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The Big Mistake Companies are Making in Leadership Development

Failing to develop leaders is the single most expensive mistake a leader can make.


In a Nutshell

  • Leadership development is crucial to company growth

  • Strong leaders are the ones behind the success of strong companies

  • Leadership development gives companies a competitive advantage


The pace of change today is accelerating, with greater and greater impact. Alain Bejjani, CEO of Dubai-based lifestyle conglomerate Majid Al Futtaim Group describes these changes as “tectonic shifts”.

It’s not just one major shift: “We’re going through two or three tectonic shifts that are happening in parallel”, Bejjani says in Leadership Development as a Competitive Advantage, by global management consultancy firm McKinsey.

Technological changes, coupled with economic shifts, have forced businesses to innovate, to redefine the way they do business. They have also forced leaders to be resilient, innovative, and strategic, in ways they never have before. Leaders who don’t evolve nor adapt don’t survive.

But as the world becomes a tougher and more challenging place for leadership, businesses are investing less in equipping their leaders. Bejjani notes that "the amount of investment in leadership is not going up; it’s going down".

Leadership development: a crucial component of growth

Leadership is increasingly crucial to business survival.

Yet many companies perceive otherwise. Among top organisations surveyed by Harvard Business Publishing, 40% said that leadership is "an important but not essential element of their business strategy".

Company spending on leadership also reflects a declining perceived value. A 2016 survey on leadership development by Borderless Research shares that "a large majority (nearly 60%) are dissatisfied with their organization’s investment in leadership development activities, and more than 65% state that the level of their organization’s investment in these activities has, in recent years, declined or stagnated".

This is an alarming reality: if leadership development is not prioritised, that means leaders are not being equipped adequately for the growing demands of their positions.

“...around the world, most organizations still don’t fully commit to leadership development’s role as a strategic need—one that provides true value to the bottom line of the organization—for many reasons, not the least of which is a perceived lack of relevance”, Harvard Business Publishing's report says.

Most organizations still don’t fully commit to leadership development’s role as a strategic need.

Leaders are key to strong teams and strong companies

When leadership development is not given priority, companies become less equipped to create strong teams that can weather crises and respond to challenges posed by a fast-changing business environment.

In Why Do People Quit Their Jobs, Exactly? Here’s the Entire Reason, Summed Up in 1 Sentence, Inc links disengaged employees and turnover to a manager's leadership capability. "If you're an executive concerned about low morale, employee satisfaction or engagement, or — at worse — a revolving door at your company, start by looking at who your current managers are. You have a choice to make: Develop their leadership skills or filter them out of their leadership roles".

Workplace consultancy firm Gallup found that “actively disengaged employees cost the U.S. $450 billion to $550 billion per year”, reports in The Enormous Cost of Unhappy Employees.

“Failing to develop leaders is the single most expensive mistake a leader can make”, Gallup says.

Failing to develop leaders is the single most expensive mistake a leader can make.

Leadership development: gaps and hurdles

The lack of attention leadership development is getting is a case of misaligned strategic priorities between organisational leaders and their L&D leaders, along with obstacles faced in the pursuit of leadership development.

“There is a perception gap between L&D leaders and the business,” Harvard Business Publishing concludes, in The State of Leadership Development. The report cited business managers in so-called 'Best in Class' companies as “32 percent less likely than L&D to see leadership development as a strategic priority for the organization. Perhaps that’s because they aren’t seeing the connection between programs and the work they do every day: Only 19 percent of business-line managers believe programs are relevant to the issues they face".

“What defines Best in Class? A program that tightly aligns with strategy, enjoys executive support, has cultivated a strong talent pipeline, and demonstrates an impact on overall success”, the report explains.

“Only 28 percent of organizations in our most recent survey see L&D as a strategic priority. While Best in Class organizations value the programs more than the others groups, it is not unanimous. Only 40 percent of these firms reported that it is an important but not essential element of their business strategy”.

The report also states that:

Respondents report a series of hurdles. The overwhelming top barrier cited by both L&D and business-line managers is “time constraints,” at 43 percent. But the next three barriers, cited almost equally, point to lack of data showing benefits (“no proven ROI,” 26 percent), workplaces in flux (“too much organizational change,” 25 percent) and lack of funding, (24 percent).

The value of leadership development

Leadership development has a direct impact on productivity and profitability. In Why Employees at Apple and Google are More Productive, Fast Company points out that “Sales teams led by an inspiring leader are 6% more productive than those that have an average leader. If you extrapolate that 6%, it accounts for an extra $1 billion in annual revenue”.

Sales teams led by an inspiring leader are 6% more productive than those that have an average leader. If you extrapolate that 6%, it accounts for an extra $1 billion in annual revenue.

The State of Leadership Development cites a client case study from 2014 that reports a direct business impact of more than $1million, more than four times its L&D investment:

Leading Bank Builds Leadership Capacity Across Mid-Level Managers

Emirates made leadership development a key element in its strategy to become a leading financial services firm in the Middle East. It employed a program to build leadership capacity among its leaders. Through a blend of self-paced learning sessions, face-to-face workshops, virtual meetings, and projects, participants learned how to pursue key issues to the bank’s strategy, including entering markets, growing market share, and formulating value propositions. Emirates followed the principles listed above. Within a year of completion, Emirates NBD had promoted almost 40 percent of its program participants and calculated a direct business impact of more than $1 million, more than four times its L&D investment.

Equipping leaders for today

Leadership today “requires an amount of leadership and a level of sophistication that is much higher than it was ten or 15 years ago”, Alain Bejjani says. “This is true even for more junior business executives”.

"The biggest issue [we are facing] is leadership, not technical skill set”, Bejjani adds. Soft skills and leadership skills are the most critical skills needed today, as shared in a blog on leading in a VUCA world.

Harvard Business Publishing shares that “L&D and business-line managers agree on the most critical leadership capabilities. Overall, four capabilities are rated as very important by two-thirds or higher”. These are:

  • ‍Demonstrating integrity (77%)

  • ‍Managing complexity (75%)

  • ‍Inspiring engagement (70%)

  • ‍Acting strategically (70%)

These findings establish a strong common ground for L&D practitioners and business-line managers. Notably, soft skills—strategic abilities, problem solving—along with strong character are key areas of importance and leadership development.

Leadership: a competitive advantage

“Inspirational leadership can be taught. Companies that recognize that and invest in making it happen create meaningful impact on the productivity of their company”, Fast Company concludes.

Leadership Development is indeed a competitive advantage you cannot miss. It is also a roadmap for success.


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