Justifying Leadership Development During Recession

In the absence of industry-wide success metrics, demonstrating the bottom-line results of L&D initiatives is a growing issue

Leading is easy when times are good, the economy is growing, and employees are engaged and fulfilled. Leadership is tested when times are tough, business is down, the future is uncertain, and employees are frightened. 

The good news is that you can recession-proof your leadership development initiatives by showing the true business impact of developing stronger leaders as well as aligning future leadership development programs directly with your organization’s broader business objectives.

As the world grapples with inflation, geo-political turmoil, and the lasting impacts of the Covid-19 pandemic — including The Great Resignation, The Great Shuffle, and Quiet Quitting — organizations everywhere are taking long hard looks at the bottom line to see how they can reduce costs and increase employee engagement and customer satisfaction.

Ironically, it is at those very times — when money’s tight, mission is fuzzy, and employees are restless — that we stop supporting our leaders. Leadership development initiatives (along with most training programs) are slashed due to cost-cutting and more urgent priorities. 

In case, you don't remember the last recession or were not in the working world when it happened, check out this February 2009 article from ATD for some interesting historical context.

Of course, righting the ship is critical to the long-term (and even short-term) viability of the organization, so, of course, leaders need to spend time leading. But why can not we continue to support them as well?

Many organizations rely on external vendors to address their leadership development needs. This approach may work well when cash is available but not so well when the purse strings tighten. And when the leadership development programs disappear, leadership capability disappears along with it … at the very time, it is needed most.

So, how do we ensure that our leadership development programs are highly valued at every level of the organization — from training participants all the way up to the C-suite?

Redefine How You Measure Success

According to LinkedIn’s 2022 Workplace Learning Report, nearly three-fourths of L&D leaders agree that L&D has become more influential over the past year. In fact, 74% of survey respondents agree that L&D has become more cross-functional and 72% stated that L&D has become a more strategic function at their organization. 

On top of that, we have also seen L&D incorporate many new, meatier, and loftier business-critical topics into leadership development programs, including inclusive leadership and DE&I, crisis communication, change management, innovation, resiliency, and agility, among others. 

At the end of the day, it is important to recognize that the change most organizations are seeking by covering these critical leadership topics is impossible to measure on a per class or even per program basis. 

And yet, most L&D teams continue to measure success the same way they always have: qualitative feedback from post-program surveys and quantitative stats from course completion data. All too often we talk about intangible benefits like a strong corporate culture, or an upswing in employee morale that could be the result of any number of factors. Or, we cite program stats like the total number of program participants, or classroom/online training hours logged that sound impressive, but don't truly ladder back to the bottom line.

As a former corporate L&D manager, I know how relatively easy it is to measure what we measure and how challenging and messy it is to measure things that actually mean something to the business. But measuring what we can rather than measuring what we should is just going to sell our programs short.

14 Ways to Measure Leadership Development ROI

Since we are often asked about the best ways to measure the success of leadership development programs, we've compiled everything into one place for easy reference. Without further ado, here are 14 business-oriented categories to include in your next leadership development measurement plan, along with specific metrics to track for each bucket:

Leader Assessments

1. Leader retention and loyalty. Has retention increased for participating leaders? What recruiting and replacement costs have been avoided by retaining effective leaders?
2. Leader promotions. Have promotions increased for leaders who have completed the program? Are they recognized in other ways for increased performance and competencies (possibly additional responsibilities, increased mobility between departments/geographies)?
3. Skill mastery, transfer, and business impact. Do the pre- and post-training assessments show an increase in the leader’s mastery and on-the-job application of key skills? And, how have those skills improved quality, increased efficiency, increased compliance/safety, improved employee retention, and increased innovation?

Team Assessments

1. Employee retention and loyalty. Has employee turnover decreased on the participating leader’s team? Is the leader retaining more high potential employees? What recruiting and onboarding costs has the organization avoided by retaining strong talent?
2. Employee promotions. How many employees on the participating leader’s team have attained a promotion due to an increase in the leader’s performance or effectiveness?
3. Customer impact. Has the team’s Net Promoter Score or Customer Experience score improved? Has the group increased sales or customer satisfaction?
4. Productivity. How have Key Performance Indicators (KPIs) and business metrics (average handle time, quality, errors, time to resolution, etc.) been impacted by the application of the skills learned in the training?

Organizational Assessments

1. Innovation and growth. Has the leader or the leader’s team generated actionable innovations for the company? Have they generated revenue? Has the organization increased its product offerings, geographic footprint, or market share as a result of those innovations?
2. Awards. Can you link your leadership development to any awards or recognition the company has achieved?
3. Bench strength. Has your company been able to quickly fill open positions internally due to a larger pool of qualified leaders?
4. Increased engagement. Has there been an increase in the number of employees who say they are committed to their work and the broader organization as a result of connecting more with their leader and their team?
5. Mentoring. Are your leaders mentoring more employees? Is there an increase in mentorship requests? When mentoring thrives, the investment in leadership development is transferred from leader to future leader.
6. Succession planning. Does the organization’s succession plan include leaders developed through your program?
7. Prestige and perception. Are your leadership development programs used to attract desirable leadership candidates, thereby reducing recruiting costs?

Design with ROI in Mind

It’s one thing to more accurately measure the impact of existing leadership development programs, but what if we actually designed courses that focused on what we’re measuring? Can you imagine designing a course with the sole intention of getting great feedback from attendees? (I’m sure it would include cake, refreshments, and lots of breaks!) Or a course developed solely to keep participants online as long as possible?  (I’m thinking a program with tons of gamification tactics and engagement incentives.)  If our measures indicate what’s important, we need to rethink our design.

Here’s a suggestion, one straight from a training vendor who relies on ROI for a living. Don’t wait until the training is designed, developed, and implemented to consider ROI. Make ROI a part of the design process.
This mindset applies to any L&D initiative, including those that seem squishy like leadership development, which we know will continue to be a high priority for organizations as we all continue to navigate our next normal together.

Terence R. Traut is the CEO of Entelechy. Connect Terry Traut