Developing midlevel execs often overlooked

Bill Kaplan, chairman and chief executive of Chicago-based Senior Lifestyle Corp., has built his business with passion and a lot of trial and error.

By Ann Meyer
Special to the Tribune

An entrepreneur who nearly 18 years ago saw the growing need for amenity-laden senior housing, Kaplan founded the company with a mission to care for each resident the way he would want his own family members to be cared for.

Today the $100 million business operates senior communities in Illinois and five other states.

Kaplan believes he has been successful, in part, because he understands that workers who are treated well will go the extra mile.

Yet Kaplan also has learned that strong top leadership doesn’t necessarily funnel down to strong midlevel leaders of a company. When he appointed a senior management team two years ago with the hopes of stepping back from the company a bit, he was disappointed.

He wanted to them to carry the company forward, but, he said, they didn’t have his vision and didn’t work well together.

"I wasn’t satisfied," Kaplan said. "People weren’t really on the same page. They could see it, and I could see it. We lost our way."

Experts say the situation isn’t unusual. Often, without intending to, a strong executive with a top-down management approach can deter the natural development of midlevel leaders.

It is a scenario that plays out not just at entrepreneurial firms but at companies all over. Very few companies are effective at developing leaders, according to a just-released study by Hewitt Associates Inc. in Lincolnshire.

Its study of 320 companies suggests only 20 excel at effective leadership development. Not surprisingly, they are big-name corporations such as General Electric Co., Dell Computer Corp., Procter & Gamble Co. and PepsiCo, which provide more developmental leadership opportunities than the rest. They offer up-and-coming leaders external training plus mentoring, job rotations and special assignments that encourage leadership development.

Only about one-third of the other 300 companies in the study offer mentoring and rotational assignments, while half offer developmental assignments and two-thirds offer external training.

Further, while the top 20 companies diligently identify high-potential leaders early on and invest in them through higher pay and leadership development opportunities, less than half of the other companies do the same.

But the investment in leadership has paid off for the top 20 companies, all of which have enjoyed a better five-year return on equity than their peers on average, says Marc Effron, global practice leader in leadership consulting at Hewitt Associates.

In fact, while many wonder whether leadership development really makes a difference, the Hewitt study found a direct correlation between leadership and a company’s financial success.

"Our financial analysis shows companies that are better led are more profitable," Effron said.

Programs can be inexpensive

And although Effron has heard many excuses for why companies can’t afford to offer leadership development programs, the programs don’t have to be costly or complicated to be effective, he said.

"These are things that take a bit of time, but they don’t really take much money," he said.

Mentoring, for example, is an excellent way to develop up-and-comers, and it costs nothing, Effron said. Similarly, techniques like "job shadowing," in which an employee spends one day a week or month seeing another side of the business, costs only the worker’s time. Appropriate assignments that will give the potential leader a greater understanding of the company also require only time, Effron says.

Support from top needed

But for any leadership development program to be effective, the study suggests, a commitment from the top is required. It takes the full backing of the CEO and board of directors.

"It takes the CEO communicating to workers that this is a place where they can learn and grow and develop," Effron said.

Effective leadership development also requires a "maniacal focus" on building high-potential leaders, Effron said. Too many companies let their potential leaders get away because they don’t identify them early enough or let them know they are valued, Effron said.

"They should be placed in challenging roles and given enough exposure to understand how more broadly the organization works," he said, adding they also should be compensated appropriately so they won’t be lured away by a competitor.

Lack of leadership development is a common problem because, in the hustle and bustle of day-to-day operations, most executives don’t take the time to step back and look at the big picture, said business consultant Ed Gubman of Wilmette, who specializes in leadership.

It’s a mistake to be too busy

Other times, it’s a lack of understanding of the importance of leadership development.

"Entrepreneurs are born, not made," Gubman said. "So they expect innovative leaders to emerge" on their own without a lot of careful planning.

For executives who haven’t had formal exposure to leadership development, the topic can seem more complicated than it needs to be.

And entrepreneurs may feel they’re too busy to add leadership development to their work load, but that is a mistaken philosophy, Effron said.

"It may be easier for smaller firms to implement these programs because they don’t have as many layers," so a CEO’s emphasis on leadership development is more likely to be heard, he said.

But often entrepreneurs realize the need for leadership development too late, Effron said. They figure it out when a problem arises, or the company stops growing.

Leadership wasn’t an issue at Senior Lifestyle Corp. for the company’s first 15 years, largely because it grew swiftly through acquisitions and mergers.

In retrospect, however, Kaplan said, "We grew so fast that we didn’t have the depth we would have liked."

Kaplan feared the company would stagnate if he didn’t do something. So, with help from Gubman, he shook up the management team.

"Bill’s smart enough to recognize that he didn’t have what he needed," Gubman said. "He kept the best that he had and went out and got what he needed."

During the past year, Kaplan said, he has made changes to 14 positions, letting some people go, moving and remotivating others and bringing in proven leaders from the outside to carry the company forward.

About six weeks ago, he added a chief financial and chief administrative officer.

Already, Kaplan said, you can notice a difference.

"Having the right people as leaders is like a chain reaction," he said. "Now we are poised for the future."

Copyright © 2003, Chicago Tribune

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