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Workforce | Skills

Limited returns: Why management development isn't fully developed

Joanne Painter talks with Effectiveness of Management Development co-author Brian D’Netto about Australian management.

Next time your senior managers take part in an all-expenses paid development program consider what happens once they are back at work. Is the program linked to corporate strategy? Does the organisation have the necessary systems in place to ensure that managers can apply their new skills and knowledge at the workplace? Are those taking part the best choices for that program?

If the answer to any of these questions is no, you could be wasting your money. At best, the effectiveness of your organisation's management development activities will be mediocre.

These are key findings of an important new study into the effectiveness of Australian management development. The study, by University of South Australia academic Dr Brian D'Netto and Fotini Bakas from the Mt Eliza Business School, reveals that, a decade after the Karpin Report criticised the quality of Australian managers, companies are still not getting maximum benefit from management development programs.

However, the problem identified by Karpin - the quality and quantity of management programs - is well on its way to being fixed. Today, says the D'Netto and Bakas study, it is the way employers approach management development that threatens to hold managers back.

Dr D'Netto summarises the findings:

"To be effective, management development must be linked to corporate strategy, it must be systematic, and organisations must allow managers to apply skills learned in development programs. By and large, this is not happening - or at least not enough to ensure organisations are getting maximum benefit from development programs."

In their report, Effectiveness of Management Development in Australia, D'Netto and Bakas argue for a quantum shift in the value that organisations place on management development, and the way in which development programs are linked to strategic and business objectives.

A model of effectiveness

According to D'Netto, to be effective, management development should result in higher job satisfaction, lower staff turnover, reduced stress resulting from skill inadequacies and less difficulty filling executive vacancies. The key is to link programs to corporate strategy and let managers use their newly acquired knowledge and skills in the workplace.

It is now widely agreed that management development helps to improve job satisfaction, reduce employee turnover, increase productivity and teaches managers to deal with customers more effectively. Studies have shown that managers believe training and development programs are very beneficial and help them to think strategically.

Not surprisingly, most managers say they are keen to improve their skills through external and internal development programs.

D'Netto argues:

"Management development is not a perk. It is not something you give as a benefit like a car or mobile telephone. It is a necessity and becoming more so every day because of the rapid pace of change in workplaces. If we do not provide management development at all levels of management, if we don't create world-class human capital, we will be left behind in the global economic race."

Research design

In the years since the release of the Karpin Report in 1995, many organisations have elevated the profile of management development. A new generation of managers has grown up with the expectation that they will continually acquire new skills and that learning will be lifelong. The changing nature of Australia's labour market, including the so-called portfolio career managers, part-time and contract work and widening skill shortages, has further reinforced the need for development programs.

Yet little has been known until now about the effectiveness of existing management development activities and their benefits. The Effectiveness of Management Development in Australia study sheds new light on this question. Specifically, the study examines the association between an organisation's management development activities and the effectiveness of such initiatives.

Jointly sponsored by the Mt Eliza Business School, the Australian Human Resources Institute and CEDA, the study involved qualitative and quantitative research conducted nationally between 2003 and 2004. Using a model of effective management development based on existing literature, the research draws on quantitative data collected through a structured questionnaire and qualitative data from focus groups. A detailed review of company documents provides additional qualitative material. In all, 206 managers from 153 organisations nationwide took part in the study. Participants were drawn from small, medium and large organisations across 18 different industries.

The keys to effective development

The model of effectiveness developed by D'Netto and Bakas highlights nine variables that determine the effectiveness of management development. These include the level of top management support, organisational culture, an individual's role in the company, whether the program is run inhouse or off-site, support from line managers, the extent of evaluation after the program's completion, opportunities to utilise skills after the program, and whether management development activities are linked to wider corporate strategy.

While all are important, the study finds that it is the last two that really count.

D'Netto says:

"We are not optimising the benefits that can flow from investment in management development. Granted, companies are getting some return because even without any systematic approach, programs will always offer some benefits to the individuals involved. Organisations could gain a lot more if they had a more systematic process for investing in management developing and if they let managers apply that knowledge back at the workplace. Given that this variable was significant in the regression model, more time and coaching are required to enhance opportunities for skill utilisation."

Change must come from above

D'Netto says lack of support for programs among senior management and failure to follow though training at the workplace undermine the benefits that management development offers Australian companies.

Despite the lessons of the Karpin Report, Australian companies are still sending people to management development programs on an ad hoc basis. What stood out in the research was the widespread lack of systematic follow-up for individuals who had undertaken management development. Without mechanisms to help individuals apply their new skills and feed that knowledge back into the organisation, the benefits are being wasted.

D'Netto says organisations could reinforce the benefits of management development by ensuring that HR managers have a better understanding of corporate strategy and are able to put in place development initiatives that reinforce the skills and knowledge acquired through management development initiatives.

Top management must also play a part, he says. By recognising the value of management development and demonstrating strong support for such programs, senior executives will send important messages to all levels of staff while fostering a learning environment.

"Management development initiatives need to be more systematic. We need to expand opportunities for younger managers, women and new employees to benefit from management development and programs need to address the very real workplace issues such as stress and burnout."

Expectations exceed expenditure

While many companies endorse the need for management development, few match words with deeds. Almost three-quarters (78.7 per cent) of companies surveyed spent between $151,000 and $300,000 per year on training and development. Only 20 per cent of this amount was spent on management development. On a per capita basis, the median expenditure on management development was just $833 or about 1 per cent of a typical senior manager's $80,000 annual salary. Compare this to the best performing organisations, which typically spend around 5 per cent of annual salary on management development.

Australian managers and senior executives, on the other hand, are taking to management development with gusto, viewing it as extremely beneficial to their careers and job performance. Sixty-five per cent of respondents had attended between one and two management development programs in the preceding two years; 15 per cent had attended three to four programs and 6.3 per cent had attended five to six programs. Only 14 per cent of respondents had not been on any management development program in the past two years.

Moreover, the study confirms the link between participation in management development activities and performance.

According to D'Netto:

"Managers who attended management development programs within the past year reported stronger organisational support and played a more active role in their company's development. Yet many organisations do not appear to have a consistent approach to management development."

Part of the reason could be the fluid state of the Australian labour market and an unwillingness to invest in employees until they have been with the organisations for a long period of time.

A key reason why organisations don't support greater levels of management development is the high turnover of managers. Fifty-six per cent of those surveyed had worked in their organisation for less than two years. When organisations don't invest, their managers are not performing at their optimum level and you end up with substandard performance. By contrast, organisations that are performing better do invest and as a result tend to have lower management turnover. The lesson here is that to attract and retain good people you must invest in management development.

Young missing out

On top of the questions about strategy and opportunities to use new skills, a third important factor is whether the right people are taking part in the right sort of management development.

The study reveals important differences in the amount of management development offered to managers within organisations. Junior managers and new employees are exposed to significantly less management development than their more experienced and long-serving colleagues.

These managers experienced significantly less top management support, lower responsibility for management development and less opportunity to use newly acquired skills compared to their more senior colleagues.

"While the literature indicates that creating opportunities for management development can help companies attract and retain employees, organisations in Australia appear to be using management development as a prerequisite or reward for seniority," D'Netto says.

The view of management development as an executive perk also lingers in many workplaces. Only half of the respondents felt that top management viewed development programs as a priority. Many respondents felt that senior managers were not adequately involved in inhouse programs and often chose the wrong person to take part. The strongest criticism, however, was that organisations were simply not spending enough on management development.

D'Netto says:

"When we looked at the data, what stood out was the difference in perception of management development among the older and younger workers.

Younger managers clearly felt there was not enough investment in development and inadequate opportunities to improve their skills. Many of these programs are expensive and are somehow seen as a perk for senior executives rather than something that is linked to corporate strategy.

Senior executives are cornering the opportunities for management development. This is another reason why companies have high turnover and low levels of satisfaction with existing management development processes."

Internal versus external programs

When it comes to the type of management development programs, Australian companies are spoiled for choice. In the years following the Karpin Report, the range of program offerings from tertiary, industry and professional bodies expanded exponentially.

At the same time, human resource managers have begun to focus more on the provision of internal management development. Today's HR managers are typically the architects of an organisation's management development strategy. For this reason, they feature prominently in the study, accounting for 40.3 per cent of those surveyed.

But while HR managers are key influencers of management development activities, they are seldom actively involved in their company's strategic planning process and tend not to have an in-depth understanding of the business issues facing their organisation. HR managers surveyed tended to overestimate the real link between management development efforts and corporate strategy, and the support provided to subordinates by line managers.

The study also says that HR managers tend to overestimate the extent to which internal programs are utilised while undervaluing the benefits of external programs. In fact, most respondents said that a combination of internal and external programs is significantly more beneficial than one or the other.

Of those surveyed, 35 per cent had participated in both internal and external programs, 22.8 per cent in internal programs only and 31.5 per cent in external programs only. Eleven per cent had not participated in any sort of program over the past two years.

D'Netto says low utilisation of internal development programs (particularly compared to external programs) could be costing companies dearly. "When you look at internal development systems like job rotation, mentoring and action learning programs, these are not all that costly for organisations yet they deliver very important development benefits," he argues.

Ideally, companies should aim for a combination of internal and external development as they offer different types of learning. Internal management development tends to be company skill-specific whereas external development is more industry-specific or related to more general management and leadership skills. One of the key benefits of external programs is that the executive is exposed to senior executives from other organisations. They learn new ways of looking at problems which in turn is beneficial to the organisation.

Women doubt effectiveness of development programs

When assessing attitudes towards management programs, the study reveals key differences between male and female mangers. Of those surveyed, 66.5 per cent were men and 33.5 per cent were women. In addition to being under-represented in Australian management ranks, female respondents perceive management development as significantly less effective for them than for their male counterparts.

According to D'Netto:

"When we compared male and female responses, female managers were saying they don't seem to get as much benefit out of the programs as men and are clearly not as satisfied with management development overall as their male counterparts."

Improvements in job satisfaction, productivity, customer management and motivation are also significantly less for female managers when compared with male managers. One explanation, according to D'Netto, is that female managers may not be getting sufficient post-program job opportunities that allow them to use and build on their new skills.

Soft skills necessary for successful management

When asked about the type of skill necessary to be effective in their current jobs, most respondents cite so-called "soft" skills over technical skills. The four most sought-after skills are decision-making, strategic planning, leadership and interpersonal skills. This would suggest that leadership and managerial skills are more valued by managers than purely technical skills.

A similar pattern emerged when respondents were asked about the skills required for future roles. They cited decision-making, leadership, interpersonal and change management skills as particularly important. Executives stressed the need for change management skills in order to cope with the dynamic environment in which their companies operate.

Conclusion

While the study supports the overall model of effective management development, it highlights key weaknesses and failings in current attitudes towards management development.

To be effective, management development in all its forms must be linked to corporate strategy and provide opportunities to utilise knowledge and skills gained through training in the workplace. Organisations committed to enhancing the effectiveness of their management development initiatives will need to establish a much stronger link between their management development programs and corporate strategy.

The Karpin Report has led to some important changes in Australian management, not the least of which is a much greater awareness of the need for management development and a wider choice of development programs. But D'Netto warns that without a renewed commitment to effective management development, many of the post-Karpin achievements will be lost.

As D'Netto sums up: "We can't afford to squander Karpin's legacy by settling for mediocre results from management development activities. If we do, Australia will fall behind in the global economic race."