This document summarizes key leadership practices at top companies that allow them to successfully drive organizational transformation and change. It discusses how Procter & Gamble transformed under new CEO A.G. Lafley in the early 2000s. It then outlines a leadership blueprint for managing continuous change, consisting of six core components: 1) Weaving leadership with strategy; 2) Starting leadership transformation at the C-suite level; 3) Investing in developing the best talent; 4) Institutionalizing formal leader development processes; 5) Grooming future leaders with the skills needed for tomorrow; and 6) Reinforcing desired future leadership behaviors. Top companies closely link leadership development to business strategy and have CEOs heavily involved in talent management.

1. 4 0 L E A D E R T O L E A D E R
I
n June 2000, Procter & Gamble (P&G), the 163-
year-old consumer products company, was in serious
trouble. Earlier that year, the stock plummeted from
$116 per share to $60 in two short months, a loss of
over $50 billion in capitalization. When the CEO re-
signed under pressure, the Board offered the top job to
A. G. Lafley, a 23-year veteran at P&G.
Lafley has made some radical and symbolic changes at
P&G. He tore down the offices on the 11th floor of the
Cincinnati headquarters, where for over 40 years, the
company’s leaders had sat in offices richly paneled in
dark wood. It was formal and austere. Today, executives
share open offices that are bright, modern, innovative,
and equipped with the latest technology. An all-pur-
pose training center occupies two-thirds of the space.
The change is more than a symbol; Lafley expects his
team to model the collaborative and open environment
he wants throughout the company. He also expects con-
tinuous learning and growth—and he expects leaders
to teach. P&G’s sales have more than doubled from $39
billion to more than $83.5 billion, market capitaliza-
tion has increased by more than $100 billion since
Lafley took over, and P&G is once again one of the
most respected companies on the planet.
There is much to learn from P&G’s example. First, P&G
had a strong pipeline of leaders who were ready and able
to fill the CEO slot. The Board didn’t have to go outside.
Second, Lafley transformed P&G in a lot of ways, but
like leaders at other successful companies, he started with
the leaders themselves—changing what was expected of
them, focusing more on innovation and growth and in a
number of cases replacing leaders who were not up to the
task. Once alignment was in place at the top, he and his
HR leaders strengthened the infrastructure needed to de-
velop leadership and talent capability throughout P&G.
The corporate landscape is littered with companies that
failed to change and scattered alongside them are the
CEOs that couldn’t lead the transformation. Industry
leadership is changing hands more frequently, the life
cycles for strategies are shrinking, and leaders every-
where are finding it more and more difficult to success-
fully change direction.
E X E C U T I V E F O R U M
BUILDING
LEADERSHIP
CAPABILITY TO
DRIVE CHANGE
Robert P. Gandossy and Nidhi Verma

2. W I N T E R 2 0 0 9 4 1
Why do some companies flourish while others founder
or fade away when faced with a transformation challenge?
After studying more than 500 companies in our 2007Top
Companies for Leaders research, the largest global study
ever undertaken on what great companies do to develop
talent, leadership clearly emerged as a critical lever in driv-
ing transformation. This article is based on our research
and our consulting in driving change through talent and
leadership. (See the sidebar, “The Top Companies for
Leaders Research.”) One clear finding in our 2007 study
is that top companies first transform leadership to trans-
form the organization. It is their approach to sourcing,
engaging, developing, and advancing current and future
leaders that builds a top company’s ability to deal with
change. This article describes how they do it.
A Leadership Blueprint for
Managing Continuous Change
No company, regardless of scale or size, is immune to
today’s complex and changing business climate. There
are, however, some smart and resilient players who have
achieved enduring success. They are our usual sus-
pects—General Electric (GE), P&G, IBM, McDon-
ald’s, and a few other boldface businesses who
consistently win the race for market dominance. Lead-
ers in these highly successful and vibrant companies
have discovered the way to play the game right.
Our Top Companies for Leaders research shows that
organizations with a ready supply of talent and an abil-
ity to cultivate leadership capabilities up and down the
ranks are well positioned to withstand turbulence in
today’s business world. Top companies share common
characteristics and cultures that predispose them to
manage and master change. These common themes
have guided us in developing a leadership blueprint, a
road map to help organizations successfully navigate the
business challenges of tomorrow. The blueprint for lead-
ership integrates six core components as depicted in Fig-
ure 1 and described in the following sections.
Weave Leadership with Strategy
Leaders at top companies view leadership with a busi-
ness lens. Leadership, for them, is a business impera-
tive. They focus on leadership practices as a way to drive
future business success. Much as we saw at P&G, exe-
cuting on strategy begins at the top of the house—who
leads and what do you want them focused on? As one
top company executive told us, “Leadership develop-
ment is so much a part of our culture that we do not
think of it as a discrete activity, but how it is linked to
the way we do strategic and operational plans.” Eighty-
five percent of top companies very explicitly link devel-
THE TOP COMPANIES FOR LEADERS RESEARCH
Hewitt Associates initiated the Top Companies for Leaders research in 2001, seeking to identify those factors that allow finan-
cially successful organizations to consistently produce great leaders. The first results, published in 2002, uncovered a link be-
tween financial success and great leadership practices, and identified differentiating elements found only in top companies.
Subsequent undertakings in 2003 and 2005 further expanded our examination of successful leaders and their impacts on
the organization. The 2007 Top Companies for Leaders study was conducted by Hewitt Associates in partnership with For-
tune and the RBL Group and had the participation of 563 companies globally. Of these, 250 companies around the world
were identified as finalists based on their strong leadership practices.
Top companies transform
leadership to transform the
organization.

3. 4 2 L E A D E R T O L E A D E R
oping leaders with the organization’s business strategy,
in comparison to 37 percent of other companies.
The nation’s top defense contractor, the brains behind
such high-tech military hardware as the F-16 fighter jet
and a variety of land and sea missiles, Lockheed Martin
has enjoyed a highly successful five years of profitable
growth in large part due to the government’s increased
spending on the global war on terror. Realizing that
these strong tailwinds may be slowing for the entire
aerospace and defense industry, Lockheed Martin has
laid out new strategies for continued growth. It plans
to move into new domestic and international markets
and also pick up the tempo on acquisitions. This means
developing leaders who are able to identify, capture, and
execute on new market opportunities as well as those
who can perform with flawless execution with current
customers. To achieve this, under CEO Bob Stevens’
stewardship, the company designed a new leadership
model called the Full Spectrum Leadership, intended
for all leaders. The model drives competencies and be-
haviors Stevens and his leadership team believe will be
needed to achieve the company’s strategy. To sharpen
the behaviors, next-generation talent will be taught the
skills and capabilities needed for the future in the com-
pany’s brand new leadership center.
Start at the C-Suite
A fundamental discipline that separates best companies
from the rest is their senior teams’ involvement and sup-
port in building leadership quality and depth. Senior
teams, particularly the CEOs at the top companies,
drive the leadership agenda. They walk the talk and lead
by example. Companies such as GE, IBM, or P&G
have a long tradition of CEOs and senior leaders spend-
ing a disproportionate amount of time on leadership
and treating the development of the firm’s highest-po-
tential leaders as a personal responsibility. “It may be
my biggest legacy,” says Lafley.
In his acceptance speech for the 2007 Executive of the
Year award presented by the Academy of Management,
FIGURE 1. THE LEADERSHIP BLUEPRINT
Lafley can talk about the
top 300 people in great
detail.

4. W I N T E R 2 0 0 9 4 3
Lafley emphasized the “rigorous, intentional way we
[P&G] approach leadership development,” including
his own direct role in career planning for P&G’s top
500 people, as the most distinctive factor in P&G’s
success. Lafley is known to spend hours annually on
Global Leadership Council meetings. He has regular
business and talent reviews with each of his 20 busi-
ness line presidents and monthly meetings with a hand-
ful of his top executives and the global HR officer. As
a consequence, he can talk about the top 300 people
in great detail, including performance, potential, and
careers. He also conducts several sessions in the com-
pany’s various week-long leadership development work-
shops for senior executives at P&G. Even as U.S.
consumers tighten their wallets, P&G continues to de-
liver double-digit EPS growth.
Moreover, leaders in top companies like to teach more
than tell. Driven by a sense of reciprocity, the current
generation of leaders in top companies is determined
to invest time and resources in developing future lead-
ers, in the same way that someone took a chance on
them. Senior management at all the top companies is
actively involved in the design and delivery of key devel-
opment programs.
Invest in the Best
Top companies focus their effort on tracking and de-
veloping leaders at all levels in their organization, but
critical talent is considered a top priority. They are rig-
orous about who they hire. Recruiting the best and the
brightest is not a guarantee that you will have the best
leaders, but it provides the right foundation. Identifying
and aligning the skills, values, and experiences of high
potentials to the future business vision and priorities
helps ensure successful development of a strong leader-
ship pipeline. Eighty-five percent of top companies have
a formal process for identifying high potentials or equiv-
alents, compared to only 61 percent of all other organi-
zations. They develop their critical talent through
stretch assignments, action learning projects, exposure
to senior leaders, and real developmental experiences.
In fact, 80 percent of top companies grow their talent
by having them change jobs often. Just over half of
other companies do so.
Top companies realize that the key to building a great
talent base is identifying high potentials and putting
them in challenging assignments early in their careers.
This helps emerging talent bond with the business,
keeps them from jumping ship when they are most vul-
nerable during their early years, and allows them to
build institutional knowledge and memory that they
can build on as they evolve into more senior roles. Most
important, the earlier an investment is made on poten-
tial talent, the sooner the entire organization reaps the
rewards of more effective leadership. GE’s popular Cor-
porate Entry-Level Leadership Programs have existed
for over a decade and are a proven success, producing a
strong talent pipeline of future leaders for the organi-
zation. The company offers accelerated development to
recent college graduates with leadership potential.
Through a series of rotating assignments across GE’s
businesses, young professionals are given real-world ex-
perience, mentors, global networking, and formal class-
room learning. No surprise—applications for entry-level
jobs tripled in 2007, and GE was recognized as one of
the top 20 Best Places to Launch a Career in a recent
Business Week survey.
But focusing on your best talent to drive strategy is only
part of the story. Oftentimes leaders need to be replaced
when they are not up to task of driving needed changes.
In a turnaround, it is unlikely that the people who cre-
ated the mess will get you out of it. When A. G. Lafley
took over P&G, he changed half the leadership team
and realigned their priorities. Lou Gerstner did the same
GE’s popular Corporate
Entry-Level Leadership
Programs are a proven
success.

5. 4 4 L E A D E R T O L E A D E R
when he took over IBM. When Larry Bossidy took over
AlliedSignal in 1991, he personally interviewed candi-
dates for over 300 positions before establishing an en-
tirely new leadership team.
Institutionalize the Leader
Development Process
Developing leaders who build needed capabilities is not
accidental at top companies. It is a clear and increas-
ingly calculated process. Some companies not only
know what it takes to build capability for certain desti-
nation jobs, they even know the sequence of experiences
needed to get there. And they can be quite systematic in
making that happen.
For one leading consulting organization, widely respected
for developing world-class talent, it all begins with who
gets hired. Every candidate endures six to nine rounds of
interviews involving testing and assessments on problem-
solving and leadership capability. Once hired, they face
the same rigor when it comes to developing capability.
The firm purposely keeps associate-to-partner ratios as
low as 5 or 6 to 1 to ensure lots of day-to-day coaching
and mentoring. Each consultant has a mentor, stretch as-
signments are the norm, and to prepare consultants for an
increasingly global world, nearly half of them worked on
assignments outside their home country in the past year.
Every project ends with an evaluation, and developmen-
tal experiences are planned on a regular basis depending
on how the associate is progressing.
Many global corporations have similar talent processes
for identifying and developing critical talent. The differ-
ence is, the winners of the talent game are those who
have integrated these processes tightly, across the entire
talent life cycle—from acquisition to development to
retention. Top companies use their talent review and
performance management processes, and their compe-
tency assessments, to identify high potentials 90 per-
cent of the time. This is not the case with other
companies, which use such reviews only slightly more
than 60 percent of the time.
Groom Tomorrow’s Leaders Today
If change is your constant companion, then developing
leaders simply for today will always leave you behind.
Top companies are hard at work identifying skills and ca-
pabilities needed for the future—they must be very adept
at seeing around corners so they have the talent needed
when the market shifts. In the high-tech world at IBM,
for instance, talent is everything, and carefully monitor-
ing employee skills and capabilities and forecasting needs
is a challenging task. A team of talent executives is embed-
ded in each of IBM’s businesses. These executives cut
across the silos typical of so many companies’ approach to
talent management: staffing and development, rewards,
and performance management. They also monitor and
forecast the “hot skills” in demand by IBM’s businesses.
If IBM is going to win, the leaders need to know where
each market is shifting and have a steady supply of talent
to meet the demand. Employees anywhere in the world
can view these hot skill areas, create their own personal
development plan to attain needed and marketable skills,
and take advantage of IBM’s $700 million annual invest-
ment in “upskilling” the workforce.
Top companies are also aggressive about preparing for
an increasingly global world. For example, at P&G, 35
of the top 46 global officers have experience on interna-
tional assignments. IBM’s Global Citizen’s Portfolio,
announced last summer, is a powerful step in this di-
rection, as well. The initiative offers a suite of programs
to help IBM employees enhance their skills and exper-
tise in order to become global leaders, professionals, and
empowered citizens in the 21st-century workforce. In
March, IBM selected 100 employees out of more than
5,000 high-potential applicants to participate in the
company’s new Corporate Services Corps program, a
part of the Global Citizen’s Portfolio, to develop leader-
ship skills while addressing socioeconomic challenges
Developing leaders for
today will always leave you
behind.

6. W I N T E R 2 0 0 9 4 5
in emerging markets. Twelve teams of employees will
be sent to Romania, Turkey, Vietnam, the Philippines,
Ghana, and Tanzania to work on projects that combine
economic development and information technology.
Top companies identify the business-critical skills and ca-
pabilities required to face the realities of tomorrow. A
whopping 85 percent of our “Global Top Companies”
believe that their organization currently has the talent
pipeline it needs to be successful in the future, in contrast
to only 42 percent of all other companies. The talent re-
view process in these companies offers a clear and valid
assessment of high-impact roles that will prepare top tal-
ent for future priorities. Several opportunities to be in
stretch roles and acquire new experiences are offered in-
cluding planned formal assignments across geographies,
functions, and business units. In addition, top companies
also use action learning to both develop top talent and
generate creative solutions to business’s vexing problems.
Reinforce Desired Future Behaviors
Top companies differentiate themselves by specifically
customizing leadership programs to embed desired be-
haviors. When GE’s Immelt realized that the company’s
relentless focus on revenue generation—and the ten-
dency to weed out those who don’t deliver it—was mak-
ing its managers risk averse, he introduced a cultural
revolution to spice the company’s cautious culture with
creative energy. Immelt encouraged business leaders to
submit “imagination breakthroughs”—projects designed
to generate $100 million or more in revenue within three
years. These ideas, which must have the potential to
grow the boundaries of the company, are reviewed and
discussed by the Commercial Council—a group of top-
ranking marketing and sales executives led by Immelt
himself. As part of its many efforts to nurture break-
throughs, GE invited in consultants of various stripes—
including choreographer Twyla Tharp, who has run
creativity workshops with businesses. It also introduced
innovation as a part of the curriculum for senior man-
agers at Crotonville to discuss and learn techniques that
will stimulate growth deep in their organizations.
To enable leaders to achieve growth targets and op-
portunities, GE also rolled out several leadership devel-
opment initiatives including a Growth Leadership
Trait model, which is part of its performance appraisal
process. In this model, every leader is evaluated on
growth traits on a yearly basis and measured equally
on “how” as well as “what” results are achieved. In
2006, GE launched the LIG (leadership, innovation,
and growth) program for top-tier leaders. The training
program is intended to drive growth across the com-
pany and is now being extended to the next level in
the organization.
Leading organizations use a number of ways to hard-
wire behaviors that matter most. Communications, se-
lection and promotion decisions, performance
management, succession plans, pay, education, high-
potential selection, and 360-degree feedback are com-
mon ways for top companies to reinforce leadership
behavior and expectations.
Facing the Future
Charles Darwin once said, “It is not the strongest of
species that survives, nor the most intelligent; it is the
species that is most adaptable to change.” Top compa-
nies realize that the biggest constraint to pursuing
growth opportunities and surviving in today’s fast-
paced, dynamic world is talent. They also realize that
actions, not words, build talent. Top companies have
created a leadership discipline and talent infrastructure
where organizational renewal can be both born and sus-
tained. Their leadership programs are not always novel
or original, but they confront their challenges strategi-
cally, systematically, and frequently. No different from
a winning sports team, the winners of the talent game
play by the same rules as their competition, but the way
in which they integrate and execute their leadership fun-
damentals is far stronger.
Actions, not words, build
talent.

7. 4 6 L E A D E R T O L E A D E R
Robert P. Gandossy is a global leader for talent
and organization consulting for Hewitt Associates,
with expertise in improving organizational effec-
tiveness and human resource strategy, and in in-
creasing growth through innovation. He has
written more than 50 articles and 5 books and
has been a speaker for a number of groups includ-
ing Harvard Business School, the Human Re-
sources Planning Society, the Wharton School,
and the Tom Peters Group, to name a few.
Nidhi Verma is a senior consultant in the Talent
and Organization Practice in Hewitt Associates.
She provides consulting and thought leadership on
talent management, performance effectiveness, and
change. She writes in the area of talent development
and strategic directions of the human resources func-
tion. Gandossy and Verma are coeditors of the forth-
coming book, “Workforce Wake-Up Call: Your
Workforce Is Changing, Are You?”