Leadership Development Spending Is Up

By Dori Meinert Jul 22, 2014
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August CoverFor the second consecutive year, U.S. organizations boosted leadership development spending by an average of 14 percent, totaling an estimated $15.5 billion in 2013, according to research by Bersin by Deloitte, an HR consulting company.

The biggest increase in investment came from small businesses, which on average spent 23 percent more on leadership development initiatives in 2013 compared to the previous year. Large and midsize companies reported more-modest increases of 4 percent and 5 percent, respectively.

“It’s really not surprising because there are such big gaps today,” says Kim Lamoureux, vice president of leadership and succession research at Bersin by Deloitte.

Companies are still recovering from cuts made during the recession. Plus, leadership is so much more complex today, she says.

Companies with highly developed leadership programs outperform their competitors, Lamoureux says. Their business results are typically seven times greater, and they are 12 times more effective at accelerating business growth than companies with weak leadership programs.

The research also found that:

  • First-level leaders receive the lowest per-person share of leadership development funding. Within large organizations, these leaders each receive on average $2,600, or 34 percent less than emerging leaders and half the amount of midlevel leaders. Meanwhile, first-level leaders manage an average of nine to 11 direct reports while adjusting to their new roles as managers.
  • Seventeen percent of leadership development budgets go to high-potential professionals who aren’t yet in managerial roles.
  • Leadership development staff increased by 12 percent overall in U.S. organizations—to 3.4 staffers for every 100 leaders participating. Organizations with less than 1,000 employees reported the largest gain, 18 percent, to 3.5 staffers for every 100 leaders.
  • Large companies, in particular, are weak in succession planning, with successors identified for just 10 percent of their first-level leaders, 19 percent of their midlevel leaders, 24 percent of senior-level positions and 36 percent of executive positions.

The study, released in May 2014, included data collected from 248 U.S. organizations between October and December 2013.

Companies Urged to Report Employee Health Status

Companies should report their workforce health metrics in their annual reports, a commission of public health experts, business leaders and health insurers has recommended.

The commission calls for all companies to include aggregate employee health data in their annual reports by 2025—just like they now report financial earnings and sustainability efforts.

It also urges Fortune 500 companies to include workforce health as part of their organizational strategies by 2020.

The recommendations are included in a June 2014 report funded by the Vitality Institute, a global think tank affiliated with U.S. wellness provider Vitality Group.

Rising health care costs are reducing the ability of U.S. companies to compete in the global marketplace, the report states. Yet private employers spend less than 2 percent of their total health budgets on prevention.

“What we’re hoping this report will do is help elevate this issue and help HR professionals build the case that there’s a huge return on investment, in terms of loyalty and reduced health care costs, for keeping people healthy at work,” says William Rosenzweig, who chairs the commission.

By emphasizing the prevention of chronic diseases such as lung cancer, diabetes and heart disease, the U.S. could save up to $303 billion in annual health care costs, the report states. A majority of chronic diseases are often preventable.

“We think that workforce health is really just another dimension of the broader sustainability and corporate responsibility agenda,” says Rosenzweig, managing partner of San Francisco-based Physic Ventures Ltd. “We’ve seen that migrate from tactical to strategic.”

IBM is working with the Robert Wood Johnson Foundation and the Vitality Institute to provide employers with evidence-based training materials beginning this fall.​

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