Surgeons underwent years of training to learn their important trade, as did pilots, engineers, and lawyers. But the profession of leadership is an important one too, and it's often assumed without any training at all. Today's leaders face rapid changes in an increasingly complex environment, so it's no wonder that the result is a large variation in leadership performance.
DDI's Global Leadership Forecast 2011 (see description at the end of this article) revealed that top-performing leaders outperformed average leaders by about 50 percent. If organizations can develop more average performers into top performers, it would have an undeniable impact on an organization's bottom line. And with so many organizations competing for market share, effective leadership can be the key differentiator.
Spinning our wheels
Leadership is a competitive advantage, but we're not taking advantage. DDI's Global Leadership Forecast 2011 found that organizations with the highest-quality leaders were 13 times more likely to outperform their competition in key bottom-line metrics such as financial performance, quality of products and services, employee engagement, and customer satisfaction (organizations spanned many different industries). Specifically, when leaders reported their organization's leadership quality as poor, only 6 percent were in organizations that outperformed their competition.
Compare that with those who rated their organization's leadership quality as excellent - more than three-quarters are in organizations that are outperforming their competition (Figure 1). From this it's clear that leadership quality has a considerable effect on an organization's bottom line. High-caliber leaders are the ones who can create new efficiencies and new ideas, motivate and drive team performance, and provide better levels of service to customers.
Unfortunately, most organizations don't have the caliber of leaders they need. Only 38 percent of the 12,423 leaders in our study reported that the quality of leadership in their organization is very good or excellent. That means that more than three-fifths of organizations are missing the opportunity to use their largest asset to its fullest potential. To add insult to injury, ratings from the previous Global Leadership Forecast (2007) were almost identical, which suggests that organizations have been spinning their wheels and getting nowhere.
Leadership development works, but it needs some work. According to leaders, development was the leading determinant of leadership quality (beating out selection, performance management, and succession). In fact, organizations with high-quality leadership development programs were eight times more likely to rate the quality of their leaders as very good or excellent (Figure 2).
However, only about one-third of HR professionals and leaders rated the quality of their leadership development efforts as high, with little change during the past decade. Without effective leadership development, organizations are leaving their leaders unprepared and unmotivated to sustain future organizational success. The consistently low ratings over the years, for both leadership quality and leadership development, suggest that it's time for a change - a leadership revolution.
Time to reinvent the wheel: Making leadership development effective. It is clear that development is a critical factor to improving leadership quality and it's time to kick start leadership development to finally push past the plateau. So the question is: What can organizations do to better invest the millions collectively spent on leadership development initiatives each year?
The most organized leadership development programs will fail unless they are focused on the right skills. We went straight to the source and asked leaders what the most critical skills they needed in the past were compared to skills they'll need in the future. The top three skills needed in the past were driving and managing change, executing organizational strategy, and coaching and developing others. The most critical skills for the future, however, are largely different.
Driving and managing change will still be a priority because change will continue at a rapid pace in the next three years. And with the war for talent raging on, leaders need to be the first line of defense in both identifying and developing future talent. But a new priority rising to the top is fostering innovation.
Innovation has become a mantra for many organizations as they shift from a recessionary, cost-cutting mentality to a competitive one. Once again, leaders must play a critical role in ensuring their organizations have ready-now talent to meet these future business needs.
Are leaders equipped with the critical skills for the future? Unfortunately, current leaders are falling short (Figure 3). By their own admission, close to half of all leaders are ineffective in the key areas. Leaders are reportedly best at skills that weren't critical (for example, technical skills, executing priorities, and building customer satisfaction) suggesting that leaders have been focused on execution and their customers to survive the downturn, but haven't been honing the skills they'll need in the years to come.
In fact, the most critical skills needed in the future (such as innovation) are what leaders are most ineffective in today. This suggests that leadership development efforts have to focus on areas where the growing pains will be felt the most in the coming years.
If there is any hope in addressing these skill gaps, organizations have to look at what methods they are using to develop leaders. The development methods that make the biggest impact on leadership quality and ultimately organizational performance are displayed in Table 1.
HR professionals weighed in on which development methods they used the most frequently, and leaders weighed in on the effectiveness of each of those methods (Figure 4). Formal workshops, coaching from managers, and special projects were the methods most used by organizations. Leaders also rated those as the most effective.
Although the alignment is good news, the majority of organizations are neglecting a few significant ways to develop their leaders. Only 27 percent of organizations use virtual classroom training and external coaches, and only 40 percent use internal coaches other than managers.
When it comes to development that is impactful, the increasingly globalized economy seems to be dictating the need to add options to formal training that accommodate people in different locations (Table 2). Relying on informal, self-study (on-your-own-time) online courses won't have the impact that synchronous training tools such as virtual classrooms have.
It also seems as though, in an attempt to focus on implementing formal classroom training, coaching has fallen through the cracks. Coaching is a proven and essential developmental tool that can be beneficial for expanding breadth and strategic skills in leaders, particularly if those coaches include people other than their managers. Although it can be time-consuming, revolutionizing leadership development to include these impactful methods may be just what organizations need to take their development programs (and leadership quality) to the next level.
Wheels without tires won't get you far. Selecting the most impactful development methods to develop the most critical skills is paramount to improving the quality of leadership. But how organizations support leadership development can make or break the results. DDI's research demonstrates that the support structures that organizations have in place for development are critical to its quality.
Senior management involvement. The most significant factor related to the quality of leadership development was the involvement of senior managers in identifying and developing future leaders. In other words, when senior leaders are actively involved in leadership development, the quality is much higher. Senior management has a critical perspective in identifying the leaders the organization needs in the future, but they also have the influence needed to put development at the top of the priority list. This highlights how essential senior management investment is in the talent process.
Manager accountability. Manager coaching is one of the most utilized and impactful development activities. Yet, when we asked leaders and HR professionals if managers were formally held accountable for developing the leaders that report to them, only 41 percent of HR and 53 percent of leaders agreed. If developing leaders isn't seen as part of the job, the likelihood of managers getting involved in development is slim to none. If manager support in development is such a critical element in an organization's development strategy, then more accountability and responsibility for making sure this happens should be enforced.
Development planning. One would never dream of starting a business without a well-documented and well-thought-out business plan. And one would not manage an important project without first documenting goals, timelines, and responsibilities. Yet, only one in three organizations report that leaders have high-quality, effective development plans. And we found that having effective plans has a significant relationship to the quality of leadership development.
However, an effective development plan is only half the battle. Following through and sustaining progress on the plan is the true lynchpin to development. Yet, only 43 percent of leaders periodically review their development plans with their managers. If those performance discussions do occur, only about half of leaders say that their discussions provide clear direction about how to enhance performance.
This goes back to involvement and accountability - a laissez-faire attitude toward development won't evolve today's leaders into the leaders needed tomorrow. If senior managers did a better job of modeling effective development planning, and if managers were held accountable to develop their leaders, clear and directive discussions about development progress would occur more often.
Metrics and analytics. The old adage rings true after all: What gets measured gets done. In terms of predicting organizational performance (for example, financial performance, quality of products and services, and customer satisfaction), using metrics to analyze talent management initiatives was the most important factor. For these high-performing organizations, measurement was an advantageous tool for tracking development progress, diagnosing issues, and ultimately, creating effective development programs with quantified impact. Using metrics to analyze if and how development programs are working can ultimately mean the difference between effective and ineffective leaders.
Revolutionizing leadership development
Years of research shows that, in terms of leadership development, organizations have been stuck, and this has resulted in leaders who are unprepared for the future. The recent recession forced organizations to concentrate their efforts on self-protection tactics. But signs of recovery are everywhere, and organizations are starting to come out of their defensive positions.
Today, in an even leaner and more competitive market, the stakes have risen, and the criticality of leadership has increased. Our research shows that evolving development strategies to focus on the skills leaders need and how best to give it to them, is revolutionary. Based on the research, here are our recommendations for shifting gears:
- Focus on the future. Times have changed, and the needs of leaders have, too. A previous focus on executing and cost-cutting has been replaced by a need to grow talent and think in innovative ways. Leaders need effective and formal programs to give them the skills they need to be able to take on this new, lofty charge.
- Mix it up. Leaders need help developing their skills, and help can come in a variety of ways. Formal workshops need virtual options, and it can't be the only tool in the toolbox. Coaching is impactful, and the more the merrier. Managers are a primary source, but internal and external coaches were key strategies used by organizations with effective
- Put some teeth in it. Development cannot be successful as solely an HR initiative; to have a real impact, it needs to be a business initiative. To reap the rewards of a leadership revolution, it needs to be owned by senior management, driven by every single manager, and treated like any other strategic business priority. Managers need to be held accountable for development, development plans need to be more than lip service, and metrics need to be in place to ensure success.
A revolution can be defined as a complete overthrow or replacement of tradition, but it can also be more simply defined as a significant change in course. What better time to break convention (an ineffective one, at that) and take an impactful turn in the focus and strategy of leadership development? Leaders are the ones who will be executing and creating organizational priorities for years to come - shouldn't we be ensuring they are well-prepared to do that? Organizations need to revolutionize leadership development with the future in mind. Now is the time.