Effectiveness of leadership can have profound impact on workplace culture
Volatility, changing business environments, faster-paced and increasingly complex change initiatives and evolving workforce demographics have become the reality for organizations today.
To be successful in this environment, organizations must focus on leadership. The quality and effectiveness of leadership can have a profound impact on workplace cultures and organizational performance at all levels.
Leadership development has moved to the forefront as a strategic priority for the most successful organizations in Canada and internationally. Studies have shown investment in leadership development can improve bottom-line financial performance, create organizational alignment, increase agility, and improve an organization’s ability to attract and retain top talent.
Previous research into leadership and changing business environments by the Conference Board of Canada in 1999 and 2001 identified a shortcoming of organizations that was affecting their ability to remain competitive, to grow and to prosper.
The research indicated there was a growing “confidence lag” in organizational leadership in Canada. It highlighted both a need for strong organizational leadership and a lack of leadership capacity to identify and implement major change.
A benchmark comparison of these results conducted 15 years later reveals little advancement has been made and although some improvements are evident, progress has been minimal and slow, according to The Leadership Outlook: Leadership Driving Organizational Performance study, based on a survey of 441 HR and business leaders.
Globally, the results are not much better. A mere 40 per cent of leaders rated the current quality of their organizational leadership as “high,” according to 2014-15 research by the U.S.-based Conference Board and Development Dimensions International.
And only one in four HR professionals rated the overall quality of leadership in their organizations as high, found the survey of 13,124 leaders.
A global stalling of leadership development efforts is cited as the primary contributing factor. Despite an estimated $50 billion being spent on leadership development worldwide, only 37 per cent of leaders rated their organization’s leadership development programs as “effective.”
So, how can organizational leadership be improved? One approach is for organizations to devise a means for assessing the quality of their organizational leadership. A Leadership Performance Index (LDPI) from the Conference Board of Canada highlights 15 unique leadership qualities and behaviours that describe organizational leadership capability and capacity.
The index consists of five drivers or factors:
Alignment and culture: Organizations exhibit a strong culture of leadership and have collaborative leaders with a clear vision and alignment of organization goals and business objectives.
Capacity for change and innovation: Leaders have a high capacity for the identification and implementation of change and innovation.
Trust and relationship-building: Leaders have strong and effective relationships within, and external to, the organization and have the confidence of their customers, employees and stakeholders.
Personal and professional development: Leaders engage in their own personal and professional development and continually develop their skills and abilities to lead change in their organizations.
Identification and development of top talent: Leaders place a high priority on the identification and development of top talent.
The LDPI itself can be thought of as a continuum in organizational leadership capability, with each level representing a different stage of leadership progression or maturity.
Organizations can be organized into three levels or categories along the index — low, moderate and high.
Organizations rating high on the index reported better performance outcomes including:
• being 30 per cent more likely to have strong and effective leadership cultures
• exhibiting high organizational performance in areas such as overall leadership performance, overall productivity and the ability to retain essential employees
• being six times more likely to achieve financial unit goals, and having higher growth and revenue expectations
• having a strong capacity for innovation, a greater tolerance for risk and an emphasis on the need to integrate innovation and “reasonable” risk-taking as part of their larger business strategy.
Formal leadership development strategies that focus on the unique needs of leaders at differing levels are key for high LDPI organizations. The evaluation of leadership development programs is a high-priority item to align organizational strategy with business outcomes.
High LPDI organizations are more likely to have a formal leadership development program in place, compared with moderate or low LDPI organizations. Additionally, there is more regularity in the evaluation of the effectiveness of high LPDI organizations’ leadership programs.
In short, they have more available and current information on the development needs of employees, enabling them to offer relevant and focused leadership development opportunities.
High LDPI organizations employ effective strategies for building leadership capacity, such as the implementation of strategic work assignments, strategic recruitment, and placing a high priority on succession management.
Leadership development and leadership capacity-building are critical areas for investment. Leadership development cannot be treated as a discretionary expense.
The risk is simply too great for organizations not to consider strengthening leadership development efforts.
In this day and age, the identification and development of strong, capable and change-ready leaders has to be an integral part of the business strategy for Canadian organizations in order to remain competitive and high performing in the constantly evolving and increasing less predictable business environment.
Both at the Conference Board of Canada in Ottawa, Donna Burnett Vachon is director of leadership and human resources research and Colin Hall is principle research associate for leadership and human resources research. For more information, visit www.conferenceboard.ca.