MANAGEMENT 2020Leadership to unlock long-term growth - THE COMMISSION ON THE FUTURE OF MANAGEMENT AND LEADERSHIP
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MANAGEMENT
2020
Leadership to unlock long-term growth
THE COMMISSION ON THE FUTURE OF MANAGEMENT AND LEADERSHIP
July 2014
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CONTENTS
About the Commission 05
Forewords 06
Introduction 07
Purpose, people and potential – a snapshot of current practice 08
Key insights 09
Summary of recommendations – pathways to progress 12
1. The state of UK management and leadership today 14
2. The world of Generation Y 20
3. The working world in 2020 24
4. High-performing individuals – top ten traits 30
5. Pathways to progress – purpose, people and potential 34
6. Bridging the gap – current UK performance on purpose, people and potential 46
Full recommendations 50
Conclusion 53
Appendices 54
A. About the Commission 54
B. The student view – essays on the future of management 55
Acknowledgements 57
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ABOUT THE COMMISSION
In 2013, the All-Party Parliamentary Group on Management (APPGM) decided to investigate how management and leadership in
the UK will need to change by 2020 to deliver sustainable economic growth. The Commission on the Future of Management and
Leadership was created with the Chartered Management Institute (CMI) to pursue that inquiry, bringing together members of both
Houses of Parliament, across the main parties, with leaders from a wide range of sectors. The Commission considered evidence
from academic experts, vibrant entrepreneurs, up-and-coming young managers and world-renowned business leaders alike. Our
conclusions are outlined in depth in this report.
THE COMMISSION MEMBERS
Peter Ayliffe CCMI (Co-chair) President of CMI
Barry Sheerman MP (Co-chair) MP for Huddersfield, Chair of the APPGM
Lord Bilimoria CBE DL Chairman and Founder, Cobra Beer
Dame Carol Black DBE CCMI Principal, Newnham College Cambridge; Adviser on Work and Health, Department of Health
Tamara Box Global Co-chair of the Financial Industry Group, Reed Smith
Professor Sir Cary L Cooper CBE CCMI Distinguished Professor of Organizational Psychology and Health, Lancaster University
Management School
Hushpreet Dhaliwal Chief Executive, National Association of College and University Entrepreneurs
Jez Frampton CCMI Global Chief Executive, Interbrand
Ann Francke MBA CCMI CMgr FIC Chief Executive of CMI
Professor Abby Ghobadian Head of School of Leadership, Organisations and Behaviour, Henley Business School
Dr Jules Goddard Fellow, London Business School; author of Uncommon Sense, Common Nonsense
Lord Haskel Peer, House of Lords
John Hemming MP MP for Birmingham Yardley
Mark Hoban MP MP for Fareham
Dr Liz Jackson MBE CCMI Founder, Great Guns Marketing
Darren Jarvis Chief Auditor, Global Institutional Client Group at Citigroup
Sir Paul Judge CCMI Chairman, Schroder Income Growth Fund Plc; Chair, CMI’s Academic Advisory Council
Seema Malhotra MP MP for Feltham and Heston
Derek Mapp CCMI Chairman of Informa
Dame Mary Marsh CCMI Founding Director, Clore Social Leadership Programme
Lord Mitchell Enterprise Adviser, Labour Party
Terry Morgan CBE CCMI Chair, Crossrail; Immediate Past President, CMI
Meg Munn MP MP for Sheffield Heeley
Baroness Prosser OBE Peer, House of Lords
Dr Martin Read CBE CCMI Chairman of Laird Plc, Low Carbon Contracts Company, Electricity Settlements Company
and Remuneration Consultants Group; Non-executive Director of Lloyd’s and the UK Government
Efficiency and Reform Board
Lynva Russell Director, Policy Connect
David Rutley MP MP for Macclesfield
Andy Sawford MP MP for Corby
Andrew Summers CCMI Former Chair, Companies House
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FOREWORDS
It was my great pleasure to co-chair the Commission on the Future of
Management and Leadership.
Our work focused on the role of management in driving economic growth. The
Commission consisted of a diverse group of parliamentarians and business leaders
who desired to investigate one very important question: how can the UK produce
the right kind of managers to galvanise business expansion and growth over the
coming years?
To address this issue, we sought to understand three things. Where are we going wrong
today? What are the management skills that will be needed in the future? And how can
our managers acquire these critical skills?
Ultimately, our inquiry was underpinned by the desire to find out how we can equip the
leaders of today and tomorrow with the skills needed to succeed in 2020. We hope that
the results of our research will help to drive change in management practice in the UK
and contribute to our continued economic growth between now and 2020.
Barry Sheerman MP
Co-chair of the Commission on the Future of Management
and Leadership; Chair of the All-Party Parliamentary Group on Management
The UK boasts world-class organisations and some of the best managers in the world.
We heard from several in the course of this Commission. The insights they offered about
the future of management and leadership, and what we need to do to deliver long-term
growth and prosperity, are at the heart of this report.
But the truth is that those shining examples are just too rare. From the evidence seen
by this Commission, it’s clear that we’re faced with a ticking time bomb of myopic
management. We neglect the importance of sustainable growth in the long term in favour
of cutting costs to deliver profits in the short term. Our managers are not encouraged to
take risks or given space to be innovative. They bear a heavy responsibility for driving
economic growth yet they are not given the training and coaching that they need to do
their jobs properly.
As a result, the UK falls short in the leadership stakes.
Fortunately, however, the Commission found that the current shortcomings of UK
management can be addressed. There is a clear way forward if organisations
choose to take it.
In this report, we explain how organisations can focus on purpose, people and potential
in order to thrive in 2020. Whatever their sector – business, public services or civil society
– the demands on managers are changing fast.
It has been my privilege to co-chair this Commission. Its recommendations provide a
blueprint for a better managed Britain.
Peter Ayliffe CCMI
Co-chair of the Commission on the Future of Management
and Leadership; President, CMI
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INTRODUCTION
The financial crisis of 2007/2008 plunged So it was against this backdrop that the All-
the UK economy into the doldrums and Party Parliamentary Group on Management
shattered trust in business leaders. decided to found the Commission on the
High-profile leaders who had been Future of Management and Leadership with
publicly fêted were shamed. Businesses CMI, launching in October 2013. Over several
that looked like world-beaters teetered months, the Commission asked three key
on the brink of collapse, exposed as questions. How good are management and
being built on false foundations, driven leadership in the UK today? What are the
by skewed short-term priorities. skills that managers will need in the future?
And how can UK management be improved in
The resulting economic collapse unleashed order to deliver success by the year 2020?
a cost-cutting agenda that only reinforced
the short-termist outlook that got us into Evidence considered by the Commission
trouble in the first place. Managers were identified major changes that are not only
under pressure to “do more with less”, reshaping the world of work, but creating
often without adequate training. Many profound challenges for managers.
lacked belief in the moral purposes of their
businesses or their senior leaders. Instead Responding to these challenges is vital if the
of viewing people as valuable human capital, UK economy is to fulfil its true potential over
many organisations started to treat them as the coming years. This report outlines the
a drag on the bottom line. findings and recommendations in detail.
THE CHALLENGES WE FACE
THE UK LAGS BEHIND MANY COMPETITORS ON KEY ECONOMIC INDICATORS
Productivity is 21% lower than that of the rest of the G7 and measures of management are similarly lower than those of many
rivals.1 Time wasted by poor management could be costing the economy as much as £19bn a year.2
YOUNGER GENERATIONS WILL DRIVE NEW WAYS OF WORKING
“Generation Y” and “Millennials” will make up 75% of the workforce by 2025.3 Their expectations about the employment relationship
and ways of working demand new approaches. There are also major employability challenges for young people in the UK.
MANAGERS WILL NEED TO BE ADEQUATELY TRAINED
Government data shows that the UK labour market will need one million new managers by 2020 – yet 71% of the leaders surveyed by
CMI confess they could do better at training first-time managers, or don’t train them at all. his could leave 150,000 employees a year
taking on management roles without adequate preparation.
TECHNOLOGY DEMANDS BETTER PEOPLE SKILLS
New technology doesn’t only demand new technical skills increased connectivity between people puts a premium on
managers’ personal, communication, network-building and collaboration skills.
GLOBALISATION WILL DRIVE DIVERSITY AND MORE CROSS-CULTURAL WORKING
More organisations will operate across borders and need to navigate cultural differences. But too few young people take
opportunities to study and work abroad.
LONG-TERM SUSTAINABILITY IS FUNDAMENTAL
he global economic crash exposed the danger posed by short-termism in management thinking and incentives. But those who
cut costs and overheads still seem to earn more respect than those who take the riskier, more innovative paths that lead to growth
in revenue, profits and obs. Leaders need to define their organisation’s long-term purpose and resist pressure for short-term results.
1
Statistical Bulletin: International Comparisons of Productivity – Final Estimates, 2012, ONS, 20 February 2014
2
Leadership and management in the UK – The key to sustainable growth, Department for Business, Innovation Skills, uly 2012
3
www2.deloitte.com/content/dam/Deloitte/global/Documents/About-Deloitte/gx-dttl-2014-millennial-survey-report.pdf
7
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PURPOSE, PEOPLE AND POTENTIAL:
A SNAPSHOT OF CURRENT PRACTICE
he ommission identified ey areas of good practice
that form the basis of our anagement ramewor .
t comprises three sections.
PURPOSE PEOPLE POTENTIAL
hat social benefit ow does the ow does the
does the organisation organisation prepare organisation support
e ist to achieve and managers and leaders the ne t generation
how are its leaders at all levels of managers and
held accountable for leaders
these aims
e surveyed , managers split almost equally between members and
non members as ing them to score their organisation out of on each indicator.
summary of the results is outlined below.
HEADLINE SCORES – OVERALL AND PER SECTION
MEAN SCORE N/A Not at all/poor Could do better Good/very good
PER SECTION
Overall 5.9
9% 27% 30% 34%
Purpose 6.8
9% 18% 27% 46%
People 5.8
6% 29% 34% 31%
Potential 5.2
11% 35% 29% 24%
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04-13_CMI management2020.indd 8 10/07/2014 12:44KEY INSIGHTS
Overall, UK organisations were rated by Although organisations achieved the
managers and leaders at an average of best score in the area of purpose, with
5. out of 10 across the Management an average score of . out of 10, this
2020 Framework the e uivalent of is still e uivalent to a could do better
could do better . his shows significant mark. Organisations scored lower on
potential for improving management. commitments to their people, at 5.8, and
lowest, at 5.2, on how they invest in the
Strikingly, growing organisations next generation – their potential.
scored higher than declining ones
across all 1 measures.
PURPOSE
When it comes to purpose, the bigger over the business, and commented: “I
the organisation, the better it is at don’t consider my role at the top of Paul Polman, Chief Executive,
reporting on its aims and commitments anything, hierarchically. Great CEOs Unilever
to stakeholders. have to consider themselves in the
centre of the vortex and they have to “Our model is built on a total
For example, only 36% of small be able to gather quality information
organisations (one to 50 employees) say from all communities, both inside and value chain approach, on
they define and publish their commitment outside the business.” growing our business, reducing
to their employees, compared to our environmental impact,
58% of large organisations (over Overall, 51% of managers say their
1,000 employees). organisations are poor or could do reaching a billion people
better when it comes to escalating with health and well-being
Thomas Cook Chief Executive Harriet bad news and ensuring that the programmes and moving our
Green summed up the crucial role that senior management team receives
employees play in giving feedback when feedback directly from employees whole business to sustainable
she told the Commission: “People in around the organisation. Among the sourcing. We do this on the
the company can tell you what is sectors, the public sector scores basis of a common purpose.”
wrong. They may not be able to fix it, worst: 25 say such feedback
but they can tell you what’s wrong.” mechanisms are poor or non-existent, Paul Polman, Chief Executive, Unilever.
As a result, Green prides herself on compared to 18% in the private Unilever recorded a 9% rise in pre-tax
exchanging emails with people from all and 16% in the charity sectors. profits for the 2013 financial year.
PURPOSE: CURREN PRAC ICE
Average score
out of 10
N/A Not at all/poor Could do better Good/very good
Q1. We define and publish the long-term purpose of our 6.5
organisation, ensuring it covers measurable commitments 10% 21% 27% 42%
to all stakeholders.
Q2. We track the annual progress towards our overall 7.5
stated purpose at our AGM/annual review and discuss 10% 12% 22% 58%
during at least one board meeting.
Q3. Our CEO/top team is rewarded on the basis of 6.2
delivering value to all stakeholders and not ust on meeting 17% 21% 25% 37%
fi nancial targets.
Q4. Our senior leaders champion the organisation’s values 7.0
and act as role models. 4% 16% 30% 51%
Q5. Senior leaders are recruited for their values and track 6.7
record of delivering long-term performance. 9% 17% 31% 44%
Q6. Feedback mechanisms exist to escalate both good and 6.7
bad news, and ensure the senior management team hears 5% 19% 32% 44%
directly from employees at all levels.
9
9
04-13_CMI management2020.indd 10/07/2014 12:44PEOPLE
Sean Taggart, Chief Executive,
The best score for people practices relates improve their practical skills and make an
the Albatross Group to the extent to which people are assessed impact at work.
for their behaviours, not just their results.
“We always believe This was a key theme that emerged during There were key links between the people
the evidence sessions. scores and organisational growth. Almost
management 60% of organisations in decline do not train
is our biggest “We have put much more emphasis their staff or do so poorly, compared to only
differentiator, a on how, as well as what, managers around a quarter of growing organisations.
and leaders achieve. We now bring
source of competitive it into appraisals, throughout the Equally, only about 13% of managers
advantage.” organisation.” Sir Charlie Mayfield, in declining organisations say training
Sean Taggart, Chief Executive Chairman of the John Lewis Partnership. of staff immediately after a promotion is
at travel company the good or very good, compared to almost
Albatross Group Echoing submissions made to the 30% of growing organisations. Those that
Commission, management training is are struggling also use mentoring and
usually too little, too late: only 23% of coaching programmes far less.
organisations rank as good or very good
in terms of whether staff are trained in Smaller organisations are much better at
management and leadership before, learning from mistakes: 48% of managers in
or within three months of, taking on a large organisations say they do not do this at
management role. all well, compared to only 20% in small ones.
The use of mentoring and coaching
also appears very limited, rated good or
very good by only 24% of organisations,
despite persuasive testimony about
its effectiveness in helping managers
PEOPLE: CURRENT PRACTICE
Average score
out of 10
N/A Not at all/poor Could do better Good/very good
Q7. All staff are trained in management and leadership 5.2
before, or within three months of, being promoted into a 7% 37% 34% 23%
management role.
Q8. Our organisation uses mentoring and coaching 5.3
programmes to support all newly promoted managers. 7% 36% 33% 24%
Q9. We use performance assessment and appraisal tools 6.6
that evaluate people on their behaviours and not just their 6% 20% 30% 43%
results.
Q10. “Off-the-job” development opportunities focusing on core 5.7
interpersonal and people-management skills are offered to 7% 31% 34% 29%
managers and leaders at all levels.
Q11. We learn from our mistakes and encourage risk-taking 6.2
and innovation. 3% 24% 38% 35%
Q12. We champion the diversity of our talent pipeline at all 5.9
levels and set targets to benchmark our achievements in terms 7% 28% 34% 32%
of equal pay and promotion.
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04-13_CMI management2020.indd 10 10/07/2014 12:47POTENTIAL
Kim Winser OBE, founder of
The third area of the framework, the of business is about giving back
Winser London development of potential, is the area to the community, and sustaining
where employers are currently the communities, in the broadest sense
“Every division of weakest, scoring just 5.2 on average. of the word. We don’t see that as a
burden. Actually it’s quite liberating.”
the company adds A particular weakness relates to the
to the existing talent recruitment of young people and school Not only does supporting potential
with university leavers, leavers. Employers also scored poorly represent the weakest area of current
in terms of reporting on how they work practice among employers, but it’s also
school leavers or career- with educational institutions. Measures the area where Government action may
break women wanting to to encourage people back to work after be most effective, for example through
get back into business.” career breaks, which could include education and skills policy. This is
parental leave, appear to be weak too. re ected in our recommendations.
Kim Winser OBE, founder
of fashion company
Only 24% of managers say their
Winser London
organisation is good at reporting on their
cooperation with schools. The private
sector is lagging behind when it comes
to reporting on how organisations are
working with schools, colleges and
universities: 41% of organisations say
they are bad at doing this, or aren’t doing
it at all, compared to 35% in the public
and 21% in the charity sectors.
One witness said: “Our owners are
great believers that one of the roles
POTENTIAL: CURRENT PRACTICE
Average score
out of 10
N/A Not at all/poor Could do better Good/very good
Q13. We offer opportunities for young people to 6.3
gain practical experience and skills within our 7% 22% 35% 38%
work environment.
Q14. We report on how our organisation is working 5.0
with schools, colleges and universities. 14% 38% 26% 23%
Q15. Our organisation sets targets to focus recruitment 4.4
on school leavers and young people. 14% 45% 24% 17%
Q16. Our organisation supports others in our supply 4.9
chain or local community with development 11% 39% 31% 19%
opportunities and mentoring.
Q17. We have a programme that actively encourages 4.9
parents, carers or others to return to work after 13% 39% 29% 21%
career breaks.
Q18. We collaborate with different sectors and other 5.6
organisations to exchange ideas and people. 8% 32% 32% 28%
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04-13_CMI management2020.indd 11 10/07/2014 12:47SUMMARY OF RECOMMENDATIONS:
PATHWAYS TO PROGRESS
FOR EMPLOYERS for employers. The recommendations greater transparency, professional
To ensure successful long-term are as follows. bodies and other partners can work
leadership, we recommend that together to help promote excellence
organisations should review and focus Build employability into education. and showcase best practice.
on three critical areas how they define We recommend a series of practical
their purpose, how they lead and proposals to help embed practical IMPLICATIONS FOR INDIVIDUALS
develop their people, and how they management, enterprise and Coach and champion your team:
invest in their potential. leadership experiences into the as a manager, be a role model,
world of education. Secondary be authentic and start mentoring
ut, with official data showing that schools should be measured on others. Support new managers
the UK labour market needs almost employability outcomes, and pupils and review and reward behaviours,
200,000 new managers a year, the provided with much greater real- not just performance.
scale of the challenge is clear.4 life experience, perhaps through
Developing these new managers’ the “Enterprise Advisers” scheme Embrace change: challenge the
skills, mentoring them and helping recommended by Lord Young. status quo, embrace and lead change.
them maximise their potential is a The standing of business studies
clear priority. courses should be reviewed to Collaborate and connect: keep
ensure they are relevant, attractive learning, extend your networks across
For more detailed recommendations, to young people and respected by generations, different sectors and
see page 50. employers and higher education. cultures, and stay connected.
To help kick-start the process, we’ve In addition, the apprenticeships FURTHER RESOURCES
developed the Management 2020 trailblazers could be expanded to The full report includes further detail
Benchmarking Tool, which is freely included management, putting young on our findings and recommendations.
available. The tool enables managers people on the track to professional It’s available at www.managers.org.
to benchmark their organisation management status. In higher uk/management2020 – where you’ll
against best practice in the three education, all management degrees also find short videos, reports on the
areas distilled from this inquiry. should include experiential learning oral evidence sessions, additional
and work placements. papers and the Management 2020
With our survey revealing an average Benchmarking Tool.
score of just 5.9 out of 10, there’s Develop exchange networks.
clearly huge scope for improvement Government should work with Other useful sources include:
to create a better managed Britain. partners to encourage placements, • A Blueprint for Better Business, an
secondments and much more initiative aiming to unite corporate
FOR GOVERNMENT extensive exchanges of ideas and purpose and personal values to serve
Our recommendations for Government people across different sectors, society: www.blueprintforbusiness.org
focus on where employers need the through supply chains, and between
most support, as evidenced by the business and education. • Valuing Your Talent, a framework for
low scores around how they develop better measurement of the contribution
their potential. With unemployment Encourage reporting and promote that people make to organisations:
of young people running at over 18%, excellence. Government can www.valuingyourtalent.co.uk
it’s critical that employability outcomes do more to encourage employers to
are improved – giving young people expand annual reports to include both • The Supper Club, the UK’s
better prospects and helping to create social purpose and broader people leading club for entrepreneurs:
a much stronger potential talent pool metrics about their people. With www.supper-club.net
4
Based on IER estimates in Working Futures 2012-22,
UK Commission for Employment and Skills, 2014
12
04-13_CMI management2020.indd 12 10/07/2014 12:45WITNESSES
Ruth Ambrose Director, Legal, AMEC Plc
Professor Julian Birkinshaw Professor of Strategy and Entrepreneurship, London Business School
Tom Bromley Student and Entrepreneur, University of the West of England
Alex Cheatle Chief Executive, Ten Group
Duncan Cheatle CEO, Prelude Group (including the Supper Club); Co-founder, StartUp Britain
Peter Cheese Chief Executive, CIPD
Mark Goyder Director, Tomorrow’s Company
Professor Lynda Gratton Professor of Management Practice, London Business School
Harriet Green Group Chief Executive Officer, homas Cook
Anthony Hesketh Senior Lecturer, Department of Management Learning and Leadership,
Lancaster University Management School
Brian David Johnson Futurist, Intel
Shivam Kagadada Assistant Tutor, Explore Learning; and Owner, Original Karma
Arthur Kay Co-founder and Chief Executive, bio-bean
Debbie Klein Chief Executive, The Engine Group
Thomas Lawson Chief Executive, Leap Confronting Con ict
Alastair Lukies CBE Chief Executive, Monitise
Cary Marsh Chief Executive and Founder, Mydeo
Sir Charlie Mayfield Chairman, John Lewis Partnership
Ry Morgan Co-founder and Chief Executive, PleaseCycle
Kevin Murray Chairman, The Good Relations Group
Professor Kai Peters Chief Executive, Ashridge Business School
Paul Polman Chief Executive, Unilever
Rebecca Ray Executive Vice President, The Conference Board
Clare Reinhold Engineering Associate, Building Design Partnerships
Sean Taggart Chief Executive, Albatross Group
Duncan Tait Head of EMEIA and Corporate Senior Vice President, Fujitsu Ltd
Dylan Valentine Bid and Delivery Excellence Apprentice, Fujitsu
Robert Wilson Student and Entrepreneur, University of the West of England
Kim Winser OBE Founder and Chief Executive, Winser London
Mike Wright Executive Director, Jaguar Land Rover
Professor Mick Yates Visiting Professor, Leeds University Business School
The full list of those who gave written evidence can be found on page 54.
13
04-13_CMI management2020.indd 13 10/07/2014 12:451. THE STATE OF UK MANAGEMENT
AND LEADERSHIP TODAY
“We need a change in
attitude in the UK, whereby KEY POINTS
management is seen as The UK lags behind its competitors in terms of productivity and management practice:
a highly professional role, output per hour is 21% lower than the average across the rest of the G7.
where integrity is seen as Poor management could be costing UK businesses over £19.3bn a year in
a virtue, and where ethics lost working hours.
are valued as highly as Fourty-three per cent of UK line managers rate their own managers as ineffective.
rofita ility. ntil attitude
change, we’ll continue to Four-fifths of workers don’t think their manager sets a good moral example.
Less than one-fifth are aware of their organisation’s values.
focus on the short, rather
than the longer, ter .” UK managers are under ualified and undertrained: two-thirds 71 of employers
give either no training or inadequate training to new managers.
John W Stephens, written evidence
to the Commission Risk-taking and innovation is scarcely encouraged at three-fifths 2 of
UK companies.
Low levels of engagement are damaging productivity, while hierarchical and
silo-based organisational structures are detrimental to innovation.
The perception that leadership is the preserve of the talented few is a myth.
At its heart, the art of management
is the art of managing people. But,
worryingly, this is where British
managers fall down most today.
a en together, these findings paint a The UK is undoubtedly a major force
The Commission examined a vast picture of shortcomings in many aspects in the global economy. It is the world’s
range of evidence that highlighted of UK management in 2014. It is crucial sixth-largest economy and may overtake
a wide range of issues. Economic that we address these concerns. The rance to claim fifth place by the end of
analysis shows a productivity gap underlying weakness in management 2014.1 It was ranked 10th in the world on
between the UK and its international and leadership is holding back our the World Bank’s “ease of doing business
competitors. Other research suggests economic performance. index” in 2014.2 Overall, it remains an
we trail behind many of those attractive location for business.
competitors on scores of management 1.1 ECONOMIC INDICATORS
practice. Evidence also highlighted AND INTERNATIONAL But the evidence suggests that there are
organisations’ failures to provide COMPARATORS underlying weaknesses in the UK economy
adequate training for their managers The UK lags behind its competitors that do need to be urgently addressed
and weaknesses in managers’ abilities in terms of productivity and management to ensure long-term competitiveness.
to motivate and engage employees. practice. Compared with other major countries in the
14
14-19_CMI management2020.indd 14 10/07/2014 12:48Organisation for Economic
FIGURE 1:
Co-operation and Development, the
GDP PER HOUR WORKED FOR MAJOR OECD COUNTRIES
UK ranks mid-way down the table for
productivity. In particular, it suffers from a
significant productivity gap compared with
the US, Japan and Germany (see Figure 1).
United States
Furthermore, statistics released by the
France
Office for ational tatistics O in
show that output per hour worked in the UK Germany
is lower than the average for the other
Sweden
six members of the G7 – the US, Germany,
France, Italy, Japan and Canada.3 Austria
United Kingdom
Meanwhile, the UK also lags behind
its international competitors in terms Switzerland
of its management practices.
Australia
report by the Department for Business,
Innovation & Skills (BIS) found that its Canada
average management score is some
Spain
way below that of the US, Japan,
ermany and anada see igure . Italy
Since management and productivity
Japan
are intrinsically linked, it is likely that
management practice is one of the Greece
major factors holding the UK back from
Korea
achieving its full economic potential.
Turkey
The cost in lost productivity is
Poland
potentially huge. Research by CMI
in suggested that poor management Mexico
costs UK businesses over £19.3bn
a year in lost working hours.5
1
www.dailymail.co.u news article U per hour wor ed at purchasing power parity
economy fifth biggest world year ban er says.html
www.doingbusiness.org/rankings
3
Statistical Bulletin - International Comparisons of Productivity - Source: OECD STAN productivity statistics (see www.oecd.org/statistics/productivity)
Final Estimates, 2012, O , ebruary
Leadership & Management in the UK – The Key otes eported for all O countries with of bn or greater. urchasing
to Sustainable Growth, , uly power parties benchmarked at 1 for US dollars
5
Leadership & Management in the UK – The Key
to Sustainable Growth, , uly
15
14-19_CMI management2020.indd 15 10/07/2014 12:48THE STATE OF UK MANAGEMENT
AND LEADERSHIP TODAY
1.2 CONCERNS
ABOUT MANAGEMENT
EFFECTIVENESS
Good management is crucial to
driving growth and productivity, but
many of today’s managers are simply
not up to the job.
FIGURE 2: AVERAGE SCORE ACROSS 18
MANAGEMENT PRACTICES BY COUNTRY The Commission was privileged to hear
from many talented managers working
in well-managed organisations during
United States the course of its inquiry. Witnesses
emphasised that the UK has many
Japan world-class businesses and there are
Germany many examples of excellence.
Sweden But the Commission also received
Canada substantial evidence raising concerns
about management and leadership
United Kingdom shortcomings affecting organisations of all
Italy sizes. There was widespread consensus
that the quality of managers plays a
France crucial role in performance, productivity
Australia and ultimately growth. Nevertheless,
research suggests that many of today’s
Mexico managers are simply not up to the job.
Poland
A study by CMI in 2012 found that nearly
Ireland half (43%) of UK managers rated their
New Zealand own line managers as ineffective.6 Going
on to explore the impact of management
Portugal and leadership development, it suggested
Chile that developing managers can make a
real difference: effective management
Argentina development was linked to 23% higher
Greece organisational performance scores.
China Meanwhile, a survey of UK employers
Brazil by ranfield chool of anagement
in 2013 revealed that nearly two-thirds
India (64%) of employers think that a lack
of leadership and management skills
2.4 2.6 2.8 3 3.2 3.4
is holding back growth.7 Even more
Average management score (1-5)
believe these deficiencies
ource Constraints on Developing UK Management Practices, BIS, 2011 are preventing their employees from
reaching their full potential.
16
14-19_CMI management2020.indd 16 10/07/2014 12:481.3 ETHICS will not be given sufficient training and Even when employers do train their
Four-fifths of workers don’t think their development in their new roles.11 managers, they can be reluctant to let
manager sets a good moral example them employ their new knowledge and
and less than a fifth are aware of their The evidence suggests that a lack of skills, meaning that the limited investment
organisation’s values. s ills, qualifications and training appears that employers do make in training often
to be one of the principal reasons why UK goes to waste.
Not only are managers ineffective, they line managers are underperforming. Just
also appear to be unethical. This is a one in five managers has a management Worryingly, senior leaders are likely
grave concern, since ethics are core qualification, according to .12 to miss out most, according to 2007
to the transformation that needs to take research by U based global consulting
place if businesses are to fulfil their true ohn oard, ean of enley usiness and training firm ovations roup.14
economic potential. chool, argued in written evidence Its study found that just 59% of senior
to the Commission that the fact most executives were expecting to receive
Eighty per cent of workers don’t think their managers do not have a qualification is an training that year.
manager sets a good moral example, important factor as to why UK companies
according to research undertaken by are less productive than their overseas s anagement urvey for the
CMI in 2013,8 while less than a fifth competitors. e also said that the U s ommission confirmed many of these
(17%) are aware of their organisation’s competitors spend significantly more on indications. ome of respondents
values. This is also echoed in research management training than we do. “More reported that their organisation’s
from the Chartered Institute of Personnel attention, therefore, needs to be paid to commitment to training staff before, or
and Development (CIPD), which found the development of managers,” he added. within three months of, being promoted
that only 37% of employees trust their e suggested that two potential ways of into a management role was either
organisation’s senior management.9 encouraging this would be by providing non-existent or could be improved.
Furthermore, only 36% of UK employees tax breaks for CPD activities and creating ee hapter for more details.
think their senior leaders take an interest regional hubs of business schools to offer
in their well-being, according to Towers training to s. iving oral evidence to the ommission,
Watson (2012).10 Ruth Ambrose, Director Legal at
Other evidence highlighted the fact AMEC, observed that there is no lack
1.4 TRAINING IS “TOO that managers only receive very limited of management talent in the UK, but
LITTLE AND TOO LATE” amounts of training. The Employer across industry generally there is a lack
UK managers are under ualified ills urvey from the U ommission of training, a lack of focus at an early
and many are left without the training for mployment and ills found that a enough stage and a lack of career-path
and development they deserve to staggeringly low 34% of all employers development. “As a country, we tend to
succeed in their obs. provide management training.13 focus on management very late,” she said.
Management was the occupation in
Estimates on the changing needs of which skills gaps were most likely to be 6
Leadership & Management in the UK – The Key
to Sustainable Growth, , uly
the UK labour market suggest that the attributed to low levels of training. 7
The New Vocational Currency: Investing for Success,
management workforce will grow by some ranfield chool of anagement, uly
8
Managers and the Moral Maze, , eptember
586,000 people between 2012 and 2022. At In written evidence to the Commission, the 9
Are organisations losing the trust of their workers?,
the same time there will be a “replacement Institute of Leadership and Management CIPD, December 2013
10
Global Workforce Study, Towers Watson, 2012
demand” created by people exiting the (ILM) noted that “managers are likely to 11
ased on estimates in Working Futures 2012-22,
labour market – retiring, for example – of have an average of four days training per U ommission for mployment and ills,
12
Leadership & Management in the UK – The Key
some 1,378,000 managers. Combined, that year”. It added: “For many new managers, to Sustainable Growth, , uly
means around 1.96 million people will enter there is unlikely to be access to more 13
dera.ioe.ac.uk/19271/1/evidence-report-81-ukces-
employer-skills-survey-13-full-report.pdf
management roles over the decade, or, on substantial training prior to appointment or 14
www.trainingzone.co.uk/topic/leadership/senior-
average, 196,400 per year – many of whom during the early months in the role.” managers-least-likely-get-development
17
14-1 _CMI management2020.indd 17 10/07/2014 12:4THE STATE OF UK MANAGEMENT
AND LEADERSHIP TODAY
Her observation is backed up by The ILM echoed this, warning in Despite extensive debate over the years,
independent research. According to its written submission that, if the there remains a perception in the UK
the Harvard Business Review,15 the development of new managers is that leadership is the preserve of a few
average age at which managers left solely to current managers, there talented individuals who were fortunate
first get leadership training is is a “risk that existing underperformance enough to enter the world equipped with
about years after they first began will become the model that these natural leadership s ills. itnesses to the
supervising people. new managers learn from . ommission argued that not only is this
perception wrong, it is also potentially
hould leadership development start he sector has particular issues. or harmful to growth, since it discourages
in childhood ccording to a survey many, cost is seen as a barrier to training people from stepping up into managerial
by the Center for Creative Leadership, something cited by of businesses and senior leadership roles, thereby
nearly a quarter of leaders believe mainly s surveyed by the , with depriving businesses of their input.
it should begin when people are less many trying to ta e advantage of low cost
than five years old and half say development routes.17 Forty per cent of hat point is particularly relevant in the
it should ta e place before the age panel members said that availability context of the debate about gender
of 10.16 of training was a problem more than a equality, with recent research
quarter indicated quality of courses highlighting the need for more female role
1.5 TRAINING FALLS VICTIM was an issue and reported that time models in senior management roles.19
TO SHORT-TERM PRESSURES was a barrier. With SMEs accounting for
Why are employers neglecting managers’ over half of private sector employment But the effects of this misconception are
development? We were told that in growth in , these shortcomings are of widespread. iving written evidence to
many cases it was because organisations some concern. the Commission, Dr Mark Pegg, Chief
are too focused on other short-term Executive of the Leadership Foundation
priorities elsewhere. uncan heatle, hief ecutive of for Higher Education, observed: “As a
relude roup, told the ommission nation, we have collective psychological
he economic downturn has undoubtedly that Os often play a deciding role barriers to brea a belief that leaders are
had an effect on the degree to which in whether this training is provided, in short supply, that too few natural leaders
companies have invested in their especially in s but, as they may lac are born, that leadership can t be taught
managers since . Training and training themselves, they are often blind to and the problem is intractable. any of
Skills Panel Report by the Forum of the potential for improvements. hey need my students arrive brainwashed to believe
rivate usiness , published to lead the change. t can be enlightening this and start 100m behind the starting
in anuary , revealed that two for CEOs to have the opportunity to view line because of it. ut it is a myth. ome
out of five panel members felt senior their business through the eyes of their leaders are born, but most are made and
management s ills had been neglected peers in a group setting. earing first the supply of leaders is e pandable.
during the recession, since employers hand from those who have benefited from
primary focus tended to be on the training both themselves and their teams 1.7 INNOVATION IS
survival of the business. can be very persuasive, especially when SQUEEZED OUT
it s coming from someone with no vested A focus on the short term also means
In its written evidence, the British interest in trying to sell something. etting many organisations lack the patience
sychological ociety also noted the business leader bought in first is required to innovate for long-term results.
leaders and managers are under crucial. he rest follows.
pressure to focus on the short term. The Commission heard that many
But it emphasised the importance of 1.6 LEADERS CAN managers are ris averse and unwilling
these individuals being aware that they BE DEVELOPED to ta e the ris s required to innovate.
are powerful role models , not only for The perception that leadership is the here was a feeling that this has been
setting standards of ethical behaviour but preserve of the talented few – that exacerbated by the economic crisis,
for creating an open, learning culture leaders are born, not made – is still ma ing managers more ris averse and
within an organisation . holding us back. less willing to contemplate failure. s
18
14-19_CMI management2020.indd 18 10/07/2014 12:49Management 2020 Survey found that and rapid promotion. They are also wedded
62% of organisations were rated either to social media. “It’s not out of the ordinary
poor or mediocre at encouraging risk- for them to be in the meeting room on two
taking and innovation. screens and they are doing their jobs,” she
said. “They are listening, they are hearing
An aversion to risk-taking is holding back and they are passing on.” Generation Y is
both managers and their businesses, discussed further in Chapter 2.
according to Leadership Coach Kevin
Murray, who gave oral evidence to the 1.9 SILOS ARE A PROBLEM
Commission. “To take some risk to grow The rigid, hierarchical organisational
is a requirement of leadership and that structures favoured by most businesses
“WE LEARN FROM means having the courage to do things, today are hampering performance.
OUR MISTAKES AND even though you’re going to be under In written evidence to the Commission,
ENCOURAGE RISK-TAKING the spotlight.” Strategic Development Mentor Colin R
AND INNOVATION” Tuckwell pointed out that management
1.8 ENGAGEMENT IS LACKING as a discipline is primarily about making
HOW DO MANAGERS RATE THEIR Too many in the UK workforce are knowledge effective. In practice, this
ORGANISATIONS? disengaged, which is damaging productivity. means that managers need to have
capabilities in technical, commercial,
Julian Birkinshaw, Professor of Strategy human, social and societal knowledge.
and Entrepreneurship at London Business These capabilities are not usually acquired
School, told the Commission that “we have through working in silos, which is standard
a very poorly engaged workforce” – a practice within many organisations. He
35%
challenge faced, he said, by businesses added: “Too long spent in silos limits
around the world. the brain’s broader development and
ability to relate to people with different
Research shows that poor employee backgrounds and experiences.”
engagement acts as a drag on business
growth. According to a 2007 study by Narrowness in management experience
human resource consultancy Towers is also in evidence at the top of Britain’s
GOOD/VERY GOOD
Perrin-ISR, a group of global companies biggest businesses. In 2013, analysis by
with highly engaged employees saw recruiter Robert Half found that more than
their net income grow by 13.7% over a half (52%) of FTSE 100 chief executives
12-month period, while net income fell by come from a finance bac ground and
3.8% among companies with low levels of had moved from a finance role to
38%
employee engagement.20 chief executive at the same company.21
In his evidence, Kevin Murray highlighted In his paper, Tuckwell noted: “There
the difference made when a manager can be little doubt that this relative
succeeds in engaging the workforce. “I narrowness of people’s work experience
have seen cases where underperforming and neurological development limits the
COULD DO BETTER teams have had a new leader come in capacity of the UK’s economy to evolve
who’s been much more about involving competitively, whilst making it more
people and having conversations with fragile and slow to adapt.”
them on a continuous basis, and who
engages them in the process of new It also explains why businesses tend to
24%
ideas, taking new products to market, and focus heavily on a cost-cutting agenda
inventing new ideas around new product during difficult periods for the economy.
opportunities. The performance of the
teams changes overnight.” 15
blogs.hbr.org/2012/12/why-do-we-wait-so-long-to-trai/
16
Van Velsor, Ellen and Wright, Joel, Expanding the leadership
equation: developing next-generation leaders, Centre for
Managers trying to engage employees Creative Leadership, 2012: www.ccl.org/leadership/pdf/
need to relate to up to four different research/expandingleadershipequation.pdf
17
Training and Skills Report, Forum of Private
NOT ALL/POOR generations, all with different expectations Business, January 2014
of the workplace. Giving oral evidence 18
www.gov.uk/government/uploads/system/uploads/
attachment data file bpe stats release .pdf
to the Commission, Chief Executive of 19
The Power of Role Models, CMI, 2014
Engine Group Debbie Klein highlighted that 20
dop.bps.org.uk/organisations/insights-research/the-
business benefits of employee engagement .cfm
Source: Management 2020 Survey, Generation Y (those born in the 1980s and 21
www.roberthalf.co.uk/id/PR-03593/FTSE-100-
CMI, 2014 early 1990s) expect high levels of feedback Companies-UK-Press-Release
19
14-19_CMI management2020.indd 19 10/07/2014 12:492. THE WORLD OF GENERATION Y
“Space and autonomy
instils a high level of KEY POINTS
responsibility, trust and By 2025, Generation Y will comprise 75% of the global workforce.
authenticity. That’s how
Generation Y looks for ethical employers, opportunities for progression, a good work-life
I would have liked to have balance and interesting work.
been managed and I
More than half (57%) of UK members of Generation Y intend to leave their jobs within one
think that’s how I to two years of joining.
manage others.”
Millennials tend to be extremely independent and resistant to micromanagement.
Ry Morgan, Co-founder and However, they have a strong appetite for feedback and coaching.
Chief Executive, PleaseCycle,
oral evidence to the Commission, Generation Y is very comfortable with technology and social networks. It is also
14 January 2014 creative and open-minded, multiculturally aware, confident, able to collaborate,
and ethical.
Generation Y, also known as ‘Millennials’, But it can display a strong sense of entitlement, an inability to communicate face-to-face,
is the generation of people born in a lack of decision-making skills, a poor sense of awareness, a low work ethic and a
the 1980s and 1990s. By 2025, these tendency towards overconfidence.
individuals will comprise 75% of the global
workforce, according to Deloitte.22 They Generation Y lacks a global mindset – just one UK student studies abroad for every 15
will inevitably play a pivotal role in shaping international students in the UK.
the future development of management,
both in the UK and globally. In order More than three- uarters 77 of Generation Y view formal management ualifications
to understand how management is to be the most effective method of learning and development.
likely to evolve in the future, it is crucial
Entrepreneurialism is very attractive to Generation Y. More than a quarter (27%) of 16-
to understand their views on, and
to 30-year-olds in the UK claimed that they were increasingly thinking of setting up a
expectations of, the workplace. business, according to 2012 research by The Prince’s Trust.
2.1 WHAT MILLENNIALS WANT
Generation Y looks for an ethical employer,
opportunities for progression, a good work-
life balance and interesting work. different roles. I’d hate to have a job where was that many managers working today
I go in every day and do the same thing are unwilling to change.
A job is more than just that to Generation nine to half five.
Y. The managers who belong to this In written evidence to the Commission,
generation want to work somewhere where Bromley highlighted the value that he Dr Mark Pegg, Chief Executive of the
there is a positive, values-driven culture, places on getting prompt feedback by eadership oundation for igher
job security, the chance to learn new skills, sharing his experience of working for a Education, said of Generation Y: “There
a good work-life balance, regular/instant door-to-door sales company, saying: is a clear shift in this generation towards
feedback and interesting work. These “The managers there did a great job action learning, to collaboration, to
were the findings of a study by not for of motivating people, making sure sharing thin ing on difficult problems,
profit organisation et mpact in .23 everyone was happy at the end of the to embracing the power of the team in
day and talking through how your distributive learning, with leadership
The oral evidence of University of performance went. starting earlier in their career and
the West of England (UWE) student functioning at every level. They have a
and entrepreneur Tom Bromley, who Robert Wilson, another UWE student stronger desire to learn transferable skills
addressed the Commission on 14 January and entrepreneur, emphasised in his and best practice from other sectors.
, supports this view. e said d li e oral evidence to the Commission on 14
to work for an organisation where I have January that he wanted “the ability to have Furthermore, values matter greatly to
the opportunity to progress and take on in uence over change . is observation Generation Y. Deloitte’s Millennial Survey,
20
20-23_CMI management2020.indd 20 10/07/2014 12:50published in 2014, found that half of coaching abilities, and being prepared Indeed, management does not appear
Millennials surveyed wanted to work for to sponsor them for formal development to be a particularly appealing concept
a business with ethical practices, while programmes, according to the Harvard to Generation Y in some respects. In his
separate research by CMI revealed that Business Review.25 oral evidence, Ry Morgan described
90% of young managers would prefer to management as being about control,
join an organisation that does something Furthermore, members of Generation whereas leadership is about inspiring
they can believe in. Y are not likely to work for any one individuals to do things for themselves,
employer for a significant length of “which is much more about freedom”. He
Giving oral evidence to the Commission, time. Research by Ashridge Business added: “I would consider myself more
Dylan Valentine, an apprentice at School found that more than half of a leader than a manager and I would
technology company Fujitsu, said: (57%) of UK members of Generation definitely be drawn towards people who
“The thing I immediately noticed when Y intend to leave their jobs within one are more leaders than managers.”
I joined Fujitsu is that it’s very people- to two years of joining.26 Meanwhile,
focused. I also thought it was very the Harvard Business Review found 2.2 STRENGTHS
innovative and aspirational. It’s set that top young managers are often on AND WEAKNESSES
out long-term and challenging goals a non stop ob hunt, with three quarters Generation Y is creative and open-minded,
in an IT industry that has essentially (75%) admitting that they had sent out multiculturally aware, technologically-
stagnated.” applications and interviewed for jobs savvy, confident, able to collaborate,
at least once a year during their first and ethical. But it can also have a strong
Flexibility is important to Generation Y – employment stint.27 sense of entitlement and lack decision-
nearly half (45%) will choose workplace making skills.
e ibility over pay, according to Millennials tend to be extremely
research.24 Hence, being comfortable independent and resistant to Millennials are the least experienced
with e ible schedules is among the micromanagement. Research by London cohort of managers working in the UK
top five qualities that members of Business School found that, instead, at present due to their youth. Research
Generation Y look for in a boss, along members of Generation Y prefer to be by EY in 2013 found that 87% of the
with a willingness to help them navigate self-managed and receive feedback and Generation Y managers that they had
their career path, an inclination to coaching, rather than subject themselves surveyed had moved into a management
give straight feedback, mentoring and to more traditional “management”.28 role during the last five years, compared
with 38% of Generation X managers and
19% of Baby Boomers.29
FLEXIBILITY MATTERS TO GENERATION Y – NEARLY HALF
(45%) WILL CHOOSE WORKPLACE FLEXIBILITY OVER PAY Having come of age in the technological
era, Generation Y is very comfortable
with technology and social networks –
qualities that ma e its members very
attractive to today’s leaders, according
to the Center for Creative Leadership
(CCL).30 Furthermore, leaders are
excited by Generation Y’s creativity
22
www2.deloitte.com/content/dam/Deloitte/global/Documents/
About-Deloitte/gx-dttl-2014-millennial-survey-report.pdf
23
What Workers Want in 2012, Net Impact, 2012
24
Generation Y: Unlocking the Talent of Young
Managers, CMI, 2008
25
hbr.org/2010/05/mentoring-millennials/ar/1
26
www.ashridge.org.uk/Website/Content.nsf/wCOR/
Research+reveals+the+reality+of+the+workplace+
for+graduates?opendocument
27
hbr.org/2012/07/why-top-young-managers-are-
in-a-nonstop-job-hunt
28
Kelan, E, The e exive eneration oung rofe ional
er ective on or , Career and ender, London
Business School, 2009
29
Generations Survey, EY, 2013
30
www.ccl.org/leadership/pdf/capabilities/GenerationY.pdf
21
20-23_CMI management2020.indd 21 10/07/2014 12:50THE WORLD OF GENERATION Y
and open-mindedness, multicultural why nearly half of employers are
awareness, confidence, ability to dissatisfied with graduates international
collaborate, and strong sense of ethics. awareness and more than half are
disappointed with their foreign language
ut also found that today s s ills, according to research from the
leaders had some significant concerns onfederation of ritish ndustry.
about eneration . hey worry that
members of that generation have a t seems that both eneration and
strong sense of entitlement, an inability the aby oomers can learn from their
to communicate face to face, a lac counterparts in eneration those born
of decision ma ing s ills, poor self in the s and s . esearch by
awareness, a low wor ethic and a found that eneration managers
tendency towards overconfidence. were perceived more favourably on
nearly every management characteristic
study by oung nterprise found compared with the other two generations.
that ritish employers believe the top hese characteristics included the
two s ills young people lac most when ability to manage change, as well as
entering the wor force are the very basic communication, decision ma ing,
s ills of self management and e ibility, leadership, motivational,
communication and literacy .31 strategic and talent development s ills.
eanwhile, a poll of employers conducted
by training provider in arch evertheless, as members of eneration
revealed that more than half were increasingly come to dominate the
having difficulty filling vacancies due to wor place, it seems probable that the rest
the lac of available talent.32 of the wor force will need to adapt to be
li e them, rather than the other way round.
big disappointment for many s chief e ecutive of the ngine roup
employers is that eneration in ritain ebbie lein told the ommission e
59% appears to lac the global mindset are not going to wean them off the need
O
that will be necessary for success in for instant gratification. ou cannot change
O O an increasingly interconnected world. the generation you cannot change the
O ust one U student studies abroad for world that they have grown up in. ctually,
U
U
every international students in the don t get obsessed with them anymore
O O U , according to the igher ducation ust accept that they are different.
unding ouncil for ngland .
igures from and Spiegel iven the significance of eneration , it
show that ust . of U students is concerning that employers are not living
study abroad, compared with . of up to its members e pectations at present.
erman students.33 his may e plain ccording to research from , more
22
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