ROI and L&D: What Trainers Need to Know About Operational Results

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In January of this year, JD Dillon produced a nice blog post on insights for 2018. He curated several L&D thought leaders to share their thoughts on what L&D practitioners should focus on for 2018. He formulated a variety of questions to which they responded.

The insights are good. The thought leaders within the blog post are all ones I respect and whose opinions matter to me. However, one glaring omission stands out: the absence of a business-oriented perspective. It’s one thing for thought leaders to talk about L&D. But the entire purpose of L&D is to support the goals and strategy of a business. The business does not exist in support of L&D.

What L&D Pros Need

In our industry, thought leaders and practitioners frequently talk about the need for L&D to deliver value to the business and measure impact. But we spend too little time educating L&D practitioners on business and instead focus on building their technical skills in L&D stuff. I agree L&D people should have a solid understanding of learning science and know how to apply the research to their solution design. But there is a second, urgent foundational body of knowledge that L&D practitioners need. They need basic business acumen, understanding of how businesses function and make money, and the factors that influence business strategy.

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As a business owner who runs a $4M+ business, employs 30+ FTEs,  and who happens to be within the L&D industry, I’ve become increasingly aware of an uncomfortable truth: Too many L&D practitioners (and employees, in general) are not business literate.

There is a chasm of foundational business understanding between L&D practitioners and the business leaders who run core organizational functions such as Sales and Marketing, Operations, and Finance. For a training professional or a “performance consultant” to design and develop solutions capable of producing business impact, they need a basic understanding of what it takes to run a profitable business and how a solution might support growth strategies.

What L&D Pros Lack

If I polled most L&D professionals I feel confident many would struggle to:

  • Explain the components of a business strategy and how they work together to achieve growth.
  • Distinguish between revenue and sales and consider whether a solution is impacting one, both, or neither of these financial metrics.
  • Ask “how can you measure a solution’s value?” If a solution is not affecting increasing revenue, cash flow, or sales, what value is it contributing? (Spoiler alert: in general, everything comes back to those three items – even things designed to enhance employee engagement. If employees are engaged, they are productive and they stay, reducing costs and increasing efficiency. That, in turn, increases cash and profitability.)
  • Distinguish between cash flow or profit and why “cash is king.” (And, therefore, why a company might not be eager to expend lots of cash producing a solution that won’t yield a substantive result on cash or cash flow in the near term.)
  • Identify the factors that influence cash flow and strategies for affecting cash flow.
  • Explain the difference between cost and profit.
  • Identify the impact a learning solution can have on a business metric that matters (turnover %, employee engagement, cash, cash flow, profit margin).
  • Identify the factors that should go into calculating the cost of a training solution (an essential first bit of info to calculate potential ROI from that solution) and identify how ROI is calculated.
  • Calculate the potential costs to the business if a learning solution is UNsuccessful or how long a business might have to wait to see any actual ROI.
  • Offer examples of  “operational results.”

How to Get Started

So, if I were consulted on what topics should matter most to L&D professionals, I’d start by saying “business knowledge.” As an industry, we will continue to struggle to deliver “value” and “impact” to the business until practitioners within the industry have a true understanding of business, business results, and how learning and employee development actually impact those results. Our guidance on the right way or wrong way to design or implement learning solutions needs to be grounded in knowledge of learning science, expertise in technologies and distribution options, and understanding of business strategy, needs, and drivers. Two out of three of these is not enough.

For a “business 101” intro, here are two starter recommendations:

Coursera Course – Grow to Greatness: Smart Growth for Private Businesses

Ed Hess, a professor at University of Virginia’s Darden School of Business, teaches this course and it’s awesome. It covers basic business strategy concepts and dispels common myths about how businesses grow, whether or not they need to grow, and how fast they should grow. The case studies associated with this course provide a primer on thinking about cash, expenses, profit, operations issues, and more.

I’ve taken this course twice and had every member of our leadership team complete it as well. There is a second part of the course that focuses heavily on the impact of organizational culture and people development to a business’s success. You will learn a lot and expand your understanding of what it takes to operate and grow a successful business. You’ll expand your ability to consider how a learning solution can – and cannot help a business improve its operational results, engage its people, or fulfill its business strategy.

HBR article – Having Trouble With Your Strategy? Then Map It?

This article outlines a framework to devise a strategic plan. It’s a nice counterbalance to Ed Hess’s course because it focuses on public companies. Though L&D peeps might not be crafting company-wide strategic plans, this concise article and framework show the relationship between these four business perspectives that work together to increase shareholder value. For public businesses, increasing shareholder value is the ultimate “purpose” or destination. (Private businesses also need to make money to continue to exist, but they may not define their primary purpose as “making money.”)

Four Perspectives to Consider

The strategy is the route to that destination and it flows “top-down” with the financial perspective first. The customer perspective then supports the financial perspective. Next, the internal process perspective is informed by the customer perspective and the financial perspective. And finally, the learning and growth perspective is informed by all of the perspectives above it.

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Rober Kaplan and David Norton. Having Trouble With Your Strategy? Then Map It. Harvard Business Review. 2004.

1. Financial perspective – how will you make money so you can increase shareholder value?

  • Revenue growth strategies
  • Productivity efficiency strategies

2. Customer perspective – which value proposition will the company focus on seeking advantage in and which will the company be at parity in:

  • Customer intimacy
  • operational excellence
  • product leadership?

3. Internal process perspective – which of these levers will company focus on:

  • Build the business through innovation
  • Increase shareholder value through customer management processes (sales and acct mgmt)
  • Increase value through operational efficiency (cost management strategies)
  • Be a good citizen: regulatory and environmental processes

4. Learning and growth perspective – to enable everything listed above, what you need in terms of:

  • Employee competencies
  • Our corporate culture
  • Technology

As an adjunct resource on simply thinking in terms of ROI, here’s an older post I wrote on the topic of implementing effective training solutions. It touches on calculating the cost of poor implementation.


Want to learn more about how to connect learning solutions to business results? We’d love to chat.