If you saw the title of this article and thought to yourself, “This is nothing new,” you’re half right. The truth is that the topic might not be new, but investment in leadership development continues to be critically important — and the need to spread the word persists. Organizational success is driven by strong leadership, and companies that invest in leadership training consistently appear on most-admired and best-of lists. These businesses also enjoy higher revenue and profits, higher market share, and increased employee engagement and retention.
And yet, some companies still need to be convinced that leadership development relates directly to organizational success. That was the business case we were looking to confirm when researchers from The Ken Blanchard Cos. studied the long-term positive impact of better leadership on organizational productivity and profitability. The study looked at four different factors: (1) the role of leadership capacity in driving organizational vitality; (2) what leaders can do to increase organizational performance; (3) the connections between leadership capacity, customer devotion and employee passion; and (4) how customer devotion and employee passion link to organizational vitality.
In analyzing the results of the study, five elements consistently rose to the top of the list in our findings. We created terms and definitions for each element, which follow, to incorporate a broader range of information. These five elements together provide a direct link to organizational success.
The Leadership-Profit Chain
The first element is strategic leadership. It provides the vision, culture, strategic direction and metrics to measure the achievement of goals. It is essentially the “what” of the organization.
The second element is operational leadership. It describes the procedures and policies that guide departments and employees in how to specifically contribute to the organizational goals. It is the “how” of the organization.
The third element, employee work passion, results from positive employee experiences and overall satisfaction with the organization’s policies, procedures and management practices. Hard measures of this element include retention, absenteeism, tenure and productivity. Soft measures are defined as employee perceptions of fairness, justice and trust.
Customer devotion is the fourth element and represents the positive experiences customers have with a company’s products and services as well as its policies and procedures. Hard measures include customer retention, length of the customer relationship, number and size of transactions, and referrals. The soft measures include survey-based perceptions of quality, value, customer service, product expectations and overall customer satisfaction.
The fifth element, organizational vitality, describes the success of the organization. Hard measures can be determined by revenue growth, profits, stock price, venture capital and operating costs. Soft measures include perceptions of public trust, employee commitment and the intent for employees to stay with the organization.
We call the results of this research the Leadership-Profit Chain because we found a direct link between these five elements and organizational success. Strategic and operational leadership directly influence employee work passion and customer devotion, which drive long-term success for the organization. Strategic leadership is the critical building block for setting the direction of the company. Operational leadership owns the role of making the vision and direction come alive. The connection between strategic and operational leadership allows for employees to understand where they are going in relation to the vision, to buy into the culture and what the company stands for, and to understand how to connect their work to the strategic initiatives.
If a gap occurs in this link, initiatives are either inconsistent or not executed at all. But when the link is strong, operational leadership is able to create practices and processes that build an environment where employees and customers can have positive experiences. Aligned operational leadership practices allow employees to be passionate about their work and create a highly engaged workforce.
We also determined a positive correlation between employee work passion and customer devotion. When employees are passionate about what they do, clear about roles and goals, and perceive the organization as fair and just in its treatment of co-workers and customers, their desire to serve the customer increases. This builds customer devotion, which is a key driver of organizational success.
The Leadership-Profit Chain model serves as a mental blueprint for creating and sustaining success — but leaders must have the skills to build a motivating, trusting work environment. This is where an organization’s investment in leadership development plays a crucial role. But some companies don’t know where to start to create a lasting development plan that sets their leaders up for success.
Building a Leadership Curriculum
Ensuring your leaders have the skills they need to maintain organizational strategies to support and develop their direct reports requires that learning and development professionals and training managers create an effective curriculum for developing people into trusted professional managers. Since managers are responsible for what their direct reports do and, to some degree, how they feel — especially the emotional connection they establish with their job — companies need to make sure their managers and leaders have the right skills to be successful in every phase of the leadership journey.
This can seem like a daunting task because leaders need different skills at different stages in their careers. A complete and balanced curriculum will include training not only in managing people, but also in areas such as business and financial acumen, influencing, negotiating, emotional intelligence, technology and industry trends. The purpose of this type of curriculum is to focus on the specific skills leaders at each level need to work directly with their teams to produce results. A curriculum for a leadership journey must include development for new managers, midlevel managers, senior leaders and executives.
For example, people who are first-time managers often have had no leadership skills training. Many are promoted into leadership positions because they were high-achieving individual contributors — but the skills that helped them perform at a high level in their previous role don’t always transfer to the new role of manager. Research from Zenger Folkman, “We Wait Too Long to Train Our Leaders,” published by Harvard Business Review, indicates that most managers don’t receive training until they are about 10 years into their managerial career. This is damaging to both the individual and the organization. Further studies by CEB (now Gartner) Learning and Development Roundtable show that 60 percent of new managers underperform and often develop negative habits that are hard to break or hold them back for years. New managers need to have training early in order to set them up for success and to stop the possibility of ingraining bad habits.
New managers also need foundational skills in communication to establish positive, productive relationships with their staff. They need to learn how to have conversations to set clear goals, to provide feedback about performance, to praise a job well done and to redirect efforts when necessary. Listening is a critical part of an effective conversation, and managers must learn to set aside distractions and concentrate on each interaction. They must also learn how to ask questions to draw out insights and ideas from the other person, and how to share information that is needed to help move the situation forward and build self-assurance and enthusiasm.
Middle managers, on the other hand, need advanced skills to manage their new reality. They are in the unique position of needing to support their own staff and manage the relationship with their senior leaders while still working on their own projects. They are the link between frontline workers and senior leaders, so communication skills continue to be important. Additionally, midlevel leaders typically manage more people, teams and projects than in their previous position, so time is a valuable commodity.
Middle managers are responsible for the operational aspect of leadership. Being able to diagnose the needs of each employee to determine how much support, direction and day-to-day coaching they need enables everyone to work efficiently and productively. Leaders who realize that people need different levels of management depending on the task they are working on will be able to offer the appropriate leadership style for the situation. When people get the level of direction and support they need, they perform better and have improved morale — and their managers are able to create a work environment that is stimulating and productive.
Senior leaders are the strategic arm of the organization. They are responsible for setting direction and communicating it in a clear manner so organizational culture is defined and goals can be met. Senior leaders are an essential element to the success of an organization — yet many times they aren’t included in development plans. As a result, they often lack access to objective, ongoing feedback and could have blind spots and unproductive behaviors that might lead to less-than-stellar performance.
Executive coaching is an excellent resource that can help senior leaders develop their full potential and ability to positively impact organizational goals, objectives and ultimate success. The one-to-one relationship between a senior leader and a coach provides a confidential and neutral sounding board for discussing challenges and opportunities in a safe environment. Coaches provide senior leaders with the personal support they need to quickly sharpen their leadership capabilities, tackle tough business challenges and seize new opportunities.
A comprehensive leadership development curriculum includes offerings for all levels of leaders — new, middle and senior. Throughout the curriculum, leaders should use a learning journey approach to learn new content over time. Each step in the learning journey design starts with the actual learning experience. This is followed by an opportunity for the leader to go back to their workplace, apply the new concepts and see how they work. Then they come back to this safe community to share their lessons from the road, learn more new concepts and take their learnings back to their workplace again.
Leaders need to be able to apply their learnings on a personal level, then use the skills to work with others to influence organizational results. This design is based on four steps that build upon one another.
The first step is knowledge of self. It’s very hard for managers to influence other people if they don’t understand themselves. This includes an awareness of how they are perceived by others and how they respond to pressure. It also includes identifying what is and what is not important to them. Understanding themselves and their patterns enables managers to see how others are different from them, which creates a natural interest and empathy for people from diverse backgrounds and perspectives.
The next step is building relationships. In order to create the right energy to lead people and help them reach goals, a foundation of trust and positive regard must exist between managers and direct reports. This involves interpersonal communication and coaching techniques that result in better conversations. When a direct report sees their manager as trustworthy and compassionate, it creates a safe place for them to honestly address their issues and obstacles. A big part of being a manager is understanding how to build these types of relationships.
The third step is producing results. This is when the manager leverages what they’ve learned about themselves and leading others so they can identify and set goals for their team, department or business unit. This is where strategic and operational leadership come together around topics like innovation and leading change.
The fourth step is charting careers — addressing people’s needs so that they know how to succeed in their present job as well as how to prepare themselves for promotion. In this component, managers learn not only how to have a career conversation with a direct report but also how to provide that person with tools and resources to use in mapping out their career.
There is no doubt that organizations rely on strong leadership to remain robust, innovative and competitive. However, they must be committed to investing the time, staff and money to ensure they are giving leaders all the tools they need to be successful. The payoff is significant: financial success, competitive advantage, talent retention and a motivating work environment where people can thrive.