Welcome to Friday 411, issue #019. In 4 minutes, with 1 insight and 1 action, you’ll understand how a failure to develop leaders wreaks havoc on your company.
1 Insight
Companies spend billions each year on leadership development. Yet few companies actually develop leaders.
Imagine a billionaire resolving to end world hunger. He takes his fortune to a mountain peak and tosses his money over the side. He hopes that hungry people who live at the base will catch the cash and buy food. The best word to describe this tycoon would be “crazy.” Yet, this is the exact strategy that many executives use to develop their company’s leaders. Executives and heads of HR often launch leadership trainings, hoping that employees will catch enough insights to become better leaders.
Companies spend approximately $366 Billion per year on leadership development. 83% of companies believe that it’s important to develop leaders at every level. But many companies don’t have a strategy or plan for developing those leaders. In other words, they, like the imaginary billionaire, throw money at random leadership initiatives, hoping it will help the company develop better leaders.
The solution isn’t that companies should stop investing in leadership development. Rather, it’s that company leaders need to become intentional and strategic in their development of those leaders. In addition to wasting money, there are nine effects of failing to provide intentional and strategic leadership development.
Effect #1: Diminished Clarity
Only 22% of employees strongly agree that their leaders have a clear direction for the future. An organization has reached clarity when everyone knows (1) where the organization is going, (2) how it’s getting there (3) what each person’s role is in getting there, and (4) why it’s important to get there in the first place. Leaders at the top hold the responsibility to create clarity and to cascade it. A failure to do so results in the next effect.
Effect #2: Reduced Employee Productivity
Productivity is the ability of employees to accomplish the priorities of an organization. When companies lack clarity, employees generate activity rather than productivity. In Deep Work, Cal Newport says that busyness is a proxy for productivity. He writes, “In the absence of clear indicators of what it means to be productive and valuable in their jobs, many knowledge workers turn back toward an industrial indicator of productivity: doing lots of stuff in a visible manner.”
In addition to wasting time on low priorities, poor leadership development results in more time spent on urgent but unimportant tasks. Ongoing urgency often results in busyness and burnout.
Effect #3: Distrust of Current Leaders
We live in a time when executives and managers are often portrayed as greedy, selfish, and incompetent. This perception is exacerbated when companies don’t have an intentional and strategic leadership development plan.
The opposite happens in companies in which current leaders participate in the development of middle managers and high-potential future leaders. Current leaders can multiply a company’s vision and culture through their leadership development efforts. These efforts lead to middle managers having higher trust in the executives and strengthening communication channels throughout the organization.
Effect #4: Slower Speed
Without a network of well-developed leaders, silos emerge and politics rule. People expend sideways energy. That is, instead of moving the business forward, they spend energy navigating the silos and politics. This kind of navigation slows down both the quality of decision-making as well as the speed of decision-making. Additionally, it slows down the speed of execution.
Effect #5: Employee Disengagement
According to Gallup, only 13% of employees are engaged in their work. In other words, 87% of employees are not emotionally invested and focused on creating value for their organizations every day. If your company doesn’t develop leaders, you will see high disengagement for three reasons:
- There’s less opportunity for advancement and development. According to one survey, 94% of employees say that they would stay in their position longer if their company invested in their career development.
- People don’t respond to uncaring or uninspiring leaders. According to a 2022 McKinsey study, 34% of people said that they left their previous job because of an uncaring or uninspiring leader. Leadership Development that is unintentional and unstrategic inevitably results in uncaring and uninspiring leaders.
3.There will be higher levels of burnout. According to Deloitte, 40% of workers believe that it is not possible to succeed at work, make a good living, and have enough time to contribute to family and community. Well-developed leaders want each person on their team to succeed personally and professionally.
Effect #6: Low Retention and High Turnover
High levels of disengagement eventually lead to people leaving your company. According to Gallup’s survey of 7,272 people, 50% of people quit their job because of their boss. This is, of course, a leadership development problem. When companies fail to cultivate high-quality leaders, they guarantee that most bosses will be mediocre at best, which will cause people to leave.
Effect #7: Difficulty Attracting Outside Talent
The more that your company fails to develop great leaders, the less likely it is that you will attract the great talent that you need. In the old days, your company could have incompetent leaders, and potential employees wouldn’t know the difference. But today, sites like LinkedIn and Glassdoor make it easier for people to find out if your company has a “dark underbelly.” Outside people find out about your culture and leaders.
Effect #8: Bad – or Toxic – Culture
Every company has a culture, and the leaders set the tone for the attitudes, habits, and processes that shape a culture. There are three basic types of culture: good, bad, and toxic.
- A good culture happens when the core values of the organization drive behaviors.
- A bad culture occurs when an organization’s core values don’t drive its practices and behaviors.
- A toxic culture is one that allows or encourages dehumanizing behavior.
Without strategic and intentional leadership development, companies lack the ability to produce the culture that they want.
Effect #9: Diminished Profitability
If you have a bad culture, don’t attract great people, have high disengagement and high turnover, etc. you can be sure that you will have diminished profits. All the previous effects will wreak havoc on your profit margins.
1 Action
Evaluate if your company is intentionally and strategically developing leaders. If not, check out our previous post on Four Building Blocks to Develop Leaders at Your Company.
