According to The Conference Board CEO Challenge® 2015: Creating Opportunity out of Adversity—Building Innovative, People-Driven Organizations, senior executives are interested in operational excellence, customer relationships, innovation, sustainability, as well as the talent to get them there. Human capital remains CEOs’ No. 1 Challenge. Yet, the July/August 2015 issue of Harvard Business Review contends that “It’s time to blow up HR and build something new.” In other words, HR still doesn’t get it. In large part, HR continues to fail to align human capital investments with business needs, missing the opportunity to contribute to the interests of executives, including operational excellence, customer relationships, innovation, and sustainability.
A major portion of the human capital investment is in leadership development. In fact, when considering all the many learning and development opportunities that position human capital to add value, 18.3 percent focuses on managerial, supervisory, and executive development, according to ATD’s 2014 State of the Industry report. Similarly, Bersin by Deloitte estimated that in the United States, the investment in leadership development was approximately $15.5 billion in 2013.
Unfortunately, the investment is not working. UNC Leadership Survey 2014: Accelerating Leadership Development, a study by University of North Carolina Kenan-Flagler Business School and the Human Capital Institute (HCI), found that 85 percent of respondents agree that there is an urgent need to accelerate the development of their leaders. However, only 40 percent report that their high potentials can meet future business needs.
So what are leadership development program owners to do?
Measure the Success
Too often we hear people responsible for leadership development say that they cannot measure it. A common refrain goes something like this: “We don’t need to isolate the impact of leadership development on improvement in business measures. We just know that it’s working.” Well, obviously something isn’t working—or the judge would not be banging the gavel on the bench demanding proof.
To be sure, leadership is critical and it’s comprehensive. Consequently, the investments made in developing leaders deserve the attention measurement and evaluation can bring. This begs the question: How can you do it and feel confident that what you are measuring matters and how you measure it provides meaningful results. Here are three simple rules.
#1: Be Specific. Specificity drives results. Get clear, in specific terms, as to why you are implementing a leadership development program.
About three years ago, Jack and I were asked to meet with the leadership development team of a large organization who had invited a major university to implement a leadership development program. The evaluation team introduced us to the internal lead on this leadership development program. In speaking with her about the program, I asked a simple question: “Did you think about the business needs when you launched the program?” She looked at me like I was from Mars and said, “Of course, we thought about the business.” When I pressed for the specific measures, she could not name one.
We all think about the business in general terms. But if you cannot identify the specific needs, how are you going to ensure you have the right solution and you position it for success? Be specific. Get clear on the opportunities the organization is facing to make money, save money, avoid cost, or do some greater good. Then define in specific terms the business measures that need to improve that will help address the opportunities. Occasionally, you will have to rely on the participants to help you define those business measures, but define them.
Once you are clear on the business measures, get clear on the specific behaviors that need to change. There are a variety of tools to help you identify these performance needs. 360-feedback is a classic, but other tools are available to identify the specific behaviors lacking in an organization. ATD’s book 10 Steps to Successful Business Alignment offers some suggestions.
Consider solutions based on the performance needs. Once clear, consider what people need to learn during implementation of the solution so that they will change their behavior. Then consider how best to deliver the solution. By being specific up front as to why you are moving forward with a particular leadership development program, you have clear line of sight to how you implement and evaluate the program.
#2: Balance Your Measurement Process
The process of measurement is a balancing act. While specificity drives results, the extent to which you invest in the measuring success of your program depends on cost, conveniences, constraints, and culture. Measurement is a balance between science and art, accuracy and costs, and costs and benefits.
- Science and Art. Measurement is a science. Science dictates how measurement should occur—the techniques, standards, and conventions. The science gives us the guidelines for creating measures, gathering data, and conducting analysis. Art comes into play when time is of the essence or money is tight. When you know the right way to measure, you can take shortcuts and still yield credible results.
- Accuracy and Cost. If you are holding off on measuring and evaluating the success of leadership development because you are afraid you can’t get to precise conclusions, you will never do it. Precision is non-existent, unless you are a carpenter bee who drills the most precise, perfectly round holes in the back deck. Measurement is a form of estimating performance on a set of measures. Regardless of the statistical precision found in your analysis, there will be some error. The question is how will you manage measurement so that you reduce the error while not overspending and while meeting the needs of your stakeholders.
- Cost and Benefits. Measurement does add cost to the programming mix. But surprisingly, not that much cost considering the benefits. If you consider a costly, program that drives strategic measures, an investment of 5 to 10 percent of the program costs (once capability exists) to demonstrate the ROI is not much. Consider the benefits. By measuring and evaluating your leadership program you:
- identify opportunities for improvement
- demonstrate value in terms that resonate with your audience
- inform decisions that could affect future program investments
- build confidence in your team’s ability to contribute to organization needs
- help participants identify where they can improve
- support supervisors in their efforts to improve team performance
- provide executives the need to see the real impact of programs
- close gaps that prohibit the transfer of learning.
#3: Remember That All Roads Lead to ROI
I know some of you are reading this post and shaking your head in disagreement. However, the there is no question that all roads do lead to ROI. Every day we balance what we do with the benefits and costs of doing it. From an economics standpoint, it’s just good practice. Organizations only have so many resources. They either optimize those resources or they will overspend or underutilize their resources. Balancing benefits with costs is the clear path to using resources wisely.
Does that mean that we need to evaluate every leadership development program to ROI? Of course we don’t. There are some programs that drive changes in behavior, but they are not so expensive. While they should still target business measures that matter, evaluation of these programs could cost more than the program itself—and you never want to overspend on evaluation.
Also, keep in mind that there are a variety of short cuts you can take to measure the success of your leadership program. ATD’s Measuring the Success of Leadership Development describes how organizations show value of their leadership development investments.
Finally, embrace measurement and evaluation for what it is and what it can do for you. Specificity drives results, but precision is a wish. Follow the standards, balancing decisions based on costs, conveniences, and constraints. Measuring the success of your leadership programs is your way to demonstrate the investment in people is helping drive operational excellence, customer relationships, innovation, and sustainability.
Bottom line: There are a variety of ways to measure the success of leadership development, with measures of impact and ROI being the most sought after measures from the executive perspectives. Join me on August 17 for How to Measure the Success of Leadership Development webcast to learn how.