Exposing the true cost of under trained leaders
Let's cut to the chase. You already know how much it costs to recruit into a leadership role. You understand what the process of putting the job description together, sifting through applications, interviewing, scoring and then onboarding a new member of staff costs your organisation time and money. You’ve probably experienced the frustration of your star hire deciding to leave or not quite living up to your initial expectations. Those are the obvious consequences which can be avoided easily by investing in a coaching culture, leadership development programmes and building a succession framework in your business so talented people can work their way up.
But what about the less obvious costs?
The cost of not providing development and support for your managers and leaders goes way beyond that which is at first apparent. Leadership is the backbone of every organisation. Skilled leaders drive innovation and create an environment and culture where people can thrive. But when the investment in leaders isn’t made, poor morale, high turnover and lost productivity are just the tip of the iceberg. Investment in leadership capability and development go far beyond financial returns.
Are your leaders fit to meet the challenges of 2025?
Socio-economic challenges, global conflicts and rising costs mean that businesses will be facing challenges in 2025 that go far beyond how we manage and integrate AI into our workflows and figuring out how we’re going to cut costs without cutting quality. Leaders of 2025 need to be creative, strong and resilient and they can be none of those things without the right skills, habits and support.
Higher turnover - are people leaving organisations or bad leaders?
Failure to build trust within teams is leading to higher turnover. The costs associated with turnover don’t just include recruitment and onboarding; they also include lost institutional knowledge and lower productivity. The Society for Human Resource Management (SHRM) estimates that replacing an employee can cost an additional 50% to 60% of their annual salary. For a senior or specialised role this can rise to 200%. CMI Research suggests that almost one third of UK workers (28%) have left a job due to a poor workplace culture. All of which highlights the significance of getting it right.
Team morale and staff engagement - losing team members who vote with their feet
But it’s not just about the cost of recruiting replacements - its lost revenue, lost opportunity, reputational risk, your very survival as an organisation is at stake. 2025 is going to be a rough ride for most sectors and if your leaders, the very people at the steering wheel of your organisation aren’t equipped with the right skills, the odds are very much stacked against you.
When leaders lack the skills to lead and motivate others this manifests itself as micromanagement , poor communication and a lack of recognition of team members. Gallup's Global Workplace report showed that managers account for at least 70% of the variance in employee engagement. Great manager, great engagement and productivity. Not so-great-manager….well, you get the picture.
Poor leadership doesn’t just drive down profits and increase costs, it reduces productivity and loses you hours every week, month and year. That time is wasted by teams who are second guessing decisions and delaying action because they don’t trust their managers or believe in their ability to lead. They’re not motivated or engaged and they don’t go above and beyond for their organisation because they don’t feel important or valued.
The Gallup Report also suggests that poor leadership practices can cost businesses up to 7% of their total annual sales. Do you have a spare 7% in your budget or are you already struggling to find that to cover the cost of increased NI contributions?
Performance, productivity and future proofing the business
Leadership impacts productivity in a number of ways. Under-developed leaders struggle to set clear goals, provide constructive feedback, or resolve conflicts. The result is inefficient processes, missed opportunities, high absence levels and in the most extreme cases burnout. A McKinsey study found that organisations with effective leadership practices were 1.5 times more likely to outperform their peers financially.
Neglecting leadership development doesn’t just affect the current workforce, it also jeopardises the future. Without investment in training and support high-potential employees may lack the skills or opportunities to grow into leadership roles which can result in limited scope for internal promotions. It also increases the attrition of talent and creates leadership gaps. A 2023 report by LinkedIn Learning highlights that 86% of organisations view leadership development as critical to addressing succession planning. Without a pipeline of trained leaders, businesses risk stagnation and an inability to adapt to future challenges.
Beyond the reduction of costs, what are the long term benefits of investing in leadership development?
Improved employee engagement and retention
Actively providing support for managers to develop the leadership skills they need does more than just fostering a positive work environment. Trained leaders create transparency and trust. They recognise and reward achievements and build stronger teams reducing the amount of people who want to leave.
Better team performance begins with leaders who are able to set clear goals and expectations, coach team members to fulfill their potential and resolve conflict effectively. A study by Deloitte found that companies with effective leadership development programs are 2.4 times more likely to hit their performance targets.
Building a shared culture of improvement over time.
Development always has a ripple effect. Trained leaders model positive behaviours and encourage a culture where learning is valued. When leadership works it’s something that encourages, motivates and inspires others. Everyone wins.
How can you prevent or mitigate the costs of under developed leaders?
Avoid the one and done approach. You’ve only got to look at how quickly emerging technologies have changed the face of business to see that if leaders are equipped to handle new challenges, organisations must invest in continuous development. This should include workshops on communication, conflict resolution and coaching to address specific leadership challenges and peer mentoring to share insights and experiences.
Encouraging a feedback culture will promote a culture where feedback is welcomed and acted upon.
Organisations should seek to match their leadership development with organisational strategy and goals. Leadership training should be tailored to match with the strategic objectives of the organisation. This ensures that leaders are not only effective in managing their teams but they are also taking care of where the organisation is going in the longer term.
Embracing technology. Digital tools and platforms can make leadership development more accessible and scalable. From virtual workshops to micro learning, technology can support leaders in developing their skills no matter where they are.
Measure the ROI of training. What gets measured gets improved, organisations should track the impact of their leadership development programs. Metrics such as employee engagement scores, retention rates, and team performance can help quantify the benefits and make a case for ongoing investment. (If you need help designing your measurement and impact framework, get in touch).
The cost of under-developed leaders goes far beyond financial losses. Poor team morale, high turnover, lost productivity, and a weak leadership pipeline can severely impact an organisation's overall success. Organisations should be thinking about how they can mitigate risk whilst unlocking the full potential of their current and future leaders.
Investing in your manager's skills and development is more than just an expense, it’s a strategic investment that sets businesses up for longer term success and reduces your risk of having to fight for survival. We carried out our own research about the future of leadership training and are excited to bring you our findings. Download the whitepaper here.