Chief Learning Officer - October 2008 - (Page 12)

BUSINESS IMPACT Overcoming Barriers to Measurement Show comparative value • BY MICHAEL E. ECHOLS, PH.D. L Michael E. Echols, Ph.D., is the vice president of strategic initiatives at Bellevue University. He is the author of ROI on Human Capital Investment. He can be reached at editor@clomedia.com. the value you are representing? For better or worse, et’s role-play a little bit. It’s time for the annual investment decisions are compared using ﬁnancial budget review and you are preparing your budget models. defense for CEO and CFO review. In contrast to the past, you have been doing some To be in this C-suite conversation, we ultimately analysis and you are prepared to show that investhave to arrive at a measure of the ﬁnancial impact. ments in learning and development return more than There are ways to do this, but they require some twice as much to the ﬁrm as investments in new buildinnovation combined with prior agreement from the ings and equipment. How do you think the CEO and senior management team about what to measure. CFO would react? For now, let’s assume that an agreement on what to Let me answer with my guess about would happen: measure has been reached. They would sit up in their chairs and say, “Show us!” They would ultimately ask for more information. 2. This sets the stage for the ﬁrst thing the CFO is going to say during the budget review: “OK, I get Why? Because one of the biggest challenges for the that you are measuring the impact on the agreed C-suite today is to ﬁnd better investment alternatives business outcome, but how do you know that the than building more buildings or buying more equipimpact is a result of learning and development and ment, as tangible assets are not the engine of value not something else? There are a lot of other things creation in the 21st century global economy. going on here besides your But is the budget review learning programs.” scenario implausible? Yes This is true, and the only — not because of what the way to answer this is to CEO and CFO would do, CLO EVENTS conduct the original analysis but because we in the learnShare your thoughts on in a way that separates the ing industry do not conduct the business impact of business impact of the learnthe analysis and present the learning at Chief Learning ing program from everything evidence. What stops us? Ofﬁcer magazine’s else that is going on. The For the most part, we Breakfast Club series, way to do this is to design do not think of our training where a panel of experts the experiment in a way that and development budget as will lead conversations separates the impact of the competing with capital investabout learning’s value learning from the noise, or ment budgets for buildings to the enterprise. For everything else. and equipment. But they do a schedule, visit www. because the C-suite is all about clomedia.com/events. In statistical terms, this comparative advantage. noise is called the error term. When we fail to show why The error term captures our budget requests are more the effect of everything else valuable to the ﬁrm than alternative investments, we in one term of the analysis. are at the mercy of guesses — ours and the ﬁnance So, the answer to the CFO’s question is: “We know manager’s. This is not a good place to be. the impact of learning because it is statistically So, if we agree that having the evidence on the signiﬁcant relative to everything else that is going comparative value of learning and development on (the error term).” budgets/investments is important, the next question deals with the creation and presentation of the 3. The third issue in this budget discussion is: “How evidence. much does the analysis cost?” And the answer to We can anticipate some of the questions the CFO this question is 3 to 5 percent of the budget. will ask: In the end, being able to answer these questions 1. What business impact are you measuring to show will illustrate to your CEO and CFO the comparative the learning and development investment creates value of learning and development programs. CLO 12 Chief Learning Ofﬁcer • October 2008 • www.clomedia.com http://www.clomedia.com/events http://www.clomedia.com/events http://www.clomedia.com

Table of Contents Feed for the Digital Edition of Chief Learning Officer - October 2008

Chief Learning Officer - October 2008 Editor’s Letter Connections Business Impact Best Practices Effectiveness Guest Editorial How Fast Is Your ‘B’ Team? Hampton Hotels CLO Profile Save the World, Make a Buck: Seven Ideas From the Nonprofit Sector Developing Leaders at Amnesty International Learning Measurements: It’s Time to Align Aligning Measurement to Business Success Training Employees With Special Needs How to Reach Disabled Learners Hands Off: Facilitating Informal Learning Who Owns Informal Learning? Case Study Business Intelligence Advertisers’ Index Editorial Resources In Conclusion

Chief Learning Officer - October 2008

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