Measuring Impact and Value
As noted in chapter 4, the question of impact or return on investment is important to those responsible for leadership development. Respondents generally reported having difficulty in measuring the effectiveness of development experiences. Only 41 percent of companies, for example, relied on rigorous monitoring of development goals. And our preliminary interviews of HR professionals suggest that rigorous follow-up to assess whether development plans are being executed is not currently a common component of future-leader programs. Nor do companies systematically track how their leaders change or progress as a result of development experiences.
Exhibit 1.5. The Perceived Effectiveness of Development Experiences
(Average rated effectiveness of each activity where 1 = ineffective and 5 = extremely effective)
| • Developmental, stretch assignments within company | 3.9 |
| • Involved boss | 3.7 |
| • Development assessments by outside consultants | 3.5 |
| • In-house executive education programs | 3.4 |
| • Formal development planning | 3.4 |
| • Mentoring relationships with senior executives | 3.4 |
| • Use of outside-the-company coaches | 3.3 |
| • Coaching relationships within company | 3.3 |
| • Rigorous monitoring of progress against development goals | 3.2 |
| • External executive education programs | 3.1 |
| • Peer contact and feedback | 3.1 |
Any analysis of ROI has to begin with measuring the actual impact of the development intervention. When asked in the survey, “How should organizations measure ROI when deciding to invest in the development of future leaders?” more than half of the respondents did not answer or reported that they did not know the answer. The next most frequently reported response was retention of future leaders, the impact of which respondents said could be measured in the reduction of the numbers of leaders hired away by other companies. Companies reported measuring the value of retaining future leaders in terms of reductions in the costs of recruiting replacement leaders. They did not attempt to measure the value of keeping leaders in terms of opportunity costs, such as the increased operational efficiencies resulting from avoiding having key positions vacant for a period of time, or minimizing the timeline for integrating outside hires. (See chapter 3 for the extra time it takes to assimilate an external hire.) Promotion of future leaders into key roles was the next most frequently mentioned way to measure ROI, followed by shorter learning curves for the future leaders when they are promoted into new key roles, and fewer costly mistakes as they learned the ropes in new roles.
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