One sign of the increasing impact and scope of corporate learning today is that CLOs are starting to focus on risk-mitigation strategies. Budgets are being scrutinized, and learning executives are being asked to show a clear return on investment. With inc
by Site Staff
March 1, 2004
Although a rigorous ROI focus has created new challenges for corporate learning, it has at least clarified the risks CLOs are facing today. Basically, the question is this: What can companies do to anticipate and mitigate risks that could lead to a sub-optimal return on the dollars invested in the learning function?
Strategic and Financial Risks
Several kinds of learning risks are related to the management of the learning investment, especially as it relates to strategy:
- Managing too few parts of the value chain. Increasing the speed to market, re-skilling a workforce more quickly and decreasing the amount of time it takes for workers to perform optimally are some of the most important ways a company’s learning or training function can have a business impact that is measurable in terms of shareholder value. The reason that too few companies are delivering on that promise is that they do not effectively manage the entire value chain of a learning solution. Consider the complexity: There are processes and operations and an infrastructure in place—creating content, storing it, distributing it and updating it. This value chain, though one of a company’s greatest sources of strength during growth periods, is one of its greatest weaknesses when it needs to be agile and introduce new products and services quickly.
The key to success here is something I call “running learning as a business.” It involves more effective cost management through things like better vendor management, which can help ensure the integration of solutions provided by different kinds of vendors. Content providers, for example, may not necessarily have the capacity to develop custom content or to deploy and support enterprise backbone technology. Learning management system (LMS) providers, on the other hand, create effective delivery vehicles but may not fill the content gap. If a company takes a value-chain perspective and realizes that it needs to optimize that value chain, it is less likely to end up with non-integrated solutions that do not support the real performance needs of its workers.
Running learning as a business also involves things like common learning design and process reengineering, as well as a focus on the business value to be created through learning and putting in place the metrics that maintain focus and rigor over a multi-year journey. That journey, in fact, leads us to the next risk.
- Winning the short-term budget battle, but losing the long-term ROI war. Because of annual budget cycles, many CLOs are forced to justify spending using a 12-month ROI horizon. The pressure to take this short-term view constitutes the greatest risk to the overall learning investment. Imagine the impact if we asked farmers to show a return every three months; over time, they’d stop planting all the nutritious crops with a longer growing cycle. For learning departments, the more “nutritious,” integrated learning projects—those with the potential for major business impact—end up getting abandoned in favor of “learning lite”: the smaller, one-off investments that can be completed quickly, but have little long-term effect on performance and have the additional, unintended consequence of giving companies a mess of applications and bad user interfaces to deal with.
How to cope? Use an investment-portfolio approach to examine the assets a company is deploying against its human development activity. This portfolio model will support a longer-term view, even if many of the current activities are tactical. Outsourcing strategies are also something to consider, since they, in essence, allow your organization to rely on the outsourcer’s investments that are spread across multiple companies and are based on a longer view of the return.
- Carrying unnecessary fixed costs. Consider the true story of one company that was carrying about $3 million in instructor-led training delivery costs. An analysis of actual hours of delivery, however, even presuming a reasonable load, was actually only about $1.6 million. The company was carrying a fixed-cost load of about twice the demand. What to do? Clearly one of the key drivers in the rapid growth of learning outsourcing is the opportunity to move a large portion of fixed variable cost, which can mitigate a great deal of financial risk related to fixed costs.
- Being unprepared for budget “disaster.” When people think “disaster recovery” in risk management circles, they generally mean risks of war or natural disasters. But budget cuts sprung suddenly on people are another kind of disaster, and if you haven’t done contingency and recovery planning, you won’t know which areas to cut to minimize ROI loss. One CLO I know was asked by his bosses last year to give $1 million of his budget back in the fourth quarter. You can imagine that the meeting he had with his team that day was not particularly pleasant. But because the team had thought about this possibility ahead of time, they were able to make hard choices faster than if they’d been taken totally unaware. Good risk management is always about anticipation.
Executing a learning program is increasingly difficult, particularly as blended solutions (classroom and e-learning) add to the delivery complexity. Delivery risks are very real. In fact, one major financial services company recently chose an outsourcing strategy precisely because it was not confident that it could adequately mitigate its execution risks. Here are a couple of specific risks to address:
- Delivering a solution that is not business-relevant. Delivering on a learning investment is a bit like throwing a football: Your target is always moving, so to be successful, you need to throw a little bit ahead of the receiver. The problem with many learning departments, however, is that because they do not have close enough ties with the executive suite, real business needs are way downfield by the time the ball is thrown.
What can be done to mitigate the risk of delivering a learning solution that isn’t exactly what’s needed? Shortening development and delivery times is one obvious answer. Another is making sure that those responsible for the development and delivery of learning content and the company’s senior management responsible for establishing the business goals and objectives collaborate closely. We call this “business interlock,” and we actually establish business interlock teams with our clients—teams that are charged with understanding the business needs behind the training initiatives and then managing relationships with key decision-makers and making sure the learning function is included in their agenda from a planning-and-business-management perspective. The goal here is to drive the learning agenda further back in the business-process value chain so learning hits the receiver right in the breadbasket when products or services are ready to be deployed.
- Not matching the solution to the need. Making good decisions about learning delivery vehicles involves examining three key variables: learners, content and volumes. Who needs what kind of learning? How many workers are there? How stable is the content being delivered? For example, a company that has large numbers of IT people learning a particular skill is a good candidate for e-learning, since learners and volumes are high and content is relatively fixed. In contrast, using a high-end e-learning solution to provide strategic training to executives constitutes a significant risk because the learners and volume levels are low and the content is dynamic and complex. By undertaking a needs evaluation as part of an execution strategy, not only can a company match investment level to return, but it can also have a road map for prioritization and timetables of transformation.
- Failing to use effective project and program management techniques. Risks associated with project execution and operational issues are often just as difficult in large organizations as the higher-level strategic risks discussed earlier. Some key techniques here are to use best-of-breed project management expertise and tools and a consistent, standardized approach to delivery. By applying basic design principles, such as standard user interfaces, reliable availability, SCORM compliance, global access, interfaces with HRIS and standard enforcement of policies, a company can mitigate a great deal of execution risk for learning projects. In the absence of this risk-mitigation approach, a company can find itself with hundreds of unmanaged courses, each with different approaches, interfaces and pedagogical strategies.
On the ash heap of history there are many wonderful products, services and solutions that no one wanted to use. What is the risk that your learning solution will not be embraced and utilized by your user community? Several risks come into play here:
- Failing to change learning behaviors. If companies are to be successful in getting take-up for their learning solutions, they need to integrate them into the way people work or into the structure of job progression. For example, successful e-learning rollouts designate the new program as a prerequisite or antecedent to an instructor-led course. Or e-learning can be used for pre-certification of certain levels of regulatory, mandated or technical competencies. Other companies have tied a new learning release to a significant near-term event, such as a large-scale technology implementation, or to major policy changes, such as ethics training. This kind of approach gives learners no alternative to engaging in the new learning experience.
- Creating overly generalized training. It’s vital to personalize the training experience. For example, Avaya University recently introduced new sales training where learners work on an actual sales account in class. When they leave the training course, they come away with real value propositions and techniques they can immediately use. Feedback from the learners has been remarkable; for many, it’s the first time they’ve been able to use a training experience immediately on the job. Organizations cannot escape the fact that custom, job-specific content will be the most attractive driver of use.
- Taking an individual, rather than a team approach, to learning. Many organizations today struggle to integrate their star performers with the rest of the workforce, but learning is one place this can definitely be done to great advantage. This integration produces several benefits. Giving your average performers the opportunity to learn in the company of your top performers provides almost daily opportunities for richer learning experiences. Human beings learn best through imitation, but without good models to imitate, you’re missing big opportunities to improve general workforce performance. Well-structured teams learning together can inspire their members and raise everyone’s performance several levels. Teams can support and encourage individual performance at levels that would be unattainable otherwise. More effective training utilization will occur if companies focus on teams and workgroups, and not just on individual learners.
- Overlooking hidden costs. Taking a utilization perspective can lead to a different costing of learning, such as packaged e-learning solutions. The unit prices of these solutions often appear quite attractive at an aggregate level, but the price jumps considerably when you look at it by true utilization. A growing trend here is to ask vendors to take more of an economic interest in utilization as part of establishing a contract structure for the agreement.
Conclusion: Delivering on the New Learning Metric
One thing is certain: The ROI bar will be raised increasingly higher for corporate learning departments. Just as executives engage in the necessary cultural shift to get their people thinking in terms of metrics, the metrics are getting tougher. Indeed, for the traditional learning or training function, “value” has usually been defined according to the amount of training delivered. In the future, value is going to be defined as the business value delivered as a result of the training. In that environment, effective risk management will only grow in importance. Extremely effective tools, techniques and methodologies to manage risk are available today. It’s up to individual companies to make using them a priority.
Tom Kraack is a partner in Accenture Learning. He can be reached at firstname.lastname@example.org.