"Grow a leader; grow the organization. A company cannot grow without until its leaders grow within." — John C. Maxwell
This is a quote I often share with senior leaders who are resistant to making an investment in developing their leaders. Most recently, I shared this quote with the leaders of an organization that was in "panic mode" after experiencing an "unexpected" leadership crisis and making a decision in 2017 to cut leadership programs to "focus on growth."
After five years of 20%+ growth, however, the leadership team was rocked by the unexpected departure of the three members of their senior leadership team. This then triggered a chain reaction, and within the next few months, the organization also saw the departure of four senior directors as well as three high-potential managers. As the search began to replace these leaders, it quickly became clear that despite the years of growth, no formal succession plan was in place for key roles, and their employee base lacked key leadership skills and behaviors such as setting strategy, executing for results, leading teams, and relationship building and influence.
The impact of these leadership gaps was swift and severe. Two major product launches, critical to the company's growth strategy, were delayed by six months. Customer satisfaction scores declined by 18% as service quality wavered. The stock price dropped substantially as investors lost confidence in the company's stability. Overall, the organization's growth rate fell from 22% to 8%.
The Costs of Cutting Out Leadership Development
Over the next 18 months, the organization was forced to make significant investments in recruiting new talent and rebuilding its leadership team. During this time, its competitors capitalized on this vulnerability and captured market share as well as poached key talent. The organization was also forced to pay out retention bonuses to prevent further departures, and millions were lost in revenue due to the delayed product launches.
Warning Signs Ignored
In retrospect, the warning signs were clear. The company had systematically underinvested in talent development, treating it as a luxury rather than a necessity. Training budgets were consistently the first to be cut when times got tight. High-potential employees stagnated in their roles without clear advancement paths. The board's quarterly meetings focused extensively on financial metrics but rarely addressed succession planning or leadership development. Like many organizations, the company was so focused on quarterly results that it forgot to invest in its future leaders, and this lack of investment resulted in a critical cost to the organization.
The Path Forward
After experiencing this leadership crisis, talent development is now a top priority for this organization. Recently, they made a decision to allocate 5% of revenue to learning and development initiatives, implement mandatory succession planning for all key roles, and integrate leadership development into quarterly objectives. While it will take some time for the organization to reach its previous growth trajectory, leaders have recently shared that they are more confident in their path forward because of the focus on creating more ready-now leaders.
Lessons for Other Organizations
This company's experience offers three crucial lessons for other organizational leaders who may be contemplating cutting or reducing talent development investments in their 2025 budgets to focus on "growth."
Leadership development isn't a luxury – it's a strategic imperative
The days of viewing leadership development as a nice-to-have HR function are over. Recent studies demonstrate that companies with robust leadership development programs achieve:
- 19% higher return on equity (Center for Creative Leadership, 2023)
- 37% higher revenue per employee (Bersin Leadership Development Impact Study, 2023)
- 9% higher gross margins (SHRM Performance Metrics Study, 2023)
These aren't just feel-good metrics – they translate directly to bottom-line results.
Succession planning must be an ongoing process, not a reactive measure
Succession planning isn't a one-time event—it's a continuous process that demands regular attention and systematic execution. Yet research reveals that only 46% of organizations have implemented a formal succession planning process (Stanford Corporate Governance Research Initiative, 2023).
When organizations actively develop their talent pipeline, it creates a win-win situation. Employees see clear paths for growth and advancement within the company, increasing their engagement and likelihood to stay. At the same time, organizations build a robust bench of ready-now leaders, ensuring stability and continuity when leadership changes occur.
Research shows this proactive approach leads to 2.5 times higher organizational performance (Gartner HR Research, 2023), largely because companies can smoothly navigate transitions instead of scrambling to fill unexpected vacancies. Simply put, good succession planning keeps employees motivated and keeps the organization prepared for whatever changes may come.
The cost of developing leaders is far less than the cost of not having them when you need them most
Recent research shows that 89% of organizations are currently experiencing leadership shortages, yet only 11% report having a strong leadership pipeline (McKinsey Global Survey, 2023). This disconnect between need and preparedness has created a crisis that's costing organizations billions annually in lost productivity, missed opportunities, and reactive hiring costs. Additionally, a 2023 study of 752 corporate leadership managers found that the average return on investment (ROI) is $7 for every $1 spent on leadership development. The ROI comes from increased revenue and sales as a result of leadership development participation, as well as cost savings through higher employee retention and lower recruiting costs.
Avoiding YOUR Code Red moment
Organizations must ask themselves uncomfortable questions: How many of our key positions lack ready-now successors? Do we have leaders who are ready to take on the new challenge or opportunity? What is the cost of not investing in our future leaders across all levels?
For companies looking to avoid their own Code Red moment, the message is clear: Invest in developing your leaders as if your business depends on it—because it does.
Start Growing Your Leadership at Learning 2024!
The Learning 2024 Learning Leaders Conference offers numerous opportunities to develop your own leadership skills—and pick up tips and proven strategies for boosting leadership development at your organization. Don't miss Arika Pierce-Williams' session, Code Red: Why You Need to Grow Talent As If Your Business Depends on It. Learning 2024 is December 4-6 in Orlando, with pre-conference Learning Innovation Labs on December 3.