Employers see $7 ROI for every $1 spent on leadership programs, report says

When businesses invest in coaching programs for employees, the average return on investment (ROI) is $7 for every $1 spent on leadership development, according to a Sept. 21 report from BetterManager, a leadership development platform, and research firm The Fossicker Group.

The ROI appears to stem from increased revenue and sales as a result of leadership development participation, as well as cost savings through higher employee retention and lower recruiting costs.

“Countless qualitative studies have shown that the benefits of leadership development ripple out across the entire organization,” John Topping, president and COO of BetterManager, said in a statement.

“People leaders are increasingly being asked to make the business case for programs they implement,” Topping said. “This type of tangible return speaks in real dollars and cents and shows that leadership development is a profit multiplier.”

In a survey of 752 people responsible for leadership development at a range of companies in the U.S., Canada and the U.K., 84% said their company still prioritizes investment in leadership development despite tough market conditions. In addition, 99% said they’d maintain or increase spending on leadership development during the next 12 months.

Leadership development investment varies by industry, according to the report, including the amount and who receives training and coaching. For instance, the amount ranged from a low of $25 per person in government agencies to a high of $2,667 per person at law firms. Also at the higher end, holding companies spent $1,667 per person, and manufacturing companies spent $1,000 per person.

The amount spent on new and mid-level managers varied as well. Business services companies spent about a third of their leadership development budget on new and mid-level managers, while government agencies spent nearly half of their training dollars on lower-level managers. Also near the top of the list, healthcare and insurance companies spent 41% and media, and internet companies spent about 39% on lower-level managers.

“It’s important for managers at all levels to receive the support and expertise that leadership development provides,” Topping said. “This shouldn’t just be for the people with the corner office.”

Leaders of all types are struggling to adapt to new trends in today’s workplace, according to a recent Deloitte report. Companies are placing more emphasis on training to improve project management, communication and soft skills such as decision making and critical thinking.

In particular, managers need better training today, according to a recent report from Info-Tech Research Group, especially if they are promoted from a technical role or other position without leadership expertise. The most effective manager training provides trainee-centric instruction, focuses on essential skills and requires practical application as soon as possible.

In addition to leadership development, coaching can help managers reskill to meet new demands, especially related to cultural changes seen since the pandemic. According to a survey from CoachHub, coaching can improve employee well-being, support women leaders and promote inclusive leadership.