A new study shows companies focus on developing bench strength in-house, with high-potentials getting the largest investments.
Bersin & Associates recently announced new research that shows US companies have increased leadership development spending 14% over 2011 levels to an estimated $13.6bn in 2012. The findings, which appear in the Leadership Development Factbook 2012: Benchmarks and Trends in U.S. Leadership Development and are summarised in 'Leadership Development: Growing Our Own,' also indicate a shift in spending further down the leadership chain as companies focus on developing all levels of leaders, especially high-potential talent, to remain competitive.
The research shows that companies that excel at leadership development spend up to 60% more per participant on average than their less sophisticated peers. That investment delivers key business results including 20 times greater employee retention. The research is based on an online study of nearly 400 U.S. organisations, and was conducted in part through collaboration with Human Resource Executive magazine in Q1 2012. The research included a series of qualitative interviews to better understand issues and trends.
"With the economy improving and corporate restructuring behind them, most large organisations have set their sights on global expansion, highlighting the need for new leadership skills in global acumen, agility and innovative thinking," said Josh Bersin, chief executive officer and president, Bersin & Associates. "Of the $13.6bn we estimate U.S. companies will spend on leadership development this year, we see those funds invested in developing a new breed of leaders, creating more comprehensive solutions, hiring additional leadership development staff, and acquiring tools for identifying and developing future talent in-house rather than relying on the external job market to solve their talent challenges."
The study also found:
- Mature companies invest more. Companies at the highest level of sophistication with strategic leadership development initiatives on average spend 30 - 40% more per participant than the least mature companies. As Bersin & Associates foundational research [1] has shown, organisations with high-impact leadership development programs are seven times more effective at delivering improved business and talent results than organisations with less sophisticated leadership development functions.
- Greater investment at all leader levels. Although companies traditionally have invested heavily in senior leaders, today senior leaders consume 22% of the leadership development. That's a lower proportion than in previous years, as more money is directed down the leadership chain.
- Disproportionate spending on high potentials. High-potential leaders are critical to ensuring that businesses meet their goals now and in years to come. Increasingly, executives are realising how important this group is to corporate competitiveness. As a result, organisations are investing heavily, spending approximately $7,100 per high potential leader on development initiatives.
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[1] High-Impact Leadership Development: Best Practices for Building 21st Century Leaders, Bersin & Associates/Stacia Garr, Laci (Barb) Loew, October 2011
