Building broad enterprise leadership capacity

Agricultural and energy cooperative.

Most people may not have heard of CHS Inc., but it is a Fortune 100 company, the largest agricultural and energy cooperative in the U.S., and a major player in feeding a burgeoning planet. It is owned by some 1,100 cooperatives and 75,000 farmers, ranchers, and producers, who are the main customers served every day by 11,000 CHS employees in the U.S. and 25 countries around the world.

Historically CHS operated as a series of silos—each emphasizing efficient execution, deep expertise, owner/customer focus, and rural American values such as integrity, accountability, an unrelenting can-do spirit, making a difference in the world, and treating others like family. This structure has helped CHS succeed in its commodity-based industries and generate employee and stakeholder loyalty. These values are at the core of the company’s culture.

The challenge: Broadening enterprise bench strength.

However, talent development and enterprise collaboration took a back seat to “getting things done.” From a talent management standpoint, the priority was on leveraging domain expertise and promoting vertically within silos. As a result, senior leaders often had great depth, but little breadth across the organization.

To meet the challenges of the rapidly evolving agriculture and energy industries and to continue to grow in size and geographic power, there needed to be a course change in talent management. Enterprise rather than silo leadership was necessary. Leaders still needed to exhibit core CHS values like integrity and accountability, but the future also required greater diversity of thought, “one enterprise” collaboration, global fluency, and agility.

As Adam Holton, Senior Vice President and Chief Human Resources Officer, who joined the company in 2014, explains, “In the past, deep domain expertise was the most important executive attribute. While leadership capacity was important, it came second." And there was a big chasm between the two. Now, we’re trying to flip that around to achieve a broader and more robust leadership bench.”

“It’s been a time of phenomenal growth and we’ve almost doubled in size over the past five years. The key to this has been a shift away from a short-term silo mentality to an enterprise mentality, with a systematic focus on talent management, development, and succession. We need to promote people who can demonstrate the capacity of thinking more broadly. We want our people to think bigger, create synergies, and drive enterprise collaboration,” emphasizes Carl Casale, President and CEO of CHS.

This thoughtful talent management shift can be seen in a series of leadership challenges that CHS has addressed in recent years.

CEO transition and the start of the transformation.

When John Johnson retired as CEO in 2010, there were no internal candidates with the breadth desired for the changing role, so CHS looked outside. Korn Ferry’s legacy PDI Ninth House unit assessed the external finalists using a holistic assessment process, helping the board understand which leader would have not only the required skills, experiences, and personal traits to handle the challenges ahead, but would also fit best with CHS’s unique culture and values. Casale stood out, was hired, and has led a transformational change journey in vision, strategy, and talent management, while setting repeated profit records.

A CEO who deeply values employees and champions talent development sets the stage for the success of any talent initiative. Casale is committed to ensuring CHS has the best talent for all critical positions, whether they come from inside or outside the organization. “We have needed to use parallel talent strategies. In the short term, we have hired some external candidates when critical top enterprise leadership positions became open because our internal talent was not yet ready for the roles and we did not have time to develop the breadth needed. At the same time, we are identifying those individuals who have the interest and potential to take on bigger roles in the future, building their breadth and capabilities by providing diverse experiences.”

While he does not expect all positions to be filled internally —“there is no perfect ratio, maybe three-quarters to four-fifths internal with some strategic hires from the outside”—Casale’s desire is for CHS’s internal leaders to be viable candidates for important positions. Indeed, so committed is he to internal succession that “Regardless of CHS’s financial results, if my successor does not come from inside, I will consider my tenure as CEO a failure.” Getting someone ready for the CEO position or other top roles takes time and clear intention. He notes, “If you think of a 10-year horizon to get leaders ready to compete for the CEO position, that only gives you time for about three key experiences. You have to be purposeful with what you do with them.”

To support this enhanced succession and development effort, CHS looked at the top 65 executives across the globe to identify who would be interested in advancing to the Senior Leadership Team (direct reports to the President), who had the potential to do so, what their skills and gaps were, and what they needed to do to get ready for a top role. Those who were interested went through an in-depth assessment with Korn Ferry, including career interview, personality and cognitive testing, and a realistic business simulation where they took on the role of a senior executive who has to think and act across business units and the whole enterprise. For a couple of days, participants faced the business and leadership challenges typically encountered at that higher level, had the opportunity to demonstrate their skills, and received clear feedback on their leadership capabilities.

Enhanced bench understanding and a powerful development experience.

The results were valuable for both the organization and participants. For Casale and his team, the assessments enabled a better understanding of CHS’s bench strength, including quantifiable measurements of each participant’s potential to advance, actual readiness for the next level, strengths and gaps to close, and development ideas. “The independent and objective insight comparing the global benchmark data of senior executive leaders provided by Korn Ferry has been very powerful in helping us identify gaps or strengths that weren’t apparent beforehand,” affirms Holton.

What the results showed overall was that there was a lot of potential talent, but not many leaders who were “ready now” or in the near future for the senior roles. It also confirmed that the biggest challenge was a lack of experience breadth, the result of historical silo talent management practices.

For individual participants, it was a powerful development experience, providing insights into their leadership skills compared to successful executives and their personal characteristics that can support or hinder their effectiveness. “The independent insight and comparison to a global benchmark of leaders at the senior executive level adds particular power,” states Holton. Participants came away with clear development priorities and a robust action plan agreed to by the participant, boss, and HR partner.

The experience also enhanced motivation for growth. Casale shares the story of an individual being considered for an open Senior Leadership Team role. Rather than being disappointed at not being selected, for the role, the leader’s job satisfaction and fulfillment increased notably. “The leader told me they had undergone more development in the last 90 days than in the previous nine years.”

Critically, the organization took the assessment information to heart and used it to drive the goal of creating broader, enterprise leaders. As Holton explains, “Of 18 recent internal moves, 14 were deliberately made to broaden the individual. Historically, they would have all been made on domain expertise. Instead, we took people out of their current units and put them into places where they had no experience.”

This has given leaders a chance to expand their enterprise appreciation, forcing them to think differently, be more agile, and truly lead rather than rely on their expertise. “They have to take on an enterprise view. It also challenges their change orientation. They see that to remain relevant, they need to change faster than the environment outside,” Holton affirms.

The moves, while challenging and surprising to some at first, are generating positive outcomes and spreading interest in leadership development. They have put a spotlight on the importance of owning and investing in career development. “A number of individuals have come to my office to seek out opportunities to broaden their careers. Two years ago, that did not happen,” says Holton. “Now leaders are more invested in their development—filling in what is missing experientially and broadening their leadership capabilities. By aligning with our leadership expectations and broadening their leadership capabilities, they know that their careers at CHS will be enhanced.”

Rolling development to all levels.

There is an appetite for learning more broadly in the organization also. CHS is committed to building out a learning culture for employees at all levels of the organization, not just executives.
The company has improved its performance management system, started a learning function, enhanced the coaching skills of all leaders, provided online development courses and "lunch and learn" opportunities. It also involves some bolder actions: there is a leadership development academy for midlevel high-potential leaders, which provides them the opportunity to have a say on key strategic issues and a commitment from Casale to implement recommendations. “It gives them a sense of power and pride that they can help shape the company at an early stage of their career.”

Both Casale and Holton agree that identifying high-potential talent more accurately and earlier in their careers is an important step in transforming talent management. Casale stresses, “We have very talented people. My responsibility is to identify our best people earlier in their careers to give them the optimal chance to reach their full potential.” Holton notes that identifying people with the potential to lead at higher levels should start “three to five years out of school” to afford time for the broadening experiences that can then drive development and enterprise leadership.

In the past, managers at CHS had not been adept at identifying employees with high potential to be leaders in the future. Often, current performance or length of service was confused with potential to succeed in broader challenges. They did not know what to look for or what questions to ask. Holton explains that for many decision makers “potential equaled tenure, so it was imperative that we became better at spotting actual potential earlier.”

Holton has put into place a process to help managers better understand what potential means and how to identify it in their up-and-coming leaders. A core element is learning agility, which is particularly relevant in predicting who is likely to succeed in new, broader roles.

Now CHS is taking the identification of high potentials to the next level, adding in additional elements that predict success in higher roles (including self-awareness, problem solving capacity, positive personality traits, and a lack of derailers).

As part of the process, the company is rolling out the Korn Ferry Assessment of Leadership Potential to all levels. This will provide managers with an independent, accurate, and scalable tool to calibrate impressions of potential and support more rigorous talent discussions tied to development.

An ongoing journey.

Transforming leadership in the support of new business challenges is not a quick or easy task. Holton remains realistic, “We have to remind ourselves that this is a marathon, not a sprint. We need to acknowledge where we came from and understand where we are going. It is a 10-year journey, not one where you bound three or four steps at a time, but one where every year, we attend to another step.”

With top leadership committed to internal development, thoughtfully adapted talent management processes, leaders motivated by development, and external partners to support the efforts, CHS is well into the journey and reaping the benefits.