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Leadership development � A Key Business Issue

Have you ever heard of an engineering degree obtained by reading a few bestsellers or taking a workshop? Neither has Murray Hiebert, leadership development expert and co-author of, among others, the Encyclopedia of Leadership - A Practical Guide to Leadership Theories and Techniques. Hiebert, whose �first career� was engineering and chemistry, looks at leadership development as a discipline that needs as much �training and development� as any technical profession. �I see leadership books that sell the concept of �leadership in a few easy steps�. �That�s crazy�, exclaims Hiebert. �Have you seen schools or books promoting �Five steps to become an expert geophysicist�? �Leadership is an extremely complex issue,� says Hiebert. �Dealing with human behaviour, an intangible, is a lot more challenging than dealing with tangibles, such as how much oil a well is producing.�

According to Hiebert and other key leadership experts, the perception has changed in the last 40 years. �If we look at what makes a company successful in the stock market we can see that in the past the average earning was a percentage of the stock price. If you made $100, the stock market would value your shares at $100. Now, research shows only about half of a share price is due to earnings. The other half is the intangible value, of which leadership is a vital part. �Today, there is an increasingly bigger gap in what a company earns and what it is valued at by investors,� says Hiebert. �Finally we have some kind of proof of the importance of the intangibles, such as leadership development. You would expect executives would start shifting some of their focus to the soft side of running an organization.�

Not so. A market survey conducted by RHR International Company in 2003 studied 115 companies as to how they are managing the development of their future leaders. A key finding indicated that talent development is still only a project, not a way of doing business. Yet overall, there was a high level of concern about the anticipated talent shortage. Not surprisingly, most of the companies had only been developing leaders formally for less than three years.

So why is it taking companies so long to jump on the bandwagon and realize the profound benefits of leadership development? �First you need the executive team to buy in to make leadership training work,� says Gary Agnew, partner at Cenera. �One reason many are not buying in is that leadership is not their strength and they just don�t have the time to pay attention to it.� Explains Agnew, �Senior executives who are retiring in the next few years may not see how addressing leadership needs in the short term will add to their bottom line, so they focus on the tangibles and things they are more familiar with that can show more immediate results�.

According to Hiebert, leaders are not paying attention to the area of leadership development because it�s a �soft area� and too difficult to grasp. It�s an intangible that is hard to measure and hard to deal with. �Most leaders have a technical background and it is hard for them to get their head around these things. They need to see the correlation between strong leadership and share value.�

Illustrating the value good leaders can have on organizations - when General Electric (GE) CEO Jack Welch retired and one of his top leaders got the job, 19 other highly qualified leaders left GE. According to a 2003 article in the Economist and based on a study by Harvard Business School Professor Nitin Nohria, the move by these GE top performers immediately added an astonishing $24 billion US to the share prices of the companies that hired them. On average, the article claims, the stock market reaction to the hiring announcement was a gain of about $1.3 billion US for the hiring firm, but no decrease in GE�s share price.

At GE, training their staff, including leaders, has always been at the forefront. As early as 1960, GE saw the need for training and development. It was in those days that Crotonville, GE�s world-class training centre was established. General Electric has long been known for developing some of the best leaders in business and some of the most widely practiced business techniques. Worldwide, GE invests about $1 billion annually on training and education programs - from assembly lines to corporate classrooms to boardrooms.

Strongly supporting the notion of how the value of a company is more than just earnings is the theme of Dave Ulrich and Norm Smallwood�s book: Why the Bottom Line ISN'T!: How to Build Value Through People and Organization. Ulrich and Smallwood asked the question: how can two companies in the same industry with similar earnings have vastly different market value? The authors� strong message is that today�s successful leaders must understand the new role that intangibles play in company valuations and see their own roles from a larger perspective if they are to join the new breed of leaders�those who can consistently build value within the company.

The revelation around the value of leadership and valuing intangibles has only come to light in the last 3-4 years. Jim Collins, author of Good to Great: Why Some Companies Make the Leap... and Others Don't (the best selling business book since Search of Excellence), also used the stock market as a score card. In his book Collins illustrates that the transition from being a good company to becoming a great one, doesn't require a high-profile CEO, the latest technology, innovative change management, or even a fine-tuned business strategy. What made the difference in those rare and truly great companies was a corporate culture that found and promoted disciplined people to think and act in a disciplined manner. Collins discovered the most successful companies were not run by leaders who were charismatic, vocal, visible, and visionary. The most successful leaders are quite the opposite; humble, soft leaders who believe in the value of the intangible, including developing people with potential and getting the rest �off the bus�.

�It will take time before this kind of thinking becomes more widespread and accepted at corporations,� says Hiebert. In addition, leaders, who in Collins book are to �face the brutal facts�, for example about their own leadership shortcomings, seldom get the benefit of feedback or performance reviews. �It�s difficult to face the facts when you don�t know what they are.� One of Hiebert�s clients, a very senior leader at a Fortune 100 firm, is receiving his first ever review this year. �The only feedback many leaders get in their careers is how they perform technically or financially, not how they are doing in the soft skills area of developing future leaders.�

Many recent articles discuss the looming talent shortage. According to RHR International Company research, most companies are not very confident they can meet future growth needs. The survey indicated that companies anticipate significant departures (50 per cent or more) within senior management ranks by 2010. Hiebert does not agree with the talent shortage predictions. �There is not a shortage of talent, just a shortage of opportunity to learn, including training, on the job learning, coaching and mentorship.�

There are many young leaders today who have not had the benefit of learning on the job from their predecessors. These young leaders are struggling as their �soft skills� of leading have not been developed. �Leaders are promoted based on their technical abilities and successes,� says Hiebert. �And all of a sudden they are promoted to lead teams, but now, rather than being faced with technical challenges, they are faced with the most complex issues of all: human behaviour and interaction.�

People and relationships are complex. From our relationships in marriage, partnerships and friendships to relationships with colleagues, managers and CEO�s, it�s a life-long learning that is not learned with a good how-to manual. It�s about willingness to take the time to learn, for introspection and for listening, and accepting that we don�t become expert over night and that it is great humans that create the biggest value.

If you are looking for a flexible but all encompassing approach to leadership development, please contact Cenera for more information. 403.290.0466/800 387.8797 or info@cenera.ca