Does Learning & Development impact the bottom line of the business?

L&D functions are traditionally counted under support functions and thus are considered as “budget sucking” functions rather than “profit-generating” functions. There are scarce organizations where L&D as a function partakes in Business Update Reviews and discusses the profit planning of the organization. This is even though L&D has a major stake in impacting the bottom line of various business functions. 

Consider the following case:

We have a product-based organization that is trying to strengthen its sales capability. It has a sales force that isn’t getting utilized optimally. They could do more sales, bring more business as there is potential in the market for the products but the competitors are winning the orders. Something is wrong. The business volume is projected to be at a certain number for a certain business quarter, but the challenges are:

  • Managers share feedback with their sales team, but the numbers don’t move
  • Sales team members have been in this filed for so long that they have forgotten the virtues of putting in more effort 
  • Too many meetings happen but results are not visible 
  • Targets are met with difficulties
  • Aggressive targets get rejected 

In the above case, there are team members who don’t lack either experience or skill. Some managers are trying to drive the results but aren’t able to. Traditionally, one would suggest implementing a few solutions like giving more incentives to people or motivating them for sales.

An L&D professional thinks outside of these traditional solutions and does a structured analysis of performance linking it to an organization’s income. In the above case, the L&D representative should suggest a team analysis to understand the performance issues related to skill, competence, intentions, and other behavioral factors which are obstacles in performance. Whatever is the root cause then, should be tried to be solved through a fine mix of training, coaching, mentoring, and other tactics over a while. This brings us to the next question which is pertinent to showcasing that L&D interventions do hit the bottom-line of businesses. 

In the case discussed above; the L&D manager should capture the improvement (pre-post learning intervention data) and analyze the improvement which should be presented to the business in terms of the number of learning hours plus the investment and the income impacted through the learning. The following formula can be used to determine the ROI of the learning intervention.

 

Sales Volume Generated (Number of Units Sold in the Target Period etc. /  Investment (Learning Hours + Cost of Training + Cost of Being out of Production  * 100

(ROI FORMULA TO BE USED TO SHOWCASE BOTTOM LINE IMPACT OF LEARNING)

 

For example, in the given case, the L&D manager should follow the process highlighted below to reach the ROI. The following process also highlights the prerequisites before launching an L&D project.

  • Capture KPI: Capture the KPI which needs to be targeted for improvement. In our case, it should be sales volume per person as the KPI for improvement. Discuss with business leaders the correct KPI before starting the intervention. Check where ideally they should be, what is the mean deviance from the target
  • Capture people in scope: Capture how many people and their roles who’ll be part of the intervention. In our case, it will be most probably the field sales staff
  • Capture pre-intervention data points on the KPI: Capture the performance of the people in scope on the KPI for at-least a quarter before the target date of starting the intervention. The data is best captured in quantitative form like the number of sales per person for the given quarter
  • Turn the data points into measurable figures: As mentioned in the previous point, data should ideally be captured in a form where measure and comparison don’t become a challenge later. If the data is in qualitative form, then it should be converted into a quantitative form. 
  • Create project charter: Any learning intervention should have a mandatory project charter at this stage which should be shared with the project sponsors and stakeholders for their approval. The project charter should have the following details and should be presented to the sponsors as a pre-requisite. 
      1. Project details capturing the problem statement
      2. Project sign-off document
      3. Data collection methodology 
      4. Process capability evaluation (if required)
      5. Key milestones
      6. Project team members
      7. Stakeholders and sponsor communication plan
      8. Budget requirement (if any)
  • Design the intervention: The intervention should be designed basis what is the KPI being targeted, the experience and role of people, and time available among other considerations. It should be a fine mix of coaching, training, mentoring done in a way that gives a chance to the participants to have control over their learning. One should explore online methods of learning delivery too as the world is constantly moving in that direction.
  • Pilot the intervention: The intervention, once designed, should be ideally piloted over a significant-small number of people. This way, you’ll know the failure points at an early stage and you can be confident of the outcome expected from the learning. Also, you’ll get feedback and improvement points to modify the learning wherever required.
  • Analyze the outcome: Here the outcome of the training is analyzed and necessary changes are made basis feedback received on the intervention. The feedback and changes should be incorporated into the learning plan before going full-scale.
  • Do a full-scale intervention: While the intervention is going on for the complete population, the L&D manager should adopt an “inform and intervene” approach with the project. It means that the sponsors should be informed regularly and any risk to the project should be intervened in immediately. The following points should be included in a regular update to the business.
  • Regular business updates
      1. RAG status update to sponsor and stakeholders
      2. Key risks
      3. Key achievements 
  • Capture post-intervention data points on the KPI: When the project is over, there should be a closure report of the project which should be submitted to the sponsors and stakeholders. The closure report should have the following:
  • Plan to capture data post-intervention
      1. Key highlights of the project
      2. Success stories
      3. What worked well, didn’t work well and lessons learned 
  • Stack pre-post data together to see improvement: When the data is captured again to gauge improvement, it should be ideally done for a quarter after the learning intervention in the same data type done while capturing the pre-intervention data. This pre-post data should be stacked against each other and comparison should be drawn to showcase improvement as a target group and at an individual level.
  • Turn the improvement points into dollar value: The improvement in data points should be turned into dollar/rupee value for the organization. For example, if the capability of salespeople has gone up by 10% as a mean figure, what does this 10% translate into in terms of rupees? This is an important figure to be captured to showcase how the intervention hit the bottom-line of the business.
  • Apply ROI formula: taking the previous step further, there should also be an ROI calculation using the formula shared above. Why is this important? This is done to showcase that the benefits from the intervention surpassed the investments in the intervention. If there has been an improvement, but the improvement didn’t cover the investment, then the improvement looks good only on paper and in theory. There hasn’t been any improvement at a business level. 

Thus, to sum it up, we saw that L&D functions are logical and important stakeholders in business who can potentially impact business bottom-line and should be held accountable for the same. The journey to capture ROI is not easy and it depends on the process adopted by the project leader and if the learning project pre-requisites were met or not. Without following a rigorous and data-driven approach, it is difficult to showcase the value and ROI of a learning intervention. 

  • Is E-learning going to replace the traditional methods of Learning & Development?

Had it not been for COVID-19, the whole debate around e-learning versus classroom learning wouldn’t have picked any pace. What would have taken years to happen, thanks to the virus, has happened in a matter of a few months – a transition from a traditional set-up to an e-learning platform; however, what needs to be debated is if this trend is going to pick pace and e-learning will replace the traditional learning methods in organizations.

To answer the question, we need to stack up the pros and cons of both the methods and look at the result the organizations are trying to achieve. 

What are the advantages of e-learning:

  • Cost: Looking at the cost of learning per person, e-learning has an advantage. Let’s look at the case wherein you need to train a group of 20 employees on a selected topic. You can train all of them in one session and that’s it. The trainer leaves and the learning can’t be passed on the 21st person at the same cost. Barring the initial cost of deploying an LMS at work or creation of coursework, a virtual learning course once developed can be used again and again which brings in the economy of scales, and over a while, the cost becomes almost zero. This isn’t the case with classroom or VILT as you have to have a person delivering a session which means for every 21st person you have to put in additional cost.
  • Accessibility: E-learning can be accessed anywhere and this probably is the biggest advantage of e-learning. During COVID19, almost all of the organizations moved their employees to WFH set up which meant that the learning also had to be done from home. This made e-learning a popular and almost mandatory option for organizations to sustain their employees’ learning. The learning could be accessed on the go from the mobile, laptop, or tablet. This isn’t the case with classroom learning.
  • Scalability: The scalability of e-learning is high which gives it a huge advantage over traditional learning methods. As mentioned above, it doesn’t take any extra cost to deploy the learning solution to an extra set of employees once the learning solution has been developed.
  • Repeatability: What classroom learning doesn’t do is repeat the same content in the same style. It could be one of its strengths too wherein every time you are in the class, you get to learn differently; however, if you are looking for consistent and stable content without any variation, e-learning is your friend. What LMS does is, offer you the same content as many times as possible and this becomes a good feature in cases of onboarding and product pieces of training where employees are supposed to go through consistent pieces of training without any variation.
  • Learning on Demand: Again, e-learning wins here as you can learn whenever you want. LMS learning creators and curators can create a whole playlist of learning courses and curriculum and can house it on LMS. Employees can access these courses from anywhere they are and on whichever device they have. This gives a huge advantage over the classroom and other traditional learning methods wherein a student or learner has to be present in the class or front of the laptop/desktop in case it’s a VILT.
  • Stretchability: One thing which doesn’t happen in a classroom training is, you can’t take enough number of breaks if the learning is overwhelming you. Compare this with an e-learning curriculum – you can start and stop as many times as you want so there’s no stretch at all. You can create a curriculum in such a way that it could be taken over months and the employees can keep getting their progress reports.
  • Reporting: Another thing which e-learning does beautifully is to create dashboards and a reporting infrastructure which is quite useful for organizations to monitor and check the progress of their employees. The managers can check and share feedback on completion and course content once it’s over. The employees can also track their progress and do course correction. These reports don’t need any curation and are available for years versus maintaining excel files in the system.
  • No one size fits all: Because the learning creators are creating a repository of different courses and curricula, it gives flexibility to the employees to select learning which suits them. there could be items in the course which are broken down to different levels basis experience and other factors.

Considering these facts, it seems that betting big on e-learning is for sure going to be profitable for organizations. However, the biggest impact of this transition has been in the area of social connections and relationships among others. 

Indeed, e-learning is here to stay and the trend is surely going to go up considering the facts cited above; but one has to consider that in a country like India, only 50% of the population is connected to the internet and only 36% of Indians have access to smartphones. How many of these are working professionals isn’t known for sure but network availability is a major concern around e-learning accessibility. In this case, it is best to go for classroom training sessions. 

Also, it’s always not possible to translate classroom pieces of training into e-learning solutions without creating an equally supported ecosystem of learning. An ecosystem covers a solid LMS which can allow users to access the learning on any device and can support different formats. Also, the learning creation should have a mix of exercises, simulations, and elements of the game which is a huge task, and sometimes organizations don’t find themselves ready for this kind of investment. Also, organizations should think about providing learning outside of LMS too so that its adoption increases with users. 

Classroom learning on the other hand creates a social environment that is important for humans to learn. We are social beings and our ability to discuss, communicate, role-play, and collaborate adds a lot to our learning which is difficult to replicate in a virtual environment. Probably a mix of coaching, mentoring, and e-learning is a better idea which gives chance to people to meet face to face. The stability and standardization of e-learning have the potential to make the learning morose and stale which we shouldn’t forget. 

“As research shows 80% of organizations believe their use of digital learning will remain the same, increase or decrease only slightly as restrictions on live training ease. It is unlikely that e-learning will ever fully replace classroom learning. However, what is evident is that e-learning is here to stay and organizations are increasingly looking at online learning as the future”. 

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Author / Educator – Deepak Sharma – APAC L&D Head, American Express Global Business Travel

Deepak is a Marshall Goldsmith certified coach, writer, and speaker. He has been in the learning management space for the last 16 years and has been a facilitator, consultant, and L&D leader in various organizations like Amazon and American Express GBT and has been rated as a specialist in his field. He has successfully led projects related to organizational development, leadership development, coaching, succession planning, and performance management.

Deepak has shown a strong working understanding of both short and long term learning engagements that align with the organization’s core competencies and thus impact business priorities like growth, revenue, and learning ROI. Deepak has executed learning projects in Six Sigma way to eliminate performance inefficiencies in people and processes. 

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