The Cost of Management & Leadership Shortfalls

By Andrew Cooke | August 17, 2012

The Cost of Management & Leadership Shortfalls
by  Andrew Cooke, Growth & Profit Solutions
The costs and risks associated with having weak managers and leaders are often overlooked.  What does it mean to you?  How can you overcome it?  And what are the benefits of doing so?
A recent report from the UK’s Department for Business, Innovation & Skills Leadership and Management Network Group (LMNG), showed the UK’s economy has been negatively impacted by a lack of training and support for new managers.  Across 18 management practices by country the UK ranked 6^th, whilst Australia ranked 9^th – behind France and just ahead of Mexico.  This strongly suggests that the findings for the UK are equally applicable to the Australia and that there is a stronger sense of urgency.
John Hayes MP, UK Minister of State for Further Education, Skills, and Lifelong Learning, suggests that effective leadership is what makes the difference for successful, innovative companies. “Strong leadership and management is a key factor in fostering innovation, unlocking the potential of the workforce and ensuring organisations have the right strategies to drive productivity and growth.”
However, in the UK the research shows that effective management is the exception rather than the rule.
“Too many of our organisations, both private and public, are failing to achieve their full potential: managerial shortcomings and a lack of strategic thinking are holding them back. Overcoming these weaknesses and improving our leadership and management capability is fundamental to creating a culture where more organisations have the ambition, confidence, resilience and skills to respond to the current economic challenges and compete successfully both nationally and globally.”
By providing more comprehensive management training and development for budding leaders, companies can gain the edge over competitor firms.
Key Findings of the UK Research:

• Ineffective management is estimated to be costing UK businesses over £19billion per year in lost working hours.
• 43% of UK managers rate their own line manager as ineffective – and only one in five are qualified.
• Nearly three quarters of organisations in England reported a deficit of management and leadership skills in 2012, contributing to the productivity gap with countries like the US, Germany and Japan.
• Incompetence or bad management of company directors causes 56 % of corporate failures

Quite simply, improving leadership and management capability is an issue that no organisation wishing to achieve long-term success can afford to ignore. There is no question that good leadership and management can have a truly significant impact on organisational performance, both in the immediate and longer term.

• Best-practice management development can result in a 23% increase in organisational performance.
• Effective management can significantly improve levels of employee engagement.
• A single point improvement in management practices (rated on a five-point scale) is associated with the same increase in output as a 25% increase in the labour force or a 65% increase in invested capital.

Business’ long-term success is dependent on developing these management and leadership skills, these  are crucial to ensuring high performance working and business success. This is especially true as more new managers and leaders will be needed over the next decade as the number of experienced baby-boomer managers and leaders who are retiring increases.
Why are businesses underperforming when it comes to developing their talent pipeline in management and leadership?  There are a number of reasons including relatively low levels of training, shortages of key skills, the failure to apply skills strategically, and employer concern about the relevance of training provision, have also been identified as potential reasons. Other factors include difficulties in recruiting graduates with the right skills, particularly for small and medium sized companies; a perception that leadership and management skills are something you “pick up” on the job; and lack of clarity about the specific leadership and management skills and behaviours managers need to display.
Improving our leadership and management capability makes sound business sense. Helping managers at all levels to develop the right skills and behaviours will ensure organisations have the ability to adapt, innovate and evolve, and seize the growth opportunities that lie ahead.
So what are you going to do?
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