The largest survey of leadership in Australia, the Study of Australian Leadership (SAL), launches today revealing significant shortfalls in business performance, innovation and leadership development in organisations across the nation. 

The study identifies links between good leadership and positive business achievement, and highlights the need to improve skills across all levels of the workforce, promote innovation, and get management basics right.

Undertaken by the Centre for Workplace Leadership (CWL) at the University of Melbourne and funded by the Commonwealth Department of Employment, SAL’s aim is to determine if Australia has the leadership skills needed to boost productivity and business performance.

  • 40% of Australian companies missing key performance targets
  • Too few (18%) private sector organisations at the forefront of innovation
  • Managers rate themselves more highly than employees rate their managers
  • Academemic calls for urgent action to enable Australia to become the “Innovation Nation”

Based on interviews with almost 8000 people including CEOs, frontline leaders and employees in over 2700 organisations, SAL is a nationally representative survey of Australian organisations and the most comprehensive study on leadership for a generation.

“Forget the 'lucky country,' if we want to become the 'innovation nation,' this study suggests many Australian organisations need a reality check. The danger for Australia is that the resources boom, now rapidly evaporating, has obscured the need to invest in the leadership capabilities required to deliver future growth and productivity. We have modelled the linkages between leadership, performance and innovation in Australian business, and our findings reveal a pattern of mediocrity. We must act to use the levers of leadership to get the basics right, to innovate, improve communications and increase investment in the right training across all levels of management” said Professor Peter Gahan, Director of the Centre for Workplace Leadership.

To set the baseline for understanding current performance in Australian business SAL developed a methodology which rated success in meeting targets across a range of areas. This found that more than 40% of workplaces did not meet their performance targets for return on investment and profitability. In addition around one-third of workplaces underperform on their sales target.

The Study found many organisations are not getting basic management practices right, specifically performance monitoring, target setting and the appropriate use of incentives. Only one third of workplaces display KPIs in a readily accessible and visible place, and one in three do not provide employees with any access to KPIs. Knowledge of performance targets is similarly limited, with only 34% of workplaces reporting that all employees – both managerial and non-managerial – had access to the workplace’s performance targets.

The research also shows a positive association between more capable leaders and innovation. The analysis shows that high performance work practices tend to positively relate to both radical and incremental innovation. A workplace demonstrating high performance work practices (HPWP) ensures that employees have the skills they need to do their jobs. It also ensures employees have the motivation to work effectively, which is achieved through mechanisms such as performance-based pay, opportunities for internal promotion, and effective performance appraisal and development systems.

Too few (18%) private sector organisations report high levels of radical innovation (defined as experimentation and identifying new products and markets). The report finds that the lowest levels of radical innovation are occurring in mining, transport and postal businesses. Surprisingly, public sector organisations were more likely than private sector organisations to have reported high levels of both radical innovation and incremental innovation (improving the efficiency of existing ways of working and expanding existing markets).

The Study also found a gap between managers’ perceptions of their own leadership skills and the way they are viewed by their employees. Employees saw their managers as less effective at things like information sharing, and gaining commitment than managers perceive themselves. For example while 84% of frontline managers believe they are effective in gaining employee commitment, only 50% of employees agree that their manager involves them in decision making.

Investing in leadership development really does matter. The Study shows workplaces investing in a range of leadership development activities have more capable leaders with a stronger belief in their ability to do the job. Both of these factors are linked to better performance and more innovation. Despite this, 40% of Australian businesses do not undertake mentoring or executive coaching programs and 60% do not invest in formal leadership qualifications.

“Our advice to Australian businesses is to get some quick wins on improving management, but also take an urgent review of what leadership skills you need for the future. Quick wins include taking a look at your basic management practices such as setting goals and communicating KPIs. Over the longer term organisations need to increase investment in leadership and ensure sufficient investment is being made at all levels, particularly front line leaders who have been shown to have a real impact.

“The business community is facing a period of seismic change as we shift from a resources based economy, turn outwards to new trading opportunities and grapple with new technology that is transforming business models and jobs. We need to take urgent action using leadership skills and innovation capabilities as the levers for responding to these challenges,” said Professor Gahan.