Should the SA government lend money to Zim?

Have your say
Chat on the Business in Africa forums with other readers about the issues of the day, affecting Africa.
Post your comment...

Calculate the latest currency rates for Africa and world currencies
Find out more...

Leadership : the critical key to financial success
Posted Thu, 03 Mar 2005

In a volatile and unpredictable economy and even in good times, leaders must demonstrate extraordinary performance to their employees, customers, stakeholders and shareholders. Regrettably, at the beginning of the 21st century, we have too many poignant reminders of the effects of leadership failures. The trust and credibility of leaders is at its lowest.

Restoring stakeholder trust and confidence will require exceptional leadership abilities. Fact is, the performance of top management is crucial to the bottom- line success of a company.

Building the kind of leadership that is vital in today's competitive environment resulting in high-performance global organisations is not a phenomenon that develops magically on its own. It must be deliberately cultivated.

Senior executives consistently maintain that leadership development is the single most important organisational issue facing their companies today. But the fact that so many firms fail to perform to their potential suggests that accomplishing the goal of developing leaders is more difficult than it appears.

John Alban-Metcalfe, a lecturer in psychology and Beverly Alimo-Metcalfe, professor of leadership studies at the University of Leeds in the UK stated, "Leadership qualities are often found in organisations, but rarely at the top. The reason is simple: while track record and management competencies are adopted as criteria for selection or promotion, leadership is rarely defined explicitly."

Compounding the situation is a demographic shift. A global demographic shift is occurring as the baby boom generation enters its retirement phase. Not only are many senior managers preparing to retire, few qualified people in succeeding generations will be available to fill the resulting vacancies. Organisations around the world are going to have to be much more active and progressive in the selection and development of their managerial talent.

Watson Wyatt, an international consulting firm, tackled the complex study of leadership development. Their work examined corporate leadership globally in order to answer a number of critical questions. According to the results of their study, the more companies do to develop their leaders, the greater their financial success. Below are 'leadership' key findings followed by an overview of the study and a global profile of what decision- makers believe matters most.

Key findings

  • The more comprehensive a company's leadership development effort, the better the financial results were on critical financial measures.

  • The establishment of formal leadership programmes is the most important organisational priority identified.

  • Top executives place nearly equal importance on encouraging innovation and risk taking, developing and communicating a global vision, and sharing knowledge throughout the organisation as critical leadership skills.
  • The Leadership skills required for global marketplace success are unrelenting focus on customer satisfaction, and the need to transform the global corporate vision into effective business strategies.
  • Building global leadership strength will depend directly on specifically defining leadership for incumbents, ensuring the recruitment of quality leadership talent, regular leader; assessment and development, and rewarding effective leadership.

Study overview

To understand what comprises corporate leadership, interviews were initially conducted with CEOs at 75 of the world's premier global companies.

The top executives were asked to rate the importance and need for improvement for leadership in three strategic areas: people, processes and programmes, and the marketplace. The similarity of views about leadership held by these executives suggests that companies will benefit from crafting consistent leadership development efforts on a global scale.

  • People
    The survey respondents indicated that establishing formal leadership programmes is the most important priority. However, despite increasing globalisation, North American executives seemed to place less emphasis on multicultural experience. In other words, some organisations may be missing opportunities to develop the capabilities of their leaders in an increasingly global business environment.
  • Processes and programmes
    Top executives responded almost identically on the importance of process issues. Linking pay with performance is their least important priority, while encouraging innovation and sharing knowledge presented the greatest challenges. In what appears to be contradiction, the research suggests that Asian executives place considerably less emphasis on knowledge sharing but they view encouraging innovations as a high priority.

    In this region, therefore, the lack of management support for information sharing may impede employees with innovative ideas.

  • Marketplace
    According to the executives surveyed, customer satisfaction was their most important concern. The second concern was the need to transform the global corporate vision to effective business strategies. Although a degree of uniformity was evident, a higher proportion of Asian executives believed in encouraging a 'beat the competition' mindset, assigning less importance to translating vision into strategy.

Linking leadership
Development to the bottom line

The leadership survey reveals that a significant relationship exists between leadership development efforts and financial success. In particular, the more comprehensive a company's leadership development efforts, the better its financial results on four financial measures.

Highly performing companies are more likely to be using a number of developmental programmes.

Building leadership strength

As global demographics move towards an ageing population, a leadership 'crunch' will soon be upon us. The survey results demonstrate that many of the top business leaders around the world have similar views regarding key organisational priorities in terms of people, processes and markets.

Frequently, however, the issues deemed most imprtant are the ones most in need of improvement. What can be done in an organisation to build the necessary leadership structure to close this gap?

  • Define leadership

    What a particular management team means by leadership is best answered by a frank, comprehensive discussion of:

    • core values
    • future business scenarios for the organisation
    • strategic business objectives
    • an overarching leadership concept, and
    • core competencies that support the leadership model and relate to strategic objectives.
    • Ensure the recruitment of quality leaders
      Acquiring the right talent is essential to building a leadership pool. Leader selection depends on clearly knowing the talent needed for the future, not solely on past job experience. Armed with solid definitions for leadership competencies. It is relatively easy to build assessment tools to facilitate the recruitment and selection process, and infuse decisions with greater rigour and credibility.

  • Regular leader assessment

    Most leaders require continual development to maintain their edge and ensure their success. A leadership model and defined leader competencies are the foundation for leadership assessment and development. Whether quantitative ratings or qualitative comments are used, feedback on the way a leader exhibits the prescribed leadership competencies can provide a wealth of insight for the individual.

  • Provide meaningful development opportunities

    Meaningful development fits with and supports the needs identified in leadership assessment. It is also tailored to individual needs and occurs when the experience is viewed by the leader as:

  • relevant to his/her work
  • requiring him/her to exercise 'leadership muscles', or
  • reinforced on the job by his/her superiors.

  • Reward effective leadership

    Finally, rewarding effective leadership requires a deliberate decision from top management to make leadership a focal point of compensation decisions. Leadership must be defined in clear, unambiguous terms that can be measured. Assessments and other data sources, such as employee surveys, are valid bases for differentiating a portion of pay among leaders. Any of the regular reward mechanisms can be used to reward a demonstration of leadership competencies, including merit pay increases, bonus programmes, stock options and others.

    The prognosis is clear. Organisations must invest in their leaders in order to survive and thrive. As organisations around the world experience or begin to experience a leadership vacuum, it is imperative that companies develop talent to maintain their corporate success. Fortunately, the leadership model and the steps for implementing it are easy to access and execute. "With permission from Watson Wyatt, an international consulting firm that provides services in the areas of employee benefits, human resources technologies and human capital strategies. Headquartered in Washington, DC, Watson Wyatt has more than 6,300 associates in 87 offices in 30 countries. For more information: [email protected]." Contributors to this article: Watson Wyatt's Jan Grude, Dawn Bell and Grahan Dodd, senior consultants who focus on leadership and senior team development, and Owen Parker, Senior Research Associate with the firm's Canadian Research and Information Centre.

  • Economic Statistics
    Click here for the latest economic statistics graphs.
    Find out more...

    Special book offer
    A new book by Eskom's Reuel Khoza on how to enhance performance of state-owned enterprises.

    Buy this book now!

    Market news on your cellphone
    Get live JSE listed shares, warrants, major indices, brent crude oil, international markets, agricultural futures & daily market analysis via SMS on your mobile.
    Find out more...

    Energy in Africa
    Energy in Africa is an intelligent and in-depth look at how energy impacts people, places, projects, price and development around the African continent. It is the first pan-African bilingual publication in both English and French in Africa, published quarterly.
    Subscribe now...

    Eskom leaders forum
    African business and public sector leaders define and construct a prosperous future for the continent.
    Find out more...

    Online travel bookings
    Planning to travel? Book accommodation in Africa & South Africa here.
    Book now...

    Financing Black Empowerment Partnerships 2006
    27 February � 3 March 2006.

    Sandton Convention Centre, Johannesburg, South Africa
    Click here for more

    �Current Edition
    ��Subscribe to:
    �� Print magazine
    �� Digital edition
    �� Energy in Africa

    Employee E-Mail | Contact us | About us | Newsletter | Subscription centre | Advertising

    All material copyright Business in Africa. All rights reserved. Material may not be published or reproduced in any form without prior written permission. Read these terms & conditions. Read our privacy statement and security statement. Powered by Mail & Guardian Online &