In 1999, Gallup did a study. They polled of over 1 million professionals in 330 organizations worldwide. They determined that well managed work groups are 50% more productive and 44% more profitable. Stop. Re-read that last sentence. Well led teams perform better. Period. If that doesn’t make sense to you or you don’t agree it seems reasonable, feel free to stop here.
Of course I am a big fan of training and leadership development. I simply love the idea of helping people to be more successful and organizations to optimize their performance. So, no surprise, this is going to be a biased article filled with facts and statistics that support my prior held beliefs. I am also a fan of measurement and understanding ROI for any part of the business. So I am dedicating this month’s 90-second ICYMI to some information around why investing in your leaders at all levels is a sound financial decision.
Here are some statistics that a finance person or anyone holding the budget purse strings can embrace:
- A recent study in Harvard Business Review showed that companies with high scores for their investments in human capital delivered stock market returns that were FIVE times higher than that of companies with less emphasis on human capital.
- In a separate Harvard study of 750 large, public firms, the researched demonstrated that organizations with the best human capital practices provided returns to shareholders that that are three times (3X) greater than those of companies with weak human capital practices.
- DDI Global Forecast Report proved that organizations with the highest quality leaders were 13 times more likely to outperform their competition in key bottom-line metrics of financial performance.
Now for the downside:
- Gallup’s 2013 “State of the American Workplace” Report. Gallup interviewed nearly 150,000 workers–people in all states and industries.
- Only 30% of working population today admits to being fully engaged.
- 52% of Americans admit to being disengaged in their jobs.
- 18% to being actively disengaged.
- Gallup estimates that a disengaged employee costs an organization approximately $3,400 for every $10,000 of salary.
- We have all heard the axiom “people leave bosses – not companies”. Well, here is what happens when they leave: The cost to replace someone earning $50,000/year can easily reach $75,000. In fact, turnover costs you 30-50% of the annual salary of entry-level employees, 150% of middle level employees, and up to 400% for specialized, high level employees!
If all this is true, why do we wait for so long to train our managers and supervisors to make them into leaders? This problem was discussed by Harvard in an article called “The Lost Decade: We Wait Too Long to Train Our Leaders.” In the study they found that the average age of trainees was 42, but the average age of a manager at these firms was 33.
They are operating within the company untrained, on average, for over a decade. That is scary. Or worse, not training them at all. We wouldn’t let a pilot fly without a license or hire a CFO without a CPA or MBA. We wouldn’t allow a person who wasn’t a doctor to operate on us or let an engineer design a bridge without professional degrees and certifications. That would be reckless and absurd. Even an Infantry private has to pass basic training. So why then are we so willing and okay with letting an untrained and potentially unskilled person manage and lead our most important asset? We are inviting disaster as they struggle and muddle their way through and in the meantime we lose all-stars and our best high potentials.
If you don’t have money – or not in the budget – that is okay. Start a book of the month club. Set up a mentoring program using inside or outside help. Lunch and learns. Better yet, set aside an hour a week to coach them yourself. But for goodness sake – DO SOMETHING – anything. Please don’t promote someone and just wish them luck. That is not fair to them and truly unfair to their new team.
Leadership is a skill and it needs to be focused on, nurtured, and developed just like engineering, or finance, or medicine. The research is in, the facts are clear – leadership development has solid and undeniable ROI.
Lastly, The Human Capital Institute found that disengaged employees cost the American economy up to $350 billion a year due to lost productivity. So in closing, (if none of my earlier arguments worked) I suggest that NOT investing in leadership development and regularly coaching your people is downright unpatriotic. LOL. Happy 4th of July.
– Tom Deierlein
If you enjoyed this monthly newsletter, please forward to a friend and have them sign up:
Please follow us on twitter: @CombatLeaders