Do you need to justify the costs of your proposed leadership development program? Justifying leadership training costs is easy. Yet many human resource professionals struggle with proving the benefits of their leadership development program. Below are the proven techniques, examples, and even calculators to prove the return on investment from leadership development programs.

Studies Prove the Benefits of Leadership Training

If you want the evidence, statistics and data, on the many benefits and financial return on investment from leadership training, this section is for you. There have been many studies conducted that prove the benefits of leadership development programs. Some examples of these studies include:

500% Stock Market Returns

One study by CCL found “Companies that rate highly for their investments in human capital deliver stock market returns 5 times higher than those … with less emphasis”.

28% Boost in Behaviors & 8% Jump in Performance

Another study for leadership training participants “exhibited a 28% increase in leadership behaviors and an 8% climb in subordinate performance.”

29% ROI Within 3 Months / 415% Annual

In 2019, “businesses saw an ROI of 29% within only three months of leadership development training and an annual ROI of 415%” according to Training Industry.

11x Better Competitive Advantage & 7x Better with Followers

A Deloitte report found companies with “stronger ‘leadership maturity’ are 11 times more likely to have a high number of leaders who can build talent for competitive advantage. And they’re 7 times more likely to have a high number of leaders who can inspire people to follow them.”

How to Justify Leadership Training at Your Company

That’s great, but how do you prove the value and benefits of a leadership development program to your boss? We made it easy below, with several calculators. Each leadership development benefit calculator is based on one or more of the studies. Each ROI Calculator can be tailored to your needs. If you want help justifying the investment in leadership at your employer, let’s chat.

Leadership Development Program ROI Calculators

Number of Participants

The number of participants in the program.

Cost / Participant

This should be your fully loaded participant cost for a single (average) individual participant. It should include travel expenses, hourly or daily salary, presenter, and material costs / participant.

Rate of Return

A Training Industry study found leadership development programs return 29% 3 months after completion and 415% annually. So you should choose a number between 29% and 415%.

Return On Investment (ROI)

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Months to Fill (CURRENT)

On average, how many months does it take your organization to fill open positions?

Months to Fill (FUTURE)

As a result of improved leadership, how many months do you anticipate reducing the average time to fill openings?

Monthly Cost of a Vacancy

On average, how much does it cost your organization, each month, that a position goes unfilled. Some examples of these costs include: 1) Overtime costs from employees covering the gap 2) Lost sales 3) Lost customers 4) Costs related to decreased quality 5) Increased replacement costs based on wear and tear of assets not receiving maintenance. Many employers estimate this as a percentage of average salary, revenue, or operating expenses. For example, you could 50% of employee percentage of operating expenses. You would calculate this as 50% * (Operating Expenses / Number of Employees).

Benefit

Your projected benefit from the Leadership Development Program, based on the numbers provided.
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Voluntary Turnover: Previous

The number of employees voluntarily leaving the organization in the previous year / period.

Voluntary Turnover: Future

The (reduced) number of employees anticipated to leave voluntarily, following leadership development program implementation.

Average Salary

The estimated average salary of employees in your organization.

Turnover Costs

The average turnover costs for your organization, as a percentage of salary. Most studies place this at 50% to 200%. The more education, skills, or unique requirements for the typical employee in your organization, generally the higher the percentage.

Benefit

The forecasted savings based on the numbers provided.
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Participant Productivity Rate: CURRENT

The current rate of productivity for training participants. For example, if the participant her/himself currently produces 1,000 units / year, you would use 1,000 (assuming your calculations are based on a full year).

Participant Anticipated Productivity Improvement

The forecasted / predicted rate of productivity improvement for participants. For example, if you anticipate increasing productivity by 50%, use 50%.

Subordinate Current Productivity Rate

The current rate of productivity for subordinates of participants. For example, if the participant's team currently produces 20,000 units / year (average), you would use 20,000.

Subordinate Anticipated Productivity Improvement

The forecasted / predicted rate of productivity improvement for subordinates of attendees. The research suggests 8%. If you have reason to forecast more or less, adjust that number here.

Value of Each Unit

The value assigned to each unit. This could the cost to create units, the sale price / unit, the margin / unit, or another value your organization attributes to each unit. If you are uncertain, use the sales price / unit.

Benefit (# of Units)

The forecasted benefit of your leadership development program, in number of units.

Benefit ($ of Units)

The forecasted benefit of your leadership development program, in cost / sales / margin or other financial value of units, according to the data you provided.
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