For HR to form useful and reliable alliances with line managers up and down the business, competency and confidence are integral ingredients. Simon Mitchell, Director at DDI UK reports on the Global Leadership Forecast, a comprehensive survey of more than 12,000 leaders and 1800 HR professionals across 74 countries.
The latest survey provides a snapshot of leadership in three sections: leadership development; talent management as related to leadership; and management culture that supports, or hinders, leadership effectiveness. The report covers how both leaders and HR rate organisational leadership quality, examines the skills that leaders will need over the next three years; which learning and development methods work and which don’t; and current effectiveness of various leadership-related talent systems and management culture.
For HR Directors, the report paints a useful picture for future developmental needs and trends relating to leadership skills and practices.
Data gathering for the Global Leadership Forecast took place in what can best be described as a period of cautious optimism. The world economy had just experienced one of the worst recessions in living memory, especially in many areas of Europe and across the United States, and organisations were thrown into a period of self-preservation and austerity. Many of our business leaders had never experienced an economic downturn before, certainly not on this scale and as a result, had to rapidly shift their way of thinking, use different leadership skills and demonstrate resilience under intense pressure.
It is very apparent from the report that many leaders rate themselves poorly and confess a worrying lack of proficiency in some of the core skills they believe they will need over the next few years. According to the Forecast, only 38 percent of leaders, at all levels, rate their own organisation’s leadership quality as high. Their HR peers rate leadership even more poorly, with only 25 percent, (18 percent in the UK), of HR professionals stating that their organisational leadership is high. This is worrying, given the overwhelming evidence which shows a distinct link between effective leadership and organisational effectiveness. In fact, in this study, organisations with higher leadership quality were up to three times more likely to retain employees than their competition and they also had more than five times the number of highly engaged leaders. When compared with the competition, leaders in organisations that have highly rated leadership are more effective in many key areas including financial performance at 2.8 times more effective; customer satisfaction at 4.6 times more effective; productivity at 4.7 times more effective and quality of services at 4.4 times more effective.
Perhaps the most troubling news from the Forecast is that only 18 percent of HR professionals reported strong leader bench strength to meet future needs. The low perception of our leadership quality and lack of bench strength is not a new phenomenon. According to data from previous Leadership Forecasts, these factors have been low for the past decade, yet if companies are to remain competitive in the increasingly challenging and competitive market they need to commit fully to developing the sort of leadership capability that can keep up with the rapid speed of change in business today. So what is the best approach to developing our leaders and building confidence in their own ability, within the context of a rapidly changing business environment?
According to the leaders in the Global Leadership Forecast, training and development programmes are the leading determinant of leadership quality, beating selection, performance management and succession systems. In fact, leaders in organisations with the most effective leadership development were eight times more likely to rate the quality of leadership as very good or excellent. Unfortunately though, only one-third of leaders and HR professionals actually rated their own organisation’s leadership development efforts as highly effective. It would be easy to assume that, in our current climate, leadership development effectiveness is suffering because of a reduction in development budgets, yet the findings from the Forecast do not support this. Four in ten organisations maintained the same level of funding this year and a similar percentage increased their spending on leadership development. This trend in increased funding looks set to continue, 55 percent of respondents plan to increase their development budgets in 2010, while only seven percent expect it to decrease. The remainder expects budgets to stay the same.
So how can HR Directors ensure they get a better return on investment for their leadership development and what is the right combination for effective leadership development? Comparison data from the Leadership Forecast showed that the most effective organisations used a greater number of development methods compared to less effective organisations. The data shows that the greater the number of development methods used, the more effective the skill acquisition. Organisations that were more effective tended to use four or more development programmes, the most valued were formal workshops and three types of coaching: manager; internal and external. However, the majority of organisations are not making best use of the development tools available to them and while they are utilising formal workshops and manager coaching successfully, they are not making enough use of internal and external coaching. A useful and increasingly popular approach to leadership development strategy is the 70/20/10 approach. In this model 70 percent of skill acquisition is acquired through on-the-job experiences, 20 percent by learning from others, including coaching and mentoring and 10 percent from formal training.
The 70/20/10 model while useful, has its primary use in thinking through the elements of an effective learning journey rather than discreet developmental interventions. Our data shows that, although representing only ten percent of the 70/20/10 model, formal classroom is disproportionally important and leaders consider it to be the most effective element of their development. It is important to note, that leadership development does not sit alone and is only part of a broader talent management strategy that should focus on organisational objectives. In addition, organisations need to develop the systems and processes to ensure the right selection in the first place and to also build a sufficient pipeline of talent for future business needs.
According to HR respondents, leadership selection is the most critical element of a talent management system, yet less than a third of both HR respondents and leaders rated their selection systems as highly effective. Unfortunately, it is probably true that no amount of development or performance management will make up for a poor recruiting decision and most organisations have experienced the consequences of a poor hiring decision at one time or another. It is critical that the systems and processes support the recruitment process. HR professionals have to work with their organisational leaders to establish clear objectives and develop a vision of what success in a role will look like – a success profile.
Having a clear success profile will make it far easier to evaluate candidates effectively through interviews and assessment, to evaluate the data and to help bring people up to effectiveness in the shortest time possible. Unfortunately, according to the Global Leadership Forecast data, only one in three organisations use validated tools, such, as behavioural assessments, to make their leadership selection decisions. A key responsibility of HR and Talent professionals is to work closely with organisational leaders to ensure that there is a sufficient pipeline of talent coming through an organisation. Many senior managers will argue that they know who their successors are and generally look to the next layer down the organisation for their successors. However, strength and sustainability lies in spotting talented people five or even ten years away from senior roles and accelerating their readiness for bigger challenges. Leaders should be aware of their role as talent scouts and they may need help and training to help them do so.
Leadership potential should not become confused with shorter term decisions about readiness for bigger roles, neither is it to do solely with current performance, rather it is about narrowing the funnel in order to focus on key people with the most potential, to eventually be groomed for a future, more senior position. That way the development budget can be aimed at those that are most likely to become senior leaders in the future. The survey showed that fewer organisations have formal succession strategies in place than they did two years ago and only 22 percent of HR professionals rated their leadership succession system as highly effective. Today less than half surveyed have a formal process for early identification of high potential talent and even of those that do, only just over one third have formal processes for early growth of high potential talent.
To ensure that leaders can successfully move up to the next level, HR professionals should consider how best to support a smooth transition. In the study, two-thirds of leaders had made a transition during the past five years, yet only 26 percent of organisations had effective programmes in place to support them. Most development seems to occur once leaders are in situ in their new role, rather than prior, which may partly explain why, on average, only one in four leaders found their transitions to be easy. When asked what leaders would have benefited from most during their transitions, they identified areas such as: having a better understanding of the change in mindset required in their new role; help in identifying the early experiences that were relevant to their new position; and support in building a new network. They also said that they would have benefited from a greater self-awareness of their strengths and growth areas related to their new assignment.
The Global Leadership Forecast provides us with a unique perspective on the issues affecting our leaders and HR professionals today. They operate in an increasingly global and technology-enabled economy, where markets shift at lightning speed. On first appearances, the report may paint a gloomy picture of leadership, but dig a little deeper and a brighter landscape emerges. Organisations are clear they have a pressing need to develop leaders and that leadership really does matter. Leaders in the Forecast have clearly told us the skills they will need over the next three years and have articulated the development methods that are most effective. The challenge now is for HR Directors to take this information and develop a strategic approach to development and talent management which will equip their leaders with the support they need, now and in the future.
