Companies Failing to Develop New Leaders

November 30, 2016 – Developing new leaders is critical for organizations to prosper in the years ahead, yet companies appear to be failing to do so according to a recent report by the Hay Group division of Korn Ferry. More than half of HR leaders polled said they rank leadership development as fair to very poor.

The report also found that many organizations question whether their current leadership is up to the task of delivering strategic change. Across North America, only 18 percent of respondents were confident their organizations have the right leaders in place to deliver on strategic business priorities. Moreover, 28 percent were either “unsure” or do not think current leaders can execute strategic priorities. Canadian organizations were slightly more confident in their current leaders than the U.S.: 79 percent of Canadian organizations are at least “somewhat” confident in the capacity of their leaders to deliver change, compared with 71 percent in the U.S.

Here is a closer look into the Hay Group / Korn Ferry findings:

Leading By Example

According to the report, leading for change requires a different set of skills than those required for traditional business management. Change leaders must be agile, flexible, resourceful, and have the ability to navigate unknown situations. They must be good listeners and open to new ideas from all corners of the organization. And, most importantly, change leaders must be able to articulate a vision and inspire others to higher levels of performance.

Only 18 percent of respondents in North America reported that their leadership teams “definitely” display the behaviors needed to deliver on their organizations’ strategic priorities. Again, Canadian respondents were somewhat more optimistic, with 59 percent saying their leadership teams “somewhat” display the right behaviors, compared with 55 percent of U.S. executives.

Participation In Driving Change

Organizations also reported there is a substantial lack of engagement in driving and executing strategic change among mid-level, first-level, and high-potential leaders.

In many organizations, the strategic message becomes diluted due to stagnant cultures, entrenched ways of doing things, and lack of communication from top leaders. As a result, organizations often fail to fully execute their strategic initiatives.

Over 80 percent of C-suite and senior executives are “somewhat” or “very active” in driving strategic change, respondents said. However, engagement in driving change dropped precipitously to 57 percent among high potentials, 56 percent among mid-level leaders, and 36 percent among first-level leaders.

First and Mid-Level Leader Engagement

While it may be expected that lower levels of leadership are less engaged in driving strategic change because it falls outside their responsibilities, overall engagement is a more troubling story for organizations. Engagement levels fall off sharply from C-suite and senior executive leaders to lower ranking leaders within organizations.

“Alignment and strong collaboration are requirements today, whether making sense of market shifts or driving speed of execution,” said Dennis Baltzley, global head of leadership development solutions and senior client partner at Korn Ferry. “Yet it’s not happening at the mid and lower levels of leadership. Getting this right, over ‘driving the same way harder’ is what will win today.”

North American respondents said that overall engagement levels (“slightly” or “highly engaged”) were 58 percent for mid-level leaders and 43 percent for first-level leaders. An average of only 38 percent of organizational talent is highly engaged.


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Shifting Focus

The report also found that developing leaders to drive strategic change requires a different leadership development focus, survey respondents said. In general, they indicated a preference for development activities that were “customized,” “live and in-person,” and those that deal with current issues facing their organizations as opposed to an abstract, top-down, topical approach.

Leadership development activities that were “context-based” and relevant to the organization’s business strategy and culture tend to generate increased engagement and interaction between participants. As a result, participants gained insights into issues facing the organization and how to solve real-world problems with their colleagues.

Survey respondents indicated a preference for “customized solutions” geared to specific development needs as opposed to “pre-designed solutions” that are more generic in nature. Typically, customized programs drive outcomes that address the individual’s development needs within the context of the leadership requirements of the organization.

In addition, respondents said they prefer “live, in-person development” over “self-directed, on-line development.” While on-line training has become very popular it often is less demanding of the participants. Live training may require participants to give presentations or interact with others face to face — experiences which are important for driving elevated development outcomes.

Leveraging Social Responsibility

North American organizations face a variety of pressures from internal and external stakeholders to go beyond maximizing shareholder value and to do good for society as a whole. While commitments vary, most larger organizations, and many smaller ones, have responded by establishing a social responsibility agenda. Sixty one percent of organizations leverage their corporate social responsibility agenda to develop leaders.

The good news is that giving back is a win-win for the company and society. Socially responsible organizations tend to have cultures that are more positive, with a stronger sense of purpose, enhanced employee engagement, and greater sustainability. Moreover, social responsibility can be an effective way to develop leaders and organizational culture. Business people who take leadership positions on boards or in community organizations often develop skills and experiences that help them to become better leaders in their companies.

Heightening Impact

By connecting their leadership development programs to their aims in social responsibility, organizations build a powerful tool to create purpose-driven leaders. They, in turn, can unleash the full potential of their people, driving engagement and inspiring others throughout the organization. A growing number of people — from people new to the workforce to senior executives — want to work in companies that are aligned with their values and committed to serving the world in a positive way.

Canadian organizations are slightly more likely than U.S. organizations to leverage their social responsibility platform to develop leaders. Over 80 percent of respondents from both countries said leveraging social responsibility to develop leaders improves their organizations’ overall engagement and performance.

Rethink Leadership Development

Survey respondents were unhappy with their current leadership development programs; 53 percent of U.S. respondents and 54 percent of Canadian respondents judged the return on their leadership development spending investment as “fair,” “poor,” or “very poor.” Ineffective leadership development harms an organization’s pipeline in three ways, resulting in a lack of leaders ready to step into new roles, right now; newly promoted (or transitioned) leaders inadequately prepared for their new roles; the next generation of leaders unprepared for advancement.

Starting from Scratch

If they were to start over, 55 percent of North American respondents said they would scrap half or more of their current approach to developing leaders. “This finding is incredible,” said Stu Crandell, senior vice president of the Korn Ferry Institute. “It’s a highly critical commentary on the state of leadership development. If you think you need to get rid of about 50 percent of your approach, it’s tantamount to saying you need to re-think your entire leadership development strategy.”

This finding also begs the question: how are organizations building the leadership talent they need to drive their business strategies? said Mr. Crandell. “Traditional leadership development doesn’t seem to be an effective lever. Perhaps they should be looking to more innovative leadership development approaches.”

Barriers to Effectiveness

North American survey respondents identified “lack of executive sponsorship” and “lack of budget” as their top barriers to successful leadership development. Canada ranked “lack of budget” as the No. 1 priority, while U.S. respondents gave nearly equal weight to both barriers.

Frequently, organizations invest a great deal of financial and human resources into formulating new strategies, but do not invest sufficiently in the leadership development that may be required to execute the strategies.

The Missing Links

To alter their culture and create an environment where strategic change and innovation can occur, organizations need broad engagement and alignment among their talent. All leadership levels need to participate.

North American respondents indicated that leadership development could be most improved at the “mid-level” and “senior executive” levels, with both U.S. and Canadian executives identifying the “mid-level” as the area needing the most improvement.

Mid- and senior-level leaders often shape and determine the outcome of key organizational initiatives. They often manage other managers or a business function and are usually accountable for growing revenue or managing costs. Thus, their buy-in is critical. U.S. and Canadian respondents differed on their second priority, with 24 percent from the U.S. selecting senior executives and 18 percent of Canadian respondents selecting high potentials as the groups most in need of improved leadership development after mid-level leaders.

Building a Sustainable Foundation

When top executives don’t pay enough attention to leadership development, it can harm the advancement of their direct reports and increase pipeline gaps. Frequently, this inattention is due to the day-to-day operational demands and short-term requirements placed on executives.

Filling talent gaps, however, is a long-term exercise that is often overlooked. The survey revealed that organizations were unhappy with their existing development programs. Ultimately, top executives may have to take a more hands-on approach to reinvigorate development efforts and replenish leadership pipelines.

Leadership development focused on activating strategy can not only help close this strategy execution gap, but can also accelerate the organization through its planned business shifts.

Conclusion

Organizations in North America with more engaged workers and agile leaders will be the ones that capitalize on opportunities and achieve their goals.

Leadership development needs to be critically examined and re-engineered to address issues common to many organizations: a lack of leaders to drive strategic change, a shortage of ready-now leaders in the pipeline, and insufficient engagement outside of the C-suite and senior executive levels. Failure to address these issues will imperil the ability of organizations to innovate and grow.

Organizations will benefit from a deeper and more sustained focus on leadership development. They will drive superior transformation, growth, and performance when they:

  • Embed leadership development into the fabric of the culture; everyone must grow and change.
  • Focus on the changes they need to see from their leaders, not the activities and programs alone.
  • Keep development focused on real work that’s tied to strategy, solving relevant organizational issues.
  • Invest where it counts: to accelerate key transitions, and help groups make transformational change.

“The best thought-out business strategy will fail miserably if the leaders within an organization don’t have the skills to make it come to fruition,” said Mr. Baltzley. “Effective leadership development is the key to helping leaders have the right knowledge and experiences necessary to drive change.”

“A growing number of people across all levels want to work for an organization that is aligned with their values and committed to serving the world in a positive way,” Mr. Baltzley concluded. “Linking leadership development to social responsibility helps the individual, the organization and the greater good.”

Contributed by Scott A. Scanlon, Editor-in-Chief, Hunt Scanlon Media

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