Australia's largest ever leadership survey has revealed drastic shortfalls in innovation and business performance, and outright failures in leadership development in organisations across the country.

Key points: Only 18 per cent of private sector organisations reported high levels of radical innovation

Only 18 per cent of private sector organisations reported high levels of radical innovation Study shows there is a systematic failure of leadership ranks to reflect wider diversity in society

Study shows there is a systematic failure of leadership ranks to reflect wider diversity in society For every $10 spent on senior leaders, only $1 spent on frontline leaders

The Study of Australian Leadership (SAL), by the Centre for Workplace Leadership at the University of Melbourne, found more than 40 per cent of organisations did not meet their performance targets for return on investment and profitability.

And despite Prime Minister Malcolm Turnbull making innovation a hallmark of his time in office, centre director Professor Peter Gahan said just 18 per cent of private sector organisations reported high levels of radical innovation, which was defined as "experimentation and identifying new products and markets".

"There are too few private sector firms that innovate, and we found less than one in five reported high levels of incremental or radical innovation," he said.

"We also found that innovation was far more commonplace in public sector organisations than private sector ones."

About one-third of workplaces also underperformed on their sales targets.

Professor Gahan said one of the most concerning findings was the systematic failure of leadership ranks in Australian organisations to reflect the wider diversity in society.

The study found this was particularly evident in relation to gender.

Glass ceiling 'as thick as it has ever been'

Professor Gahan said it was not acceptable that in 2016, the vast majority of senior and executive management roles were still dominated by white men.

"Our study provides some strong evidence that the glass ceiling is as thick as it has ever been," he said.

"We see almost parity representation based on gender at the front line in leadership ranks.

"[But] by the time we get to senior workplace level, women are less represented, and then, by the time we get to senior organisational levels, there are certainly troubling signs in terms of the proportion of senior leaders that are women.

"I just think that we need to think a lot harder about how we change this far more rapidly than we are able to do right now."

Furthermore, the study revealed that organisations that gave leadership training to lower level managers, rather than senior executives, reported better performance outcomes.

"It's workplace-level leaders and frontline-level leaders that are really important for driving those linkages between the quality of leadership, innovation and performance, and employee engagement," Professor Gahan said.

"There's too little investment in frontline and workplace leaders to drive those sort of outcomes that we need, if we're going to become the innovation nation."

'Business community facing a period of seismic change'

The centre said recent evidence for the Asia-Pacific region, including Australia, showed that for every $10 spent on senior leaders, only $1 was spent on frontline leaders.

The research also found a huge gap between managers' perceptions of their leadership skills and the way they were viewed by their employees.

Professor Gahan said organisations often promoted people into leadership roles because they were very good at certain specific tasks, not because they were adept at managing others.

"Based on their technical performance, they're thrown into roles where they have to exercise very different skills, and they don't have the experience to be able to manage those roles particularly well," he said.

"I think this partly explains that gap, but also tells us why investing at the frontline in leadership capability is critically important."

He said the current economic climate made it crucial for Australian organisations to urgently review their leadership programs.

"The business community is facing a period of seismic change as we shift from a resources-based economy, turn outwards to new trading opportunities, and grapple with new technology that is transforming business models and jobs," Professor Gahan said.

"We need to take immediate action, using leadership skills and innovation capabilities as the levers for responding to these challenges."

The SAL interviewed almost 8,000 people from more than 2,700 organisations, and represents the first major review of leadership and management capability in Australia since the Karpin report was published in 1995.