Investing in leaders

Australia needs to spend more training dollars at the frontline if it is to meet the skills challenge of the modern workplace, writes Kath Walters.

Australian organisations do not have the leadership or management skills needed to meet the challenges of the 21st century, according to a major new report, Leadership at Work: Do Australian leaders have what it takes?, published by the Centre for Workplace Leadership (CWL).

It’s a worrying thought. Also worrying is the finding that our leaders are undereducated for their roles, yet not enough money is spent on training. And the money that is spent on leadership training is skewed to those in the most senior roles, such as chief executives, compared to workplace managers or frontline team leaders. Yet the Study of Australian Leadership (SAL) upon which this report is based, shows that training workplace and frontline leaders has more impact on performance. In other words, organisations are aiming their training at the wrong target. These are important findings for Australian companies. This report exhorts them to spend more on training, but warns against spending it in the wrong way.

Is this worth listening to? I believe so. The study is the largest in Australia, surveying almost 8,000 individuals across 2,703 organisations and 2,561 workplaces. The report is the first in 20 years to examine our leadership capability, following David Karpin’s report, published in 1995.

CWL was established in 2013 by the Federal Government and the University of Melbourne’s Business and Economics faculty to research leadership and provide practical help to develop leaders. The Commonwealth Department of Employment funded the study, CWL designed it, and the Social Research Centre conducted it.

The study demonstrates a clear relationship between leadership capability and high performance. The more skilled an organisation’s leaders, the more innovative it is, and more engaged and committed its employees. The more training leaders receive, the better their firms perform.

This in itself is a contentious finding. In her 2012 book The End of Leadership, Harvard University professor Barbara Kellerman argues that despite billions spent on leadership training, leaders are less effective, less ethical and less respected than ever before.

There’s plenty of debate about how to measure the impact of leadership on performance. SAL solves the problem by measuring each organisation against its own performance targets. For example, when a company sets a target of 7 per cent growth and achieves 5 per cent, it has underperformed. If it sets a 12 per cent target and achieves 15 per cent, it has performed well. Of course, nothing is certain.

The report identifies seven important gaps in our leadership capability:

1. Australian workplaces are underperforming.
2. Australian organisations do not get the basics of leadership and management right.
3. Few Australian organisations report high levels of innovation.
4. Australian leaders are not well-trained for the job.
5. Australian organisations underinvest in leadership development, especially at the frontline.
6. Leadership in Australian organisations does not reflect wider social diversity.
7. Many senior leaders do not draw on strategic advice in making decisions about the future.

Of those seven problems, four are directly related to training and development. For every $25 spent on senior leaders, $1 is spent on workplace and frontline leaders, international and Australian evidence shows. That is a remarkable disparity. But does this matter?

First of all, about one in seven large organisations does not provide any leadership training at all. Yet there is a clear relationship between leadership training and performance – both a negative and a positive one. Those companies that do not train, or provide less training, underperform. Those companies that do provide training are high performers.

The study measured the impact of leadership training on three outcomes: employees’ intention to quit and engagement; workplace performance on sales, labour productivity, and customer satisfaction; and innovation.

Leadership training has a positive impact on all outcomes. SAL clearly shows that spending on workplace and frontline leaders is more effective in improving performance.