The Role of Developing Individual Leaders to Enhance Organizational Performance: The Human Capital Perspective

Abstract

There is evidence showing the role of developing individual leaders to enhance organizational performance. However, both theoretical and practical works relating to components of leadership development practices and organization-level performance are required in the literature. To close this gap, a model analyzing the impact of two components of leadership development methods on the growth of human capital, which in turn improves organizational performance, was presented. The differentiation leadership development practice component is directed primarily at developing the intrapersonal knowledge, skills, and abilities of leaders, while the integration leadership development practices component helps develop leaders’ interpersonal knowledge, skills, and abilities. Primary data were collected using a structured questionnaire from a sample of 336 bank managers to test the proposed hypotheses. The collected data were analyzed using Structural Equation Modeling. The results of the data analysis revealed that the differentiation leadership development practice was positively correlated with human capital and that human capital may explain the correlation between this practice and organizational performance.