The Importance of Leadership
I was recently asked to find a succinct explanation as to WHY leadership is so important. Whilst understanding how crucial it is to a business, a simple and straightforward answer escaped me despite the impressive array of literature on the subject.
Alarm bells began to ring as I was reminded that if you can’t answer the WHY in less than 20-30 seconds, then you don’t know the point you are trying to make or have clarity of the problem you are trying to address. Spending time extrapolating such an explanation from the plethora of reports, confirmed that an organisation’s lack of clarity and understanding of the importance of leadership negatively impacts the results they get from leadership development.
According to Bersin, we spend $50 billion out of a learning budget of $150 billion on leadership and yet, Barbara Kellermen from Harvard University and Jeffrey Pfeffer observe that:
“the leadership world continues to be dominated by stories, myths, and fads, often promoting superficial solutions that appear effective but fail to address the issue” and “Surprisingly, most leadership programs are evaluated primarily by so-called “smile sheets”- in effect, feedback from participants on how they enjoyed the leadership program, instructor, and venue. Too few leadership programs are designed on a foundation of research, clear priorities, and assessments of needed leadership thinking and outcomes.”
Thinking about leadership from the perspective of the impact and outcome it can have on an organisation, led me to conclude that there are three main areas in which we can define its importance. This is critical to understand before thinking of the skills and behaviours that form part of a programme or the mechanism of delivery – a different perspective to most of the literature I researched despite the evidence.
1. Navigate the Changes
Businesses today, operate in a rapidly changing landscape and the ability to be agile and implement changes quickly is paramount.
Consequently, decision-making has been devolved further down the line. This requires a wider breadth of employees to be up to speed with the organisation’s agenda so that they can make effective decisions on behalf of the business.
It is leadership that plays a crucial role in ensuring this happens as leaders enable and support the organisation and its employees to navigate these changes as one.
The CEO Institute in “Business Leadership – Is it important?” for example, describes the leader as “invaluable when it comes to formulating and communicating new strategic directions”. Furthermore, Jack Welch stated that “The function of leadership is to produce change, set the direction of change and enable the organisation to cope with change”.
Yet in the CIPD Learning and Development survey 2014. only 40% of the 1081 respondents felt “accelerating change within the organisation” was a purpose of leadership development activities.
This supports our view that many organisations will continue to struggle with implementing the constant state of change required in business unless they invest in the right leadership development.
2. Inspire and Influence
In “High Impact Leadership Development”, Bersin claim that “Great leaders attract, hire, and inspire great people”.
As the workforce and workplace changes, embracing portfolio and mobile careers, we face challenges in access, recruitment and retention of employees. People are no longer entering “a career for life” or working in a traditional office set up. The career cycle has become much shorter and staff turnover in organisations has consequently increased.
The way in which people work and their motivations for doing so, have also changed. This is leading to evolving organisational structures and an increase in companies working with external partnerships.
Therefore, there is not only an increased need to retain core staff, but individuals and leaders also now find themselves needing to exert their influence over others. These are both internal and external colleagues who they may have no authority to reach and inspire yet have to ensure the organisation’s aims and goals are met.
As pointed out by the CEO lnstitute’s examination of the importance of business leadership, good leadership includes “communicating with and motivating employees to increase dedication to organisational goals”.
With the right development, effective leadership can increase employee and partner engagement, improve retention, and reduce turnover costs. However, off the shelf management and leadership programmes may not be as relevant in today’s workplace.
3. Return on Investment
Whilst effective leadership can help to reduce turnover costs, there has been a tendency to believe that the return on investment in leadership development can be difficult to measure beyond that. Indeed, should we measure that in a more relevant way given natural and ‘acceptable’ churn expected with a portfolio and mobile workforce?
However, plenty of evidence exists to show that with the right leadership development, appropriate for today’s challenges, significant business impact can be demonstrated.
Kellermen & Pfeffer recently wrote that “High-performing companies outspend their competitors on leadership by almost four times” suggesting a correlation between leadership and company performance.
This view is further endorsed by statistics from the ICF. According to their “Global Coaching Client Study”, 19% of companies surveyed stated that they saw at least a 5000% return on investment in leadership development. It reports that the “median company return was 700%, indicating that typically a company can expect a return of seven times the initial investment”.
It’s not just about the raw financials but about impact on a broader set of metrics such as those related to performance, competitiveness and agility. These can be measured at a local level that when common practice is exercised across the business, becomes an organisational way of thinking about value and impact.
Whilst the variation on the return experienced by companies does suggest that some leadership development is more successful than others, there is overwhelming evidence that investing in leadership improves the financial position of an organisation.
Why is leadership so important?
To return to our original question, leadership, in my opinion, is important for a few key reasons.
It allows an organisation to enhance its agility to keep pace with increasingly rapid business changes, to manage change effectively ensuring employees are onboard and comfortable with the changes and that it becomes business as usual and part of organisational culture.
Taken together, these create a thriving and competitive business that allows the organisation to drive its business growth and ensure its future success.
To find out if and how your investment in leadership and leaders can deliver greater impact, contact us.