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MELBOURNE UNIVERSITY'S CENTRE FOR WORKPLACE
Leadership (CWL) has trumpeted the release of its Study on Australian
Leadership (SAL) as the most significant in a generation. It concludes
that Australian leadership has underperformed and needs a makeover.
The study makes the claims that Australian leadership is weak
because 40 per cent of companies are not hitting key profitability and
return on investment targets, and that public organisations outperform
private ones. Both claims reflect a fundamental misunderstanding of
how these targets are set by the two sectors.
Private sector organisations, exposed to open business competition,
usually set targets on a "stretch" or "outperform" expectation of
hitting a predicted median or a third-quartile outcome -- with a
resulting statistical expectation of 50-75 per cent failure rate, well
above the 40 per cent recorded in the SAL.
Alternatively, public sector organisations, with near monopoly
power or minimum statutory service requirements, set and hit "low-
ball" targets. It's like comparing a group of students exposed to open
competition over which they have no control, to a group of students who
mark their own examination papers.
From the perspective of what's good for the economy, I would
contend that it makes sense for competitive private players to set
exacting stretch targets that they might just miss, rather than an
approach that is predicated on everyone winning a prize.
Other flaws in the SAL study include failing to disentangle
leadership from other core drivers of performance such as
competitiveness and productivity. It concludes that Australian
organisations don't get the basics right, but seems to assume a "cascade
of objectives" from top to bottom, which is 1980s or 1990s thinking at
best. Modern organisations devolve autonomy to their front lines which
set business objectives that deliver group goals.
Australian organisations aren't innovative enough, according to the
SAL, because only 18 per cent of private organisations report radical
innovation annually, compared to public bodies. But public bodies can
be more risk-prone because they can recapitalise failures more easily
from taxpayer funds. In addition, the SAL ignores the implications of
the Global Innovation Index it quotes, where Australia ranks 17 out of
141 countries. That places us well inside the top quartile.
The SAL also claims Australian leaders aren't well trained, with
only 25 per cent having achieved secondary level qualifications or
less. That claim neglects to mention that many business leaders work
hard to undertake late entry study at universities, as well as courses at
professional associations such as the Australian Institute of Company
Directors, the CPA, and my own organisation.
SAL claims few senior leaders seek advice externally. The US Centre
for Creative Leadership has quantified a well-accepted ratio, which
shows these come from on-the-job experience (70 per cent), talking to
external business authorities (20 per cent) or readings and downloads
(10 per cent). So in any one year, only one in five will need reference to
an external authority. Further, the SAL's conclusion conflicts with its
own data which shows about 75-80 per cent of leaders seek external
advice at least once a year.
The SAL misunderstands the relation between executive leadership
development and frontline management training, and points to a mis-
investment of $10 on the former compared to every $1 on the latter.
Frontline management training is directive, executional and process-
driven. Executive training today is about assessing
and strategising systemic risk and ambiguity as
it affects business. Pressures in the latter area
have increased enormously in recent years.
The SAL study points to a lack of diversity
in management, but ASX companies
have made progress since 2009, with an
improvement of 8.3 per cent to 23.3 per cent
female gender representation on boards. Female
workplace participation is rising
at the expense of men, and all
people are working longer. The
challenge is not to squeeze out
more "pale, male and stale leaders"
stated at SAL's launch, but to get
workforce participation rates, in
general, to rise.
A landmark government-funded report on leadership is fundamentally flawed.
BY PETER WILSON AM, AHRI CHAIRMAN
To read past Perspective columns by
Peter Wilson, visit hrmonline.com.au
This article was first published in
the Australian Financial Review
on 8 June 2016.
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