But when you’re already running on a skeleton crew after years of skills shortages, such steps could actually be counter-productive. While the office fruit bowl is unlikely to make a whole lot of difference to the bottom line, investing in growing leadership skills within your organisation alleviates the skills gap while helping create teams that are more willing to stay and more productive – not just saving money, but growing it.   

It’s notable that organisations are increasingly reversing the trend of the early 2000s, which was to do away with their middle management tier. These days more are recognising the importance of having that extra layer to look after people management, allowing senior leaders to take care of strategy – and growing the business.

But the right external hire may not be available (and often isn’t) in the current market, especially in the regions. With so many businesses needing to appoint leaders from within due to ongoing worker shortages, it’s crucial to ensure new leaders are well supported, and to take a more lateral approach to appointments that doesn’t always recognise the person who’s “due” a promotion.

Why investing in management makes business sense

Businesses will understandably be looking to cut costs wherever they can in the current climate. However, letting go of learning and development programmes – especially for leaders – will incur a long-term loss, of both profits and people. Research from Deloitte found that that on average every dollar spent on L&D is associated with an extra $4.70 in business revenue per employee. Meanwhile if training and development opportunities disappear, so do employees. A recent McKinsey report revealed a lack of career development to be the top reason cited amongst employees for quitting.

If providing growth opportunities (even if promotions aren’t available right now) helps workers see a future at an organisation, it’s often the quality of leadership that makes all the difference to how well teams work together. It’s worthy of note that uncaring or uninspiring leaders also came in the top three reasons why employees quit.

A good leader inspires and helps teams communicate and resolve their differences, making for happier and more engaged workers that deliver better results. That’s why investing in supporting new leaders with training, external coaching and/or internal mentoring should be a key part of any business’s strategy heading into a recession, helping create a more resilient, thriving organisation.

San Francisco-based coaching business Better Up surveyed 1600 teams and identified how leaders who aren’t as strong in certain areas affect their team’s performance, from resilience to innovation. When teams perceived their leader had low resilience, overall team performance fell by 23%. Leaders with low cognitive agility — the ability to view issues from different perspectives and see the world beyond black and white — also had teams whose agility was 29% lower than average.

A lack of strategic thinking, a hallmark for top managers, impacted team innovation by as much as 23%. And unsurprisingly, leaders with low emotional regulation, the ability to exert control over one's own emotional state, lost the trust and respect of their teams. Manager net promoter score tanked by -20%. 

EQ over IQ

But before you invest in training new managers, it’s also essential to find the right person for the role.

Often employees are promoted into leadership positions because they boast the highest IQ and are stand-out performers in their role. However, we’ve all heard of the Peter principle – the one that says employees are often promoted based on their previous success, until they reach a level at which they are outside their skillset or competence. Not everyone wants to be a people manager or is necessarily suited to leading a team.

There are two obvious solutions to this. Firstly, to invest in more training to grow their competence (if this is something you mutually believe would be in the best interests of the company). The other is to allow the person to remain at a level where they’re delivering the greatest value to the business and identify someone else with higher EQ (emotional intelligence) who would be happier in and more suited to the role, even if they also require some training to reach their full potential.

This is where psychometric testing isn’t just useful during external recruitment processes. It’s an under-utilised tool to review who within your company has unrecognised leadership skills and EQ, as well as a desire to head in that direction.

While a single great leader can’t solve every challenge, as everyone who’s worked for long enough knows, a single poor manager can break a team. Investing in finding the right talent internally and being prepared to provide the right training for new leaders can pay for itself many times over, in improved productivity, staff retention and even less conflict. Organisations looking to put themselves in the best position to weather the recession need to beware of viewing learning and development – especially at manager level – as disposable, or they could find themselves with a much harder struggle ahead.