Weighing up your leaders

Written by
Changeboard Team

13 May 2013

13 May 2013 • by Changeboard Team

Leaders as motivators

A leader that can fire everyone up is a great motivator. But how often have you seen this go to waste when they fail to see it through with management and process? Equally, the leader that simply focuses on management detail will probably fail to excite and drive people forward.

To be really effective, a leader really must use the cognitive and emotive portions of the brain together. Of course, we want our staff to be truly exceptional, and to achieve this the emotive domain of leadership absolutely must come to the fore. Without it, staff can lose trust and switch off emotionally.

But how can you actually quantify the effect that leaders’ behaviour has on how well the organisation performs?

The tool that proved the mettle

We first introduced the Leadership Employee Index – a leadership behaviour measurement tool developed by Inspiring Business Performance – in November 2006.

We’ve been using it ever since. I chose to implement it as I believe measurement forms a crucial basis for management. If you don’t have a baseline, it’s very difficult to measure how you are moving forward.

The LEI differs from a traditional 360-degree review by focusing firmly on behaviours rather than skills and outputs.

Being web based, it is simple to use and employees can access it via their desktops. We opened it to 15,000 staff and, every six months, asked them how they perceived the style and behaviour of their leaders.

Personal LEI results were passed on to 2,500 leaders based on the aggregate scores gained by their direct reports. These helped us establish important correlations between leadership and business performance and a baseline from which we could measure change. We then incorporated leadership development needs and interventions into all of the leaders’ personal development plans. Feedback on leaders’ style and behaviour shows us where they have worked towards these targets and allows us to measure the impact on labour costs and profit growth. We can then forecast future business performance through further leadership behaviour change.

Since the tool was introduced, the percentage of staff using it has increased from 75% to 98%.

Return on investment

Our initial use of the LEI found statistically meaningful positive correlations between LEI scores and level of profit growth in different business units. Generally, low LEI scores matched with low profit growth and the opposite was also true of high LEI and high profit growth. After a period of feedback and encouraged behaviour change we found a 5% improvement in LEI score, corresponding to a 4.9% improvement in profit growth.

Reducing labour costs

By using the LEI we were able to give constructive feedback to leaders about how to change their behaviours. After they had acted on this, we found a 95% correlation between
improved LEI and reduced labour costs.

Generally business units that had experienced an improvement in LEI also reported a drop in labour costs for the same period. We found that the bank saved 7.6% in total labour costs by improving LEI scores by 3.5% between mid-2011 and mid-2012.

Impact of LEI’s four leadership dimensions on profit (% increase)

  • Lead and Influence +2.4%
  • Building Constructive Relationships +1.3%
  • Enable People +0.8%
  • Personal Development & Growth +0.4%

Impact of LEI’s four leadership dimensions on labour costs (% decrease)

  • Lead and Influence – 3.5%
  • Building Constructive Relationships – 1.8%
  • Enable People – 1.4%
  • Personal Development & Growth – 0.95%

Reaction to the LEI

Initially the LEI sparked suspicion and ‘ducking and diving’ behaviour among managers. It is painful to be given the hard facts that, even if you are doing your job generally well, there are areas personal to you that you need to address and improve.

Over the first two to three years, keeping the process consistent and measuring it at regular intervals allowed managers to recognise the benefits. If they could see where they had moved from their baseline and had clearer objectives as a result, they could see the positive impact the process would have on their own performance and job satisfaction.

Slashing risk when recruiting leaders

Using the LEI helps to identify the behaviour and style we are looking for in new managers and leaders. It also helps us to manage recruitment processes with a more open and level playing field. But we are pragmatic – we still need to work with the new manager and benchmark their initial performance. We can’t predict exactly how their behaviour will fit or suit the job. This is again about measuring individuals so that they develop.

We use the data as a baseline measure for our coaching programmes and it shows where we need to provide people with external coaching.

The year ahead...

We carry out a standard annual review of leadership behaviour each year. But 2013 is all about analysing the data to maximise its validity and accuracy. We’re using structural equation modelling to ‘comb’ the data for discrepancies which could skew the result. This continual improvement is vital to ensure managers continue to trust the tool.

To validate it even more, we are also correlating data against benchmark figures from the corporate leadership council. The LEI results from our 2012 cycle correlated 92% with the CLC data.

Its success means we now plan to roll out the LEI across a larger segment of FNB, both within South Africa and other divisions across Africa.