In one of our group coaching calls, we discussed “leadership and the bottom line.” Specifically, we brainstormed about how a leader or an organization can measure the return on investment (ROI) of leadership development, either for him/herself or for a staff member chosen to receive coaching.
Two types of ROIs, or bottom lines, emerged from the conversation:
- “Hard” ROI, which is usually quick to measure
- “Soft” ROI, which takes longer to reap but which holds the power to deliver more substantial returns
Hard ROI measures for the leadership development investment are typically tied to specific performance metrics. One example is attaining a minimum score on customer satisfaction surveys. These types of metrics are measurable by numbers and are typically achievable within a fiscal window, such as a quarter or a year. Hard measures are often thought of as “quick wins” to justify an investment in leadership development—but they don’t necessarily tell the whole story, or even the best part of the story.
We spent much more time discussing the soft ROI metrics of leadership development. Leaders on the call generally felt that more significant ROI occurs in this area—if one is willing to wait for it. For example, let’s say that the minimum customer satisfaction score is not met. Looking only at that metric, the leadership investment would be a failure. But what if that “failure” becomes the impetus for the developing leader to demonstrate true leadership skills?
“Leadership is about being able to get to the next step, but you never do it by yourself. It’s done through building relationships with staff, with partners, with clients, and so on. The bottom line here may be fuzzier—it’s about having a strong group that clicks together in order to create real change and impact on the organization’s bottom line.” – Executive leader, call participant
If a key performance metric is not met, leadership is required to “turn the boat around.” Most organizational KPIs involve numerous functions, departments, and people, so improving them calls for strong relationships and engagement throughout the organization. Customer satisfaction is an excellent example of this—the things that contribute to that satisfaction score may include front-line staff performance, technology systems, marketing, service partners, and others. Improving that metric will require a leader—or leadership team—capable of building relationships and engagement within and outside of the organization. It’s difficult to measure the skills required to make that happen, but over time, the ability to do so can yield substantial returns in customer retention, increased sales, larger subscription or membership bases, and so on.
“The elements of leadership that tend to have the biggest impact on the bottom line are usually the ‘soft’ ones that take longer to show impact. You will probably need to measure and consider both: the quick wins and the bigger picture results. Individually, a leader may not affect the bottom line a great deal, but through interacting with others they may eventually have a big impact on the bottom line.” – Executive leader, call participant
If you are looking to create real change in your team or your organization, please contact us to discuss how we can help you build leadership capacity to meet the challenge.