Investments in leadership training and leadership skills training are an important driver of success for any business. Great leaders make for better and happier employees, which not only increases engagement but also ensures higher retention and better performance.
A recent study found that running first-time managers through a leadership development program offered a 29% ROI in the first 3 months, and a 415% annualized ROI. This means that the business made $4.15 for every $1 spent on training.
Need we say more? Yes we do. Tighter economic conditions have forced many companies to cut back on their spending budgets. Learning and development has taken a hit, and leaders are looking for ways to measure and prove the ROI of their expenditure. Consequently, HR and Learning and Development (L&D) teams must have a plan in place to measure impact of their programs to justify bankrolling when it comes to the need for leadership development programs in their organizations.
But how exactly can this be achieved? In this guide, we’ll run through effective solutions for measuring the ROI for leadership development programs.
ROI Measurements to Consider
According to an article by SHRM, “only 18% of businesses are gathering relevant business impact metrics, which may be why some experts have questioned the worth of these programs in recent years.”
When measuring the ROI on leadership development programs, you need to first identify the exact things the leadership team wants to improve and measure. Additionally, the company's overall strategic direction must be considered when developing leadership. Management often spends money and time on generalized leadership training, which doesn't always correlate to what you want to accomplish as a company, so make sure to establish goals before going about implementing leadership development.
To effectively focus on ROI, consider implementing the following qualitative metrics:
- What do the retention rates look like? Did the employees that participated in the leadership development program stay longer than the average employee? If so, this can directly relate to retention enhancement in profits for the company.
- How many of the people who participated in a leadership development program went on to become promoted? Promotion is a great qualitative metric to consider. However, to accurately measure correlation between promotion and the leadership program, follow-up with a survey to ask the participant how effective the program was in helping them get promoted. Also, be aware that leaders who do not get promoted might have added as much value or more to the business as those who did. Titles are not everything - and sometimes it is more beneficial if the leader stays true to their strengths and stays in a role as an individual contributor, rather than seeking a promotion where their strengths will not be useful.
- How much did engagement from the individual leader and the team around them rise? Engagement surveys are great measures to prove that the investment in leadership training has been worthwhile. Many studies show how engagement is linked to performance, therefore, this is a measure you must not miss.
- Pre- and post-training assessments to show day-to-day progress: Keeping a pulse on how well an employee is applying their leadership skills is a must and can elevate the productivity and overall success of the individual, the team, and the organization.
You’ll also need some quantitative metrics for measuring ROI. One of the most widely used and respected systems for doing this is through the Kirkpatrick/Phillips Model, which is made up of four levels:
- Reaction to the program from the participants. This includes the thoughts and feelings on the program, the moderator, the venue, the content, etc.
- Knowledge assessments of the newly acquired skills, capabilities, and knowledge of the participants.
- Behavior 360-degree assessments that measure the transfer of learning of the trainees’ leadership skills by supervisors, the trainees, and direct reports.
- Impact and ROI assessments measuring changes in the productivity of the participant by the supervisors, trainees, and direct reports, and how they benefited the entire company.
This is powerful data to show stakeholders because it describes how successive rollouts can be optimized. Using this model, you can essentially tell the extent of the training’s impact — from learners’ participation in the program to business results to ROI to and how to improve the training impact in the future.
In the end, leadership development programs should not just serve the individual participant, but the organization as a whole. Measuring the ROI on your programs ensures that organizational goals are being attained, and that employee development is moving in the right direction. As Peter Drucker once famously said ‘’You can't improve what you don't measure”, and this couldn’t be more true when it comes to leadership development! Investing in leadership development programs is a no-brainer for L&D and HR teams, but to convince management of its effectiveness, knowing how to measure ROI is a necessity.
At Session, we know how important it is to track ROI for our coaching journeys, so we do exactly that. We provide regular check-ins and feedback surveys to ensure that programs and journeys stay on track. Additionally, when 8+ employees undertake coaching, we make quarterly trend reports highlighting issues, recommendations, and tips for HR to stay up-to-date. Curious to learn more about advancing leadership development with Session? Reach out to our team to learn more.