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Getting the Most Out of
Your Leadership Pipeline

Leadership Practices:
What’s Proven. What’s “Worth Less.”

Title: Getting the Most Out of Your Leadership Pipeline

When designing a leadership development strategy, many companies aspire to a pipeline approach to aligning key program components (e.g., competencies needed for success, in-role performance management, transition planning) across all leader levels. This alignment is intended to create a smooth flow of individual contributors into first-time leader roles, as well as progressing current leaders into taking on more strategic oversight and direction.

Our research, which looked at financial metrics for each of 150 publicly-traded companies, included profitability, earnings per share, five-year rate of return to investors, and stockholder equity, examined two critical facets of what it really means to have a leadership pipeline.

The first is that the pipeline approach extends all the way through the leadership ranks, sidestepping the risky (and decidedly wrong) assumption that top leaders have topped out their skills. Through our research, we’ve found that even senior-level managers notably change their behaviors through leadership training, attaining, on average, 35 percent skill growth.

Second, any individual leader’s learning path should consist of multiple, interconnected stops—spanning both on-the-job and formal development accelerators—rather than just occasional, detached, and single-modality learning activities.

Worth Less PracticeWorth Less Practice: Anything Less than a Full Pipeline Approach

When organizations focus on only part of the pipeline, the results of their efforts fall far short of what they could be. We found that only when organizations were successfully extending their leadership development programs across all three levels—frontline, mid-level, and senior-level—did they financially outperform their peers.

Yes, there was a meager jump of two percentile points on the financial composite from successful programs at zero levels to succeeding for only one level (see the figure below). And, the same two-percentile point increase from one to two highly effective programs—still only placing these companies at the 46th percentile (with the 50th percentile as average across all companies).

But these bumps were dwarfed by the steep surge between having successful programs at two levels to having programs at all three levels operating effectively—a 17 percentile increase.

Company Financial Performance and Execution of Leadership Development Across the Pipeline

Anything Less than a Full Pipeline Approach
 

Best PracticeProven Practice: Ditching Event-centric Development

The second facet of a full-pipeline leader growth approach is how development is planned and delivered: a carefully sequenced learning path versus “event”-centric development.

When a carefully sequenced learning path is used, the advantages are striking. Companies that have moved away from leadership development as an event and that instead position leadership development as a planned, integrated learning journey are 2.5 times more likely to be in the top 20 percent of organizations on the same financial composite described above. In fact, of 20 common leader-focused activities initiated and managed by the HR function, this was the single talent management practice that had the strongest link to financial performance!

Number of Levels with Highly-Effective Leadership Development in Place

Company financial performance of leadership development across the pipeline
 

Learn how DDI can help you develop and transform leaders at all levels.

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