Sector News

Does leadership development actually drive profitability?

June 6, 2018
Borderless Leadership

The amount of content on leadership available today is mind-boggling. From books, articles, white papers, professional publications and TED talks the topic has certainly been thoroughly covered. What is astounding however is how little is covered on the subject of how leaders actually improve – how they become better leaders.

In their outstanding new book How Leaders Improve: A Playbook for Leaders Who Want to Get Better Now, John Gates, Ph.D., Jeff Graddy, Ph.D. and Sacha Lindekins, Ph.D. answer this exact question. While there is plenty of material out there on the qualities, characteristics and behaviors great leaders typically embody in order to lead teams to greatness, what does that mean for the rest of us?

As a former Navy SEAL turned entrepreneur, my leadership capabilities have certainly been put to the test time and time again. I believe the best leaders are life-long learners who are never truly satisfied with the status quo, much less their own ability to lead effectively. Especially in this modern age of constant disruption. Great leaders are students of leadership who learn, apply, accept feedback, adjust and re-apply.

So how does highly effective leadership actually drive growth and profitability? And how do leaders improve their ability to lead in order to achieve the lofty goals they set for their organizations? In chapter one, Gates, Graddy and Lindekins reference a fantastic business book The Service Profit Chain by Heskett, Sasser and Schlesinger. In their book, these Harvard Business School professors began with the question: What makes companies profitable? Based on their research – and my own experience – the core driver of long-term profitability is customer retention. While new sales are critical for growth, it requires far fewer resources to put mechanisms in place to retain current business than hunt down new customers.

They of course then asked the question, what fuels retention? The answer to this question seems obvious. Service and quality. So what ensures consistent quality and great customer service? Their research uncovered that the most important factor driving service and quality is employee satisfaction – more commonly referred to today as employee engagement?

Employee engagement is a hot topic these days, but unfortunately, few organizations make this a top managerial – and cultural – priority. According to recent global Gallop research, only 15% of the workforce can be defined as “engaged.” Engaged team members are emotionally connected to their work and understand exactly how their job function connects to mission success. They go above and beyond in their approach to teamwork and collaboration. All of which is fueled by their manager’s approach to leadership.

Sixty-seven percent of the workforce is disengaged. These employees are often hard to identify because they can actually be relatively satisfied in their role – but they do the bare minimum. This is a problem but also a great opportunity for leaders and managers who can learn to master the art and science of managing culture and prioritizing engagement.

Which leads me to the main point. What actually drives employee engagement? At the end of the day it all comes down to culture. And culture is reflective of leadership, which means leadership drives engagement for better or worse.

But again, leading through change and disruption in today’s volatile and uncertain business landscape is exceedingly difficult. Leaders are forced to attempt to grow faster with fewer resources often leaving less time to focus on the fundamental elements of what drives lasting health and profitability: a culture that aligns with the strategic vision of the organization.

The best and most profitable companies typically put culture management and employee engagement at the top of the priority list. And that’s a long list! As business leaders and managers, we are pulled in a million different directions every day dealing with everything from shareholders and a board of directors to emerging technology, competitors and an endless array of people problems.

But by becoming better leaders, we can learn how to properly prioritize, delegate and execute. We can focus on improving culture and engagement to drive a healthier EBITDA. By putting our people practices at the forefront of the strategy we are in a better position to improve quality and customer retention.

So how does leadership development play an impactful role here? Gates, Graddy and Lindekins also reference an article by leadership expert Jeffrey Pfeffer in the January 2016 issue of McKinsey Quarterly. Pfeffer cites a study showing that somewhere between $14 billion and $50 billion a year is spent on leadership development in the United States alone!

But what is the return on that investment for most organizations? There seems to be a pretty big disconnect in what leaders actually do in organizations and how they actually improve. If we can’t directly connect the leadership development programs we invest in with actual business results, we could be wasting a ton of money.

I know because I have made two critical leadership mistakes in the past. I’ve promoted people into leadership and management roles because they were subject matter experts but had no leadership or management training. And when I did invest in professional development, I invested lightly and in the wrong areas. And I definitely didn’t take a data-driven approach to linking that investment to actual business results. I eventually figured it out but only after wasting a lot of time and money.

Effective leadership development all starts with the leaders willingness to improve. In How Leaders Improve, they refer to this as RIPENESS. This is an acronym but also a perfect analogy for assessing how accepting of change someone is – how ripe they are for making significant improvements. A leader or emerging leader who is ripe for change is also accepting of feedback and constructive criticism – which makes most people uncomfortable.

In the SEAL Teams, we learn quickly to get comfortable being uncomfortable. Our culture is based in large part on peer to peer learning and brutally transparent feedback. Something not typically well-replicated in most corporate organizations. But by first assessing a leader’s (or potential leader’s) ripeness, you have a better understanding of where to begin. If a strong desire to constantly improve isn’t part of the individual’s nature, the professional development programs should start with ripening that person. For example, improving emotional intelligence.

By Brent Gleeson

Source: Forbes

comments closed

Related News

December 3, 2023

3 takeaways from AWS’ generative AI course for executives

Borderless Leadership

Knowledge workers, employees with technical expertise and high-level executives alike can benefit from training to grasp the nascent tech. Across industries, businesses are laying out plans to train employees to use generative AI and AI tools effectively.

November 26, 2023

The challenge for HR of supporting the squeezed generation

Borderless Leadership

There also needs to be an understanding of the toll that caring takes on the mental, and sometimes physical, health of the individual. The constant mental burden of ensuring that both children and the elderly are cared for needs to be recognised by managers, followed by an honest discussion with employees about how best to manage and support it.

November 19, 2023

Fake candidates, hallucinated jobs: How AI could poison online hiring

Borderless Leadership

Next year will see some kind of embarrassing calamity related to artificial intelligence and hiring. That’s according to Forrester’s predictions for 2024, which prophesied that the heavy use of AI by both candidates and recruiters will lead to at least one well-known company to hire a nonexistent candidate, and at least one business to hire a real candidate for a nonexistent job.

How can we help you?

We're easy to reach