Organizational effectiveness can be defined as the efficiency with which an organization is able to meet its objectives. It is about everyone doing everything they know how to do and doing it well. AND Leadership is the art of creating the conditions in which people do everything they know how to do and willingly do it well.
An article by Chief Learning Officer [1] lays out the business case for Leadership Development. It includes hard data about Leadership Development programs delivering a significant net benefit as measured by improvements in business metrics for absenteeism, turnover, rework, overtime and accidents.
Clearly, Leadership plays a very important role in organization success. So why aren’t organizations investing in Leadership Development? Or if they are, how do they demonstrate program value and verify that the business case has been achieved?
A financial Return on Investment (ROI) can be generated and calculated for any program aimed at improving organizational effectiveness.
𝑅𝑂𝐼 (%)=𝑁𝑒𝑡 𝐵𝑒𝑛𝑒𝑓𝑖𝑡𝑠/𝑃𝑟𝑜𝑔𝑟𝑎𝑚 𝐶𝑜𝑠𝑡𝑠 𝑥 100
The program costs themselves are typically straight-forward to calculate. Quantifying the net benefits is more nuanced and requires careful consideration. And, to generate a significant ROI, there are actions that must be taken before, during, and after the program is implemented. Primarily, sponsors must understand the organizational needs that the program is designed to address. Establishing a baseline of “needs” will enable the calculation of the net benefits generated after implementation.
Let’s consider employee retention as one of the “needs” an organization aims to address with a Leadership Development program. Some may consider improved retention to be an intangible benefit (not easily quantified). But is it? Josh Bersin summarizes [2} that losing an employee can cost from tens of thousands of dollars to 1.5 – 2 X annual salary. To calculate the benefits of a Leadership program, it becomes a matter of looking at the savings related to reducing the turnover costs and other needs addressed by the program.
Improved Leadership Capability leads to increased employee engagement and retention which ultimately lead to greater profitability for the organization. The business case is there; it is just a matter of ensuring that the right activities are carried out to generate and quantify the desired results.
Safety Masters is not a Leadership Development program. It is a consultant-led process that helps Leaders to assess current organization capabilities and to develop and take ownership of a custom action plan to work towards Mastery (organizational effectiveness). Not only can we help you to run an organizational ROI study of Safety Masters itself, we can also help you to fully integrate any other programs you have run or are running, in order to maximize the full benefits and increase overall ROI.
Comments