In Challenging Times, Leadership Skills and Leader Development Matter

Reports suggest that many employers are cutting their training and development budgets in response to the recession. At the same time, there are reports of other organizations that are responding by retooling their human resources departments to enhance the skill sets required to succeed under new market realities. These kinds of contradictory responses are familiar. In times of crisis, leadership development is commonly seen as simultaneously crucial to organizational success and also as a luxury that must be sacrificed while the organization focuses on the situation at hand.

     Both responses seem potentially sensible but need to be finely honed to focus on the aspects of leadership that are most crucial. In particular, organizations need to discern which leadership skills are most important under these circumstances. They must also be able to assess whether training programs and other leadership development activities are effective in building needed skills. While there is much anecdotal wisdom about these issues, rigorous research can provide a more valid guide for those deciding which investments in leadership development will be most beneficial to their organizations.

Assessing which leadership skills matter most
     In the fall of 2008, the Fuqua/Coach K Center on Leadership & Ethics at Duke University’s Fuqua School of Business conducted The Duke Executive Leadership Survey. The survey of 205 executives covered a number of leadership issues. The leadership skills identified by executives as being most important included:

• Promoting an ethical environment

• Acting with authenticity

• Accurately interpreting the competitive environment

• Developing trust
  

    The Duke Executive Leadership Survey also examined the relationship between organizations’ financial performance and assessed senior leadership skills and between financial performance and leadership development investments. The survey found that those skills associated with inspirational and ethical leadership were most strongly associated with organizational performance. Inspirational leadership skills included such behaviors as engaging employees in the company’s vision and inspiring employees to raise their goals, while ethical leadership skills included such behaviors as promoting an environment in which employees have a sense of responsibility for the whole organization, its mission and constituencies..

    Ongoing research being conducted by the center’s researchers sheds additional light on the survey’s findings by explaining why leader credibility and inspirational and ethical behaviors may be especially critical aspects of leadership that affect organizational performance.

    Specifically, researchers at the Fuqua/Coach K Center on Leadership & Ethics have found that followers who see their leaders as more competent and trustworthy also evaluate those leaders as being more inspirational. In essence, leaders who are seen as more competent and more trustworthy are perceived as offering a more compelling and more valid inspirational impetus for followers. The research has also established that there is a connection between inspirational leader behaviors and follower performance. Inspired by their leaders, followers pursue more challenging goals, which in turn leads to greater organizational success.

    Researchers from the Fuqua/Coach K Center on Leadership & Ethics also have found that leaders who display ethical leadership behaviors—that is, those who place the long-term interests of a group ahead of their personal goals—are more likely to ensure the long-term survival and success of the organization. Displaying such stewardship involves considering the trade-offs between short- and long-term objectives. Leaders who are able to do so take personal accountability for their influence on stakeholders within and outside the organization.

The underutilized potential of leadership development activities
    If specific behaviors affect organizational performance, it is worthwhile to see which activities organizations are using to develop leadership skills. Given the impact of leadership actions on performance, the Duke Executive Leadership Survey looked at whether such leadership skills were being actively developed. The survey asked respondents to identify the leadership training and development activities currently being used by their organizations.

    Performance evaluation discussions were the most commonly identified developmental activity used for senior managers, followed by training programs that were internally developed and delivered and then training programs that were externally developed and delivered. The least frequently used activities included executive coaching provided by individuals outside the organization and formal internal mentoring programs. 

    Because developmental activities often require intensive use of money and employee time we wished to explore not only whether organizations were using a particular activity, but to what extent these activities involved significant numbers of managers. We found that senior manager participation rates were significantly lower for externally developed and delivered training programs relative to other resource-intensive activities.

    Specifically, only 30 percent of organizations using external training programs reported having more than half their senior managers participate in those programs over the past fiscal year. By comparison, 52 percent of organizations using internal training programs reported having more than half their managers participate over the past fiscal year. For formal mentoring and executive coaching activities, higher participation rates were reported by 45 percent and 39 percent of organizations, respectively.

   To further explore executives’ perceptions of different leadership training activities, we also asked respondents to evaluate certain activities based on how effectively those activities develop leaders for their organizations. We found additional evidence on why organizations may not be investing more heavily in training and development programs of all types: They don’t find them particularly effective. Specifically, we found that most programs are perceived to have significant room for improvement (see Table 1). In fact, no type of program evaluated achieved an average rating of very good or excellent. The findings did show some minor differences in program evaluation for executives who reported higher performance for their organizations over the past year when compared with those who reported lower performance for their organizations. Specifically, executives from higher performing organizations had slightly more favorable evaluations of their organizations’ training and development, performance evaluation, mentoring, and executive coaching programs. The results did not show any significant differences between how executives from higher and lower performing organizations viewed external training, such as MBA programs and non-degree courses.

    Finally, we sought to examine executives’ perceptions regarding the amount of time organizational leaders spend on leadership development. We found that senior executives are believed to spend less than 25 percent of their time on leadership development activities. Moreover, this perception holds true even for positions typically associated leadership development (i.e., more than half of executives whose firms have a Chief Learning Officer and more than 40% of executives whose firms have a Head of Leader Development indicated that no more than 25 percent of that individual’s time was spent on leadership development). However, executives indicating that their CEO, CLO or Head of Leader Development spent more time doing leadership development activities were more likely to report higher firm performance (either higher profits, revenues or both) in the current fiscal year relative to the previous one.

    In difficult times, organizations should not ignore the positive effect that a leader’s behaviors can have on organizational performance. In these situations, people turn to their leaders to inspire them to reach for higher goals, and aspiring to higher goals, in turn, improves organizational performance. Employees also look toward leaders to model ethical behaviors that promote the long-term welfare of the organization. While these leader behaviors appear to be critical influences on organizational performance, our research also found that firms seem to be inadequately emphasizing programs that could enhance this positive leader effect and even senior executives tasked with leadership development are often not believed to be doing so. Thus, focusing leadership development activities on behaviors that promote higher aspirations among employees and that emphasize accepting responsibility for the whole organization, its mission and constituencies are specific actions that organizations can take with regard to leader development that can improve performance in these trying times.

    Full results from the Duke Executive Leadership Survey can be found on the Web site of the Fuqua/Coach K Center on Leadership & Ethics at www.leadershipandethics.org. 

Update: March 9, 2009
This article has been revised
The Duke team conducted additional analysis after this article was originally published and found that the relationship between external training and firm performance originally reported was not accurate. The survey results indicate that there is no positive correlation between the use of external training programs, or any other training activity considered in this research, and executive-reported firm performance. To access the full survey results, visit www.leadershipandethics.org. 

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