How to Measure ROI for your Leadership Development Programs

This past January, on an extremely foggy day in San Diego, I facilitated a session at the 2017 Training Conference called Developing Leadership Awareness Through Experiential Learning. During the session, a question came up; How can you show ROI or business outcomes from a leadership development program, especially if the participants aren’t leaders yet? When answering this question, I referred to a blog post I wrote discussing the idea of Flipping the Kirkpatrick Model in Learning Program Design to show business outcomes. The key to flipping the model for design purposes is that you must know what the business outcomes are when designing a program.

For training programs involving sales-related roles, you can easily show an impact on sales growth. For programs involving safety procedure training, you can show an improvement with a reduction in incidents. For Leadership, it is not that easy.

There are some standard business outcomes that can be used, two that I hear the most include:

1. Increase in Revenue
2. Increase in operating profit.

To use these metrics, you would have to determine was there an increase in revenue or profit that can be traced back to the participants in the program.

Let’s dive a little deeper and see how difficult this can be.

Typically, Leadership Development programs are smaller in nature as not everyone in the organization is targeted as high potential to be placed in the program. With this smaller population size, you would first have to look for the increase in the metric (business outcome), then through a survey or interview with the participants, learn what they were doing differently (behavior changes) that led to their change having the direct impact on the metric. The follow up survey may need to take place at multiple intervals, 3 months, 6 months, 1 year, and 2 years. The reason for the multiple intervals is that participants may be promoted to impact positions at different times.

So how can you demonstrate that the leadership program is having an impact on the business in the shorter term.

Here are 4 metrics you can use to help show ROI:

1. With the talent pool in place ready to assume roles, what was the time to fill vacant managerial roles compared to before the programs began? Translate that into a profit improvement by demonstrating less expense by filling roles faster.
2. How many got promoted who went through program? Demonstrating the content of the program made an impact by filling the leadership pipeline with more prepared candidates.
3. How long did they stay at company vs average employee? Improvement in Retention Rates can lead to improvement in profits.
4. How many of their direct reports were promoted? Once promoted, strong leaders should foster growth on their teams by prepping their team members for future roles. Good leaders mentor, coach, influence, and even sponsor individuals for future leadership development programs. Think of a leadership family tree. It reminds me of a coaching tree I once saw for the NFL. Bill Walsh was the creator of the west coast offense. Here is what his tree looks like:

Very impressive to say the least. Even those that aren’t familiar with the NFL can see the influence this leader had on future leaders of teams.

The next step in determining ROI is of course to add up your investment. Don’t forget all costs associated with the program: time is money (design time, participant time out of office), space, food, SME vendor cost, etc.

The last step: Is the return higher than the investment?

If you want to learn more about converting these types of metrics to financial terms, consider brushing up on your business and financial acumen by working with companies like Capsim Management Simulations to help make the translation when showing results to the CFO. For more information on Capsim programs, please visit http://corporate.capsim.com.