Leadership Development – Return on Investment

One of the most common questions we get at Echelon Front, when talking to prospective clients, is what kind of return on investment will we see from this training? This is an honest question, and we know how important investing in your people is for mission success. Employees are the backbone of every company in the world, and the highest functioning, highest performing teams across all industries, recognize the value of their employees and invest in their people. This investment is not only developing relationships and empowering employees at every level but is also an investment in their training and development. Too many times, we see a business promote a highly skilled, highly technical performer into a leadership position, and they do not provide any leadership training for that person. This is not setting that individual, their new team, or the organization up for success. In fact, it can lead to a lot of negative outcomes like low morale, poor decision-making, and subpar execution.

Leadership is not something you are born with. It is a skill just like playing the piano. In order to get better, you need to practice the skill, which means you have to learn and study, practice, assess, and evaluate how you are doing and continuously stay in that cycle in order to see growth, improvement, and ultimately bring out the most in yourself and your teams.

The return on investment for leadership training can impact every area of your business. The Extreme Ownership principles, when applied effectively and regularly, improve relationships across the organization, which means there is more support which means more work is getting done. Communication improves and is more effective, so people understand what to do and are able to go out and execute. Teams are focused on the correct priorities that have the highest impact on the mission because their leaders can stay detached and make the right calls in an oftentimes chaotic environment. People are leading at every level because leaders are properly utilizing decentralized command and pushing decision-making down. Team members feel empowered to make decisions, understand why they are doing what they are doing and know the mission so they can go out and make things happen in the best interest of the organization. Finally, and most importantly, when problems arise, leaders are not looking to point the finger or place blame; they are taking ownership and stepping up to solve problems and implementing solutions so they can keep pushing the mission forward.

We know that these outcomes from leadership training benefit the team and the organization and are often more qualitative in nature. However, we also know that applying the principles of Extreme Ownership and investing in leadership training impacts the bottom line and has positive effects on business operations. We also know any training that we do with our team comes at a cost, and with the changing market conditions and fluctuations, it is the responsibility of leaders to ensure they do their due diligence to research different options and be able to navigate how that training will meet the goals and objectives of the organization.

WHY DEVELOPING LEADERS MATTERS

Study after study shows that organizations that invest in leadership development programs for their employees outperform those that do not. Good leaders tend to build and retain high-performing teams, they create more leaders, problems get solved, and their impacts are felt throughout the organization. There is often a reluctance, though, to invest in leadership development because so much of leadership is rooted in soft skills and application based on the context of the situation, not technical skills or cookie-cutter solutions. Because of this, it is hard to quantify the return on investment for an organization looking to develop more leaders.

Through experience on the battlefield and with thousands of clients over the last 7 years, we know that the principles of Extreme Ownership lead to good outcomes in every environment where they are applied. Leadership is a human nature endeavor, and at Echelon Front, we teach leadership skills that help individuals build better relationships, communicate more effectively, make sound decisions, and develop other leaders. Ultimately, we teach people how to deal with people, and those are constant, everyday situations we have to navigate in order to achieve our goals and accomplish the mission.

It is worth asking, what is the alternative to not investing in leadership training? Can you afford the costs of poor leadership? Without the proper development and training in leadership positions, people tend to make poor decisions, there is high turnover among those teams, low productivity on those teams, low morale, and likely some unhappy customers.

LEADERSHIP TRAINING

In the SEAL Teams, we would promote a good SEAL operator who was reliable, good within their tactical operator skillsets, and a good manager of their departments within the platoon and who had the correct amount of experience.

Sometimes the person we selected was not properly developed for the position we promoted them into and this would create a lot of frustration for that new leader and their team. Areas we would see our young leaders struggle in were communicating with their peers, developing plans, developing timelines for daily work schedules, and accountability for themselves and their teammates. How they communicated with their teammates would create misalignment and create an us versus them mentality.

In short, we would fail them by not providing leadership development training. Not just fail them, we would also fail the team because one bad leader or a leader that is underdeveloped can have a tremendous effect on the team they are leading. This can impact the mission, the credibility of that platoon and team, which then impacts the culture and contributes to attrition.

The lack of leadership training had a real domino effect. Some of these leaders would wind up getting fired, which created uncertainty for the team. We would have to fill the position and bring in another new leader which meant that person had to get trained up, learn the job quickly, which can create additional stress for that person and for the platoon.

How does any business fix this? One of the best ways to set your new and existing leaders up for success is by providing them with initial leadership development training and following that with sustainment training with a leadership development program. Leadership is like a muscle, the more you exercise it the stronger you will be, and this is what businesses need- strong leaders to lead their teams, who can make good decisions, communicate well, bring people together to work as a team, and to build out a business for long term success. Investing time and money into your people now and developing those leaders will create the culture that every business needs for success.

The return on investment for the organization will be productive leaders who are set up with the right skills to lead their teams, which will create a good culture in your business long term and reduce attrition within your business.

CLIENT EXAMPLES – RETURN ON INVESTMENT

RESEARCH AND DEVELOPMENT ORGANIZATION – FROM LAST TO FIRST

Echelon Front worked with a technology lab over the past four years to help develop their leaders. The main reason this lab brought Echelon Front in was that out of the 10 divisions across the U.S., they were ranked last for 5 years running. One leader within this lab was tired of losing and reached out to a few other peers, and they decided to bring in Echelon Front for some leadership development training. We’ve been working with them for the past four years, and they’ve ranked number one for the past three years in a row.

From last to first, how did they do this? The first thing they did was take action. They identified what they were not doing great as leaders and started to look at what they could do to become better. From that analysis, they identified that they needed leadership development training to provide their leaders with additional skillsets to become more effective. Areas Echelon Front focused on were teamwork and building relationships, communication and alignment, setting priorities and staying detached from emotions while making decisions, and setting up everyone to lead and explaining the why behind tasks and projects. Lastly, this leadership development training focused on ownership. Leaders are responsible for everything in their world, their people, every project, and every task. When something isn’t going correctly, leaders have to pull the thread back to themselves and take a hard look in the mirror to see what they can do better.

Taking action was the first step in the process. The next thing this organization did was carve out time to conduct leadership development training and identify how much training they would need. This helped them build out a budget for a 12-month leadership development and alignment training program. In collaboration with the client, we developed a program focused on mid to high-level leaders to gain initial traction. This included a series of workshops to baseline the entire organization. From that training, they received more buy-in from different levels of leadership and decided to conduct a train-the-trainer program where they would identify key people within their organization that would help facilitate implementing the Echelon Front leadership principles throughout their lab. This came in the form of monthly touchpoints with their leadership team, onsite visits, and virtual training sessions to train their trainers.

This tiered approach, along with the action by their team members and leadership team, allowed them to slowly change and gain alignment within their organization, which overall has contributed to better teamwork, better communication, alignment, and a training program that is in place to set their people up for long-term success.

From last to first, based on one person who was willing to take ownership of creating more effective leaders in their organization.

OIL EXPLORATION COMPANY – $18 MILLION REVENUE INCREASE

At Echelon Front, we know that leadership impacts every industry, and one field that we have consistently worked in is Oil and Gas.  One particular oil exploration and production company was facing a few major challenges when we began working with them.  They were 20% over budget and 4 weeks behind schedule. Machine downtime was at a staggering 12% for 3 quarters in a row, and there was a culture of casting blame and making excuses both internally and externally with vendors.

We conducted a 9-month leadership training program with the goal of instilling the Extreme Ownership mindset and reducing downtime by 30%. During this leadership development training, we provided initial introductory training, quarterly on-site workshops, and monthly phone calls.  These sessions focused on building relationships to create better teamwork between the vendors and the organization.  They also emphasized empowering the team by explaining the why and pushing decision-making down to allow individual team members more ownership over finding solutions to the problems they faced at their level. To wrap up the leadership training program, we conducted a [corporate field training exercise] to further reinforce the Extreme Ownership principles in a hands-on, risk-free environment and to develop trust between department leaders.

As a result, this company was able to cut machine downtime in half – from 12% to 6%. Far exceeding the goal of a 30% reduction.  The production team was also able to execute projects within 14 days of receiving the request instead of the 4 to 6 weeks that were previously required.  This resulted in increased revenue of $50 to $60 thousand per day, which is roughly $18 million annually.

The transformation within this organization was impressive, but it only occurred because the team recognized the leadership gap they had and took action to correct it through a leadership development program.  Their CEO stated: “When Echelon Front showed up, my people were broken, didn’t care, missing maintenance, and taking their time. When they left, 9 months later, my people were happy, upbeat, and excited to work here.”

HEALTHCARE SERVICES – 40% REDUCTION IN COST

The healthcare industry is extremely chaotic, stressful, and impactful. Each person who works in this field cares deeply about their patients, and when death does occur, they do everything they can to ensure that those left behind to deal with the tragedy have the best experience possible. The healthcare services provider we worked with is specifically focused on providing alternative choices for families dealing with a death.  And as a business, they still had to worry about being profitable in order to continue to provide excellent care for these families.  Unfortunately, they were not doing well. They were at a -8% net operating loss after two years under their new leadership.  The sales force was fully reliant on leads generated by the company and did not execute quickly enough.  When they brought us in, they asked us to focus on breaking down silos across the organization, building an Extreme Ownership mindset at every level of the organization, and helping the team reach a 3% net operating profit.  With these goals in mind, we created a 12-month leadership training program consisting of a 2-day kick-off, quarterly on-sites, and weekly check-ins. During these sessions, we focused on helping the primary management team work through how they could apply each Extreme Ownership concept to their specific challenges. We also supported them in simplifying their organizational chart and compensation bonus plans and then communicating this new information with the reasoning to help everyone on the team understand how the new organization and plan would benefit them.

This allowed the team to better understand how they could all take ownership of their piece of the mission. So, they began generating their own sales leads, which dropped the cost of sales by 40% and increased their revenue by 25%. This meant that their net operating profit was up to 15%, which was 5x their original goal of 3%.

ENGINEERING SOLUTIONS INCORPORATED (ESI) – RESILIENCE THROUGH TRAGEDY

Why is leadership development important?

In 2019 Echelon Front was brought in for a keynote speaking event for an engineering business. The CEO of that business liked what he heard and decided to bring Echelon Front into his business for a Leadership Development training program for 6 months. During the course of this training, the leaders within the business had stated that they were seeing their CEO change because he started utilizing the Echelon Front leadership principles: Teamwork, building relationships, simple-clear-concise communications to create alignment, stacking priorities effectively and staying detached from emotions while making decisions, everyone leads and how to set our people up to lead, explaining the why and taking ownership of everything in your world, seeing what you can do better, not casting blame and not making excuses.

Throughout this leadership development engagement, the people within this organization showed incredible initiative, follow-through, and professionalism at every level of the organization. They were in the game! This CEO was setting his business up not just for the next 9-12 months but for long-term success.

In March 2021, this CEO unexpectedly passed away. Because this leader was investing in his team and his people, that business took an emotional hit, but they were ready to step up, lead, and make things happen in this tumultuous time due to his foresight and his investment in the team.

That leadership team came together and navigated, over the next 11 months without a CEO in position, to make key decisions and to maintain the course that he had set for them. How did they do this? They utilized the principles of Extreme Ownership and worked together as a team, maintained alignment, made good decisions, and continued to invest in their people with leadership development training.

Who’s taking your position if something happens to you? Are you properly training them? Do they know everything you know? Are you giving that person feedback on their performance? Are you investing in their improvement?

DESIGN A LEADERSHIP TRAINING PROGRAM THAT MAXIMIZES ROI

When designing a leadership training program, there are three important considerations.

  1. Iterative Steps
  2. Repetition
  3. Sustainment

ITERATIVE STEPS

Some companies don’t have any formal leadership training, some companies have obligatory box-checking training, and some companies have robust leadership training programs. No matter what category you fall into, when you want to introduce new leadership training at your organization, iterative decision-making is key. Iterative decision-making is a concept we teach at Echelon Front that absolutely applies to training as well. The goal is to make a series of small decisions instead of one massive decision. This allows you to work towards a solution without overcommitting so that you can gather feedback, create buy-in, and adjust as necessary. Rather than immediately creating a detailed, long-term training plan around a leadership methodology and rolling it out, the first step could be something more iterative:

  • Attend a leadership conference or event.

Once you’ve completed one or all of these steps, you’ll have a better sense of the usefulness and applicability of this training within your organization. Then, you can begin to create a more long-term, customized plan for increasing leadership capacity within your organization.

REPETITION

Leadership is not an inoculation. You can’t attend one event, read one book, take one course, or sit through one workshop and become a great leader. Leadership is just like any other skill – it can atrophy from disuse, it often doesn’t come naturally, but it can absolutely be learned.

However, to truly learn and retain your leadership skills, repetition is key. When creating a program and in order to maximize ROI, you have to ensure ample opportunity for continued learning and repetition throughout the program. The consistent exposure, application, and learning will allow your leaders to establish the basics and continually iterate on their effectiveness as a leader.

SUSTAINMENT

Finally, if you truly want to embed this leadership model into your culture, you need a plan for sustainment. At Echelon Front, our ultimate goal for sustainment training is that you no longer need to rely on us for training. Our long-term training programs focus on supporting you in creating mass adoption of Extreme Ownership concepts across the organization and then partnering with you to identify team members that can continue to provide baseline training as needed. Through our internal trainer program, online academy, and other resources, we can provide a variety of sustainment options. We also support your team in creating a training program that helps ensure new hires are exposed to the concepts immediately, all employees continuously maintain their skills, and that any other unique training needs within your organization can be met.

No matter what industry you are in, what budget you have, or the number of leaders you want to train, we can help you customize, develop, and implement a formal training program that will meet the needs and objectives of your organization.

ROI CALCULATION

Every company wants to ensure that their investments are solid, and many companies are starting to recognize the impact of leadership training. However, quantifying the return on investment of leadership training can be difficult. There are many notional improvements that can be observed following leadership training, but actual attribution to the training and associating a dollar amount to that can be done in many different ways.

A recent study for a retail organization reported an annualized ROI of 415% when they trained 2,000 new leaders within the first three months of being in their new position.  This was based on five specific metrics they tracked for those who were trained. One of our clients reported that the engagement scores for the 200 leaders that went through our training went from the 60th percentile to the 96th percentile after one year of training with us.  While another client attributed cost decreases, improved delivery, and an $18M bump in revenue to the Echelon Front training program they went through.

Let’s take a look at an ROI example. As you know, there are many factors that go into calculating the return on investment of training, and training costs are not as straightforward as simply the cost of the program. Often, training requires travel, hotel stays, time away from work, materials, and other administrative costs (room reservations, etc.) for the participants. These costs all need to be included in the calculation.

The other part of the equation for an ROI calculation is the monetary benefit to the business. This can be calculated in several ways. Some examples include cost savings areas like improved attrition, lower absenteeism, fewer injuries on the job, and other associated cost savings. You can also calculate this by looking at the profit side of the business with higher margins on products, additional sales, increased productivity, and more.

ROI = ((MONETARY BENEFITS – TRAINING COSTS) / TRAINING COSTS) X 100

Below is an example of an ROI calculation based on an improved attrition rate due to a leadership training program. The leadership development program example is a 12-month program with 50 participants from a medium-sized business. The averages used were based on a quick Google search and Department of Labor numbers.

TRAINING COSTS: $552,138.50

ItemAmount
Total Number of Training Participants50
Average Number of Training Hours per Participant55.4
Hourly Rate per Participant$35.79
Cost of Time for Training per Participant$1,982.77
Total Time Away from the Office Cost for all 50 Participants$99,138.50
  
Services (Training Program) from Vendor$300,000
Travel costs for Participants$150,000
Training Materials for Participants$1,000
Other Miscellaneous Admin Fees$2,000
  
Total Training Costs for 50 Participants$552,138.50

MONETARY BENEFITS (ATTRITION EXAMPLE): $990,145.10

ItemAmount
Average US Salary$74,447
Cost to Hire a New Employee1.33 x Salary
Cost of Replacing each Employee Lost$99,014.51
  
Average Attrition Rate20%
Number of Employees in a Medium Size Business250
Number of Employees Lost per Year50
Total Cost to Rehire for 50 Person Attrition$4,950,725.50
After Leadership Training
Improved Attrition Rate16%
Number of Employees Lost per Year40
Retention Improvement10
  
Monetary Benefits for 10 Less Person Attrition$990,145.10

ROI

ROI = ((MONETARY BENEFITS – TRAINING COSTS) / TRAINING COSTS) X 100

ROI = ((990,145.10 – 552,138.50) / 552,138.50) X 100 = 79%

In this example, an improved attrition rate from 20% down to 16% indicates that of the 50 trained participants, an estimated 10 effectively implemented the principles of Extreme Ownership. Let’s assume those leaders retain 1, just 1 additional employee, and they save the company nearly a million dollars.

The value of investing in leadership development programs for employees cannot be understated, and we have options that range from individual opportunities to fully customized programs for large businesses and everything in between. We have a breadth of services that lend themselves to different modalities of learning, implementation, and evaluation of success and impact. Through the various services, leaders and organizations find what works best for them and their teams, given the various factors that go into these decisions.

The return on investment for leadership training has ripple effects that go far beyond one person, one year, and the retention of ten employees. Ownership breeds ownership, and when leaders utilize the principles of Extreme Ownership, good things happen. Others see this, so they start using the principles, and now the culture starts to shift towards ownership and leadership, and the team is on the path to WIN.

So, if your team has specific metrics they are interested in improving, tailored leadership training may be the piece you’re missing.

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