Measuring ROI on Leadership Initiatives

Many leadership and executive development learning managers find themselves at a loss for quantifying a return on investment for development programs and initiatives.  Often, L&D leaders default to qualitative results versus quantitative results, which is understandable since quantitative results require considerably more digging.  Organizations without data scientists or employees trained in knowledge and insights often struggle to tell a story using data.  Below are some tips to make this work easier for leadership and executive development professionals.

Step 1:  Define your purpose.  I recommend a purpose statement like “the purpose of this research is to determine the influence of leadership development programs and executive coaching on these variables:  performance and potential, retention, engagement and job movement.”  It is imperative to have your senior leaders’ buy in before beginning the process.  Here is a place to demonstrate leadership: make recommendations but be sure to incorporate factors that are important to leaders.

Step 2:  Narrow your focus.  Are you measuring ROI on executive coaching, leadership programs or mentoring?  Each discipline will require a different standard for measurement.   For example,
programs may last a week while leadership development experiences may last much longer.  Most executive coaching engagements range from six to twelve months.  Also, it is critical to clearly define your audience.  At this point, many leaders realize that their efforts at developing leaders haven’t been as focused as they should have been.  Often, emerging leaders are placed in signature programs for which they were not properly vetted and ready.  This practice compromises the validity of the executive development experience.  Getting the right people in the right programs for the right reasons is key.  This is the point at which you clearly define your audience; remember: right person, right program, right time.

Step 3:  Decide on the three to five key questions you want to answer.  For example, is there a common profile for each participant?  Obviously, if you’re measuring the impact of a women’s leadership program, being female is a common characteristic of all participants.  Apply that line of reasoning for each program or initiative; for example, male/female, job grade, age, tenure, ethnicity, veteran status, gender identity, etc.  All this data becomes extremely relevant when slicing, dicing and targeting your development initiatives.

Is retention important?  If so, compare retention rates of program participants against those who haven’t participated in a program.  Is there a difference?   

How does participation in a program affect performance and potential?   Programs that hit their target are ones that increase not only the participant’s performance, but also the performance of their team.  Look at the performance of the leader and their team one year prior to the program/event, the year of the program/event and up to three years after the program/event.  There should be a positive correlation between performance/potential and the program.  If there isn’t, then it’s time to reexamine the content of the program.  A redesign may be in order.

Are program participants being promoted at a higher rate than those who haven’t participated in a program?  Again, if the right person was in the right program for the right reason (growth and development), then the participant should be promoted at a faster rate than non-program participants.

Step 4:  Determine and vet your process with learning leaders.   In most cases, these 6 steps will produce consistent results:

1.       Determine the specific research questions

2.       Determine the data requirements

3.       Gather the necessary data

4.       Conduct data analysis

5.       Summarize the findings

6.       Report the findings to key stakeholders.

A few finer points to also consider:

If you are measuring several programs or initiatives, call out and report on each one individually.  As you compare results, you may see misalignments that can be corrected.  The same holds true for measuring executive coaching engagements.  Look at the coaching results from each coach and compare them side by side.  Are you getting the results you expect?  After a deep analysis, you’ll have the quantitative data to make that determination.

If your development programs are “staged” meaning that there is a program for front line leaders, emerging leaders, high potential leaders, etc., is there course overlap?  Is there a pure sequence for the programs?  This may/may not be important in your organization, but if it is important, now you’ll have data to support your decision to continue or course correct.

To better protect your investment, it is important to look at separations from the company, both voluntary and involuntary.  If there are a disproportionate number of voluntary separations, you may be training people to leave your organization for other jobs.  If there are a disproportionate number of involuntary separations, are you properly identifying the right people during your talent management and succession planning discussions?

Does the investment drive employee engagement?  If so, is it appropriate to broaden the offerings to drive higher engagement?   Is feedback provided at the end of a program?  If so, how is that data used to enrich the program? 

Finally, has the concept of “differentiated investment” become a common expression in talent management and succession planning discussions?  If so, are the leaders identified able to articulate what that means and the expectations that come from such investments?