This week we launched a two-year study of corporate leadership programs and the results are impressive. Despite the pandemic, inflation, pressure for hybrid jobs and a highly competitive job market, companies have been neglecting leadership development. And according to our research, this can have a very negative effect on performance.
Let me put it simply: Of all the things we spend money on in HR, leadership development is the most important. We correlate HR investment areas with business growth and, surprisingly, leadership development scores the highest. In other words, companies that focus Developing leaders (not just promoting them) significantly outperforming their peers.
Why is this so important? Because when you talk about leadership, when you discuss the qualities and principles you look for, your company will be stronger, more focused, and more aligned.
What is a “Leadership Model”? Well, it takes many forms, and I won’t help you with examples, but it’s an opportunity to decide what you value. Are you a company focused on sales and revenue generation? (Deloitte did it this way.) Or you’re a company focused on innovation and product leadership (Apple works this way). Or are you a cost-effective, value-based organization (Walmart, Target) or more focused on customer service (Four Seasons)?
And it goes further than that. Do you value individual achievements and competition? Or do you value cooperation and teamwork? Is your company an “up or out” culture or are you a company that develops people? And how do you want to demonstrate these principles in behavior?
You can decide.
And each of these decisions has a different effect. In our company, for example, we value customer service as our top priority. This means our analysts, consultants and service teams take customer calls above all other functions. It’s okay to miss a company meeting if you’re with a client, and we all talk about our clients so we always focus on their needs. I used to work in a company focused on income, and their behavior was different.
That’s how bad it got
I’ve done four such studies now (one in 2005, one in 2009, one in 2015, and this one in 2023), and this study really surprised me. The focus on maturity, investment and leadership has actually decreased. See the information:
* Only 25% of companies believe that their leadership development is providing significant value to the company
* 24% of companies say their model is “updated” or “very useful”.
* Only 11% of companies receive mentors and only 18% provide training for managers and leaders
* Only 15% of companies nurture leaders and actively manage leader burnout
* Only 17% of companies are increasing their leadership development budget.
* Only 17% of companies have a succession management and leadership review process in place.
* Only 26% of companies feel prepared for an unplanned or emergency CEO replacement.
* Only 12% of companies score at the top of the JBC Maturity Model.
And when we looked at spending on leadership, the numbers were equally disappointing. More than 60% of companies spend less than $500 per year on management and leadership development (per person). Honestly, I think we spend that much on coffee these days.
Why did this happen? I think it’s pretty simple: CEOs and CHROs are so worried about the pandemic, staff attrition, quiet layoffs, and leadership. And now we see books, articles, and researchers waking up and telling us, “Leadership teams are in trouble.”
And there’s something else. Leadership is everyone’s job now. The new employee or first line manager who is leading a project to save money or analyze the sales team is now the leader. What education, training, and vision have you given this person?
As Marriott’s CHRO told me a few weeks ago, the only way Marriott can grow is to make everyone in the company a leader. And that means investing in leadership development for front-line staff, area managers, janitors and regional managers – not just high-potential leaders at headquarters.
Why is this important?
It’s easy to write off leadership development and say it’s “nice to have.” Well that is simply not true. If you’re not talking about leadership, bringing leaders together, and setting a set of behaviors, values, and skills for your leaders, the company is sitting on shifting sands. As one commentator put it to me years ago, when things go wrong, the only thing you have left is the culture of leadership. And if you don’t take care of it, well, just float away.
I am not saying that leadership development is easy. It’s quite tricky, actually. There are thousands of books, courses, and vendors selling models, tools, and content. And most of them have many good research supporters. The most important thing is not to just “buy” but rather to look at them and decide which models and values work for you.
And here is another important value. When you decide to revamp your leadership model, build a global program, or democratize leadership, you’ve now opened the door to conversation. If you’ve read “Hit Reset” by Satya Nadella, you’ll know how he “discovered” broken leadership behaviors at Microsoft and set out to fix them as his first priority. Today that company is one of the most valuable organizations in the world and I would like to say that everything is because of their renewed leadership model.
Another thing this does is give you a way to attract, retain and develop people. Once your leadership model and program are strong, people will flock to your company for work. Ambitious young people are looking for a company to help them grow – they need mentors, coaches and role models. If you don’t talk about these issues, raise your value, and strengthen your non-attachment, these people may go elsewhere.
Our new research tackles this topic squarely and we can show you our Leadership Maturity Model and dozens of studies. Of all the topics you discuss in HR and management, take a moment to talk about your leadership. You’ll be glad you did.
We thank BetterUp for supporting this comprehensive study.
(Download the executive summary here.)
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