New research has shed light on the state of leadership in Australia. And it’s not pretty.
The Study of Australian Leadership (SAL), by the Centre for Workplace Leadership at the University of Melbourne, found more than 40% of organisations did not meet their performance targets for return on investment and profitability. The research found a clear link between leadership capability and high performance. In fact, the more skilled company leaders, the more likely employees were found to be more committed, engaged and innovative. While companies that provided little leadership training or no training, under-performed.
Overall, their main finding was that Australian organisations do not have the leadership or management skills needed to meet challenges of the 21st Century because most companies fail to get the basics of leadership and management right. The main culprit is a failure to invest in frontline and middle management leadership training, where it is needed most.
Leading in a VUCA World
Knowing how to create future business success is working out what leaders need to be good at today for tomorrow. This means understanding what future challenges may appear on the horizon. But it’s insanely difficult to predict the future, particularly one that is VUCA: Volatile, Uncertain, Complex and Ambiguous.
As Benjamin Franklin said: “In this world, nothing can be certain, except death and taxes.” We might live in uncertain times, just like Benjamin did 300 years ago, but we can be certain that uncertainty will continue and about some of the underlying shifts. According to Deloitte, the three main changes include Asia’s economic transformation, globalisation/hyper-connectivity and demographic shifts.
Companies who will be able to successfully navigate these shifts need to be more than just crystal-ball readers producing the best value-creation strategy. They will need the right leaders who can execute the strategy through influencing others to head in a new direction. Leaders who are able to actively engage others and help them adapt to changing conditions. The old leadership skills of command and control are slowly losing their relevance. Successful leaders need to think differently and exhibit different behaviours.
Here are three leadership skills that organisations need to develop within their people for profitable growth.
Managing growth is about managing change. In the industrial landscape, the ability to handle constant change makes the difference between success and failure. Today, executives, supervisors, and project managers have plenty of methodologies for managing change, yet the failure rate of major organisational change is a paltry 70 percent.
Many organisations make functional and structural changes that are visible and concrete. They will undertake a restructure, change systems or processes, increase hard skills competency training, make some redundancies or change strategic direction. This provides short-term efficiencies that only address the symptoms of dysfunction, not the root cause. Years down the track, companies usually find themselves in the same place.
Where it goes wrong is that change involves two components – functional and emotional. Most companies focus on the functional and forget the emotional. Yet, when dealing with humans we need to understand that change makes people nervous. Emotions take over and no amount of logic can penetrate.
People will only embrace change when they trust leadership will do the right thing and have the competencies to meet the new challenges. Trust is the precursor to change. Leaders who don’t have the skills to build, judge and rely on trust will struggle to influence their workforce to buy into a new project and get it off the ground. If employees are still annoyed that the last IT transformation project didn’t deliver on its promises, they’re going to be cynical about any new initiative.
One of the other issues is that while organisations need to constantly change, it makes being consistent and predictable really hard to do. Sometimes leaders make a promise and have to break it, due to circumstances beyond their control. The result is low trust that makes it more difficult to get everyone on board with the new direction. It creates a lot of friction, reducing the agility with which a company can respond to competitive challenges.
Successful leaders have the skills to create safe work environments that encourage open dialogue and entrepreneurial mindsets, where people understand the risks and who are okay with a new strategy failing. It’s this environment that helps employees cope with change, and failure, to succeed in today’s world.
Retaining and Developing Talent
Globally, we are facing a critical shortage of talented employees.
While business conditions may be tough, there has been a shift in belief that talent is no longer readily available in the marketplace. CEOs acknowledge that it’s important to retain talented employees. And the way to do that is developing effective leaders, increasing employee engagement and building organisational capability.
But it also means providing an environment where employees can flourish and thrive. One of the number one reasons people leave an organisation is because they don’t trust their manager.
Leadership matters because it influences employee attitudes and behaviours. Positive attitudes and behaviours translate into greater productivity and employee creativity.
The Study of Australian Leadership shows that leadership capability and efficacy are related to a range of employee outcomes, including employee engagement, voice, creating a culture of learning and innovation, trust and intention to quit.
But organisations and leaders need to be aware of how much their behaviours affect trust in leadership. According to a SunSuper study, 46% of Australian employees always trust their immediate manager and 24% always trust senior management.
Leaders need to do more to keep people happy and satisfied in their job. They need to lead in a style that enables people to trust them and know that they are looking out for them.
The ability to grow, build, repair and extend trust is the single most important leader competency in the new global economy. Leaders need the skills to align interests, demonstrate that they care about employees, deliver on their promises, reframe risk, connect with others through sharing common ground, provide the right support and communicate to build trust.
Developing Next-Gen Leaders
Organisations get to a point where they need to take it to the next level and grow beyond where they have been before. This means merging or acquiring another organisation, employing more people, launching a new product or tapping into a totally new market. Unfortunately, most of these initiatives fail.
One of the top challenges that CEOs mention is executional excellence. Studies have found 70% of companies fail to implement their strategies, even though managers have lots of different techniques to drive change.
One of the issues I hear time and again from company leaders is that their middle managers don’t have the skills to communicate the vision or strategy. Often, the CEO and executives are energised by the new value-creation strategy, they can talk about it and influence others on it all day. Unfortunately, this enthusiasm gets stuck at middle management level who either fail to understand it properly and subsequently are unable to communicate it to employees below.
A study by Donald Sull found that fewer than one-third of senior executives’ direct reports clearly understood the connections between corporate priorities, plummeting to a meagre 16% for frontline supervisors and team leaders.
Furthermore, people get promoted based on their technical ability and expertise to do a certain job. But the best football player doesn’t make the best coach. Many middle managers don’t have the right people or communication skills to lead others. This causes a lot of frustration with the workforce and a lack of alignment which means results are often patchy and inconsistent throughout an organisation.
One of the key parts to the leadership function is to be able to trust people and for them to trust you. Unfortunately, few of us are taught how to enhance and rebuild trust. Managers often try to influence their audience, by providing them with lots of information and asking them to trust it. Unfortunately, information doesn’t mean understanding. Instead, managers need the skills to get others to trust them first, then when they provide them with information, they will be more likely to trust it because they trust the messenger.
To grow, organisations require leaders who know how to build trust first. When leaders don’t have a trust communication skills, their ability to engage their team on strategy will always show up as poor financial performance in their department or executive management will have difficulty trusting that the message they’re sending is going to be acted and received upon. It creates a cycle of distrust that keeps the organisation stuck.
In today’s rapidly moving business world, an organisation’s ability to quickly make decisions and change is a key competitive advantage.
Australian organisations need to improve trust in leadership within their organisations, in order to compete with other international countries who are already realising the benefits of a high-trust culture. Avoiding the word trust is a sign of a low-trust culture and sadly is the case for many Australian companies today.
For leaders to navigate change more effectively, they need to nurture a trusting environment where everyone is allowed to speak and challenge views. This can only be done through a good leader who trusts their people and in return, employees trust them. It means employees can commit to actions, make decisions faster and have the confidence to buy into a big vision and get an innovative project off the ground. It means that people can cope more with new change. The result is loyal customers, highly engaged employees, stronger relationships with partners and a healthy workplace culture.