INVESTING IN TRAINING

From the desk of the CorpU Research Team...

Investors know the importance of balancing their portfolio in order to optimize the return on their investments. They manage portfolio effectiveness by balancing risky investments that offer high returns with safer ones with lower paybacks.

Learning and Development (L&D) teams should use this same principle to balance learning investments to assure that the business will grow, much like an investment portfolio, and develop people with the right skills, at the right time, to achieve that growth.

MAKING CHOICES

CLOs know that two tenets hold true in learning:

1: Not all projects add equal value to the enterprise

2: Not all projects can be accomplished immediately due to resource constraints

If CLOs classify categories of learning, projects might fall on a scale from providing foundation-level knowledge, to knowledge that must be developed to keep the enterprise competitive, to the kind of innovative thinking that might propel the enterprise into new businesses or new markets. The fact that not all learning has the same goals requires CLOs to prioritize their enterprise L&D project list.

That prioritization should be based on established selection criteria like alignment to business strategy, building toward future enterprise capabilities, or reducing business risk. Portfolio management can provide a clear insight on the results of priority setting, as well as act as an effective method for tracking performance of the learning investment.

Realizing that learning initiatives use corporate capital and are therefore "investments" creates a focus on return, risk, and business alignment that is often missing in learning decision-making processes. CLOs that use a balanced approach towards managing L&D’s portfolio shift their thinking from an expense thought process to an investment mind set – something that will provide great benefit to an enterprise. Showing business acumen in the selection of investments will increase the credibility of learning organizations and highlight the financial benefits of learning initiatives.

This responsibility rests with CLOs, executives, and business leaders. This group should meet regularly to discuss the upcoming initiatives, needs, and mandated training for the business unit and enterprise. They should also balance the learning portfolio by categorizing upcoming programs into three areas (Figure 1):

• Foundation
• Progressive
• Leading Edge

Figure 1: Learning infrastructure for portfolio management
Source: Corporate University Xchange

The goal of this exercise is for L&D to see where its learning efforts are focused:

• What new initiatives are being planned?
• What knowledge gaps exist?
• What new skills are needed to move the enterprise’s strategy forward?

In some enterprises, this leads to the creation of an annual strategic plan for the learning organization, which is rolled up from business units to the enterprise.

The exercise also helps the L&D team understand the budget or resources available, and allocate those in a way that balances out where learning is invested. Where will L&D achieve the biggest bang for its buck? Each project should then be assessed to determine its profitability (rewards), investment requirements (resources), risks, and other appropriate factors. This includes making decisions about the risk vs. profitability; new products vs. improvements; strategy fit vs. reward; and long-term vs. short-term.

FOUNDATION

Some percentage of the L&D budget is needed to provide mandated, compliance-related training. L&D teams that primarily focus investments here operate at a Foundation level and are achieving the business equivalent of “keeping the lights on.” While the programs at this level are essential, they do not have a high impact on the enterprise’s business strategy.

To operate programs considered necessary at this level, the L&D team should focus on minimizing costs and resources to ensure that the resources are available to invest in levels where higher returns can be achieved. L&D should purchase off-the-shelf content when mandated training involves generic topics – safety, diversity, and regulatory compliance – and minimize, if not eliminate, time to customize these types of programs. The objective at this level is to invest the exact amount required to get the job done.

A large gas and chemical enterprise found that their objective – “to be the safest enterprise in the industry” – led to an overinvestment in safety training. While they met their objective, it was achieved to the detriment of other critical areas of their business, leaving the door open for competitors to slip in and take away market share.

PROGRESSIVE At the next investment threshold, L&D teams should allocate funds for programs that will increase the enterprise’s competitiveness. Enterprises that invest the majority of their learning budget and resources here are operating at the Progressive level and are focused on remaining competitive, but not necessarily increasing market share. Programs at this level teach employees to be effective in functional/technical roles, as well as understand and interact with enterprise operations. Other programs in this category include those that improve business operations, covering topics like Six Sigma and common leadership practices like Coaching for Performance. This segment’s programs represent a mix between generic and industry-specific content. For example, Six Sigma is a standard methodology with training on the methodology available from many sources. However, L&D teams should consider customizing modules to supplement Six Sigma programs that would help practitioners evaluate enterprise-specific projects to find those promising the biggest benefits. LEADING EDGE Companies that focus their learning investments on the Leading Edge level allocate ample funding for L&D programs targeted at new initiatives, innovation, enterprise growth objectives and other areas with the potential to push the enterprise ahead of competitors.

"Companies are doing more performance consulting and needs analysis in terms of the alignment of learning to business goals. They are moving away from using a reactive and order taker approach, but it is still not good enough. The process must go further with companies creating a physical business plan for learning." Dave Vance Former President of CatU Watch this exclusive CorpU TV interview with Dave Vance

Programs at this level require a significant degree of customization because they present management innovations and business trends (1) in the context of the enterprise’s own industry and (2) in relation to its specific challenges. This is the key area where L&D has the potential for the greatest impact, but also presents the most risk.

Leading Edge programs include action learning and team projects that are directed at (1) finding new business opportunities or (2) looking for new methods that would create innovative ways to improve current products or processes. Consultants can be hired to manage the action learning process, but theses programs are very enterprise-specific and can’t be bought off-the-shelf. They often require investment in experts to expand the knowledge base and bring needed perspective to the project teams. The rewards – solutions to enterprise problems or completely new business opportunities – are worth the risk.

PORTFOLIO MANAGEMENT

L&D teams can use numerous tools to analyze their learning investments. One such tool taken directly from the investment world is a basic portfolio management tool. This type of tool analyzes learning investments by projected returns, required funding, resources, timing, and other decision criteria. An example is the CorpU Portfolio Management Tool*, which is easy to use and customizable to an enterprise’s specific decision criteria.

Using a portfolio management process requires enterprise-wide agreement about how these criteria are applied. Once that is achieved, the short-term results for using this type of tool includes:

• Better project selection
• Greater visibility into L&D’s projects
• Better alignment of L&D programs to the enterprise’s strategy

Long-term effects include:

• Developing consistency in selecting
• Justifying and monitoring enterprise learning initiatives
• Identifying verifiable improvements to financial effectiveness

Ultimately, balancing L&D’s portfolio of programs achieves the same result as in the finance world – a higher return on investment while significantly improving the overall impact that learning has on corporate sustainability and success.

CorpU Research Team

 

*The CorpU Portfolio Management Tool is only available to CorpU Members. Located in the research collaboratory, the Tool can be accessed by clicking here. For questions on how to use this tool, please contact members@corpu.com.

 

Original article written by Sue Todd, CorpU President and CEO, for Chief Learning Officer Magazine. The full article can be viewed here.