The Real ROI of Leadership Training

We're just going to put this out there: this is going to be a difficult topic to address and calculate properly. But we've always loved a challenge. When it comes to the ROI of leadership training, there are many aspects that go into measuring and proving it aside from the cost of the leadership training itself. We'll try our best to cover the different ways that you can track the return on your investment and decide which activities in regards to leadership training you'd like to implement. 

Leadership training's effectiveness truly lies in the TRUST of employees, the strength of the leaders' teams, retention rates, productivity, and a whole host of things that can't necessarily be measured in numbers. At A Better Leader, we've spent decades helping organizations connect with their employees and solve employee engagement challenges. It's our philosophy that creating a culture of engagement begins with new hire orientation on day one and continues throughout the employee journey. We specialize in new hire orientation, union organizing campaign, leader & supervisor training. Let our expertise be your asset.

What Are Companies Spending on Training?

Historically, companies in the US invest billions of dollars (approximately $83 billion in 2019) into employee training programs and resources. This means that organizations are spending a lot of money worldwide, but how do you measure the return on investment? There are a few ways to determine the effectiveness of a training program. Let's start by trying to track the financial ROI. This may be the most difficult to calculate, simply because an increase in employee engagement, retention, or a decrease in customer complaints won't necessarily translate to dollars and cents. But, of course, these are all ways to measure your training being highly successful.

Make The Most of Your Time and Money

Patti Phillips, president and CEO of ROI Institute Inc., and co-author of Measuring the Success of Leadership Development (Association for Talent Development, 2015) says "while everything worth doing can—and should—be measured, it might not be practical to evaluate some inexpensive programs so extensively." "Conducting an analysis will enable you to identify where improvement is needed so the initiative can be more effective next time," Phillips and other experts also say. 

The article from SHRM also shared a few tips you can implement to get the most of your leadership training spending, measure the ROI of your training efforts, and avoid any missteps in the future. Some of the most important among them were to align your efforts to business needs, consult with others, find out what your leaders need, and, most importantly, share the results of the training with your workplace. In fact, Phillips shared that, if you happen to find a negative ROI, it doesn't mean you have to stop the program. It merely means that you need to improve it in some way, or that more employees were involved than necessary to be included. Keep in mind that some sort of system in place before training occurs will help you to track the leadership activities you're hoping to implement.

Keep Measurement in Mind

As stated before, specific metrics are harder to track for measuring ROI than others. However, it would be best if you had a goal in mind for which activities will yield the best results for your organization. As Dave Root from Eagle's Flight shared, "Calculating ROI is one of the biggest hurdles decision-makers face when determining which leadership activities to include in organizational development and training initiatives." You can keep your leadership training both insightful and straightforward. The most common areas that you will be able to measure and track are going to be higher employee retention and lower turnover, higher employee engagement, boosted morale and results from employee surveys that can pin down more in-depth questions related to your industry and your organization. We'll touch on these metrics below so you have a better idea with what to move forward with when selecting a leadership training for your organization.

Employee Engagement

One of the most important metrics to measure is the engagement levels of your employees, before and after you choose a leadership training to implement. Consider what your workplace currently has in place that focuses on employee engagement, and compare to the training options you're contemplating. It's also a good idea to conduct employee survey(s) before and after you execute any form of training, to get an accurate depiction of how effective it is. This is an excellent indicator of your ROI. Engaged employees are more likely to be productive on a consistent basis – which leads to more revenue. Additionally, companies with a high level of engagement report 22% higher productivity according to data from Gallup.

Reduced Turnover

As SHRM states, controlling turnover is one of the many quantitative ways the HR department can affect the bottom line. It's crucial to be mindful of your company's turnover rates, considering that the cost of losing one employee can be anywhere from 1.5-2 times the amount of their salary. When you consider the cost of losing just one of your leaders, and the amount of time it could take to train their replacement, a leadership training that focuses on lowering your turnover rate and increasing retention would yield a high ROI.

The ROI of Leadership Training

Bottom line: anything that can be measured by a leadership training program should be. Take the steps ahead of time to avoid missing anything of importance. The training you decide to implement within your workplace should have a positive impact on your employees and your bottom line. It should incorporate measureable components to determine your ROI and improve critical areas within your business. If you are in need of consistent leadership training that delivers engaged employees and a connected workforce, we're here to help.