Westpac says building these 4 strengths in business leaders could add $70 billion to Australia's GDP

David Warner of Australia switch hits for six. Photo by Matt King/Getty Images

Leadership is a nebulous thing.

You know it when you see it. And you notice its absence.

Often leadership, at least good leadership, seems to have a level of specificity to the task, battle, business, or political situation at hand and the time at which it takes place.

Which means for all the many books on leadership written over the centuries – from Marcus Aurelius on down – there is still no definitive guide to exactly what leaders and leadership look like.

In an effort to remedy that, and as part of the launch of its Businesses of Tomorrow program, which forms part of Westpac’s bicentennial celebrations next April, Westpac commissioned Deloitte Access Economics to undertake a study to try and pin down what leadership looks like for Australian businesses.

In doing so the bank says it has identified four key traits our business leaders need to have in order to improve. They also say better business leadership effectiveness could give a $70 billion boost to the Australian economy and lift the nation’s GDP ranking from 19th to 14th on a global basis.

The traits that effective leaders have as identified by Deloitte are:

  • Fit for purpose education – overall, leaders are well-educated; in “Top Attractor” established businesses they are 43% more likely to have a higher degree compared with the average business, while leaders in fast-growing companies are 22% less likely;
  • A set of core skills – beyond formal qualifications, leaders need a core set of skills, especially management and strategy skills. What is interesting is that beyond that, business maturity again plays a key role – for established businesses it’s about mastering business process improvement and change management to make businesses more agile in a fast-moving environment, whereas for successful fast-growing businesses, driving business development is a higher priority;
  • International experience – although clearly not a prerequisite for effective leadership, senior people at Top Attractor businesses and fast-growing businesses were two and three times more likely to have international experience than a leader at an average business, and
  • Connectivity – leaders in successful businesses tend be more connected with their staff, suppliers and customers; the opposite of isolated. LinkedIn connections are just one proxy for leaders’ communicative and collaborative behaviours, but telling – on average, leaders in the Top Attractor businesses have 17% more connections than leaders in businesses overall, and leaders in fast growing businesses have 88% more than leaders at average businesses.

How does harnessing those skills give the economy a $70 billion boost?

Westpac says it’s “based on academic studies suggesting that 29% of the productivity gap between Australia and the United States (23%) can be explained by management effectiveness, as measured by a range of factors such as goal and target setting, plan execution, talent management and promotion systems. Deloitte Access Economics has calculated that halving this gap could lift productivity by 4%”.

So we now have a guide for business leaders.

But more importantly, we have a guide for boards when it comes to choosing the next CEO for their business. That has to be good for the economy.

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