Stop Wasting Time: Your Leadership Development ROI Calculator

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PICKING UP WHERE WE LEFT OFF…

Last week, I wrote a bumper newsletter on the pros and cons of an MBA qualification. I even gave you a framework to help you evaluate whether an MBA is right for you at this particular point in your career.

I was awarded an MBA in 2003 from one of Australia's top business schools, and it didn't disappoint. My MBA was critical to my success as a corporate executive, and it massively changed my career trajectory – not because of the three letters after my name, but because of what I learned, and what I was able to apply.

If you didn't get a chance to read that newsletter or listen to the podcast episode, I'd highly recommend that you do, because this is like a “Part II”.

My intent in that episode was to help you navigate through the hype, the misinformation, and the ever-changing landscape of continuous learning in a digital world.

In this newsletter, I go a step further as I take a look at the overabundance of leadership development options that you have to choose from – or that your company might choose for you. The vast majority of companies aren't going to invest in an MBA program for every one of their leaders, but they will invest in more broad-based leadership development programs.

I start with a look at the core purpose of any professional development... I then go on to explore a couple of recent studies on the state of leadership development today… and I finish by proposing a comparison model, so that you can assess the ROI of your future professional development options.

HOW DO YOU MAKE SENSE OF THE OPTIONS?

I don't want to tell you how to suck eggs, but I think it's important to agree on the primary purpose of any professional development that you might undertake. It is what it says. You want to develop your professional skills, and there are many worthwhile elements to professional development.

Continuous learning is a virtuous pursuit in and of itself, regardless of your goals, objectives, and outcomes. Leaders are learners, but let's face it, we're all pretty busy and we have lives to lead that, hopefully, involve more than just our work personas. In most cases, we want an outcome. We don't just want to acquire knowledge for its own sake.

That's what hobbies are for. Back in the day when I was running marathons, before my dodgy knees and love of good red wine convinced me to stop, I had a hobby interest in exercise physiology. I understood the ins-and-outs of muscle chemistry, VO? max, and the physiological responses to different types of training.

That knowledge probably helped me to run faster, but it was really just for fun. I had no expectation of getting a Return On Investment (ROI) from my hobby learning.

But professional development is different…

In last week's episode, I wanted to get us all to the same jumping-off point, so I proposed this premise:

“The primary function of any professional development is to expand your career opportunities, thereby improving your earning capacity.”

Now that I’ve had a few weeks to think about that premise, I reckon I'm pretty comfortable with it. If you're trying to improve your earning capacity, the equation has an ROI element to it – your investment of time, energy, and money (not to mention the opportunity cost of what you forgo in the meantime, which has to be weighed against the expected return that you're going to get).

The difficulty is that in the field of professional development, there are so many options that it's hard to know where to start.

It's incredibly difficult to get an apples-with-apples comparison. Let's just take the simplest example of comparing a postgraduate degree to a short course. The rigor of two years studying in a structured environment, where your retention and application of knowledge is frequently tested is going to be way greater than the rigor of, say, a three-day course in negotiation.

Both can be valuable… both can deliver an ROI… but they are completely different animals.

An MBA will no doubt help you to increase your business acumen, but then the question is, “Would my energy be better invested into developing a specific area of that skill set?”

For example, my sister Brigid, who's a corporate executive in Asia-Pacific, chose a Master of International Relations, rather than an MBA. Many CFO aspirants choose a Master of Applied Finance.

Where it gets even more confusing is that the blanket term, “leadership development”, covers a plethora of diverse things. It crosses all areas of business acumen, leadership, and personal development.

Do you need to master the disciplines of economics, marketing, operations, and finance? Well, if you want to run a major business, you probably should. It's a good place to start.

But if you don't want to do that, should you focus more on getting performance from the people in your team?

This is why it can be so hard to decide what to do and when to do it.

WHERE DO WE GO WRONG?

Leadership development can be a lot of things: it can be listening to a podcast or reading a book; it can be a formal short course in a classroom; it can be a serious commitment like a postgraduate degree.

At Your CEO Mentor, Emma and I believe that this podcast, No Bullshit Leadership, is the most comprehensive free leadership development resource that you could ever hope to stumble upon – but it's not necessarily going to give you the structured learning that you need to reliably build your capability and confidence.

Every year, companies across the globe spend an estimated $60 billion on leadership development programs. During Covid, this number spiked, with a six-fold increase to almost $360 billion.

In the Fast Company article that revealed that statistic (Companies Spend More Than $60bn Annually on Leadership Programs), the author gave five reasons why that $60 billion is largely wasted:

1. Many of the programs focus only on content;
2. A lot of companies limit leadership development to their highest potential people;
3. Companies tend to get distracted by shiny things – they pursue the latest leadership fads;
4. They assume that everyone has to be in the same physical location for the training; and
5. They forget about real world application.

In my view, the value of any formal professional training has to be measured in terms of our primary objective. For you, as an individual, does it expand your career opportunities, thereby improving your earning capacity?

This implies (by definition) that you have to be able to perform better than you could have performed prior to the training. This is especially the case with leadership development.

This objective leads, in turn, to the company's objectives. If a company spends money training its people, it needs to be able to see a tangible improvement in performance, regardless of how it's measured.

If any investment in leadership development fails to fundamentally satisfy those criteria, it's all just conversation.

Another report from elite consultant, McKinsey, also relates some interesting conclusions from its major global customers. The article is titled, Why leadership-development programs fail.

The good news is that when McKinsey surveyed 500 top executives, almost two-thirds of them identified leadership development as their top priority… but only a tiny fraction of these felt as though their companies were developing global leaders effectively.

Among the four most common reasons for this was the feeling that ultimately the knowledge these programs imparted, lacked real world application – a finding that was underpinned by three of their four points:

1. The reflection process is decoupled from the real work. This means that the retention and application of concepts is poor and, consequently, you can't actually deploy the knowledge to improve the outcomes.
2. Most leadership development doesn't sufficiently address mindsets. Becoming a better leader usually involves modifying existing beliefs, and leaning into the discomfort of change. But most leadership development programs don't address this. That's why, for example, in our Leadership Beyond the Theory program, we focus on the psychological and emotional shifts that leaders need to make, as much as we do the practical tools and strategies that need to be deployed. This is the foundation of increasing leadership confidence and capability.
3. There's the almost universal failure to measure results. You've heard me say before, what gets measured gets managed, and what gets rewarded gets done. You're going to love this – I once worked for an organization that spent millions of dollars on a structured leadership program for every leader below executive level. How did they measure the success of that program? With a single metric – the percentage of leaders who had attended the training.

But no matter what form of professional development you undertake, you've got to be able to trace it back somehow to improve performance. If you can't, then you may as well not have done it.

DIFFERENT NEEDS AT DIFFERENT STAGES

Last week we gave you a free resource to determine whether or not an MBA was likely to deliver an acceptable return on investment for you in your specific circumstances.

In this episode, I'm going to broaden that out with another high-value free resource, how to maximize your career development ROI.

Of course, I have to declare our bias here – leadership development is our business, so clearly we think it delivers an outstanding ROI.

But equally, as you probably know from this podcast, we are extremely focused on value and results – and we've seen thousands upon thousands of leaders from all over the world, at different levels of experience, achieve exceptional results – which is why we believe in our work so strongly.

But it's horses for courses, right!? You've got to work out, at any given point, what the biggest bang for buck is going to be on any development that you invest your time, energy, and money into.

For example, if you've just stepped into your first ever leadership role, you're still bright-eyed and bushy-tailed, I would give you this advice:

There are five books that you should read before you do anything else:

1. Developing the Leader Within You, by John Maxwell;
2. The Seven Habits of Highly Effective People, by Stephen Covey;
3. How to Become a Great Boss, by Jeffrey J. Fox;
4. Good to Great, by Jim Collins; and
5. No Bullsh!t Leadership, by yours truly.

In addition to that, go away and listen to as many episodes of this podcast as you feel are relevant to you.

And, right there, you may well have enough content to absorb and apply for the next couple of years… and it really costs you nothing other than the investment of your time.

Later on, as you go up the ladder and you’re approaching more senior roles, a postgraduate degree like an MBA might be important.

And along your path, once you work out that leadership is a lot harder than it looks, you might want to supercharge your leadership performance through our Leadership Beyond the Theory program.

Remember, your objective is to get traction from your professional development so that you can perform better in your role.

Even though improving your business acumen is critical on your way to the top, the biggest performance lever that you can possibly pull is the leadership lever.

Why? Because if you lead better, it enables you to get better results from your people… it's a value multiplier… it's leverage… and it's not easy. If it was, everyone would be doing it.

THE ROI MODEL, EXPLAINED

Over the course of your career, you'll rely on a range of different types of professional development options from a range of sources. I've been able to use podcasts, books, and magazines (like Harvard Business Review) to fine tune my business and leadership skills, and keep them current.

But this was built on my foundational education pieces, which I chose to invest in at various points of my career. I've already mentioned my MBA. I also completed Harvard Business School's Advanced Management Program and a graduate diploma in company directorship.

I'm going to say this again to hammer the point home, but I think we can now agree that the measure of any type of professional development is improved performance. And as I look back on my career, I can genuinely attest that the 70/20/10 learning model worked for me: my formal education accounted for 10% of what I picked up, while my on-the-job experience accounted for 70%.

I was able to combine my practical knowledge with the foundational concepts from formal education to achieve my own peak performance.

Whenever you’re at a decision point, deciding what's going to give you the best ROI in your current circumstances, you should be open to all possibilities.

In our free downloadable, I've summarized this into a chart. I compare a number of criteria to help you decide which option is likely to give you the best bang for buck right now.

I'm not going to cover this off in full here, because you can download the PDF, absolutely free.

The table compares three different options that you could invest your leadership development effort into:

1. A postgraduate degree, like an MBA;
2. Books and podcasts (which includes articles and blogs etc); and
3. A targeted leadership training course like Leadership Beyond the Theory.

To give you a flavor for the comparison table, I've chosen 16 criteria that I think are relevant to your choice.

For example, does that particular option cover all areas of business acumen? The only one that's true for is an MBA. Depending on how heavily you weight that criterion in your current situation, that might be the deciding factor for you, right there.

Another criterion is whether you can reap the benefit of a high-quality cohort of global leaders to share your experience with. That's generally true for the MBA, and it's certainly true for Leadership Beyond the Theory, but obviously not for the individual pursuit of reading books and listening to podcasts.

An important criterion is, of course, the cost element, because we're talking about ROI. You can't beat free, so the “books and podcasts” route is going to be attractive. But then there’s the principle that you get what you pay for.

An MBA is a large investment. From last week's episode, if we're talking in Australian dollars, you could pay anywhere from AUD $50,000 to AUD $400,000 (the cost of an MBA from Stanford or MIT).

Calculating your ROI here can be a little tricky, because the payback comes further down the line and it's a little bit uncertain. If we compare that to our Leadership Beyond the Theory program, the investment is less than AUD $3,000... it has practical application from the very first lesson, and it's completed in only 9 weeks.

Anyhow, go and download that resource and have a play with it. I hope you find it really useful in working out the best ROI that you can achieve at any point in your career.

I have used (and I continue to use) the benefits I received from all of those three options, but you can't do it all at once, so you need to be deliberate about your choices.

SPOILT FOR CHOICE!

These days, professional development, particularly in leadership, is readily accessible to anyone. Your biggest limitation will most likely be your ability to retain and apply your knowledge and turn it into enhanced performance.

The articles from Fast Company and McKinsey outline the reasons why the huge investment that companies make into leadership development programs often fail to generate any benefit.

So, don't fall into that trap, whatever you do. To use a rather hackneyed cliche, your career is a marathon, not a sprint… so there's no need to get carried away just yet.

Bide your time, formulate a plan, and build continuous learning into your DNA.

?????? Click here to download the free PDF resource that accompanies this episode: Your Leadership Development ROI Calculator

This is from Episode 336 of the No Bullsh!t Leadership podcast. Each week, I share the secrets of high performance leadership; the career accelerators that you can’t learn in business school, and your boss is unlikely to share with you. Listen now on Apple Podcasts, Spotify, or on your favorite podcast player.