SO much has been written about leadership and the impact thereof on business.
Unfortunately some organisations have suffered serious paralysis and negative growth as a result of poor leadership. As we continue to discuss this very topical issue, it is important to reflect seriously on the correlation between effective leadership and organisational growth and or financial performance.
In this instalment I felt it necessary to share a research by the Boston Consulting Group which I stumbled upon recently and which I found to be relevant to our situation.
The research gives a very interesting analysis of the link between talent, leadership and financial performance. This relation has been an “intuitive” only given to enlightened leaders for a long time.
Thanks to recent work by Boston Consulting Group it’s no longer intuitive. The data produced by this consulting group released in its Global Leadership and Talent Index survey of 1,263 CEOs and HR directors of global companies in 85 countries is quite revealing. these findings certainly challenge our mind set with regards to investing in talent development.
The high level findings include:
Leadership and talent management capabilities have a surprisingly strong correlation with financial performance. “Talent Magnets” — those companies that rated themselves strongest on 20 leadership and talent management capabilities — increased their revenues 2,2 times as fast and their profits 1,5 times as fast than “talent laggards”, or those companies that rated themselves the weakest.
The performance spread on leadership and talent management capabilities was wide.
The talent magnets had an average capability score of 2,5 (on a scale of -3 to 3), while the talent laggards had an average score of -2,2.
Companies — even talent laggards —that move up just one level will experience a distinct, measurable and meaningful business performance return.
With organisations spending an estimated US$40 billion worldwide on leadership and talent development, these findings may enable leaders all over the world to re-orient their priorities, investments and behaviour on talent/leadership development and gain the critical involvement and support with all the members of the C-suite.
Leadership accountability critical
Through their research, Boston Consulting Group divided leadership/talent management capabilities into six categories:
Leadership and talent model;
What is interesting to note from their definitions is the requirement for a great deal of accountability from leaders. This is a differentiated approach and one that should spur some thoughtful analysis by HR leaders.
A one-two punch of investment
What’s even more interesting, then, is the data connecting these leadership/talent management performance levels with business outcomes.
(Take a look at the graph above). In addition to proving the real correlation between leadership/talent management performance and financial performance, a valuable take away from this data is Boston Consulting Group’s conclusion that:
The companies that excel at leadership and talent management have figured out how to involve their leaders, not just the HR team, meaningfully and regularly in people development.
The one-two punch of investment in leadership/talent development and significant accountability of senior leaders should help HR leaders around the world create successful business cases for moving leadership/talent development investments forward.
Robert Mandeya is a senior executive training consultant and communication in management advisor, a personal coach in leadership and professional development with the Institute of Leadership Research and Development. You can contact him on email@example.com, firstname.lastname@example.org.