When Does Leadership Development Become Organizational Development?

Identify the Individual and Organizational Capabilities that Your Company Needs to Succeed

What Are Leadership Development and Organizational Development?

Much has been written about the importance of developing leaders to meet the challenges of the future. A wealth of material has also been produced on organizational development (OD) and how, by overcoming the barriers to effectiveness, it can improve an organization’s overall performance. So where do the two meet?

Let’s start with some definitions. Leadership development is the easier of the two to define: “Expanding the collective capacity of organizational members to engage effectively in leadership roles and processes” (McCauley, 1998).

For organizational development, the Chartered Institute of Personnel and Development (CIPD) defines it as: “The planned and systematic approach to enabling sustained organization performance through the involvement of its people.” Even the CIPD concedes that “behind this definition lies a depth of research and practice, but also confusion.”

What is a Leader?

When we talk about development, we have a very simple definition of a leader: “Anyone who has responsibility for the performance of others.” So if you believe that OD is essentially about improving the capability of an organization to succeed in its stated goals, and that the capability of an organization resides mostly in its people, then improving the quality of leadership in an organization must, by the definition above, also improve the performance and capability of the wider organization. If you can develop leadership capability on a wide enough scale, you should be able to achieve performance improvement across the organization.

This is not to say that leadership development is the be all and end all of OD. It is not. There are other items that need consideration: developing and executing winning strategies, creating efficient operational systems and processes, having a structure that works in the environment in which the organization operates, and ensuring the organization has the right staff, etc.

However, when you consider who is responsible for strategic implementation, who chooses and defines the processes, who creates the structures and who hires and fires staff, then the importance of leadership, and by extension its development, in OD becomes obvious.

Business Growth

To illustrate the above, we worked with a client in the logistics arena. They had a number of traditional businesses that effectively facilitated the movement of goods into and out of the country. They had been successful for some years, however, they realized that while their performance was sustainable in the longer term, it was not going to give them the growth they were looking for.

The CEO considered the best way of leveraging the physical assets at his disposal (plant, property and infrastructure) and decided that the organization should diversify into related businesses through a combination of a new start-up, an acquisition and joint ventures. He identified that he needed to leverage his people too, and asked us to both assess his leadership and identify how best to build the capability of his leaders to execute this strategy.

We assessed the top leadership team of about 40 people, including the CEO. We found that while the existing team had all the right leadership capabilities for success in the traditional business (they were adept at searching for information, analyzing it, creating action plans and executing), they had little of the required capabilities needed to succeed in the future (people development, teamwork, empathy and flexible thinking). What was interesting was that where these capabilities did exist, they resided mostly with the CEO and the MD of his biggest operation.

Corporate Governance

This led to a number of difficult questions: What did this mean for the future strategy of the organization? What actions needed to be taken? How great was the succession risk, and what did it mean for corporate governance? We provided a number of recommendations including:

  • Creating individual development plans for key leadership team members
  • Identifying roles that require external hires and provide assistance to fill them
  • Aligning recruitment, reward, performance and talent management processes to future requirements

As a result, a number of people left the business, while others were promoted or given stretch assignments. Also, a number of new hires were made and processes were aligned. By highlighting the gap between the current and future required leadership capability, we were able to identify the individual and organizational capabilities that the company needed to succeed.

Are leadership development and OD the same thing? Patently not, but the ability to develop the people who cast such a large shadow over an organization’s success is certainly key to developing the organization.