When looking into increasing the skill level, awareness, and behavioral practices of leaders, organizations need to be able to weigh the costs against the benefits of any training program in which they invest.
But how does one determine the financial return on investment (ROI) of leadership and soft skills training?
A Broad View
Organizations must look at several factors before deciding whether to provide leadership and soft skills training:
- The cost in salaries of the people attending the training
- The cost of the training being provided
- The amount of lost production of the attendees
- And the most important question, are we getting a satisfactory ROI?
For technical training such as learning to operate, run, and maintain a machine, the ROI is easier to calculate. How much profit was being made when the machine wasn’t producing goods compared to how much profit is being made with the machine producing goods.
Leadership and soft skills training assessment for ROI isn’t quite as straight forward. To calculate return on investment you must consider factors that aren’t so easy to place a monetary value on, such as:
- Lost revenues from dissatisfied customers
- Wasted advertising dollars
- Employee turnover
- Employee and customer lawsuits
- Sub-standard production (what it is compared to what it would be if all personnel where proficient and committed to the organization’s mission)
- And more
The fact is, the lack of skills and commitment to professional standards by leaders and company representatives cost the organization tremendous amounts of profit in a myriad of ways.
I’ve seen companies spend millions of dollars in new customer acquisition programs, both in advertising dollars and give-aways, only to see many prospective customers walk away due to poor customer service efforts. What about the team or unit leader who speaks to employees negatively and as a result has constant turnover?
The average cost of acquiring and hiring a new employee has been $27,000 and is rising. How about the leader that gets an organization sued due to their lack of skill and professionalism? In 2008, American organizations paid out more than a half a billion dollars in fines from the Equal Employment Opportunity Commission. That number doesn’t include damages against companies awarded by American courts as a result of employee lawsuits.
The key to having the greatest return on investment is having a highly skilled and committed group of people who know what to do, how to do it, and they want to do it well.
Of course this attitude and level of performance starts with the leadership.
Most anyone can force people to work given the power of authority, however, skilled leaders make people WANT to be highly productive and successful. We all know that when someone wants to do something it will get done better and faster than if they are forced to. If you don’t know that fact, there is a ton of research that verifies it. Teams accomplish magnificent feats when they are led well and want to, not because they are forced to.
So how do we measure ROI for leadership training and soft skills? How do we know that the investment is worth it? Look at the following (after the appropriate training and follow-up):
- Are we capturing more customers from our marketing efforts?
- Do we have a higher percent of prospects purchasing goods and services?
- Has customer satisfaction increased?
- Have customer referrals increased?
- Have sales increased?
- Has customer feedback become more positive and more frequent?
For leadership training:
- Has morale increased?
- Have employee complaints decreased significantly?
- Has production increased (without overtime)?
- Has absenteeism decreased?
- Have employee lawsuits stopped?
- Have leader and employee relationships improved and interpersonal stresses been removed?
- Has position turnover declined?
- Has the work environment become more positive, team oriented, and mission focused (don’t ask, walk around unexpectedly and observe)?
Research shows most organizations that have problems with production and performance suffer from people issues not process issues. Changing processes, adding rules, making demands does not fix people issues.
People work for people, not for policies.
Getting the right people, providing the right skills, creating a unified sense of purpose, completely defining and enforcing the required professional standards, and setting the example are the true path to maximizing an organization’s Return On Investment. Get good people, provide the training (good training not just any training) and reap the rewards!
So, what are you doing to evaluate your organization’s investment into leadership and soft skills training? How are you taking the time to measure those elements that can lead to better working environments and better production rates? What investments in these types of training have you seen work well? And which ones have failed? I would love to hear your thoughts!
A. D. Roberts is President/CEO of A. D. Roberts Consulting, Inc. in North Augusta, SC
He helps with Leadership & Interpersonal Communication Consulting & Training
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Filed under: Leadership Assessments, Leadership Lessons Learned, Leading & Developing Other Leaders, Team Building Leadership Tagged: | business, communication, executive coaching, executive development, leadership, Management, soft skills