The Director Dividend of Continuous Leadership Development

Today’s businesses are navigating an incredibly complex operating environment, and there’s more pressure on senior leaders than ever before.

The rapid development of AI, ongoing economic uncertainty, tighter regulation and continually shifting employee expectations are all making board-level decisions more challenging – and each decision increasingly has consequences in multiple areas.

Irrespective of their individual areas of experience and expertise, today’s directors are expected to understand all of these issues and be able to assess their potential impact on long-term business performance. At the same time, they need to be able to continue to make decisions that maximise productivity and enable the business to attract and retain top talent and respond to change effectively.

This is a significant responsibility. Yet, it’s also one many organisations assume every director is fully prepared for as soon as they join a board. Drawing on her work with business leaders across the UK, Kirsty McManus, Director of Professional Development Services and Nations Director for Northern Ireland at the Institute of Directors (IoD), has seen first-hand how continuous development strengthens board effectiveness, leadership capability and organisational performance. As a result, director development is often overlooked or deprioritised in favour of those on the front line of the business’ day-to-day operations.

The business impact of strong director capability

Directors influence the conditions in which everyone else works. Their decisions affect an organisation’s priorities, culture, ways of working and ability to respond to problems. A director who communicates clearly, makes well-informed decisions and builds trust can help teams work more effectively. Poor decisions or unclear leadership will often have the opposite effect.

Directors are also responsible for leading through periods of uncertainty. For example, they may need to oversee a restructuring programme, respond to new regulation, introduce new technology or manage a fall in demand. During these periods, employees look to senior leaders for clarity, consistency and confidence about the way forward.

Every decision made at board level has consequences beyond the boardroom. It impacts costs, productivity, employee morale, customer relationships and the organisation’s ability to grow. Gaps in a director’s knowledge or leadership skills can create risks in each of these areas.

Investing time and resource to developing directors can help to reduce these risks, strengthening the board’s ability to assess information, question assumptions, understand the impact of their decisions and lead people effectively through change.

This can be described as the ‘Director Dividend’ – the tangible commercial value delivered by robust director development programmes. It describes the wider value an organisation sees when directors improve their knowledge, judgement and leadership skills. This can be seen in clearer priorities, stronger decision-making, more effective teams and greater organisational resilience.

And it’s shown in the numbers. IoD research highlights that businesses with a Chartered Director on their board achieve a 16.7% higher revenue advantage over comparable organisations.   

Ensuring development keeps pace with business needs

Director development should be treated as part of business strategy, rather than as an optional benefit for senior employees. Boards, HR teams and learning and development teams all have a role to play in identifying the capabilities an organisation will need and providing opportunities to build them.

Development should continue throughout a director’s career. A director who understands finance and governance, for example, may still need to develop their knowledge of artificial intelligence, workforce planning or leading organisational change.

The issues facing businesses do not remain fixed, so the skills required to address them cannot remain fixed either. Ongoing development can help directors respond to new risks and make better decisions as circumstances change.

The most useful development is practical and linked to real business decisions. It should give directors the opportunity to examine issues such as financial performance, risk, governance, workforce strategy and organisational culture.

Discussing realistic scenarios with other experienced leaders can also help directors test their thinking and consider different approaches. This is particularly valuable when there isn’t one single, obvious answer and decisions may affect employees, customers and shareholders in different ways.

The aim isn’t simply to gain a qualification or add to a director’s knowledge, it’s to improve how that knowledge is used. Better prepared directors are more likely to ask the right questions, recognise potential risks and make decisions that take account of both commercial and human consequences.

Benefits beyond the boardroom

When that happens, the benefits can extend throughout the organisation. Employees have clearer direction, teams are better placed to respond to change and the business is more likely to make consistent progress towards its goals.

That is the Director Dividend of continuous leadership development.

By Kirsty McManus, Director of Professional Development Services and Nations Director for Northern Ireland at the Institute of Directors (IoD)