By Melissa J. Anderson

According to a new report [PDF] by the UK’s Department for Business, Innovation & Skills Leadership and Management Network Group (LMNG), the UK’s economy has been negatively impacted by a lack of training and support for new managers.

That also affects companies’ abilities to successfully plan succession strategy. In his opening letter for the report, John Hayes MP, Minister of State for Further Education, Skills, and Lifelong Learning, suggests that effective leadership is what makes the difference for successful, innovative companies. “Strong leadership and management is a key factor in fostering innovation, unlocking the potential of the workforce and ensuring organisations have the right strategies to drive productivity and growth.”

But, he continues, research shows that effective management is the exception rather than the rule.

“Too many of our organisations, both private and public, are failing to achieve their full potential: managerial shortcomings and a lack of strategic thinking are holding them back. Overcoming these weaknesses and improving our leadership and management capability is fundamental to creating a culture where more organisations have the ambition, confidence, resilience and skills to respond to the current economic challenges and compete successfully both nationally and globally.”

By providing more comprehensive management training and development for budding leaders, companies can gain the edge over competitor firms.

Managerial Performance

The report says that UK business are losing over £19 billion per year due to poor management.  In fact, almost half of say their line manager is effective. “43% of UK managers rate their own line manager as ineffective – and only one in five are qualified.”

Furthermore, the report continues, “Incompetence of bad management of company directors causes 56% of corporate failures.”

BIS suggests that one of the root causes of this level of ineffectiveness is due to poor training.

“First line managers are primarily selected because of their technical capability rather than their potential to move into more senior positions, despite technical proficiency being far less significant when considering subsequent promotion. They frequently do not receive any specific management training and are not only ill-equipped to take on this role, but their immediate line managers often lack the knowledge and skills to support them.”

But, the report continues, the situation can be improved. By investing in leadership and development training for managers, companies can prepare them for the non-technical aspects of their job, which become increasingly important as managers advance.

Succession Planning

Research by the Institute of Leadership and Management (ILM) shows that poor management development is also hampering succession planning efforts in the UK. According to a March 2012 survey of 750 UK companies, only 55% of managerial openings are being filled by internal staff. In fact, the percentage of internal promotion decreases as at each level within the corporate pyramid – with 61% on the front line, 58% at middle management, and 50% at the senior levels.

ILM CEO Charles Elvin told HR Magazine that companies increasingly have to look outside their own ranks for suitable managers. “We are not seeing talent pipelines and I wonder are we failing to build the skills of the future? Are there employers that have a culture that won’t last the next 12 months? This should be a rude awakening. The survey shows employers know they need talent pipelines, but aren’t creating them.”

Elvin believes that companies should approach talent as a career-long investment, mapping progression and providing leadership development at key career junctures. Talent has to become a strategic initiative, he continued. “Employers are not recruiting early enough for the skills they will need later.”

Unsurprisingly, the BIS report showed that companies placing a high value on leadership development tend to have better leaders. It says, “…the more importance given to management and leadership skills when promoting individuals the less likely the organisation is to report they have a deficit of these skills (71 per cent compared to 94 per cent of those who consider such skills only somewhat important).”

By ensuring that leadership skills are part of internal promotion requirements, and actively planning leadership development for high performers to meet those metrics, companies can better build a pipeline of successful managers.