Leadership Development Programs: Worth The Investment (And Risk)?
Once upon a time, it wasn’t unusual for workers to stay with one employer for their entire career.
In those days, it made sense for the employer to invest in the professional development of its employees. This investment built loyalty and prepared new employees for future leadership roles. It also strengthened recruitment efforts with the promise of new skills and higher job satisfaction, which in turn gave organizations access to the “best and brightest” talent.
But as we head into 2019, the idea of a worker remaining loyal to a single employer seems… quaint. We can’t blame companies if they aren’t sure whether they should invest in early career development programs. After all, why spend the resources if program participants are simply going to take their newfound skills elsewhere?
Leading companies build leadership or technical development programs that will justify the expense and risk. They need to know their program will deliver the ROI that makes it all worthwhile.
Success Starts With Goals
A McKinsey leadership-development survey revealed that barely one-tenth of all executives believe their leadership development initiatives deliver the results they sought.
We suspect this may be because those results weren’t clearly articulated from the beginning.
RJ Wronski Associates is a Boston-based talent development organization that has worked for 25 years to help companies clearly articulate the end-goals of their programs. They partner with companies that have a “learning mindset,” according to Stephan Wronski, who helms the company.
“Learning isn’t an afterthought for these organizations; it becomes a way of life. You’ll find that everyone from the top executives on down share that commitment,” Wronski says.
Too many companies fail to translate their guiding strategy into a training program specific to their needs. A company’s size, culture, business goals and a myriad of other factors will shape their approach. The best early career development programs should meet the highest-priority needs of the business.
“If this program is considered successful, what will change? What objective will be met? If you don’t know those answers going in, then you’ll have a difficult time measuring if it’s successful or not,” Wronski says.
For some, the goal may be to create a cohesive culture change in the wake of an organizational shakeup. For others, the goal may be to create a more diverse workforce. Retaining employees or preparing to fill the leadership roles of tomorrow are other common targets. Ultimately, the direction your program takes – and your ROI yardstick – will depend on your core business goals.
Monitoring Outcomes to Measure ROI
The investment required to build a leadership development program is substantial. Therefore, measuring the short-term and long-term impact of your program is key.. Short-term outcomes might include enhancing participants’ technical and leadership skills or their satisfaction with the initial phase of the program. Long-term outcomes might include making a positive impact on recruiting and retention. Naturally, it takes time to gauge the acceptance rate of job offers and promotions; that’s why these long-term outcomes can take five years or more to fully appreciate.
“We can help our clients perform an ROI comparison,” Wronski says. “Say there is a two-year IT training program, and its graduates are supposed to be able to come out of this program and take on roles as team leaders or project managers.
“We look at the total investment per participant in the leadership development program and compare it to the cost of the direct hire from the IT program. If you compare the program participants against that control group of direct hires (over time), you can compare the costs. Then you can take it one step further and look at performance ratings between the groups.”
For most organizations, Wronski says the long-term ROI is clearly higher with the group that has undergone leadership development. Over time, participants get better performance ratings, they’re more likely to take on mission-critical challenges and they are more upwardly mobile through the ranks of the organizations.
Knowing What Risks to Guard Against
The return on investment in a well-planned, well-run leadership development program is clear. But what about the risks?
There’s always the risk of training employees only to have them defect to competitors. There’s also the potential of alienating non-program employees who don’t feel like they’re getting the attention that program participants get. For example, let’s say you have an employee who has been with the company for years. He or she sees a cohort of new hires meeting regularly with the C-suite, getting constant feedback and being assigned career coaches. This employee may think, “Hey, what about me?”
Your program shouldn’t create an “us-versus-them” mentality where the participants feel at odds with the rest of the company. Learning doesn’t happen in a vacuum. That’s why program managers have to take these tenured employees into account and include them where possible. Give them mentorship roles and other stakeholder roles and you’ll see better results company-wide.
“Think about what role they can play and how they can get excited about what’s happening,” Wronski says. “When we launch a program, we spend a lot of time thinking about the assignment leaders in a rotational program. Is there any benefit or reward for them for all the time and energy they’re putting into developing the program participants?”
What this reward might look like will depend on your organization. Some companies leverage financial compensation. Others incorporate mentorship evaluations on employees’ performance appraisals, making 10 or 20 percent of their score based on people development, for example.
“Other times the assignment leaders themselves get training. Or they’ll get more visibility in senior leadership as a result of being an assignment leader for the early career folks. This is a huge benefit in some of these larger organizations.”
Aside from the effort it takes to make employees feel included in development efforts, there’s another risk—one that most organizations never consider when building out a rotational program. This is the risk of pushing away potential new hires if there’s a perception that your development program leaves something to be desired.
“If you try to deliver a program and you don’t do it well, word gets out,” Wronski says. “Recruiting is expensive. If you’re competing for top talent and your program isn’t fine-tuned, word gets around quickly. It will leave you settling for talent that may not be as good as you want.”
Like any other large initiative, building a successful leadership development program requires a close look at investments and a careful measure of results.