Effective employee development and leadership coaching programs are hugely important for today’s organizations. They represent an important investment in human capital that can deliver significant returns. It’s not enough to simply hire the “best” people; without a comprehensive program to nurture them and help them grow, organizations will struggle with engagement and retention. No one would wonder why a company with deteriorating, out of date production facilities struggles to be competitive; why should they think any differently about a company that doesn’t invest in employee training and development?

When asked to list things that give organizations an advantage over their competitors, people might not immediately think about skill development programs and coaching. Although it can be easy to focus on the kind of strategic vision or day-to-day operational efficiencies that make for good headlines, overlooking an organization’s leadership development makes it hard to identify why it’s so good at what it does. Simply pointing out that a company has “good people” fails to consider why it consistently has high quality employees and leaders so vital for success in an increasingly competitive economy.

Value of Coaching Programs

More and more companies are recognizing the value of good leadership coaching. A whopping 77% of organizations had plans to expand their coaching efforts in 2016, and the coaching industry as a whole amounts to a $2 billion dollar business. The rising popularity of coaching is undoubtedly due to its effectiveness. Studies have shown that the median return on investment (ROI) for individual-focused coaching is well over 300%, while the returns on executive coaching can be as high as 5,000%.

For many years, leadership coaching was directed mainly at the executive level, but recent trends have shifted to a model aimed at cascading skills through the organization. The time to build leadership skills is not when people ascend to positions of leadership, but rather before they take on those responsibilities. One-on-one coaching can help candidates identify potential difficulties and better understand the responsibilities of leadership. From a practical skills standpoint, the use of case studies, simulations and role play exercises as part of a coaching intervention make it possible to replicate situations leadership candidates will eventually confront in the future, allowing them to develop the skills they will need for those situations.

For their part, most employees want to be coached. Recent studies have shown that nine out of ten employees want coaching of some kind, but only three out of ten actually receive it. Millennials in particular place a very high value on development and are far more likely than previous generations to leave an organization that isn’t willing to invest in them adequately. Engaging millennial employees early and often with resources that give them control over learning or by partnering them with experienced coaches and mentors is critical to retaining promising leadership candidates. Considering that millennials will occupy half of all leadership positions within a decade, taking active steps to develop their skills and retain them within an organization is critical to building a competitive advantage.

Developing Flexible, Adaptive Leaders

In today’s fast-moving economy, circumstances are always changing. Organizations capable of adapting to new situations and shifting circumstances will find ways to succeed, while those that don’t will careen towards obsolescence. The same holds true for employees. If they’re not developing new skills and learning from successes and failures, they will struggle to overcome new challenges.

While there’s something to be said for consistency, leaders must be able to make quick decisions and learn to embrace change when necessary. Falling back on old patterns for no reason other than “that’s the way we’ve always done it” is not only ineffective, it can lead to frustration and a sense of powerlessness within an organization, especially when the old patterns are clearly ineffective. Many HR directors are already looking at the ability of candidates to deal with change as major recruiting criteria.

Many of the most effective leadership coaching models today focus on developing flexible leaders. These coaching interventions emphasize skills that help high-potential employees to become more situationally aware, understand how business systems interact and change, and identify ways to motivate employees through greater involvement and empowerment. They also focus on building up self-awareness, helping potential leaders to recognize how their own mental state and attitudes affect their judgment and how they should model their behavior to set a good example for others.

While many factors play a role in an organization’s success, very few companies will remain competitive for very long without an engaged, adaptable, and empowered workforce. By investing in comprehensive training programs and leadership coaching initiatives, organizations can ensure that they’re giving themselves the very best chance to compete in a dynamic economy where even the slightest edge can mean the difference between success and failure.