Companies spending more ‘priming the pump’

Bersin by Deloitte says leadership development is still underfunded

U.S. organizations boosted leadership development spending in 2013 by 14 percent for the second consecutive year, spending $15.5 billion, according to research by Bersin by Deloitte.

Even with these increases, however, the study suggests that leadership development is still generally an underfunded corporate initiative.

“The new research shows that the overall pipeline for leaders is weak, despite the efforts within many organizations to improve succession planning,” the study said. “Poor succession planning has widespread implications for costs, retention and overall organizational performance. Large organizations are especially guilty of not ‘priming the pump.’”

The spending gains indicate that high-performing organizations have a better understanding of how to allocate dollars for leadership development. The study found that small businesses are more enthusiastically embracing leadership development, and that it’s stalled at the mid-sized level.

“The biggest increase in investment came from small businesses, which on average spent 23 percent more on leadership development initiatives in 2013,” the report said. “Large and midsize organizations reported more modest gains during the year,” 4 percent and 5 percent, respectively.

The research showed that staffing for leadership development initiatives increased, and that much of the money earmarked for leadership development is being dedicated to training high-potential “emerging” leaders who haven’t yet ascended into the management ranks.

However, on the down side, first-level managers aren’t considered a leadership development investment opportunity — a missed opportunity, according to Bersin by Deloitte.

Evidence to support these trends includes the following:

  • A 12 percent increase in leadership development staffing was reported, with small companies leading the way with an 18 percent increase in this area. Large companies reported a 10 percent increase, while midsized reported only a 4 percent gain.

  • 17 percent of leadership development dollars were earmarked for emerging leaders.

  • First-level leaders receive 34 percent fewer budgeted dollars than emerging leaders.

The overall lack of focus on leadership development could best be seen in the data around succession planning, the firm said.

“Successors have been identified for just 10 percent of their first-level leaders and 19 percent of their mid-level leaders. The pipeline at higher levels also looks weak within these organizations, with successors identified for just 24 percent of senior-level positions and 36 percent of executive positions,” its report said.

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