The world is rushing, with technology-driven innovation changing companies and industries dramatically. Despite the exciting new developments, employee engagement is at an all-time low. 85% of employees worldwide are not engaged or actively disengaged from their jobs. Disengaged employees have higher absenteeism, lower productivity, more accidents, and lower profitability.

What is the cause of low employee engagement? The relationship between managers and employees is a crucial driver of employee engagement, and some studies indicate that as much as 70% of employee engagement is based on this vital relationship. Yet, managers’ and leaders’ responsibilities have increased significantly, making the world rush, with technology-driven innovation changing companies and industries dramatically. Despite the exciting new developments, employee engagement is at an all-time low. 85% of employees worldwide are not engaged or actively disengaged from their jobs. Disengaged employees have higher absenteeism, lower productivity, more accidents, and lower profitability.

What is the cause of low employee engagement? The relationship between managers and employees is a crucial driver of employee engagement, and some studies indicate that as much as 70% of employee engagement is based on this vital relationship. Yet, managers’ and leaders’ responsibilities have increased significantly, making investing in these critical relationships challenging. Beyond managing outcomes, assessing performance, and hiring and firing employees, managers are now tasked with helping their direct reports navigate their careers, coaching them to success, adopting new leadership behaviours, and developing new skills and competencies. Overwhelmed and time-constrained managers continue to exacerbate the problem.ing investing in these critical relationships challenging. Beyond managing outcomes, assessing performance, and hiring and firing employees, managers are now tasked with helping their direct reports navigate their careers, coaching them to success, adopting new leadership behaviours, and developing new skills and competencies. Overwhelmed and time-constrained managers continue to exacerbate the problem.

Underdeveloped Leaders are Compounding the Issue

The prevalence of underdeveloped leaders and managers across all organisations worsens matters. While 80% of respondents in a recent survey indicated that leadership is a critical issue, only 42% of leaders say that the quality of their organisation’s leadership is high. In particular, 47% of leaders rated their senior leaders as high quality compared to 33% for first-level leadership.

Creating an ROI through Leadership Development

How can we improve the individual performance of leaders and managers, resulting in greater employee engagement and the metrics impacted by it? By investing in the launch and improvement of leadership development programs.

LEADERSHIP DEVELOPMENT COMPONENTS

Before looking at how leadership development drives an ROI for organisations, we will first outline the standard components of leadership development programs. Leadership development programs will look different across organisations as some lean heavily on front-of-room training. In contrast, others have taken to one-on-one coaching to drive the rapid development of key managers and executives. Here is a brief overview of the standard components of leadership development programs:

• Assessments: Assessments are a powerful tool to provide a baseline evaluation of leaders’ skills and increase individual and team awareness of employee personality differences. Assessments can provide insight into personality to help improve communication and interactions among teammates and colleagues. Other tools assess an individual’s skills and competencies over time. Regardless of the type of tool selected, all assessments provide an objective viewpoint into individual leaders that can be used to accelerate ongoing development.
• Training: In-person leadership development continues to be one of the most common components companies use to support the ongoing development of leaders and managers, given its cost efficiency per employee and a long history of success. Training also offers break-out groups to facilitate real-time, experiential learning and participant input. With the continued development and adoption of video conferencing and collaboration tools, companies have successfully developed and deployed virtual training by leveraging tools such as Zoom, Skype for Business, WebEx, and GoToMeeting. Doing so helps minimise costs by reducing travel and enables teams from across the globe to connect and learn in a unified environment.
• Mentorship: Many top organisations rely on formal and informal mentorship programs to help accelerate high-potential development and onboard new employees. Mentorship fills a critical gap that must be addressed by proper manager coaching, given the need for more time managers can devote to developing their direct reports. Mentees seeking out multiple mentors benefit from different expertise, career experiences, and insight to support their ongoing development. Some of the fastest developing leaders form an informal board of advisers to support their continued growth.
• Executive Coaching: Executive coaching is another critical element of leadership development, given its efficacy and ability to provide real-time, iterative coaching to drive the adoption of new leadership mindsets, behaviours, and skills. Companies hire in-house and external coaches to develop high-potential managers and senior leaders. Coaching isn’t as scalable as training, given its high cost per employee, and thus is most effective when deployed at key leverage points within an organisation to drive meaningful change.
• Management: Managers continue to be a key inoculation point for the development of individual contributors. Despite the scarcity of time, the best managers act as coaches to their direct reports to understand their career goals and aspirations. They use one-on-one meetings not as a command and control exercise but to find ways to support their ongoing development and act as a resource for growth. Successful coaching conversations create new awareness of possibilities and close gaps in ongoing leadership development issues. Unfortunately, most managers struggle to find consistent time to develop their direct reports, and check-ins often become less about coaching and more about managing tasks and deadlines.
• Technology-Enabled Learning: HR leaders increasingly use technology to support traditional leadership development efforts. From mobile apps providing leadership tips to just-in-time insights provided by tools such as one we love to use called Core Strengths Platform, leaders and managers are armed with an array of knowledge to support their ongoing development. Technology alone will not solve all leadership development ills. However, its cost efficiency and ability to be used on the go are compelling reasons to adopt technologies to develop organisational leaders.

HOW LEADERSHIP DEVELOPMENT CREATES AN ROI

So, how does leadership development drive an ROI for an organisation? Investing time, human capital, and budget to developing leaders create an ROI in three critical ways: improving individual leadership performance, accelerating team performance, and improving employee engagement among direct reports.

Better Leaders Have a Greater Impact and are More Productive

The first-way leadership development programs create an ROI is by increasing the performance of individual leaders. Programs do so by improving a leader’s productivity and that of their team. Leaders become more productive by learning to manage time more effectively by prioritising and spending time on the most important tasks and focusing on output, not just time spent on tasks. In an era of lean organisations where incremental budget and headcount are hard to come by, increasing productivity is necessary, given that employees are already working more strenuously than ever. The key is to work smarter, not harder.

In addition, helping leaders improve the efficiency and efficacy of their communication also helps generate an ROI. A Genpact/MIT Sloan Management Review Study 2016 found a 74% correlation between quality relationships, communication patterns and individual performance. Therefore, leadership development programs to improve communication and relationships will increase individual performance.

Further, leadership development programs that equip leaders and managers to manage conflict can directly impact the bottom line through greater productivity and increased collaboration and innovation. Leaders and managers can learn to better prevent and manage conflict through greater awareness of individual motives, strengths, and personality differences. Leaders can also learn to communicate in a manner that is better received and leads to less conflict. According to one study, the annual cost of conflict is $359 billion, which equates to approximately 2.8 hours per week by US employees. Imagine the impact on your organisation if each employee could recoup almost 3 hours per week to direct towards high-value tasks in place of conflict.

More Exceptional Leaders Build Greater Teams

Investing in leadership development also creates an ROI by improving team effectiveness. Specifically, leadership development focused on the effectiveness of leadership teams increases ROI through higher levels of trust, lower conflict, more robust communication, increased collaboration, better and faster decision-making, and more accountability.

At its most basic level, teams’ success starts with a greater understanding of individual and group personalities and preferences and an ability to communicate and collaborate with different people. Leadership development efforts that support greater awareness of motives and strengths and adopting new communication styles will lead to higher-performing teams. Given that teams are where real work gets done, investing in improving team performance yields an ROI from leadership development efforts.

ROI from Higher Employee Engagement

As noted above, the relationship between managers and their direct reports is the critical driver of employee engagement. Developing leaders who can inspire, empower, and build up their team members will directly impact employee engagement. Improving these key relationships will also provide short- and long-term benefits. After all, people don’t quit jobs; they leave managers. Higher employee engagement will ultimately lead to lower attrition and support hiring efforts – one of the biggest challenges in the current marketplace.

The benefits of increasing employee engagement are clear. Organisations with higher employee engagement metrics boast earnings-per-share growth an astounding four times that of their competition. In addition, companies in the first quartile of employee engagement also have 21% higher profitability than those in the lowest quartile.

TIPS TO IMPROVE THE ROI OF LEADERSHIP DEVELOPMENT PROGRAMS

Even with the best intentions, many leadership development programs fail to generate ROI for their organisations. Below are a few tips to improve the success of your leadership development programs.

• Start with the End in Mind: The best leadership development programs don’t focus on behaviour change merely for the sake of behaviour change. Instead, they connect the behaviour changes required to their current business context. For example, a company seeking incredible innovation to capture new growth opportunities will focus on improving communication and collaboration. On the other hand, a company facing a slow-growing marketplace will focus on more excellent analytical and process reengineering skills to streamline processes and identify excess costs that can be eliminated.
• Please focus on the Right People: Given the cost of leadership development, companies should focus on the people with the most significant potential to change and those at key organisational leverage points. In addition, companies should be sure to match the leadership development mode with the needs of the employees. For example, training is an excellent tool for front-line employees and individual contributors, given its cost efficiency and ability to convey broad concepts. At the same time, executive coaching should be reserved for senior leaders with a proclivity to grow and improve.
• Make it Experiential: Experience shows that people remember more of what they do than what they read and hear. Given how people best learn and retain information, create interactive and experiential exercises to practice the new behaviours in real-time and anchor them in real work. Include exercises requiring action while practising new behaviours connected to an actual business topic they are facing.
• Provide Tools to Sustain Learning: Sustaining the efficacy and learnings of leadership development programs is a crucial challenge of such efforts. To help sustain their efficacy, provide tools such as mobile apps, quick guides, and email reminders to keep information top of mind. In addition, learning can be sustained and reinforced if the content and insights can be easily ported into Learning Management Systems and one-on-one check-in agendas between managers and their direct reports. Providing talking points and questions aimed at the particular leadership development content will ensure continual progress is made.
• Measure More than Participant Feedback: To ensure your leadership development programs are creating meaningful change, go beyond measuring participant feedback and look at additional measures such as individual productivity before and after the program, employee promotions over the next few years after the course, and 360 input focused on the behaviours that are being addressed through the leadership development program. Doing so will help quantify progress, justify continued investment, and identify programs needing refinement to deliver meaningful results.

NEXT STEPS

Leadership development continues to be one of the highest priorities for CEOs, heads of learning and development, and fellow executive team members and warrants time, effort, and budget to help achieve organisational goals. There are various tools, courses, and programs to consider, and it’s essential to design the program to match the organisation’s needs, culture and objectives. The right program can help accelerate the development of leaders and managers to drive improved individual leadership performance, greater team effectiveness, and higher levels of employee engagement, all of which will deliver an ROI.

Please check out our programs page here to learn how LeadershipHQ can impact your culture and success