Today’s modern leaders have a tough job. As well as the increased pressure to hit company targets and objectives, they must also ensure they’re effective people managers who are able to motivate and relate to a diverse workforce.
Technology now supplies a myriad of ways to measure business effectiveness across all departments. The range of data available on everything from marketing reach to sales and conversions enables companies to clearly see how they’re performing. But, the data doesn’t just give insights on an external audience. There are many ways to gather data internally to measure the effectiveness of leadership, too.
In this blog, we’ll explore why measuring leadership effectiveness is essential, metrics a business can use to gather this internal data, and ways to build this activity into a core part of your business.
Why assess leadership effectiveness?
You’ve probably heard the quote ‘people don’t leave bad jobs, they leave bad bosses’. While the debate on whether this quote holds true or not, most of us probably have first-hand experience of a time when we didn’t feel supported or encouraged by our managers and left that role as a result. Bad managers run the risk of losing talented staff members, and poor employee retention can be costly as the financial implications, as well as time lost, of constantly backfilling roles through recruitment can be hugely disruptive.
There is a growing body of evidence which suggests effective managers also have a significant impact on organisational performance and return on investment. A report by Forbes found that poor leaders lost money for their companies, good leaders made profit, and extraordinary leaders created huge revenue growth by more than doubling their company’s profits.
Assessing the effectiveness of a leader is good for the leader, too. Most people want to ensure they’re doing a good job and are a valuable asset to the business they work for. By measuring leadership competency, they’re able to see where they may have blind spots and room for improvement in a constructive way.
Commonly used metrics for measuring leadership effectiveness
Assessing leadership effectiveness is essential. It provides clear data and valuable insights measuring the impact of both individual leaders and the organisation as a whole, enabling effective growth, development, and improvement.
Here are some commonly used metrics for measuring leadership effectiveness. These metrics are a mix of quantitative methods and qualitative methods, and can be set as Key Performance Indicators (KPIs).
Employee satisfaction
Tracking employee satisfaction is a commonly used metric for assessing leadership effectiveness. This metric provides useful feedback for the leadership team on how well they are meeting the needs of their workforce, and a high performance score often indicates effective leaders as happy employees are more likely to be engaged, productive, and loyal to the business.
Employee engagement
When employees are engaged, they are more likely to be committed to the organisation’s success and are motivated and productive in their roles. Effective leaders are able to create a positive work environment where their employees are engaged and able to thrive.
Team collaboration
Teams which work together effectively to achieve collective goals display a good level of team collaboration. Effective leaders are able to build and foster collaborative teams as they can identify and leverage the diverse skills and perspectives of their direct reports efficiently.
Employee turnover
High employee turnover rates are usually a sign of poor leadership, as talented employees seek out new opportunities within businesses where they feel valued and supported. Low turnover and high retention rates suggests effective leaders who have the trust of their team and are able to retain their employees.
Performance metrics
Effective leaders impact the overall business results, so a business can look at its performance metrics as an assessment of their leadership team. Metrics such as sales revenue, customer satisfaction scores, and productivity level or team outputs can provide tangible evidence of a leader’s organisational impact.
Change management
The modern business environment is fast-paced and prone to rapid change as technological evolutions continue to adapt and improve business practices in radical ways. Effective leaders are able to communicate changes to their teams and implement changes successfully, while creating resilient and adaptive employees.
Goal setting and attainment
Specific objectives and annual employee performance reviews to assess whether goals have been met are a common key metric of measuring leadership performance. Effective leaders consistently meet or exceed their goals, and measuring them in this way enables them to track their progress, identify areas of improvement, and align their efforts with the organisation’s strategic objectives.
Employee feedback
Companies can gather feedback and reviews on leaders from team members, peers, and superiors to assess their effectiveness. Leaders can also complete their own self-assessments for reflection. The information gathered can measure how a leader effectively engages and connects with others, their communication style, and whether they can inspire and motivate their teams.
How to make leadership assessment a core part of your business practice
There are many ways to measure the effectiveness of leadership within an organisation. When a business commits to making this assessment a core part of their business practice, they should explore which metrics make sense for them, and commit to them. All stakeholders should agree on the frequency of these assessments, and it should be an open and safe space which helps people to develop in their practice, rather than something employees or leaders fear.
When the metrics are clearly defined and data has been collected from multiple sources to create a bigger picture, development opportunities should then be provided. This could be through external leadership training programmes, leadership development initiatives, mentorship, or additional individualised KPIs.
Ways to efficiently track the impact of leadership development
Companies can adopt a variety of assessment tools, software and systems to track leadership effectiveness. Some of these include:
- Performance management systems
- Survey tools
- 360-degree feedback tools
- Data analytics software
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