive. Ninety-eight percent of participants rated the program as either very good or excellent. Participants self-reporting indicated that their understanding and awareness of Kodak Professional’s key business was greatly increased. For example, 64% of the leaders who participated stated that their understanding and awareness of the influences that impact Kodak profitability was increased by a “great extent”.The Business Advantage Program has yielded major financial dividends. For example:“All my product line managers are taking this course, and we have been able to reduce inventory on total delivered costs to the tune of$30 million.”“Since attending the program we have found opportunitiesto reduce assets by up to$500,000.”“We have found ways to grow the top line of the business by up to $375,000.”“After attending the program, we had a better understanding of the impact that COGS (Cost of Goods Sold) has on revenues and assets. Our elimination of steps and reduction in inventory have translated to a savings of $3 million.”Four-hundred leaders and executives participated in the Business Advantage Program at a total investment of $1.44 million (including participant lost productivity, tuition and travel) compared to an estimated $23.4 million return, Kodak Professional estimates the ROI as roughly 16:1.GM LINKS BETTER LEADERS TObottom line? The pilot location was the only one to improve both culture and business performance. There was a 21% productivity improvement at the pilot plant, which translated into a $4.4 million savings to operating budget. This savings compared to a cost of approximately $300,000 to implement and evaluate the program. The return on investment was 15:1.There were also believed to be significant dollar savings resulting from increased quality, health, safety, schedule attainment and absenteeism, but these were not measured.IBM’S ACCELERATING CHANGEBETTER BUSINESS2TOGETHER(ACT) INITIATIVEThis leadership development effort took place within the Service Parts Organization (SPO) at General Motors. SPO was not meeting its customer’s needs. The division was in tenth place out of ten warehouse/ parts supplier companies surveyed. Ron Driggert, a Director in the SPO world headquarters wanted a test bed for evaluating the business impact of their executive / leadership development efforts.Initially, the leadership training was done as a pilot at one plant only. All senior leaders at the pilot facility participated in a two-day leadership assessment. Based on their individual performance, each person created an individualized development plan and then received training in the areas of coaching, developing accountability, promoting teamwork, quality, safety, communications and customer relations.Four similar facilities were used as control groups so that potential influences other than the leadership development intervention could be held constant. The effect of the leadership development intervention was assessed using the opinions of all plant employees.The results? The pilot location improved dramatically. Management and employee satisfaction increased. Culture had definitely changed in the desired direction, but what about the impact on the“GM links better leaders to better business”. Article from: Workforce; Costa Mesa; April 1998; Steven R. Davis, Jay H. Lucas, Donald R. MarcotteIBM’s ACT reaches across the organization and gives top executives an opportunity to assemble their best people to solve critical business issues and to educate them (and learn from them) about the current and future business realities.Pilot Consulting Corporation helped IBM achieve measurable results, drive sustainable change and build leadership capability through ACT.In designing ACT, Pilot used it’s three phased process that typifies their corporate change initiatives. The Scoping phase brings together key stakeholders to thoroughly examine the problem. At the 3-5 day Business Meeting, 30 to 100 participants typically divided into 3-5 sub-teams to work on parallel paths to resolve major components of a critical business issue. Executive leaders make “on- the-spot" decisions to support or reject the teams’ recommendations. The Implementation phase combines the approved recommendations into a single project plan and tracks execution through formal 30, 60 and 90-day checkpoint reviews. At 90 days, key business/cultural impacts and learnings are captured, measured, and communicated.The business impact of using the ACT methodology to improve workplace learning and to develop leaders has been considerable at IBM. Over 400 ACT sessions worldwide have been conducted and over 300 internal consultants have been trained with the following overall results:Measured impact included:Increased revenue growth = $3.25 BillionProductivity and overall client savings = $1.2B+Inventory reduction = $565M+Market share growth = $3.75B+Anecdotal evidence includes these themes from statements made by a variety of executives:Strengthenedleadership:makingpublic decisions and using ACT tools to sustain changeFaster and more disciplined implementation: visibleownership, commitment, monitoring actionsEnhanced cross-business literacy: strategically aligned with one voice to the customerImproved knowledge management: applying learnings across the matrices.Built internal capability to conduct ACT. ACT EXAMPLE: IBM’S CROSS SELL UP SELLThe purpose of this specific ACT was to define and implement a plan to effectively cross-sell and up-sell in each customer segment using the web to increase the closing rate by 50%, incremental web revenue by 10%and overall customer satisfaction. The measured results included an increase in incremental revenue of $62M and an IBM return on sales of 10% in the first year slightly higher in the second year.The executive sponsors, Mark Shearer, Vice President, Marketing IBM Americas and Harvey Bergman, Senior Manager, Interactive Marketing IBM Americas, used their influence to bring the right participants and decision-makers to the table. They took risks at the decision-making session by publicly asking their peers to commit resources. And throughout the implementation, they led the checkpoint reviews, removed roadblocks and modeled collaboration and how to work effectively across organizational boundaries. They also ensured that processes and people were in place to sustain the momentum beyond the 90-day checkpoint by dedicating project management resources to monitor progress.At the 60 day checkpoint, Mark Shearer commented, “ACT makes you a better leader -- by giving me the structure and tools I needed to mobilize commitment from my executive colleagues and my team, we aremaking a difference for our customers and for the future positioning of our business”SIEMENS NIXDORF INFORMATIONS SYSTEME AG TRAINS UNIT MANAGERS TO BE ENTREPRENEURSBabson College located in Boston, MA has an exceptional reputation in the field of entrepreneurship. The mission of their Center for Entrepreneurship is to “enhance entrepreneurship education and practice worldwide.”Professor Neal Thornberry of Babson led the effort to create a customized program for Siemens Nixdorf in Munich, Germany, to train 300 Unit Managers to become entrepreneurs. The Unit Manager position was new in Siemens Nixdorf Information Systeme (SNI) and would play a critical role. Unit Managers would have P&L responsibility, be expected to be close to the market and to drive the growth of the business. The Entrepreneurial Development Program (EDP) was five-weeks in length. The program design was two two-week segments with sixeight weeks allotted for between module work. The specific EDP objectives included:The identification, development & capturing of new business opportunitiesThe development of unit managers as corporate entrepreneursThe development of general management skills including finance, marketing, teamwork and leadershipto help Unit Managers in implementing new business ventures.During EDP, unit managers were asked to develop a complete business plan, which they would then use to ask the SNI board for resources. The business plan opportunities could not simply be derivatives of what SNI was already doing, but ventures involving new products and new markets.Twelve EDP’s were run with approximately 30 Unit Managers in each session. During EDP, Unit Managers conceived new product and service ideas and developed implementation plans.The impact? In assessing the financial impact of EDP, one case is a good example: One of the Unit Managers used the program concepts of creating a unique value proposition for customers as well as value selling and developed a new client that resulted in $250 million in revenues. The participant directly attributed his success to the concepts, skills and tools learned in the program.According to Jürgen Samuel, Project Director of Innovation Initiatives at Siemens, “While participating in the program, I developed the business plan for Siemens International Venture Capital Program, which is now in place at the company. The program really helped me understand how venture capital works and how to determine funding and financial returns. It also made me aware of entrepreneurial thinking and how this fits into our environment.”THE WEYERHAEUSER LEADERSHIP INSTITUTEAccording to then CEO of the Forest Products Company, Charlie Bingham, “We designed the ‘Leadership Institute’ to narrow the gap between where we are and where we must be – leading the forest products industry.”The Leadership Institute began with a week of outdoor leadership and teaming exercises and ended with a week of “mind-crunching business exercises”. The four intensive weeks (over two years) were aimed at equipping their top 1300 executives with the leadership capabilities and sense of purpose that they needed to lead the company in a new direction.According to Horace Parker, Director of Strategic Education for the Wood Products / Timberlands Sectors at Weyerhaeuser, “Everything was done with a bias toward action. It was intended to change how the company was run, and that made the Institute unique.” One of the innovative aspects of the Institute was the inclusion of four to five major customers, in the second week of the Institute which was aimed at building and leading a customer / focused organization. The idea was to learn what it meant to develop long-term, profit partnerships between Weyerhaeuser and its major customers. The finalweek of the Institute dealt with financial management from an entrepreneurial perspective. Participants were engaged in a customized, computer-based simulation where they were provided the opportunity to apply what they learned in the Institute in running their own business and receiving immediate feedback on their effectiveness.The business impact of the Leadership Instituteincluded the following:They realized $50 million in productivity improvements from projects that were begun in the Institute and subsequently implemented.Sales with customers who attended the Institute increased by 24%.Weyerhaeuser Forest Products Company became rated number one in customer satisfaction compared to their key competitors.Their financial performance improved from the third to the first quartile compared to their key competitors.They realized a significant increase in their performance compared to competition, in return on net assets.Reviewing the impressive results achieved at Weyerhaeuser, a cynic could argue that the dramatic improvement in their performance relative to competition (the last three bullets) might have been coincidence. That, after five years of below average performance compared to competitors, Weyerhaeuser moved into the top tier of their industry due to factors unrelated to the Leadership Institute. However, Weyerhaeuser executives directly attributed much of the performance improvements to the Leadership Institute.CONCLUSIONSIt is hard to ignore the evidence of the Business Impact of Corporate Executive Development presented in this study. However, we at Executive Development Associates are biased. We make our living developing customized programs like the ones described in this study and you can be sure that we want to be sure that we are making a difference. We were prompted to conduct this study by clients and other colleagues who felt a strong need for moresubstantial evidence to support their work. Some would agree that this kind of evidence doesn’t measure up to the rigors of scientific research (it probably doesn’t) and others might say that executive development should be an act of faith and and should not be measured. Regardless, our assumption has been that this information could be valuable to many people who pay the bills for executive development (internal clients) or who are responsible for the executive development efforts in the companies (practitioners).Perhaps the real question that bothers human resource and executive / leadership development practitioners is this: Does what we do matter? Are we making a difference? I believe that we are all driven by a powerful need to know that we’re making a difference in our work. We spend too much time at it to simply be punching the clock and cashing our paychecks. This study demonstrates a variety of cases where it is crystal clear that what we do does indeed matter. And of course, the results could be used in cases where we need a lever to open the door with top executives so that we have the opportunity to do just that.Finally, this study is a work in progress. The authors would appreciate hearing about your own efforts to measure the business impact of executive education and leadership development efforts.About the AuthorsJames F. Bolt is Founder and Chairman of Executive Development Associates (EDA). EDA is a leading education, consulting and networking firm specializing in the strategic use of executive/leadership development. Bolt founded EDA in 1982 after 16 years with Xerox Corporation initially in Marketing and Branch Management and then as Corporate Director, Human Resources Planning, Training and Development.Kevin J. Sears is a graduate student in the Master’s of Science program in Industrial / organizational psychology at San Diego State University and will be graduating in the Spring of 2000. During the past year, Kevin has worked with Executive Development Associates in the capacity of Research Consultant.Executive Development Associates’ mission is four- fold. We exist to: 1) Help executives and organizations achieve their full potential through high-impact, custom-designed executive/leadership development strategies and programs; 2) support executive/leadership development practitioners through powerful research, educational experiences, and "community of practice" networks that foster their personal and professional growth and success;3) be advocates for, and promote, the strategic use of executive/leadership development; and, 4) be the source for information about best practices as well as leading edge thinking and activities in executive /leadership development.For more information, write or call Executive Development Associates at P. O. Box 9710, 16236 San Dieguito Road, Suite 1-20, Rancho Santa Fe, CA 92067-9710, (858)759-2838, or e-mail atjbolt@ or visit our website at AcknowledgementsThe authors wish to thank the following people for their contributions to this report: Melanie Cadenhead, Director, Executive Education, BellSouth Leadership Institute; Christopher Cappy, President, and Teri Riddle, Lead Project Manager and Consultant / IBM ACT, Pilot Consulting, 20 Grove Street, Ste 2, Peterborough, NH 03458, (603) 924-4300; David Lester, Human Resources Director, Kodak Professional Division, Eastman Kodak Company; Horace Parker, Director, Strategic Education, Weyerhaeuser Company; Tom Pettey, Chief of Human Resources California Public Employees Retirement System (CalPERS); Professor Neal Thornberry, Faculty Director at Babson’s School of Executive Education and Associate Professor of Management, Babson College, Babson School of Executive Education, Wellesley, MA 02457-0310, (781) 239-5331; and, MarshallGoldsmith, Found-ing Director, Keilty, Goldsmith & Company, P. O. Box 9710, Rancho Santa Fe, CA 92067, (858) 759-0950 and Brian Underhill, Consultant, Keilty, Goldsmith & Company, P. O. Box 9710, Rancho Santa Fe, CA 92067, (858) 759-0950. ................
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