How HR creates value for the company through leadership culture development?

The case from MTU Aero Engines

Why are we talking about leadership development?

Developing the next generation of leaders is ranked in the top three challenges, along with global recession/slowing economic growth. CEOs acknowledged how critical it is for them to have effective leaders to drive their strategies forward and position their organization for future success. (Global Leadership Forecast 2021 report that examines responses from 2,102 human resource professionals and 15,787 leaders, spanning 50 countries and 24 major industry sectors. Published in partnership with HR analyst Josh Bersin, the research summarizes best talent practices and provides key trends to guide the future of leadership).

There is no doubt that effective global leadership development is vital to organizational effectiveness and competitive advantage. The shortage of global leaders could be a major threat to the future growth of international companies. We address this gap by presenting a case study of the Leadership Development program at MTU Aero Engines. MTU Aero Engines is a global leader in the design, development, manufacture, and maintenance of commercial and military engines—in all thrust and power categories—and stationary industrial gas turbines. With innovative engines, high-tech solutions, and comprehensive services, MTU Aero Engines make aviation safer, more efficient, and more sustainable. Back in 2018 further development of MTU’s leadership culture was kicked off. But why was it more important than ever to have new leadership values right then, at that successful, but also challenging time?

“The modern world we are working in is seeing a radical change: Globalization and digital transformation allow for previously unimaginable flexibility and, at the same time, change the workspaces we have come to be accustomed to,” explains MTUs chief executive officer Reiner Winkler. “As a result, organizations are faced with new challenges that have a tremendous impact on their leadership culture.”

There was consensus among the members of MTU’s Executive Board about what leadership should be like: “It will increasingly become impossible for managers to lead from a position of hierarchical authority; instead, they must stand out for their personality, exemplary character and credibility. What is needed is a coaching type of leadership style, to foster our employees’ self-responsibility and, at the same time, develop their strengths systematically, individually, and effectively. Only then will we be able to jointly manage the ramp-up and the further growth and ensure our capability to perform in the future.”

So managers should see their role as that of “change agents” and should call the existing status quo into question. In doing so, they take the initiative to actively engage their employees, encourage creativity and independence, and listen to their employees’ wishes and ideas. “We want to adopt this approach to leadership behavior and, with the future challenges in mind, have fleshed out our canon of values with the details required. Incidentally, we are lucky enough to already have a very positive leadership culture in place on which to build,” according to Winkler. 

Leadership Values at MTU

These are the three leadership values introduced by the members of the Executive Board back in   2018 at the Leadership Conference in MTU Aero Engines.

We transform

MTU stands for innovation. Our business is changing – we anticipate future developments and lead into the future. 

We empower

MTU stands for performance. With a coaching-based leadership philosophy, we put conditions in place that drive superior performance. 

We create trust

MTU stands for appreciation. Our employees give a lot to the job – we appreciate their hard work and treat them as equals. 

So for the first time ever, MTU has set values in place that create a shared understanding across all of its organization of what modern leadership means for it.

Why have we selected exactly these values?

Internationalization, digital transformation, ramp-up, investments at all locations, the integration of new employees, and new programs both in the commercial and military sectors – are just a few of the numerous operational and strategic challenges we have to tackle now and in the years down the road.

In joint workshops, the members of the Executive Board and the managers discussed their ideas as to which approach to leadership would best help address these issues and which qualities and behaviors would be needed for the purpose. They jointly defined principles and translated them into values.

Finally, they narrowed the values down to three leadership values. These were then reviewed and there was a consensus that exactly these leadership values, which are tailored to MTU’s specific needs, are suitable for ensuring the company’s long-term success

Pictures from Leadership values kickoff event in MTU Serbia, April 2022

How to drive implementation by positive energy? How can we bring the leadership values to life?

Putting new leadership values into practice is an endeavor that cannot be accomplished in a one-day workshop. An active process aimed at implementing the leadership values throughout MTU was conducted. 

Step 1: The project kicked off with launch events for all managers to familiarize them with the leadership values. This was done in a playful and experiential way since we cannot rationally explain or discuss the values if we truly want to understand them. Values need to be experienced. We knew that we have strong leaders in the room with many years of leadership experience – we didn’t want to teach them something new and factual. It was about making them think. Think about what we stand for as an MTU leadership team. Why do we lead the way we lead? And what can we adjust and develop to make our leadership profiles well equipped for the future?

These events were followed by a joint reflection on the values and their practical application in the centers, with the goal being their implementation in all departments and teams. Implementation started in Germany in 2018 and was spread among all MTU locations worldwide. In 2022 our MTU Serbia site kicked off leadership values implementation.

Pictures from Leadership values kickoff event in MTU Serbia, April 2022

Given that communication is the key to successful leadership, dialog played a pivotal role during the kick-off events. Dr. Heike Caspari (APD, director, leadership development and change, and at the same time Business Challenge project manager) and her team had come up with some innovative and exceptional ideas for bringing the leadership values to life and encouraging an active exchange of views and ideas. Thus, for instance, the 600 or so participants who make up the leadership team had to solve a number of different challenges for which they needed teamwork skills and creativity. 

Step 2: Working together to bring the new leadership values to life

While the focus of the launch events was on experiencing, understanding, and discussing the leadership values, reflection at the center level was the name of the game in the next phase. 

A first assessment of the current situation at the launch events allowed conclusions to be drawn as to how deeply the leadership values are already rooted in the organization. The results were then directly addressed at the workshops and further discussed by the participants. Together with their teams, the center managers took a closer look at the leadership values and selected areas in which they wanted to further improve. 

Step 3: Leadership roadmap to anchor the values in the everyday work routine 

With the aid of so-called “challenges”, the participants can then try out the application of the leadership values on the job.

Dr. Heike Caspari explains: “We have developed 54 challenge cards with various tasks associated with the leadership values. If a manager wishes to improve in the field of “We empower”, for example, he or she selects one or several of the associated challenges. One possible challenge is that the superior delegates a task carrying responsibilities that had previously been performed by him or her to an employee. Then, after some time, they will assess the situation to see how well it works.” Each center selects a certain number of challenges to be addressed and reflected on by all managers of a specific area. In addition, managers are free to add their personal challenges in line with the areas in which they want to further develop. “The challenges are intended to help MTU’s management team bring the leadership values to life and further develop leadership practices step by step,” says Caspari.

The center workshops revolving around the implementation of the leadership values were followed by a series of similar events held in the individual departments during the next six months. Caspari adds: “The center and department managers work with the challenges thus setting an example of how to effectively apply the leadership values in everyday work. Of course, there was a continuous exchange of experience among the managers to ensure that the process will be here to stay.”

“Over the coming months, the focus will be on applying the leadership values to our day-to-day activities as managers and leaders. First workshops have already taken place for the heads of the company centers to take stock of where they stand and to jointly reflect on the leadership values. What’s important next is to integrate these values in the day-to-day work at a departmental level and to live by them,” says Winkler, looking into the future. But it is not only the managers who will have to contribute their bit: “We call on all of our employees to support the further development of our leadership culture, for instance, by giving their superiors active feedback and clearly expressing their expectations and ideas,” according to Winkler.

How to evaluate the impact of leadership values implementation?

Conducting impact evaluations is the most neglected aspect of Leadership development programs, but it is also one of the most critical. This is because of the fact that evaluation results yield the data required to assess the impact of the program, and also provide valuable information on how to improve the program being evaluated over time. 

Conducting an evaluation was an important component of the leadership values implementation program  at MTU. This became evident via the unsolicited feedback provided during the review interviews with managers. Some participants stated that conducting this evaluation was a very good idea, as it assisted them to reflect on the program and reinforced what they had learned and how they had applied it. 

Let’s see how were the Experiences with the Challenges?

“The challenges are tracked once a month and we ask, what is going well / what not?”

“Leadership values are definitely an issue, e.g. firmly integrated into departmental rounds or as a conversation over lunch.”

“Purpose is good. Values are good and tangible, well discussed, very intense.”

“Positive is the more conscious confrontation with leadership.”

“Even if it’s not labeled a business challenge, the leadership values flow into practice.”

“Further development of leadership in our center has been taking place for 3 years, supported by challenges.”

“The feedback culture has intensified. Feedback is increasing.”

“The subject of appreciation is given more consideration. More mutual appreciation at management level.”

“Managers deal with it – in particular, EMPOWERMENT not in the sense: giving work away, but empowerment is the focus.”

*source review talks with the Managers, 2020

What were the first Effects on Leadership Behavior

96% of the leaders perceive a change in their leadership behavior themselves in the  following way:

  • Increased reflection & discussion on the topic of leadership;
  • Dealing with employees is more respectful, e.g. through increased feedback, open communication, and compliment cards;
  • More coaching-oriented leadership;
  • More delegation of responsibilities to employees in the sense of “We empower”.

87% of lower management level also observe changes in the way centers were run thus in the following way:

  • Significantly more discussion on the topic of leadership and “What is good leadership?”,
  • Improvement of the feedback culture (frequency, appreciation, and praise);
  • Coaching-oriented leadership is increasingly being implemented: More trust and room for decisions for employees.

Leadership culture changed in recent months with regard to the following statements:

We transform – Innovation 81% of management survey participants stated that they perceived change in leadership focus toward innovation

We empower – Performance 88% of management survey participants stated that they perceived change in leadership focus towards performance

We create trust – Appreciation 97% of management survey participants stated that they perceived change in leadership focus towards appreciation

How to measure the overall impact on business?

Traditionally, assessing this type of impact is associated with measuring the ROI to the organization. This is often seen as a contentious and challenging task. There are different ways to demonstrate the value of Leadership development programs, which are not necessarily expressed in financial returns to the business, nor easily captured on the balance sheet. Considering ROI alone is unreliable, and an insufficient measure of outcomes and success.

Hence, the alternative approach considered for evaluating the impact of Leadership development programs is the more holistic concept of return on expectations (ROE). Initially developed by Kirkpatrick Partners, ROE is a holistic measurement and ultimate indicator of the value of all the benefits (both qualitative and quantitative). From this perspective, we can use wellbeing and engagement as indicators of improvement – outcomes that are not directly quantifiable but are nonetheless real and assessable. A qualitative response, as the example provided above, can be a good indicator of the value delivered by the program. 

This may include indirect returns as a result of individuals applying new competencies that result, for example, in positive changes in management/leadership style, improved quality of work, engagement, and consequently higher productivity.

Further, we can benefit from identifying the key indicators (from either an ROI or ROE perspective) that will be used to assess the impact of the leadership development program and follow up such outcomes to track resulting business improvements. This is something that MTU intends to do more rigorously in the future.

Authors: Žaklina Teofilović and Dr. Heike Caspari 

Publication: HR World Magazine No. 8 (2022)

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