Leadership Development Strategy for Human Capital

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Leadership Development Strategy for Human Capital

Executive Summary

The main aim of this research was to examine critical factors that need to be considered when designing an LMD strategy to build human and social capital.

As business landscape changes, effective leadership, and management are necessary to create sustainable business practices. Based on the reviewed literature, it was established that LMD, which is designed to improve individuals performance and ultimately organisational performance, was appropriate for enhancing organisational performance, but it required aligning strategic goals with learning requirements.

Introduction

Background

It is argued that leadership, management, and organisational performance or developments are all elements of a single process, especially to improve the capability of organisations and employees within them to perform better and realise their objectives. According to Gold, Thorpe, and Mumford (2010), leadership and management development is an intended and deliberate process to assist managers and leaders to become more effective. This implies that managers and leaders must demonstrate some leadership and management capabilities to realise enhanced organisational performance. Thus, leadership, management, and organisational development are closely linked to strategic options and all other supporting systems.

Leadership and management development (LMD) is now a critical aspect of organisational management-driven, to some extent, by the desire of academics to explore new leadership, management, and organisational practices (Mabey & Finch-Lees 2008). Moreover, its growth is also attributed to the desire to gain access to the growing global leadership market and political and corporate interests in the value of effective leadership and the importance of enhancing leadership and management capabilities by addressing skills gap (Gold, Thorpe & Mumford 2010). For most organisations, the main triggers for focusing on LMD are the constantly changing business landscape, dynamic business demands, and human resource strategies. Additionally, many graduates now believe that leadership and management related qualifications improve their chances of employability and career growth.

It is imperative to recognise that most existing studies do not provide direct empirical evidence of impacts of managerial and leadership development activities on organisational performance, and not much literature is available on management education researchers and practitioners (Arbaugh 2016). Studies that have focused on such effects, however, provide a positive association between managerial and leadership development activities on organisational performance (Gentry et al. 2014). It is, however, the consistency of management and leadership development efforts and executives commitment to such efforts, which may influence organisational performance (Larsen & Madsen 2016).

Aims and Objectives

This research aimed to examine critical factors that need to be considered when designing an LMD strategy to build human and social capital.

The research objectives explored the contested nature of leadership and management; the nature, purpose, and value of leadership and management development (LMD); considered the nature and role of formal and informal approaches to learning in LMD; and considered the nature, role, and contribution of human capital versus social capital in improving organisational performance.

Scope and Limitations

While the field of leadership and management is broad, the research was discussed within the context of leadership and management development based on the available literature.

Methodology

The methodology used is based on literature that has conceptualised the field of LMD, leadership, and management. LMD is an emerging concept in organisational learning, development, and performance and, thus, not much empirical evidence is available to support its organisational benefits. Hence, models and theories have been selected to explain LMD and its applications in organisations.

Factors that Need to be Considered When Designing an LMD Strategy to Build Human and Social Capital

Leadership and Management

For effective LMD design, one must understand the differences between leadership and management. The difference between leadership and management is sometimes not clearly defined, and when LMD is introduced, then some competing forces may be observed. Of course, some practical issues have emerged in attempts to develop more effective leaders, managers, and to improve organisational performance (Harrison 2005). Leadership development is different from management development to the level that it prepares people for functions and situations beyond existing experiences and influencing unanticipated challenges. Conversely, management development aims to equip people with skills, knowledge, and capabilities to improve organisational performances on recognised roles by using proven solutions.

There are also variations between leader and leadership development. Leader development aims to create leadership in individuals while leadership development strives for an overall leadership capacity of an organisation. Hence, every employee is regarded as a leader, and leadership is perceived as an outcome instead of a cause. Leadership development based on this viewpoint entails the use of social systems (relational aspects) to aid in creating commitments among individuals of a community of practice. Thus, leadership development can be construed majorly as an investment in human resources of particular people. Conversely, leadership development reflects an investment in social capital through developing interpersonal relations, collaboration, and teamwork in an organisation and among employees.

Individual Characteristics and Learning Needs

LMD focuses on individuals and organisational learning needs. Individuals who take part in leadership development programmes are normally managers, and during training, they usually create social networks and relations among themselves and extend such relations and networks to organisations, thereby blurring any variations. In this sense, LMD may be considered as any process that results in individual development and that all formal and informal activities are important.

Current practices in LMD are characterised by individualistic approaches. That is, interpersonal characteristics, individual cognitive abilities, interpersonal qualities, communication skills, and role-specific skills of an individual are relatively important. At the intrapersonal level, no leadership development is considered except for the fact that the involved individuals have leadership roles in their organisations. At the interpersonal level, leadership development is linked to social influence processes. The other soft skills, namely cognitive, role-specific skills, and communication skills, are considered as a wide range of personal abilities that assist one to improve interpersonal attributes. At every level, the major challenge has been how to identify specific types of skills needed by a leader (not managers and/or followers). LMD strives to improve interpersonal influences above every other quality. Hence, building personal attributes of managers, including major skills related to communication, problem-solving skills, problem-definition, task facilitation, and moral attributes, should be major areas of focus.

Organisational Culture, Performance, and Learning Needs

LMD is designed to enhance organisational performance. The purpose of leadership is to promote a new direction (OReilly 2015, p. 207). Conversely, management is an ongoing process that involves developing, engaging, empowering, and motivating people towards the achievement of goals in a way that makes best use of all the available resources (Jenkins 2015, p. 201). Hence, management is an ongoing process that only ends when the goal is achieved (Jenkins, 2015 p. 201). Organisational performance reflects the relation between effectiveness in management (Hurduzeu 2015). Organisational performance is directly linked to human resource management, employee practices, and organisational cultures.

Specifically, effective leadership and management practices motivate and aid followers to be competitive. In this case, leaders and managers use effective styles to enhance standards of excellence in employee development for enhanced performances. Effectiveness of managers and leaders could be assessed using key performance indicators in finance, employee attrition, and costs among others (Rayner & Adam-Smith 2009; Watson & Gallagher 2005). Enhanced organisational performance can only be realised through leaders abilities to promote creativity and innovation, encourage employees to challenge their achievements and value systems and improve individual performances (Northouse 2010). Most studies on leadership styles have shown how transformational leadership has positive effects on followers and organisational performance (Pirozzolo 2015).

Many studies show relationships between human resource management practices and organisational performance (Cho & Egan 2009). This literature indicates that elements of employee development, such as LMD activities, are important in contributing to organisational performance. Further, it is observed that it is the alignment of HRM practices with organisational strategies, business strategies, the internal consistency of HRM, and the effectiveness of implementation, which are perhaps influencing organisational performance. Consequently, one can conclude that HRM practices offer clear evidence that demonstrates the relevance of employee and organisational performance (Farnham 2010). Hence, managers and leaders are usually expected to implement HRM practices by relying on their abilities to manage, lead, and motivate employees.

Leadership is evaluated based on the influences it has on organisational culture and long-term effectiveness on organisational performance. Management performance should account for goal setting and motivation, encouragement, rewards and outcomes. When performance management in organisations is well-executed, employees tend to perform better and attain organisational goals. Leaders should create their way if they wish to establish commitment and attain utmost standards, develop their preferred behaviours, and clarify values. Leaders inspire a common vision and enlist followers to act and attain the ultimate goal.

Management, on the other hand, focuses on organisational efficiency, planning, administration, processes, procedures, control, and coherence. Leadership is characterised by risk-taking, innovation, dynamics, creativity, vision, change, and value. Leaders are known to do the right things relative to managers who are expected to do things right, and these observations are a part of the organisational leadership theory and practices. Hence, leadership theories tend to highlight a leaders character (what a leader is) and competence (what leaders do). Leaders and managers, therefore, can influence organisational performance by efficient, effective performance. It is noteworthy that if effective and efficient organisational performance is established and leveraged, then leaders and managers can create unmatched organisational growth and sustained success irrespective of the size of an entity.

When leadership is considered instead of management, LMD focuses on encouraging persons to think beyond obvious circumstances of their positions and to develop critical abilities to operate between operational and strategic aspects as needed abilities to balance expected details with comprehension of the bigger case. More importantly, LMD based on management education should strive to develop individual character, skills, integrity, and other skills required for responsible leadership and use of authority. Thus, LMD should include various aspects that appeal to management and individual development programmes, such as self-awareness, planning, and role delegation among others, but to develop a reflexive environment to allow a leader or a manager to evaluate existing practices and experiences using appropriate tools (Ben-Hador 2014).

Notably, it is imperative to recognise that LMD should not only be provided to senior executives but also be offered to other employees, thereby creating an opportunity to develop collective and individual leadership capacities. Nevertheless, various managers, leaders, or employees are most likely to need diverse leadership interventions based on roles, position, experience, and personal attributes. Therefore, one must recognise the dynamic relationships between leadership development issues and influences across an organisation. It is evident, for instance, that building leadership abilities for an individual leader in isolation is not likely to enhance leadership within an organisation, implying that leadership development involves sharing experiences of various leaders and managers.

Today, academics have observed interdependent attributes of organisational systems and processes (Gold, Thorpe & Mumford 2010). In this case, leaders must demonstrate their attributes to lead complex systems. For example, one may evaluate the role of HRM practices and influences of line managers in employee management. This implies that a critical association can be observed between staff experiences of people management, the creation, or change of attitudes towards an organisation, tasks, and motivation derived from such relationships that make employees engage in certain behaviours or adopt the organisational culture.

While the foundation emanates from HRM practices, it is, however, not the quality of HRM practices as such that lead to this development. Instead, the role of first-line managers is extremely critical in the application of HRM practices among juniors. Subordinates experiences of HRM practices are directly linked with the relationship with a line manager who is thought to be the main agent of an organisation in delivering employee management practices. Thus, the observation is that LMD is most likely to be effective in organisations where leadership and management are already practised well relative to others with weak practices.

The issue, therefore, for people engaged in such programmes is how to develop a virtuous cycle that reinforces individual, team, organisational practices and performance (Gold, Thorpe & Mumford 2010). Irrespective of the alignment between organisational values and LMD, each concept strives to deliver preferred behaviours.

LMD Needs in Differing National and Cultural Contexts

Within the global context, one must recognise variations across national cultures and organisational cultures and their possible impacts on leadership and management development (Courtney & Du 2015). Across cultures, one may refer to Hofstedes research to guide leadership and management development needs. Leadership in a given culture is linked to how national cultures influence leadership, power, and image, as well as interpersonal relationships between leaders and their followers (Simkins 2012). For power, culture is shown to influence both the actual and perceived capacity of a leader to influence followers in an organisation. For instance, national cultures of high power distance demonstrate high possibilities of leaders influences on followers relative to low power distance.

An effective leader in a given cultural context affects the epitome of the leadership image of followers. Moreover, the behavioural exchange (role execution by a leader) is culturally dependent. For instance, one does not expect a leader-follower exchange driven by a participatory approach to be effective in high power distance national cultures. Resource availabilities and other factors that can act as a substitute for leadership influence effectiveness across all cultures. This implies that leadership and management development cannot ignore the role of national cultures and specific contexts defined by resources and potential substitutes.

LMD and Learning

Concerning LMD, action learning can help leaders from various cultures and with different experiences to learn and share. A group of leaders or managers from various cultures, organisations, and business units come together and discuss various challenges they encounter in executing their managerial or leadership roles. They evaluate and exchange diverse ideas on problem-solving approaches and aim to find the best alternatives using both informal and formal learning approaches. Eventually, they are expected to develop major leadership skills and behaviours, including creativity, innovation, open communication, change management, analytical skills, influencing abilities, and collaboration among others through task assignments, coaching, mentoring, and job rotations. Additionally, the theory of strategic learning can account for related aspects found in learning in strategy processes to promote strategic change, behaviour, and discourses (Moon & Ruona 2015).

Social Factors

While leadership and management development invest in human capital, it is noted that the current competitive business landscape needs more than human capital alone. Hence, social capital is introduced to reflect new connections for organisational development. Social capital encompasses communities of practice, knowledge exchanges, information flows, interest groups, social networks, and other emergent connections between employees, suppliers, regulators, partners and customers (Krebs 2008, p. 38). Social capital links different forms of human capital, and these connection patterns are responsible for generating advantages for a group and creating obstacles for another, and in a networked landscape, only the best group wins.

Therefore, factors of social capital contribute to individuals, teams, and organisational success (Krebs 2008). Concerning LMD, social capital is a factor for organisational learning, adaptability, and agility (Krebs 2008, p. 39). Initially, HR functions focused on human capital to hire the best talent for the job. In the age of social capital and knowledge organisation, however, HR managers have to expand their roles to hire and connect. That is, they strive to hire the best talents with the best network, connect and integrate them into the organisational value chain to ensure that the integrated human and social capital offer optimal returns.

Figure 2: Factors for consideration for an LMD strategy to build human and social capital

Conclusion

During difficult business environments, managers and leaders must have the right skills, experience, and knowledge to tackle challenges associated with greater responsibilities. Notably, one issue of confusion is the difference and similarity between management and leadership management. While some literature may apply these terms interchangeably because of a substantial degree of overlap, they do indeed have some significant differences. Additionally, organisations and people may benefit from these practices differently. This means that organisations must now initiate beneficial training programmes to improve the performance of leaders and managers. Organisational business needs and strategies should guide the development of LMD. Individuals, teams, and organisational learning and leadership needs vary significantly. As such, LMD approaches should recognise the diverse needs of various stakeholders.

Overall, LMD requires goal setting, supporting structures and processes, actual leadership development, learning transfer, and process evaluations to improve peoples workplace performances. While LMD is expanding, it faces pressures and competitions because organisations and individuals may not always comprehend the need to invest in such programmes. After all, limited empirical evidence supports the organisational benefits of LMD (Terry 2009). That is, HRM practices may account for aspects of LMD. Moreover, some findings demonstrate that results of competence development interventions are not simple to interpret, implying that such programmes may not necessarily yield the desired outcomes (Jönsson & Schölin 2016).

Nevertheless, it is shown that effective alignment of strategies and priorities with LMD is most likely to yield positive outcomes. Moreover, participants in organisational training programmes often benefit from experiences, skills, and knowledge (Terry 2009). It is important to assess how LMD may improve the individual, team, and/or organisational capabilities and performance based on distinct assumptions, such as national cultural influences, resource availability, individual abilities, group characteristics, and organisational cultures and support structures. More importantly, LMD may fail to develop managers and leaders in isolation and, thus, leader and manager development should be conducted in a collective environment that promotes shared learning and experiences. As such, the concept of social capital is important for organisations that wish to support human capital. These two concepts do not compete, but rather complement each other for enhanced organisational performance.

For effective LMD outcomes, organisations should strive for the following:

Align leadership and development initiatives to strategic business needs
Leadership and development should apply to all stakeholders in an organisation, especially line managers because they determine success or failure of an LMD programme. In most instances, line managers have often been ignored in LMD planning and implementation yet their roles are critical. Line managers define strong requirements of performance and behaviours, offer feedback and motivation, support both formal and informal learning, and correct noted lapses. Moreover, the line manager is the main change agent of a team.
Besides human capital, HRM must know to embrace social capital to drive organisational performance
Organisational benefits of LMD should be evaluated using appropriate methods, such return on investment (ROI)
LMD should be based on certain beneficial models, such as action learning and theory of strategic learning

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