5 Ways Leadership Development Impacts Business

The types of skills required to be an effective leader have changed tremendously over the last decade. There has been a drastic shift in the ways managers and their employees interact. Leadership tactics of the past are no longer practical, and bad managers cost organizations billions of dollars each year. In this challenging and uncertain labor market, developing the skills and effectiveness of existing leaders takes on new urgency. 

Today’s skilled people managers need to approach leadership with new skills, such as empathy, engagement, and a desire to make their teams feel valued. Organizations who take the time to develop these skills in their leaders can transform how employees feel about their roles and the company, ultimately creating better business results. This blog post will explore five ways that skilled, developed leaders positively impact critical business outcomes.

1. Good leaders lead to better employee engagement and productivity

Low employee engagement is a serious issue — Gallup estimates it costs the global economy $7.8 trillion. Organizations that invest in good leadership development programs produce managers that can tap into their employees’ sense of purpose and motivation, as well as identify opportunities to help employees grow and develop new skills. Managers can learn specific skills, such as goal setting, coaching, and effective feedback, to help their teams prioritize and focus while removing barriers and reducing distractions. When organizations develop these skills in their leaders, they can move the needle on the number of engaged employees and achieve an estimated 23% higher profitability. 

2. Skilled leaders improve employee retention

Disengaged workers are more likely to leave their companies, with managers accounting for at least 70% of the variance in employee engagement scores across business units. This shows that engagement doesn’t necessarily depend on employees themselves, but relies greatly on the experience created by their managers and organizations. According to research by Gallup, teams scoring in the top quartile on employee engagement saw 18% lower turnover for high-turnover organizations and 43% lower turnover for low-turnover organizations. Organizations that develop skilled managers who support their teams are able to retain their most valuable employees.

3. Strong leaders support change agility and business continuity

The past few years have shown us just how unpredictable the world can be. One of the most powerful skills organizations can develop in their leaders is change management. Developing change agility (both for leaders themselves and their organizations at large) involves a process of honing self-awareness and decision-making in ambiguous situations. This tactic is one way strong leaders can handle disruption and ensure business continuity. While there will always be change in the workplace, skilled leaders can help employees feel more confident in facing any change that comes their way. 

4. Good leaders drive innovation

Innovation is critical for long-term growth in any organization. It’s also lucrative — McKinsey found that innovative organizations deliver 2.4 times higher profits. It’s important for companies to develop leaders who empower employee decision-making and creativity, limit bureaucracy, and encourage diverse opinions. Sue Todd, Director, Cohort Content Strategy for the Udemy Cohort Leadership Development Solutions says, “Innovation starts with company leadership and a strong aspiration to be more innovative. The leadership team has to be passionately behind innovation strategies. Not just the skills, but the mindset that we will seek novel approaches to create value for customers.”

5. Great leaders develop the next generation of great leaders

Taking on a new leadership role is challenging, and strong, established leaders can play a meaningful role in nurturing new leaders. The increased pressure and responsibility of leadership means more than 50% of new managers fail within the first 18 months. Strong leaders are aware of this and provide the resources to help new leaders prepare for the demands of their new roles. Research shows that when companies are good at talent planning initiatives (e.g., identifying critical positions and can’t-lose players and engaging senior managers in the talent planning process), they enjoy annual revenue growth of 10% or more than their peers. 

Develop your leaders to take on tomorrow’s challenges

There’s a direct connection between an organization’s leadership and its business performance, and companies that make it a priority to invest in their leaders achieve significant benefits. 

Download the ebook, Leadership Development as a Strategic Advantage, to discover how investing in leadership capabilities can help a company meet any challenges that come its way.