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  • Print publication year: 2013
  • Online publication date: June 2014

3 - Leadership

Summary

When asked about the cost of executive development, Jack Welch replied (paraphrased): ‘What is the cost of ignorance?

Introduction

In Chapter 2 we examined the dimensions of organisation culture which are often intertwined with the focus on leadership effectiveness. Many researchers have found that there is a strong positive correlation between leadership effectiveness and performance. David Maister, for instance, states that for each point of increase an organisation achieves in leadership effectiveness, there can be up to a forty-two point improvement in financial performance. Others have found similar results all over the world. In Asia, for example, Bennett and Bell make the point that effective leadership engages employees, and engaged employees produce results. In their research they found that organisations in the top 20 per cent in employee engagement scores achieved 20.2 per cent shareholder returns, whereas average engagement companies achieved 5.6 per cent average shareholder returns and low-engagement companies actually had negative 9.6 per cent shareholder returns.

In addition, the increasing global shortage of leadership talent is now recognised as a key source of risk to successful business strategy execution, business continuity and growth. In fact, boards of directors are paying more attention to their accountability for executive succession and are asking tough questions about business continuity. In a recent study by the Conference Board, people risks were determined to be 4th out of 15 risks for growing businesses but only 11th in how well they are currently managed.

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