Kevin Lawrence is MD of Odyssey management training – on a mission to eradicate mediocrity Odyssey specialises in leadership and management development, change, executive team development and organisational development strategy.
Last year the British Chamber of Commerce (BCC) carried out a survey of nearly 3,000 UK businesses. It found that:
- 92% of UK companies had identified a skills shortage among their employees
- As a result, 80% of companies were planning to invest in training in 2015
- Of those, 39% were planning to invest over £500 per employee in training
These are significant sums of money. But the BCC found that most companies strongly agree with the idea that training is a worthwhile business investment. It drives growth and productivity.
The question now, is: how is that growth and productivity measured? Last year the management consultants McKinsey & Company carried out a global survey that looked into issues of staff development. They found that over a third of executives believe that a key challenge today is to find credible ways in which to measure the impact of training.
Step one. Drill down to the core training need
One of the problems companies face in quantifying the benefits of training is that training can fulfil multiple objectives. It can also fulfil different objectives for different stakeholders. It’s important, therefore, to break down both what those objectives are and whose objectives they are.
As an example, imagine a manufacturing group who specialise in making kitchen products. The quality of their product is good, but their CEO has identified a lack of creativity within the company which is affecting their market profile. What should they do?
The first step is to break the issue down further. Is the company failing to fulfil the needs of its customers, and if so, how?
- Is the lack of creativity failing to fulfil a customer desire for novelty?
- Is it failing to fulfil a customer desire for enhanced functionality?
- Is it failing to adapt to market trends?
This company focuses its design on functionality. Their creativity is going into improving the materials and design of core products, rather than into producing innovative new products. The problem, therefore, is that creativity is not being focused on novelty and market trends. This is important because it shapes how the shortfall should be addressed. The CEO now needs to ask:
- Is the issue a lack of innovation (a creative skill) within the company, or is this a failure of management?
- Company shareholders – who want the training to build profit and/or market share
- The CEO – who wants the training to build profit or market share and retain employees
- The promotional team – who want new products to showcase and build the brand
- The sales team – who want to attract new customers through new products
- The design team – who want to enhance their skill set
It could be that the company does need to improve its creativity and the ability of its employees to think ‘outside the box’. However, it could also be that the company employees have creative ability, but are not being encouraged to utilise it. Managers need to identify the need for the creativity and allow staff the time and resources to be creative.
In this instance the CEO might decide that the failure lies within management. There is not sufficient responsiveness to market demands. Again, this entails a breakdown of why this is happening. Is the issue time management: managers not giving themselves the time to think about the company’s wider goals? Is the issue communication between the sales team and other departments? In focusing on fulfilling targets, sales teams may not be noticing what the customers really want. Is the issue managerial fear of creativity and trying new things?
Step two. Link the training with a defined outcome
Once the core training need has been identified, it can be measured by linking it back to the training goal. It could be that the kitchen products CEO made the decision that the key skills shortfall was creative: the design team was not producing enough innovative products. As one way of addressing the issue, a decision is made to give the design team training in innovation or in blue sky thinking. The desired outcome is that they start designing and selling new innovative products, with no reduction in profitability. Training can now be measured financially, because it can be considered as a production cost:
Profit from the product minus production costs (including the training).
Another measure is to establish a baseline against which the training can be measured. In this instance the baseline could be:
The number of innovative products made by the company in the three years preceding the training vs the number of innovative products made by the company in the three years following the training.
Step three. Identifying other training objectives.
As highlighted earlier, training fulfils different objectives for different stakeholders. Continuing with the example of the kitchen products company, the training given to the design team may fulfil the objectives of the following groups:
Each of these objectives has a financial implication for the company as a whole: they can either be measured in company profit or in employee retention. So these objectives can be measured in the same way:
- Identify the right skill shortage
- Link the training to a financial goal
- Choose a baselinev
This approach provides a company with quantitive data about training. It won’t tell the whole story: because the benefits of training can be both tangible and intangible and its impact can be immediate – or create long-term changes. That’s why it’s important to gather qualitative date too (feedback; workplace observations; behaviour change). But the key to credible measurement starts with identifying one clear change that you want to see. Break it down. The smaller and more narrowly defined your objective is, the easier it will be to measure.