Here's a guest post by Rich Wellins, Senior Vice President, Development Dimensions International (DDI):
DOES THE QUALITY OF LEADERSHIP MATTER?
Put 10 people in a room and ask them how they define leadership. Chances are, you’ll get a lively debate but not a lot of agreement. The word “leadership” can mean very different things to different people. Some believe that a leader’s key responsibility is to nourish and cultivate team members, while others believe that it is to drive growth and innovation. The reality, of course, is that both perspectives are true. Still, no matter how they define leadership, those 10 people will probably agree on one thing: Leadership makes a difference.
The difference between the impact that a top-performing leader and an average leader has on an organization is at least 50 percent, according to leaders participating in DDI’s Global Leadership Forecast 2011. In fact, this research demonstrates that organizations with the highest quality leaders were 13 times more likely to outperform their competition in key bottom-line metrics such as financial performance, quality of products and services, employee engagement, and customer satisfaction. Specifically, when leaders reported their organization’s current leadership quality as poor, only 6 percent of them were in organizations that outperformed their competition. Compare that with those who rated their organization’s leadership quality as excellent—78 percent were in organizations that outperformed their competition in bottom-line metrics.
In this study of 1,897 HR representatives and more than 12,000 leaders from 74 countries some of the global findings are:
Leader quality is low and hasn’t budged.
Only 1 out of 4 organizations (as rated by HR representatives) rated leadership quality as very good or excellent. With leaders themselves, a little more than 1 out of 3 three gave themselves and their peers high marks—consistent with the same study from two years ago, telling us that we’ve made very little progress. We also broke down the results geographically to see how some of the countries fared. In a comparison between China and India, India dramatically outperformed China, and was well above the global norms when it came to the quality of leadership.
Organizations are not confident in the future of their leaders.
A mere 18% rated the bench strength for the future as strong. As baby boomer retirements loom and organizations on the precipice of recovery and growth, confidence in the next generation of leaders should be much stronger. As one leader said: “We need to develop key talent for the future in a strategic way, not by default.” It can also be explained by the fact that while ‘identifying and developing future talent’ was rated as one of the top skills needed for leaders in the future, it was not rated as a top skill that was needed in the past, and a staggering 43 percent of leaders said they’re ineffective at doing this.
We’re falling down on innovation. Innovation rocketed up the list as a skill needed for the future, however, according to research from the Boston Consulting Group, the US is investing the least in innovation when compared to other countries around the world.
However, half of leaders rated themselves as ineffective at fostering creativity and innovation, the highest among all of the future necessary skills. One answer to this could be the high occurrence of leadership ‘derailers’ or dispositional qualities that HR identified were the most common personality shortcomings of leaders in their organization. The high occurrence of risk aversion, distrust and approval dependence, which were likely to be reinforced as a means of survival during the economic downturn, are qualities that will squash innovation.
Rigid management practices are holding organizations back.
When looking at Gary Hamel’s factors for management innovation, 6 out of 10 leaders said that key business decisions were made by those in power with little discussion, and more than half said they’re in organizations that are rigid, siloed or hierarchical. Why the concern over updating management practices? Organizations with effective management cultures were more than two and a half times more likely to have highly passionate leaders.
And we know passion is important because leaders in organizations with higher quality leadership were almost eight times more likely to report that the passion of their leaders is high.
So what do you think—how does leadership quality impact an organization?