Several studies on the impact of investment in leadership development undertaken by The Conference Board, Bersin & Associates and HR expert McBassi & Company amongst others, have proved that such investments do improve employee engagement and organizational performance. Center for Creative Leadership (CCL) in-house studies also support the fact that businesses do perform better when they invest in developing their leaders. Organizations across the globe realize the need to have an able leader at helm to steer the organization. While scarcity of good leaders is a challenge, it also makes a strong case for the HR department to take ownership of leadership development initiatives. The proactive measure, besides helping the organization gain competitive advantage, will also serve as a benchmark for others.
Can investment in leadership development build sustainable competitive advantage? Yet again, the answer is in the affirmative. The following are a few positive impacts of investing in leadership development:
Improved bottom-line: It has been observed that stock market returns for organizations that invest in developing human capital are five times higher than those with less emphasis in human capital. In fact, investment on human capital and leadership development helps build capacity, which in effect, drives new lines of revenue and improves customer satisfaction. For instance, the leadership development at Boehringer Ingelhim – a global pharmaceutical company, led to the company reporting a healthy bottom-line.
Attract and retain talent: The focus on leadership development lends an impetus to the employee engagement initiatives and also helps an organization to effectively deal with gaps in talent pipeline as well as reduce costs associated with employee turnover. For example, KONE - a global leader in elevator and escalator industry, successfully transformed its organizational culture to one that is based on strategy, collaboration and overall excellence. This transformation based on investment in leadership development helped the company in retaining its most valued employees.
Create organizational alignment: Investment in human capital equips the organization with the necessary resources that can connect with business realities as well as strategize so that the organization attains market leadership. This also helps to shape the organizational culture. In fact, Barclaycard, when faced with regulatory changes and competitive pressure, turned to CCL to develop a consistent leadership model for all business leaders. This, in turn, helped to bolster overall strategy and execution for Barclaycard.
Increase organizational agility: Leadership development increases people’s ability to respond to unpredictable business environments. The emphasis on developing human capital apart from those of senior executives and high potentials helps the organization unlock the potential of its talent pool and magnify its agility. For instance, Aviva’s focus on including a larger employee base for leadership development program helped it to widen its talent pool, and forge a more nimble organization. This, in turn, helped the company to weather the recessionary phase.
The sooner organizations realize the organizational and business benefits of investing in leadership development, the sooner they will reap the rewards.