Making the Case for Learning and Development: 5 Steps for Success

Making the Business Case for
Learning and Development:
5 Steps for Success

By: Susan Palmer, Program Director
UNC Executive Development

All Content © UNC Executive Development 2010
Website: www.execdev.unc.edu |Phone: 1.800.862.3932 |Email: unc_exec@unc.edu

Making the Business Case for Learning and Development: 5 Steps for Success

Introduction
Human resource and talent management professionals can turn today’s economic
challenges into opportunity and become true strategic partners by creating strong
business cases for their learning and development initiatives. To do so, HR can no longer
measure the return on investment (ROI) of learning and development after the
programs have been implemented. Instead, they should calculate and anticipate the
returns these initiatives will have on their organization’s bottom line.

This white paper explores how organizations can retool their learning and development
programs to reflect how they should be doing business and provides steps you can make
to show your CEO and CFO the top and bottom-line value and the ROI of learning and
development initiatives. With the proper focus and understanding of how learning and
development programs contribute to corporate profits, spending on training and
development will be viewed as an investment with the potential for strong returns
rather than as a disposable business cost.

Our Promise
This white paper draws lessons from our work with a range of organizations. It outlines
steps you and other learning and development leaders can take to show your CEO and
CFO the top and bottom-line value and the ROI of learning and development initiatives.

These steps can change your own and your senior management’s perception of learning
and development programs and of the value these programs provide to the
organization:

1. Know your organization’s strategic priorities.
2. Understand how the learning and development function can contribute to those
priorities.
3. Determine what learning and development programs will support the
organization’s strategic direction.
4. Build it with metrics.
5. Pitch it like you’re the CFO.

With the proper focus and understanding, you can have leaders view training and
development as a worthy investment instead of as a cost.

All Content © UNC Executive Development 2010 2|Page


Step #1: Know Your Organization’s
Strategic Priorities
The turbulent economy of the past few years has put even seemingly recession-proof
industries like health care and utilities on edge. Such volatility often makes it easier to
think in terms of short-term survival, rather than long-range strategy. Yet it is crucial to
focus on what is important (long-term strategic priorities), rather than on what is urgent
(today’s employee relations problem).

Make it your business—even a job duty—to know and understand your organization’s
strategic priorities and keep these priorities in mind when developing your learning and
development programs:

1. Read about your industry and organization on
Learning and development the Internet.
professionals who can show how
their organizations’ top and 2. Learn about your competition.
bottom lines ultimately improve 3. Understand how your organization is rewarding
from investing in training and its executives and how this compares to others
development will grab the in your industry.
attention of senior management
4. Learn how your company is viewed externally
and quickly become a valued
and what your customers are saying about
strategic business partner.
you—both positive and negative.

This environmental scan will help you understand and anticipate where your
organization needs to be in three to five years, and how effective talent management
can push your organization in this direction.

Gathering this knowledge will help you to communicate better with your top
management and improve your ability to ask the right questions. These enhanced
communication skills will also put you in a better position to offer human capital
recommendations that align with your organization’s strategic priorities.



An Example – Duke Energy
Top management at Duke Energy understands the value of long-term planning. At a
time when most organizations slashed their training budgets, Duke Energy actually
increased its spending on leadership development.

In 2008, the company launched the Strategic Leadership
Program, intended to develop the next generation of leaders
to be more strategic and less tactical in their thinking and
actions.

The two-week program focused on developing the leadership skills of mid-level
managers. Participants learned how to evaluate business decisions, how to execute
business strategies, and then how to put the theory to practice:

 It started with in-depth sessions on understanding the industry and the business.

 During the first week, participants identified actual business challenges in their
own business units and then developed solutions to address these challenges.

 During the second week, they worked on emerging company challenges
identified by the senior executives.
According to a recent Bersin &
The challenges had measurable bottom-line impact
Associates survey1, corporate
for the organization, and they piqued the interest
learning and development
and generated ongoing support of senior
management.1 budgets were cut by 11 percent
in 2009, and by a total of 22
percent since 2008.

1
O’Leonard, K. (2010). The Corporate Learning Factbook: Benchmarks, Trends and Analysis of the U.S. Training
Market. Bersin & Associates, Oakland, CA.



Step #2: Know How Your Department
Contributes to Those Priorities
Understanding your organization’s strategic initiatives will help you better focus on how
the learning and development function can contribute to achieving these priorities. Two
key questions to ask are:

1. How can your existing learning and development programs help support the
business strategy?

2. What new learning and development programs may be needed to assist in
achieving those goals?

Two Examples
For example, if your organization plans to expand its business internationally within the
next several years, determine how the training and development function can support
this goal. Will current employees need to do work overseas? If so, then evaluate the
training that employees will need to succeed in these new business environments.

Will the organization need to hire new employees in other countries? If so, then careful
thought should be given to the training needs of these employees, as well as to how to
deliver the training efficiently and effectively overseas. Also, understand how those
employees who do not work overseas will support the strategic objectives and develop
training programs that align with those global priorities.

The impact of training and development on a
strategic priority, such as expanding globally,
“Once senior leadership understands that can be multilayered, so it pays to think outside
your focus is the same as theirs, it leads to of the box.
better support to obtain your goals.”
Providing a clear picture of how work will
Lori Antieau change and preparing employees for these
Vice President, Human Resources changes can be an invaluable contribution.
Talecris Biotherapeutics Knowing what learning and development
opportunities are needed to help employees
adjust to new or changed roles can offer great
results and pay back.



Step #3: Determine What Programs
Will Support the Strategic Direction
Now that you understand your organization’s strategic priorities and how the learning
and development function can help make them a reality:

 What specific learning and development opportunities are needed?

 What existing training programs should be included or excluded moving
forward?

 What new training programs may be needed?

Except for those required by law, evaluate how your existing learning and development
programs support your organization’s strategic direction. Keep those that support the
strategic direction and discontinue the rest. And even with programs that are required
by law, evaluate them to make sure they are working and getting the results your
organization expects and needs.

For example:

 Is your organization developing a new product, service, or solution?

 If so, do you have the knowledge and skills in-house to design and deliver it?

 If not, can you help develop the knowledge and skills that will be critical to bring
this new offering into a highly-competitive marketplace?

Examples for training and development may be preparing the sales force to sell the new
product or building a customer-focused organization that can deliver it, particularly if it
is outside your organization’s normal offerings.

An Example – Caterpillar

Caterpillar, the world’s leading manufacturer of
construction and mining equipment, diesel and natural
gas engines, and industrial gas turbines, has done
exactly this. Caterpillar has hundreds of locations worldwide to serve and support their
customer base and to respond quickly to their needs.



– 79% of CEOs who Jose (Pepe) Brousset, regional director for Americas South at
responded in a recent Caterpillar, focuses on how Caterpillar can maintain its
PriceWaterhouseCoopers leadership in the industry.
survey2 said they intend
According to Brousset, “While we continue to invest in the
to increase focus and
differentiation of our products, we recognize that we need to
investment on how to
change the (85 year-old) organization to become much more
manage people through
customer-centric. We need to understand, really, the solutions
change. This includes
that our customers are seeking.
redefining employee roles
within their "Our talent development efforts are designed to drive this
organizations. organizational change; to become more customer-centric,
starting with top leadership and continuing down through the
– 79% of CEOs in that same operating managers. In this way, we’re able to transform the
survey said they want to organization and impact the bottom line.
change their strategy for
managing talent. "To be successful, talent development needs to start with the
leadership; they need to be committed to driving the culture
– 68% said they intend to
change down through the organization. They also need to
increase investment in
empower their managers and provide support. From there, it
leadership and talent will cascade through the organization. 2
development as a result
of the global recession, "At the operating manager level, our talent development
suggesting that existing efforts are designed to provide the training and tools to enable
people practices did not organizational change. We help our executives throughout the
support businesses when organization see their roles in supporting this strategy so they
the global recession hit. will better understand how their contribution drives results.

"As a result, we have a direct impact on market performance by imparting knowledge
that drives the behaviors which will change attitudes."

2
Managing People in a Changing World: Key Trends in Human Capital, PriceWaterhouseCoopers, 2010



Step #4: Build It with Metrics
Too often, CEOs and CFOs view employees as depreciating assets, and frankly, learning
and development professionals have given them little reason to change their minds. A
recent McKinsey Quarterly report found that only 8 percent of respondents said they
track the return on investment of training and development programs. Learning and
development professionals must be prepared to show at the planning stage the top and
bottom-line impact learning programs will have on the organization.

Measuring outcomes that have a real and demonstrable effect on the organization’s top
and/or bottom line is not as hard as it sounds. Learning programs can have measurable
results such as increased sales or improved productivity. Reductions in recruiting costs
from lower employee turnover and improved customer service also can have positive
and very measurable impacts on corporate results.

However, no single set of metrics will apply to every program, so talent management
professionals must be prepared to develop specific measurements for each program.

An Example - Boys and Girls Clubs of America
According to a recent McKinsey Quarterly report (July 2010),
officials with the Boys and Girls Clubs of America (BGCA)
analyzed and created a set of metrics when developing a
leadership training program for more than 650 volunteers.

In 2007, BGCA management realized that an anticipated wave of retirements among
local club leaders would leave them with a severe leadership shortage. With the
changing demographics, this leadership gap is a consistent theme seen today in many
for-profit and non-profit organizations.

BGCA management also found themselves in a situation not uncommon among non-
profit organizations; donors preferred that their money go directly to those in need and
not to overhead costs like training and development. BGCA quickly understood they
would have to make the business case for the leadership training at the outset and
ensure that they could demonstrate how the training would pay for itself.

First, BGCA officials narrowed the focus of its leadership training down from 50 to 4 key
aspects. They accomplished this goal by analyzing which leadership traits contributed
the most to job performance. By designing a program based on leadership aspects tied



directly to performance, BGCA officials found that developing metrics and assessing the
success of the program was straightforward and tied directly to the association’s
strategic priorities.

BGCA compared the pre- and post-training results of leaders who completed the
training program. The BGCA officials also gathered benchmarking data from a control
set of member organizations that had similar characteristics, such as budget size and
operating revenue; however, the leaders in the control group did not receive the
training. The results for leaders who participated in the training programs were
markedly better than leaders in the control group on every outcome measured.

Officials estimated that if all 1,100 member organizations matched the success level of
the groups whose leaders participated in the training programs, then the BGCA would
have added 350,000 new members and increased revenue across all its organizations by
$100 million—or approximately a 3 percent increase in the average local organization’s
budget.



The BGCA officials also calculated that the training programs generated more than four
times the return on the program’s cost—including the cost of time and travel for all the
participants.

An Example – Duke Energy
Duke Energy also measures the success of its leadership
program, but takes a venture capitalist view; if just one of
the business plans generated from the program comes to
fruition, the cost savings to the organization or the increase in revenue will pay for the
program and more.

This is a lesson we can all be reminded of: Don’t be afraid to think unconventionally.
According to Atul Nerkar, associate professor of strategy and entrepreneurship at the
University of North Carolina’s Kenan-Flagler Business School, who was involved in the
development of the Duke Energy program, "We wanted activities that lead to either
cost savings or an increase in revenues. We wanted to show where [the program]
impacts the top and bottom lines. This is a unique approach which we believe helps
make the program pay for itself."

According to Mark Short, managing director of organizational development at Duke
Energy, this venture capitalist approach to its leadership program has paid off. "We
wanted to create an environment of innovation and empowerment; an environment
where our leadership talent is encouraged to think outside of the box when seeking
solutions, and they feel safe in pushing those solutions forward.

Talent management "The impact from the program has been tremendous, both
professionals must be culturally and on the bottom line. You know the program has
prepared to develop made an impact when every new participant in the program
knows the successes of the preceding class, and they all strive to
specific measurements
top."
for each program.

All Content © UNC Executive Development 2010 10 | P a g e


Step #5: Pitch It Like You’re the CFO
It’s time to change your mindset and think like a finance person. As you identify how
future learning and development programs can affect your organization’s strategic
priorities, you need to be able to make the business case to obtain and retain program
funding.

This principle applies to both for-profit and "We have aligned our HR efforts
not-for-profit organizations. The key to more closely with the business
success for any organization is how to get the strategy. Although there was some
best returns from its available resources. resistance from managers at the
Your Assignment beginning, early and frequent
communication and involvement of
This will require you to shelve your HR or staff and managers in the
training and development role for a while and development of new, more effective
start thinking about how your job and your talent management processes has
department create organizational value. substantially reduced the resistance
While HR professionals stress the need to get to change."
senior management support for training and
development programs, it is unlikely that they Milton E. Barrios
will get or maintain this support without Assistant Senior Personnel Manager
being able to demonstrate the effect on the International Monetary Fund
organization’s key performance metrics.

At the end of the day, training and development programs should not be seen by the
CEO or CFO as a cost, but rather as an investment in the organization’s human assets.
An investment that you can demonstrate has a real, positive top and/or bottom-line
impact.

In most cases, other departments or divisions within organizations have been doing this
for years. Marketing and operations directors normally can make strong business cases
and have measures in place to show how their functions and programs directly affect
the organization’s bottom line.

CFOs are not likely to support what appear to be disposable costs which offer no
measurable positive impact to corporate profits—especially in tough economic times
when resources are limited. However, a positive return on a cash outlay will elicit a
completely different response from most finance officers.



The challenge that many learning and development professionals face is calculating the
return from what some call a "soft set" of measures.

"A basic rule of capital budgeting is to only fund investments where the net present
value is positive; the challenge to HR and learning and development managers is how to
calculate the real value that training and development programs add to the bottom
line," said Robert A. Connolly, associate professor of finance at the University of North
Carolina’s Kenan-Flagler Business School.

"Since HR and learning and development projects generate human capital, change
management processes, affect job satisfaction and have a direct impact on other hard-
to-measure outcomes, these types of investments tend to be much more difficult but
not impossible to quantify," Connolly says.
The challenge that many
For example, how might one measure the impact of
learning and development
a cross-cultural training program for a business
professionals face is calculating
planning to enter the international market? Many
the return from what some call
times organizations tend to chalk up such a training
a "soft set" of measures.
exercise as a direct but necessary cost.

However, even a training program which appears to support a "soft set" of skills can
have a hard and measurable impact on corporate profits by improving external and
internal customer satisfaction. This satisfaction can be measured through customer or
client retention, which in turn can directly affect corporate profits and costs savings.



Conclusion
An organization’s financial officer will be much more likely to fund learning and
development proposals that project a return on the initial investment. Metrics such as
customer retention and the positive impact repeat customers have on the bottom line
can be ways to illustrate the efficacy of a learning and development program.

The trick is learning to use a
financial perspective to view the
"Getting a seat at the table is imperative; however,
possible outcomes of learning
you have to be a respected voice at the table or you and development programs and
are doing nothing more than keeping the chair warm. then apply the appropriate
Business is the key word, not the kumbaya-hold- metrics to project the possible
hands-and-sing-the-praises-of-people approach. returns. As most any financial
professional will tell you, it’s not
"Business means putting your numbers up and
an exact science. No one can
presenting your viewpoint or proposal from a
predict the future with 100
quantitative instead of a qualitative approach."
percent accuracy, so cost and
Carrie Alden, SPHR-CA return projections which provide
Human Resources Manager best and worst-case scenarios
Sierra Nevada Brewing Co. and the probabilities of success
are what CFOs think about and
want to see.

Simply put, do your homework. And if that homework clearly shows how learning and
development programs offer a strong return on investment on the organization’s
performance metrics that matter, then a business will be much more likely to provide
the resources. It’s a formula for success that many top organizations (both profit and
not-for-profit) are now using.



About UNC Executive Development
Our approach to program design and delivery draws upon the power of real-world,
applicable experiences from our faculty and staff, integrated with the knowledge our
client partners share about the challenges they face.

We call this approach The Power of Experience. We combine traditional with
experiential and unique learning. Through action learning and business simulation
activities, we challenge participants to think, reflect, and make decisions differently.

Our Approach: The Partnership

Our team customizes each leadership program through a highly collaborative process
that involves our clients, program directors, faculty, and program managers. This
integrated approach consistently drives strong outcomes.

Our Approach: The Results

Our executive education programs are designed with results in mind. Below are a few
examples of the results our client partners have achieved:

 Leadership refocused with new  Products redefined
strategy and cohesive vision  New markets targeted
 Strategic plans created for the  Cost-saving measures developed
global marketplace  Silos leveled
 Supply chains streamlined  Teams aligned
Participants leave empowered to bring in new ideas, present different ways to grow
business, and tackle challenges. The result is stronger individuals leading stronger teams
and organizations.

Contact Us

Website: www.execdev.unc.edu
Phone: 1.800.862.3932
Email: unc_exec@unc.edu


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