Leadership lag: Are you investing in leadership training? Part 1

Fail to develop your leaders and your whole organization will suffer – both in the short and long term.

By Tom Moriarty, Alidade MER

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There is fierce competition to find and retain qualified tradespersons, supervisors, and managers. If your organization is facing a shortage of skilled labor, it’s especially critical to keep the people you have, and be recognized as a preferred place to work. That depends on your supervisors and managers being productive leaders.

Employers often believe employees walk for a better-paying job. But that’s not the only reason. Tradespersons, and especially those who are highly skilled, will walk in a heartbeat whenever another alternative looks better. Better opportunities appear more readily when workers have the chance to get away from a bad boss. They may say they are leaving to get better pay, career development opportunities, or improved work-life balance. The motivation is to reduce stress. Stress results in reduced productivity and health issues.

Those who are less likely to walk are the ones who are treated fairly and who encounter a consistent, predictable workplace culture. This workplace culture is a result of productive leadership.

What’s in it for the workforce when the workplace culture is guided by productive leadership? There’s potential for a lower-stress work environment, for one, plus there are opportunities to learn and develop new skills. In addition, team members’ input gets heard when they have an opinion about an improvement. In general terms, they have the chance to work for supervisors who don’t irritate the stuffing out of them.

What’s in it for supervisors? A leader delivers value to an organization through the performance of his or her team. If a supervisor lacks sufficient leadership skills, and they are not provided with training, their organization has put them in a bad position. But that doesn’t matter. The supervisor is still expected to perform. When properly trained, most supervisors can improve performance of themselves and their team. Stress is lower because team members feel respected and more engaged. The supervisor feels better about how they lead. When supervisors can actually supervise, they can focus on solving issues that cause problems for their team, making the team more effective and reducing stress. When you solve problems for people, they feel more appreciated. 

Great supervisors spend time with individuals, learning what their goals are and providing opportunities for them to move towards those goals. That includes providing opportunities for their team members to learn new things through training or delegated responsibilities. 

What’s in it for managers? The more senior you are in an organization, the more that the financial bottom line affects you day to day. The value in productive leadership is in two main areas. First, when teams are executing effectively and efficiently, an organization will experience lower operational costs. Second, turnover and related costs can be reduced. A productive leadership development program will help managers evaluate supervisors and prospective supervisors, identify strengths and weaknesses, provide recognition to strong supervisors, and identify areas where supervisors need to improve. 

Where can value be found? When supervisors and managers are more engaged, a 20% labor efficiency improvement can be achieved. This means getting the equivalent of one additional worker for every five workers in your workforce. For 100 employees at $40,000 per employee (a conservative figure), that equates to $800,000 per year, or 20 additional full-time-equivalent workers at no additional cost. 

The cost of hourly-wage employee turnover, depending on the source quoted, is between 16% and 46% of loaded annual compensation. I use 25% as a somewhat conservative estimated value. Turnover costs come from losses due to:

  • Lower productivity as an employee gets closer to leaving
  • Administrative costs (termination of benefits, state filings, advertising for the position, time to interview and select candidates, initiation of benefits for new employee, etc.)
  • Loss of productivity while the position is vacant
  • Increased stress on, and lower productivity of, the remaining employees covering the vacancy (and potential safety and quality impacts)
  • Increased stress and lower productivity during the on-boarding and as the new hire gets up to speed. It takes about 18 months to get a new employee fully acclimated and integrated into the team’s routine and culture.

A turned-over position with a loaded rate of $40,000 per year would result in a $10,000 cost per position turnover. If you have 100 employees and 10% annual turnover among them, that’s $100,000 per year, or 2.5 equivalent workers, just due to position churn. 

A good leadership development program that leverages best-practice tools and information can achieve significant return on investment (ROI) via lower turnover and higher productivity. Recognizing that there is a massive, long-term, skilled worker shortage , organizations can and should do what they can to improve their work environment. A dedicated program to develop productive leadership can improve the workplace, reducing the risk of workers leaving.

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