Measuring for Success: What CEOs Really Think about Learning Investments

Chapter 1

Why the Executive Viewpoint Matters

Regardless of what you’ve heard, opinions do matter. The executive viewpoint is essential, particularly with regard to learning and development. This book emphasizes that the executive point of view is the most critical perspective for today’s learning and development manager— and this chapter explains why. Though past assumptions about learning and development may have been based on inaccurate, incomplete, or even false data, now it is imperative to influence executives’ present and future perceptions with credible, relevant data.

This chapter provides the context needed to help learning professionals step up to the challenge of measurements that matter by providing:

background on the changing roles, perceptions, and priorities of senior managers and other top organizational leaders

grounding in the key factors that drive funding and resource decisions by C-level executives—that is, chief level, such as chief learning officer to chief executive

cultural context to help you understand changing employee attitudes toward learning

a reality check on the processes and politics that drive organizational funding decisions

tips on ensuring that learning and development is valued by top decision makers.

Where It All Started: The Manager’s Role

The role of the manager in the success of learning and development activities can be summarized with a brief history. In the early years of organized work, the foreman provided training to employees so they could perform their jobs. Because workers didn’t read and write, on-thejob training was essential. Thus, the foreman (that is, supervisor) initiated and was responsible for job-related training. Apprenticeships became widespread in the Middle Ages as necessary knowledge and skills became more complex and specialized. Craftsmen managed the development of future experts in their trade.

Classroom training evolved during and after the Industrial Revolution and allowed many workers to be trained by a single trainer. As this type of training grew, responsibility for training success expanded beyond a specific foreman or craftsman. Rather, managers had to work together to ensure that large groups of workers received the training they needed to succeed in their various jobs.

As the growth of learning and development continued, managers throughout organizations encouraged and supported the process. At the turn of the 20th century, training became more important to organizations and the industrialization of the U.S. economy than ever before. Theoretically grounded approaches to learning evolved, and the responsibility for managing, leading, and propagating learning and development expanded even further. One of the first documented organized workshops in U.S. industry was conducted by National Cash Register in Dayton, where the chief executive summoned the sales team together near Dayton for sales training.

For centuries, supervisors, managers, and executives have seen the necessity of organized learning and development. Though today these leaders still recognize the importance of developing their people, there has been a change in perspective. For example, a respected communications company, where the learning and development team had trained 4,000 managers in leadership skills, was challenged by its CEO to show the value this significant expenditure contributed to the organization. To the disappointment of the CEO, the team had no evidence that this costly leadership development program contributed anything. The results were a tarnished image and a reallocation of departmental resources. The CEO supported the development of people, but not to the detriment of wasted resources. Without firm evidence of a contribution, there was ittle choice but to make a change.

The growth of organizations and the demand for limited resources have changed the position of learning and development from a function of absolute necessity for an organization’s good to one that requires the same level of accountability as other functions. Accountability to senior executives has never been so vital.

A New Approach

Executives have changed their approach to managing organizations. This issue has been documented in thousands of books and articles. Four key issues have evolved that affect learning and development directly and, consequently, its success:

organizational growth

short-term results as well as long-term payoff

competitive edge

demonstration of value from multiple perspectives.

Most executives and industry observers suggest that growth is a must for survival. Without growth, an organization dies. With growth comes investment, including building skills to position employees to achieve goals, and learning new roles to take advantage of new opportunities. The investment is often high, leaving executives with high expectations for results.

In business, results are the most critical part of success or failure. Unfortunately, most of a business’s focus is on short-term and frequent results—the What have you done for me lately syndrome. With this type of pressure to show immediate, routine results, an organization is forced to examine results in all areas, including learning and development. Although investment in learning and development is often positioned for a long-term payoff, some large investments in specific programs should deliver the short-term results desired by executives.

Competition, whether locally or globally, is fierce. The goal of many organizations is to defeat their competition. To achieve their mission, organizations must be efficient, competent, and effective. They have to be better than the competition; this translates to building a better team, which requires that skills and competencies be developed for success. The process for building this team armed with the appropriate knowledge, skills, and information must be timely and flawless. This translates into a strategy that includes increased investment in learning and development. Such strategic investments require accountability.

Accountability is defined by the value that investment in programs and processes brings to an organization. But the definition of value is changing—there is no one specific measure; instead, it now includes both quantitative and qualitative data, as well as financial and nonfinancial data. Table 1-1 highlights the new definition of value being sought for earning investments. From the executive viewpoint, value is not just defined by the financial contribution, although this is critical. Rather, value includes a clear business alignment between programs and outcomes, and the success of learning and development activities in terms of performance proficiency, teamwork, and service quality. Unfortunately, for many learning and development teams, especially within large organizations, the executive viewpoint of value is not often defined by measures of participant reaction and learning—although, from a process improvement standpoint, these measures are important.

Funding

For executives, a regular task is making decisions about major funding opportunities. Ultimately, an organization’s CEO and board of directors approve its entire budget, which often includes a line item for learning and development. These funding decisions are normally made on the basis of the demonstrated value of either previous budget allocations or the forecasted value of a requested allocation. When these details are unavailable, decisions must still be made. Unfortunately, they are often made based on perceptions rather than data.

When budget time nears, executives examine the value and costs of the function in the context of what is planned for the future. They try to reach a conclusion as to whether or not the budget request fits their value definitions. When data is unavailable, the executives take leaps of faith that the investment level is appropriate. Fortunately, executives have done this many times and are somewhat proficient in their allocation of funds.

Unfortunately, this process of resource allocation is near its end. All functions, including learning and development, must have enough data to show executives that they are delivering credible value if funds are to continue flowing in their direction.

This is particularly true in tough economic times, when the allocation of resources is even more challenging and budgets are tightening. When budgets are small and requests are modest, the pressure is released—either because executives keenly perceive the value contribution due to the organization’s small size or there will be limited financial risk if the program ends up adding little value. When budgets are large, however, perceived value is often lacking and financial risk increases. Funding discussions revolve around objective data regarding results. The larger the learning and development budget, the greater the need for accountability.

Resources

Along with the need to justify funding, there is a need to justify additional resources. For the most part, funding secures the resources for the direct costs of learning and development programs. But other resources are also required to support a strong learning and development function. These other resources include facilities, internal staff, and external support.

Learning and development requires facilities. Investing in facilities is expensive, and many corporate learning campuses have been developed to house comprehensive classrooms, theaters, and offices. Today, this trend is changing. Learning and development facilities are becoming integrated into organizations’ other facilities, and virtual learning is helping to eliminate the requirement for extensive brick and mortar facilities.

A second resource, which is particularly important, involves people—the learning and development team. A large team is needed to deliver a comprehensive learning and development agenda. Most benchmark studies show a ratio of 1 trainer for every 200 employees. Given this ratio, a company with 200,000 employees would usually have a learning and development team of 1,000 employees. Employees are expensive, and top executives are aware of this. Thus, when budgets are approved, staffing level is always a concern. Some companies go to extremes to avoid having to actually staff the team. This leads to the third type of resource issue: outsourcing.

Because of the high cost of maintaining employees, many organizations choose to outsource learning development, delivery, and evaluation, among other functions. This choice is often less expensive, but it still consumes precious resources and risks putting a greater disconnect between an organization’s needs and programs.

learning and development resource requirements are high. These requirements thus create pressure to show executives the value of a learning and development function—enough value to offset the costs of resources.

Changing Workplaces

Today, the attitude within the workplace has changed, because employees are not necessarily viewed as expenses but investments. Activities are not measured so much as results. This shift in the way executives view employees and practices is illustrated in table 1-2, which compares the change from an old view, which focuses on activities, expenses, and lack of contribution, to a new approach, which focuses on results, delivering value, and performance. This change in focus is causing executives to seek value in almost everything that takes place in the workplace, including investment in learning and development.

Changing Employee Attitudes

No change in the current workplace environment is more dramatic than the attitudes of employees regarding their work and employer. Historically, attitudes were determined with measures of job satisfaction, which recorded employees’ satisfaction with their jobs, the company, immediate managers, career opportunities, compensation, and coworkers. These measures were important because job satisfaction had a positive correlation with retention and absenteeism—though not necessarily with productivity and quality.

Measures of employee attitudes now include organizational commitment and employee engagement. More than mere job satisfaction, these measures include the extent to which employees are actively involved in work processes, feel a part of the organization, or are fully engaged in decision making. Involvement and engagement have a positive correlation with both retention and productivity, measured in unit of revenue per employee.

As employee attitudes change, an important issue is evolving. Previously, employees did not necessarily seek to be involved in learning and development opportunities. The prevailing attitude was this: If the employer thinks I need training, then they will provide it. Otherwise, I will learn on the job. Today, employees want to learn. They want to build skills. They have realized that a person’s only job security in today’s global economy are his or her skills and competencies. The concept of lifetime employment with a single company is gone, for the most part. Employees seek employers that provide learning opportunities, and their retention is based on the employer’s continued investment in their development.

This trend has created a dilemma for executives: On one hand, they are forced to invest heavily in learning and development to keep their employees. But on the other hand, if this investment is not managed wisely to focus on job- and career-related topics that help employees succeed on the job and, consequently, help the organization succeed, the investment can be wasted. Although increased investments help with staff retention, there is a renewed emphasis on showing the value of learning and development from both the employee’s and organization’s perspectives.

Internal Competition for Funds

As internal budgets increase in growing companies, there is fierce competition between departments for funds. With the need for more funds, technology, and people, many parts of the organization are vying for a share of the learning and development budget, especially when there is a significant amount on the table.

In the authors’ work with a large package delivery company, the top corporate learning and development officer made this comment to his senior team regarding the department’s budget:

Our direct expenditure managed by our department is over $600 million. That is a huge expenditure and would be equivalent to a medium-sized organization if we were operated independently. Today, many parts of this organization would like to have our funding diverted to their needs. The operations people would like to have it for additional trucks and airplanes. The IT Department would like to have it to invest in technology, as it is becoming an important differentiator. The sales and marketing team would like to have it to increase revenue with new marketing initiatives. With all these internal pressures to have our budget, we must show management that it’s adding value. We can no longer ask them to invest on faith that things will work out.

Table 1-3 shows the functions that want a part of the learning and development budget. These functions command respect by adding and driving value. If the learning and development team doesn’t enjoy the same respect, perhaps it could be in trouble at budget time.

Commitment, Support, and Involvement

Executives and managers play a critical role in the success of learning and development activities. Their commitment, support, and involvement are imperative for a sustainable learning process. But to gain their commitment, support, and involvement, the learning and development team must show executives the potential payoff for their involvement.

Commitment

Executives’ commitment to a particular process or function is vital to its success. Few business professionals will argue with this conclusion. Commitment is found in the allocation of resources; personal time devoted to the function; and the attitudes, behaviors, and support for the function.

Without commitment, the function will not flourish as a value-added part of the organization. In the context of learning and development, value is developed because executives understand its necessity for fueling growth and enabling the organization to remain competitive. They also see the value of having skilled, competent employees. Commitment is increased when executives see routine data showing that the learning and development process is working effectively.

Support

Support for the learning and development process and programs is also very important. Failure to support these activities is a colossal problem in the industry. Support is usually described in the context of middle managers and, at times, first-level managers. Unfortunately, their failure to support these activities properly often catches the eye of not only the learning and development team but also executives. Support for these activities can be gained with a responsive team that can connect to business needs and help managers and executives drive results. Managers need data to be confident that their support is worth the investment. When positive support is achieved, it is extremely powerful, often making the difference between the success or failure of specific programs—or in some cases, even the process itself.

Involvement

Having executives involved in learning and development activities is another critical factor for success. Top executives’ involvement translates into ownership and support from others. Involvement is not just teaching—although that’s highly visible and important. Executives are involved when they kick off a major leadership program, write an article in support of the learning process, or coach their managers as to how they can better support learning and development activities.

To achieve this type of involvement, the value of learning and development activities must be evident. Executives must understand that these activities are relevant, necessary, and vital to their organization’s success and are executed professionally and in a timely way. When this understanding is attained, the activities’ image and perceived value increases. Even when other executives do not clearly understand the connection between learning and development and business results, they perceive that there is value when top executives take an active role.

The Commitment Cycle

So how does all this connect? Commitment, support, involvement, and results are revealed as forming a commitment cycle. Without results, commitment to learning and development may not exist. Without commitment, support will not be strong. Without support, involvement will not occur. Without involvement, results will be diminished. Thus, without commitment, support, and involvement, funding is at risk. This cycle may cause a downward spiral if the results are not apparent, or an upward spiral if the results are present. Obviously, the bottom line is this: Without clear results that executives appreciate and respect from the learning and development team, executives’ commitment, support, and involvement vis-à-vis the learning and development process will not flourish.

Keys to Success

The key to achieving learning and development accountability is to develop measures that are important to executives because the measures reflect their perspective of value. This is not a one-shot effort but a continuous process that involves not only micro-level program evaluation but also macro-level reporting that is routinely updated.

This macro-level reporting is usually conducted via a scorecard or dashboard that can be monitored consistently. Actions are taken when the scorecard’s values are unacceptable and measures need to improve. When the values are as expected or exceed expectations, the data is reviewed to determine how to sustain the momentum. This constant focus on process improvement, with a continuous stream of results, confirms to the executive that reporting value is not just for his or her sake. Instead, the learning and development team also recognizes the importance of these measures and uses them as an integral part of the learning process. This removes any perception that learning processes, including evaluation, are mere busywork activities rather than being part of ongoing business processes.

This chapter may sound like utopia to some readers—how things should be in an ideal situation. But the fact remains: Results and measures of value can be developed and communicated to senior executives to influence their perception of and decisions about learning and development.

To ensure this influence, the learning and development team must focus on six important actions:

Spend wisely.

Respond professionally.

Operate proactively.

Build productive partnerships.

Show results.

Take risks.

Spending Wisely

Because of the growing expenditures for learning and development, resources must be spent wisely. Efficiency is critical. There is no room for waste, which means that programs should be connected to business objectives. Steps should be taken to ensure that alignment has occurred, with unwavering focus on cost control and efficient delivery. This environment makes for a strong, productive business unit—one executives want in their organization.

Responding Professionally

Unfortunately, sometimes the learning and development team is slow to respond. Executives misunderstand why meeting an obvious need takes longer than expected. This problem is exacerbated when new products are added or there is a need for merger integration. Quick, professional responses while delivering impeccable service and building professional relationships within the organization are a must.

Operating Proactively

Today’s climate requires the learning and development team not to just respond quickly but also anticipate needs. Team members must look at the organization environment and its goals for the future. Learning and development must be connected to the business in every way. This connection should consist of understanding its problems and opportunities as well as being able to examine, explore, and recommend programs that may solve problems before they are requested. Proactive involvement also ensures that the solution is properly addressed. Without this proactive approach, challenges may not be met in a timely manner, which could lead to a missed opportunity for adding value.

Building Productive Partnerships

The learning and development team must build proactive partnerships with key operating executives. Doing this is a challenge because these executives are busy and do not always prioritize partnering with learning and development staff. The challenge, then, is to work with those executives and understand their issues while delivering value that they appreciate. This effort will help make the partnership productive and earn the respect necessary for the success of the learning and development process, optimally changing this process’s somewhat negative image within organizations.

Showing Results

Fundamental to influencing management’s perceptions and decision making with respect to the learning and development team is that the team shows results in ways that executives appreciate and value. This endeavor is the heart of this book—presenting what is appropriate and feasible to enable the reader to focus on results important to the ultimate key stakeholders. Pursuing this results-focused approach will have tremendous influence on executives’ attitudes toward and perceptions of the learning and development process.

Taking Risks

Finally, the learning and development team must take risks. Doing this may involve taking on programs when they may be unpopular, being willing to rigorously evaluate favorite programs, and overcoming the fear of negative results or a lack of success. All executives take risks, and the learning and development team should follow suit, but it can mitigate these risks by aligning potential programs with business objectives and by making immediate changes as needed. Most executives appreciate risk