How do you measure good leadership?

While many organisations invest heavily in leadership development, fewer have established methods to measure the real impact of their leaders.

Yet, assessing the long-term effectiveness of a leadership strategy and vision is essential for sustained business success. Without a systematic approach to measurement, companies risk stagnation or misalignment with evolving market demands.

A fundamental starting point for measuring business leadership involves recognising that leadership is not a one-dimensional concept. It’s a blend of various skills, qualities, and behaviours that collectively influence an organisation’s trajectory.

Several key dimensions are critical for assessing leadership, and each of these elements can be observed through both qualitative and quantitative lenses, allowing organisations to better understand how leadership directly impacts their operations:

1. Employee engagement and satisfaction

A good leader fosters an environment where employees feel valued, motivated, and engaged. In return, high engagement often correlates with productivity and a positive company culture. According to Gallup’s State of the Global Workplace report, companies with highly engaged employees experience 21% higher profitability and 17% higher productivity.

Leaders who foster a positive work culture, provide clear direction, and inspire their teams contribute significantly to these figures. On the other hand, poor leadership can have significant consequences. Studies show that nearly 50% of employees who leave an organisation cite poor leadership as the primary reason for their departure. Employee surveys, retention rates, and feedback mechanisms can all help to indicate the level of satisfaction within the workplace and measure the impact of leadership on the results.

2. Business performance and growth

The financial health of an organisation is a direct reflection of leadership effectiveness. Revenue growth, profit margins, market share, and innovation rate are key performance indicators that showcase a leader’s ability to drive success. Research supports this notion - study by McKinsey & Company found that organisations with high leadership effectiveness scores outperform their competitors by as much as 3.5 times in terms of financial performance - underscoring the necessity of measuring leadership impact consistently.

Another research, a Harvard Business Review analysis, found that companies with strong leadership development programs generate shareholder returns that are nearly five times higher than those with weak leadership pipelines – showing strong correlation between leadership quality and financial performance and highlighting the importance to track leadership effectiveness using specific metrics such as revenue growth, profitability, and market share.

3. Organisational adaptability

One of the fundamental ways to assess long-term leadership strategy is by tracking organisational adaptability. Companies that thrive in dynamic environments often have leadership teams that proactively shape strategy rather than react to disruptions.

Measuring adaptability, however, is inherently complex. It involves assessing how well a leader can anticipate change, respond to unexpected challenges, and cultivate an organisational culture that embraces innovation and agility. This can be done through surveys, feedback from employees, and even through examining a company’s ability to quickly launch new products or pivot to meet market needs.

4. Emotional intelligence

Research has consistently highlighted the importance of emotional intelligence (EQ) in leadership effectiveness. Leaders with higher EQ are better able to navigate interpersonal dynamics, foster trust, and create a more collaborative work environment. This kind of leadership is not just about being a figurehead but about being present, empathetic, and capable of steering teams through adversity with grace.

Measuring EQ, however, requires more than just a superficial look at a leader’s ability to manage stress or resolve conflicts. It involves understanding their capacity for self-awareness, self-regulation, motivation, empathy, and social skills, all of which contribute to a leader’s overall effectiveness.

5. Decision making

Decision making is perhaps the most visible and immediate measure of a leader’s effectiveness. Leaders are faced with complex choices that can affect the future of their organisation, and their decisions often serve as the litmus test for their capabilities.

Research by the Journal of Business Strategy points to decision-making as a key component of leadership success, emphasising that leaders who make informed, data-driven decisions tend to outperform those who rely solely on intuition or subjective judgment. Assessing decision-making effectiveness involves tracking both the short- and long-term outcomes of decisions, considering the quality of available data, and gauging how well the decisions align with the company’s strategic goals.

6. Long term sustainability

Beyond financials, the long-term sustainability of a company often hinges on its leadership succession planning. A well-led company doesn’t just perform well in the short term but also ensures its future success by nurturing and developing new leaders from within.

Businesses that fail to measure and refine their leadership strategies risk creating a leadership vacuum, leaving them vulnerable to instability when key figures step down or transition out of the organisation. On the other hand, organisations with a robust internal leadership development program are 1.5 times more likely to sustain long-term growth.

Regularly reviewing leadership talent development, mentoring effectiveness, and internal promotion rates ensures that businesses thrive under current leadership and are also prepared for future transitions. While these individual measures are essential, they must also be evaluated within the context of a leader’s ability to foster a positive organisational culture. A strong culture, defined by shared values, trust, and accountability, is a direct result of leadership. Leaders who create environments where employees feel valued and empowered will see higher levels of engagement and lower turnover rates.

Leadership is not just about inspiration and vision - it is about measurable results. Businesses that systematically track and analyse leadership impact are better equipped to make informed decisions, retain top talent, and drive sustained financial growth. Without proper measurement, leadership effectiveness remains speculative.  At Acumen we’re dedicated to equipping leaders with the practical tools to tackle real-life challenges. Our comprehensive range of training and development programs, including customised interventions and off-the-shelf courses, help organisations foster a culture of respect and empower their employees.

To learn more about our programs and how they can benefit your organisation, please contact Simon at simon@askacumen.com