• May 16 2023

3 Ways to Measure the ROI of Leadership Development

How to use the ExecOnline Impact Framework to build a data-driven case for your leadership development program.

Understanding the financial impact of your leadership development program is crucial to securing future investment. This is especially true during times of economic uncertainty, when many organizations are looking for places to cut costs. 

You know that your organization’s short- and long-term success depends on developing a deep bench of capable leaders. However, it can be challenging to quantify the value of your leadership development program in dollar terms for key stakeholders at your company. 

Read on to learn how the ExecOnline Leadership Development Impact Framework can help you calculate the real financial impact of your program through increased employee retention, productivity, and goal achievement. 

Understanding (and speaking to) your C-suite’s priorities

When it comes to assessing corporate spending on an initiative, your company’s senior-most executives are focused on two main questions:

1) Does this initiative increase our profit margin (by driving revenue or cutting costs), and 

2) Is this initiative tightly aligned with our business objectives? 

This is true in general, and especially during times of economic uncertainty. When budgets get tight, failure to demonstrate that your program has a beneficial financial impact that aligns to business goals can result in a smaller investment in your initiative. (Tip: Download our Ultimate C-Suite Conversation Guide for HR and L&D Leaders). 

While most L&D leaders use data to measure employee enrollment in, engagement with, and reaction to their programs, very few–only 4%–use data to measure the financial impact of their program in real dollar terms.* These are the terms that can make the biggest difference when it comes to winning and defending the budget for your program. 

The few who do measure ROI often make the mistake of trying to summarize ROI in a single metric. However, ExecOnline has found that providing a more holistic look at ROI offers a stronger and more flexible business case to senior executives. 

The ExecOnline Impact Framework

It’s no wonder that so few leaders measure the ROI of leadership development. Let’s face it: it’s hard to quantify the value of learning and leadership development. The ExecOnline Leadership Development Impact Framework is designed to help you do just that. 

Based on the Kirkpatrick-Phillips models of learning evaluation, the ExecOnline framework defines distinct levels of impact that a leadership development program has on individuals and the organization at large. Uniquely, it includes financial ROI as a distinct level of measurable impact.

Understanding Business Impact and ROI through Retention, Productivity, and Goal Achievement

Levels 4 & 5 of the ExecOnline Leadership Development Impact Framework–Business Impact and ROI–empower talent development leaders to measure the real financial impact of their program. Using data from a variety of participant inputs before, during, and following the program, the framework measures to what extent a program helps the organization keep top talent (retention), get more done (productivity), and drive business priorities (goal achievement). 

ExecOnline has found that these three outcomes–better retention, greater productivity, and higher achievement of goals–builds the most durable, flexible case for leadership development among key stakeholders. 

Here’s how it works:

Measuring your program’s impact on retention

Turnover comes at a high expense to companies. It can cost 50-75% of an employee’s annual salary to replace them in recruiting and training costs alone. Leadership development can reduce turnover by increasing employee commitment to their company. On average, 40% of ExecOnline participants say that they are more likely to stay at their organization for at least another year as a result of the program. 

Measuring your program’s impact on productivity

When employees are able to get more done, teams need fewer resources to meet their productivity goals. Based on ExecOnline participant surveys, an average of 68% of leaders reported being willing to take on up to 10% more work as a direct result of their experience in the program. Meaning that for every 100 employees sent through ExecOnline programs, companies have saved, on average, the equivalent cost of up to 7 full time employees in increased productivity. 

Measuring your program’s impact on goal achievement

An increase in confidence leads to an increased likelihood of achieving your goals. For every one percentage point a leader’s confidence in their skills increases, the likelihood of them achieving more goals increases by 0.6 percentage points. On average, ExecOnline graduates’ confidence increases 18% as a result of their experience, meaning that each is 11% more likely to achieve more goals. 

Participant data gathered and aggregated in ExecOnline’s Client Dashboard allow users to easily calculate, based on how many leaders they send through our programs, the financial impact of their program based on its impact on retention, productivity, and goal attainment.

*Source: 2022 ExecOnline State of Leadership Development Report

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