SIP in Leadership Development -A Great Investment Strategy

Business Excellence Series Title – 11

It is well known that Leaders are responsible for making investment strategies for the organizations to achieve continuous growth at a faster pace than its competition. But what is not so popularly accepted is the fact that Leaders also need investment in their own development on a regular basis, which becomes the catalyst for sustained organization business growth.

A Systematic Investment Plan (SIP) in Leadership Development not only leads to the achievement of increasingly steep targets but also sends a visible message across the organization, regarding the positive intent of the management towards its employees inspiring them for exceeding set expectations. The first and foremost requirement is the change in the mindset of the management in terms of viewing employee development as an investment rather than an expense.

According to John Maxwell, a Leadership expert, and Coach, developing leaders helps to grow an organization. There are a lot of variables in business, but people are one of the constants. “You need people to run a business, so it makes sense to invest in those people and help them fulfill their potential,” he says. “Investing in leaders grows your organization because it is the one activity that compounds a leader’s time, influence, energy, vision, culture, finances, and mission.”

Undoubtedly, the success of an organization is largely a function of the quality of Leaders it is able to attract, retain, and develop.

Leadership Training or Leadership Development?

Most organizations have a handsome training budget and ensure that the same is spent in providing various kinds of training to its employees at all levels. While providing skill-based training to the operational workforce definitely adds value in their performance and business outcomes, similar training have much-reduced value add when imparted to middle and senior-level employees.

Each year, U.S. businesses spend more than $170 billion on leadership programs, with the majority of that being spent on “Leadership Training.” And that is a critical area of concern. This approach leads to excessive underutilization of resources and a very small part of the total expenditure is able to add desired value in leadership capabilities. That is precisely the reason that unplanned and indiscriminate expenditure for Leadership development must be avoided, as it hurts organizations in multiple ways. That leads us to the premise that Leaders are not trained; they are developed.

“Training focuses on best practices, while development focuses on next practices,” says Fortune 500 leadership adviser, author, and Forbes contributor Mike Myatt. “Training is often one-directional, one dimensional, one size fits all, authoritarian process that imposes static, outdated information on people,” Myatt explains. “The majority of training takes place within a monologue (lecture/presentation) rather than a dialog. Perhaps worst of all, training usually occurs within a vacuum driven by past experience, not by future needs.”

Training is the top reason why leadership development sometimes fails. Training indoctrinates on the “right way” to do things and such prescriptions are actually not meant for the leaders. Development differentiates and encourages forward-thinking, which helps leaders to identify the “right way” themselves.

Leadership Investment dimensions – Our own Experience

In my experience with various organizations, when we talk about the need of organizations to make investments in Leaders, it is not limited to their training or development alone. The investment needs to be wisely planned across the life cycle of leaders in the organization, involving various critical aspects like - ​

• Leadership hiring – Sourcing and Selection process designed to help organizations to converge on the right candidates with the right cultural fit

• Talent Reviews – Regular reviews on Performance and Potential grid for leadership positions – using a well-designed Talent review process

• Individual development plans (IDPs) – Preparing IDPs in an objective manner using inputs from all stakeholders for each identified leader and periodically reviewing progress

• Development Centers – Investment in DCs for an objective assessment of Strengths and Areas of Improvement for Leaders, helps in the development of meaningful IDPs, thereby leading to better Return on investment

• Executive Coaching – One-on-One coaching that strengthens leaders by helping them see different perspectives, uncover blind spots and change behaviors that directly impact business results.

• Succession Planning – Institutionalizing a systematic process for developing an internal pipeline for occupying critical leadership positions

• Psychometric Assessment – Investing in objective assessment tools for getting better insight into leaders’ capabilities

In one of the organizations, I led initiatives on this front, we were able to increase our ROI on leadership investment by more than 25% just by ensuring more focused and planned spending. I am sure the readers will be inquisitive to know the method that we used to calculate the same, which I shall be sharing in my later blog, or will be happy to connect for discussion.

“I’ll bet most of the companies that are in life-or-death battles got into that kind of trouble because they didn’t pay enough attention to developing their leaders.” – Wayne Calloway

Return on Investment

Sometimes organizations stay away from allocating sufficient funds on leadership development thinking that what will happen if the leaders in whom they are investing, leave the organization? Instead, they need to be more worried about what will happen if they do not invest in these leaders and they stay back?

Leadership development is always a very sound investment for any organization, which must be carried out in a systematic and consistent manner, without worrying about immediate Return on Investment. Various research studies have shown that investment in Leadership provides a very handsome return over time.

One of the studies by ICF shared some compelling outcomes of Executive Coaching initiatives alone. According to a Global Coaching Client Study by ICF, 86% of the companies able to provide figures to calculate ROI indicated they had at least made their investment back: 19% showed an ROI of at least 50 times (5000%) the initial investment, while a further 28% saw an ROI of 10 to 49 times the investment. “The median company return was 700%, indicating that typically a company can expect a return of seven times the initial investment,” ICF reported. (ICF Global Coaching Client Study Executive Summary (April 2009).

During most discussions on this topic, it very clearly emerges that one of the critical responsibilities of the top management of any organization is to proactively design leadership development strategy, identify a dedicated Talent Management team to focus on its effective implementation and consistently review the progress at the highest level on a periodic basis.

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