by Rich Mesch
Businesses spend billions of dollars a year on Leadership Development. Few would question whether leaders drive value for the business, but how do you measure the impact of leadership development? Given the level of investment, isn’t it reasonable for the business to expect a return on that investment?
Measuring the impact of Leadership Development can be confusing and mysterious, but it’s not that different from measuring other business impacts. The trick is knowing what to measure.
1. Start with Behavior.
This may seem obvious, but a lot of organizations miss it. Leadership Development is about changing behavior. Behavior is observable. So, before you start measuring increased revenue, measure whether your leaders are actually using the behaviors they learned. If the answer is “no,” then none of your other metrics will matter.
2. Establish a Baseline.
It’s hard to know if things have improved if you don’t know where you started. Begin any measurement initiative by measuring where you are now and then set a baseline. Every measurement you do after that will be much more meaningful because it’s easy to demonstrate how your leadership efforts moved the needle.
3. Measure what Matters to the Business.
Leadership is more than a good idea; it’s a tool the business uses to achieve its goals. Many organizations measure their Leadership Development effectiveness through participant satisfaction surveys (“smile sheets”). While that data is useful, it’s not meaningful to the business. How will leadership development drive the priorities of the business?
A lot of organizations focus too quickly on the big picture metrics. Are we making more money? Are we being more innovative? Are we controlling costs? There are valid metrics, of course, but it’s difficult to measure these in a meaningful way in the short term. If you expect that you’ll run a leadership class and the next month you’ll see a significant increase in revenue, you’re going to be disappointed. It doesn’t work that way.
Leading Indicators are metrics you can measure in the short term, so you can determine if you’re on the right path. Start with the basics: are leaders actually using the behaviors they learned? If so, are they doing it consistently? Are they doing it well? What is the immediate impact? Are problems being solved?
If you don’t like your Leading Indicators, odds are good you won’t like your Lagging Indicators either.
5. Measure Lagging Indicators and Intervening Variables.
It’s tempting to measure “is revenue up and cost down?” but focus instead on Intervening Variables—those aspects of the business that drive revenue and cost control. For example:
- Employee Satisfaction: Do employees feel the impact of the changes you are making?
- Talent Impact/Mobility: Are you retaining the talent you want? Is your talent growing their skillset and being primed for promotion?
This kind of measurement can build a causal chain that demonstrates that Leadership Development improved the culture and hygiene of the business, leading to improved business results.