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Building Capability

The Step-by-Step Guide to Building Leadership Capability


Leadership capability goes beyond the technical skills required of a leader to, well, actually lead team members. A successful leader has a variety of soft and hard skills that enable their leadership capacity and support their ability to execute on business priorities.

So how do you go about building leadership capacity in your leadership talent? In this guide we’ll discuss how you can go about building leadership capabilities within your organisation in order to achieve your business goals.

What is leadership capability? 

Leadership capability refers to the mix of knowledge, skills, tools, processes and behaviours that combine to deliver an organisational objective. In other words, they are the qualities, resources and expertise that leaders require for effective leadership, from leading teams to guiding strategies for organisational success.

The importance of building leadership capability 

Leadership positions should ultimately have a positive influence on an organisation, improving employee culture and engagement. 82% of employees consider leaving their jobs because of bad managers. On the other hand, 94% of employees say they’re more likely to stay with their employer if they’re offered professional development opportunities.

It’s not just about working to develop leadership skills or leadership capacity (which is the ability of an individual to effectively lead others). It’s about the bigger picture of building business strategy and a sustainable workforce which can withstand challenges.

Developing leadership capabilities impacts your business outcomes in several main ways:

How to build leadership capability  

The exact specifics of building leadership capability in your business will be unique to your organisation’s needs. But that doesn’t mean there’s no foundation to base your capability development practices on. Generally, there are six steps to follow in building capability.

  1. Engage leadership buy-in 
  2. Establish co-owned accountability 
  3. Evaluate capability gaps
  4. Assess capability maturity
  5. Create methods for building capability
  6. Review and track progress.

Engaging leadership 

Your first step is to secure leadership buy-in. Yes, we know, this sounds paradoxical. But you need current leaders and executives to support leadership development in your future leaders just as much as you need current leaders to buy in to their own development. (This is all about continuous improvement, but we’ll get to that later.)

70% of change programs fail to meet their goals, and a lack of leadership involvement plays a part in it. Leaders are essential for securing employee engagement in learning, and employee engagement directly influences learning effectiveness. There are of course other factors that feed into whether learning works or not, but your leadership teams are the first point of call when it comes to participation.

Frame leadership capability building in terms of the KPIs and pain points leaders are most concerned with. Saying training programs will “improve your leadership skills” or “make you a good leader” isn’t very helpful, because what does a good leader actually do that makes them “good”? Think more along the lines of improving change management processes or becoming more efficient at strategic planning.

For example, a leader of your finance department would need to have a good understanding of fiscal management. Without it, they might struggle to effectively allocate financial resources, hindering the organisation’s ability to achieve its goals. On the other hand, a business leader or executive with a customer-facing position needs to be able to handle stakeholders, or manage the company’s reputation and external perception. If they can’t do this, the relationship between company and stakeholder, or company and customer, could deteriorate.

Co-ownership between HR and leadership teams

Don’t view your leadership team as a single entity separate from the business as a whole, here. Leaders should develop leadership goals specific to their position and team, but you should make it clear how they fit into the business overall. (For example, leaders, particularly more senior leaders, should have an idea of business strategy.)   An oiled cog in the machine, if you will.

What we mean here is that HR (who represent the business) and leaders don’t necessarily have the same immediate focus. HR has a deep understanding of business strategy, while individual team leaders are well-versed in the needs of their specific teams and what they need to better serve their team.

This is why establishing co-ownership between HR and leadership is so important. This means both have to contribute to the capability building process to prevent one functional vision of the organisation from overshadowing the other. Siloed accountability drives poorly informed business decisions which prevents business needs from being addressed.

Understanding leadership capability gaps

As new technology, processes and industry standards change the landscape, the current capabilities required of a business’s leaders become out-of-date, creating a gap between current and required capability levels. Gaps in individual leaders’ capabilities won’t necessarily cause critical risks to the business, but a lot of them at once are detrimental to business performance.

To close those gaps, you need to understand what and where they are. This is where capability assessments come in. Competency, or proficiency, is the levelled scale that capabilities are measured against. You might have your own naming system for each level of competence which fits your brand voice and mission, but they’ll generally follow the same guidelines. That’s something like:

The idea is to use a capability assessment to evaluate where your current individual leadership capabilities are. You can use this information to create a development plan for employees (just like we mentioned already, employees have greater job satisfaction when their employer invests in their learning).

In general, it’s best to create two or more capability assessments to get a more objective overview of individual capabilities.

  1. Start by getting employees to complete a self-assessment.
  2. Compare that to an assessment by managers, who have more objective insights into business needs.
  3. In the case of specialty capability sets, compare one or both of the above with an assessment by subject matter experts.

You’ll want to run these assessments again after implementing training in order to understand learning effectiveness. It’s the only way to ensure a continuous improvement culture.

Assessing leadership capability maturity

Where a capability assessment looks at individual leadership capabilities, capability maturity focuses on businesses’ overall capability. It looks at how “mature” business capabilities are, which you can use to help prioritise essential leadership capabilities and assess the potential risk they pose to the organisation if undeveloped.

This is where business capability heat maps come in, highlighting business-critical capabilities and identifying those opportunities for growth. It should come as no surprise that leadership capabilities are considered high-risk if undeveloped.

Like a capability assessment, the capability maturity curve exists as a levelled scale that you can measure capability competence against, only this time, “competence” is for the whole business. Again, what you name each level might be different, but they generally follow a 5-level structure:

  1. Reactive, where capability performance is unpredictable and ad hoc.
  2. Managed, in which capability performance is managed project to project.
  3. Defined, where capabilities are managed through organisation-wide guidelines.
  4. Qualitative, where business processes and objectives are aligned with each other.
  5. Optimised, in which capabilities are optimised to create long-term organisational transformation.

Leadership capability maturity needs to be reassessed over time to get an understanding of how effective your L&D programs have been.

Methods to build leadership capability

The easiest way to make sure you get results from your leadership capability building initiatives is to embed learning in the flow of work. That, and ensure L&D activities are closely aligned with business objectives.

There are several development activities that are particularly effective in building leadership capability.

  1. Use a knowledge management system like a performance learning management system (PLMS) or LMS, which can collate all leadership materials and resources in one central place. It means leaders can access what training they need, when they need it, reinforcing learning and increasing knowledge retention. And if you use a PLMS, it also tracks the application of learning in the workplace, which will be helpful for you in the next step.
  2. On-the-job teaching allows for the faster adoption and application of new leadership skills on the job, improving time-to-proficiency. It’s a type of informal coaching that creates a feedback loop between coach (a supervisor or current leader) and coachee (a leader or emerging leader), meaning behaviours can be corrected in the moment.
  3. Mentoring is the process of providing a mentee with greater business perspective, which is essential for leaders to possess. Mentoring comes in different types such as virtual mentoring, peer (like a buddy system), group mentoring, or one-on-one mentoring where a more experienced leader mentors emerging or potential leaders.
  4. Implement capability academies, or institutionalised learning, to allow leadership professionals to engage in best practice sharing and gain new insights. It also increases knowledge transfer among employees.

Tracking progress

We said we’d get into reassessments and tracking progress, and here we are. Regardless of whether you’re building leadership capabilities, digital capabilities, or even marketing capabilities, you can’t just drop a training initiative and expect it to be the silver bullet of training solutions.

This is why reassessment on a regular and continuing basis is so important—to build a culture of continuous improvement. We don’t just mean reassessing competency or maturity (although that is an important part of the process) but reassessing the training itself in order to understand its effectiveness.

There are a few methods you can try here.

  1. Conduct proactive training needs analyses to determine capability needs. This helps determine the effectiveness of past training initiatives by looking at whether it closed capability gaps. And, because capability building should be a regular, continuous process, it can be used to determine what training is needed to address specific gaps in capability.
  2. Embed performance management in L&D efforts. Like on-the-job coaching, this creates a cycle of continuous feedback from supervisors and team members back to other leaders. It ensures employees are on the right track with their leadership capability development. A PLMS can help you here too, because it links learning to performance within the system.
  3. Use 360-degree feedback to get an objective overview of how effective training was for leaders in terms of their performance. You can collect data with training surveys, feedback, and evaluations to gauge employee engagement and satisfaction with the delivery of learning and the improvement in leadership performance.

The impact of not building leadership capability 

Failing to invest in nurturing leadership capabilities blocks budding leaders from becoming great leaders. It creates a snowball effect of negative impacts that will reverberate across the different facets of the business.

When you don’t invest in building leadership capabilities, you’ll see:

  1. Stagnant business growth, as leaders won’t be equipped to communicate and guide business strategy.
  2. Poor decision-making, leading to a lack of innovation and preventing companies from maintaining their competitive advantage.
  3. High employee turnover due to disengaged employees and poor management. In fact, when poor leaders take over a team, the risk of turnover is 13% higher than in teams operating under strong leaders.
  4. Weak succession planning, with future leaders lacking the leadership capabilities required to be effective leaders. It also means emerging leaders with promising leadership potential may be overlooked.
  5. Cultural erosion, due to poor leadership and interpersonal skills between leaders and employees. That can lead to resistance to change when it comes to future change management programs, as poor leadership will be unable to influence support and buy-in.

Key takeaways 

Over time your business landscape will change, and business leaders (and team leaders) will have to be prepared for change. So, it’s crucial that you build leadership capability effectively and efficiently in your organisation to ensure your strategy and competitiveness remains strong.

To build leadership capability you need to:

  1. Get buy-in from leaders
  2. Establish co-ownership between HR and leadership teams
  3. Identify your leadership capability gaps
  4. Assess the maturity of capabilities and prioritise which to develop
  5. Link L&D with everyday work
  6. Monitor progress for continuous improvement.

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