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.