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A Higher Standard for Managers

Spending on managerial training initiatives is soaring as employers wake up to profound skills gaps. They are now demanding managers with strategic vision, global business acumen and an ability to nurture their employees.

June 22, 2007
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Related Topics: Career Development, Employee Career Development, Workforce Planning
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Chris Arvin is committed to nurturing managers at Caterpillar Inc. The company, which makes tractors, earthmovers and other heavy construction equipment, is trying to fend off domestic and foreign competitors. Having a highly productive and engaged workforce is pivotal in an industry in which margins are tight and talent wars intense. Arvin, 40, the dean of leadership at Caterpillar University, knows strong managers can serve as lodestars who guide employees to achieve extraordinary things. Likewise, poor managers have the opposite effect, leading to dissatisfied employees and higher turnover.

As Peoria, Illinois-based Caterpillar enters its 82nd year in business in 2007, managers are being held accountable like never before. Direct supervisors are responsible for helping employees map out long-term career paths with Caterpillar, a Fortune 100 company with about $36 billion in annual sales. They are expected to closely observe employee behavior to ensure that newly acquired knowledge is applied on the job. Managers at Caterpillar also are taught to be on the lookout for top performers who could benefit from job shadowing, job rotation and other forms of experiential learning.

    Employee feedback helps Arvin know how managers are faring. In isolated cases, learning goals for individual employees may be embedded within a manager’s own performance evaluation. The goal isn’t to threaten or intimidate managers into complying, but rather to help them understand the tremendous influence they can exert on employee behavior.

"Our leaders all have jobs to do, and many of them are working supervisors. All we’re trying to do is get them to realize, ‘Hey, if we’re going to provide these learning opportunities, you’re the biggest driver of making sure employees apply it,’ " Arvin says.

Caterpillar certainly isn’t alone in its desire to develop savvy managers. Organizations in all sectors are waking up to profound employee skills gaps, particularly within their managerial ranks. Senior executives are starting to feel the pain, and their angst is trickling down to human resources and training directors in the form of higher expectations.

    "Executives aren’t losing sleep over training, but they are worried about how they’re going to execute global business strategies. They are beginning to realize that identifying and developing leaders is a key part of that execution," says Jim Concelman, vice president of leadership development for Development Dimensions International, a Pittsburgh-based consultancy that has helped Caterpillar devise training strategies.

Soaring investment in manager training reflects CEOs’ heightened interest. U.S.-based companies spent nearly $56 billion on training programs and services in 2006, a one-year jump of nearly 7 percent, according to research firm Bersin & Associates. (Bersin’s report notes that its survey of 331 respondents is weighted toward smaller companies—78 percent of organizations surveyed had 100 to 499 employees—to reflect the makeup of businesses in the U.S., most of which are small.)

About one-third of that spending, or roughly $13 billion, was devoted to grooming leaders, including spending for manager training programs, outsourcing, trainers’ salaries, content development, coursework and other services.

    Bersin & Associates predicts that 2007 will be another record year for spending, with 63 percent of organizations sporting fatter training and development budgets. Moreover, management and supervisory training remains a top priority for 29 percent of companies, second only to sales training (33 percent), according to a January report by Bersin researchers. Overall, leadership development—including training for managers and supervisors as well as executive education (7 percent)—will receive a combined 36 percent of funding in 2007.

Josh Bersin, president of the Oakland, California-based firm, says companies are worried about where to find the next crop of line managers, supervisors and other management-caliber employees. One thing they know for certain: Demand far outpaces supply.

"The biggest problem that companies face today is an acute shortage of midlevel managers. They look around and just don’t have enough qualified people" to promote to those positions, Bersin says.

Nor can companies simply poach the best managerial talent from competitors, "because they probably don’t have enough managers either," he says.

Another study, this one by the American Society for Training & Development in Alexandria, Virginia, pegs corporate training investments much higher. According to ASTD’s annual State of the Industry Report, U.S. organizations spend a combined $109.25 billion on learning and development each year, with about $79.8 billion consumed by internal training functions. Nearly $30 billion is spent for external services related to training.

Although ASTD’s study does not provide spending estimates for manager training, it notes that of all learning content developed in 2006, about 9 percent was dedicated to people in managerial or supervisory roles. That is up from 7.4 percent in 2005.

The spending on training also is fueled by frustration over the current, less-than-stellar level of managerial ability, experts say. Poor managers are widely believed to be a leading cause of employee dissatisfaction and high turnover. In response, companies want managers who are capable of teaching concepts, inspecting performance before and after training, and reinforcing what employees learn.

"Organizations used to focus on training every employee. Today, they’ve come to realize that they get more out of their investment by focusing on making sure managers have the right skills" to coach and lead, says Sharon Daniels, president of Tampa, Florida-based training firm AchieveGlobal.

During the past year and a half, Daniels says, employers have become more demanding. "We’re being pressured to do a lot more training of people on the job. Companies are telling us: ‘I don’t have time to send somebody to class for a day, so train my managers to help employees focus on [a handful] of tasks that can have an impact on that day’s business,’ " Daniels says.

Coaching to coach others
   Although training dollars appear plentiful, companies are spending more wisely, says Jan Rose, a principal with Chicago-based HR consulting firm Capital H Group. The idea is to more closely align training initiatives to accomplish strategic objectives, such as increasing market share, bringing products to market sooner or reducing customer service calls. Management-training fluff—courses such as "How to Get Along With Difficult People"—is rapidly disappearing from corporate curricula.

"Instead of a wide, diverse set of courses developed from an employee wish list, companies are saying: ‘Here is our business strategy. Let’s work on the five or six skills gaps that are obstacles to achieving that strategy,’ " Rose says.

    Before launching its blockbuster $2.4 billion initial public offering in May 2006, MasterCard trained about 200 managers to deliver interactive learning to help its workforce prepare for the distinct changes that would ensue. Special attention was paid to educating employees about heightened scrutiny the company would receive, both from government regulators and from investors.

Representing a cross section of MasterCard’s 4,600-person workforce, managers were trained as "table coaches" to facilitate discussion using a series of interactive learning maps created specifically for MasterCard by Root Learning Inc. of Maumee, Ohio.

"We wanted people to understand our strategy, our financial models and the roles they would play in executing that strategy," says Rebecca Ray, MasterCard’s senior vice president of learning.

Training was delivered live and through e-learning modules. Most employees participated in live sessions set up in huge hotel ballrooms in 12 cities around the globe. Other sessions were facilitated in smaller MasterCard offices. Table coaches probed employees about their individual job roles and helped them to understand their roles in helping the company achieve its strategic aims.

The sessions are regarded as the greatest single learning event in MasterCard’s 41-year history, and Ray says participants left with greater insight into the company and greater enthusiasm for their jobs.
"Our table coaches did a fabulous job helping our employees understand where we needed to go as a company. It was one of the most powerful things I’ve ever seen," Ray says.

Engaged or disengaged?
   Employee engagement is another motivation behind companies’ emphasis on manager training. Campbell Soup Co. evaluates managers based on engagement scores culled from employee surveys. Every manager with at least five direct reports receives periodic engagement reports to use as a self-assessment tool.

But it’s not simply a feel-good document for successful managers, nor is it a weapon used to hammer underachievers. "Employee engagement is the metric we use to measure the health of our workplace. That means focusing on improving the quality of our managers," says Mindy MacKenzie, vice president of human resources for Camden, New Jersey-based Campbell.

MacKenzie speaks from experience. Despite having numerous well-known consumer brands, including its signature line of soups as well as products by Pepperidge Farm, Swanson’s, V8 and others, Campbell found itself at a crossroads in 2001.

Attempts to diversify, including an ill-advised effort at selling fitness equipment, proved a poor fit. A foray into the European soup market sputtered. Turnover in the executive suite didn’t help matters. When Douglas R. Conant took over in 2001, he was the fourth CEO in 12 years. And Campbell had become a company of "disengaged, untrusting and unhappy workers," MacKenzie says.

"And we had gone from being the best food company in 1996 to being the worst food company," she says.

Conant and his executive team immediately set about trying to revive the sagging spirits. Upgrading the competencies of managers was paramount, especially helping them communicate effectively and facilitate employee learning. Efforts to track engagement have proved fruitful. After six years of tracking results, MacKenzie says there is a direct correlation between engaging managers and improved business results.

"The business units [whose managers] have the lowest engagement scores also have the lowest business results," MacKenzie says. "Rarely is there an anomaly with that." Likewise, Caterpillar uses employee engagement surveys and a nine-question "leadership index" to determine whether managers are spending time developing their employees, Arvin says.
"We knew we needed to spend more of our energy in supporting managers to change employee behaviors, not just keeping up with training classes," Arvin says.

The passion to build an engaged workforce is not unusual. About 54 percent of human resources and training directors cite engagement as a major challenge heading into 2007, according to a recent survey by the Ken Blanchard Cos., a learning consulting firm in San Diego.
Companies’ obsession with nurturing strong managers is leading to more highly integrated talent management strategies, experts say. Recruiting, hiring, onboarding, training, career development, succession planning and retention are all driving an intensified focus on cultivating capable managers. Even bastions of the digital economy are feeling the pressure.

Launched 12 years ago, Yahoo Inc. has evolved from an entrepreneurial startup to a sprawling global enterprise with 12,000 employees. Such explosive growth can be a double-edged sword.

    "When you’re a fast-growing company, it’s really hard to get everyone to stop and focus on career development," says Libby Sartain, chief people officer at Sunnyvale, California-based Yahoo.

To deepen its bench strength, Yahoo launched the Executive Leadership Series two years ago. Through the program, promising managers gain exposure to business issues and boost their chances of advancement. In addition, Yahoo last year began requiring all managers to undergo an intensive three-day training course "that covers everything you need to know about being a manager at Yahoo," including HR policies and procedures, legal issues and other business concerns. The initiatives have combined to help Yahoo boost its internal rate of promotions for senior positions by about 35 percent.

"If we had not done the Executive Leadership Series two years ago, I don’t think we would have had as deep a bench as we do now," Sartain says. "Our goal is to fill senior positions from within about 70 percent of the time. In order to do that, you have to be developing your people. When people see career opportunities happening inside the company, they’re more likely to stay."

Overcoming cultural barriers
   Globalization and a shrinking labor pool are prompting more top executives to examine the competencies of their managers, says Pat Galagan, executive editor for ASTD. For one thing, companies realize they can’t penetrate burgeoning markets in the Asia-Pacific region and elsewhere without first equipping managers to lead teams of culturally diverse, globally dispersed employees, Galagan says. Second, "no ready-made managers are coming out of business schools" in India and China, two of the fastest-growing regions. That’s forcing U.S. multinationals to look into its own employee ranks for people who can lead teams of workers both stateside and abroad.

Finally, the changing face of organizations is forcing managers to learn new skills. Concelman, the Development Dimensions International consultant, notes how global organizations are flatter than ever, with lines of accountability blurred or indistinct. The baby boomer retirement phenomenon, not usually considered a global issue, is manifesting itself in some of Europe’s mature economies. Newer free-market economies are emerging in Eastern Europe and the Asian subcontinent. All these developments pose challenges for companies seeking to compete through their talent.

    "More and more organizations are realizing they can’t just leave it up to individual business units to buy a polyglot of training and roll it out whenever they see fit," Concelman says. "They need a common set of leadership expectations and a common set of development processes."

And they want people who can coach, nurture, inspire, encourage and spot potential leaders. As the world seems to grow smaller, the role of managers seems destined to grow ever larger.

Workforce Management, June 11, 2007, p. 21 -- Subscribe Now!

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