THE ROI OF PERFORMANCE LEADERSHIP
The subject of return on investment is always a bit touchy with training groups. There are so many intangibles that could impact ROI such as adoption, management buy in, and so on. With Performance Leadership it is not a question of whether there is ROI but how much?
One Company's Story
With an oil and gas company there was a need around building a culture based on metrics. They did not know how to go about doing this and so I had the chance to work with their team. We established a base line of performance that worked out to around 52% daily. I taught the leadership and crews how to measure their activities as they related to the overall performance of the team and how they could incrementally drive performance up. By the end of the engagement daily performance was averaging 93%!
But How Do You Measure ROI?
One of the outcomes of the Operational Excellence method is crews learn the value of a minute. That is to say that they calculated what a minute of downtime cost the company. For this group it was $642 for each minute of downtime. It was a simple measure that was easy for crews to understand. They knew that a one percent improvement in efficiency was equivalent to a decrease in downtime of 14.4 minutes. Multiply that number by what a minute of downtime cost and each percent saved the company $9245! Moving from 52% to 93% daily efficiency amounted to a daily savings of almost $380,000! Now of course there are a number of factors that could move that number up or down but the fact was when the crews began to see the numbers and found a "placeholder" to use as a measure they were eager to strive for daily improvements. Clients took note of the change in character and work of the crews and new contracts were added too!
How to Face Tight Times
Another oil and gas company who had applied Operational Excellence to their crews and leadership had also done quite well. Savings were being made, crews were engaged and there was a general sense of having a unified and common understanding of how things were going from front line to the executive offices. When the downturn hit the executive presented a much lower ops budget to the crews and a challenge to come up with cost savings ideas. Applying the principles of Operational Excellence, they not only came up with cost saving ideas but also income producing ones as well! In a year when the ops budget had been slashed drastically the crews were coming in significantly UNDER budget! It was a win win for everyone!
These Results Are Not Unique
There are many stories like the one above. What’s more we haven't even touched on areas like employee retention and the savings made when staff stay rather than leave, or the application of behavior based safety programs which are a natural expression of Operational Excellence and the savings to companies in terms of a reduction in lost days due to fewer accidents and so on.
If your leadership training programs cannot demonstrate ROI that you can quantify and measure my question is how do you know what value are they giving you? Performance Leadership - Think About It!
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