Most leadership development initiatives fail to deliver any measurable results despite huge investments.
By Vikram Bhalla Leadership development is failing leaders. In a global HR survey BCG runs every two years, leadership development has always been rated as the most important, but poorly addressed, need by CEOs and HR heads. It represents one of the biggest spends on people outside of salaries – estimated at a staggering $40 billion a year. However it is failing to deliver any measurable results. CEOs and leaders are no more successful today than they were earlier. In fact on many counts, they are failing faster and more spectacularly.
One of the key reasons for the failure of leadership development is the lack of good, robust data that allows companies to know whether their efforts in leadership and talent management are delivering results and are well directed. Companies develop leadership programs and interventions without the data to guide them about what really leads to results. This is like driving blind in a storm at really high speeds. No wonder the $40 bn spend is wasted!
To address this gap, BCG created the BCG Global Leadership and Talent Index (GLTI), which is a study of more than 1,200 global executives. It is a simple 20-question survey that precisely places a company in one of six leadership and talent management capability levels and suggests ways to systematically move from one level to the next. With this, the money and efforts can be welldirected to have a real impact. So how can companies get better at leadership development?
Leadership and talent interventions to drive business performance
Intuitively, we have always felt that leadership and talent management capabilities have a strong correlation with financial performance. This impact had never been quantified. The GLTI shows that the 'talent magnets', or companies that rated themselves strongest on leadership and talent management capabilities, increased their revenues 2.2 times faster and their profits 1.5 times faster than the 'talent laggards', or companies that rated themselves the weakest.
It turns out that ten capabilities correlate strongly with business performance. (See graphic) Companies that are strong on these capabilities typically deliver strong business performance. In particular, translating leadership and talent plans into clear and measurable initiatives, leaders devoting significant time to leadership and talent management, and making leaders accountable for talent development are the three capabilities with the greatest payoff. Notably, four of the ten capabilities require the active participation of leaders. The companies that excel at leadership and talent management have figured out how to involve their leaders meaningfully and regularly in people development. In fact, leaders at high-performing companies can spend more than 25 days a year on leadership and talent management activities.
Making the transition
Companies must benchmark themselves and clearly chart out a course to progress towards becoming talent magnets. Companies that do badly at talent development initiatives need to fix the basics. An overall leadership and talent development culture is generally absent in these companies and they need to act on three key fronts. Firstly, they need to put in place a leadership model that clearly articulates the competencies that their leaders need to demonstrate. Secondly, their senior leaders must be made to spend their time on developing and grooming talent. Finally, they must put in place core leadership and talent management systems.
Then there are companies which have a leadership model in place. However, it is not yet an integral part of their people processes. They need to embed leadership competencies into recruiting, performance management and rewards systems. They also need to put in place structured training and development programmes to develop the desired competencies and continually build and establish a culture of people and leadership development.
Companies which sit in the middle generally have core leadership and talent processes and planning in place. To move ahead, they need to align their leadership and talent plan with business strategy and actively measure and track progress. They need to pay attention to sourcing talent externally by tailoring their employer brand for specific talent pools and identifying and grooming internal talent for future leadership roles. Culture is important at every step but especially at this level. Unless senior leaders demonstrate substantial commitment and support to these initiatives, the company is unlikely to become a high performer.
Companies at the top of the scale need to continuously adapt themselves to changing leadership and talent needs. The companies with the strongest leaders and talent have an ongoing commitment to initiatives such as corporate universities and leadership academies, and long-range strategic processes. Leadership and talent systems are not only fully embedded in the organisation but also capable of evolving to the changing needs to the business. They regularly conduct strategic workforce planning, succession planning, and talent-diversity exercises. In these companies, leadership and talent management issues are on the senior executive agenda—leaders prioritise and spend time on these issues more than in other companies.
(The author is a Senior Partner & Director in the Mumbai office of The Boston Consulting Group.)
