How Much Do You Spend on Learning?
Whenever I get involved with a client's learning or HR organization, I ask, early on, how much the company spends on learning. Ten years ago, one in ten could answer that question; today, it may be two in ten, or, at best, three in ten.
I remember an engagement with a global investment bank when we were brought in to help the director of learning quantify how much they were spending. The head of learning thought it was $100 million; the CFO believed it was half a billion.
The director of learning was a lot closer (the figure turned out to be $150 million), but that’s not the point. If no one can tell me how much you’re spending on learning, who’s reporting those figures to ASTD, Bersin, Saratoga, Hackett, and the others? It’s sort of a Zen question.
In November and December of last year I was contacted by a number of reporters who were writing about how the economic crash was affecting training budgets. The first question was whether big companies were instituting training freezes, like the one famously imposed by DuPont circa 1990. What I said was that in most big companies, training is so decentralized – and the responsibility for spending so broadly distributed – that it’s very difficult to influence spending on an enterprise basis, unless you’re the CEO or CFO: they’re the only two places where the budgets converge (even the CHRO or CLO normally controls a very small percentage of training expenditures).
Many of us in the L&D profession are inclined to grumble over the cocktail hour that what we do is insufficiently valued by the business. But tell me: how many processes do companies invest in where they can’t quantify what they’re putting in, can’t quantify what they’re getting out, and still continue to invest?
Comments
Industry benchmarks clearly support this. ASTD (American Society for Training & Development) reports year after year that BEST companies (BEST awards recognize organizations that demonstrate enterprise-wide success as a result of employee learning and development) year-on-year allocate a larger proportion of their training dollars on developmental training such as leadership development, customer service, sales and interpersonal skills. While others tend to focus more on functional subjects that are easier to justify in terms of dollars spent; compliance, IT systems and industry-specific subject matters.
Further to this point, during the economic downturn industry experts encourage training executives to focus on Sales, Customer Service and non-functional services to strengthen the organization’s overall competitiveness in the down market and get ready to ripe the benefits of the upturn.
However organizations spend big bucks on ERP and business transformation initiatives, but may only spend a small fraction of that on strategic talent systems initiatives, and this is because of the lack of tried and tested ROI forecasting tools and models that can justify the needed upfront capital investment.
It has been a while that talent and HR leaders have been preaching the value of having a talent strategy and building an integrated people’s systems landscape to support it. There is a great wealth of professional and academic literature around talent management strategies. HR consultants have decks of fancy PowerPoint presentations, showing integrated HR processes and systems; hiring, on-boarding, developing, measuring, workforce planning, succession, compensation, reassigning, goal-setting and so on…
While these make sense to everyone and ‘buying into the idea’ have been easy, when it comes to ‘buying into the actual initiative’ and putting up the capital budget, suddenly lack of empirical data becomes an issue.
…and this is where a reliable ROI model for talent systems investments can come very handy.
Posted by: Sean Vafa | November 25, 2009 7:56 PM