Academic journal article The McKinsey Quarterly

How Executives Grow

Academic journal article The McKinsey Quarterly

How Executives Grow

Article excerpt

Talent can be bought, but the best companies develop their own.

Most companies are poor at developing their executives, and most of them acknowledge this: only 3 percent of the 6,000 executives occupying the top 200 positions at 50 large US corporations examined by a recent McKinsey survey strongly agreed that their organizations developed talent quickly and effectively. [1] In no area of executive development--job rotation, traditional internal and external training, or mentoring--did a majority of these executives believe that their employers were doing a good job (Exhibit 1, on the next page).

Some companies feel that their high performers will rise to the top naturally, like cream. Others, believing that talent can be bought, try to recruit executives from such sources as General Electric, a famous developer of people. In fact, though businesses should look for senior-level talent outside their own organizations, they themselves must also be good at developing it. In the first place, as talent becomes scarcer--and demography suggests that it will--the "buy-only" strategy becomes risky and expensive. Moreover, recruiting all of a company's senior executives externally sacrifices cultural cohesion and institutional memory. In any case, companies that can't develop their own talent find it hard to attract good people from the outside.

Job experience drives executive development

Companies develop executives in various ways: by giving them feedback, coaching, mentoring, and training. But more than anything else, executives need on-the-job experience in appropriate positions. What makes positions appropriate? Four considerations are crucial.

The first is the way a job is structured: the executive who holds it should have both headroom (authority and responsibility) and elbow room (scope and variety). Organizations that are decentralized or that have many "P&L jobs"-- in which the holder's decisions are linked to, and measured by, the company's profit or loss--therefore create more opportunities for development than organizations that do not.

Second, people with high potential should move through a series of challenging jobs, for after two or three years the learning curve in any position tends to flatten out, and capable people start to chafe. How long any one person should stay put varies with the business, the extent of the challenge, and that person's ability to grow. One company's line executive held 18 positions in 24 years, and though not everyone can or should move so quickly, companies tend to leave executives in jobs much too long.

Third, this series of jobs should provide a range of challenges. Working in different geographic regions or with a variety of bosses requires executives to master new contexts. Leading a turnaround, stimulating a stagnant business, and influencing a company from a staff position draw on different skills.

Finally, executives need to learn their craft from highly skilled colleagues as well as superiors. The ability to lead can in part be acquired through apprenticeship, and apprentices learn more from world-class experts and leaders than from mediocre ones. Success, moreover, breeds success, so good people are likelier to stay with an organization that has many other good people.

The role of job experience in driving growth is fairly well understood. Thus, it is striking that only 10 percent of the 6,000 executives McKinsey surveyed thought that their companies used job assignments effectively. The problem is that the people who control the process--senior line executives--don't adequately factor development into their decisions. A division president naturally finds it safer to appoint an experienced, highly qualified candidate to a key position than to take a chance and stretch a possible future leader.

Furthermore, that division president might not know how to use job experience to develop people: in the McKinsey survey, 48 percent of human-resources executives said that most executives think development is simply a function of training programs. …

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