The Leadership Capability Gap Multiplying Every Problem in Your Organisation
Here's a question that should make every executive team uncomfortable: What if the biggest skills gap in your organisation isn't technical ability, sales capability, or customer service—but leadership skills themselves?
The Lindorff research revealed something that challenges conventional assumptions about skills gaps in Australian organisations. When managers were asked to identify where skills gaps existed, 34% identified leadership skills and 33% identified professional and industry-specific technical skills.
Leadership skills gaps are nearly equal to technical skills gaps. Yet which one gets more attention and investment in most organisations?
The Invisible Multiplier
"In nearly every capability review I conduct, leadership skills gaps emerge as the hidden multiplier," says David Williams, Principal Consultant at Regional Capability Systems. "Organisations will spend hundreds of thousands on technical training while their leaders lack the skills to develop others, build high-performing teams, or create learning environments. It's like pouring water into a leaking bucket."
Here's why leadership skills gaps are so dangerous: they don't just create a deficit in one area. They multiply every other skills problem in the organisation.
Leaders lacking development skills prevent:
Accurate diagnosis of team skill needs
Effective coaching and capability development of others
Creating environments where people can learn and develop
Building psychological safety that enables performance
Retaining high-performing employees who want to work for capable leaders
Strategic execution that requires skills the organisation doesn't yet have
You can invest heavily in technical training, but if your leaders lack the skills to develop people, create learning environments, and build capable teams—none of it will deliver sustainable results.
Understanding Leadership Skills
Before we go further, let's be clear about what leadership skills actually means—because most organisations confuse two different skill sets:
Management skills include:
Operational planning and execution
Resource allocation
Performance monitoring
Process coordination
Day-to-day problem-solving
Leadership skills include:
Strategic thinking and communication
Developing others' capabilities
Change navigation and facilitation
Creating psychological safety and high-performing cultures
Building and sustaining team capability
Aligning people to strategic direction
The Lindorff research found that 23% of organisations have management skills gaps—but 34% have leadership skills gaps.
"The Lindorff study confirms what we observe: organisations confuse management skills with leadership skills," Williams explains. "They promote competent managers—people with strong operational skills—into leadership roles without assessing whether they have the skills to develop others, build team capability, or create high-performing cultures. Then they tolerate the dysfunction because the person 'gets results' or 'works hard'."
Consider this revealing pattern: In information and media firms, 53% report leadership skills gaps but only 27% report management skills gaps. In arts and recreation, it's 50% leadership gaps versus 22% management gaps.
These organisations have people who can manage operations effectively. What they lack is people with the skills to lead strategically, develop others, and build team capability—and that gap cascades through everything.
Where Leadership Skills Gaps Hit Hardest
The Lindorff research shows leadership skills gaps are worst in:
Large organisations (39% report gaps versus 27% in medium, 11% in small firms)
Information and media sectors (53% report leadership skills gaps)
Arts and recreation (50%)
Public administration and safety (47%)
What do these have in common? Rapid change, complexity, and strategic demands that require leadership skills many managers simply don't have.
"The data shows leadership skills gaps worst where they're most dangerous," Williams notes. "In rapidly changing sectors and complex organisations, leadership skills—strategic thinking, developing others, navigating change—become critical. And we're seeing massive deficits."
These are also sectors reporting highest stress (public administration 61%, information and media 56%), greatest loss of high performers (information and media 47%, public administration 45%), and most compromised strategic planning.
The pattern is clear: Leadership skills gaps create cascading damage throughout organisations.
The Promotion Without Skills Assessment Problem
Here's how most organisations create leadership skills gaps:
Identify a high performer in a technical or operational role
Promote them to leadership as reward for performance
Provide minimal leadership skills development
Assume technical competence or management skills translate to leadership skills
Wonder why they struggle—or worse, don't recognise they're struggling
"When leaders lack development skills, psychological safety collapses organisation-wide," Williams observes. "Teams don't just have skill gaps—they have leaders who lack the skills to develop their people. It's a vicious cycle that perpetuates skill deficits throughout the organisation."
The promoted high-performer often struggles not because they lack potential, but because:
They were never assessed for leadership skills
They were never developed in strategic leadership, coaching, or team development
They're now expected to develop others when they lack those skills themselves
The organisation normalised "learning leadership on the job"
Meanwhile, the organisation has lost a high-performing individual contributor and gained a leader whose skills gaps multiply problems across their entire team.
Leadership Activity Versus Leadership Skills
Here's a critical distinction most organisations miss:
Being busy with leadership activities ≠ Having leadership skills
A person can be:
Working 60-hour weeks (activity)
Attending endless meetings (activity)
Responding to constant emails (activity)
"Handling issues" all day (activity)
Highly visible and engaged (activity)
And still fundamentally lack leadership skills.
Actual leadership skills show up as:
Clear strategic communication that aligns teams
Effective development of others' capabilities
Psychological safety that enables honest dialogue and learning
Successful change navigation
Talent retention because people want to work for skilled leaders
Team capability that grows over time
"I see leaders exhausted from constant activity, and organisations that confuse busyness with capability," Williams reflects. "But when you examine what they're actually accomplishing in terms of developing people, building team capability, executing strategically—you often find massive skills gaps hidden beneath frenetic activity."
The Psychological Safety Connection
Psychological safety—the shared belief that the team is safe for interpersonal risk-taking—is largely created or destroyed by leadership skills.
Research by Amy Edmondson and others shows psychological safety is foundational for:
Learning and skill development
Innovation and problem-solving
Speaking up about problems or skill gaps
Admitting mistakes and seeking help
High performance under complexity
But psychological safety requires specific leadership skills:
Acknowledging one's own fallibility and skill gaps
Inviting input, challenge, diverse perspectives
Responding constructively to bad news
Creating space for learning from failure
Modeling vulnerability and learning
Leaders who lack these skills don't just fail to create psychological safety—they actively destroy it. And without psychological safety, skill development throughout the organisation becomes nearly impossible.
The organisation invests in technical training, but people are afraid to admit skill gaps. They launch development programmes, but people don't trust the process. They try to build team capability, but leaders lacking development skills undermine it all.
The Political Difficulty That Hides the Problem
"Here's what the research won't tell you but experience will: leadership skills gaps are the last thing organisations want to examine," Williams reflects. "It's politically difficult. That's why external assessment is critical."
Structural barriers to diagnosing leadership skills gaps from within:
Political barriers:
Current leaders would need to acknowledge their own skills gaps
HR teams report to the leaders they'd need to assess
Challenging leadership skills feels like career risk
Perception barriers:
Leaders see themselves as capable (they've been successful previously)
Leaders are "busy" (which feels like evidence of capability)
Leaders point to results (confusing outcomes with leadership skills)
Normalisation barriers:
"That's just their style" (translates to: lacks interpersonal or development skills)
"They get results" (regardless of how, or cost to people and culture)
"They're learning" (which would be unacceptable for other critical skills)
"They know the business" (confuses tenure with leadership skills)
These barriers ensure leadership skills gaps persist, multiply, and become embedded.
The Cascade Effect
How a leadership skills gap in one person cascades through the organisation:
A leader lacks development skills →
Can't accurately assess team skill needs →
Can't coach or develop others effectively →
Can't create learning environments →
Team skill development stagnates →
Performance pressure increases →
Stress and turnover rise →
Remaining staff compensate →
Psychological safety erodes →
Innovation slows →
Strategic initiatives fail →
Organisational capability declines →
Competitive position weakens
One skills gap in one leader creates compounding deficits across the entire team.
Multiply this across 34% of organisations with leadership skills gaps, and you understand the scale of damage—and why it's so hard to see from inside.
Why Internal Processes Perpetuate Leadership Skills Gaps
The Lindorff research shows 25% of organisations use internal promotion to address skills gaps. For many roles, this works—you develop skills, then promote.
But for leadership roles, internal promotion without rigorous skills assessment often perpetuates leadership skills gaps:
The organisation has normalised certain leadership behaviours (which may include skills gaps)
Internal candidates are assessed on current performance, not leadership skills
Leadership skills aren't objectively measured during promotion
The organisation lacks benchmarks for what good leadership skills look like
Political relationships influence decisions
Tenure substitutes for leadership skills assessment
"I've worked with organisations investing heavily in technical training while completely overlooking that their leaders lack the skills to develop people," Williams says. "You can't build workforce capability without leaders who have development skills—the research proves this pattern exists. Yet leadership skills gaps are the last thing most organisations examine."
Sector-Specific Patterns
The Lindorff research reveals important sector differences:
Information and media (53% leadership gaps): Rapid change demands leadership skills many managers—promoted for technical expertise—simply don't have. They can manage projects but lack skills to lead change or develop others.
Arts and recreation (50% leadership gaps): Passion for mission often substitutes for leadership skills development. Leaders are experts in their craft but haven't developed skills in leading people, building teams, or developing capability.
Public administration (47% leadership gaps): Complexity demands sophisticated leadership skills. Management skills that worked previously are insufficient for current demands.
Without external benchmarking, organisations in these sectors don't recognise their leadership skills gaps are significantly worse than average—and that this gap multiplies every other skills problem they face.
The Develop-Leadership-Skills-First Principle
Research confirms: if you develop leadership skills first, everything else becomes easier.
Leaders with strong development skills:
Accurately diagnose team skill needs
Coach and develop others effectively
Create environments where people learn and grow
Build psychological safety enabling development
Retain talented people
Execute change successfully
Leaders lacking development skills make every other skills initiative harder, slower, less effective—often impossible.
"When we conduct reviews, leadership skills gaps almost always emerge as the hidden factor multiplying every other skills problem," Williams notes. "Develop leadership skills—particularly the ability to develop others—and you create conditions for building every other capability. Leave leadership skills gaps in place, and you're trying to build workforce capability without leaders who have the skills to do it."
Why External Assessment Is Essential
Internal teams cannot objectively assess leadership skills because:
Political constraints: Naming leadership skills gaps is politically fraught
Normalisation: They've adapted to current leadership and can't see gaps objectively
Lack of benchmarks: They don't know what strong leadership skills look like comparatively
Relationship dynamics: Personal relationships cloud assessment
Missing frameworks: Lack tools that distinguish management from leadership skills
External assessment provides:
Political independence to name leadership skills gaps
Cross-sector benchmarking
Objective measurement frameworks
No stake in protecting current leaders
Clear distinction between activity and skills
Integration with professional judgment
"We integrate professional judgment with objective assessment," Williams explains. "We're not telling leadership they're incompetent. We're providing objective assessment of leadership skills against requirements and benchmarks, then working WITH them to develop needed skills. We work for boards and management—our success depends on theirs."
The Bottom Line
One-third of Australian organisations have significant leadership skills gaps. In large organisations and certain sectors, it's approaching half.
These gaps don't exist in isolation. They multiply every other skills problem:
Technical training fails without leaders who have development skills
Strategic initiatives stall without leaders with execution skills
High performers leave when leaders lack retention skills
Psychological safety collapses when leaders lack interpersonal skills
Skill development stops when leaders can't coach or develop others
You can have excellent technical training programmes, but if your leaders lack the skills to develop people, build teams, and create learning environments—you're fighting a losing battle.
The question isn't whether you have leadership skills gaps. The question is whether you're assessing them objectively, developing them systematically, and recognising how they multiply every other skills problem you face.
What leadership skills are actually present in your organisation? And how would you know?
Next in this series: From tolerance to strategy: closing skills gaps that actually works.
Ready to move from tolerance to systematic skills development?
Book an independent skills gap review with Regional Capability Systems. We'll bring frameworks, sector benchmarking, and political independence—integrated with respect for your leadership judgment—to diagnose why skills gaps persist and build strategies that address root causes.
Visit www.rcap.com.au to discuss your organisation's skills gap challenges.
This article series is based on research by Professor Margaret Lindorff, "Skills gaps in Australian firms," Journal of Vocational Education and Training, 63:2, 247-259 (2011), combined with two decades of organisational capability consulting experience across Australian industries.
