The use of discrete computer simulation modeling to estimate return on leadership development investment

Organizational leaders seek monetary returns on their investments (ROI). Thus, making decisions to invest in human capital, such as in leadership development interventions, are often difficult due to the lack of research demonstrating monetary returns on leadership development investment (RODI). This study introduces an innovative approach to estimating leadership development investments and expands on previous research conducted by Avolio, Avey, and Quisenberry (2010), which was the first attempt to estimate leadership development RODI using utility analysis. Further, it is a unique study in that it uses computer simulation modeling to generate random distributions of each utility analysis variable to estimate RODI. Computer simulation modeling enables organizations to better estimate RODI for both current and future leadership development programs. Comparisons of RODI methods are conducted. Results demonstrate that potential gains from effective leadership development are greater than previously estimated but potential losses from poorly executed leadership development are also larger than previously estimated.