How to price leadership training
Steven Forth is a Managing Partner at Ibbaka. See his Skill Profile on Ibbaka Talent.
Leadership skills are coming into general demand. All recent research on critical skills identifies leadership skills as a high priority. Ibbaka has found this is its own research and our results are supported by organizations like the World Economic Form. One great article is What does leadership mean in an age of perpetual change?
The importance of leadership has led to a flourishing of offerings for leadership training. A Google search found more than 816 million results. The top three advertisers were Skillsoft, Korn Ferry and LinkedIn Learning
Most leadership training is delivered to individuals, rather than to teams, and as a consequence the most common pricing metric for leadership training is per person. This seems to make sense, it is an individual being trained and an individual that makes the difference, so price per individual. But is that always the case?
There are different forms of leadership training in the market. The six most common types are for
Executive leaders - the top people who shape strategy and are responsible for its execution
High potentials - the people being set up to be future leaders
Line managers - who mange a small number of people for extended periods
Team leaders - who lead small teams for relatively short durations
New leaders - who have just moved from sole contributor to manage roles
Employees as leaders - for organizations where anyone can take a leadership position depending on context
A note on the final category, in team based organizations (one of the most powerful ways to organize agile, networked organizations), virtually everyone in the company can find themselves in a leadership role, and a team leader can often be managing a person senior to them in the organization.
Is the same approach to pricing leadership training appropriate for each of these situations?
A simple decision tree for pricing leadership training
Per user pricing will not always align with value or drive the organizational goals associated with the training.
Per user pricing makes the most sense for high potentials, line managers and new managers. These people generally do not have a broad span of control and the focus is on their contribution rather than their impact on the whole organization. The exact form of the per user pricing is a related subject that we will pick up in a subsequent post.
Leadership training for top executives is different. These people have a disproportionate impact on their organization. A better pricing metric in this case is span of control. The greater the span of control the higher the value of the training and this should be reflected in the price.
There are several ways to measure span of control and people pricing leadership training should research this issue and be able to explain it to buyers. Span of control is normally measured in terms of the number of people being managed (there are several ways to measure this) but could also refer to assets under management or the extent of revenues or profits the person is accountable for.
Team leadership training is an emerging field, driven by the growing importance of teams and team work. It is generally rolled into manager training, but is this the best approach? We have seen some companies test a pricing metric based on the number of teams in the organization and connect this training to team management or project management software. Each time a new project is spun up team leadership training is required (or offered) and the price metric is the number of teams.
General leadership training for all employees. Some of the most progressive companies are extending leadership training to everyone in the organization. The idea is that in a modern, networked workplace everyone has the opportunity, and the need, to demonstrate leadership. Everyone should be encouraged to take this training and limiting it based on the number of people who happen to take it runs counter to the value being created. In this case, the best pricing metric is not the number of people who take the training but the number of people eligible for the training. This can be a larger number than the people who actually take the training, and the unit price will often be lower, even though the whole contract is larger.
The general lesson here is that even something as straightforward as leadership training can be differentiated on how value is created and this can lead to different pricing metrics. In pricing work, understanding value and working out what should be priced and how it should be priced is more important than optimization.
