How to Measure ROI for Leadership Development Programs

By: Annette Klososky, Partner & Sr. Leadership Consultant, Executive Development Associates, Inc.

 

As constant technological disruption brings all departments and budgets under the proverbial microscope, leadership development programs must have a plan in place to measure impact and to justify bankrolling these efforts.

Yet even with this being true, 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.”

Add that to the fact that it can be difficult to show direct connections between softer skills like decision making, strategic thinking, innovativeness, and collaboration with increased revenue.

With that being said, thanks to the research of Laurie Bassi, a former researcher for the American Society for Training and Development, we now know that there is a strong connection between learning opportunities like L&D programs and higher levels of participant promotion, skills and knowledge, satisfaction, and retention. All of these factors contribute to organizational performance and the bottom line.

So how can we measure the ROI of these programs? Let’s look at the short-term first, and then some ways a company can measure more long-term impacts.

 

Short-Term Measurements

The most important thing to start off within any leadership development program is to identify exactly what kinds of things the leadership team wants to improve and measure. The more specific the better.  Connecting the improvements desired to the overall strategic direction of a company is a much more powerful way to look at developing your leadership team.  All too often company management will spend a lot of money and time on generalized leadership training, which can, of course, be meaningful, but doesn’t necessarily correlate to what you are trying to accomplish as a company.   Once the definition of success is agreed upon, a program must then simply show development beyond a reasonable doubt.

While most leadership development programs focus on more long-term ROI, there are some metrics and questions that can be utilized to see what the impact is in the short-term for ROI, as well:

How many participants were promoted and how long did it take? This can help show the strength of the content and what skills have been fully utilized that the program taught. The faster the spaces were filled, the better for the company’s expense. The key here is to get the right people in the right seats with the right training so you can execute effectively.

What do the retention rates look like? Did the employees that participated in the program stay longer than the average employee? If so, this can directly relate to improvement in profits for the company.

How many of the people hired and trained by the leadership development participants then go on to be promoted? This shows good leadership and coaching capabilities, being able to mentor and help their employees succeed within the business and be more efficient.

There should be pre- and post-training assessments to show actual progress and integration in the day-to-day. Keeping a pulse on how well someone is developing around their leadership skills is a must and can elevate the productivity, velocity and overall success of a team and/or organization.

 

Things to Consider When Measuring Long-Term ROI

CEOs and others in leadership positions want quantifiable, observable results when considering the effects of Leadership development programs. Gathering data that shows that the program is what has increased leadership value and department performance, and not another factor, is without a doubt a difficult process, but those in charge of measuring this can gather their information on ROI through various systems. 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:

  1. Reaction to the program from the participants. This includes the thoughts and feelings on the program, the moderator, the venue, the content, etc.
  2. Knowledge assessments of the newly acquired skills, capabilities, and knowledge of the participants
  3. Behavior 360-degree assessments that measure the transfer of learning of the trainees’ leadership skills by supervisors, the trainees, and direct reports
  4. 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

According to a study done by UNC Executive Development Directors Keri Bennington and Tony Laffoley, it’s important that when measuring ROI for these programs, that the focus should lie on results over quality. So, when calculating ROI and evaluating the results of a program, focusing less on the quality and more on the effect of the learning is key.

They also remind us that measuring ROI is not all about money, and that “When analyzing results, consider such learning measurements as quality, effectiveness, job impact, and business results,” and that “Linda O’Connell, principal of Learnologies, LLC, recommends blending ROI metrics with participant and stakeholder feedback and anecdotes to better convey the total value of leadership development programs.”

For those measuring the impact of leadership development programs, it has become vitally important that the surveys and interviews were done after becoming more robust.

  • These assessments should include concrete examples of exactly how the participants have applied their new knowledge and skills in the workplace.
  • The surveys continue to be done over a period of several months.
  • The programs themselves include real business challenges so that the participants can start applying their skills and knowledge.
  • After the program, the participants be assigned projects that utilize their new skills with measurement checkpoints as well.

With the techniques that measure return on investment sometimes being difficult to implement, companies can get creative in how they measure their objectives, as long as there is a clear metric and goal to look for that has been previously agreed upon.

Employers hold each department accountable, so it’s always important to share whatever results you find, as well. Even if they end up reflecting negatively on the current leadership development program, this information can then be used to create more productive and impactful programs in the future and show where money can be saved or invested later on.

With a strong leadership development program in place, a company can ensure a more engaged, productive workforce, and encourage higher retention rates, as well.

 

About the Author:

Annette Klososky serves Executive Development Associates in a partner role as a Senior Leadership Development Consultant and Operational Executive. She has 20+ years of experience working to influence change and results within organizations. A successful entrepreneur and organizational development expert, Annette built a peer advisory business in less than a year comprised of members representing companies with 40,000+ employees and $23 billion in revenue that was featured in Entrepreneur Magazine. She is passionate about equipping leaders with measurable people analytics data and much more.