Traditional ways of framing leadership development would argue that the outcomes of an intervention are oriented towards individual and corporate learning objectives. We believe that outcomes of a leadership development intervention should be the resolution of major corporate problems.
If we were in our clients’ shoes, would we want to work with a partner who is willing to demonstrate commitment to something that they believe in, like addressing leadership and organisation challenges? How about asking them to link part of their fee to the outcome of the intervention?
We think this is a very reasonable conversation to be had.
Currently most consultants’ fees are rigidly focused on length of service (be it daily rates or project fees) largely ignoring the outcomes achieved. According to Paul Solman (FT, 10th November 2014) things are changing: “Fees based on outcomes are a growing trend in the consulting sector, though they still account for only 12 per cent of all consulting, compared with about 8 per cent a decade ago.”
Of course measuring the impact of a leadership development initiative is not a straight forward activity. Shifts in behaviour or organisational culture are difficult to evaluate and ‘the relationship between the program/content and the kind of impact and outcomes that management would like is very tenuous at best’ (Marguerite Foxon).
Initial findings from our research “Innovation in Leadership Development” indicate that the approach to measuring the impact of executive development interventions in organisations varies greatly from one institution to the other. At one end of the spectrum you have companies who rely only/mainly on traditional evaluation methodologies (e.g. happy sheets). At the other end of the spectrum we spoke to organisations who shared very powerful stories of their programme outcomes: strategic shifts, behavioural shifts, new organisational initiatives launched, improved leadership capabilities, increased talent retention, etc.
At very senior executive level, we find that the greatest outcomes emerge when participants are free to set their own goals and can focus, with their peers, their energy on what they perceive to be the most important challenges that they and the organisation face. This empowers them to develop new approaches to improve the way they work.
That said, our experience suggests that if we can clearly articulate up front the objectives for an executive development initiative, there is an opportunity for providers to demonstrate their commitment and belief in their capabilities.
Pay for performance model
With a financial services organisation we have agreed a mechanism to link a portion of our total compensation to the impact of a leadership development intervention on the target group’s stakeholders.
Specifically, when 50% of participant’s line managers and direct reports indicate an improvement in the participants’ leadership and coaching skills via the follow-up 360-degree survey, then we will get the full fee. If this is not achieved, we have agreed to forfeit 5% of the overall fee.
We believe that a pay per performance mechanism can be applicable in a range of leadership development programmes, for example:
- Culture change programmes
– Do X% of Line Managers believe that participants have reported a greater sense of purpose and empowerment as a result of participating in the programme? - Launching organisational initiatives
– Have more than X% of participants launched new initiatives in the last year as a result (direct or indirect) of insights gained from the programme? - Talent retention
– Are the participants more likely to stay with the organization because of their experience on the program?
– Has X% or more of the participants been promoted since their participation in the programme?
A huge amount of work has been done around impact measurement over the years. However, as a curious team of individuals constantly seeking new insights and challenging prevailing wisdom, we want to push the envelope a bit further and aim to develop new thinking and approaches in the area of “pay for performance”, working hand in hand with organisations on real issues that matter to them.
