Creating a Leadership Development Program: Nine Essential

Tasks

Empirical research supports common sense—leadership matters to an

organization's effectiveness. Leadership skills can be learned; although learning on the job
is too haphazard a way to ensure an organization's viability. A leadership development
program (LDP) requires nine overlapping tasks, which should be managed by HR
professionals. Each task answers a basic question: 1 . What kind of candidates is the
organization looking for? 2. What does it take to be a good leader in the organization? 3.
How does one become a program participant? 4. How does the participant stack up as a
leader right now? 5. What specific actions should the participant take to become a better
leader? 6. In what ways is the LDP reinforced by other HR systems? 7. How can the
participant's work group be part of the developmental process? 8. Is there a leadership
succession plan? 9. Is the LDP giving a satisfactory return on investment?

It is axiomatic that superior organizations have superior leaders. Yet, broadly

skilled leaders are in short supply. The time-honored way of learning one's technical
specialty, and then somehow transitioning into supervision is not a reliable method for
producing adequately trained staff. Most organizations need a vigorous and deliberate
way to improve the skills of supervisors, managers, and executives. They need a
leadership development program (LDP). Although costly, an LDP is a wise investment for
a compelling reason— well-led organizations tend to attract quality applicants, produce
satisfied employees, incur less unwanted turnover, engender loyal customers, and yield
impressive financial returns.

However, it is fair to raise a basic policy question in deciding how to ensure the
organization is leadership ready: buy or build. Under the "buy" approach, the organization
relies upon recruiting and selecting talented leaders from outside. This is a fast way to get
skilled personnel with fresh ideas and obviates the need for erecting an expensive internal
development program. The major disadvantages of not developing from within are a likely
decrease in morale for those bypassed and temporary dips in productivity while new
leaders "learn the ropes." In addition, unionized organizations may encounter additional
resistance.

The prime advantage of building leadership talent, besides eliminating the

disadvantages of going outside, are twofold. First, the organization gets to groom the next
generation in line with its culture and strategic agenda. Second, the organization has
greater control over the supply of leaders with the requisite skills, making strategic
implementation faster.

The need for talented leaders exists, and on balance, it appears the benefits
outweigh the costs of creating an LDP within the organization. The following plan provides
an overview and detailed oudine of the nine essential tasks for creating a leadership
development program to help current and future leaders reach their potential in the
service of organizational goals.
 Core Program Premises

Two premises, based on ample evidence, are at the program's foundation. First,
leadership matters to an organization's performance. 2 Hence, an organization should
concentrate resources on securing, developing, and keeping good leaders. Second, it is
possible to develop leaders. Leaders may be born, but they are also made.

Several other premises guide this plan:

• LDP develops the whole person, not only one's skills at work. Many people can
benefit from some aspects of the program. (In this respect, leadership development can
be. viewed as an organization-wide initiative, "operationalized" through the widespread
use of individual development plans.)

• Most organizational members have opportunities to lead at work. Many people

can benefit from some aspects of an LDP.

• Leadership is fundamentally a relationship between leaders and followers; the

context in which the leader resides must be considered in creating developmental
activities.

• Valid assessment and measurement of progress are necessary.

• Growth entails motivation, substantial effort, challenge, and a willingness to

accept risk and setbacks.

• People learn best in a nurturing environment.

• Certain traits—enduring personality characteristics—correlate with leadership

effectiveness. Careful selection improves the odds of developing the most promising
candidates. Selection, versus open enrollment, should be part of the program.

• Developing leaders requires considerable effort and expense. Measuring overall

success allows us to make the program more effective and efficient. We must evaluate
the program, and to do this we must have clear goals.

Each premise suggests a value. Build these values into the program if they agree
with the current or ideal culture of your organization. If not, adjust the program
accordingly. Litde is more dispiriting to participants than for the organization to create an
unrealistic "cultural island," only to thrust graduates back into an environment that does
not support, and may even punish, different ways of leading. In this respect, leadership
development is a product and a shaper of the organizations culture.

Overall Approach

A comprehensive LDP requires careful selection of participants from the applicant

pool, adequate funding, and dedicated administrators and development staff. Beyond
that, the symbolic aspects of leadership need attention (e.g., awards ceremonies,
distinguished leaders speakers' series, etc). Create or use existing methods to visibly
reward current and aspiring leaders for behaving in accord with officially designated
competencies. Equally important, the organization should show its commitment to the
program by intolerance of poor leaders. Ineffective program participants and current
leaders who are incapable or unwilling to improve despite organizational support should
be removed. Dramatic acts demonstrate real versus espoused values around leadership.

Next, give potential leaders challenging opportunities early in their careers,

ideally in their twenties and thirties. They should be nurtured and have enough
responsibility to make an impact and significant mistakes. Noble failures are not punished.
Indeed, the wise organization tries to accelerate its mistakes, thereby increasing its
learning. Mistakes are tolerated, provided they are in service to the organization, and
participants learn from those mistakes. Young leaders receive targeted training and
development based on individual needs. Older leaders receive broadening experiences
and educational opportunities. Finally, the organization rewards the developers of the
next generation of leaders. 3 Mentors are highly valued and rewarded.

Beyond this general approach, a leadership development program involves the

nine major tasks described below.

TASK 1. Create Program Selection Criteria

"What kind of candidates is the organization looking for?"

Define criteria for program selection. Each strategic business unit (SBU) and
support office may answer this question slighdy differently, based on unit-specific
strategy, goals, and current and future leadership needs.

General selection criteria can be established beyond specific SBU needs. Find a
good match between immediate and future role demands and the applicant's personality.
Admittedly, this is easier said than done, owing to inconsistent findings over decades of
earnest research. Still, despite situational contingencies that determine the traits
necessary to lead in a particular circumstance, several traits appear to correlate with
leadership effectiveness in most situations. The following list of traits is not exhaustive,
but can be used as one part of the selection criteria. 4 Alternatively, it can be used as a
starting point for discussion within the organization. If not these, then what leadership
traits does the organization consider fundamental? What traits, upon entering the
program, are likely to accelerate skill acquisition?

Desire — wants to lead; wants to get things done through other people; wants to
have an impact (perhaps the most heavily weighted variable).

Purposeful — has vision and goals; wants to achieve something, to accomplish

things.

Confident — believes she or he can make a difference, but isn't grandiose.

Assertive — is willing to assert self and to compete, without becoming unduly

upset.
 Psychological fitness — has insight and comfort with self; is empathic towards
others and open to feedback. Centered—has sufficient impulse control; stays focused
under pressure.

Energy — has physical stamina to do lots of things and work long hours.

General intelligence — possesses average or slightly above average general

intelligence (e.g., logical, linguistic, mathematical, spatial, relative to subordinates, and
sufficient for the occupation). 5

General intelligence and other characteristics are necessary but not sufficient
characteristics to guarantee leadership success. Context and technical skills matter, to say
nothing of motivation. Still, the applicant who possesses these eight traits has met one
threshold test to become a leader. A summary argument for the importance of traits
might by found in the following quote:

"Regardless of whether leaders are born or made or some combination, it's clear
leaders are not like other people. They need the "right stuff," and it is not equally present
in all people. Leadership is demanding. It is a disservice to leaders to suggest that they are
ordinary people who happened to be in the right place at the right time. Maybe place
matters, but it takes a special kind of person to master the challenges of opportunity."
(Kirkpatrick & Locke, 1991).

Other program selection criteria might include:

• Strategic directions—Where is the organization going and what type of skills

does it need to get there? For example, a marketing unit may need staff with an aesthetic
sense. This might suggest recruiting and selecting candidates for the program from
nonbusiness backgrounds.

• Demographic diversity goals—Many organizations see this as a real need, in that

women and minorities tend to be concentrated in lower salary levels.6

• Technical skills—What are some basic, foundational skills of a technical nature

that are required to be a good leader within the organization? Some organizations insist
that the candidate must first possess solid technical expertise before earning the right to
manage others. Performance appraisal data might aid assessment.

TASK 2. Define Leadership Competencies

"What does it take to be a good leader in the organization?"

Identifying the critical leadership competencies that correlate with organizational

effectiveness tells us what leadership skills are needed. Some organizations use generic
leadership competencies found in theory; others build their own competencies; and some
derive competencies from the organization's mission statement and core values. The
exact competency set may vary by level—supervisor, manager, or executive—and
organizational unit. However, most organizations find foundational competencies apply
in many situations, and, therefore, can be used in the same developmental activities.

Researchers are offering fresh ideas of what makes a good leader. As a distinct
competency, moral leadership at work is attracting attention. 7 Why? Organizations are
better off if they behave ethically. Most employees come to the organization with some
understanding of ethical values, and some attraction to these values. The aspiring and
current leader should be taught how to use all five bases of his or her power 8 to reinforce
ethical values. We should recognize leaders have a degree of influence over their
employees, and they should use it to create a better society. Moral leadership is not
foreign in many organizations. It aligns with many mission statements and core values
such as integrity, human growth at work, and stewardship.

A degree of realism is needed here. Although it is possible for a leader to influence

the ethical development of her or his employees, we should not expect significant change.
Advancing the most abstract values will avoid cultural bias and organizational irrelevancy.
A moral leadership competency might include the following values and behaviors.

• Compassion.

• Willingness to help others.

• Truthfulness, including not lying by omission.

• Avoiding gossip and political behavior designed to advance a personal agenda.

Also, not attempting to gain an unfair advantage over one's coworkers that does litde, if
anything, to further legitimate organizational goals.

• Fairness. Leadership that promotes equality between races, genders, and

hierarchical and occupational levels.

• Repudiation of destructive competition.

• Tolerance for diverse views.

TASK 3. Establish an Application Process

"How can I become a participant in the program?"

The program application procedures should be simple, fair, and accurate. It is a

three-step process: (a) advertise the program, (b) evaluate applicants' suitability, and (c)
inform them of the decision. 1 0

A. Advertise program. Some policy questions the organization needs to address

in creating general selection criteria follow.
• Length of service, status, and standing—For example, longer than 24
months as a regular, full-time employee and acceptable performance
appraisal ratings.
• Occupations—Where are the predicted shortages, due, for example, to
resignations and retirements over the next few years?
 • Grade-level categories—For example, those at or under a certain grade level
enter a first-line supervisor track; those at the highest-grade levels enter an
upper management track.
• Location—Where does the program reside? Perhaps the organization could
have a regional and headquarters program.
• Specific experience requirements—For example, 2 years as a brand
manager assistant.
• Specific educational requirements—For example, 12 semester hours of
management credit.
• Implementation of leadership skills—Likelihood of having an opportunity to
lead in a reasonable time after graduating from the program, given the
organization's workforce trends and strategic directions.
• Commitment to the organization—For example, requirements to remain for
a given length of time, or willingness to relocate at the organization's
discretion to fill a management position.

B. Assess applicants. Use the leadership traits noted above and any other traits
or criteria assumed to correlate with leadership ability to develop an
assessment protocol for program applicants. This protocol could involve:
• A limited number of essay questions based on the eight traits.
• A limited number of essay questions concerning previous, verifiable
leadership experiences. This is possibly the best predictor of success.
• Standardized tests based on the (eight) traits. 1 1
• Leader, peer, and subordinate, if any, ratings of applicant's potential. For
existing leaders, a 360-degree leadership survey can be a piece of the
application. Leader aspirants could use the same survey. 1 2
• Technical knowledge usually gleaned from performance appraisals, within
one's occupation. If the individual wishes to lead in an area outside of her or
his current occupation, these criteria may be waived.
• A concise biographical information blank; e.g., work history, formal
education, and training. '3
• Personal interview—open-ended, structured questions based on results of
the above data collection

C. Notify applicants. A crucial but often overlooked job. Prompt notification is

one way applicants judge the quality of an organization; don't jeopardize your
standing with the people who are interested in working with you.

TASK 4. Assess Current Leadership Skills

"How do I stack up as a leader right now?"

Craft valid, reliable, and efficient ways of measuring participants' current

leadership style tied to competency criteria. A 360-degree leadership survey and
performance appraisals are good sources of data. The assessment data collected during
application may also be used. For example, the individual's and others' assessment of his
or her leadership traits could provide insight into the participant's style and motivation.

Assessment data is analyzed and packaged by an LDP staff member, and fed back
to the participant. These data provide targeted information to assist the participant in
creating an action plan, and aggregated results help to create development activities for
all participants.

Assessment centers are a popular way of providing participants with a

multifaceted portrait of their leadership style and potential. Despite considerable cost,
they are in use in thousands of private and public sector organizations. The typical center
puts candidates through 2 or more days of intensive activities that evaluate their planning,
organizing, decision-making, and leadership ability. Trained observers rate performance
on these simulations and exercises. Assessment centers provide a valid measure of
leadership, providing a nuanced picture of the participants' styles. 1 4

Larger organizations usually favor assessment centers where, due to the high
volume of participation, per-unit cost declines. Still, a smaller organization could have an
abbreviated version targeting a few critical competencies. Allowing the organization's
executives to help design exercises and assess others will enhance their own leadership
style. Owing to its intensity, the assessment center provides accuracy, depth of
understanding, and participant commitment to the action plan. An assessment center
makes a powerful statement about the organizations intention to build an excellent
organization through its leaders.

TASK 5. Provide Developmental Activities

"What specific things do I need to do to become a better leader?"

Offer a set of measurable, challenging, and time-bounded developmental

activities for participants. The LDP assumes that (almost) all motivated participants can
become effective leaders within 3 to 5 years. This requires accurate assessment of skill
needs, focused development, and consistent organizational support. Using the survey and
other assessment data, participants prepare a detailed individual development plan (IDP)
and review it with an LDP administrator, their supervisor, and organizational mentor.

IDPs capture participants' specific strengths and areas of needed improvement.

The participant develops a plan that focuses on greatest needs, while capitalizing on
strengths. A l-to-3 year time frame allows plenty of small, deliberate steps that add up.
Each IDP details any number of time-bounded activities, for example, classroom training,
rotational assignments, committee work, and directed readings.

Each participant takes primary responsibility for his or her own learning. An IDP is
a practical way for this to happen. The IDP is checked frequently and revised, as needed,
with input from the program administrator, supervisor, and mentor. At various intervals
formal evaluation occurs, usually by readministering the 360-degree leadership survey
and performance appraisals. Resurveying every 6 to 12 months yields useful data to affirm
growth and revise action plans.
 Leadership development typically occurs in three related areas: technical,
conceptual, and interpersonal.

Technical. Technical training enhances skills to perform the work unit's tasks,
and/or to oversee the work of others. Technical skills are most important at the lower
levels of leadership, where leaders are closest to the work. It is the easiest developmental
task to accomplish, and usually involves a combination of traditional classroom training—
more frequendy just-in-time and OJT.

Conceptual. Here the focus is on teaching the leader how to think in a more
abstract and critical fashion. It is harder to do than technical training, but possible
Conceptual leadership competencies that might be used for assessment include
creativity, strategic thinking, decisiveness. Of course, these competencies are not
immediately relevant for all occupations and levels of leadership.

The developmental method for conceptual skills may target specific areas or be
more general in nature. Nevertheless, every participant should ensure that her or his skill
needs receive sufficient attention. Some common methods include business games;
college or graduate courses; certificate and degree programs; simulations; critical thinking
training; directed readings; writing articles for publication; making presentations at
professional conferences; rotational assignments; task force assignments; seminars and
workshops; focused meetings with consultants and other subject matter experts; being
mentored; mentoring others; and shadowing executives.

Interpersonal. The ability to work effectively with people is the essential

determinant of leadership success. Developing interpersonal skills is, however, the most
challenging of the three leadership categories. Still, it is possible. Most developmental
methods involve experiential learning, i.e., learning by doing. The learning is reinforced
with cognitive understanding of theory. Common methods include:

• Role playing with observer feedback

• Role playing with video feedback and observer feedback.

• Participating in organization development (OD) projects with goals related to

the participant's specific skill needs.

• Receiving coaching and counseling from an O D consultant.

• Engaging in case analyses with other program participants.

• Job rotation through managerial tasks, with frequent feedback

• Being mentored.

• Receiving special assignments that require high levels of interpersonal

interaction.

• Shadowing executives.

• Using an assessment center as an observer of others.

• Attending interpersonal skill workshops, for example, at the National Training

Laboratory's Human Interaction or the federal government's Federal Executive Institute
or Management Development Centers under the direction of the U.S. Office of Personnel
Management.

• Maintaining a learning journal.

• Providing coaching and counseling to peers within the program.

• Attending "interpersonal forums" with other program participants to discuss

progress and problems.

• Attending feedback-intensive programs, for example the Center for Creative

Leaderships Leadership Development Program.

TASK 6. Align Structures to Reinforce Program

"In what ways is the LDP reinforced by other HR systems?"

Successful LDP programs find ways to tie desired leader behavior to the
organization's formal personnel systems. These include:

• Writing position descriptions that capture required leader behavior as a critical

success factor.

• Designing selection systems that heavily weight past leadership successes and
clear potential for leadership in the hiring decision.

• Including leadership as the key element of the leader's performance appraisal.

• Providing balanced feedback on a routine basis.

• Creating meaningful reward programs for the effective leader.

• Providing frequent and timely reinforcement of desired behavior.

• Withholding rewards from and removing leaders who are not performing and
demonstrating litde motivation.

Many organizations, such as American Express, AT&T, Eastman Kodak, and

Honeywell require their top leaders to engage in a 360-degree feedback process and use
the results to sharpen their skills. 1 5 Moreover, all four firms use the survey findings—
and trend lines from administration to administration—in making decisions about salary,
bonuses, succession planning, selection, placement and, in some cases, termination of
employment. Thus, leadership development is linked to other H R structures.

Other H R systems should be audited to determine their congruence with the

LDP's goals. At AT&T, for example, executives in some divisions get feedback early in the
rating period as to what their bonus will be, assuming the leader's performance continues
along the projected path. This H R system serves as an "early warning device" that
leadership matters, thereby reflecting the corporation's values in an administratively
feasible way.

The same format described for executives could be adopted at the supervisory
and managerial levels within an organization.
 TASK 7. Develop Leaders in Context

"Can the group(s) I lead be part of the developmental process?"

As much as possible, leadership development should occur on the job, not away
from the job. Leaders get things done through others. Leadership is essentially a
transaction between a leader and followers. It makes sense to create developmental
programs that attend to the transactional context within which the leader resides. For
instance, empowered groups such as self-directed work teams distribute the leadership
function rather than relying on one formally designated person. Increasingly, teams are
held accountable to each other via performance appraisal and customer satisfaction
surveys of each other's timeliness, quality, and so forth. The mature team recognizes it is
responsible for its reputation, along with the leader. We can increase the developmental
yield by helping the leader and her or his groups to grow.

Team-based leadership development reflects modern thinking about leadership.

This model downplays the ancient understanding of leadership as dominance of one over
many. We step away from teaching leaders how to make decisions by themselves,
towards developing the capacity of people to maintain themselves within a social setting
and achieve group goals. The leader alone is not responsible for creating an effective
organization. The development must occur within the group because the view of the
leader as the person with all the answers is challenged by the reality of having individual
team members at all levels making continuous decisions. Further, in a multicultural world
it is logical that any one leader cannot have all the answers. Even the most cosmopolitan
and seasoned person has limits to her/his ability to know other groups, other cultures and
other markets.

Education and training within the group is practical, being immediately applied
within the leaders setting. For instance, he/she does not deal with difficult people in the
abstract, but deals with a specific difficult member of his/her current team. In this respect,
group-based development is a practical experiential method of learning.

How might an organization conduct leader and group development? Team

building is a powerful method. Team building is widely used to improve the work group's
effectiveness and job satisfaction, whereby the team examines its current performance
in several areas. The leader plays an important role in the process, as he or she is often
the principal, although by no means the only, actor in the group.

During a team building intervention, members, with the help of an outside

facilitator, examine their functioning compared to the ideal, high-performing team.

The goal is to replace ineffective behavior with more productive methods of

working together. Considerable research1 6 finds high-performing teams share certain
elements, including:

• Interdependence and commitment to goals.

• Effective communication of ideas and feelings.

• Quality decision making and problem solving.

• Relevant technical expertise.

 • The ability to manage conflicts with a minimal amount of tension.

• An optimal level of social cohesion.

• Challenging performance norms.

• Active participation and distribution of leadership.

• A supportive leader who uses power appropriately.

In each area, the group reviews its behavior and often finds more effective ways
of working. One could argue that the leader's first responsibility is to create a high-
performing team because teams are fundamental units having critical leverage points for
improving the enterprise.

Like individual development, team building is most effective when carried out
over a period of time, say, one session per month for 12 months. One-time team building
interventions are usually not effective, given the tendency of groups to revert to type soon
after the initial enthusiasm wanes. However, because the group often concentrates on
real business issues, we tend not to see productivity slippage because of time away from
the job. Real work gets accomplished within the team building session itself. The
investment produces fast returns.

In addition to team building with a leader and her or his intact work group as
described above, the organization may also wish to conduct many other of the
developmental activities described in task 5 with the leader and intact team. In many
instances, the activities lend themselves better to work with the intact team than the
leader "going it alone." Conceptual skills such as thinking strategically and being
entrepreneurial can be directed at the work team, especially when implementation
becomes the real test of utility for learning something new. Interpersonal skills such as
resolving differences and effective communications are most effectively taught in groups.

Finally, although not working with the intact team, peer team-building
interventions are a useful developmental activity. Peer groups could tackle special,
organizationwide projects, with a facilitator assisting them to enhance their leadership
and team member skills while they solve business problems. Moreover, the cohesion
generated from this type of learning makes it easier for the leaders to collaborate on any
number of initiatives and projects that go beyond their immediate relationship. In this
way, peer team-building has a substantial, albeit indirect, impact on organizational
effectiveness.

TASK 8. Plan for the Next Generation of Leaders

"How can we ensure we have the right mix of leaders today and tomorrow?"

Assuming the organization chooses to build its talent pool, the leadership
succession plan becomes a central part of the development process. In a sense, LDP and
leadership succession planning are synonymous. One distinguishing feature is viewing LDP
as a specific program for developing individual leaders, whereby succession planning
accounts for the aggregation of leadership development needs, activities to address those
needs, and measurement of leadership readiness across the organization. Succession
planning takes a broad, longer-range view of future managerial needs and resources. 1 7

The LDP should fit within the organization's strategic goals—organizational

directions determine current and future leadership needs. The succession plan ensures
an adequate supply of capable leaders is available to carry out strategic intent throughout
the organization.

The succession planning process has several steps designed to develop leadership
talent. These steps involve the following:

• Assessment of LDP applicants or participants' current leadership potential and

skills— Includes range of biographical data (for instance, career progress, education,
interests, and realistic career aspirations).

• Appraisal of leadership behavior from formal appraisal systems and surveys—

Answers the question, in the aggregate, "How well led is this organization?"

• Determination of future management and leadership needs through forecasting

and strategic planning

• Definition of leadership requirements in the near future, expressed in

qualitative terms for various organizational levels—The executive committee must review
this document carefully and reach an agreement on the numbers and types of leaders
needed.

• Specification of actions for training and developing categories of LDP

participants (methods noted in task 5)—Specification usually involves a discussion about
the wisdom of "fast tracking" participants. Every organization must weigh the costs and
benefits of such an approach.

• Creation of a measurement system for summarizing developmental progress

and overall organizational leadership readiness.

• Act to meet immediate needs for leaders.

• Modify the program to manage surpluses of leaders.

Ultimately, assessment of leadership potential and readiness remains a line

management responsibility. The succession-planning process must be directed by the
organization's leaders, not the H R staff. Staff may, however, administer the plan under
the line's direction.

TASK 9. Evaluate the Leadership Development Program

"Are we getting a good return on our investment?"

The organization's executives and program designers should define the exact
nature and scope of the evaluation, based on program goals. Furthermore, because
evaluation requires a degree of time and expertise, the decision to conduct an evaluation
at any level should be based on resource availability.
 Answering the question "How well is the program working?" requires clear
program goals. Without clear goals the program is unlikely to succeed and impossible to
measure. From clear goals derive the potential to evaluate the LDP at five levels: reaction
(Level 1), knowledge and skill transfer (Level 2), on-site behavioral change (Level 3),
business impact (Level 4), and monetary return on investment (Level 5.) 1 8 Data needed
at each level influences the kinds of program activities one conducts. A well-planned
evaluation minimizes the burden by building in practical and unobtrusive ways of
gathering data. Evaluation begins at the very beginning of the program design, not at the
end

Generally, each succeeding level of evaluation increases rigor and cost. It is

financially prudent, therefore, to consider the program's success criteria. For example, if
success is primarily measured by satisfied participants who assert their intention to apply
what they have learned, a Level-1 evaluation suffices. Conversely, if the program must
pay its way to stay alive, you should determine return on investment by tabulating and
subtracting program costs from bottom-line indicators such as revenue enhancement or
cost savings. Following are some general suggestions for evaluating the LDP.

Make the evaluation robust, given the importance and cost of an LDP. As each
level builds upon the one below it, you should collect data on level one through four.
Information on participant reactions, knowledge and skill acquired, on-site application,
and business impact helps us to understand and explain level five, monetary return on
investment.

State goals and intended audience for each developmental activity clearly.
Measuring return on investment (ROI) revolves around two goals, reducing costs and
increasing desired impact. For this purpose, leadership development goals should map
back to one or both of these primary objectives. In addition, you can cite non-monetary
outcomes such as increased job satisfaction from pre-post climate surveys and fewer
grievances or less unwanted turnover by tracking personnel records.

Gather baseline data for participants and comparison groups. Although it is

tempting to forego compiling baseline data, you should resist the temptation. The ability
to show before-and-after change is a powerful argument that training has made a
difference, especially when you have a control group that did not receive the training.

Use a control group and, if possible, randomly assign people to training or no-
training conditions. To avoid being accused of turning the organization into a laboratory,
refer to the control group as the comparison group. Comparison groups may, at some
point, become participants in the program. If so, the study can be explained to the
organization as a "lagged participation" evaluation. In the ideal situation, the organization
could randomly assign leaders to the participant and comparison groups to avoid the
danger of biasing the results by choosing "winners." In the "real world" choosing the most
qualified candidates might make perfect sense. Use judgement rather than random
assignment to determine who is in the initial participant and comparison conditions, if
you so desire. This may be especially important to ensure that an adequate number of
women and minorities are included in the program.

Gather a sufficient sample size and attempt to get representative participants for
the study to permit organizational generalization; at least to the strata included in the
study. Initially, the organization may identify three levels—supervisors, midmanagers,
and upper-managers.

Calculate costs and benefits over the shelf life of the program. That is, estimate
how many times the program will run and subtract this cost from the projected future
benefit. Some organizations include an inflation factor to enhance precision.

Consider using trend-line data to isolate the effects of training. Use past data to
predict future trends, then compare that to the posttraining actual performance. Note
the gap in the two trend lines, and attribute this gap to the effects of training. It is an
inexpensive and intuitive method. Be careful. It may be inaccurate attribution because
posttraining changes may be caused by something other than training. Past is not always
a good predictor of future. However, as one indication of the program's effectiveness, it
is a reasonable method to use.

Use regression analysis — a statistical method that shows the relationship

between two or more variables. To use this technique one specifies all of the potential
independent and dependent variables that are likely to influence the desired outcome.
Examples of independent variables include amount of budget, supervisory style, and skill
level of workers. Dependent variables, i.e., those that are acted upon, might include:
sales, revenue, profit, scrap rate, cost savings, and turnover. We are looking for a
correlation between the independent and dependent variables. For example, assume
leaders are taught how to improve quality. We later find that scrap rate declines. We can
begin to build a case that training made the difference. Especially if we do not see a similar
downward movement in scrap rate within the comparison group that did not receive the
training.

Measure quality with a customer satisfaction index. Record the difference in

customer satisfaction before and after training for participants and comparison groups.
Next, correlate customer satisfaction to sales. Customer satisfaction is hard data in the
sense that it is part of the unit-profit contribution. Customer satisfaction data is a good
metric in organizations that use a standardized, valid instrument such as the American
Customer Satisfaction Index Rating, Gallup and Schulman, Roncas, Bucuvalas, Inc. (SRBI).
These may be useful, assuming we can isolate the participants' contribution to these
indices. This is another reason to use a comparison group.

Consider employee grievances. Assume leaders are trained in how to diffuse

conflict. After training, have managers and H R staff calculate average cost of a grievance
award plus the labor cost of time spent by the organization processing the claim, plus
external legal fees to arrive at the unit cost of one grievance. Then calculate before-and-
after changes in number of grievances filed and annualize the difference to arrive at ROI,
minus cost of training itself, of course.

A final thought on evaluating an LDP: Don't forget intangible benefits from

training. By intangible, we mean important indicators that do not tie direcdy to monetary
outcomes such as increased job satisfaction, improved communication and teamwork,
and fewer complaints. Calculating these benefits can be a challenge; nonetheless, even
here the organization may be able to measure financial returns.
 Conclusion

It is often noted that a firm's only distinctive competence is its employees. But,
coordinated effort is needed to convert employee potential into positive outcomes.
Leadership at every level is the necessary catalyst. High performing organizations are led
by technically, conceptually, and interpersonally skilled individuals who have the ability
to empower and guide employee behavior. Leadership is a teachable skill, albeit difficult
and time consuming. Also, an internally built and administered LDP is a large undertaking,
especially when the program comprises the nine steps described here. However, the
organizational benefits can be substantial, far outweighing the costs. Systematic
leadership development is a strategic choice, representing a long-term investment in the
organizations future and that of its employees.