Are Leadership Development Programs Worth It?

Leadership development programs have grown robust and costly. Are they worth it?
Leadership development ROI

Leadership development and training programs are now a $14 billion industry, according to Kaiser Leadership Solutions, although some experts are skeptical that they work.

“There is scarcely any evidence that all this spending on development is producing better leaders,” the organization said in a 2013 Consulting Psychology Journal article, “Leadership Development: The Failure of an Industry and the Opportunity for Consulting Psychologists.”

To be sure, developing leaders is important. Brandon Hall Group found in its 2013 “Leadership Development Benchmarking” survey that respondents ranked leadership development as the second-most important issue their organization is focusing on. Despite this, about 75 percent also said their leadership development programs lacked effectiveness.

Recovering the ROI

“Leadership programs are as effective as both the program and the candidate,” said Andrew Gilman, president and CEO of CommCore Consulting Group, a communications consulting firm based in Washington, D.C. Of course, some company programs are great, but many major companies parted with developing their own talent over time.

In years past, when it was normal for people to work at one company for their entire career, it made sense for companies to invest in their development. However, the job hopping workers of today leave less of an incentive for companies to make an investment in this area. “The individual may get the ROI because of the training, but why invest that if you’re not going to see it at your place?” Gilman said.

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As a result, external leadership development programs could be more beneficial for individuals. Especially for prestigious programs, the return on investment could come from networking with other participants. For instance, someone could meet a fellow trainee, who could help them land their next job, Gilman said.

Content and Context are King

The return on investment can also come in the form of program content, but this shouldn’t only involve attendance and a simple test. Programs are most effective when they are hands-on, Gilman said. They should include knowledge gained, as well as practicing the presented concepts and guided critiques.

Deloitte Leadership’s global leader agreed. Anthony Abbatiello, who is also a principal at Deloitte Consulting LLP’s human capital practice, said, “In order to build better leaders, programs alone are not enough.”

He likened classroom training to a Japanese Zen garden, which is peaceful and relaxing, and compared it to where leadership takes place, which is a much messier and chaotic environment, like the summer streets of Calcutta. Development initiatives should take into consideration the context of the work and be more like the leader’s daily life. “When you’re thinking about developing future leaders, you have to find ways of bringing that capability and context together,” Abbatiello said.

The static classroom program won’t do the trick. Instead, Abbatiello suggested moving out of the classroom to develop skills and capabilities. He said development should be thought of in three areas:

  1. Understand the context and challenges to effectively lead. What’s the world they’re living in? What are the things they’ll deal with? The leaders today won’t be the same in the future.
  2. Have a clear, measurable profile of what capabilities and personal factors the leaders need.
  3. Find the different experiences and exposure to different leaders and industries to give them the understanding of what they need in the future. Exposure has the greatest impact and correlation to development.

Who should be included in leadership development? “You’re never going to be able to develop all leaders within your organization at once,” but invest in those that exhibit the highest potential for leadership, Abbatiello said. First, identify high-potential leaders who have innate qualities such as curiosity, risk taking and boldness, for example. Then, develop those going into critical senior roles first.

Consider organizational design, too, Abbatiello advised. As workplaces become more digital, it’s important to build leadership confidence in the ability to implement artificial intelligence and robotic process automation alongside the human workforce. HR needs to be included in this as well, because it impacts the human capital of the company. Include HR when developing leaders who are preparing for a digitally connected workforce.

Better Leaders, Better Bottom Line

Maturity of leaders is sure to impact business results, Abbatiello added. Deloitte University Press’ article, “Better Pond, Bigger Fish: Five Ways to Nurture Developing Leaders in an Ecosystem for Growth,” which Abbatiello co-authored, found that high-maturity companies had 37 percent higher revenue per employee. This type of company has a strong leadership development environment, encourages risk taking, has a well-communicated leadership model and a strong leadership pipeline. These organizations also see 9 percent higher gross profit margins, and cultures that encourage risk-taking are five times more likely to anticipate change, the report states.

Failure in leadership’s ability to predict change is why boards fire CEOs, Abbatiello said. “Boards are moving into changing CEOs because they’re not innovating enough or they’re not pushing for what could be or should be next.”

Lauren Dixon is an associate editor at Talent Economy. To comment, email editor@talenteconomy.io.