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The ROI of Leader Development

Feb 11th, 2019 • Andrea Butcher

Stop me if you’ve heard this one (you have, but it is worth repeating): A CEO and CFO are battling it out during the budget process.  The CFO says to CEO, who is asking for dollars for leader development, “What happens if we train them and they leave?” The CEO pauses and responds with, “What happens if we don’t and they stay?” I love this two line quip.  It is so true and so telling of the way we lose sight of what could happen to our businesses if we fail to invest in the development of our people.

I hear a lot from leaders I meet with—“When you come to talk to us about talent development, can you make sure to bring numbers on the ROI of leader development?” And who wouldn’t want that?  Of COURSE we are all asking ourselves about the return on investment for spending dollars and taking time away from actual work to focus on developing oneself.

Businesses don’t grow, people do.

Let me say that again: BUSINESSES DON’T GROW, PEOPLE DO. I think that is such a powerful statement.  It encapsulates the idea that a business cannot grow faster or bigger than the most significant growth of its people. We KNOW this to be true, and yet how many of us spend day after day, eating lunch at our desks to get more work done instead of going to a networking event, attending a webinar or a development program?

In a statistically significant way, investing in your people will increase their engagement in their jobs and your company.   If you look at the opposing perspective, the cost of replacing someone is upwards of 65% of their one-year salary. When asked about the ROI on leader development, I try to encourage leaders to think of the return as three things, each of which is defined by what is significant to YOUR business: Alignment, Cohesion, and Results.

Alignment

Alignment simply means that what your team members are doing on a daily basis fit with your team’s goal, your company’s goals.  It is having transparency with leaders in order to understand what to prioritize. It is also a sense of understanding of how each person fits into the big-picture vision of the company.  In “The Strategy-Focused Organization,” authors Kaplan and Norton state, “A mere 7% of employees today fully understand their company’s business strategies and what’s expected of them in order to help achieve company goals.” Focusing time on developing your leaders allows them focused time to align their goals and feel a part of the company’s vision.  In a 2006 study by SuccessFactors, researchers found that companies that more closely aligned goals across their organization enjoyed much higher levels of financial success. Now THAT is a return on investment AND profit!

Cohesion

Cohesion is hard to measure, but you can feel when it isn’t there—it is when teams are siloed, when everyone feels like they are carrying the weight of the company on their shoulders, when you hear “we have terrible communication in our company,” or “I never know what is going on here.” Lack of cohesion can lead to lost time, work duplication, and general disengagement. What if your business units were working cross-functionally, maximizing their time to complete projects together and delegating to the person most capable of doing the work?  It is these types of high-functioning teams that come from leader development—from people who know how to prioritize what is important, know their strengths, and have the confidence to leverage the strengths of others where they have gaps.

Results

Anyone in the workforce can tell you that results are important, but they can vary as much as the companies we serve. When I work with groups to define their desired outcomes, we talk about the behaviors and competencies that will grow their specific business, support their business values.  I love this exercise because it truly is different for every business; the essential element is that it is measured. Have you ever heard the mantra “Guessing doesn’t lead to greatness?” It is true in leader development. When leaders understand how behaviors support their business goals, their self-awareness grows and their ability to adapt does too.

So the question is, “What is the return on investment to YOU?” Could your company or your team be more aligned, work more cohesively, and become more focused on the right results? If these are the questions you are asking, the answer is leader development.