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PrefacexiiiTarget AudienceThis book should be of interest to anyone involved in leadershipdevelopment including the leaders themselves. The primary audiencefor this book is executives, managers, and professionals involved inleadership development, coaching and mentoring programs, actionlearning projects, training, and performance improvement. Whetheran individual is involved in needs assessment, instructional design,delivery, evaluation, or is a participant, this book will be an indispensable reference. Individuals in leadership development and inleadership positions (i.e., managers, supervisors, team leaders, directors, and vice presidents) will find it to be a helpful guide to measurement and evaluation. With its step-by-step approach and casepresentations, it will also be useful as a self-study guide.Structure of the BookThis book has two unique features that make it a very usefulguide. First, it presents the scorecard model in a step-by-step process.The second unique feature is an application of the scorecard in adetailed case study that is based on an actual situation. The case isdivided into ten parts. One part is included at the end of each chapter,beginning with Chapter 2. Readers can work through the case, stepby-step, exploring the issues uncovered in the chapter and learn howto apply them to their own organizations. The results of each partare presented in the next chapter where a new issue is addressed.This case presentation is a proven learning tool to understanding thescorecard process.Chapter DescriptionsChapter 1: Developing Leaders. This chapter reviews the current leadership development issues and challenges that organizations experience. A variety of leadership development methods aredescribed in detail. The need for accountability is addressed.Chapter 2: Creating the Leadership Scorecard. This chapter introduces the scorecard process and addresses the need for implementing a leadership scorecard. The evaluation framework is introducedand an overview of data collection methods is provided.Chapter 3: Measuring Indicators, Satisfaction, and Learning. Thischapter presents a variety of approaches to one of the most fundamental issues. Ranging from conducting surveys to conducting tests,

xivPrefacethe most common ways to collect indicator, satisfaction, and learning data are described in this chapter. Useful tips and techniquesto help select the appropriate method for a specific situation arepresented.Chapter 4: Measuring Application and Business Impact. Thischapter addresses the critical issues concerning how to measure theapplication of skills on the job and the resulting impact to the business. A variety of data collection techniques are covered. The actionplanning process is introduced along with tips and techniques forusing the action planning process.Chapter 5: Isolating the Impact of a Leadership DevelopmentProgram. This chapter presents what is perhaps the most importantaspect of the scorecard process. Ranging from the use of a controlgroup arrangement to obtaining estimates directly from participants,the most useful techniques are presented for determining the amountof improvement directly linked to the leadership developmentprogram. The premise of this chapter is that there are many influences on business performance measures with leadership development being only one of them.Chapter 6: Converting Business Measures to Monetary Values.This chapter presents an essential step for developing an economicbenefit from leadership development. Ranging from determining theprofit contribution of an increased output to using expert opinion toassign a value to data, the most useful techniques to convert bothhard and soft data to monetary values are presented, along withmany examples.Chapter 7: Tabulating Leadership Development Program Costs.This chapter details specifically what types of costs should beincluded in the scorecard formula. Different categories and classifications of costs are explored in this chapter with the goal for developing a fully loaded cost profile for each return on investmentcalculation.Chapter 8: Calculating the Return on Investment. This chapterdescribes the actual ROI calculation and presents several issuessurrounding its development, calculation, use, and abuse. The mostaccepted ROI formulas are presented, along with examples to illustrate the calculation. Common ROI myths are dispelled.Chapter 9: Identifying the Intangible Benefits. This chapter focuseson non-monetary benefits from the program. Because not all measures can or should be converted to monetary values, this chaptershows how the intangible benefits should be identified, monitored,and reported. Over 25 common intangible benefits are examined.

PrefacexvChapter 10: Communicating Results and Overcoming Resistance.This chapter provides best-practice approaches for communicating leadership scorecard results. Information on how to plan forcommunications, select audiences and media, develop reports, andaddress typical issues that surface during communication is provided.The types of resistance that may be encountered when implementing a scorecard are identified along with tips and techniques for howto deal with the resistance.Chapter 11: Forecasting an ROI. This chapter shows how thereturn on investment can be used to forecast the payoff of a programbefore it is implemented. The chapter underscores the range of possibilities available for calculating the ROI at different time frames,using different types of data.Chapter 12: Developing Leaders at Imperial National Bank. Thischapter provides a case application that shows the monetary impactof an executive leadership program. This case study explores thecomplexity of measuring the impact of leadership development usingan action learning process. More importantly, this case shows howchanges in a program design can significantly increase the actualreturn on investment.Chapter 13: Executive Coaching: The ROI of Building LeadershipOne Executive at a Time. This chapter provides a case applicationthat shows the monetary benefit of executive coaching. A comprehensive study is outlined that evaluates coaching using the measuresthat are a part of the leadership scorecard. The case study providesrecommendations on how to increase the value of coaching for thebusiness.

AcknowledgmentsFROM JACK J. PHILLIPSNo book is the work of the author alone; many other individualsprovided input and support to make this effort a reality. I am particularly grateful for the clients I have had the opportunity to workwith in my years of consulting. I have learned from every assignmentinvolving leadership development and have translated that knowledge into this book. To all of my clients, I owe much appreciationfor their willingness to engage our services and experiment with ourapproach.Several individuals were very helpful in developing this manuscript. Many thanks go to my co-author, Lynn Schmidt, for developing much of this manuscript. She assumed this task on top of avery busy schedule and performed admirably with this huge challenge. Lynn understands leadership, development, and measurement.I would also like to thank Joyce Alff for her meticulous review,editing, and coordination.I would like to acknowledge the continued support and assistancefrom my spouse and partner, Patti Phillips, who always inspires meto do my best and supports me in all my work.Jack J. PhillipsFROM LYNN SCHMIDTEverything I know about leadership I have learned from books,classes and life, and from the leaders I have had the fortune tointeract with over the years. I have found leaders everywhere—corporations, universities, volunteer groups, non-profit organizations, social settings, and family gatherings. And in all types ofxvii

xviiiAcknowledgmentsroles—CEOs, assistants, teachers, clerks, friends, mothers, andbrothers. These individuals, whether they were leading billion-dollarcompanies or dinner conversations, demonstrated a competenceand strength that sparked my interest in leadership development. Iappreciate the opportunity that I have had to learn from theseindividuals and thank them all.Everything I know about measurement and evaluation I havelearned from books, classes, and a special group of people—theASTD ROI Network Advisory Committee. Special thanks go to themembers of that committee for providing me with the opportunityfor continuous learning: Jack J. Phillips, Patti Phillips, Toni Hodges,Merrill Anderson, Holly Burkett, Deb Wharff, Dan McLinden, JimChatt, Uichi Tsutsumi, Kyoko Watanabe, Bruce Aaron, DiederickStoel, Ed Hubbard, and Lizette Zuniga.I would also like to thank the behind-the-scenes support staff thatmade this book possible—Joyce Alff, the internal editor, and the staffat Elsevier/Butterworth–Heinemann. And a special note of appreciation to my three canine friends, Plato, Bailey, and Chipper, whospent many evenings waiting patiently for me to finish working onthe manuscript and who made sure that I took breaks whether Ithought I needed them or not.Note: Limited portions of this book were taken from two otherbooks that discuss the process. These sources are:Phillips, Jack J. Return on Investment in Training and Performance Improvement Programs, 2nd Edition, Boston: Butterworth–Heinemann, 2003.Phillips, Jack J., Ron D. Stone, and Patricia Pulliam Phillips.The Human Resources Scorecard. Boston: Butterworth–Heinemann, 2001.

PART ILeadership ScorecardFoundation

CHAPTER 1Developing Leaders“At the end of the day, it’s the top-flight leaders who make a business great.” Larry Bossidy, former CEO of AlliedSignal, spentapproximately 30 to 40 percent of his time hiring and developingleaders his first two years at AlliedSignal. He attributes AlliedSignal’ssuccess in large part to the commitment he made to leadershipdevelopment (Bossidy, 2001). Leadership continues to be a criticaldevelopmental focus for organizations around the world. Researchindicates that strong leadership has a positive impact on bottom-lineresults. Organizations with strong leadership bench strength economically outperform companies with weaker leadership.A Corporate Leadership Council study reports that 82 percent ofcompanies with strong leadership displayed above-average revenuegrowth over a six-month period (2001). In addition to increased salesand profitability, customer and employee satisfaction is higher fororganizations with strong leadership. A study conducted by theConference Board found that companies rating themselves as havingstrong leadership capacity appeared more often at the top ofFortune’s list of “Most Admired” companies and were almost twiceas likely to appear in the top quartile of the rankings (Csoka, 1998).Leading companies consider leadership development to be a businessimperative and a critical component of business strategy and succession management.The Leadership Development ImperativeSeveral factors are causing a multitude of changes in the worldand are having a significant impact on the way work gets done.Factors such as changing workforce, rapidly changing technology,and changing board requirements are causing organizations to takeproactive steps to plan for future leadership development.3

4The Leadership ScorecardWorkforce demographics are changing in a number of ways. Thenumber of retirees is expected to increase drastically while at thesame time there will be fewer entrants into the workforce. As a resultthere will be more job openings available than candidates to fill them.This leads to increased competition for leaders with the ability tolead today’s organizations. Increased competition requires additionalfocus on retaining leaders, thereby reducing the turnover of criticalleadership talent creating an ongoing need for leadership development programs.The changing demographics reflect greater diversity in the workplace—diversity with regard to race, gender, as well as generations.These changes lead to diverse employee needs. Young workers todayare more concerned with work/life balance, less accepting of traditional hierarchy, and less trusting of organizations. Leaders needcapabilities in the areas of people management, empowerment, andcommunication skills in order to lead a very diverse workforce.Leaders will need to be able to not only develop talent but also torecruit and retain top talent. This means that leaders will need tobecome more adept at designing more individualized, flexible workarrangements that are tailored to diverse needs (Barrett and Beeson,2001).Rapid changes in technology require that leaders be able to managethe changes brought on by technology and look for ways to apply newtechnology to business. While these changes do not require leaders tobe technological experts, they do require a priority of analytical skills.Leaders need to be able to quickly sort through all of the data to seepatterns and make good decisions (Barrett and Beeson, 2001).At many organizations the board of directors is focusing morestrongly on succession management and leadership development.Many board of directors are requiring that a talent pool of potential successors be identified and developed to eventually move intosenior leadership positions. This requires that leaders become thedevelopers of other leaders. Along with that, the board of directorsis also focused on governance issues and ensuring that the organizations leaders are operating in an ethical manner. This, along withthe financial expectations of stakeholders, requires that leadersbecome very ethically and financially astute.Additional changes brought on by deregulation, globalization, andincreased competition require that leaders become adept at strategicthinking, competitive positioning, and cultural awareness. Thesechanges place further pressure on organizations to invest in leadership development.

Developing Leaders5Leadership Development ChallengesThese changes in the way business gets done will have a significant impact on the quantity and quality of leadership talent. Asstudies have shown, strong leaders are essential to business success making leadership development a business imperative. Unfortunately, many organizations implement leadership developmentmethods that result in a poor investment of time and money. Organizations focused on wisely investing their time and money in effective leadership development methods that address the issues raisedearlier face four key challenges: accelerating the development of leadership talent;selecting effective leadership development methods;investing leadership development dollars wisely; anddemonstrating the success of leadership development methods.The lack of leadership talent in the pipeline presents a challengefor many organizations. Many organizations do not have the leadership talent necessary to sustain a competitive advantage. In a studyconducted by the Conference Board, only one-third of respondentsrated their company’s leadership capacity to meet business challengesas excellent or good. This requires organizations to proactively buildleadership bench strength for the future, as well as play catch-up andaccelerate the development of their current leaders. Even more disconcerting is the fact that less than one-half of the survey respondents reported that developing future leaders is a major priority fortheir organizations (Barrett and Beeson, 2001). This suggests thatover one-half of the organizations represented will not be focusingon leadership development until it is too late, too costly, or too timeintensive to accelerate the development of their leaders.Along with the challenge of accelerating leadership developmentcomes the challenge of selecting effective leadership developmentmethods. Research has shown that effective leadership development is achieved through a systems approach, by incorporating onand off- the job experiences with mentoring, coaching, or trainingall closely aligned with development plans and business strategy. Toaccelerate the development of a leader it is critical to ensure thatright development methods are used. Several sources suggest thata mix of leadership development methods is the most effectiveapproach to developing leaders (Barrett and Beeson, 2001; Byham,Smith, and Paese, 2001; Charan, Drotter, and Noel, 2001; Corporate

6The Leadership ScorecardOff the Job Experience(e.g., industryassociations, communityleadership)15%Education/Training10%On the Job Experience(e.g., enrichment/lateral/ Coaching/Personal Feedback20%Figure 1-1. Leadership development methods.Leadership Council, 2001, 2003; McCall, Lombardo, and Morrison,1988; McCauley, Moxley, and Van Velsor, 1998; Zenger andFolkman, 2002). Figure 1-1 indicates that 70 percent experiencesboth on and off the job, 20 percent mentoring or coaching and feedback, and 10 percent education and training are an effective mix ofleadership development methods.Selecting effective leadership development methods is challengingdue to “the productization of leadership development” (Ready andConger, 2003). Many leadership development efforts are not alignedwith business strategy; rather organizations are in search of a quickfix becoming focused on commercial products rather than the issuesthat need to be addressed. Many of these commercial products arebased on a current best-selling book. The problem does not residewith the authors of these books but with the misuse of these worksthat takes the form of quick fix training packages implemented byorganizations that have not diagnosed the business needs. As a result,organizations are unable to show a positive return on investmentfrom the programs and a significant investment in time and moneyis wasted (Ready and Conger, 2003).A division president at a Fortune 50 company was quoted assaying during a leadership development audit “We spend 120

Developing Leaders7million a year on this stuff, and if it all went away tomorrow, itwouldn’t matter one bit. Leadership development in this company isnothing more than a series of disconnected programs sold by consultants to training managers who don’t understand our business”(Ready and Conger, 2003). This indicates that another challengefacing organizations is investing leadership development dollarswisely. The education and development of lead

leadership scorecard. Needed: A Leadership Scorecard What is needed is a rational, logical approach to measurement and evaluation that can be simplified and implemented within the current budget constraints and resources of the organization. This book pre-sents a proven scorecard methodology based on almost 20 years of development and improvement.