Leaders are responsible for allocating company resources. These resources include money, people and other resources. However, the most important resource is people. Organizations with leadership development programs for their people can’t help but grow. Outstanding leaders know that acquiring, keeping and developing good people is a leader’s most important task. In today’s climate, that task is more challenging than ever before.
Of all the challenges organizations face today, talent management is one of the greatest. According to a poll conducted by OI Partners, Inc., the number one challenge facing the HR profession is leadership development and succession planning. Attracting, developing, and keeping quality talent is more costly and has a greater impact on the bottom-line than ever before. With baby-boomers retiring, the expectations and mobility of Gen X and Gen Y employees, and the new definition of “long-term” employment add up to a drastic shift in the way organizations are managing their talent.
One effective way to overcome these challenges is to implement a leadership development initiative. This proactive approach to ensuring future leadership talent offers many benefits. Studies have shown that organizations with leadership development programs have a higher retention rate of human capital and a reduction in recruitment and compensation costs.
Leadership development and succession planning has to be more than matching employees with forecasted vacancies. Take into consideration the future direction of the organization and the direction the employee intends to take in their career path. This ensures that the employee is engaged in the process, committed to the organization, and has a vested interest in the company’s success.
The Leadership Development Challenge
While there are many benefits to leadership development, there are also challenges such as limited resources and expertise within the company. Without the help of external consultants and coaches, implementing a leadership development initiative can drain an organization’s resources. The most effective programs capitalize on the talent available throughout the company during the implementation phase; however, companies often lack the resources needed for ongoing management and training needed to develop internal talent. In addition, using external resources provides expertise in leadership development and offers an impartial perspective.
Why Leaders Developing Leaders Is Worth The Investment
Identifying and developing the people around you into strong leaders for future roles is critical to the ongoing success of an organization. No organization has ever complained about having too many well-equipped leaders. In fact the number of leaders in your organization determines the overall success or your organization because as noted leadership expert John Maxwell has said for years, “Everything rises and falls on leadership”.
Without an effective leadership development program in place, companies will face greater challenges than those incurred during the implementation of a program.
Challenges such as:
- Poaching of high-performers
- Fewer leaders prepared to take on new roles
- Obstacles to achieving strategic goals
An organization’s growth potential relates directly to its personnel potential. An organization cannot increase its productivity, only its people can. Systems become dated. Buildings deteriorate. Machinery wears out. People are the only asset that truly appreciates. People can grow, develop and become more effective if they have a leader who understands their potential and true value.
The ROI of Leadership Development
Attracting and keeping high-potential employees may be costly, however not as costly as the turnover of high-potential employees. Studies have shown that superior performers are 50% to 100% more effective than the average performer.
Using these statistics, if an average performer generates $250,000 in new business each year; a superior performer will generate between $375,000 and $500,000 in new business. Promoting the superior performer is not enough though. Develop their leadership skills and promote that superior performer to a leadership role and they have the potential to increase the productivity of the team. As an example, this leader can increase the revenues of a team generating $2.5M to $5M. Given the possibility of increased profits, meeting the employee’s desire for career growth is both a financial and strategic advantage.
Because growth and development are benefits highly sought after in a potential employer, organizations with highly publicized leadership development initiatives and career management programs become “employers of choice”, making it easier to attract top talent and reduce turnover.
Most employers are unaware of how much turnover costs them each year or how to reduce this number. Assuming a fifteen percent turnover rate and turnover costs of twenty-five percent of an employee’s annual compensation, an organization with one thousand employees and an average compensation of $50,000 will incur $1,875,000 in costs each year. Given that half of all turnover is avoidable, this organization could save $937,500 each year by investing in employee retention strategies.
Focus on the “Farm Team” not the “Free Agents”
One of the greatest benefits the coach offers is preparing the organization’s existing talent for future leadership roles. They take the organization’s human capital to the next level through the use of assessments, powerful questions, and individual development plans. Promoting from within provides benefits, such as:
- Reduced recruitment costs. You reduce the need for external recruiting for executive level position, which decreases head-hunter fees (between 25% and 33% of the candidate’s total compensation). An executive placed by a head-hunter with an annual compensation package of $200,000 would incur fees between $50,000 and $66,666.
- Reduction of executive compensation. According to Towers Perrin, organizations generally pay external candidates 20% to 30% more than internals that are promoted because externals need a financial reason to make a career change.
- Promoting internal candidates offers the employer the benefit of knowing their track record, strengths, and their development needs. External candidates, unless personally known, only reveal as much or as little information as they deem appropriate, leaving the organization to rely on the interview process, assessments, and references to complete the picture.
Thriving leadership development initiatives balance the strategic direction of the organization with the career aspirations of its high potential employees. They also rely on external consultants and coaches to provide expertise, an impartial perspective and additional resources.
The Leadership Development Resource That Pays for Itself
Executive coaching can provide help with career management and employee development at the individual level. Using individual coaching and assessments, the coach will guide the employees to select the career path within the organization that best matches their interests and abilities. Once the employee chooses a career path, the coach will help the employee prepare for their next promotion.
The coach can administer assessments such as DISC and specialized assessments like the Career Impact and the Growth Impact Reports to help the employee gain clarity in the areas of motivators, interests, values and strengths. The feedback gained from the assessment is essential in creating a career management plan and maximizing the potential of your employee. During the coaching engagement, employees will compare this information along with their experience and education to key leadership positions and determine the strongest fit. This process ensures employees are matched with the correct positions, reducing the possibility of employee disengagement and turnover at the executive level.
Besides helping develop a career path, an executive coach will help create plans to develop the skills and capacity to step into those new roles and shine as a leader. Based on the information gathered during a gap analysis, together the coach and the employee outline the next steps in the development plan. Comparing the employee’s current level to the experience, skills, and education needed for the next promotion will give the employee and the executive coach a clear picture of where to focus their coaching sessions. Execution of the development plan during the coaching engagement results in promotion readiness.
The Personalize Approach to Leadership Development
Using a coach in your leadership development initiative allows leaders and Human Resources to focus on effectively managing and evaluating the program. An external coach provides a confidential, safe environment where the employees are free to discuss the challenges and opportunities they face in their careers without fear of repercussions and establish plans to overcome them.
Executives who engage in coaching during the leadership development program have a clear direction of where they are going and how they are going to get there. In contrast, executives that are not offered coaching are not as well prepared to map out their career path or develop the skills they need for future promotions. Executive coaching facilitates the process of creating successful careers and developing future leaders at significant savings to the organization and earning the loyalty of your star players.
At the end of the day, your ability to attract, hire, and keep great people is the most important skill for you to master as a leader. If you’re interested in finding out more about how I can help you develop the people you need to make your business successful, let’s talk.
As an Executive Director with the John Maxwell Team I am passionate about helping other leaders like you. I can offer you access to content exclusive to the John Maxwell Company. The Maxwell Method of Speaking, Selling, Coaching and most importantly Leadership is the new standard of excellence in the personal and leadership development field. Here are just some of the programs I can offer you training on: Leadership Development Programs
I’d love to learn more about you, your company, and your goals. Select a time that is convenient for you in my calendar here: Leadership Training Consultation. I look forward to hearing from you!