Study of Australian Leadership

SAL confirms that the role leaders play varies considerably at different levels of any organisation. At the most senior organisational level, leaders play a critical role in scanning their external environment, making sense of the many factors likely to influence the competitive position of their organisation. At the workplace level, leaders have a critical role in building and maintaining efficient operations to meet targets and improve performance. Frontline leadership matters most for employees, shaping the experience of work and creating a positive climate for innovation and performance.

Leadership matters for performance in a number of ways. Leadership drives the development of core organisational capabilities associated with meeting and exceeding targets, performance relative to competitors and profitability.

Innovation is a critical source of productivity growth and competitiveness. SAL shows that workplaces with more capable leaders are more innovative – regarding both incremental and radical innovation performance. It also confirms the importance of innovation for business performance.

One of the main reasons why leadership matters is because it influences employee attitudes and behaviours. Positive attitudes and behaviours translate into greater productivity and employee creativity. SAL shows that leadership capability and efficacy are related to a range of employee outcomes, including: employee engagement, voice, creating a culture of learning and innovation, trust and intentions to quit.

Investing in leadership matters for leader self-efficacy (a leader’s belief in their ability to lead) and leadership capabilities. Workplaces that invest in a range of leadership development activities have more capable leaders with a stronger belief in their ability to do the job. Both of these factors are associated with better performance and more innovation.

A significant proportion of Australian workplaces – more than 40% – are not meeting their performance targets for return on investment and profitability. Around one-third of workplaces underperform against their sales targets.

Many leaders and managers are not mastering basic management fundamentals such as performance monitoring, target setting, and the appropriate use of incentives. Mastery of these is important for improved performance and better employee outcomes, above and beyond leadership capabilities and self-efficacy.

Innovation drives growth and productivity. Yet most organisations struggle to turn knowledge and ideas into successful innovations. Too few (18%) private sector organisations report high levels of radical innovation. Surprisingly, public sector organisations were more likely than private sector organisations to have reported high levels on both types of innovation. However, findings show those organisations that do innovate successfully achieve superior performance outcomes.

Formal qualifications are not everything, but formal training provides a foundation for the diverse skills associated with leadership – from technical skills to solving problems and managing change. One in four senior leaders in private sector organisations has no formal training beyond secondary school. The same goes for majority Australian-owned, and small or medium-sized organisations.

SAL shows that investing in leadership development is positively associated with leader capabilities and self-efficacy, which in turn significantly betters workplace performance and innovation. Yet the findings reveal that many workplaces do not invest in leadership development at all, or invest very little. Those that do invest in leadership development often spend in the wrong places. SAL shows that investing in workplace and frontline leaders can be effective in improving performance through better employee outcomes and driving innovation. But recent evidence for the Asia-Pacific region (including Australia) shows that for every $10 spent on senior leaders, only $1 is spent on frontline leaders.

Diversity can be good for business performance. It can lead to greater creativity and innovation, improvements in productivity, as well as higher employee commitment and engagement at work. Yet senior leadership in Australian organisations is dominated by older men from English-speaking backgrounds. Women, younger leaders, and leaders from non-English speaking backgrounds are under-represented when compared to their numbers in the broader population.

Senior leaders play a critical role in scanning the external environment and making sense of how external challenges are likely to influence the organisation. Leaders cannot do this in isolation; they require multiple sources of advice and information. Yet, the evidence presented in this report shows that few senior leaders seek advice from external sources, such as associations, consultants, experts, or other senior leaders in their industry or elsewhere. This leaves their organisations vulnerable to poor strategic insight and decision-making, especially in the current environment marked by disruption and uncertainty.