Your business leaders need to be as effective as possible. Did you know that just one high performing leader can deliver about $151,000 more a year than a poor performing one?
In today's fast paced world, your business needs AMAZING Leaders.
“The most dangerous leadership myth is that leaders are born -- that there is a genetic factor to leadership. This myth asserts that people simply either have certain charismatic qualities or not. That's nonsense; in fact, the opposite is true. Leaders are made rather than born.” ~Warren G. Bennis
Average Salary: If an organization pays an average leader $80,000 a year, that leader should bring back at least that amount of value to the organization; otherwise, the person could be considered a losing investment. Ideally, leaders return more than what they are paid, thus producing profit. Past studies have shown that there is about a 40 percent deviation in performance for a given role. So, an average leader might be worth $80,000, a great leader worth $112,000 (+ 40%), and a poor leader worth $48,000 (- 40%).
Number of Direct Reports: Leader value extends far beyond their individual productivity levels, because leaders must guide and influence the performance of others. The more direct reports a leader has, the greater their impact on the organization.
Average Salary of Direct Reports: In our calculation, we value employees based on their salary, including direct reports. Then, we assume that a great leader gets at least 10 percent more productivity out of his/her direct reports than an average leader; poor leaders get 10 percent less. The value of this difference is greatly magnified when a leader has many direct reports.
Turnover of Direct Reports: Turnover costs money and poor leaders are more likely to have turnover than great leaders. In our calculator, we assume that poor leaders have 25 percent more turnover than average leaders; great leaders have 25 percent less. Depending on the cost of replacement and the number of direct reports, this can have a big impact on overall costs. We use 10% turnover in our calculation.
Number of Days a Direct Report Position is Left Open Before Being Filled: We use 60 days in our calculation. Turnover is compounded by the time it takes to fill a position. When a position is left vacant, it has the impact of lost productivity. Every day that a position is left vacant, more stress is placed on other workers and the organization has a reduced capacity to handle the workload. This lost productivity and stress equates to increased costs.
Cost to Replace a Direct Report: This cost includes the costs of turnover and the lost opportunity created by vacant positions. Poor leaders will have more turnover and greater vacancy rates, thus producing more costs. We use $10,500 in our calculation.
