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Leadership Strategy

Global Leadership Forecast 2018

Leadership Strategy:

The Forgotten Foundation of Business Planning

Adam Canwell, Joe Dettmann, Richard Wellins, Liz Collins

Only 14 Percent of CEOs Have the Leadership Talent to Execute Their Strategy

The data in Global Leadership Forecast 2018 shows that organizations with effective leadership talent outperform their peers. Yet very few organizations manage this high-value asset in an integrated, cohesive way. Even after spending more than $50 billion annually* on developing their leaders, many companies still don’t have the bench strength to meet their future business goals. And despite the spending, investments are often fragmented and see a lack of returns. Leadership models and development programs abound; few tie to business goals. Worse yet, there’s scant evidence that they actually work. What’s needed is a coherent, integrated leadership strategy. A well-crafted blueprint ensures that companies have the right talent, at the right cost, and with the right capabilities to deliver today and into the future. Yet, we found less than one-third of the HR professionals surveyed feel their organizations have an effective leadership strategy. Companies that do have such strategies in place report better returns on their investment in talent. They consistently feature deeper leader bench strength and stronger leaders at all levels.

Leadership Strategy

What Differentiates Organizations with Effective Leadership Strategies?

The advantages of having a leadership strategy in place are enormous, beginning with leader preparedness to meet business challenges. The graphic above shows the leader-readiness advantages of an effective leadership strategy.

So, What’s in an Effective Leadership Strategy?

Senior line managers define “leadership strategy” as having a supply of capable leaders to meet both their short- and (ever-changing) long-term business needs. A sound leadership strategy consists of the four elements defined below. We looked at the effectiveness ratings for each element, comparing organizations that report having a leadership strategy in place with those that do not.

  • Defines the competencies required for success. We see a much higher level of effectiveness of this basic practice in organizations with a leadership strategy versus those with no strategy (82 percent versus 49 percent).
  • Models supply and demand as part of the strategic planning process. Organizations with an effective leadership strategy are 4.3 times more likely to adeptly forecast future leadership demand than those without.
  • Ensures that all core leadership processes align and are consistently reinforcing the appropriate skills/capabilities/mindsets. All major talent systems are more effective in organizations with stronger leadership strategies. For example, when there is a leadership strategy in place, 70 percent of organizations report having effective development programs in place versus 27 percent in those organizations with no strategy. The same magnitude of difference applies to succession management (51 percent versus 15 percent). These systems comprise the foundation for delivering a steady flow of leaders through the pipeline.
  • Measures the impact of leadership spending on performance and potential. Companies with effective leadership strategies are four times more likely to gather business-impact measures on their talent initiatives.

What Are the Performance Benefits?

We found that an investment in formulating and executing an effective leadership strategy can have a significant impact in several other areas:

  • Working with the business to articulate a leadership strategy improves HR’s strategic impact. Organizations with a leadership strategy are twice as likely to rate their HR teams as strategic advisors.
  • Of organizations with effective strategies, 56 percent have overall high leadership quality versus 20 percent with less-effective strategies.
  • Future bench strength, a critical lead outcome measure, is much stronger with an effective strategy (32 percent versus a dismal 5 percent).
  • Stronger ability to fill critical open positions with internal candidates (56 percent versus 38 percent). The cost of even a few senior positions remaining open far exceeds the investment required to put a sound strategy in place.

Should HR Be Involved in Strategic Planning?

Leadership strategy should never stand alone from an organization’s strategic plans, yet only one in four HR professionals are involved in strategic planning from its inception. This diminishes the role they can, and should, play in connecting the business to required leadership capability.

* Kellerman, B. (2012), The End of Leadership, New York, HarperCollins.

Where to Start
  • Translate your strategic plans into leadership and talent implications. Assess risks and areas where poor leadership capability will impede execution.
  • Focus on execution. Like any other strategy, leadership strategy often fails more due to lack of execution than integrity. Make sure to align all components of successful execution: rewards, metrics, resources, and skills.
  • Look carefully at deploying initiatives across the enterprise. Ensure the most efficient and effective deployment of your limited resources.
How to Excel + Differentiate
  • Use robust predictive analytics to pinpoint the likely gaps in your leadership supply chain. This will help you focus your efforts.
  • Orchestrate all components of your leadership strategy. They do not stand alone. Forecasting demand is worthless without accompanying initiatives to close the gaps.
  • Prove the return on your leadership investment. Unlike every other function, HR typically fails to seriously evaluate (and thus justify) the impact of their spend on organizational performance.
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