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ROL - Return on Leadership

You know all the standard economic measures of business; return on investment (ROI), Return on Sales (ROS), return on capital employed (ROCE) and all the others. But you probably have never calculated your return on leadership (ROL). I am certain of that because the metric doesn’t exist. But that doesn’t mean you should not be evaluating and analyzing the ROL of your people.

The concept is simple. You have an employee in a leadership position. Call them a manager. This manager gets a salary and is responsible for certain assets in your company. The ROL analysis makes us look at the contribution of this manager to the overall organization. The traditional manager evaluation focuses a few very finite metrics like profit, production, or sales. These should be part of your ROL calculation but the manager does more than this and their contribution and impact extends far beyond these traditional metrics.

• People developed – My interviews for NO YELLING: The Nine Secrets of Marine Corps Leadership You MUST Know To WIN In Business revealed that the best leaders have a default mentality of developing new leaders. Development isn’t a sometimes thing for these leaders, they are always looking for the opportunity to coach and develop others. The ROL calculation then involves assessing how well the manager does in developing new talent for the company. I know a regional manager for a national company who is a master at this. Every year a handful of his people transfer to different regions, often stepping up to regional manager roles themselves. His P&L results are good, and it would be easy for him to hoard his good people but he offers them up and they respond. The company recognizes his contributions. Clearly his ROL is high.
• Turnover- I don’t care how good your results are, they could be better if you had stability on your team. Some managers view employees as an expendable production asset. These managers will take time to do preventative maintenance on equipment but they run their people into the ground – and the people leave. The manager is able to accomplish the mission but at a price. Lower turnover would probably improve production and enhance the bottom-line. This manager who has a high turnover has low ROL.
• Playing nice in the sandbox – Clearly this is an intangible. We can measure how many people you developed and what your turnover was but we cant measure how well you are getting along with teammates. The operations manager who recognizes the importance of the accounting function and works closely with accounting to produce accurate reports has a high ROL. The maintenance manager who views operations people as irresponsible careless users of his equipment and treats them like that has low ROL.

Ideally, your performance evaluation system enables you to consider these ROL implications when evaluating a manager. The reality all too often is that the performance evaluation system is broken. Evaluations are not done, are done incorrectly, and when they are done they focus on the easy stuff like “did you make money for us last year.”

Your ability to think about and talk about the ROL of a manager will help them become a leader in your organization. Notice, we are not calling this return on management. We are looking at the skills of leadership because we recognize the exponential power that leaders have in our organizations and we will only develop this capability if we think about the return on leadership of our supervisory personnel.

Wally Adamchik is President of FireStarter Speaking and Consulting. Visit the website at www.beaFireStarter.com. He can be reached at 919-673-9499 or wally@beaFireStarter.com.