Leadership Capital as Strategic Asset: The Board's Role in Executive Development
Traditional succession planning focuses on identifying replacement candidates for key positions, but leading organisations recognise leadership development as strategic asset creation that requires systematic governance oversight. Research from the Corporate Leadership Council indicates that organisations with strategic leadership development approaches achieve 23% higher revenue growth and 18% better profitability than those with tactical succession planning.
At Collyer & Co., our SLG3 evaluations consistently identify leadership capital development as the most underutilised strategic lever available to boards. While directors routinely oversee financial capital allocation and operational performance, few systematically govern leadership capital development despite its critical impact on strategic success.
Leadership capital represents the collective capability of an organisation’s leadership team to execute current strategy while building capabilities for future strategic requirements. Unlike traditional human capital metrics that focus on individual competencies or retention rates, leadership capital assessment examines systemic leadership capability relative to strategic context.
The governance dimension is crucial because leadership capital development requires long-term investment with uncertain returns, precisely the type of strategic decision that benefits from board oversight and stakeholder perspective. Executive teams may focus on immediate performance demands while underinvesting in future leadership capabilities. Boards can provide the strategic perspective and accountability necessary for sustained leadership capital development.
Effective governance of leadership capital demonstrates three critical characteristics. First, boards establish "capability forecasting"—a systematic assessment of future leadership requirements based on strategic direction. Second, they create "development governance"—ongoing oversight of leadership, capital investment and progress. Third, they implement "capability accountability"—performance measures that include leadership development outcomes alongside operational results.
The strategic dimension is critical because different strategies require different leadership capabilities. Digital transformation demands different competencies than operational excellence. Market expansion requires different skills from organisational consolidation. Leadership capital development must align with strategic requirements rather than generic leadership improvement.
Our SLG3 framework specifically evaluates leadership capital adequacy by assessing the integration between strategic requirements, current leadership capabilities, and systematic development processes. We identify where leadership capital investment will have the greatest strategic impact.
The result is leadership development that functions as strategic asset creation rather than generic capability building, ensuring that organizations develop the leadership capital necessary for sustained strategic success.