ONE TEST ABOVE all others shows if an organisation's leadership development programme is really working. That is, if the current chief executive has been promoted from within or brought in from outside after a far-reaching and possibly time-consuming international search.
By this measure, US snack and beverage company PepsiCo passes with flying colours because, when Indra Nooyi assumed the position of president and chief executive in October 2006, she was moving up from the post of chief financial officer and had previously held senior roles in strategic planning and corporate development.
'Our succession management was heralded by 'the Street' [Wall Street], and one of the reasons is that stock price reflects the ability for executives to step up,' said Carol Surface, chief personnel officer for PepsiCo, Asia region.
She noted, though, that from the company's perspective, this was simply the logical outcome of having a system that expected people to perform, developed leaders at all levels and gave the range of experience needed to reach the top.
In terms of structure, the leadership development programme had two distinct stages - one for general career growth, the other for high-calibre talent. Roughly 10 per cent of executives are selected for the more advanced phase.
'The threshold is that you first have to deliver on the people and the performance side,' said Dr Surface, who has a PhD in industrial and organisational psychology.
'We weight it 50/50, so you can't just drive hard on the business results and leave a trail of dead bodies in your wake.'
She explained that the talent management model was based on letting staff accumulate experience in diverse roles. This was by far the best way of creating a pool of executives with all the skills needed for senior roles.
As a rule of thumb, the company also believes that 70 per cent of a development should be done on the job. Therefore, a list of 20-odd 'critical experiences' has been compiled, many of which an aspiring leader should expect to complete.
These include such things as a head office assignment, an overseas posting, spells in the snacks business as well as beverages, and running an operations division.
So, for example, someone who had successfully managed multiple market units in Chengdu might find their next assignment was in a staff marketing or sales role. Or, someone known to excel in 'fix it' situations might be asked to run a start-up.
'It might seem counter-intuitive for the organisation to do this, but it gives [employees] a breadth of experience and the opportunity to learn what they don't know,' Dr Surface said. 'Also, a lot of research indicates that three years is the optimum time for anyone to be in one role.'
For the first year, the company is investing while the employee adjusts and absorbs new information. During the second, he or she starts to contribute and, only in the third year, is firing on all cylinders and able to exert a lasting influence.'
After that, though, no matter how well things are going, high fliers tend to get bored and start looking for new challenges.
'That's why we keep an eye on the 36-month time frame,' said Dr Surface, adding that about 20 per cent of the development programme was in the form of mentoring, coaching and getting feedback, and the remaining
10 per cent was formal classroom training.
In Asia, this includes a week-long leadership academy run each November in collaboration with the Hong Kong University of Science and Technology.
Every year about 30 executives are invited to attend, and there is equal focus on business topics and personal development.
The course deals with strategy, innovation and customers, while also providing participants with a higher level of self-awareness about their own strengths and weaknesses.
'Time is spent on deciphering motivators and results,' said Dr Surface. 'We also have executive panel discussions on building a career at PepsiCo, and inspirational external speakers asking what you want to achieve.' In addition, the regional president tackles subjects such as how to have more influence and impact. This kind of senior executive involvement is seen as an integral part of the corporate culture, inspired by former company chief executives.
They all made a point of conducting annual training sessions for managers on the fast track and emphasised the importance of devoting sufficient time to developing talent.
Dr Surface noted that there were inevitably risks in a system that deliberately assigned staff to unfamiliar roles. However, it taught people to cope with steep learning curves and to be adept at applying previous lessons to new and unique situations.
'They may make mistakes, but not the same mistake twice,' she said.
To monitor progress, each executive has an annual action plan, mid-year review and defined checkpoints. These, though, are an opportunity to identify their ambitions for the next couple of years and state where they want to be three to five years hence.
'In career terms, PepsiCo is not paternalistic or prescriptive,' Dr Surface said. 'Individuals can articulate what they want to do and why. The organisation will then put the resources in place to help them get there.'