When it comes down to it, the people controlling a company's wallet control the business' goals and activities. It is hard to push for new plans and objectives if they do not sound appealing to budget-holders – that is why many companies are quick to allocate resources to marketing, sales and product development, but not other areas such as risk management or accounting.
Leadership is often one of the areas where many enterprises do not allocate the proper resources. Every company has managers, but many have comparatively few actual leaders. Yet many businesses consider leadership as a "warm and fuzzy" intangible function – because it is difficult to directly tie a return on investment to effective leadership, budget-holders are reluctant to invest in improving this area and eliminating any gaps.
Identifying the returns of leadership investments
The real benefits of leadership are actually much more tangible than many businesses think, and recent studies have affirmed this notion. The Financial Times recently reported on new international business leadership research that found leadership culture actually has a strong correlation with the ability of companies to recover after serious accidents or disasters and avoid these in the future.
The study found business cultures that supported strong leadership and collaboration were more likely to see failures and heed warnings as critical learning points. These organizations were also more likely to share responsibility across departments, which resulted in fewer mistakes being repeated and better communication across the board.
Yet many leaders fail to create a collaborative business environment. Citing a CCL survey of more than 500 enterprise executives, the Financial Times reported that collaboration was one of the least practiced leadership habits.
"Most executives understand how important collaboration across an organization is to mission-critical outcomes like innovation, service, efficiency and risk management," the news source reported. "To reap the full benefits of cross-functional collaboration, this behavior must be embedded as part of an organization's leadership culture and must not be confined to one or a few individual leaders."
Putting dollars to leadership problems
As the Financial Times noted, strong leaders nurtured by an even stronger culture of leadership can save businesses some serious money. Accidents and disasters need to be avoided at all costs, and if better leadership helps bolster collaboration and promote a workplace of shared responsibility, businesses can prevent these incidents from occurring again in the future.
If one of the top problems hindering corporate investments into leadership is the lack of clear ROI, businesses may want to consider illustrating the real costs of accidents in the workplace. Better leaders and a stronger leadership culture can create an atmosphere that encourages responsibility, and that may result in fewer accidents. Considering the fact that some disasters or accidents can cost firms thousands of dollars – if not millions – this may help convince budget-holders that management skills are necessary.