The Business Case for Return on Investment (ROI)
There are three reasons leading employers send their rising stars to Yale for the Leadership in Healthcare program:
- To improve their results as managers and leaders
- To reward performance and increase retention
- To prepare them for future leadership positions
Evaluated on their financial impact, any one of these reasons provides ample justification for investing in a valued associate.
From the employer’s perspective, the return on investment begins to pay dividends from the first class. Students returning to work after attending a class weekend can immediately put into action the lessons learned. This, compounded over the 22 month course of the program, can add up and deliver significant revenue to the bottom line. A second point of return is in the access students have to the full resources of Yale and to the student cohort of diverse professionals from across the industry. As a result, students gain a deeper understanding of the industry on a much broader level than they otherwise would have– all in the context of real world business.
Results
Staffing a department efficiently, leading a team effectively, understanding the strategic implications of regulatory and market changes and planning accordingly, or weighing conflicting factors to develop a sound strategic and financial decision are but a few examples that require skills that are not part of most healthcare professionals’ tool kits. Focusing narrowly on the impact of improving any of these decisions and the value of investing in management education is easy to see.
| Manager’s Financial Impact | | | | | |
| If the annual value of decisions made or influenced by a manager is as little as | | | | And the quality of those decisions improves by only | | | | The value of the MBA – considering only direct financial impact – is | |
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The total value of the degree, when indirect factors like team efficiency, employee retention, recognition and development of new opportunities, etc. are taken into consideration, is likely to be much higher.
Retention
The market for good executive healthcare talent is extremely strong and will only get stronger as changes occur in healthcare. Retaining a promising performer in the organization will have significant advantage to the organization over those who have to go to the market frequently to replace team members who have left. The financial impact of retaining talented associates is easy to quantify and provides powerful incentive for investment.
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| Hiring-related expenses for replacing a $250K/year executive (search at 30% + 20% for relocation, etc.) are likely to be at least | | | | And other transition-related expenses (loss of team efficiency, lost team members, costs incurred in interdependent departments…) will run at least | | | | Driving a high cost of turnover for the position, and a proportionally high saving if you avoid that turnover by investing in retention. | |
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* Employers frequently require a minimum 3 year commitment beyond completion of the MBA as a condition of sponsorship, making minimum retention, from the commencement of the program, 5 years.
Prepare
Cultivating talent for future leadership positions is an important element of any organization, whether a for-profit or nonprofit entity. As management educators, we think of it as a “build vs. buy” decision, where developing internal talent is the “build” option and going to the market is the “buy”. Viewed in this light, the logic for investing in the Leadership in Healthcare program as a way to keep talent and develop them for the next generation of leadership is a wise investment.
Note: If you or your management development group would like additional information, please contact us. We would be happy to discuss the situation in the context of your organization and its needs.
| | | | | | Cost of External Succession | |
| Hiring-related expenses for replacing a $600K/year top executive (search at 30% + 20% for relocation, etc.) are likely to be at least | | | | And other succession-related expenses (impact on relationships with customers and strategic partners, effect on investor confidence, loss of team efficiency, lost team members, incremental costs incurred throughout the organization…) will run at least | | | | Making the cost of going to the market for top succession astronomical, and the saving associated with maintaining a well-prepared pipeline of internal talent proportionally large | |
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Oddly, the most common concern about investing in internal talent is that “we cannot afford it.” In light of these examples and knowing students are gaining new experiences that are immediately transferable to the organization, are being challenged to rise to a higher level of performance, and are able to take on new and added responsibilities within the organization, it would appear the decision is self-evident.
Members from our admissions team are available to meet with you and address any concerns you might have. Call (203-432-4649) or email us to schedule a time.