It goes without saying that strong leadership drives business performance, but a new study reveals some key skills can be linked to profit growth. Learning leaders might want to expand their thinking about leadership development and who receives it.
According to Development Dimension International’s High-Resolution Leadership report, a global survey of more than 15,000 leaders, while there are a variety of skills that factor into an organization’s bottom line, five business and leadership skills help to drive revenue growth most: entrepreneurship, business savvy, driving execution, decision-making and the ability to lead change.
A look at about 1,000 leaders from large organizations revealed a strong relationship between high competency in those “money skills” and revenue growth — as much as 45 percent over a six-year period. The study included observation and measurement of the leaders skills in “day in the life” role simulations in which participants were leaders at fictitious organizations.
Matt Paese, DDI’s vice president of succession management and C-suite services, said before taking the simulations, participants did four to six hours of pre-work to learn about the organization, which had all the aspects of a regular company built in including: history, product history, people and personalities, market data, competitor information and financial data. Once in the simulation, participants made a series of decisions, built a business plan and held meetings with direct reports, internal partners and external parties.
The goal was to create an environment with a lot of opportunities and some dilemmas that leaders would need to solve so researchers could watch their reactions. In simulations like this, Paese said the team could isolate behaviors to set the stage for discussion and analysis with the participant later. “It helps us to improve the conversation that organizations have around how to help people get ready for a key job or a key job category, and who to place in a role once they have to make a decision,” he said.
Paese said the research team was frequently surprised at how often senior leaders needed training, nixing the belief that once a leader is part of the C-suite, that person has a firm handle on critical skills.
“Certainly, there are people who are great at all of those skills,” he said, “but there are also a lot of people who may have gotten to where they are because of one great capability or another. But when they get to the top, they have to draw on a broader set.”
Further, the study suggests that developing these money skills shouldn’t be relegated to top leaders. While money skills like “entrepreneurship” might sing CEO, Paese said when an organization invests in developing these leadership skills across its workforce, it will benefit the enterprise in the present and in the future.
In considering the skills needed for leadership and ultimately business success, the report cautions against overweighting certain skill sets within a business or culture. In highly technical fields like engineering or software development, for instance, technical skills or specific functional or industry knowledge or experiences are promoted as variables driving people’s trajectory at an organization. However, study results indicate there are some nonfunctional, nonindustry specific capability sets that have a significant effect on a company’s bottom line. Paese said that should cause learning leaders to think about the early cultivation of skill sets and the early identification of high-potential talent.
Some chief learning officers might find it difficult to make the case to business leaders that cross-functional experience and knowledge are essential for organizational agility. Paese offered a few tactics that will help leaders to communicate the value of an organization broadening its perspective on leadership development investments:
Give data.It is important for learning leaders to make use of available data that makes an undeniable case that the effort to grow and accelerate the development of leadership pays off in tangible, financial ways.
Share other people’s stories. Learning leaders should share stories about organizations that have successfully made this broadened approach to leadership development happen.
Create your own stories. Learning leaders can relay stories of dramatic growth inside their organizations to win buy-in for this development perspective. Note: Stories about programs and processes that apply to a lot of people but produced incremental growth might not be as effective at generating the positive energy and buzz that happens when a small number of people have a transformational experience.
“If we can have individual people have a transformational experience that suddenly and quickly and dramatically changes their capabilities as leaders, if we can just create a few powerful stories inside an organization, it can very quickly turn around the whole organization’s orientation with what’s possible from a growth standpoint, and create more of a mindset that fuels it all the time,” Paese said.
Such a shift in perspective would not only increase an organization’s profit and develop pivotal skills among more of its workers but also expand how leaders scan the organization for talent and think more broadly about what leadership looks like.