If the flickers of optimism in UK boardrooms are to be believed then now is the time for businesses to be investing in their assets and that includes their people. However when one considers that recent CIPD research showed that over 40% of businesses don’t believe that their people development projects even work so it will doubtlessly remain an uphill struggle to convince any CFO to give this priority.
The challenge is that, when it comes to measuring benefits, the L&D investment case will often focus on qualitative measures around improved capabilities. Whilst important these are seldom compelling for CFOs who are much more persuaded by sales revenue growth figures or improved profit margins.
A recent client project reminded me that the marketing world suffers the same anxieties. However whilst Vauxhall or Ford may still not be able to prove how media spend generates more car sales they can measure changes in customer behaviour with metrics such as:
- Unique clicks on sales websites
- Customer visits to dealerships
- Test-drive bookings, etc.
Marketeers know that improvements in these “process outcomes” or actions ultimately deliver more car sales even though the pure correlation to sales revenue is trickier to prove.
I think there is a reminder here for us in L&D. It’s not the capabilities that we build that are important – it is the action that results. Improving skills may well develop the individual but are of little value to any business unless they either enhance the value of its products or services (so they can be sold at a higher price) or make that person more productive or cost effective.
Achieving this alignment should not be difficult (see diagram below). Starting at the top with the high-level business outcomes the challenge is to ensure that these are expressed in detail. Just, for example, saying we want our business to grow revenue by 20% is too imprecise. One needs to be more specific about where this increase is expected to come from.
Once the business outcomes are clearly understood the next step is to define the specific actions that people need to undertake to give a high probability of the business outcomes being achieved. See below. These are the “process outcomes” that demonstrate any new capabilities are actually being applied.
Of course just because an action is undertaken doesn’t mean that it is being done well. There is an important role for line managers to evaluate performance here – but that’s a topic I plan to address separately. For now let’s just focus on action – making something happen!
Example
| Business outcomes | Process outcomes | Capabilities |
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How to:
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The big advantage of process outcomes is that they are actions and as such are measurable. Hence they can be a lot more persuasive as to the impact of any L&D initiative than capabilities alone. There is no guarantee that doing the right things gets the right results but it does dramatically increase the chance of the outcome you want. And after all, it is the only thing we control.
So what’s the message for us? We need to go further than measuring how we build capability to measure true business impact but, like our marketing colleagues, not beat ourselves up because we can’t give 100% proof of bottom line impact.
If we can build into our whole approach an understanding of the actions that result from L&D that will at least give us a firmer platform to base our case on.
