The ROI of Leadership Development

Last year I invested in an up-and-coming technology company. In less than one year, the stock rose 201%. WHAT?!  Where else can you get that kind of return-on-investment in such a short period of time?  I know of one other place…

Here’s my hot “stock tip” for business owners: Invest in leadership development.

Every dollar you invest will return 300% - 500%, nearly immediately – here’s how.

There are three distinct ways that leadership development pays back the organization:

1.      Reduced turnover and greater retention

2.      Easier recruiting

3.      Leadership benchstrength

Let’s take a look at these in a little more depth.

Reduced Turnover and Greater Retention

With the exodus of Boomers from the workforce, there will be a rapid rise in leadership roles fulfilled by Millennials. What’s important for every employer to know about this group of employees is that they value professional development above money and titles. They are most excited about continually learning and advancing their career.  By initiating a leadership development program in your organization you minimize the risk of losing an employee who will leave simply to learn something new.

Another advantage of providing a steady stream of professional development is that it increases productivity. As people learn more and are more capable, they can produce better outcomes and work with others in the organization more cooperatively, which leads to higher productivity.

A 10% increase in productivity can increae the profits of most organizations by 50%

Peter Drucker

Finally, employees are more committed to an organization when that organization provides professional development and a career path.

Easier Recruiting

One of the most expensive activities for any company is the recruiting and hiring process. Recent data from SHRM has determined that it can cost anywhere from $3000 to fill an hourly worker’s role, to as much as two-times the salary of an executive to replace that individual. Since so few organizations provide well thought-out professional development, it is seen as a real perk by employees and potential employees – lessening the need for recruiting efforts and costs. Oftentimes organizations that embrace professional development are listed in their local “best places to work,” lists – which is worth more than any advertisement to attract quality workers.

Leadership Benchstrength

 As mentioned at the start of this article, Millennials will be moving up the corporate ladder sooner than expected (the US Census had predicted that the Boomers would be out of the workforce by 2030, simply based on their age, but the pandemic has accelerated that exodus by a decade) and will not have the years on the job to learn organically as the Boomers have. There must be a purposeful and concerted approach to develop your next generation of leaders’ skills such as decision making, problem-solving, teaming, risk management, stakeholder management, and a myriad of others.

By having a group of prepared individuals at the ready, organizational leaders can sleep better at night knowing that there will be continuity in performance and culture as younger professionals step into leadership roles.

Leadership is not the nebulous topic that most people make it out to be. It is a skill that can be taught - but it must be taught over time, which is counter to the typical methodology for leadership development in the last fifty years.  There are significant benefits for forward-thinking organizations that provide leadership development as discussed above; any one of which can save a company tens of thousands of dollars a year. Smart investors (aka business owners) will make the minimal investment today in order to reap amazing return on investment in both the short and long-term.

The Biggest Mistake in Leadership Development is...

The biggest mistake in leadership development is waiting to do it.

Too may (all?) organizations wait until they promote someone to a leadership position and then start to apply leadership development.  And that’s for the lucky folks. Most organizations don’t offer any kind of development to their new leaders and instead let them struggle to figure it out all on their own. I know that’s what happened to me the first time I was promoted to a managerial role. I was flattered that the organization thought I had the potential to lead a department of eight at the tender age of 25, but then I panicked because the only “training” I had was modeling the good leaders I had had in my life and anti-modeling (yep, I made up a new word) the bad ones. I was flying by the seat of my pants. This was especially terrifying because at least two of my employees were old enough to be my mother.

This approach is really unfair to the individual and detrimental to the organization.

There are plenty of things we learn through the school of hard knocks – not to speed through a yellow light, not to cheat on an exam, not to lie on our resume… and most of the time the only person we hurt is ourselves.

Often, in the midst of the pain, we’ll think, “If only someone had warned me…” But in the workplace, there are other individuals that are impacted when a new leader is rattling around trying to find their footing. And without good guidance, new, unskilled managers can really do damage.

Don’t know the difference between constructive and critical feedback? Perhaps you’ll figure it out when your employees start to defect. Don’t recognize your personal bias in a performance review? The HR department can bring you up to speed when one of your employees lodges a complaint. Think it’s OK to hang with the boys (but not the women) after hours? Lesson learned. Lesson learned. Lesson learned.

What’s truly unfair to the new leader is that the organization is expecting him/her to also take on new functional responsibilities like scheduling, project planning, budgeting, and more. This is too much to ask of a new leader all at once – to be functionally responsible for a department and to change their behavior at the same time. As a training and development professional for decades, I know that the hardest thing to “train” someone to do is to change their behavior. Yet organizations consistently drop the ball on shaping individuals’ leadership behaviors early on.

This is detrimental to the organization as well because when push comes to shove, the new manager will need to focus on their functional responsibilities – it is what they will be judged on after all; and in all likelihood, it is what got them promoted in the first place. So without a focus on leadership and interpersonal skills early in one’s career, there is a lot of heavy lifting that is required of a new leader – and any failings impact both the individual and the organization.  

The Solution is Early Leadership Development

In a perfect world, leadership development would begin the moment a new employee walks in the company’s door. They would be handed their HR paperwork and a development plan for the next 3 to 5 years. Not  only would this approach benefit the organization by ensuring everyone has “baseline skills” (of your choosing) such as business writing, giving and receiving feedback, understanding how the company makes (and keeps) money, and more, but think of the impression made on the new hire! “Wow. This company is investing in me from day one? Amazing!” 

In today’s business environment, a need for and a confidence in employee’s self-leadership skills is critical. I’ve seen a number of articles lately that discuss company’s monitoring their employees while they are working at home. This seems perfectly reasonable if your company has not set and trained for a certain standard of behavior. It’s like trusting your child to stay home alone for the first time. The parent who hasn’t trained for good decision making and responsibility is a lot more worried than the parent who has.

In the long-term, the company that has trained for leadership skills at the start of their employees’ careers will have a ready and capable pipeline of leaders who can fully focus on their functional responsibilities because their leadership abilities are standard-operating-procedure by the time they are promoted.

At The Training Doctor we specialize in preparing your employees for future leadership roles. Apply early and often, for best results. Give us a call to discuss your needs. It never hurts to ask… is another truism my mother taught me.

3 Free Leadership Development Resources

Note: This article originally appeared on Forbes.com
https://www.forbes.com/sites/forbescoachescouncil/2019/09/26/how-to-develop-your-future-leaders-for-next-to-nothing/#69afc9ec2d11

Are you a business owner or managerwho knows you need to startdeveloping the future leaders of your organization, but you’re paralyzed by theidea of where to begin? No worries. This article will help you get started withno cost and minimal effort.

When people learn that The Training Doctor helps companies to develop their leadership strategy, we often hear, "Yeah, but we have no money.”

There are a LOT of organizations - big and small - in this same situation. And the good news is - leadership development does NOT have to be expensive or time-consuming. Here are three resources (and we have PLENTY more to share, if you are interested).

Reading and Discussion Groups

The best activity your company’s futureleaders can master is to be knowledgeable about business in general and yourindustry in particular.  A businessleader needs to know how a business works, not how a job is done. Assist yourup-and-coming leaders by subscribing to industry journals and general-businesspublications such as Forbes, Harvard Business Review, or the Wall StreetJournal.

More importantly, form weekly orbi-weekly discussion groups around an article or two that you think isparticularly enlightening or that would be good for discussion. If you reallywant to go the extra mile, pre-formulate discussion questions that get awayfrom opinion (What do you think of that?) and lean toward critical thinking(Could that happen to us? What would we do, if that happened?).  It’s important to have your future leadersthinking about “the big picture,” and your company in the context of yourindustry and business in general.

Job Rotations

Job rotations are traditionallythought of as an activity reserved for “hi-pos” (high potential individuals).Why?

It’s important that your futureleaders understand how your business works, what departments areinterdependent, and especially how you make money. They cannot learn thesethings if they are stuck in the silo of their own department or role.

A job rotation doesn’t have to beextensive or lengthy, but it should give the “visitor” a thorough understandingof another department’s work processes, priorities, and constraints. Imaginehaving a customer service representative work in the sales department for aweek. They could travel on sales calls, learn about your competition,understand better about contracts and pricing and the customer lifecycle, andon and on. Wouldn’t that make them a much more knowledgeable and helpfulcustomer service rep? Now imagine the reverse - a salesperson on the phones inthe customer service department for a week. Wow.

When people have a perspective onthe whole organization they do their own jobs better, have better collaborationskills, better communication skills, more empathy, a better understanding ofthe constraints or opportunities throughout the organization, and are not justfocused on the role that they do at their own desk.

Tuition Reimbursement

Finally, my third free leadershipdevelopment recommendation is to institute a tuition reimbursement program.Now, this isn’t exactly cost-free because it will take a bit of money to hire alawyer and/or accountant to set it up correctly (for instance, the rules aredifferent for C-corps vs. LLC’s) but once that process is done, the payback isextraordinary.

First, you have little to managebut the reimbursement process because participants are engaged more with the institutionwhere they are taking classes. Second, you are able to take advantage of a taxcredit of slightly over $5000 per participant. Third, courses often requireon-the-job projects, which means that your company reaps the rewards of betterproject management or a better HR communications strategy, for example.

And individuals often feel loyaltyto those companies that help them to further their career and their education, soan added benefit is that you’ll see increased retention (which mutes thosecynics who worry “What if I train them and they leave?”).

Bottom line: You CAN afford todevelop the future leaders of your organization with little cost and minimaleffort by starting reading and discussion groups, instituting job rotations,and offering tuition reimbursement, for everyone, not just for those employeesyou think are “high potential.”

For more great suggestions for leadership development follow The Training Doctor on Twitter or LinkedIn.

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