A better way forward: Putting business impact first in leadership development

A better way forward: Putting business impact first in leadership development

Posted by Noah Rabinowitz on March 23, 2017.

An old philosophical question asks, “If a tree falls in the woods and nobody is there to hear it, did it make a noise?” The essence of this question can be applied to leadership development initiatives as well. If development happens, but it can’t be measured, did it have an impact?

I started this four-part series with the recognition that while leadership development is big business, few people are actually working to measure the actual tangible impact of these investments. Assessing the impact of a program against clear metrics represents the highest level of the well-known Kirkpatrick Model (Level 1: Did you feel it was worth your time? Level 2: Did you show that you understood it? Level 3: Did you apply the learning? Level 4: Did something change as a result of applying the learning?).1 Without measuring at Level 4, what are you really accomplishing?

We know the caliber of leadership can make a big difference in business outcomes, because investors recognize its critical importance. A Deloitte survey of 445 analysts with investment banks, private equity firms, and hedge funds in six countries found that 52 percent of those surveyed said they routinely factor corporate leadership into their assessments. When asked to rank the criteria they use to judge a company’s success, senior leadership team effectiveness was second only to a company’s most recent financial results. Analysts view senior leadership team strength ahead of seven other criteria, including ratio analyses and performance forecasts.2

Research has also supported the impact of leadership on the bottom line. In a study of 150 multinational organizations, the companies in the top 25 percent of leadership effectiveness realized 5.7 times greater diluted earnings per share and seven times greater total shareholder return over three years than the companies in the bottom 25 percent.3 And these are the tangible impacts. What about impact on culture, engagement, retention, and the like?

While these statistics are encouraging, a study of executive coaching practices showed that 60 percent of organizations still use self-reported progress as the primary measure of success (Kirkpatrick Level 1) while only 34 percent examine business impact that comes from the intervention.4 While measuring satisfaction of participants is important (and only 5 percent of organizations in that same study reported they never ask about satisfaction with the coach), it doesn’t give you the information you need to determine a program’s overall impact, and isn’t effective in measuring broader initiatives involving hiring, promotion, or pipeline overhaul. It also doesn’t give the information you need to be able to tell an executive-relevant story of impact and outcomes.

The leaders in the C-suite likely aren’t particularly concerned whether their people liked the development efforts; they want to know how the business will do better as a result.

Marrying program design with the direct measurement of outcomes can help us chart a new path forward.
In my experience, leadership development professionals diminish their own potential impact as they rarely see themselves as directly tied to business outcomes. Instead, they typically see themselves in support roles. This has changed, but not fast enough. The Bersin Leadership Maturity Model5 shows that companies with the most mature leadership development efforts take a holistic approach to leadership development rather than seeing themselves as operating in isolation. Where an organization at Level 1 or Level 2 on the maturity scale might ask itself “How can we generally improve the leadership pipeline of the business?”, Level 4 organizations will be asking, “How can we empower people working on this specific initiative to achieve big breakthroughs and fundamentally change the trajectory of a team, business unit, or whole enterprise?”. This breadth of thinking encourages greater collaboration with every aspect of the business and requires a continual focus on leadership development as a priority in addressing any challenge that arises.

First, problem identification
Doing this well requires development teams to work on digging down to the true root of a problem, rather than just addressing issues on the surface. When you observe performance on a team dipping, there could be many reasonable explanations. Is it due to the leader managing the team poorly or feeling overwhelmed? Or maybe it’s a problem of resources—they don’t have what they need or don’t get it fast enough? Or maybe it’s a problem of vision—teams in the organization not being aligned around coherent goals?

The vast majority of problems in any workplace can be tied back to a challenge of leadership at some level. Identifying the leaders who are ineffective in overcoming these challenges (or contributing to them directly) and then helping them find a better way forward may be one of the quickest ways to improve outcomes for the business as a whole. The multiplier effect of doing this at scale can be massive.

Next, focused development
Once the right problem is identified and the right leaders are being developed, it becomes possible to provide development opportunities to address that problem in real time. Targeting specific and time-bound challenges creates the possibility that the activity will either succeed or fail in addressing those challenges. This takes leaders out of the “safe space” environment so typical in conventional leadership development programs and puts them into a “logged-on” learning environment (as discussed in my second and third posts in this series).

Finally, meaningful measurement
In addition, having a clearly desired outcome means that you can start to measure the outcome in a concrete way, just as you might measure the adoption of a new software system (as discussed in the first post of my series) or measure really any other part of the business. For example, did retention on the problematic team improve? Are numbers for diversity and inclusion improving? Are the sales figures increasing for teams with leaders in the program?

Now when development teams present to the C-suite, the conversation can be concrete: “First, we identified a critical initiative in the business. Then we figured out what could create barriers for the leaders working on it or what could accelerate its success. Next, we developed a development experience focused on addressing those barriers. And now, we can cite hard data showing the successful implementation of the initiative that is directly tied to the work we did on the program.”

Ultimately, a better way forward
This is a much more compelling narrative for the C-suite, empowers development teams to take on a more proactive role in becoming business partners, and helps leaders truly develop in ways that can make a measurable impact on the business.

Noah Rabinowitz is a managing director in Deloitte Consulting LLP’s Leadership practice, helping clients solve their most important challenges through people development, learning, and leadership.

1 See http://www.kirkpatrickpartners.com/OurPhilosophy/TheNewWorldKirkpatrickModel/tabid/303/Default.aspx.
2 Adam Canwell and Euan Isles, The Leadership Premium: How Companies Win the Confidence of Investors, Deloitte, 2012. https://www2.deloitte.com/cy/en/pages/human-capital/articles/leadership-premium.html.
3 Kenexa Research Institute, Exploring Leadership and Managerial Effectiveness: A Kenexa Research Institute Work Trends Report, 2010.
4 Brian O. Underhill, Ph.D., Kimcee McAnally,Ph.D., et.al. Executive Coaching for Results: Executive Coaching Industry Research, 2013 Final Report, CoachSource, 2013.
5 Andrea Derler, Ph.D., High-Impact Leadership: The New Leadership Maturity Model, Bersin by Deloitte, 2016. http://www.bersin.com/Practice/Detail.aspx?docid=20180&mode=search&p=Leadership-Development.

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