Too often, the quest for ROI and translating success to the business is an afterthought. Once learning solutions have been built and rolled out, then the team creates a plan to measure its success. Forward-thinking learning and development departments start with the business in mind.
Instead of taking orders, they partner with internal business allies to define performance issues in business terms. Then, when learning is the solution, they help prioritize initiatives by determining not only the cost of the solution, but also the cost of the problem.
Unfortunately, learning leaders are usually the least prepared in an organization to have a strategic business discussion. Having a superficial grasp of business acumen is no longer enough. The ability to consult, negotiate and influence the business using its own terms is now a fundamental survival skill for those in the learning profession.
To achieve this, a learning organization needs to understand the key components of strategic alignment in a company (Figure 1).
Defining the Company’s Competitive Position
The key to align learning with the business is to ensure practitioners understand the business at both the organizational and individual unit levels. It’s hard to earn a seat at the table when someone can’t even find it. This means most every member of the learning organization — especially those interfacing with internal customers such as account managers, consultants and project managers — should be able to effectively describe the company’s competitive position in terms of:
• Industry and key features.
• Range of products and services provided.
• Customers and their affinity for the company’s products and services.
• External partners in the value chain.
• Competitive strategy.
• Competitive advantage.
• Current and emerging competitors.
For example, an internal training consultant in a pharmaceutical company could deliver better aligned solutions with a firm grasp of the following:
• Industry regulations.
• The different products the company develops.
• Appropriate patients and related health outcomes served through those products.
• Who the company partners with for discovery or commercialization.
• How the company positions itself in key therapeutic areas.
• How the company sees its research and development process as a key competitive advantage.
• How the patent window shapes business practices and activities.
• Current and emerging competitors.
Further, for each internal customer or business unit, it would be critical to understand how the unit contributes to produce/deliver products and services, achieve the company’s competitive strategy and maintain the company’s competitive advantage.
Mapping the Company’s Operational Blueprint
Once learning leaders understand the company’s competitive position, the next step is to understand how the organization structures itself to execute its strategy. The PARC model adapted from Strategic Management by Garth Saloner, Andrea Shepard and Joel Podolny provides a solid framework with which to understand a company’s operational blueprint. A deep understanding of the blueprint allows learning leaders to create relevant, credible and action-oriented learning solutions.
The PARC model consists of:
People: In business terms people refers to the employees and contractors who embody the company’s competitive position and drive execution through the company blueprint. This also includes the systems that support the people, including the organization’s selection, retention, reward and compensation methods.
Architecture: Architecture refers to how the organization structures and governs itself. It also includes how the company communicates formally and informally, vertically and horizontally. Many of the technology tools in an organization serve as links between the company’s architecture and routines.
Routines: Routines refer to the formal and informal procedures, processes and habits a company has. Formally, these are captured in the policies, procedures, process maps, workflows and tacit knowledge. Just as important, but harder to identify, are the informal routines. In many ways, these routines truly drive workplace performance.
Culture: Culture refers to individuals’ commonly held values and beliefs in the organization. A company’s culture shapes the evaluative criteria used to make large and small decisions. The culture will reinforce desired employee behaviors, learned or otherwise.
Once learning leaders have mapped the blueprint, it is important to confirm that understanding with business partners. By partnering with internal customers, learning leaders can establish a shared vocabulary to frame relevant issues in business terms, rather than falling back on learning jargon. If CLOs truly understand the organization in terms of PARC, they will have confidence the learning solutions they recommend are aligned with:
• How the employees are incentivized to perform.
• Employees’ skill levels when they are recruited.
•How employee performance is reinforced through the formal and information communication/governance structure.
• Routines the employees are expected to participate in.
• Organizational culture.
Beyond PARC, there are several other tools learning leaders can use to look at the organization such as Geary Rummler’s Anatomy of Performance (AOP), Dale Brethower’s Total Performance System or Lynn Kearny and Kenneth Silber’s Business Logic model.
Linking to the Organization’s Metrics
Winston Churchill once said, “However beautiful the strategy, you should occasionally look at the results.” Many organizations employ some type of system to determine how well business activities align with strategy. These systems enable the organization to monitor and modify its strategy, with hopes alignment is achieved and performance improved.
An effective system will take an organization’s competitive position and operational blueprint and translate them into a tactical roadmap to success. By design, this framework highlights the metrics and organizational activities that should be measured. Fundamental to such a system are the leading and lagging indicators, which help frame the organization’s performance. The balanced scorecard is but one of many systems companies use as performance dashboards. Like balanced scorecards, most systems include financial and non-financial indicators.
Leaders can’t do anything about lagging indicators once they are measured. Companies have established and well-defined processes to measure these. Common examples include revenue, profit margins and labor costs. Leading indicators, on the other hand, provide early information about where lagging indicators will be in three to six months. Common examples include customer orders, customer satisfaction, waste and defects.
Proactive learning departments not only understand the power of both, they understand how to measure initiatives that align with these indicators. Although many learning professionals believe a financial ROI is the key to being perceived as valuable, most key decision makers are more interested in how learning initiatives support organizational goals measured in financial and non-financial terms: it’s not about whether the initiative makes or loses money. Like research and development, marketing or HR, it’s about whether or not the initiative is aligned with an organizational goal and can be measured under a leading or lagging indicator.
It’s also important to recognize the difference between organizational metrics and learning department metrics. Learning departments should have metrics to measure themselves by, but these metrics usually are not aligned with internal customers’ metrics. The more learning practitioners collect and share metrics such as those in column A of Figure 2, the more likely they are to be seen as partners in the organization.
The Importance of Helping the Business Prioritize
There is a difference between being a true business partner and a high-functioning order taker. If learning leaders have a firm understanding of their organization’s competitive position, operational blueprint and organizational metrics, they can then begin to truly partner with the business to prioritize strategic initiatives.
To do this effectively, it is important to determine not only the cost of the solutions, such as the cost of one hour of Web-based learning, but also the cost of the problem, such as the cost of product defects. There are many approaches to determine this, but the key is to determine the actual costs prospectively, before investing in the learning initiative. Several resources can help with this exercise including the Front-End Analysis and Return on Investment Toolkit by Harold D. Stolovitch and Erica J. Keeps. Once accurate numbers have been identified, learning leaders can focus on the prioritization with confidence.
Figure 3 details three initiatives a sales organization may request from its learning partner.
Let’s assume the business challenge is accurate, the requested solution is appropriate and the requested solution combined with other non-learning solutions will yield a return equal to the cost of the problem. Let’s also assume current learning budget is $60,000 and current resources only allow two projects to be completed.
Given this scenario, there are two paths a learning leader could take:
Path 1: The easy win: An obvious solution would be to recommend option A and B. Given the potential ROI from investing in A and B, staying within budget and delivering a strong ROI might be enough of a win. In this situation, the learning department could simply let budget drive prioritization and still be perceived as a partner.
Path 2: Focus on the greatest return: By considering the cost of the solution and the cost of the problem for all three solutions, a learning leader could make a compelling argument with the business to prioritize solution C, using the information included to present a solid case for investing $150,000 into a solution that would yield a greater return.
Path 2 highlights how a learning organization can show leadership and truly partner with the business unit to deliver a better solution for the organization.
The more effective learning leaders are at justifying the cost of their solutions against the cost of the problem; the more effective they will be at getting initiatives approved. To justify costs, speak on the company’s terms regarding its competitive position, operational blueprint and how it measures value. Knowing this information helps to align initiatives with business goals, measure initiatives the way a company measures performance and run the learning organization more like a business.
Matt Donovan is the executive director of client services at GP Strategies Corp. He can be reached at editor@CLOmedia.com.