Only 40% of leaders report their company to have high-quality leaders – reflecting a 17% drop from just two years ago and the biggest decline in a decade, reveals a study by global leadership consulting firm DDI on the current and future state of leadership.  

That puts current leadership quality ratings nearly on par with those in the wake of the 2007-2008 economic crisis.

The global study, 2023 Global Leadership Forecast, reveals that half of CEOs say developing the next generation of leaders is a top challenge for their organisation. Only 12% of companies report confidence in the strength of their bench, creating a huge obstacle to growth.

According to DDI’s data, the reason for the decline is two-fold:

Lack of trust in existing leadership: Only 46% of leaders report that they fully trust their direct manager to do what’s right. Even more troubling, fewer than one in three trust senior leaders within their organisation.

Lack of purpose and meaning in leadership work: Despite companies’ best efforts to amplify purpose in their organisation, fewer than half of mid-level leaders and front-line leaders are finding it in their work.

Even in the C-suite, fewer than two-thirds find their job full of meaning and purpose. That not only drives disengagement at virtually every level, but it also discourages high-potential individuals from stepping up to leadership roles.

“Companies are facing a leadership crisis - existing leaders are frustrated and exhausted, benches are thinning out, and there is a significant shortage of leaders prepared to fill key roles. In order to survive, organisations must invest in creating an environment where emerging leaders feel valued and can find purpose in their work,” said Stephanie Neal, director of DDI’s Center for Analytics and Behavioural Research.

“That means prioritising trust, authenticity and diversity, along with a holistic approach to career growth and development.”

In addition to these challenges, DDI’s data also revealed some startling facts.

Hybrid work hasn’t delivered on its promise for leaders: Despite the overwhelming desire for hybrid work to support work-life balance, it turns out it could be making things worse.

Compared to leaders in fully remote and in-person models, leaders in hybrid models were least likely to say that it’s easy to balance their work and personal lives. Fewer than half of hybrid leaders feel fully engaged in their work and only a third reported that their work energises them, about 10% less than their in person- and remote-working counterparts.

Vulnerability builds trust: Contrary to the common fear among leaders that vulnerability will be perceived as weakness, employees are 5.3 times  more likely to trust leaders who display vulnerability. Furthermore, leaders who genuinely acknowledge their failures or shortcomings are 7.5 times more likely to maintain trust than those who do not.

Diversity is essential to leadership strength: Companies with strong leadership benches have 22% more women leaders and 36% greater leader background diversity, and they invest heavily in identifying and developing talent with diverse capabilities.

Leaders aren’t equipped to address growing burnout: Signs of burnout have increased 60% since 2020, with 72% of leaders reporting that they often feel used up at the end of the day. Leaders are deeply concerned about burnout on their teams, yet only 15% feel prepared to prevent employee burnout.

“We know that leaders who trust their senior colleagues are 3 times more innovative and those who feel a strong sense of purpose are 9 times more likely to feel engaged and 2.4 times more likely to stay with the company,” said Tacy Byham, Ph.D, CEO of DDI.

“That’s why it’s so urgent for companies to take action to rebuild confidence and trust in their leadership - so they can retain and nurture the next generation of leaders.”

Spanning over 50 countries and 24 industry sectors, the study examines responses from more than 1,800 human resource professionals and nearly 14,000 leaders from over 1,500 organisations.