Focusing on leadership development is very important for organisational growth, but on many instances it’s been observed that organisations invest excessive time, money and effort in grooming leaders of tomorrow. Such initiatives definitely are a cost to the company and do not justify ROIs at the end of it all.
To testify this, findings on the “CRF’s Leadership Development – is it fit for purpose?” survey found that, “34% of organisations have increased spend on leadership development over the last three years, and that 17% had increased this spend significantly. Almost half (42%) reported that this was likely to rise over the next three years.”
There is no reason that we could identify for the disparity existing between spends and outcome. One major reason could be not devising leadership development programmes made to cater specifically to the growing needs of business.
Also many HR managers opt for “off-the-shelf” formal training courses, without adhering to on-job training, wherein the 70:20:10 model can be inculcated. 70 percent comprised of on-job learning, 20 percent of the theory and 10 percent will be some strategically relevant programmes or workshops on job.
Also there is no metric system wherein leadership development can be measured accurately to understand the knowledge of the person on chair.
Paul Kearns, chair of The Maturity Institute said, “This inability to measure leadership development’s effectiveness shows confusion among L&D professionals about what they are actually trying to achieve. Everyone has just thrown their hands up and said ‘you can’t measure it; you can’t prove if you develop a leader in this way it leads to this business performance.”
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Kearns added, “The only way forward is to accept you can’t isolate things in an organisation, it’s a complex picture. But you do need to work out a system for measuring the effectiveness of leaders and leadership development.”
Organisations will be able to achieve more with same spend or achieve similar results with lesser spending, provided they have set clear objectives to be achieved from the leadership mentoring programme, and can accordingly customise approaches to meet unique business needs.
While value of money is significant, it should not be earned at the cost of compromised leadership.
One of the most commonly used methods for measuring ROI on leadership development is by using Kirkpatrick/Phillips Model, which comprises of four levels:
It is also recommended that follow-up leadership evaluation programs be conducted every six months to determine the grasp of information by employees and to gauge performance.
Pre and Post leadership mentoring is essential to understand areas wherein the employee seeks guidance and faces challenges to deal with situations. You can also use assessment tools like skill practices, role playing, simulation to grade trainees on new knowledge skills etc.
On an average, it costs nearly four times as much as to recruit and train a new leader, rather than retaining one who already understands the business operating system of the firm.
Hence, HR managers should maintain an account of how many managers are trained on job, continue to stay with the firm and those who chose to quit before time, assess the total dollar value of the personnel costs including benefits and multiply those costs depending on the level of the employee.
This will help organisations measure costs incurred on training a leader as against ROI. A strong succession management program is the key to fostering employee engagement within the organisation and safeguarding interests of the company against high turnover.
Also read: Developing Leadership Capital and Capability
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