Financial success linked to more women directors, research reveals

But HR questions level of leadership quality for the future

Just 40 per cent of business leaders believe the current quality of their organisation’s leadership is ‘high’, according to research from global talent management consultancy DDI.

This is a marked improvement on the one in four HR professionals who strongly rated the quality of their leaders, exposing the misalignment between HR and the rest of the business.

The seventh Global Leadership Forecast surveyed 13,124 global leaders and 1,528 HR executives, and revealed the rapidly changing role of the HR function in organisations around the world.

Despite human capital being voted the number one concern for chief executives in 2014, just 27 per cent of leaders felt ‘very prepared’ to be a leader that creates an optimal workplace where employees deliver their best.

HR was even less confident of their organisations’ ability, with nine per cent voting leaders as ‘very ready’ to meet the human capital challenge.

‘Leading across countries’ was also voted one of the most critical skills required in today’s businesses, yet only one in five organisations is currently focused on the development in global leadership.

Comparing the best and worst financially performing companies, DDI identified the financial impact the HR function has on a company’s bottom line. Organisations with both high levels of leadership quality, leader engagement, and retention, were nine times more likely to out-perform their peers financially.

Companies with a higher percentage of women in leadership roles also perform better financially, according to the research. Females accounted for over a third of leadership roles in the top 20 per cent of financial performers in the survey, compared to the bottom 20 per cent of businesses, where 19 per cent of leaders were women.

The research revealed that just 18 per cent of HR professionals view themselves as ‘anticipators’, regularly using data to predict talent gaps in advance, and providing insight about how talent relates to business goals.

Dr Bruce Watt, managing director at DDI Europe, said the findings demonstrate the power and impact HR can have when it is aligned to the business strategy, and yet HR has so far mostly been a reactionary function, rather than proactively preparing for future business challenges.

“That HR can add value to an organisation is unquestionable. Any organisation is nothing without its people. But the skills and knowledge that got HR to where it is today are unlikely to remain relevant in the future,” Watt said.

“The function needs to be in a constant mode of learning to avoid obsolescence. We predict that the role of human capital management will change more in the next five years than it has in the past 30.”

While volatility, uncertainty, complexity and ambiguity increase in the business environment, less than a fifth (18 per cent) of HR professionals surveyed said they were highly confident in their leaders’ capability.

DDI suggests HR should invest in their future leaders so organisations can meet these increasing pressures.

“HR needs to be thinking well ahead of the game,” Watt added.