The importance of leadership development is undeniable. McKinsey reports that when five hundred executives were asked about their most important priorities, leadership development was in the top three. 86% of the companies interviewed rated developing new leaders as urgent or important. As a result, over $14 Billion/year is being spent on leadership development by US companies. Top business schools charge upwards of $150K on customized leadership development courses.

Despite this sense of urgency and investment, the statistics on the value of leadership development and training are sobering. To start with, 61% of all US companies offer no leadership training at all. Of those companies that do, only 13% of them rate their ability to develop leaders as excellent. 81% of executives are not very confident in their leadership pipelines and are skeptical that there is any return on investment (ROI) of leadership training programs.

Just imagine the competitive advantage you would gain if you dramatically improved your return on leadership development!

Having spent over 40 years in management positions, from group leader to senior VP, and then coaching emerging leaders in several companies, I have learned a lot about what works and what doesn’t when it comes to identifying and developing the next generation of leaders. I would like to share some of my thoughts with you on why the statistics are as bad as they are and some suggestions on how to dramatically improve your leadership training ROI.

First and foremost, you must start off with the right philosophy and mindset. Leadership development is a long term, continuous process, not an episodic event. There are no short cuts or quick fixes that you see advertised in the brochures of training companies. If you cut corners, you chip away at investment returns. It requires the full commitment of management at all levels. There is a threshold investment that must be made before seeing real dramatic results. Recognizing that in the rapidly changing world that we currently live in, you should try and build the culture of a learning organization, where a percentage of everyone’s time should be allocated to learning. As counterintuitive as it sounds, productively goes up in learning organizations.

I have identified seven critical deficiencies that are common the leadership development process that need to be corrected. Once corrected, you will see a dramatic increase in ROI.

Mistake #1 – A lack of purpose – Most leadership development and training programs are not grounded in the organization’s strategy. Your leadership development program should be designed to answer the following questions, “What is the current and future (next three years) leadership requirements for all of our organizational units or program initiatives? Do we have ready now and/or ready with additional development candidates? The answers to those questions can be found in the organization’s succession plan. If you are thinking “my organization doesn’t have one” you would be wrong. Every organization has a succession plan. It’s either a formal written one (which is ideal) or is in the heads of managers who lie awake at night worrying what would happen if one of their subordinate managers or key project and program leaders left the organization (which is harder to identify).

The succession plan is not just focused on the organizational chart either. There are critical leadership positions needing to be filled in programs and key initiatives across the organization. Identifying the number and types of leaders required for your organization, based on job requirements, and linking it to the selection and training of emerging leadership candidates is the first essential step that will lay the foundation for your leadership development program. You will then have a target to shoot for and be able to measure your progress.

Mistake #2 – Lack of a selection process – The succession plan will provide a guide for the number and types of leaders you need to select and develop. There is a wealth of information that points to the selection process being more important than the development process as a leadership success factor. While most organizations feel compelled to provide training to their staff, leadership training should be reserved for those candidates who have the highest probability of filling the gaps in the succession plan. What are the positions that you are trying to fill at each level of the organization, now and in the future: what are the specific requirements for those positions; and what are the attributes necessary to be successful? It is important that the Training and Development Department builds consensus from line management and HR on what is needed and why.

Have the right reasons for selecting the leadership candidate pool. Your return on investment is highly dependent on which candidates you invest in. There must be a strong suspicion that the candidates not only have the talent and track record of performance, but also a personal growth mindset, is open minded, and is willing to learn. We are all familiar with the star performer who has failed miserably in a group leader position either due to an oversized ego or not being quite ready. The ancient Chinese proverb rings true to me, “When the student is ready, the teacher will appear”. You need to look for that readiness mindset, the drive to learn, willingness to receive feedback, and the discipline to change. So, don’t send your ducks to eagle’s school if they are not willing to fly.

Mistake #3 – A lack of preparation – Too often, leadership candidates are sent to expensive training courses with little preparation. As with any investment, you need to have a baseline from which to measure progress. You need to know where you are starting from in order to determine relevant improvement gained from training. Once candidates are selected for leadership development, it is important to develop a comprehensive profile of their strengths, weaknesses, belief systems and aspirations prior to the training course and not assume that this is the goal of the training itself. There are numerous psychometric assessments available such as Myers Briggs, DISC, 360 analyses that can be synthesized to produce a pretty good profile of each leadership candidate and his/her development needs. Dalio, in his book on Principles has done such a synthesis and developed a comprehensive assessment tool called the Team Dimensions Profile. Armed with this information, group training and coaching can be made more effective by customizing case studies, personalizing exercises, and matching the training to the specific requirements of the leadership positions and the attributes of the leadership candidates being trained.

Mistake #4 – a focus on the wrong training methodology – When it comes to leadership training, most leadership development courses focus mainly on skill development which is the easiest to teach. Most of the research on effective leadership development however points to behavior change as the single most important success factor. Leadership development is a journey of personal growth that requires a change in philosophy and a different mindset that leads to positive behavioral changes. Everyone has seen examples of outstanding individual performers who have failed as leaders due to an inability to change their philosophy from “me” to “we”. 70% of the training effort needs to be spent on philosophy and mindset (what is authentic leadership and why it works) and 30% on learning new skills (how to master the skills of leadership).

While on-line training can be quite cost effective and useful as a training tool (I use it myself), there must be an element of personal interaction when it comes to leadership training. Ideally, this would be in a classroom setting or at a minimum, interactive webinars where instructors can dialog with the attendees, challenge them and provide iterative feedback, which leads directly to experiential learning.

Mistake #5 – A lack of experienced instructors – Leadership philosophy and mindset are best learned through experience aided by apprenticeship and coaching. The best way to learn leadership is from someone who has had experience in leading. Too often, leadership instructors bring much “book learning” to the training classroom with a curriculum developed by senior members of his/her firm. Unfortunately, I have seen it first-hand. These training instructors have very little hands on experience or track record of managing a department, growing a company, surviving a downturn and the like. Experienced leaders are scarce and in high demand but are well worth seeking out. They will provide real personal examples of common leadership challenges and how they overcame them. They approach the classroom as a group coaching session rather than a training course. Even in a classroom setting, the focus should be on group coaching not teaching.

Mistake #6 – Lack of assessment – During the preparation phase, a leadership profile was developed for each candidate and shared with his/her immediate supervisor, the head of HR and the Training and Development Leader. Upon completion of training, a written self-assessment needs to be conducted by each leadership candidate that identifies specific insights gained (i.e. changes in philosophy and mindset), planned changes in behavior, and expected improvement in performance. In addition, a one-page report should be required by the leadership training instructor describing the changes seen in each candidate. This will form an interim progress report on the investment made and potential return.

Mistake #7 – a lack of follow-up – In order to quantify the return on investment, changes in both behavior and performance need to be monitored over time. Leadership development is a process not an episodic event, and just as much time must be spent in the follow-up as in the preparation. Scheduling a training session that takes up several days without organizational follow-through is almost certain to deliver poor results.

If you don’t have one already, you need to develop an assessment protocol to measure ROI after 6 months and one year. This is where your investment in purpose and preparation will pay off. At the micro level, the assessment protocol can quantitatively determine how well each candidate delivered on his/her improvement goals through a 360 analysis. At the macro level, the succession plan can be revisited to determine how many of the leadership gaps have been plugged with ready now candidates.

Summary

At first blush, some of you may be thinking “this sounds all well and good, but this would take too much time and money to implement; I don’t even know where to start”. I can assure you that once this process is codified you will wonder why it took so long to implement. The road to your desired destination starts with the first step. The best leadership development programs did not start fully developed but were built in deliberate steps and personalized to the organizations. Once developed, management decisions on leadership talent will dramatically increase, the leadership pipeline will get filled much quicker, and the increased ROI will become very transparent.

At Graffeo & Associates, we assist organizations with customizing and implementing a comprehensive leadership development framework to avoid these pitfalls and maximize the return on this critical investment. Call us at 617-704-6093 to learn more about how we help organizations maximize their leadership development investment”.

For a more in-depth discussion of this topic, read Leading Science and Technology Organizations: Mastering the Fundamentals of Personal, Managerial, and Executive Leadership.

Stay tuned for my new E-book coming out next month, On Becoming a Three-Dimensional Leader.