Why Is Leadership Development Important?

Leadership development is important because:

Best-practice management development can result in a 23% increase in organisational performance
Effective management can significantly improve levels of employee engagement
A single point improvement in management practices (rated on a five-point scale) is comparable to a 25% increase in the labour force or a 65% percent increase in invested capital.

- Department for Business, Innovation and Skills (2012)

"All successful organisations and businesses need effective leaders. The leadership of effective and well trained leaders is paramount to providing an agreed upon goal for the company’s success. Leaders are invaluable when it comes to formulating and communicating new strategic directions, as well as communicating with and motivating employees to increase dedication to organizational goals. Ongoing leadership skills training is essential to making sure that leaders are on the right track."

- (The CEO Institute, 2021)

Leadership development has long been seen as important, although its contribution to business success is not always easy to identify.

In its review of the literature in 2016, the Center for Creative Leadership identified four areas in which investment in leadership development creates a competitive advantage for the organisation:

Improve Bottom-Line Financial Performance
Attract and Retain Talent
Drive Strategy Execution
Increase Success in Navigating Change

- Center for Creative Leadership (2016)

In 2012, the Department for Business, Innovation and Skills proposed the case for investment in leadership and management skills to help the UK achieve sustainable economic prosperity and growth and to address the UK’s apparent lack of competitiveness when compared to its international competitors.

What is leadership development?

Leadership development is the commitment to, and the 'always-on' process of upskilling your workforce to ensure strong leadership is in place. Successful leadership development recognises the need to adapt methods and styles to external factors.

“Sixty percent of the executives in the 2021 Deloitte Global Human Capital Trends survey said that leadership was important to prepare for unknown futures—the top-ranked priority for supporting preparedness. And while much of leadership has historically been about setting direction and ensuring compliance, now effective leadership is shifting to preparing for the unpredictable by coaching, teaming, and fostering workers’ ability to learn and adapt.”

- Deloitte Insights (2021)

Key Qualities of a Good Leader

The so-called ‘soft skills’ of leadership have gained a new importance through the age of remote working brought on by the pandemic and the advent of widespreada AI use, and have possibly changed leadership for the foreseeable future:

“Major research conducted among 1,711 CEMS alumni and Corporate Partners in Summer 2020 found that for 87% of respondents, Covid-19 has profoundly affected their business and teams. A quarter believes these changes will be permanent. There has been a dramatic increase in the importance [of] resilience and empathy as leadership qualities and a correlating nosedive in the importance of traditional leadership authority and technical skills.”

- (CEMS, 2020)

Accountability or 'ownership'
Effective communication
Integrity or 'authenticity'
Self-awareness
Visionary or good 'storytelling'

Check out our dimensions of leadership for more qualities of a good leader.

Business Benefits

Below we've listed the key benefits any business can enjoy from proper investment into leadership development.

Better employee retention

High turnover can be quite expensive for businesses, due to the costs associated with hiring new staff, training them and loss in productivity during this time. Strong, well-developed leadership is one part of the employee retention pie. Ensuring your senior leadership team are trained correctly also allows for a hands-off approach and better satisfaction and results at each level of the workforce.

Increased ROI

Investing in leadereship development leads to more value returned from essential business costs. This is because the process facilitates senior leadership in fulfilling their potential and ensuring business operations run like a well-oiled machine. A practical example of this, is an embedded coaching culture. This top-down approach increases the ROI of essential overheads.

A future-proofed business

Any business' needs are constantly evolving due to external factors. The pandemic and recent developments in AI technology are great examples of the need for future-proofing. Committing to regular leadership development efforts is an excellent way to prepare your business for any surprises around the corner.

Employee Benefits

Below we've listed the key benefits your employees can enjoy from proper investment into their workplace's leadership development.

Improved workplace culture

When a workplace invests in leadership development, this equips managers with the tools they need to listen and lead with empathy. Strong, people-focused leaders help foster trust and collaboration, creating a healthier, more inclusive workplace culture where everyone feels supported.

Better career progression

When leadership skills are nurtured at every level, employees enjoy better teamwork and see clear pathways for growth. Investing in leadership development opens doors for advancement, empowering individuals to step into new roles with confidence and purpose.

More job satisfaction

Employees thrive when guided by capable, forward-thinking leaders. With better communication, recognition, and support from leaders, day-to-day work becomes more rewarding—leading to higher motivation, engagement, and long-term satisfaction.

How can Institute of Leadership Help?

Embed this ‘new’ style of leadership throughout your organisation, and start to realise the benefits on the bottom line. Take a look at our leadership and management development pathways, From young aspiring leaders to senior management teams, leadership is for everyone. So, get on board and embrace this new way of working today.

Want to know how we can help? Talk to our team today.

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Bibliography:

Center for Creative Leadership (2016). Driving Performance: How Leadership Development Powers Sustained Success Center for Creative Leadership®
Deloitte.Insights (2021). The social enterprise in a world disrupted: Leading the shift from survive to thrive Deloitte.Insights
Department for Business, Innovation and Skills (2012). Leadership & Management in the UK – The Key To Sustainable Growth: A summary of the evidence for the value of investing in leadership and management development © Crown copyright 2012
The CEO Institute (2021). Business Leadership - Is It Important? The Importance of Business Leadership | The CEO Institute