What rippling effect has the recession had on leadership?

Written by
Changeboard Team

22 Mar 2010

22 Mar 2010 • by Changeboard Team

More than ever, we need competent leaders

Many companies have cut costs and reviewed their supply chain efficiency. Restructuring, realigning and job losses have all resulted from the economic downturn. One positive outcome of this is that organisations should now be leaner, with the potential for higher profit margins in the future in the expected economic upturn.

More than ever we need competent leaders taking charge of our organisations and leadership competence is only achieved and updated through development on an ongoing basis. Regardless of the economic constraints facing many companies, my aspiration is that more organisations start to identify that a larger number of leaders can be successful and contribute directly to profitability and the organisations strategic goals when they have well-developed, and sustained interpersonal and strategic skills.

But, over one-third of leaders fail

I recently came across a study by Development Dimensions International (GLOBAL LEADERSHIP FORECAST: 2008|2009, Overcoming the Shortfalls in Developing Leaders) reporting that many leaders are failing; nonetheless, companies are still shifting their focus away from developing their leadership. In actual fact, 75% of the 13,700 leaders and HR professionals surveyed around the world believe that developing their leadership talent is a significant business priority. Regrettably, it seems that this top business imperative may not be getting the interest and effort that is required to really deliver Results, even though being directly aligned to strategic business goals.

Also mentioned in this report is the decline in HR professionals confidence in leadership over the past eight years (from 47% to 35%). These professionals indicated that 37% of leaders fail; by leaving their positions and/or failing to achieve their positions objectives.  This implies that something is wrong globally with either leader selection, leader development, or both. Particularly in todays competitive landscape this represents an overwhelming failure for organisations.

Prime suspect: basic skills are leaders main fail

When asked about the main reason that leaders derail, international leaders listed a deficiency of leadership skills (e.g. facilitating change, building a team, coaching) and interpersonal skills (e.g. building relationships, networking, communication) at the top of their inventory. In close second place was being deficient in visionary or strategic skills; an outlying third was poor business management skills.

So, every single one of the top three reasons for leadership failure were skills. Technical knowledge, experience, motivational fit, personality or personal styles were all rated significantly lower.

What does this mean in practice?

Take heart. The fact that the top three reasons for leadership failure were all skills or leadership competencies is good news. Why? Because skills can be developed through sustained training and development initiatives such as coaching, teamwork, strategic thinking, change management, and fundamental leadership qualities. Research has shown that visible enhancement of interpersonal and leadership skills can result from excellent development solutions and training programmes.

How can leaders prepare their organisations

In turbulent times leaders need to focus on engagement and performance as it is even more important for leaders and managers to obtain discretionary effort from employees in such circumstances. 2010 could also see the return of the war for talent concerns for retention.

Coincidentally, one of the positive payoffs of excellent leadership development is factors that influence employees attitudes and involvement: engagement, satisfaction and retention.

Therefore, it seems reasonable that this should be the time for organisations to invest in the development of their current leaders and high potential future leaders. The critical word is investment. Unfortunately, when the economic pressures are on, leadership development is not always recognised for what it is an investment, or an insurance policy, for the future health of the business. 

What does successful leadership look like?

Harvard Business School professor Michael Beer has identified high commitment, high performance (HCHP) companies which are led by their transformational CEOs those who take charge of a company in a crisis to achieve sustained high commitment from all stakeholders: employees, customers, investors, and community. Such firms carry out performance alignment managing with their head, psychological alignment managing with their heart, and the capacity for learning and change.

In a classic Harvard Business Review article from 1998, Daniel Goleman applied the concept of emotional intelligence to business. Up to that point, traditional qualities were associated with leadership vision, determination, intelligence, toughness. Softer qualities were usually left off the list. But Goleman found that truly effective leaders were notable for high degrees of emotional intelligence all of the traditional qualities were a necessary but not sufficient pre-requisite. The components of emotional intelligence self-awareness, self-regulation, motivation, empathy and social skill can sound unbusinesslike, but Golemans study found direct links between these leadership skills and measurable business outcomes. 

Intelligence, emotional intelligence...

At A&DC we believe that there are five core elements, or Quotients, which are significant contributors to successful leadership:

IQ Intelligence although intelligence correlates with performance, this does not indicate an individuals ability regarding qualities such as interpersonal skill or creativity. And, there is evidence that the brightest individuals are not always the best leaders.

EQ Emotion emotional intelligence describes the ability, capacity and skill of an individual to identify, assess and manage the emotions of ones self, of others and of groups. These are highly important skills and qualities to look for when identifying leaders given that a larger proportion of their responsibilities revolve around interacting with and motivating others.

VQ Values this element focuses on integrity, honesty, trust and respect and is the basis of what many theorists have described as character. The recent collapse of the banking system and high profile corporate scandals such as Enron and the Madoff Ponzi scheme highlights the importance for modern leaders to have an effective moral compass that guides their behaviour so they act as a role model for others.

DQ Drive this aspect of leadership relates to an individuals personal motivation to deliver Results and achieve success. It includes passion, self-motivation, resilience and tenacity.

LQ Learning Agility Lominger defines Learning Agility as being able and willing to derive meaning from all kinds of experience, and Learning to learn is the key to becoming a leader, according to Bennis and Thomas (2002).

So how important is learning agility?

Given the current economic turbulence and the fact that going forward, change is the norm, the competence of LQ is more relevant for todays leaders than ever before.  Lominger, who researched LQ across ten companies, found that those individuals who demonstrated higher levels of LQ:

  • Overcame complexity and ambiguity, linking new connections to solve challenging obstacles.
  • Demonstrated comprehensive self-awareness.
  • Took risks by experimenting with new approaches and took the responsibility for introducing new and innovative approaches.
  • Motivated others to deliver Results in ambiguous, novel situations.
  • Demonstrated creativity and curiosity in new situations. Proactively grasping new opportunities, showing openness to change, flexibility, and adaptability to their environment.

Must have leadership

In conclusion, organisations succeed if their leaders are able to inspire, develop and align team and individual efforts. Leadership is now a must have, and is critical to organisational performance. Companies must have good leaders at all levels everything else is contingent upon this.