Companies must invest in leadership

By Dinesh Weerakkody

Effective Leaders in organisations bring together people and organisations to solve customer and organisational problems. But, there is a difference between leaders and leadership.

Leaders refer to people who have unique abilities to guide the behaviour of others to deliver outstanding results or resolve problems. 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 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.

Generally, there are a few key things that organisations can do to improve the quality of leadership in a firm. The quality of leadership will drive business performance 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 customer needs.

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.

Sustainable

The owners in a firm must define the company’s intended brand and then identify the leadership behaviour consistent with this external brand.

When leaders inside the company behave in line with the expectations of customers and other stakeholders outside the company, leadership becomes more sustainable and effective. 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 the 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 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 help to identify future leaders with high potential 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 give their best.

Investment

The traditional formula for leadership investment has been 70 – 20 – 10. The logic is that 70% of learning and development is on the job, 20% from feedback and observation of role models and only 10% from training.

Prof Dave Ulrich, the author of the Leadership Code, has suggested that this formula should shift to something like: 50% of learning from job experience, including mirroring role models, 30% from updated training and 20% 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 life experiences, leaders will broaden their repertoire.

For example, many companies now use CSR as development opportunities for high potential leaders. The mix of leadership investments is the foundation for a professional approach for development of leadership throughout a firm.