By David Wentworth, Senior Learning Analyst, and Laci Loew, Principal Analyst and Practice Leader in Talent Management, Brandon Hall Group
Ensuring a solid pipeline of suitable leaders has proven to be a daunting task for many organizations of all sizes and in all industries.
Organizations are facing a retirement boom that will drain them of their intellectual capital and know-how. To make matters worse, the incoming talent into organizations does not possess the requisite leadership skills needed to drive results in functional areas, business units, and across the enterprise. And leadership development programs that organizations have developed to address the problem—many of them still in their infancy—are not producing the results organizations need.
Almost 75 percent of respondents to Brandon Hall Group’s 2013 Leadership Development Benchmarking Survey said their leadership development programs are not very effective.
In separate research, Brandon Hall Group’s 2013 Skills Gap Survey, respondents said leadership concerns were the second biggest factor impacting the hiring, retention, and performance of their skilled workforce.
But these troubling results are not because of a lack of effort or focus. Two separate Brandon Hall Group surveys—Business Focus ’13 and the 2013 Team Development Survey—found that organizations ranked leadership development (LD) as their second most important issue toward which they would be devoting significant time, energy, and resources.
So with all this focus on leadership development, why aren’t organizations doing better?
While there are no easy answers, and they undoubtedly differ from organization to organization, Brandon Hall Group’s research on leadership development shows that organizations are dramatically more satisfied with their LD programs when:
- A specific LD strategy is in place.
- Spending on LD in the training budget is higher.
- The LD programs have been in existence five years or longer.
From data collected for the 2013 Leadership Development survey, which drew responses from 329 organizations of all sizes in more than 20 industries from around the globe, Brandon Hall Group found five findings to be the most significant:
1. Almost 75 percent of organizations surveyed said their leadership development program was not very effective. (See Figure 1 in PDF to be downloaded at end of article).
More than twice as many respondents said their programs were completely ineffective (11.6 percent) than they did extremely effective (4.9 percent). This signifies a big disconnect between the established importance of leadership development and an organization’s ability to execute on it. There are, however, several factors that influence effectiveness. As explained in the results below, the effectiveness of leadership development programs increases significantly when organizations spend more of their training budget on leadership development, have a specific leadership development strategy in place, and when LD programs have been in existence more than five years.
2. Respondents who rated their LD programs either very or extremely effective dedicated, on average, 60 percent more resources in their training budgets than those who said their LD programs were either slightly or not at all effective. (See Figure 2 in PDF to be downloaded at end of article).
Those organizations that spend a bigger chunk of their training budget on leadership development are typically happier with the results. The companies reporting very or extremely effective programs spend an average of 32 percent of their training budget on leadership development. Those reporting slightly or totally ineffective programs spend 20 percent. Brandon Hall Group believes that, given its drivers and impact, leadership development is actually a talent initiative that should have its own independent, dedicated budget and not be tied to the training budget. That would prevent leadership from having to compete for dollars with initiatives such as compliance and job-specific skills.
3. Approximately 44 percent of organizations surveyed said they had a formal leadership development strategy. Among those that do have strategies in place, 42.6 percent rated the leadership development programs as extremely or very effective—that’s 68 percent higher than the overall result of 25.3 percent. (See Figure 3 in PDF to be downloaded at end of article).
Overall, 56 percent of organizations have no formal leadership development strategy. The good news is that 61 percent of those without a strategy said they were in the process of developing one. Yet, more than 20 percent of organizations have no strategy and no plans to develop one. This is significant because those organizations with a strategy in place are far more likely to say their leadership development programs are effective. Close to 43 percent of companies with a formal strategy in place say their program is either very or extremely effective—that’s 68 percent more than the overall result of 25.3 percent and six times greater than organizations with no strategy and no plans to develop one.
4. Nearly 63 percent of organizations with formal leadership development strategies reported that the majority of their Key Performance Indicators (KPIs) had improved. That is 76 percent better than organizations with no strategy and no strategic plans in development. (See Figure 4 in PDF to be downloaded at end of article).
Not only do those organizations with a strategy in place report increased program effectiveness, but they are also more likely to report that a majority of their KPIs have increased over the last fiscal year. A little more than one-third of those organizations with no strategy and no plans to develop one saw positive movement from their KPIs, while nearly 63 percent of those with a strategy saw improvement. Organizations that are even just in the process of developing their strategies do better than those that are doing nothing. This correlation indicates that as companies begin to get their arms around the LD issue, they also see across the board business improvements, as well.
5. There is a direct correlation between LD program maturity and effectiveness. Only 18 percent of programs two years old or less are considered very or extremely effective, while 38 percent of programs older than five years are seen as that effective. (See Figure 5 in PDF to be downloaded at end of article).
The maturity of an organization’s leadership development program has a big influence on effectiveness. Essentially, the longer a program has been in place, the more effective it is. The fact that 51 percent of all programs are less than two years old clearly has an impact on overall effectiveness ratings. It’s not that overall so many companies have poor programs in place; it’s that most of them are still early on the maturity curve.
Conclusions and Steps Forward
From all the data described above, it’s clear that the effectiveness of LD programs depends on the investment of resources, development of a formal strategy, and the time needed to allow the programs—and the people in them—to mature and develop. Failure to invest and develop strategies that allow for consistent and effective execution of LD programs will mean organizations will continue to struggle to develop the leaders necessary to drive breakthrough business results.
Because almost 56 percent of organizations surveyed lack a dedicated strategy, it’s clear that leadership development—while important—is difficult to conceptualize into a formal strategy. It is a complex process that requires a focus on both external and internal influencers, investment and development in technology that enables continual learning, continual measurement of the LD program and its participants, establishment of governance, and many other factors.
David Wentworth is senior learning analyst, and Laci Loew is principal analyst and practice leader in Talent Management, for Brandon Hall Group, a research and analyst firm specializing in the learning and talent management industries. Brandon Hall Group has an extensive repository of thought leadership research and expertise in its primary research portfolios—Learning and Development, Talent Management, Sales Effectiveness, Marketing Impact, and Executive Management. At the core of its offerings is a Membership Program that combines research, benchmarking, and unlimited access to data and analysts. Members have access to research and connections that help them make the right decisions about people, processes, and systems, coalesced with analyst advisory services tailored to help put the research into daily action. For more information, visit http://go.brandonhall.com/homeand http://go.brandonhall.com/membership_TM