A 2007 McKinsey report (“Management Practice & Productivity: Why they matter”) on the impact of effective management practices on productivity has gotten a lot of attention on twitter recently and is yet another example of the power of leadership. The key finding of the study should be a clarion call to all organizations to double down on leadership development and ensure that leadership across organizations have the mindset, skill set, and tool set to drive business success and develop the people they lead.
The key finding: “Across all the firms in the research, a single point improvement in management practice score is associated with the same increase in output as a 25 percent increase in the labor force or a 65 percent increase in invested capital. We found this observation is true even after controlling for a host of factors like the firm’s country, sector and skill level.” (Bloom, et al, 2007)
To see leadership development as a cost and not an investment is an outdated mindset. Not having a comprehensive leadership strategy that complements and supports the business strategy creates a risk to organizations that must be seen as a corporate governance issue.
A culture of strong and shared leadership across an organization increases productivity by ensuring the alignment and engagement necessary for high performance. It’s leadership that reduces risk and creates competitive advantage.
What I especially like about the report is the fact that it is strong leadership and management practices across organizations and not just at the top that create real impact. It’s about leadership, not leaders. While we need a strong leader at the top of the organization or a team; we need all people managers, indeed, even individual contributors, to think and act like leaders.
Watch a soccer match and observe the continual shifting of leadership from player to player depending upon who has the ball, what the situation is, and what the team is trying to do at that moment. No one on the field is the owner, the General Manager, or the Coach; but during the game, the players share leadership. We need to build that level of leadership capacity in our organizations. It’s not a luxury or an expense; it’s smart business. You’d think this would be a “no-brainer” by now. It’s not. The organizations that invest in growing their leadership capacity will win. Those that don’t, won’t.