Leadership development costs money…usually a lot of money.  Our recent study, Leadership Development Factbook 2009, showed that companies spent nearly $500,000 last year, on average, on leadership development initiatives. This figure varies by company size, ranging from $170,000 for small companies to nearly $1.3 million for large companies.

On a per-person basis, organizations spent just over $2,000 for each leader participating in development. Of course, programs for higher level leaders are far more expensive than for lower level leaders.  Senior-level and executive programs typically utilize outside facilitators, external coaches, and assessments, all of which come with a high price tag. Executive education at business schools is also costly, with a high premium on highly credentialed professors and, in some cases, the school’s brand. 

So the key question is, “Is it worth it?” 

The short answer is, “Yes,” with the caveat “if it’s done right.” 

The truth is that a lot of companies are spending money on leadership development and getting very poor results.   Our study shows that, for most companies, leadership skills at every level are seriously lacking.  However, companies that have made a continued investment in improving their leadership development initiatives have seen their efforts pay off. At these companies (which include firms like Ameriprise Financial, Motley Fool, and Textron), leadership development has evolved to a strategic, organization-wide process  that is aligned with business priorities and integrated with the company’s overall talent management process.  These companies target every level of leader and think of leadership development in terms of building organizational capabilities, not just individual capabilities.  Although this type of leadership development takes a great deal of time and effort, the pay off is in stronger leadership capabilities, reduced employee turnover, and better financial and business performance. 

For more information on the cost and impact of leadership development programs, check out our Leadership Development Factbook 2009.