Poor leadership undermines US organizations

Jul 28 2011 by Brian Amble Print This Article

The quality of leadership in American organizations is poor and it isn't getting any better. What's more, leaders are stifling creativity and innovation and holding back new ways to do business because they are risk averse and focussed on their own survival.

That's the uncompromising message from the sixth edition of the Global Leadership Forecast, a bi-annual report by consultants Development Dimensions International (DDI) which this year partnered with Gary Hamel and his Management Lab to identify the key factors that identify how organizations' management cultures have evolved.

What they found, according to Rich Wellins, Senior Vice President at DDI, is that while business practices are changing, leadership is barely moving at all.

"We looked at what leaders needed in the future, what organizations' future leadership needs are, and how we can advance our practices around leadership and found that our work is cut out for us," he said.

The leadership practices in most organizations received a resounding thumbs-down, with only a quarter of the HR professionals questioned for the report rating the quality of leadership in their organization as very good or excellent and just a third of leaders giving themselves and their peers high marks.

These numbers remain consistent with the study when it was done two years ago, DDI pointed out, suggesting that little progress has been made on the quality of leadership despite the microscope that leaders have been under.

There is also a lack of confidence in the quality of leadership coming through for the future Ė something that is a particular worry as baby boomer retirements loom. Fewer than one in five (18 per cent) of those questioned feel that the leadership pipeline will produce the individuals needed for the future - a figure that falls to just 14 per cent of those in the US.

According to DDI, one fundamental problem here is poor succession planning. As one leader said: "We need to develop key talent for the future in a strategic way, not by default."

Moreover, less than half of organizations (44 per cent) have a process to identifying high potential talent and even fewer (37 per cent) have a process for growing those individuals. Both have decreased since 2009.

Another factor is that while 'identifying and developing future talent' was rated as one of the top five most important skills leaders will need in the future, it was not seen as being nearly so important in the past. This discrepancy might go some way to explaining why more than four out of 10 leaders now admit to being ineffective at doing this.

Just how ineffective is highlighted by a separate survey by the American Management Association which found that fewer than one in ten large organizations integrates management development and succession planning with strategic business objectives.

The same survey found that fewer than one in five companies (18 per cent) have a succession plan intended for a sudden loss of key senior executives and a quarter have no succession plans in place at all.

DDI also found profound shortcomings in another critical area. While innovation is acknowledged to be one of the key factors for success in today's uncertain climate, the US is actually investing the least in innovation when compared to other countries around the world. What's more, half of leaders rated themselves as ineffective at fostering creativity and innovation.

"This is a grade we should be concerned with - the heart of future competitive advantage - half of leaders say they're not effective at encouraging their teams to be creative and innovative," Rich Wellins said.

One answer to this could be the high occurrence of leadership 'derailers' or dispositional qualities that HR identified as the most common personality shortcomings of leaders in their organization. A high occurrence of risk aversion, distrust and approval dependence Ė all of which are likely to be reinforced as a means of survival during the economic downturn Ė emerged in the survey, all factors which will quickly squash innovation.

Rigid management practices are also holding organizations back. When looking at Gary Hamel's factors for management innovation, six out of 10 leaders said that key business decisions were made by those in power with little discussion, and more than half said they're in organizations that are rigid, siloed or hierarchical.

Such a culture does little to empower others or encourage innovation, which means that organizations are simply not capitalizing on their talent.

"While we have been focused on innovating products, services and business models, we have lost sight of the need to innovative the way we manage," Wellins concluded.