Businesses headed up by ‘effective leaders’ make more money than those run by less capable ones – FACT!
If any of you haven’t read the 2010 Kenexa Research Institute survey ‘Exploring Leadership and Managerial Effectiveness’ let me give you an overview. Kenexa evaluated contributions from over 29,000 employees in 21 countries on topics such as employee engagement, leadership and managerial effectiveness to produce the first global ranking of leadership effectiveness.
The results for UK businesses were somewhat disappointing to say the least as cultural differences aside you ranked a poor 17th out of 21 countries surveyed for managerial effectiveness! The report also highlighted the correlation between effective leadership and engagement with ‘employee engagement index’ scores of 91% when leaders are rated ‘effective’ against 17% when leaders are viewed as ineffective. That’s an employee engagement level 5 times lower!
The report found that the UK’s most effective bosses were more likely to be found in the manufacturing, retail and healthcare sector. How ironic knowing the state of the UK economy that it also found that the least effective bosses were most likely to be found in government and the financial services industry! I have to say I’m not surprised at this result as in my experience these sectors are notoriously poor at ‘leading’ their people as they don’t tend to be particularly good at building internal cultures to support their key focus or value proposition.
Jack Wiley, executive director of Kenexa said; “For their own effectiveness and for the sake of their organisations and the economy – UK leaders should look in the mirror, evaluate their own practices and commit to personal improvement. At the same time, UK organisations should review the approaches they use to recruit and develop their leaders.”
I don’t think you can disagree with Jack Wiley here especially when you look at the figures. The UK only scored 47% for leadership effectiveness, way behind India for example who scored 72% and even more disappointingly below the global average of 55%. Here’s some food for thought and a different perspective for all of you out there with children. If they came home from school with a ‘D’ in all their exams how would you feel? Also, in the fiercely competitive world we live in what would be your perception of the future they could look forward to?
What you need to start to understand is that the fast paced economy that you now operate in is no longer influenced by the same performance metrics the traditional ‘product orientated’ businesses were founded on. Control, efficiency, delivery and profitability still have a part to play in business but how you lead a business and how you engage your people will effect organizational creativity, agility and innovation and it’s these new assets and how you add them into the mix that will drive true differentiation and ultimately shareholder return.
The UK’s score of 47% is not acceptable! You as business leaders reading this should want to be at the top of any survey of this kind so I challenge you all to start changing things. As the UK’s leading expert and inspirational speaker on innovation in business I’m happy to lead the revolution however it’s you, the UK business community that will have to roll your sleeves up and get your hands dirty! So, if you’re up for some hard work, here’s what I think…
If you want to tackle the leadership effectiveness issue, first, pump some value back into the word leadership. In the same way as the word innovation has been devalued over the last several years, leadership has suffered the same fate. The word innovation has now become the marketing departments favorite buzzword with corporate straplines and positioning statements all preaching innovativeness. So if everyone’s preaching innovation where’s the true value. The same goes for leadership. The leadership title has now been firmly embedded into many corporate structures and senior managers automatically granted the prestigious title. UK businesses seam to have forgotten that the title cannot be self-imposed and it’s your people who will bestow a great manager with the leadership badge. So, concentrate on developing exceptional managerial talent, managers who are what I call ‘people centric’. Start initially by teaching them to become world-class masters at two things, involving your people and appreciating your people. The natural leaders will emerge and be chosen by your people.
This is even more important when you consider other findings from Kenexa’s research that reveal 68% of bosses had fallen into their role by ‘by accident’ with 63% of them having never received any management training! Yet businesses will consider some of these people as leaders! The correlation between organisational performance and the quality of managers who are highly rated by their employees (maybe even branded leaders) showed Jack Wiley and his team that over a three year period businesses led by ‘highly rated leaders’ significantly outperformed businesses with ‘less effective leaders’ with the top 25% of organisations generating shareholder return seven times that of the bottom 25%. If that isn’t a solid enough business case for investment in genuine management development and employee engagement then I don’t know what is.
One of the other comments I recently read on the Kenexa survey was the issue that some business decisions will inevitably hurt or annoy employees but if leaders communicate the thinking behind such decisions in a clear and honest manner, staff will understand why such decisions have been made and may well view the leader as more effective. I disagree and my perspective is this; if you’ve made a decision and then have to try and communicate the thinking behind it in the right way to minimize it’s impact you’re not ‘involving’ your people in the decision. By not doing this you perpetuate the ‘them and us’ position and the decision is perceived as ‘your’ decision not ‘our’ decision, which wouldn’t need defending.
Kenexa’s research backs this up by suggesting that the top two key priorities for leadership development are the need to build trust and the need to engage in open, honest, two way communication.
The truth is that this stuff isn’t rocket science and even sounds simple when it’s put in black and white like this. However it’s fair to say that the vast majority of my time is spent working with organisations for which this might as well be rocket science. Whilst many find it easy to grasp conceptually and understand the need to do things differently my schedule is dominated by organisations saying, “Cris, we know we need to change and do things differently, but just what do we do and where do we start?”
Well, here’s where you start. Sit down with your senior team and have an honest conversation about what you do and how you do it. This is alcoholics anonymous for business so get over your denial. Preaching greatness whilst not actually differentiating is one of the biggest issues I deal with in the organisations I work with. I call it ‘Celebrating Averageness’. It’s human nature to want to be and be seen as good or great at what you do but it takes a really strong self-aware individual or team to recognize your true position and value proposition. Organisations need to take the same view and have company-wide conversations about what they really want to achieve. I call it the ‘sat-nav’ approach because only when you know where you are can you plot a course to where and what you want to be!
Whatever industry or sector you’re in, where you want to be should hopefully be something bold like; to create a company with an entrepreneurial and innovative culture filled with amazingly talented and engaged people and followed by unwaveringly loyal customers. Sounds awesome don’t it but the reality is that most organisations don’t think this big. But the truth is that to really differentiate in the globalized, thousand mile-an-hour world we live and operate in you have to think and do differently. The companies I work with embrace my philosophy that ‘innovation is a by-product of being exceptional’ In essence, you can’t celebrate averageness. Unless you strive to be outrageously good at what you do the chances of being truly different, innovative and world-class are remote. There’s also little chance of pitching higher up the league tables in the next Kenexa survey!
The bottom line is differentiation and innovation is all a bout people and leadership and in the new knowledge and experience economy we’re now in that’s great news. Creating the right culture and engaging people to want to be exceptional is what the worlds leading, most innovative companies in Kenexa’s survey do best. They are talent-rich, entrepreneurial communities, collectively passionate about what they do and how they do it. So, whatever sector or market you are in, whatever product you sell or service you offer, forget it. If you’re the MD or CEO, from now on I want you to think of yourself as being in the People Business! Let me clarify that further. Most companies have a fair understanding of their customers and I’m sure you’ve heard the term ‘customer centric’. The really world-class ones have an even deeper understanding of their people. Being ‘people centric’ as I mentioned earlier is just as, maybe even more important than being customer centric. Don’t think of your employees as ‘Human Capital’ a phrase that I absolutely detest. If you’ve got a HR person or department change it. They’re ‘people’ not resources and they are your most valuable asset!
Real change has to start at the top so if you’re now thinking in terms of being in the people business appreciate their value to the company but most importantly their as yet untapped potential. Study some of the contemporary, genuine leaders in the world and you’ll see they have similar traits. They’re absolutely on-fire, they’re dynamic and they’re inspiring. They’re passionate about the company, its people and its brand and they demonstrate that they ‘live it and breath it’ every day. So, become a trustee of your people and create a holistic, company wide culture of innovation where shared purpose and the quest to become exceptional is just part of what you do. Then maybe we’ll see the UK back at the top of the leadership board in the next Kenexa survey where it belongs!
I wish you the best of luck! But if you need a different perspective feel free to get in touch!