TOUGH ECONOMIC TIMES AHEAD

From the desk of Cindy Thatcher...

Headlines everywhere point to economic woes and tough financial times ahead, and many companies are beginning to look at where they can trim excess expenses and implement cost-saving measures. Historically, companies have reduced their investment in training in difficult economic times. So how can a CLO not only maintain the learning department’s budget, but also possibly increase it?

The answer is by showing the value of learning.

Increased Pressure

Quantifiable impact and accountability are key issues talked about almost daily in businesses around the globe for all functions and is of particular importance for learning. The data in Corporate University Xchange’s 8th Annual Benchmarking Study (the CorpU Study) supports this with 58% of L&D organizations reporting that they are increasingly being asked to demonstrate the value of learning (Figure 1). This is especially true in large organizations with 81% of companies with between 50,001 – 100,000 employees being asked to deliver metrics.

Figure 1. Source: Corporate University Xchange 8th Annual Benchmarking Study

In fact, the need to show the value of learning is even more pressing in emerging markets than it is the United States today. In the CorpU study, more than 65% of the companies having L&D operations in Latin America, East Asia, Central Asia, and South Asia answered that they have had increased pressure to measure their results.

Most executives instinctively understand and recognize the inherent value of learning and correlate it to increases in employee and business performance. The “appearance” that training is necessary used to be all that learning organizations needed to keep their budgets intact. Executives in these tough economic times, however, are demanding more and more evidence of the value learning adds to business and employee performance.

As discussed in the CorpU weekly article Learning Myths Busted, executives don’t always simply accept the measurements that learning organizations present. There has to be up-front agreement between the CLO, the learning team, and the business leaders that a particular outcome will be evidence of success. That ensures credibility and makes the measurement more likely to be believed.

The Value of Learning Defined

So how can a learning department describe the value of learning in terms that a business executive can understand?

Simple.

The value of learning lies in the improved performance of employees using agreed upon measures. That performance can have outcomes in three areas:

• Personal Outcomes – These outcomes consist of specific ways that employees feel they have personally benefited from learning and include perceptions of quality programs, increased knowledge and competence, and career development.
• Business Outcomes – These outcomes consist of quantifiable metrics and qualitative evidence that demonstrate how learning improved business performance. Some of these will be the key performance indicators (KPI) that have been defined as strategically important to the overall business, while others, such as customer feedback or specific performance measures, will be important to particular business units.
• Cultural Outcomes – Outcomes in this area refer to how learning has influenced and spread the company’s culture and include the value of learning within the culture, employee engagement, and senior leader support.

Some of these outcomes are hard metrics that are easily understood and believed by executives, but others are intangible and not easily converted into dollar values. Some are more easily measured than others, but each one needs a defined measurement strategy and definitive methods to be successful at showing the value of learning.

Measuring the “Soft Stuff”

Many learning professionals speak in terms of Kirkpatrick, Phillips, or Balanced Scorecard methods to show quantifiable results. These methods are by far the most popular and well known in the industry. Each has its own advantages and disadvantages, but all can be used to demonstrate the value of learning in ways that executives can understand. The Kirkpatrick Levels 3 and 4, as well as the other levels, focus on hard facts and quantifiable business outcomes, but what they often miss are the benefits that are less tangible. These less tangible benefits are, however, becoming increasingly important in today’s talent hungry business world. With human capital being perhaps the biggest investment and value in business today, how does a learning organization demonstrate the value of a benefit that isn’t easily converted to hard numbers or monetary values?

The “Softer” Side

Less easily quantified benefits to demonstrate the value of learning encompass many areas such as innovation, employee satisfaction, organizational commitment, teamwork, competencies, and leadership capability. These benefits increase business performance by increasing its human capital and intellectual property – both areas that are considered the largest contributors to value in today’s knowledge intensive business. That’s all well and good, but how does an organization measure these intangibles to show the impact learning has on them and thus the organization?

Specific to less tangible areas, learning organizations can use several methods to demonstrate its impact:

• Count the “intangibles”
• Rate employees’ on-the-job performance
• Survey employees
• Use existing metrics

Count the “intangibles”

With up-front agreement on the areas a learning program is designed to impact, the learning team can measure before and after. Other factors that may have influenced the results should be accounted for with the remaining increase or decrease attributed to the program. For example, if a learning program is designed to impact employee complaints, the learning team can track complaints before and after the program. The team may not be able to point to a specific performance metric that is affected by fewer complaints, hence the result is an “intangible” that would be difficult to turn into a financial measure. Even though the result is not converted to hard dollars, this method does provide hard data to use when presenting results to senior leaders. 

Rate employees’ on-the-job performance

This method rates the employees’ application of on-the-job-behaviors as a result of a learning program. To successfully complete this type of rating, up-front agreement on the targeted jobs and behaviors must be achieved. Next, competencies must be developed for the role or job targeted by the learning program. Managers and participants rate the participants’ performance on each behavior/competency before the learning program. After the program, managers and participants again rate participants’ performance on each behavior/competency with the increase or decrease correlated to the learning program. As with the counting method, other factors such as personnel change issues should be isolated with the results and adjusted accordingly.

This method can actually be used to forecast the Return-on-Investment (ROI) of a program. To do so, the learning team and managers assign an estimated value for each competency, which is then multiplied by the expected results to produce an estimated monetary value for benefits. In turn, this can be subtracted from then divided by an estimated cost value to forecast a potential ROI for the learning program.

Survey employees

Employee surveys have been around for a long time. Early on, many of them measured employee satisfaction and were primarily designed to measure what people thought about benefits and other aspects of corporate life. Typically, these types of surveys are used for teamwork assessment, organizational commitment, and climate surveys.

Employee engagement surveys are another popular method to determine employee satisfaction and take a different approach by measuring how aligned people are to the mission of their company. The thesis is simple: employees that are engaged with their organizations understand how what they do relates to the overall goal of the organization. They are given the tools to accomplish what they are supposed to and are more likely to be productive and remain with the company.

The Gallup Organization has boiled down the measurement of employee engagement to 12 short questions. One of those questions relates directly to learning: “In the last year, have you had opportunities at work to learn and grow?” Learning organizations in companies that use the Gallup Q12 often isolate the response to this question, as well as several others that deal with development as measures that evaluate the contribution the learning organization is making to engagement. There are other surveys, such as the Employer of Choice or Best Places to Work surveys, that also measure engagement. Many companies build their own surveys to measure this intangible benefit and include additional questions specifically related to learning. The key to using this method is to survey employees consistently, keep results anonymous so employees can answer honestly, and look at internal changes over time. 

Employee Statistics

Collecting employee statistics is not a new measurement method, but using them to demonstrate the value of a learning initiative is. The key to using employee statistics to demonstrate the value of learning is to show the reduction in negative employee behaviors (absenteeism, turnover, rework rates, etc…), then translate those into cost-savings for the company. It is well documented that these negative behaviors cost companies a great deal of money, slow down production, and affect employee morale. By showing the effect of learning on these kinds of organizational statistics, the CLO can demonstrate how learning adds value to the organization.

An All-Time Favorite

Of all the methods used to measure the value of learning today, there is one that never fails and is my all-time favorite. This method speaks to the heart of why we are all in business and is the most listened-to piece of data a learning department can cite. What am I talking about? A satisfied customer’s feedback.

A dissatisfied customer – internal or external – can have a disproportionate impact on a business, particularly in this era where the Internet enables instant information sharing. This feedback can be collected via customer satisfaction surveys, interviews, or comment cards. When improvements in customer satisfaction can be correlated to a learning program or initiative, customer feedback can bring a learning department much needed credibility. Successful application of learning and results at the customer level demonstrate in a way that no other data can that learning is having an effect on the business. 

Final Thoughts

While some of these methods may not be appropriate to measure the value of learning at your organization or may be too difficult or time consuming to implement, it is important that learning organizations show the value of learning on a daily basis.

Learning helps companies grow talent to meet their competitive challenges and future business strategies, assist in smoothing the transition of the organization during changes and restructuring, and helps the company retain and recruit the best and brightest talent available. The more learning can demonstrate its value, both tangible and intangible, the more likely it is to gain the credibility with and support of senior executives. Ultimately in times of crisis, that credibility and support will make it easy for the CLO to make the case for learning as an essential strategic element, and the CLO will be able to maintain the learning budget.

 

Cindy Thatcher, CorpU Research Analyst