Without effective leadership, even the strongest teams falter. Discover why investing in leadership development is essential for SMEs and gain practical tips to kickstart the journey.
By the time COVID struck, I had been in the people development field for over 30 years, with the last decade focused on developing high-performing teams and people leaders in business. At that time, I had written the manuscript for my latest book People Leadership. However, I wanted to intersperse the theory with interviews from experienced workplace leaders about their own leadership evolution.
These interviews, initially intended as a supplement, took on a life of their own and became the foundation for a separate book. The recurring theme that emerged from the interviews was encapsulated in the near-universal response to the question: “How were you prepared for your first leadership role?” Almost without exception, the answer was: “I was thrown in the deep end. I received no training, education, or formal preparation.”
These interviews revealed story after story of costly mistakes in staffing, decision-making, and lost revenue – many of which could have been mitigated with proactive leadership development. These insights highlight a critical, yet often overlooked, need in businesses of all sizes: preparing leaders before they step into formal roles, then developing them once they’re in various management roles.
So, why should small to medium business owners or senior leaders invest time, money, and effort in developing their own leadership, their people leaders and their teams? Well, the businesses that approach me each year for leadership and team development do so for two main reasons: to increase effectiveness and/or to mitigate ineffectiveness. This developmental input can be seen in both “soft” and “hard” outcomes. On the “soft” side, businesses experience boosts in interpersonal communication, creativity, innovation, motivation, and morale. It’s a well-known principle that “People join companies, but leave managers”. Of course there are lots of positive reason why people move on, but a Gallup poll of more 1 million employed U.S. workers revealed that 75 percent of workers who voluntarily left their jobs did so because of their bosses and not the position itself. And, according to Deloitte Research, it takes up to 94 days to replace a team member, which is likely to have negative impacts on productivity and profitability.
On the “hard” side, tangible improvements include increased productivity, time savings, and reduced staff turnover.
While many clients don’t explicitly require a measurable return on investment (ROI), it’s not hard to decide on the ‘quantifiables’ and track the gains post-development. In fact, my own leadership programmes that include project work, generate quantifiable returns which typically exceeds the cost of the programme.
On the other hand, the cost of not investing in development can be far greater. For example, an Australian client contacted me some years ago to address dysfunction in both their team and management. After conducting surveys and one-on-one interviews, I proposed a development plan, however, the business declined, opting to manage the issues internally. A year later, they reached out again, asking me to deliver on the original proposal. Unfortunately, by that time, the company had lost key staff, experienced a significant drop in productivity, and seen a decline in overall team morale. The cost of lost opportunities and lost talent far outweighed the investment they initially avoided.
This highlights a fundamental truth: while proactive leadership development requires an upfront investment, it’s always more cost-effective than trying to fix broken teams and leadership after the damage is done.
There are two main approaches to addressing leadership and team inadequacies: Proactive Development: Investing in leadership and team growth before problems arise. This is more cost-effective, less time-consuming, and results in stronger, more cohesive teams.
Reactive Problem-Solving: Addressing issues after they’ve taken root. While I often help businesses repair broken teams and dysfunctional leadership, this is always a more expensive and disruptive process.
Proactive development fosters a culture of resilience and adaptability, enabling teams to navigate challenges more effectively. Reactive measures, while sometimes necessary, come with higher costs to staff well-being, productivity, and customer relationships.
While I’m a strong advocate for engaging external experts like consultants, coaches, and facilitators, I understand that some businesses may face significant budget constraints. Here are three practical steps to kick-start development internally:
- Take time to clarify why your organisation exists and the level of excellence you aspire to achieve. While an external expert can streamline this process, even doing it in-house with your leadership team can deliver benefits by shifting focus from the day-to-day output to long-term, purposeful strategy.
- Determine the values that will drive your business’s mindset and behaviours. These values should guide decisions and interactions, serving as a compass for both you and your team.
- Don’t let your vision and values gather dust as a poster on the lunchroom wall, or a “tick the box” exercise for your website homepage – embed them into everyday conversations, from team meetings to recognising and rewarding staff who embody these principles.
Just as elite athletes are not born but are coached and refined through intentional practice, effective leaders are made, not born. The first step in your leadership development journey – or that of your team – is to define what excellence looks like. Then, identify the developmental gaps that will then inform the “A to B” journey, then determine the necessary input needed to achieve that vision of excellence.
Whether you’re proactively building strong leaders or addressing existing challenges, leadership and team development is one of the most impactful investments a business can make. People leadership is not for the faint hearted, and managers are more likely to feel supported by the business if they’re receiving formal development, which will not only increase their effectiveness, but also their loyalty to the business. But how do we measure “loyalty”? Well, research by The Society for Human Resource Management (SHRM) reports that if an employee makes $60,000 per year, then it costs an average of $30,000 – $45,000 just to replace that employee and roughly $54,000 – $120,000 in overall losses to the company – loyalty has tangible worth.
Strong leaders drive cohesive teams, foster innovation, and create resilient organisations capable of thriving in an ever-changing world. If you think you might benefit from leadership or team development, don’t hesitate to reach out to me- in my experience with many clients, even an initial “no cost” discovery conversation can be highly beneficial regardless of whether any formal developmental work occurs.
This article was originally published in the December 2024 issue of NZBusiness magazine. To read the issue, click here.
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