Learning & Development

Leadership Development Programs Are a Quantified Profit Multiplier—Here’s the Proof

For those tasked with driving organizational growth, whether in HR, an executive role, or a leadership position, what’s paramount is transforming the organization’s coaching and training initiatives into drivers of financial success. The C-suite wants to know that learning and development programs are aligned with the company’s current strategic goals and objectives and gain confidence that training and coaching contribute to these goals and support the company’s long-term growth initiatives.

leadership development programs

Countless qualitative studies have demonstrated that the benefits of leadership development ripple across entire organizations. Can we also now think about leadership development as a profit multiplier? Is it possible to calculate the concrete return on investment (ROI) of leadership development?

The answer is a resounding “yes”!

Proof in the Pudding

A recent double-blind survey conducted by the Fossiker Group for BetterManager of 752 U.S., U.K., and Canadian leadership development professionals, 50% of whom work at companies with more than $1 billion in revenue over the last 12  months, found an ROI ranging from $3 to $11. On average, that’s a whopping ROI of $7 for every $1 spent on leadership development.   

On average, the total tangible benefit of leadership development across all companies surveyed came to $374,796,036. The median leadership development spend was $1 million, or $444 per person.To calculate leadership development ROI, the mean total program costs were subtracted from the mean total tangible benefits reported by survey participants; then, that number was divided by the mean total program cost.

The tangible ROI benefits of leadership development include revenue from sales directly attributed to leadership development, savings from retention as a result of leadership development, and savings as a result of promotions from within. Two additional factors went into the creation of our ROI formula: reduced attrition rates and increased rates of promotions from within.

Unlike reported revenue increases from sales, these two factors improve the bottom line through cost avoidance. So, how does leadership development impact attrition and promotions from within? Among leadership development participants, we observed a clear relationship between reduced rates of attrition and increased rates of promotions as compared with nonparticipants.

Executive coaching, group coaching, and training programs are also an important part of retention and the professional benefit for employees. Employees’ leaving the company because they aren’t growing and developing is a very costly issue in business. Many senior leaders are now requesting executive coaching as part of their package when onboarding.

We also found that retention and promotions from within account for 11% of overall ROI savings. Furthermore, when comparing the retention and promotion rates of participants and nonparticipants, we found that in just 1 year, an average of $11.5 million per company was saved due to these factors alone.

Leadership Leaders Still Investing in Development

The good news is that many of the companies surveyed are already calculating the ROI of leadership development. It’s no surprise then that 84% said their company prioritizes investing in leadership development in 2024, with an eye-opening 99% projecting they would maintain or increase their leadership development spend over the next 12 months. 

As alluded to above, for many companies, organically growing, developing, and then keeping that talent remains a huge challenge. Underpinning the ROI of leadership development programs is the major impact it can have on talent retention and culture. These numbers are startling:

  • 88% reported a higher or significantly higher desire to more frequently hire from within.
  • 83% reported a higher or significantly higher ability to more quickly/easily fill job vacancies.
  • 87% reported higher or significantly higher employee satisfaction rates.
  • 88% reported higher or significantly higher employee performance scores.

Executive coaching is based on behavioral science and is considered one of the most impactful ways to develop leaders and help leaders improve their performance. The personalized nature of coaching makes it constantly applicable, especially in an agile and constantly evolving business world. This allows leaders to tackle timely real-world problems during coaching sessions and to quickly apply the lessons learned in the workplace for immediate impact. In contrast to other development methods, coaching can create a lasting behavior change for the coachee and the team and ultimately has ripple effects throughout the organization, which the survey demonstrates.

To justify leadership development investments, executives need to be able to prove that leadership development programs contribute to the bottom line. To that end, 87% of respondents agreed or strongly agreed that their decision-makers use ROI as a determining factor for investment decisions. 

Accountability and Results Measurement Are Key to L&D Investment Decisions Today

By tracking the costs and benefits, companies are taking the guesswork out of the decision to  invest in leadership development. Ninety-one percent of respondents agreed or strongly agreed that their decision-makers have a clear, data-driven process for determining leadership development budgets, and 95% agreed or strongly agreed that their decision-makers have a clear understanding of the costs of leadership development programs. 

Of course, the ROI of leadership development coaching will vary depending on the specific organization and the individual leader. However, current research shows that coaching can be a very worthwhile investment for organizations of all sizes. The ROI of leadership development coaching comes from improvements in the organization, becoming more focused while being agile regardless of the situation that might arise and maintaining alignment with the organization’s biggest challenges.

Wendy Hanson is the cofounder and Chief Culture and Community Officer at BetterManager. In this role, she oversees all programming and is responsible for recruiting, managing, and cultivating a vibrant community of executive coaches and facilitators around the globe. Under her leadership, BetterManager has grown into a top-rated executive and employee coaching company, amassing an industry-leading net promoter score of 90 and a client roster that includes leading companies like Chegg, NASA, Eventbrite, DraftKings, and more. As an executive coach for over two decades, she has worked with companies of all sizes, coaching C-suite leaders and business teams across various industries. Her clients have included Google, Yelp, SurveyMonkey, DropBox, AOL, Mapquest, and hundreds of early-stage and high-growth start-ups. She’s a member of A Network for Grateful Living’s Board, Forbes’ Coaches Council, and the National Speakers Association.

Hanson earned a master’s degree in education from Antioch University of New England in organization and management. In 1999, she received her coaching certification (PCC) from the Coaches Training Institute. She was also named the Small Business Administration’s Women in Business Champion of the Year for the State of Rhode Island in 2009.

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