Workplace training

14 minute read

Why Is Leadership Development Important for Your Business?

Joseph Mapue

Joseph Mapue

Businesses rarely run on auto-pilot. Someone has to set the right direction, make smart decisions, and lead the way for everyone to achieve strategic goals. Without leaders to make things happen, businesses will find it nearly impossible to drive growth and remain profitable. Read on to understand why leadership development is important, and how it can benefit your organization. 

Why is leadership development important?

Top organizations put a high premium on leadership development. In fact, 80% of respondents in Deloitte’s Global Human Capital Trends survey rated leadership as a high priority for their organizations, even when less than half think they have what it takes to meet their leadership requirements. The same scenario emerges in a separate McKinsey study: nine in 10 CEOs believe that leadership development is the most important issue in the human capital aspect of their business. 

The need is clear and urgent. A growing company consists of teams that need key people to lead them. But teams and people come and go. When current leaders leave, new teams emerge, or new challenges arise, companies need a pipeline of well-trained professionals who can step in and take charge. Leadership development ensures that a company maintains a dynamic pool of in-house talent who possess the training required to secure competitive advantage and achieve desired business results.

As management professor and business icon Peter Drucker said, "Effective leadership is not about making speeches or being liked; leadership is defined by results, not attributes." And it goes well beyond business management. Managerial skills will help you run a business smoothly. But true leadership enables you to inspire people into effecting change and breaking new ground. 

Workplaces evolve as business realities change, requiring new breeds of leaders with relevant skills and the right mindset. Given its impact on competitiveness and profitability, leadership development has become an existential necessity for companies looking to future-proof their business. 

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Top reasons your company won’t grow without leadership development

In his book, The 17 Indisputable Laws of Teamwork, bestselling author and motivational speaker John Maxwell wrote:

The single biggest way to impact an organization is to focus on leadership development. There is almost no limit to the potential of an organization that recruits good people, raises them up as leaders and continually develops them.

Real-world data affirm that premise. Over the years, leadership development has been shown to benefit several areas that are crucial to sustained business success. Lifting both worker and company, leadership development delivers compelling ROI by improving productivity, profits, retention rates, role succession, skill fit, job satisfaction, and corporate culture. 

In contrast, lack of leadership development leads to low morale, poor productivity levels, dysfunctional culture, and high employee attrition rate.

Here are key areas in your business that will benefit when you make smart investments in leadership development:  

Competitive advantage

Done right, leadership development enables your company to establish and keep competitive advantage. Good leaders inspire people to deliver excellent performance. With the right training, these professionals also tend to formulate and execute effective strategies that help move their companies forward. In an oft-cited study by McBassi that showed a strong correlation between talent development and corporate stock prices, McBassi & Company said:

Superior human capital management is an extremely powerful predictor of an organization’s ability to outperform its competition.

One key area where leadership programs deliver tremendous impact is change, particularly when it comes to economic shifts and unpredictable movements in the market. Because a good leadership development program helps improve people’s ability to solve problems and navigate changes, it ultimately enhances an organization’s agility to thrive in any business environment.   

Profitability

Well-trained professionals lead their teams towards greater levels of productivity and efficiency. These in turn, lead to higher revenue and improved profit margins. In fact, PricewaterhouseCoopers reported that leadership development helps improve an organization’s financial performance, adding that companies with better investments in human capital generate returns that were five times higher compared to organizations with less focus on their human assets. 

Talent recruitment and retention

Companies that provide vague or inadequate employee development and leadership programs tend to have higher staff attrition rates compared to organizations with strong leadership development strategies. This is because the vast majority of workers — especially millennials and Gen Zers — value programs and job experiences that help improve their skills and enhance their careers. In fact, research revealed that millennials prefer training and development over any other employment benefit. On the other hand, bad leadership erodes employee engagement, dilutes the impact of coaching, and increases turnover rates. Making things worse, the cost of bad hires and hiring new talent can become untenable especially to small startups.  

Workforce morale

When workers have a deep appreciation of their roles and a clear roadmap for their career, their engagement dramatically improves. A high-morale team has a far better chance of achieving high performance compared to a fragmented and directionless workforce. Talent development and leadership training programs also help establish a culture of ownership and accountability. When people “own” their roles, they acquire purpose, improve morale, and perform better.   

Succession planning and skills progression

 Leadership development programs aim to equip staff with relevant skills that will help them not only to advance in their career but also to assume ever bigger roles in their organization’s success. A good program ensures that a pipeline of well-trained talent will cushion any sudden turnover, avoiding any serious setback and keeping the company on track. Describing how leaders play a crucial role in redefining the workplace, Majid Al Futtaim Group CEO Alain Bejjani said, “If we want to succeed in business we have to succeed in our people agenda… What’s important is the capabilities that you develop in your business to accompany and support your talent during their tenure with you.” According to Bejjani, one key purpose of leadership development is to enable people to address current and future challenges while leading their company through the path of growth. 

Corporate culture

When leaders lead by example and when ordinary staff perform their tasks like a business owner, a culture of engaged excellence ensues. Top-notch leadership development programs provide purpose, improve morale, and unify the entire organization. These programs encapsulate the human-side elements that are crucial to organizational success: skills development, behavioral change, accountability, innovation, business continuity, and teamwork. 

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How to develop leaders

Do you have to be a “born leader” to be a good one? 

Warren Bennis, prolific author and former advisory board chairman of the Center for Public Leadership at Harvard University's Kennedy School gave a succinct answer:

The most dangerous leadership myth is that leaders are born — that there is a genetic factor to leadership. That's nonsense; in fact, the opposite is true. Leaders are made rather than born.

While Bennis’ reply is accurate, leadership development programs are not created equal. Some of them can turn you into a good leader. But others won’t. In fact, a good number of them fail. Citing a Fortune magazine survey, McKinsey reported that only 10% of CEOs believe that their leadership development initiatives have a clear business impact. 

Because leadership development involves significant costs, making sure that your program succeeds is very important. Here are some tips and tactics that can help you orchestrate sustained success for your leadership development efforts: 

Involve the entire organization

More than just a prop to drive productivity, leadership development ensures business continuity and strengthens your culture. Hence, virtually everyone in the company should participate in your program, with current leaders and key staff deeply involved in planning the overall leadership development strategy. In addition to your HR or Personnel Department, involve the C-suite, business unit heads, and team leaders. If your budget allows, acquire tailored insight from talent development consultants. 

Define the parameters and goals of the program

Leadership development serves three primary purposes: a) help current and potential leaders develop relevant skills; b) provide high-performing staff with a formal and guided pathway to leadership and managerial roles; and, c) establish a strategic talent pipeline for the company. However, you may have other goals and more specific objectives for your leadership development program. 

Start with the following checklist:

  1. What are the short-term and long-term strategic goals you want the program to achieve?
  2. Perform a self-assessment. 
    • Are there talent gaps in the organization that should be filled by a new breed of leaders? 
    • What are your core corporate values? How can strong leadership support those values?
    • Describe your pervading culture. Does it need transformation or reinforcement? How can leadership development help in either case? 
  3. Define what makes an ideal leader. 
    • What type of leaders does each unit in your company needs?
    • Which leadership traits and skills does your organization needs? Which will make a positive difference?  
    • Which leadership style matches your organization, team, or corporate culture? 
  4. How much are you willing to allocate for leadership development? How will you measure ROI?

Adopt the frameworks, methods, and tools that work for you

There are many leadership development frameworks and resources to choose from, but not all will work optimally for your organization or business. You need to identify and implement the ones that will match your situation, needs, and goals. For example, a program may have an onsite, offsite, and virtual (online) learning components but the ideal makeup for your organization depends on your situation. 

Consider the following checklist:

  1. Specific skills and competencies to develop
  2. Cultural fit
  3. Learning components
    • Onsite 
    • Offsite
    • Online Courses/Virtual Training
    • Coaching/Mentoring
    • Formal classes
    • Workshops and seminars
  4. Assessments and certifications

Identify potential leaders

While job performance and domain expertise may not accurately reflect leadership potential, they are a good place to start (especially for departments where hard skills are critical such as IT and finance). Leverage performance assessment scores, tenure, attitude/behavior, and professional history in making your initial and subsequent selection. However, also consider current leadership assessment tests to find high-potential individuals at the onset, even from new hires and applicants. This will help you go beyond the usual suspects (i.e., ideal workers/high performers) to discover low-key personnel who have strong leadership traits. 

Integrate the program with your talent management system

Ideally, leadership development should form part of and sync with your Employee Lifecycle Management strategy, which seeks to generate optimal value for both the company and the employee across their journey together. Once you have launched an effective leadership development program, you can use the assurance of leadership training and career development to attract and retain top talent. You can also link leadership development with your systems on Learning & Development, Performance Assessment, Rewards & Benefits, and Role Progression. 

Monitor the program and evaluate its success

Your company must have a way to either validate the success of your leadership program or accurately measure its ROI. To do this, you must adopt a framework that has robust support for metrics tracking. Among other things, you must measure the program’s level of participation and its impact on participants’ professional development, skill competencies, employee satisfaction, and attrition rate. For the long term, you should also measure its incremental impact on productivity, profitability, and growth. Bottom line: if the program does not deliver the results you expect, improve it or replace it with one that does. 

Leadership is a growth engine

Leadership development is rather complicated. Every forward-looking organization needs one. But not every program will work for you. In fact, a number of companies invested in leadership development efforts only to find out later on that the strategies and methods they’ve adopted don’t match their business needs and corporate culture. 

The key is to make an honest self-assessment, define expectations, and track progress. Don’t be afraid to change tactics and tools when you need to. Go for a blended but unified approach that gives current and potential team leaders the best of everything: in-house mentoring, coaching, online learning, formal workshops, off-site training, and skills certification

Remember, leadership is a growth engine that runs on learning. To nurture future leaders and dependable staff, always aim for a work environment that encourages continuous learning.

If you have emerging leaders in your company, the GoSkills LMS makes it easy to develop their abilities and learn new skills. Train your team with our award-winning leadership and project management courses, or create your own. It's easy to customize learning for every employee and monitor their progress at a glance. Try the GoSkills LMS today for free and help your team nurture their leadership and management skills.

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Joseph Mapue

Joseph Mapue

Joseph Mapue wears his writer's hat wherever he goes, crafting top-notch content on business, technology, creativity, and innovation. He is also a dreamer, builder, father, and gamer.

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