In last week’s blog, What’s the ROI of Leadership 2.0, I gave you a real world example of one of our clients, MiQ Digital and their results from their Leadership 2.0 journey; including statistics on revenue growth, employee engagement, attrition and more. During my entire career working in consulting, mining & oil & gas, I’ve always needed a business case to prove a benefit as part of asking for a budget to start.
MiQ’s case and the research prove that Leadership 2.0 makes people happier & healthier, and it also drives business results.
So how do we build a business case for Leadership 2.0 so we can start our Leadership 2.0 development?
Let’s take just 3 data points from MiQ:
- 35% YOY Revenue
- 83% Employee Engagement
- 18% of MiQ’s people are actively looking for another job
Let’s assume our business is 100 people, with a revenue of $10 million/year and average salary of $50,000. In this case, we’ll just look at the benefits and costs of the first year.
- MiQ has been working with Elite High Performance for a few years so let’s be conservative and say that during the first year, we can add 10% to our revenue due to improved Leadership 2.0 strategies.
- Benefit – $10 million * 10% increase = $1 million
Employee Engagement Benefit
- MiQ reports 83% employee engagement compared to Gallup’s State of the Global Workplace 2022 Report of 21%
- According to Gallup, 70% of employee engagement is directly related to their direct manager so we can’t only train our executives, we must also train our middle managers.
- Employees who are not engaged cost their company the equivalent of 18% of their annual salary.
- Let’s say we can increase our employee engagement by 20% in the first year by training our managers in Leadership 2.0 strategies.
- Benefit – 20% increase * 100 employees * 18% cost * $50,000 avg salary = $180,000
Increased Employee Retention Benefit
- MiQ reports 18% of people are actively looking for another job
- According to Microsoft, 41% of the global workforce is actively looking
- The cost of turnover varies by role & experience (source):
- Entry level employee turnover costs between 30-50% of their annual salary to replace
- Mid-level employee turnover costs 150%
- High-level or highly specialized employee costs 400%
- Let’s say we can reduce our employee turnover by 10%. Since we have more entry level employees than mid to high levels, let’s say that of that 10%, 60% are entry level, 30% are mid-level and 10% are high-level.
- Benefit – 10% reduction in employee turnover * 100 people = 10 people
- 60% are entry level – 10 people * 60% * 40% avg cost to replace * $50,000 = $120,000
- 30% are mid-level – 10 people * 30% * 150% avg cost to replace * $50,000 = $225,000
- 10% are high-level – 10 people * 10% * 400% * $50,000 = $200,000
- Total Retention Benefit – $120,000 + $225,000 + $200,000 = $545,000
Total Benefit = $1 million + $180,000 + $545,000 = $1,725,000
Obviously, we’d love to get the benefits without increased cost but we must consider the Leadership 2.0 development costs so we can determine the net benefit.
Typically, we see companies average a $10,000-$15,000 per year spend on leadership development. Let’s say we have 20 middle managers & executives and we’ll spend $15,000 on their development
- Total Cost = 20 people * $15,000 = $300,000
Business Case Results
- Net Benefit = $1,725,000 – $300,000 = $1,425,000
- ROI = Net Benefit / Cost = $1,425,000 / $300,000 = 475%
Can you afford not to boost your revenue, increase employee engagement and retain your employees? Can you afford to continue the status quo?
If not, we, at Elite High Performance, specialise in building high-impact leaders who turn their teams into happy high performers that achieve their goals. Reach out to me, firstname.lastname@example.org, we’ll put together a tailored business case for your company and a plan for your company’s Leadership 2.0 development.
On this week’s Leadership Launchpad Project podcast, Anna Greenwald, the CEO of On the Goga joins the show. We talk about how happiness & wellbeing contribute to performance and why employees demand Leadership 2.0 from their executives. You can find the interview on The Leadership Launchpad Project podcast feeds – Apple, Spotify, Stitcher, Amazon Music, Google Podcasts and more.
Want to get business results and make your people happier? We, at Elite High Performance, specialise in building high-impact leaders who turn their teams into happy high performers that achieve their goals. Rather than traditional leadership coaching, Elite High Performance blends neuroscience, mindset coaching, high-performance leadership strategies with cutting-edge technology & data to provide a clear path to building a high-performing team – or to turn around an under-performing team. It’s the same way professional sports teams combine high-performance coaching, technology and analytics to build a winning sports team. Check out www.elitehighperformance.com or send an email to email@example.com for more.
– Coach Rob