Leadership development is crucial for any organization that wants to succeed and thrive in today’s fast-paced business world. However, many companies struggle to invest in this important aspect of their operations. While 86% of business and HR leaders agree that leadership development is important, only 13% believe that they do an excellent job at it, according to a study by Deloitte. A survey by PwC found that 77% of CEOs believe that the lack of key skills is the biggest threat to their business, highlighting the need for leadership development. In addition, replacing a senior executive can cost six to 24 times their salary, as reported by Harvard Business Review.
Many organizations struggle with professional development and often expect motivated employees to seek out resources on their own as they would for extra-curricular activities or hobbies. By not prioritizing development activities internally, they end up signaling to their employees what they value. If your organization is struggling to prioritize its own professional development programs, these four reasons will help support the need for a more robust leadership training focus.
4 Reasons to Invest in Leadership Training
1. Improving revenue
Investing in leadership development can have a significant impact on a business’s bottom line. By providing leadership training, organizations can reduce costs and identify new opportunities for revenue through innovation.
According to a report from Training Industry, businesses that invested in leadership development training in 2019 saw a return on investment (ROI) of 29% within just three months and an annual ROI of 415%. This means that for every $1 spent on training, organizations saw a return of $4.15, making leadership development training a wise investment for businesses looking to improve their financial performance.
2. Attracting talent and increasing loyalty
Developing talent internally is often less expensive than searching for and hiring new employees externally. In fact, it can cost up to 60% more to hire a new employee than it does to train and develop an existing employee to take on new responsibilities. Additionally, investing in the professional development of your current employees can lead to higher employee retention rates, improved job satisfaction, and ultimately, a more productive and engaged workforce.
When organizations choose to hire external candidates instead of developing and promoting internal talent, it can lead to a lack of trust and even resentment among current employees. This is because employees may feel that the company does not value their skills and abilities or see them as promotable. This can cause a negative ripple effect, as employees may start to seek opportunities elsewhere, leading to a higher turnover rate and potentially even a loss of institutional knowledge.
According to a report by The Execu|Search Group, 86% of employees would be willing to change jobs if the new company provided more professional development opportunities. This highlights the importance of providing opportunities for growth and development within your organization if you want to attract and retain top talent. By investing in the development of your employees, you show that you are committed to their professional growth and value their contributions to the organization.
Companies with leadership development programs also have 34% higher retention rates
than those without such programs, according to a study by Better Buys. This is because leadership development programs can help employees feel more engaged and invested in the organization, as they see that their employer is committed to their personal and professional growth.
3. Drives performance and execution
Effective leadership development is critical to reaching the stated goals of every organization. However, simply implementing generic development programs without considering the unique culture and goals of the organization is unlikely to yield the desired results. In order to create a leadership development program that drives lasting change, it is crucial to tailor it to the specific needs and goals of the organization.
Research by the Association for Talent Development has shown that 83% of all organizations have a skills gap, meaning that they lack the necessary skills and knowledge to achieve their strategic objectives. This underscores the importance of effective leadership development programs that are tailored to the specific needs of the organization. By addressing the skills gap, organizations can improve their competitiveness, drive innovation, and position themselves for long-term success.
By taking a one-size-fits-all approach, these programs can fail to address the unique challenges that the organization faces, and may not resonate with employees or leaders. The best strategy is to work closely with leaders, employees, and other stakeholders to identify the specific skills and behaviors that are needed to achieve the organization’s strategic objectives. By doing so, leadership development programs can be tailored to address the specific needs of the organization, while also helping to build a strong, cohesive culture that supports the achievement of its goals.
4. Increases resilience through change
Leadership development is a crucial element of building this kind of resilience within an organization. It helps to cultivate leaders who are flexible, proactive, and able to navigate change with ease. These leaders are able to identify opportunities and challenges in the ever-changing business landscape and respond quickly and effectively to them.
To remain competitive in today’s fast-paced business world, organizations must be agile and adaptable. This requires not only having the right strategies and resources in place but also having the right leadership in place to guide the company through change and uncertainty.
By investing in leadership development, organizations can build a more resilient workforce, better equipped to handle change and uncertainty. With the right leadership in place, organizations can adapt quickly to new challenges and seize new opportunities, which can give them a competitive advantage and help ensure their long-term success.
Why Organizations Don’t Invest
Many businesses understand the importance of investing in leadership development, particularly at entry-level roles, as it can lead to a more engaged, productive, and loyal workforce. Yet, only a small fraction of organizations actually invest in such programs. This begs the question: why don’t more companies prioritize leadership training and development?
One of the primary reasons is the perceived difficulty of measuring the return on investment (ROI) of leadership development programs. Companies may be hesitant to invest significant resources into training and development without a clear understanding of the tangible benefits that will result. It’s important for organizations to conduct a baseline assessment and identify key metrics that they hope to improve through such programs.
However, the benefits of investing in leadership development can be significant.
For example, Coast Capital Savings Credit Union valued relationships with its 500,000 members for over 75 years but realized they weren’t living that vision internally. They needed a culture change and reached out to Fierce for help.
As a direct result of customized Fierce programs, Coast Capital lifted monthly revenue by over $450k over the previous year. They exceeded the cost of implementing the program by nearly $300k
True culture change took place and because of early benchmarking assessment, Coast Capital was able to measure the direct impact of the training on specific key metrics.
In the post-implementation assessment, the organization showed positive growth in:
- Strategy Execution
Each of these segments contributed to the increase in overhaul revenue and could be tied back directly to the skill development they invested in. One senior leader said Fierce programs “allowed me to have more engaged conversations with my team and colleagues, resulting in greater clarity and understanding.”
If you continue to struggle through employee engagement issues, missing goals and milestones, and finding a deep enough talent pool to remain competitive in today’s marketplace, consider leadership development as an essential strategy for growth.