Demystifying ROI

How to Manage Your Company’s Learning Investment

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Close to 20 years ago, the Chief Learning Officer (CLO) role was coined and has since been institutionalized.

Equally interesting and challenging is that the pace of business cycles has been accelerating, and thus a CLO must now play an active role in balancing and rebalancing the training investments needed to support business growth and transformations.

Concurrently, it’s no surprise that the world of work is changing, with labor shortages on one hand and skills shortages on the other. These dynamics leave CLOs and their training teams tasked with answering three preeminent questions:

  1. Are employees learning and performing better?
  2. How does a CLO secure new funding for new investments in learning?
  3. For all the money spent and invested, how do business leaders know it matters for the organization?

I recently had the opportunity to chat with Albert Siu, Corporate Vice President of Learning & Development at PAREXEL International, a global provider of biopharmaceutical services. He gave us some insight from 30+ years of experience.

Q: How do you see the changing world of work affecting CLOs and their teams?

A: I see today that there’s a new Learning Paradigm emerging. Historically, a more traditional Learning Paradigm would be one constituting of people who learn, do and retire.

Now, the new Learning Paradigm operates something like the following: People learn, then do, learn, then do, rest/reflect, then go back to learn and do, and repeat in rapid cycles. This kind of Learning Paradigm has an impact in any organization on people, processes and technology.

For example, people expect to learn in their moments of need and are less dependent on big, scheduled learning events; they want their own personalized “play list” of learning. Therefore, how training content and programs are developed, curated and administered need to be different and the need for new technology enablement is urgently called for.

If such is the case, how a CLO secures funding for new investments will be a constant challenge. And unless a CLO is well-versed in answering the three preeminent questions, it’s unlikely that senior leaders would appropriate new investments unless they’re convinced that for the investments made, the benefits are understood, accounted for and felt.

In my many experiences of speaking with other CLOs, they often love to talk about their new leadership development programs. But when I ask the simple question of how much they spent in learning at the enterprise level and how do they know that the investments matter, the answers are often vague and unconvincing.

To me, this is very problematic, because ultimately, we lose credibility and it’s difficult to imagine senior leaders would agree to fund new programs.

Q: With the impending labor shortages and the need for reskilling/upskilling ever-prevalent, the main question becomes: how do CLOs secure new funding for investing in new training, upgrading their training technology infrastructure as well as reskilling their labor force?

A: If a CLO can’t answer convincingly the question “for all the money spent…” that they do matter, it’s highly unlikely that the learning function will be able to secure the needed funding for addressing people, process and technology issues.

There’s a simple framework I use to map out where the training investments are distributed that I regularly share with top leaders in the company so that they know how the training dollars are spent.

Often, I wasn’t asking them for more money; I actually used the framework to show them how we can redirect the allocated dollars into other areas so that the net effect is that the company doesn’t have to spend more money. The company can then redirect the investments according to the prioritized needs as sanctioned by the senior leaders.

Q: Can you share with us what that framework is?

A: Sure. First, think about what drives the need for training in a company.

Typically, the needs are driven by two polarized dimensions. The first-dimension spans between a “Tactical Focus” versus a “Strategic Focus.” Draw a straight line going East and West.

The second dimension covers an “Organizational Focus” versus an “Individual Focus.” Draw a North to South straight line perpendicularly so that this line intersects with the East West line. Now you have a two-by-two framework.

On the top left quadrant is what I call “Functional Role-based” training. This kind of training is driven by an enterprise operational requirement.

This quadrant, for most companies through the past 20+ years I’ve been collecting benchmark data, constitutes about 50% to 80% of a company’s total training dollars invested as well as training hours spent. This “average range” has been very consistent across the period I’ve been tracking these numbers.

The bottom left quadrant is “Personal Professional Development,” typically covering training investments in areas of tuition assistance, external seminars for personal development, etc. Typically, companies spend 5% to 20% of their total training invested dollars in this quadrant.

The top right quadrant of this framework is “Strategic Development.” Typically, in this domain, the investments are spent on business strategy development, setting the mission, vision and culture of an organization.

Investments made to top corporate talent derived from succession talent reviews are also captured in this quadrant. The range of investment is typically between 1% and 5%.

One may ask, “Why so low?” when seemingly this is a critical area of investment. The simplest answer is because we’re dealing with a more focused and smaller target audience. Thus, the total amount of investments trend lower than the other quadrants.

The last quadrant, the lower right, covers “Leadership and Management Development.” This is the area where company leadership and management practices are invested and reinforced.

For companies that have a strong organizational philosophy of running their business, like Procter & Gamble, Johnson & Johnson, Eli Lilly and Company, Hewlett-Packard, Disney, AT&T, etc., they tend to invest higher in this domain. The range of averages span between 10% and 30%.

This framework was originally created by Sharon Sullivan, the former CLO of Eli Lilly, and I when I was the CLO at AT&T. We felt we needed a framework to capture our training investment patterns and I’ve been using this framework ever since.

Q: So, once we can capture the training investment patterns within an enterprise, what else must be set in place to enable CLOs to answer the three preeminent questions raised earlier?

A: To get the right senior leadership involvement in supporting the appropriate level of training investments, I believe every enterprise must establish a Training Governance process to oversee enterprise-wide training investments.

There are two parts to the Governance Process. The first part is a Training Governance Board: it resembles the board of an organization, but in this case, the members are inside the company and should be at the apex of the organization—that is—those that report to the CEO.

The Training Governance Board should set the overall training priorities, allocate resources (financial or subject matter expertise), drive accountability, set strategic priorities and direction for learning and training and ultimately drive what’s important to be learned in the company. At times, they’re also instrumental in resolving cross-functional training issues.

The second level of training governance is the Learning Leadership Council. The membership of this Council should be derived from organizations that offer training to the enterprise.

This group should focus on addressing training operational issues like defining common training approaches, processes, metrics and acceptable practices. They can be used to negotiate the cadence and sequence of training so that the organization won’t be “flooded” with a huge volume of training at one time.

This governance vehicle is particularly necessary for enterprises where the training functions are managed, decentralized or federated; meaning that functions and business units drive their own training agenda and requirements and have their own training organizations, and most likely their own investment levels.

Q: Once you have your investment framework deployed and your governance process in place, what else is needed for a CLO in order for training investments and priorities to be actively managed?

A: I believe Learning and Development (L&D) teams must have credible Training Business Partners whereby they can serve as the key interface, or as a Client Account Lead, so that L&D, business units and functions can partner closely together to design and drive the training priorities.

The Training Business Partner role is equivalent to an HR Business Partner role, and is the Account Lead for a business unit, focusing on helping business leaders translate their business requirements into training/learning requirements.

They communicate and partner closely with assigned business units and help the business manage their training requirements and develop curricula. They guide the business units in determining who should have what training, at what time and in what ways.

They should use the Training Investment Framework described earlier to show the business leaders how their training investments are distributed. If there are new training programs to be designed, the Training Business Partners provide project management expertise to support the creation. And when programs are ready to be launched, they support the business to manage the global launch.

Q: Since a good part of our conversation has touched upon the training investment theme, and given many organizations are global enterprises, how do CLOs manage the global coverage and scaling of its service to cover the geographic span?

A: At PAREXEL, who operates in 52 countries with more than 70 locations, it’s critical for me to think through what should be outsourced for scaling purposes.

For many of the management fundamentals, general leadership and professional development-related content, I outsource those training needs to credible global training content providers, where I don’t only subscribe to using their training content, but utilize their global instructor networks as well.

In doing so, I don’t require instructors to travel long distances and I only pay for those instructors when there is a need to do so.

Take for example: if a high-quality instructor in the U.S. costs at least $70,000 per person, I now have 50 instructors deployed globally who also have local language capabilities.

If I’m not outsourcing these resources, I would be paying $3.5M. Yet, by outsourcing the instructor requirements, I pay a fraction of that cost, and only at the time when I have a need for it.

So, what to out-source versus what to be retained for in-house deployment plays a bit part in balancing the cost profile of an enterprise’s total training costs.

Q: To focus further on one of those preeminent questions, how do you know learning matters to the success of the organization?

A: Many companies want to measure their results but aren’t sure how. There are two things I do and emphasize when I manage training ROIs.

1. I pay close attention to the reactions and feedback from people participating in training programs. A lot of my colleagues say this isn’t a good metric, but I disagree; this metric is my first line defense, telling me if the participants feel they’re getting a good return and it ensures the programs we offer are of high value and quality. Otherwise, I may not hear directly from the users of their reactions to the programs.

I partner with my L&D leaders to create a set of training operational metrics that we monitor closely and review monthly such as how many programs we plan to deliver, where they’ll be deployed and how well we’re recovering from the consumption costs of people participating in training programs where we pay external vendors.

We then track participant’s ratings to make sure the programs are well-received and track class sizes and “no-show” rate, as every seat is a perishable product; once not used, lost forever.

We’ve learned through time that these operational details led us to investigate how we manage the L&D function. Through the due diligence of paying close attention to operational details, we began to find metrics we could correlate with other performance-related metrics, enabling us to ascertain ROI data for further analysis. If we don’t have operational data, it’s very difficult to analyze ROI.

2. We also measure training impact against expected business results. I remind my leaders that business-result metrics are set by business leaders, not L&D.

For example, we need to understand what those business result metrics measure and then we triangulate the training operational data we’ve collected. Then we design “Training Impact Studies” using correlational research methodologies and experimental design analysis approaches to ascertain training impact on company’s business results.

CLOs and their training teams really need to do their due diligence here and wrestle with their data. Don’t fall asleep with your numbers; you will eventually see patterns.

Through time, we’ve found that for those managers who took more of the management development curriculum programs we’ve offered, that their Employee Opinion Survey data were more favorable than those that have participated in less programs.

We also found those managers were more discerning in gauging their employee’s performance, and get promoted more frequent than those that don’t participate in the programs.

And finally for Functional Role-based training, we’ve found that by sending our new employees through the rigor of our basic training, that they’re performing at the level of experienced people in less than 90 days since their on-boarding.

All these practices, metrics and measures are made possible by the fact that we have a systematic way of managing the L&D organization which allows us to demonstrate ROI to our business leaders. Through time, we’ve gained credibility and trust, which has enabled us to secure the funding for investing in areas where we have gaps.

With the Governance Process, the Investment Framework, and the use of metrics, we’ve forged a cooperative alliance with our business leaders. And together, we can now devote time and energy to address the emerging labor shortage and skill-gap issues.