Linking leadership development to the bottom line

Linking Leadership Development to the Bottom Line

Profitable companies tend to have a few qualities in common. These qualities can be linked to leadership development and are nicely summed up in the Service-Profit Chain model.

Coined by three Harvard Business School professors, the model says that:

  • Customer loyalty drives the profitability of a company
  • Customers are loyal if they’re happy with the company’s quality and customer service
  • Satisfied employees deliver quality and service
  • The company’s culture drives employee engagement (emotional connection, teamwork, collaboration)
  • Leaders shape culture

Or, from the top down:

Leadership → culture → employee engagement → service & quality → loyal customers → profit

Simple, right?  However, simple doesn’t necessarily mean easy.

Leadership roles (by their very nature) require a whole host of skills.  These include ‘softer’ skills, such as building relationships or resolving conflict .  Therefore, by honing these skills, our leaders can create a better culture. This filters down to a more profitable company. So how can you support leaders to do this, and what is the link to the bottom line i.e. company profit?

What Leadership Development Is & What It Isn’t

I often encounter a common misconception that development means training.  That, for some reason, in order for someone to experience development, they have to sit in a classroom course. While there’s certainly a place for classroom training, research backs the 70:20:10 approach:

  • Only 10% of what we learn is through formal classroom training
  • 20% is learning from others – for example, through mentoring, coaching, shadowing, and working with others
  • 70% of our learning is achieved through experiences – for example, learning ‘on the job’, or challenging assignments

Therefore, when it comes to leadership development, simply sending employees off on a training program isn’t going to be effective.  It requires a much more holistic approach.

The first step in selecting a leadership development intervention is to consider the overall business strategy.  What are you trying to achieve?  How will this be evaluated?  You want any development to be aligned with many aspects of your company.

So how can you tell that your leadership development is giving results. Evaluation is a spectrum.  It ranges from a simple “happy sheet” questionnaire asking the participant whether the training met their needs, to a process determining the value of the training to the business – its return on investment, impact on KPIs, and so on. Typically the Kirkpatrick Model of evaluation is used: Reaction – Learning – Behaviour – Results. Evaluation at the “results” end of the spectrum can be very intensive, involving tasks such as interviewing participants at different time points, and it would be impractical to undertake these following every learning intervention.

However, there has to be some commercial-awareness so you can answer the question:

…how successful was that leadership development?

Remember not to fixate on hard evaluations like competency frameworks.  Value soft skills like empathy, connection, building trust, resilience, vulnerability – factors which are harder to directly measure, but are what builds that all-important culture.

leadership development gt limited

Leadership Development Is for the Big and Small

Another common misconception is that leadership development is only for big corporate companies.

I would argue that it is perhaps more important for SMEs to understand and implement leadership development!

This is because, in a more compact organisation, there are likely to be smaller teams and fewer leaders.  Leadership development, therefore, has an even bigger impact on the company.

SMEs also have more restricted resources. They often don’t have the time or funds to develop an internal leadership program. Therefore, they are more likely to ask how to get the most value for money from their development interventions.

Taking an individual approach can be much more effective than employing a sheep-dip approach of pushing all future leaders through a classroom program.  I wrote about avoiding the ‘one size fits all’ approach in last month’s blog about the qualities of a good leader.

Furthermore, leaders everywhere – and in SMEs in particular – can feel vulnerable and under pressure, especially if they’re having to deal with tough stuff.  One on one coaching with an individual, focusing on what they’re finding challenging, and giving time for reflection, can create a safe environment to explore this.

It is valuable to have an environment where leaders can talk about difficulties, think about different approaches, and learn from experiences.

Effective Leadership Development Interventions

As the most recent Leadership Pulse survey showed, effective leadership development programs must be leader-centric.  The report also covers factors such as how learning technologies can be used in interventions.  Leaders are often self-directed learners, and the majority were using mobile devices years ago.

Depending on the context, the interventions I design and deliver can be suited to everyone from someone preparing for their first role in leadership, right up to corporate CEOs and board members – and everyone in between.

Development could be based around one-to-one coaching, or it could be through a program.  Either way, the majority is experiential learning such that it taps into the 70% part of the 70:20:10 learning model.  Approaches include facilitated discussions, role plays, action learning, workshops and more.

Not everyone develops in the same way. Remember my plea to ignore the temptation for a one-size-fits-all approach? As a result, none of my training is ‘off the shelf’.  It’s all bespoke and tailored to ensure that when a leader returns to the workplace, they have gained skills relevant to their organisation and working environment.

I enjoy focusing on the development required for a particular transition. For instance, I often work with individuals moving from a technical background into becoming a leader.  Or a person who has to learn to take a step back, delegate, look at the overall vision to drive an effective team working culture.  Letting go of the on-the-ground, day-to-day tasks can be a huge challenge for technical experts.

Only 18% of leadership programmes are achieving improved business performance, says the Excellence in Leadership Development report.

Businesses deserve more from their interventions – and hopefully this article will help you to reach that higher level of performance.

Top Tips for Linking Leadership Development to the Bottom Line

If you understand the importance of leadership development and its link to your company’s profitability, here are five tips for driving a more effective intervention program:

  • Define the desired outcomes to decide the best approach – or work with an expert to help you develop these.
  • Be clear on how the results of the intervention will be measured.  Refine and adjust your approach as necessary based on the results you see.
  • Lead by example – create an environment to encourage development, and where people feel comfortable giving both positive and constructive feedback upwards, downwards, and sideways.
  • When selecting a provider, ask them for case studies or testimonials.  Get a feel for whether they’re delivering something off the shelf, or whether it will be tailored to work specifically for your company’s needs.  Look for tangible outcomes, like retention and promotion.
  • See leadership development as a partnership in creating a better organisation – not a box to tick, or somewhere to farm employees out to for the week.

If you’d like to find out more about how I can help you to implement leadership development interventions, please get in touch by phoning 07980 838945 or 01224 460444, or send an email to gillian@gt.limited for an informal chat.

And if you’d like these blogs delivered direct to your inbox, you can sign up for my monthly newsletter by clicking here.

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