Leadership development fails to drive firm performance

15 January 2016 Consultancy.uk 5 min. read

Organisations are investing heavily in leadership development, yet 55% say that they are not satisfied with the current leadership programmes. While most businesses have a leadership development strategy, recent analysis by Mercer finds that that strategy is often not connected with the ‘on the ground’-leadership type required by the organisation. In addition, companies often invest in less effective methods for developing leaders, and many lack measures to track the effectiveness of their programmes.

Leadership has become a central issue for businesses faced with the challenges of today’s rapidly changing business environment. Leaders are expected to deliver results against a backdrop of uncertainty, providing the vision and practical resolve for a business to grow, innovate, and respond to globalisation. However, while businesses require such leaders, recent research from BCG highlights that many leadership development programmes fail to deliver results.

Challenging leadership


To find out what is going wrong, Mercer recently, for its ‘Connecting Leadership to Value’ report, surveyed 215 leadership development professionals from across Europe, as well as findings from 10 interviews with individuals in key talent development roles at leading companies in the UK and Europe

Of respondents, 55% say that they are not satisfied with the current leadership programmes operating within their respective businesses. Given that approximately $14 billion is invested in such programmes in the US alone, getting value for money remains a priority. To find out why leadership programmes are getting a bad reputation, the consultancy considers four key aspects of such programmes: the why, what, so what and how.

Leadership challenges

The why and what
According to the research, there is a disconnect between the why and the what of leadership development. Most organisations (62%) have a leadership strategy in place, which is generally focused on articulating leadership capabilities (71%), the process for succession (63%), and the criteria and process for identifying future leaders (62%). However, only 27% have a good understanding of what makes a good leader within their particular organisation – and thereby what strategic priorities for training are required to create such leaders.

According to Stuart Turnbull, Partner at Mercer, it is “difficult for companies to connect the business imperatives for leadership development, what good leadership looks like, how development should occur and, finally how to measure it all.” He goes on to say that: “Whilst organisations recognise that current methods are not effective, we see these tactics repeated because they are familiar, because they may play to a leader’s desires, because they may be more visible or because they are the simplest to roll-out.”

Effective vs. implemented

Effective leadership strategies
A further issue faced by organisations is that there is a disconnect between how they approach training their staff for leadership and what makes for recognised effective measures. The most effective measures are generally agreed to be challenging assignments, overseas assignments, and rotational experiences. These measures are used by 65%, 40% and 36% of companies respectively. The least effective tools – face-to-face and online learning – are used by 63% and 41% respectively.

One of the key reasons for the poor choice of leadership training is that 59% of current leaders are not being held accountable for leadership training, thereby reducing incentives to get it right. Another issue is that organisations tend to seek external coaching (71%), rather than build an internal coaching capability (41%) – because of the potentially erroneous view that external coaching is more effective. In addition, many organisations follow the 70:20:10 model, with 70% of learning occurring on the job, 20% through others, and 10% through formal programmes. Getting the 70% right should therefore be a priority in achieving strong leadership outcomes.

“We understand the pressures pushing HR departments down this route, but the world is volatile and development needs to move away from these methods which mainly focus on leadership behaviour to focus more broadly on the impact that leaders deliver,” comments Turnbull. “Leadership development needs to integrate with real-world experience helping leaders anticipate and navigate the myriad of problems that they have to address. It’s time to reconnect the chain. The starting point for reconnecting leadership to value added will be unique to every organisation, depending on where the chain is broken.”

Leadership testing

Measuring outcomes
The final issue considered by the report is a lack of measurement for the return on investment (ROI) of leadership training initiatives. The results show that 81% of organisations have no way to gauge whether their programme generates results. Given the huge sums of money involved, this could be problematic for organisations.

According to Mercer the problem stems from completing evaluation retrospectively, rather than designing metrics and measures up front. One possible solution is to create a range of analytics inspired measurements that track the success of leadership programmes through a variety of business results. According to the report, “Embedding metrics and measurement throughout the lifecycle, from setting leadership priorities to developing leaders, will facilitate an up-to-date view of leadership contribution, greater executive buy-in, and the continuous improvement of leadership development itself.”