Hoping for the best

Too many organisations simply hope for the best from their leadership programs, yet aligning, measuring and controlling leadership investment starts with a strategy. Is it time to develop yours?

It's a damning statistic and one that sits uncomfortably with the cautious, more measured approach taken in just about all other areas of business. According to Ernst & Young, the world’s companies spend US$50bn a year on developing leadership capabilities, yet the results are hazy at best, with many programs not hitting expected return on investment metrics. EY found that there is almost no such thing as a joined-up, rigorous approach to aligning, measuring and controlling their investment in leadership development.

EY’s report – Why is the best investment strategy a human one? – suggested: Activities are usually carried out ad hoc, with little integration and often no attempt to link development initiatives with identified future capability gaps. Coming from different budgets, with different owners – and often entrenched in tradition or aligned with personal interests – leadership development has few controls.

Fundamental flaws

What typically goes wrong with leadership development programs? Karlie Cremin, principal at Dynamic Leadership Programs Australia (DLPA), suggests six common reasons why programs don’t return at the desired level.

a) Wrong people in the leadership roles
If the people in the leadership team are not suited for their roles, any program is going to be a little limited in what it can return.

b) Lack of senior management buy-in
Where leadership programs are viewed with suspicion or viewed as irrelevant they are likely to be sabotaged or have limited e ect. This is why engagement and co-design is really important in the structure and implementation of leadership programs.

c). Poor-quality program content
It does have to be said that there are many programs on market that really do not deliver quality content. Where this is the case, of course the program is unlikely to yield.

d) Poor-quality facilitation and delivery
Cremin sees many organisations that have run programs in the past where the content was solid; however, the delivery and facilitation let the program down. This can occur where people try to save money and engage inexperienced facilitators, or simply where the facilitator is not well suited to the organisation

e) Toxic culture 
Sometimes organisations try to use a leadership program to correct a toxic culture. “Leadership programs are an essential part of cultural change programs; however, they will not work in isolation. Coordinated action is critical to successful cultural change,” Cremin says.

f) The business model is broken
If the business model fundamentally does not work, there is not a lot a leadership program can do," Cremin says. "Any structural issues need to be addressed prior to the implementation of a leadership program."

There’s a further, deep-rooted problem with too many leadership development programs: unrealistic expectations. To believe a leadership development program can resolve deep-seated problems within an organisation means they will always fail to live up to ROI expectations. 

“I believe that most organisations are not really attempting to measure the success of these programs in statistically valid ways,” Cremin says.

“Many organisations we see run programs because they think they should, or because they want to tick a box on a development program.”

Ultimately, Cremin says it’s not unreasonable to expect a great return on a leadership program. When properly constructed and run they have the capacity to completely change an organisation and create high-performing, resilient businesses. However, in order to achieve that she suggests it’s necessary to properly draw a correlation between your business performance and the leadership skills and capabilities that drive performance.

"This is where most programs that do try to measure ROI fall down. They have a lack of clarity on what skills and capabilities they need in their organisation to drive success, and as such the leadership program is not relevant to their business model,” she says.

Context is king

As a first step, it’s essential to match the leadership development approach to the context of the organisation – its business plan and business cycle, its industry, and so on.

“Where programs don’t take into account organisational context, DLPA has also found that participants become frustrated because they struggle to utilise their new skills and capabilities, because they have not had training and coaching in dealing with the likely obstacles in their environment, or in their environment, or indeed thinking strategically about change within their organisation."

Support at the right levels

It’s not uncommon for organisations to break their leadership programs down to target specific individuals on their career trajectories, for example upcoming/future leaders, mid-level leaders and executive leaders.

Cremin suggests there are arguments for and against that approach.

“Which option is right for you will come down to your culture, business model and what you are trying to achieve through the program. Leadership programs can be a great way to build teams, facilitate change and transfer knowledge through an organisation. If those are your aims you are probably better having a mix of people rather than focusing on a level within the organisation."

However, if the aim is more focused on capability building, then Cremin says segmenting in this way can mean that the content is more tailored and pitched to the level of the participant.

“You can also ensure unity in purpose and approach across different levels in the organisation, which has its advantages,” she says. “In short this is a valid approach; however, as with anything, you need to properly consider the context and purpose of the program to decide what is right for you.”

Exec leadership programs in 2018

If there’s one overarching trend Cremin is witnessing in 2018, it’s programs that display a mix of management, leadership and technical skills.

“We design programs around the need of organisations so that we cover off the exact skills and capability mix the organisation needs to succeed,” she says. “This is then structured into a program that makes those skills tangible, real and relevant to the participants so they can start using their new skills and capabilities straight away, and they don’t have to wait for the program to complete to start effecting change. This also ensures there is support available through the implementation of these skills.”

She adds that the key to a genuinely successful program really does seem to be ensuring the content is tailored to the needs of the organisation as well as the individuals selected for the program. Layering the content over time is important as well for ensuring a deep understanding, and the forming of true, positive habits in the executive team.

ROI

Returning to the opening EY statistic, what should HR leaders be looking at when assessing the success (or otherwise) of a leadership development program?

“Any program should be able to be measured on either improved financial indicators or reduced risk indicators, depending on the needs of the organisation,” Cremin says.

“It is important to properly define these at the start of a program. Examples might include increased profit, increased market share, cost reduction or increased sales pipeline. This is because a more effective leadership team should be able to be measured by improved business unit performance. In the absence of that you really do need to look at the core charter of your leadership team.”

On the risk side, Cremin suggests HR might look at cultural indicators such as staff churn, grievances and claims, and overall employee engagement. Risks may also include management of market or business risks, succession planning, and general business volatility. Again, an effective leadership team should be actively managing these risks, so a successful leadership program would result in these and other relevant risks reducing.

 Effective leadership during uncertain times is critical; in fact, it can make or break an organisation. EY’s report summed up where leadership development fits in with this overall picture: “By ensuring leadership investment delivers a clear impact, boards and executive teams will effectively manage the risk of a leadership capability deficit damaging the long-term health and performance of their organisation.”