Leadership Neglected, Potential Profit Lost
19 August 2010 Chris Roebuck
A lack of high-quality leadership is a challenge faced by organisations globally. Focus on improving, according to Chris Roebuck, visiting professor of transformational leadership at Cass Business School, it's a capability that, once improved across all levels of the business, can have significant impact on the bottom line.
A new UK Chartered Management Institute report confirms that organisations are potentially losing large amounts of profit because they have poor leaders.
More than 2,000 UK-based managers, including those from international organisations working in UK, were asked which aspects of management they thought they were best at, while a further 6,000 completed a diagnostic tool to identify their real strengths and weaknesses.
Did self-perception match reality? Just over one-fifth said they were good at getting results compared with 41% that actually were; just under a fifth believed they were strongest at managing themselves, but only 8% were; 44% said they excelled at managing people compared with 37%, and 14% felt they were born to lead.
The survey also revealed that 63% had no management or leadership training before taking up senior posts and thus, potentially, were not fully effective in those roles. This is an interesting new assessment from the UK that is reflected across most geographies. Lack of high-quality leadership capability is a challenge faced by organisations globally, as research from the Corporate Leadership Council and many others confirms.
Generally, a leader's perception of their own ability is often higher than the reality, be it the how well they are doing compared with their team's view, or a CEO's view of how well they lead their organisations compared with the feedback from staff.
Meanwhile, the underestimate of ability to deliver results, highlighted in the UK Chartered Management Institute report, could reflect tough objectives-setting in the current economic climate, which is happening on an international basis as senior management seeks to drive up performance. However, that won't happen without good leaders.
We should have learnt these lessons already because these themes have been coming to the surface for many years. In 1999 I was on an expert panel examining leadership in business, not just in the UK, for the UK Government. We found that standards of leadership were not as high as organisations or employees wanted.
My own research then showed that only 25% of line managers in a sample of London-based UK and international organisations had the critical leadership and management skills they needed to get good performance from themselves and their people. This was confirmed as a global trend by not only research data but also personal experience working across international boundaries from USA through Europe to Asia. Organisations often assume that if an individual has the functional capability to be promoted they probably have the leadership skills to match. Sadly, this isn't always the case.
Good leadership is the key to success or failure, wherever your organisation is based and whatever it does. Line managers are responsible for eight of the top ten most important factors in getting employee engagement (Corporate Leadership Council global research), and high engagement can deliver up to 30% more effort from up to 50% of staff. How much could that improve the bottom line? A good line manager can also reduce the risk of losing talent by 87%, according to international data. So it's simple: if managers have good leadership skills, the organisation reaps the rewards.
Room for improvement
Some will assume that if their organisation is doing well financially they must have good leadership capability within it, but this is not necessarily the case; unless you are benchmarked as number one in your sector and have high employee engagement then your organisation could do better.
We urgently need to improve the level of leadership and "self-management" capability in our organisations, including the ability to be able to assess our own performance more accurately with feedback from others.
And who is key to starting the ball rolling? As CEO, you should get HR to give you a business case that will convince your organisation that great leadership must underpin everything it does. Then have it implemented as a priority at all levels. If it works it will make processes more efficient, find cost savings, drive innovation, engage staff and thus enhance profits. To design a leadership development system is relatively easy. To make it work through both process and culture and deliver organisational performance improvements yearly is not.
It's about the senior management team and HR working in partnership to transform performance. And it's not only about senior leaders - leadership needs to be developed from first line level up to ensure top quality at all levels that will engage staff and create a pipeline of senior leaders for the future.
Leadership is the key to good profits and competitive advantage, and to neglect it is to condemn your organisation to a long, lingering decline in performance. I hope that in ten years' time we aren't still having to deal with this simply solved problem that causes so much damage to organisations and people.