Why leadership development is important
The view from the IAD
What does leadership mean to you?
How does that meaning affect your profitability and sustainability?
If you took the time to think about the answers to those two questions then congratulations, you have, at least partially, answered the question this article poses ‘Why is leadership development important?’
Our reality as business leaders is that we have to operate in an increasingly complex business environment
In their paper Complexity and the functions of the firm: breadth and depth, Professor Qing Wang of University of Warwick and Nick von Tunzelmann of the University of Sussex described the sources of complexity for a business and their impact on the functions of the firm. The diagram below is based on their work.
Effective leadership in dynamic and complex environments (like those of a modern business) requires a capacity to operate from multiple, often competing perspectives (Bolden, Petrov, Gosling, and Bryman (2009)).
Perhaps the most important of these competing perspectives is your perspective on leadership.
What leadership means to you, and how you integrate that meaning into each business context, determines how you operate, and therefore how effective you are, as a leader.
Leadership development helps you to hone your understanding of what leadership means and what it means for you to be a leader.
Why does it matter how effective you are as a leader?
If we examine just one business sector, the technology sector, we can see that, over the period 2015 to 2021, investment into this sector increased significantly, yet over the same period the survival rates for these businesses fell.
Whilst we cannot categorically attribute causality in this relationship, it doesn’t take too much imagination to infer that at least one of the reasons behind this is that the complexity of businesses in receipt of funding grew quicker than the capability of the leaders of those businesses to manage that complexity.
Indeed the big winners over the last few decades recognise the value of developing their leaders so that they are capable of managing the complexity of a rapidly growing business.
In the US we can cite Google, Amazon, Meta, and Salesforce among others. Salesforce, since it’s inception in 1999, has placed a strong emphasis on leadership development. This helped it successfully grow from revenues of c$5.4m in 2000-01 to revenues of c$26bn in 2022-23.
On this side of the Atlantic, we can look to companies like Darktrace, Rightmove, MicroFocus and Monzo. Monzo has been developing its leadership program since its founding in 2015, with leadership development is integrated into the company's values and culture. This has helped it grow revenues from £3m in 2017 to £154m in 2021, with a growth in company valuation from £0.2bn to £3.7bn over the same period.
These businesses recognise that exceptional business requires exceptional leadership.
Exceptional leadership underpins the conditions and factors for successfully growing a business because how we think as leaders maps to the behaviours that create those conditions and factors.
For example, getting to a good product market fit during start-up and then getting to a good profit market fit during scale-up requires Procedural thinking to put a process in place and an awareness of Options so that changes can be made to the business model as needed, an awareness of Detail to identify and focus on the right information to drive these processes, as well as Global thinking to keep the big picture in mind, a good balance between an Internal and External locus of evaluation to know who and what information to listen to and when, and so on.
The formula is simple:
How we think = how we behave = our level of success
In fact, research by Doctors Jack Zenger and Joe Folkman of Zenger Folkman show that exceptional leaders can double profits for their organisation.
So where does the exceptional thinking that exceptional leadership demands come from?
It has to be developed.
And we need support for that development.
Hence why leadership development is important!
But not just any leadership development, exceptional leadership requires exceptional development. Exceptional development that:
- Is vertical not horizontal (development not training)
- Is based on a rigorous scientific approach
- Uses the latest understanding of adult development (a shift away from stages)
- Uses a definition of effectiveness based on the outcome not the approach
- Targets root causes not symptoms
- Tailors the approach to the development level of the individual
To summarise then, leadership development is important because:
- The quality of leadership is fundamental to the success of our enterprise
- The growth in complexity of our business environments demands a commensurate growth in the complexity of our thinking
- We cannot develop the complexity of our thinking without the right kind of support
