Effective Leadership Development and Organisational Performance - Coursework Example

Summary

This report addresses the issue of poor people management that is costing UK firms an average of £84bn every year. Research studies have revealed that poor leadership is costing UK organizations a lot of money as most of the leaders lack the relevant skills to achieve above average performance. Most of the company executives are reluctant to undergo leadership development because they assume that their skills are enough. However, the latest findings suggest otherwise. This report addresses the need for effective leadership development because of the overwhelming evidence supporting the positive relationship between leadership development and organizational performance. This report contains evidence of how leadership development improves organizational performance and discusses the best practices UK companies should consider when designing leadership development programs. In the implementation section, this report suggests that UK companies should use the team-based approach to leadership development. The rationale is that leadership is all about influencing employee performance rather than dominating people.

Introduction

According to a CIPD article, “poor quality people management costs UK business a total of £84bn per year!” (Kirton, 2015, p. 1). The report raises a lot of concern on whether we have been applying the new management standards that were developed during the 1980s and 1990s to promote manager development. The current results reveal that the current people management capability of UK business is no different from that of the 1980s and 1990s. Over the years, businesses have been revising the new management standards, but it is astonishing to realize that UK business leaders are yet to improve their competencies. In light of the new findings regarding the cost of poor people’s management, this paper identifies types of effective managerial leadership development interventions that large organizations should develop to ensure responsible leadership and eliminate unnecessary expenditures.

The paper focuses on large organizations in every sector and industry. The rationale is that the findings of the CIPD article generalize the performance of UK businesses. Some of the issues that will be addressed include:

• the relationship between effective leadership development and organizational performance and competencies
• an analysis of the competencies that large organizations can use to measure leadership effectiveness as well as organizational performance
• approaches to identifying leadership and management development needs

The Cost of Poor Leadership/Management

Human capital is an organization’s most important asset. Regardless of the size of a business organization, the impact of a single effective leader can reverberate positively within the organization thus improving the bottom line. Conversely, the burden of a poor leader performing below standards has a negative toll on an organization’s bottom line. Some of the most common features of a poor leader include wastage of company resources on unproductive efforts and wasting time on correcting mistakes. The primary responsibility of any leader is to guide employees in performing tasks including identifying and handling issues that limit effective production. Low employee productivity is a reflection of a leader’s inability to direct employee performance. Therefore, a poor leader refers to an individual in a leadership position who lacks the necessary skills and ability to lead effectively.

Research studies reveal that poor leadership/management is among the worst hidden costs that many businesses are facing. The lack of basic management and leadership skills has numerous negative consequences for any business organization. The most common negative consequence of a poor manager is high costs of employee turnover, low employee morale, and disloyalty among employees. A high employee turnover is the first sign of poor leadership or management. It is a sign that the management team is micromanaging employees. Micromanaging among by managers offers little opportunity for employees to participate in the company’s success. Lack of employee participation in steering the company's direction makes workers lose interest in the company's long-term welfare. The lack of opportunity for advancement forces employees to look for alternative employers that can advance their careers.

Even though numerous research studies reveal that poor people management is responsible for huge costs in businesses, most of the executives do not appreciate human resource as a strategic cost. Most of the business executives continue to under-invest in leadership development solutions. The most common question is “Why would a company executive assume such a position?” (Pink, 2011, p. 45). Research studies reveal that organizations have for a very long time been unable to connect human performance with the cause of their problems. For instance, poor financial performance is as a result of the business organization hiring the worn people. Unless business organizations match their leaders with their jobs, the cost of doing businesses will continue to rise. These organizations will under-fund initiatives that promote leadership development and overfund initiatives that handle employee performance problems.

A research study by the Future Foundation reveals that the quantifiable costs of poor people-management in the workplace are very high (Eurich, 2013, p. 100). The study used participants (executives) from different parts of the world and its findings affirm the findings contained in the CIPD article. Poor people management is draining the profits of many organizations across the world. In most cases, executives suspect but never prioritize the performance threat of poor people management. Every year, organizations lose vast work hours and money because of poor people management. The problem is that most of the business organizations have failed to actualize the latent human potential of their workforce thus performance issues are consistently hindering the continuous success of these organizations.

Research studies reveal that it takes executives eight months to attain the standard performance levels, and any mismatch between the executive and the job is very costly for employers. It is very clear that business organizations across the world need to invest in leadership development so as to improve their bottom line (Short, 2012, p. 37).

The relationship between effective leadership development and organizational performance

Most of the company executives are aware that strong and effective leadership is important for organizational success. However, the biggest problem is that there lacks a sense of urgency to enhance leadership skills in most of these organizations. The reason is that most of the organizations assume that the prevailing leadership capacity of their executives is good enough. However, research studies reveal that an average business organization is losing over one million dollars every year because of their inability to tap leadership potential and promotion of leadership practices that are below optimal levels (Bass, Avolio and Goodheim, 1987, p. 15). According to Zenger, Folkman and Edinger (2009, p. 70), organizations that develop leaders who can inspire others and eliminate obstacles to productivity have the enormous potential of improving their bottom line. Their research study reveals that effective leaders have the potential of doubling profits for any business organization. Similarly, Bassi and McMurrer (2007, p. 7) show that effective leaders outperform poor people management leaders. Some of the traits of an effective leader include sharing of information, open communication, inspiring confidence, and eliminating barriers to productivity. In their study, Bassi and McMurrer (2007, p. 7) discovered that company executives with higher scores performed 60% to 130% better than their counterparts with lower scores. The scores relate to human capital management thus a higher score is a sign of effective leadership whereas a low score is a sign of poor leadership. The findings of the two research studies reveal that strong and effective leadership is not only important for organizational success but that anything less than effective leadership has serious financial implications.

The global business environment is highly competitive, and business organizations depend on their leaders to maintain their competitive advantages through their capacity to facilitate changes and promote innovation. Leaders have the potential to single-handedly steer organizations to the greatest heights of business success depending on their skills and abilities. Research studies reveal that leadership has changed over time, and a close relationship between a leader and subordinates is unavoidable. Consequently, leaders can influence other members of the organization and motivate them to achieve organizational goals and objectives. However, it takes skill and experience to manage teams as well as motivate them to achieve organizational goals. According to Bass, Avolio and Goodheim (1987, p. 8), effective leadership development has a positive impact on organizational performance. In their research, an overwhelming 80 percent of participating executives note that an organization’s ability to develop leaders as one of the primary factors that influence an organization’s competitive advantage.

Leadership development refers to efforts by an organization to improve the quality of performance among its leaders. Organizations improve the quality of their leaders through formal initiatives and policies such as structured training programs and experiential learning. When developing a leadership development programs, organizations start by developing a leadership competency model that identifies the specific elements of leadership identity that best aligns with the needs of the organization. Coaching is the most common type of leadership development and is highly prevalent among senior leaders. Other forms of leadership development programs include academic retreats and seminars. There is evidence that organizations achieve a holistic leadership experience for their leaders by mixing different methodologies. For instance, Queensland Health has been using a mixture of both long and short formal workshops to train their leaders. The organization has also been using the 360-degree feedback methodology along with self-paced online learning modules to develop clinical as well as non-clinical leaders.

According to Lee, Coaley, and Beard (1993, p. 32), British Telecom saved approximately £270 million after initiating a management-training programme. The company’s top management noted that the amount was associated with cost saving in areas such as customer complaints, missed deadlines, and errors by untrained junior managers. The company had examined employee performance after every training course. An in-depth analysis of 16 business organizations in the United Kingdom revealed that there is a significant statistics relationship between organizational performance and human resource development systems. In fact, the study revealed that there was high performance in areas where management development activity was associated with business strategy. All these studies provide proof that leadership development improves organizational performance. Therefore, UK businesses should identify best practice in leadership development initiatives and invest a significant percentage of their time and money in improving the quality of its leaders.

Best Practice Principles in Leadership Development Interventions

There is no single definition or list of principles that best define excellence in leadership development. However, a review of the literature on leadership development presents common principles that different organizations apply in implementing their leadership development programs. It is adequate evidence that organizations that explore these principles have a high rate of success in the effectiveness of their leadership development programs. It is important that every business organization develops standards of excellence that it can use to measure the effectiveness of their leadership development programs. Below is a list of some of the principles of effective leadership development:

• Assessment Of Organizational Needs As Well As Learner Needs

According to Taneja, Sewell and Pryor (2012, p. 11), the first step towards establishing an effective leadership development program is conducting an objective organizational review to assess leadership needs. The rational for an organizational review is to identify knowledge gaps and missing leadership skills so that the development program focuses on addressing these gaps. Organizations should go beyond identifying the existing leadership competencies to assess whether the available competencies are adequate to address business needs. Organizations are continuously growing and so are their leadership needs. Therefore, an effective needs assessment review should also predict future needs of the organization.

• Program delivery

Even though organizations may fail to teach leadership, there is consolation in the fact that effective leadership can be achieved through learning. Practice is the best approach to achieving effective leadership. It is important to note that no form of training can teach anybody how to be leaders. Therefore, organizations should avoid classroom-based and content heavy delivery approaches when launching a leadership development program. Organizations should focus on the authentic practice of leadership skills. One of the best approaches to leadership development is adventure retreats. Retreats allow leaders to engage physically with colleagues and learn how to apply effective leadership in real life situations. Organizations may consider taking their leaders to building and restoration parks so that they can develop the necessary skills and attitudes necessary for quality people management (Sheppard, Sarros and Santora, 2013, p. 270).

• Measuring returns

It is important that every organization measures the return on investment of its leadership development program. The rationale is that a program is only effective if the returns exceed investments. Research studies reveal that measuring the ROI of leadership development programs is a contentious issue. There is disagreement on the effectiveness of ROI in measuring the success of leadership development programs. However, Reams (2016, p. 51) identifies a myriad of indicators that organizations should measure to assess the ROI of a leadership development program. He suggests that organizations should not focus on financial measures only. Rather, organizations should measure possible gains such as acquired skills. For instance, a retreat with an international guest may be very expensive, but leaders may acquire invaluable skills that they may use to attract new clients.

• Outcome Reviews

Organizations can implement an effective leadership development program by evaluating the program after its launch. Every organization should pre-program objectives and target competencies that will be compared with the final outcomes. Comparing pre-program objectives and post-program outcomes enable the organization to determine the effectiveness of the entire program. A program becomes effective if its final outcomes exceed initial objectives. On the other hand, a program can be rendered ineffective if it is unable to achieve the initial objectives. Constant review of program outcomes acts as a quality assurance tool that ensures the achievement of organizational leadership needs. Failure to achieve some of the objectives presents the organization with an opportunity to take corrective measures and prepare well for future challenges. Program evaluation involves participants and organizations can collect valuable information on how to establish effective programs in the future. Program leaders should ensure that the organization acts on feedback from participants so that they can develop a sense of importance and have faith in the system.

• Personnel Qualification

The process of designing and delivering leadership development programs should be a reserve of the best qualified, most reputable and highly specialized individuals. The rationale is that best-qualified personnel have the capacity of designing an affective program that will yield quality results for the organization. Leadership scholars note that the most qualified personnel can transfer their skills and ideas to leaders by establishing a program that yields the best quality of training outputs. Even though some organizations outsource their leadership development capabilities, it is important that such organizations assess and validate the credentials of everyone engaged in the leadership development program. The implication is these organizations should hire, develop and retain the best leadership development talent. This is in support of the organization’s commitment to the principle of conducting quality assurance. Such an effort also proves that the organization is investing wisely in initiatives that will yield the best results regarding effective leadership skills that will improve an organizations bottom line.

Conclusions

There is a positive relationship between leadership development and organizational performance. This is an opportunity for UK firms to save £84bn every year by adopting effective leadership development initiatives. There are numerous leadership development initiatives including coaching, formal training programs and retreats. Regardless of the choice of leadership development initiative, UK organizations should consider five best practices that will guarantee the success of their programs. First, every organization should assess their leadership needs. Second, the leadership development program should focus heavily on practice rather than content delivery. Third, organizations must compare the cost of leadership programs with the benefits to ensure that the program brings more than it takes. Fourth, there should be continuous reviews of program performance to ensure that the program achieves most of the objectives. Finally, the program personnel should possess the highest qualities of leadership development to ensure that the program delivers the best results.

Implementation Plan/Strategy

Leadership development should occur on the job since one of the best practices is that leaders learn to lead effectively through experience. Leaders should work with others to get things done. The rationale is that leadership is an interaction between a leader and his follower. UK organizations should establish self-directed teams that will share tasks thus distributing the leadership function across every member of the team. Every member of the team is responsible for the overall performance of the team. Organizations should conduct performance appraisals on every team and customer feedback so that every team can appreciate their role in organizational performance. Leadership development through self-directed teams is a reflection of the modern thought of leadership. Traditionally, leadership was dominance over others. The modern concept of leadership is different from the traditional view of leadership. The modern leadership thought shifts from individual decision making to team work. Therefore, UK organizations should consider promoting a culture of team work so that every member can participate in business decision making processes. Leadership development programs should be facilitated by a third party. An external facilitator will examine employee performance and compare it with an ideal high-performance team. The aim of every development program should be to eliminate poor people management and introduce effective leadership that is centered on team work.

Every team should review its behavior and identify effective approaches to make appropriate changes to the provisions of the leadership development program. Every team members will strive to acquire competencies identified in the pre-program stage of leadership development. Training and development will be continuous and carried at intervals. For instance, organizations should conduct team building activities after every two months. Workshops and training should take place once every year.

Organizations should direct the development of conceptual skills to teams. Every team should be responsible for developing strategic and entrepreneurial skills especially when members are implementing real projects. However, a third party should be responsible for teaching interpersonal skills such as effective communication and problem solving. Employees should form groups and taught these skills. The trainer will create scenarios and assess the performance of an individual employee. Finally, organizations should consider establishing peer-building groups in leadership development. These groups will organize projects for the organization and tackle special problems.