By Alistair Gordon

Every senior management team is chasing productivity leaps: doing more with less and faster. Better leadership – of people and the business – is a crucial contributor to this goal. So why is it that nearly 75% of leadership development investments fail to produce the desired behavioural and associated business improvements?

Contrary to common perception, it isn’t the HR team that’s at fault, or their chosen supplier. Responsibility lies with senior executives. 

Most seasoned executives believe - having been on various leadership programs over the years – that these development initiatives are (a) much of a muchness, and (b) rarely deliver long term benefits to the business.

Blame for suggesting these costly exercises is typically attributed to easy targets: the supplier, the facilitator, or the HR team. The executive suite – with the CFO front and centre – rarely consider themselves culpable.

Any basic risk analysis, of why these leadership development investments fail to make a material commercial difference, will identify the senior team as prime candidates for at least partial prosecution.

Here are five reasons that support this argument:

1. The leadership team fails to own the development programs

A leadership program for 15 participants costs somewhere between $3,000 and $5,000 per person, even before calculating lost work time, travel, accommodation and the cost of those horrible sandwiches. These investments – across the business - add up to well north of $100,000 and this figure doesn’t take account of recruitment costs.

Recruitment costs? Yes, because typically, on a poorly designed and poorly supported program, one or two excellent employees will realise they are being poorly led. They’ll leave the organisation to find someone they actually want to follow.

But why would you spend even one dollar on leadership development unless you believed – and could reasonably measure – it would result in improved business performance.

Unless senior leadership teams own these programs - and can articulate the desired outcomes and real business benefits - any long term commitment to them will wain. We’ve all seen it happen - the investment will be the first casualty when the CFO is tasked with finding a three percent savings across the board.

2. The senior team are often poor leaders in the modern sense of the word

Senior leadership teams erroneously believe development investments are for people further down the organisation – not them. They argue that (a) we’ve been on lots of programs in our career already and know this stuff, or (b) we are senior executives, so must be good leaders, so we don’t need development.

Using this mindset, they resist all efforts to submit themselves to the same rigour concerning behaviour, performance and potential that they insist on imposing on everyone else. They are far too often aided and abetted in this fiction - that they are good leaders. Complicit or powerless HR people whisper about how terrible the senior leadership team are at leading but can’t say so. In their defence, many in HR have, in past lives, mustered the courage to confront those higher up only for it to backfire spectacularly on them.

The way to effectively lead people and businesses has changed dramatically in the last 10 years, but most senior leaders haven’t kept up. They are actually senior managers - not leaders at all.

This is not necessarily their fault. They have actually missed out on the raft of proven development programs now afforded to middle management. They are forced to rely on executive coaching - to use the privacy of a one-on-one confidential relationship to bone up on concepts that front line leaders are now taught as a matter of course.

The central question to ask is what sort of leadership does the organisation require for it to prosper? Having established this, the next logical question is: do the senior leaders in the business have the appropriate skills and behaviours? And if not, how do we address this issue?

There is a direct, material, commercial reason for doing this risk assessment. Often, middle management talent leaves an organisation because, while on leadership programs, they see avenues for improvement but have to return to the same old workplace. They realise the senior leaders of the business are operating on an outmoded set of behaviours - and are allowed to get away with it because no one can challenge them.

Average performers won’t take the risk of finding a more progressive culture, but the high performers will. This loss of talent doesn’t just cost the CFO dollars – it can cost the company its market position.

3. The senior leadership fail to get involved in the programs

If I were a CEO or CFO spending the amount of money discussed earlier on leadership development programs, I would be very keen to (a) see how the money is being spent, (b) on whom, and (c) whether it is working. The only way to check is to actively participate in these programs. And by this, I don’t just mean turning up to make a opening address.

Well designed programs will involve senior leaders in a variety of ways: guest appearances to share their leadership experiences; as mentors to give junior leaders access and exposure to expertise; as judges on panels to monitor progress; as sponsors of action learning projects; and socially, at dinners and graduations.

Very well designed programs will provide the executive levels with access to all the material being taught, so that they are truly kept in the leadership models, language and concepts loop.

Yes, this involvement requires a commitment of time and effort. And it may also include some personal development time for the senior leader too.

4. The senior leadership team fail to insist of clear – but practical – measures of success

Measuring outcomes from other business investments – plant, working capital deployed, technology and facilities – is a given. To not do the same for leadership development investments beggars belief.

It could be argued that the impact of these programs is difficult to measure in the same precise manner. But Blind Freddy can see positive results versus no results at all. The signs and signals that leadership development is working are clear: the responses of the participants; more engaged and better performing teams; a more questioning and innovative workplace; and a great focus on the right things (customer satisfaction and advocacy) and less emphasis on the wrong things (managements systems and processes). Over the long term, organisations must be tracking engagement scores at agreed milestones.

These measures should be visible to everyone associated with the program: suppliers, the HR team, participants, and senior business sponsors. Everyone – those authorising the expenditure and those deploying it – should be accountable for the results.

5. The senior leadership team fail to set accountabilities and expectations for the leaders of those participating in the programs

The data on the effectiveness of leadership development programs reveals that when managers are actively involved in supporting their direct reports, it is three times more likely to result in significant behavioural change and enhanced business performance.

Why then don’t businesses insist on clear accountability for the managers of those program participants? These accountabilities would include making themselves available for every part of the program – not pulling out the day before because of ‘client work’ – and providing opportunities to practise new skills.

Participants are often nominated for programs by their managers, who use the program as a tick the box exercise to avoid having to develop their reports themselves.

Senior leaders and the managers need to be held jointly responsible for the development of their participants.

Consistency and commitment

What underpins the ROI on leadership development is the willingness by the senior team to actively commit to the corporate improvement program. They have a responsibility to understand, master and deploy the same leadership behaviours that are being inculcated throughout the organisation.

Alistair Gordon is CEO of specialist AsiaPac firm, HFL

Alistair is a Course Master for the Directing Growth program run by the Australian Institute of Company Directors. The AICD program helps directors of mid-sized firms build and execute sustainable growth strategies for their businesses, including mastering the right leadership settings for themselves and their team. Find out more.