Tech layoffs. Supply chain delays. AI integration.
The global workplace faces a myriad of issues, many due to uncontrollable economic factors. But the world of work is also suffering from a deeper, more controllable condition—one preventing companies from addressing the newsier issues that dominate today’s headlines.
In the United States and abroad, workplaces have a leadership problem. Too often, business leaders view leader development as a “nice-to-have accessory” versus a core element of their corporate strategy, causing ripple effects throughout the entire office. More than 80% of businesses claim it is important to develop leaders at every level, but only 5% successfully do. According to one analysis of more than 1,000 global companies, over half devote under $500 per leader to development, with most cutting or neglecting their leader development budgets altogether.
That’s right: $500. Many companies spend more on espresso pods and granola bars than developing their leaders into truly impactful managers.
And we’re supposed to be surprised that turnover is high, especially among young people? Or that nearly two-thirds of employees have experienced a toxic work environment, with over 40% blaming leadership explicitly? Or that toxicity-induced turnover costs global businesses hundreds of billions of dollars annually?
How did we get here?
Why leader development continues to lag
In far too many workplaces, leader development—which is supposed to be a deliberate, continuous and progressive process that grows individuals into competent, committed professionals of character—is seen as optional. One example is executive coaching, whereby leaders are trained to become better communicators, clearer explainers, stronger (and more willing) listeners and more for those they lead. And yet, even when praised and championed, coaching and other leadership development programs are often slashed hastily when bad times come.
On a global scale, the treatment of leader development as “nice” versus “core” is simply too problematic to ignore.
Every workplace needs strong individual leaders, but investment in development lags behind. While departments like human resources are deemed irreplaceable (and for good reason), the same is not said for leader development. Factoring in employee benefits and job training, the average cost to hire a single new employee can climb to $20,000, and businesses generally accept it as a foregone conclusion. But spending even $500 per leader is a head-scratcher?
Much of the budgetary hesitancy comes down to perceived return on investment. While it is easier to measure ROI within a manufacturing department based on products made and sold, there is a perception that the benefits of leader development cannot be measured.
But this is simply not true. Research from the United States, the United Kingdom, and Canada suggests that, for every $1 spent on leader development, companies can expect $7 in return.
Why? For one, with stronger leadership comes better management, which leads to improved productivity and performance throughout the office. Leaders who are properly developed are proven to drive employee satisfaction higher, and more satisfied workers are more valuable contributors.
Leader development also increases retention, mitigating turnover-related costs. Savings from retention are compounded by the savings as a result of promotions from within. Leaders who are coached tend to become better candidates for higher-level management positions without the company having to look externally. Escaping the talent development churn is a key to cost avoidance, which is in itself another form of ROI associated with coaching.
In decades past, the ROI concern had more merit—because it relied on a traditional, outdated methodology. For example, companies sought to measure the impact of leadership coaching by tying dollar amounts to the accomplishment of coaching goals. But those figures can be highly subjective, and they lock both client and coach into goals that otherwise may have evolved more organically over the course of their collaboration.
Today, there is no excuse not to invest in leader development. In a world where talent up and down the corporate ladder comes at a premium, those leading that talent into the future have never been more valuable.
From supply chain disruptions to the AI conundrum, the world of work faces too many problems for companies to ignore the most important one: leadership. Businesses that coach their leaders for success will reap (and measure) rewards across the workplace. The laggards, on the other hand, will be left wondering, “What went wrong?”
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