Why companies must invest in leadership

27 May 2014 05:01 am Views - 3099

Effective leaders in organisations bring together both individuals and organisations to solve customer and organisational problems. But, there is a difference between leaders and leadership. Leaders refer to individuals who have unique capabilities to guide the behaviour of others to deliver outstanding results or resolve issues. Leadership refers to an organisation’s capacity to build future leaders and leadership bench strength.
An individual leader matters, but an organisation’s leadership matters more over time both to shareholders and customers.  Therefore, organisations must not only invest to help individual leaders to be more effective through coaching, 360 feedback and by executing individual development plans, but also must invest to build leadership depth by devoting sufficient time for leadership development.  

Build leadership

Generally there are a few key things that organisations can do to upgrade the quality of leadership in a firm. The quality of leadership will drive business performance both inside and outside the organisation. Organisations with leadership depth will have the capacity to respond to changing business conditions, execute strategy, increase investor confidence and anticipate and deliver those customer requirements. Often leadership success remains inside the company.

As a result, potential leaders learn from other leaders in the company, who have succeeded. The criteria of leadership should start with customers. The owners in a firm must define the company’s intended brand and then identify the leadership behaviours consistent with this external brand. When leaders inside the company behave in line with the expectations of customers and other stakeholders outside the company, the leadership becomes more sustainable and effective.

Also by defining internal leadership through external expectations will set more relevant and impactful leadership standards. Once leadership standards are set, leaders need to be assessed on how well they meet those standards.  To get an external view, leadership 360s may be expanded to 720s where customers, suppliers, communities, regulators, or other external stakeholders may be included in assessing targeted leaders. The board of directors should also regularly assess the CEO’s performance both inside the company with his team, among his employees and outside the company with key stakeholders.

This type of assessment offers a more complete view of leaders who have key roles to play with external stakeholders.  Assessment also helps to identify high potentials and future leaders by looking at the extent to which they have aspirations to lead, ability to meet future challenges and agility to learn and grow.  It is the responsibility of the board to keep an eye on potential leaders’ ability to serve customers and engage employees to do their best work.

Leadership investment

The traditional formula for leadership investment has been 70 – 20 – 10. The logic is that 70 percent of learning and development is on the job, 20 percent from feedback and observation of role models and only 10 percent from training.  Now it is suggested by Prof. Dave Ulrich, the author of the Leadership Code, that this formula should shift to something like: 50 percent of learning from job experience, including mirroring role models, 30 percent of learning from updated training and 20 percent of learning from life experience.

Most leaders have learnt and learn from experiences outside of work, in families, social settings, social networks, volunteer work, reading and travelling. When companies can encourage and access knowledge from these life experiences, leaders will broaden their repertoire. For example, many companies now use their corporate social responsibility (CSR) efforts as development opportunities for high potential leaders. This mix of leadership investments in my view is the foundation for a professional approach for development of leadership throughout
a firm.


(Dinesh Weerakkody is a thought leader in HR)