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The case for leadership development in tough economic times


DevelopmentIn today's tough times, well-run organisations are focusing more heavily on leadership development than ever before. And according to Josh Bersin there are three major needs that are leading to this push.

We all realise that times are tough for learning and development managers. Our January TalentWatch research of 275 global corporations showed that 61% cited "financial pressures to reduce costs" as one of their top 2009 business priorities, up from only 36% in November of last year. Restructuring, downsizing, and changing business strategies now rank as the top three challenges for businesses around the world.

We also know that corporate learning budgets are down. In 2008 the US corporate learning market declined by 11%, the largest drop in more than 10 years. We expect cost containment to continue throughout 2009.

Given these tremendous business changes, how should corporate learning managers respond? It turns out that in today's tough times, well-run organisations are focusing more heavily on leadership development than ever before – and for good reason.

Photo of Josh Bersin"In today's tough times, well-run organisations are focusing more heavily on leadership development than ever before."

In the same TalentWatch research, respondents told us that they are heavily focused on two major talent strategies: improving the performance-based culture of their workforce and strengthening their leadership pipeline.

We clearly understand why employee development and performance are so important. Organisations going through restructuring and difficult business conditions must do everything in their power to improve employee engagement and focus. At Children's Healthcare in Atlanta, the U.S.'s largest children's hospital, the vice president of talent management is focused on rebuilding the organisation's coaching and development process to focus even more directly on client care and internal collaboration. The goal: to improve individual performance among hourly nurses and technicians.

But why focus on leadership development? As pointed out in a recent Wall Street Journal story, 'Despite cutbacks, firms invest in developing leaders', now more than ever organisations are dependent on leadership skills to survive. We are working with organisations as diverse as Pfizer, McDonald's, Qualcomm, and TSYS to help them refine and revamp their leadership development programmes in today's economy.

There are three major needs for leadership development today:

  • Building strength in first- and second-line management. While research respondents showed confidence in their top executives, they see tremendous skills and capability gaps in lower and mid-level leadership. More than 65% of respondents tell us that their first- and second- line leadership is "far below" or "well below" desired capabilities.

    When organisations grow, first- and second-line management positions are often ignored because people are moving so quickly up the corporate pyramid. As a result, our research shows that more than half of all line managers are promoted into leadership roles with no real training at all.

    Today - with much of the restructuring focused on downsizing, moving people into new positions, or restructuring workgroups - the brunt of the pressure to change is put on first- and second-line managers.

  • Driving change and engagement. Second, leadership development programmes are not only training programmes, they are change-enablers. Savvy leadership development managers (those at levels three and four in our maturity model) make sure that top executives are intimately involved in the leadership programme. These executives use this opportunity to communicate company strategy, drive change initiatives, and improve engagement.

    An excellent example of such a programme is the global leadership development programme currently underway at HP. HP's new CEO, Mark Hurd, has rebuilt HP's culture with a focus on growth, execution, and profitability. He has done this by becoming intimately involved in their 'leaders teaching leaders' programme around the world. (more information on this) Best of all, such programmes are among the most cost efficient.

    "Maintaining leadership development programmes is one of the strongest ways to build learning culture."

    And even more importantly today, the opportunity for managers and other leaders to sit in a room and listen to a top executive can greatly improve the levels of motivation or engagement. Maintaining leadership development programmes is one of the strongest ways to build learning culture.

  • Building a dynamic career development model. Finally, the third and perhaps most profound change taking place in organisations is the breakdown of the traditional career model. According to our research, almost one third of all companies are undergoing a reorganisation or merger. The traditional career model, often managed through the assessment of 'performance vs potential' does not allow for an individual to make a dramatic change in function, role, or organisation rapidly. There are multiple career pathways in today's businesses (some go up, some go sideways, and some go deep) and we must redefine the profiles of success and the associated career paths and succession plans.

    Leadership development programmes form the foundation for these kinds of discussions. How do you coach someone to move into a whole new function when his or her current organisation is eliminated? Who moves into senior positions when two companies merge and how are these decisions made? Top leaders establish the ground rules for these decisions – and people must be coached and trained to accommodate these rapid changes in the company.

    At IBM, for example, the company is currently undergoing a major shift in workforce toward developing countries and away from more mature geographies. This strategy requires employees to move, learn new languages, and embrace new cultures. This transformational change must be supported by managers and leaders who clearly understand why, how, and what to do. Leadership development drives and reinforces this programme.

    One final thought. A senior leadership development director from a large U.S. banking institution told me that in the last recession the bank cut leadership development entirely. During the ensuing business upturn, the organisation had to start all over – rebuilding the programme, hiring people, and re-developing content. This time, he told me, "We have learned our lesson. Leadership development programmes take years to build. We are not going to make the mistakes of the past. This time around, we are maintaining our investment and continuing to evolve our programme even today."

    Josh Bersin is president of Bersin & Associates

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