Now more than ever, Learning & Development (L&D) needs to stand up and be counted in the workplace learning sector. Ironically, the challenge is in the “counting” — or rather the common inability of organisations to count, or recognise, the value that L&D delivers to the bottom line.
Pretty much every organisation out there treats L&D as a “cost centre” to be managed (downwards) like all cost centres. And this is the heart of the problem.
However, many L&D departments fail to connect the dots between investment in employee training and development and improvement in the employer’s bottom line. In my ten years working in the training sector and meeting thousands of firms, I’ve yet to learn of a single firm that has an official board director responsible exclusively for L&D.
If the C-suite saw a credible correlation between employee L&D and profit improvement, then L&D would be defined as a “profit centre” or at least a revenue enablement function and not a “cost centre.” C-suite representation would almost certainly occur, and investment would significantly increase. Just look at how much firms invest in information technology (IT) and try and find any medium to large enterprise that doesn’t have IT representation on their board!
Studies shows that investing in employees’ L&D significantly improves their performance and contributions to the business bottom line. The challenge is: does the training intervention result in an improvement that affects the bottom line, and is this improvement measurable to a standard that any reasonable chief financial officer and/or other stakeholders would accept?
Counting or measuring the return on investment (ROI) from training interventions has historically been a dark art and, judging by the current situations faced by many L&D practitioners, it hasn’t been very successful. This must change.
“Imagine if, as an L&D professional, you were able to produce a business case to stakeholders where you could correlate an investment in employee L&D with a quantifiable improvement in operational performance — like revenue increase. Chances are, you may need to start small and “prove it,” but assuming you delivered what your business case said, then most organisations would invest more and extract as much value from your training programs across the whole enterprise.”
Adrian Harvey, CEO at Elephants Don’t Forget
AI in Training Measurement
Times have changed and technology, specifically artificial intelligence (AI), has been increasingly recognised by businesses as a tool to measure employee performance and improvement. Take first contact resolution (FCR), for example — meaning the percentage of customer queries that a business resolves the first time they call. Every customer inquiry that is not resolved the first time has a cost impact and contributes to reputational damage. Many larger firms will not only obsessively measure FCR but will have monetary value attached to a one basis point shift up/down.
In today’s world, AI can be used to target key performance indicators (KPI) and metrics aligned with business objectives and assess individual learners’ competence, which can help L&D professionals close skills gaps and continuously improve poor performance. By being specific and targeted, we can easily craft a business case for an employer where L&D commits to improving a specific skill set and/or behaviour (like FCR) over a period by x%. This can all be done by infusing AI-enabled tools into a learning management system (LMS) and other supporting tech.
Some employers will want a proof of concept (POC), or a cohesive vision and learning strategy for L&D initiatives, before they invest further. Historically, L&D professionals would select a subset of employees delivering learning outcomes and run a POC with this group and compare the actual outcomes achieved by the user group relative to the control group (those not using the AI).
Get measurement criteria and values ratified by your CFO/finance department in advance. This is hugely beneficial as it enables L&D to avoid any counterclaims that performance improvement was a result of another non-L&D related activity. Quite simply, when the new skill/behavior improves in the user group in relation to the control group by five basis points, then the only “difference” was the actions of L&D. As the finance function has already agreed to a nominal value for every 1% improvement, there is a simple calculation to do to quantify the ROI for extending the deployment beyond the POC.
The Bottom Line
By using AI this way, L&D can solve the fundamental problem that has troubled the profession forever. You can now prove the nominal effect of your training programs on the organisation’s bottom line and count the impact from specific and targeted KPIs in the business. It’s now a case of consulting with operational leaders in your business, identifying KPIs that are impacted heavily by employee performance, building out your business case, operating your POC and then roll out.
You may be interested in…
How Microsoft use AI to improve employee knowledge, capability and KPIs
This use case examines how Microsoft use Clever Nelly to evidence cause and effect of Learning & Development (L&D) interventions on the bottom line.
Focusing on the right metrics
In a 30-minute session from our herd networking event, Adrian Harvey – CEO of Elephants Don’t Forget – considers how the rapid growth within Learning & Development will shape the sector and demand a greater degree of ROI oversight from L&D teams in the near future.
Evidencing value from Learning & Development at Volvo Car Financial Services UK (VCFSUK)
Head of Learning & Development – Mike Lucia – opens up about how Volvo Car Financial Services UK are evidencing value from L&D with Clever Nelly, winning Credit Strategy’s Car Finance Award for Innovation.