CLO as Founder

The role of the CLO in 2021 looks a lot like a startup founder.

“Will the founder always strive to do great work that is legendary, with people who are spectacularly awesome? Will this commitment translate to recruiting amazing people who want to work with the founder and each other? Have you ever been in a situation where you and a team were pursuing total excellence? A great founder will not just seek this or hope for this, he or she will demand this.”

– Mike Maples, Founding Partner at Floodgate, Investor in Twitter, Lyft, Sonos….

Today’s companies are being transformed by multiple disruptions: technology, digitization, volatility, diminishing geographic boundaries, tougher competition, more demanding customers, and skill shortages.  These disruptions are mandating new approaches to all aspects of business.

As businesses battle these disruptions, L&D organizations need to go through their own transformation. A transformation that enables them to create unmistakable value for their companies. This transformation is more than just a step change. It will require L&D organizations to think afresh and recalibrate their teams, products & services, value proposition, execution model and stakeholder communication.

Just as the success of a startup is reliant on its founder, the success of the transformation of L&D depends on its leaders acknowledging the need for transformation and then taking on the role as founders of the new L&D.

Chief Learning Officer 2.0

In 1991, when Jack Welch made Steve Kerr GE’s (and possibly the world’s first) Chief Learning Officer, the business world and the world of learning looked very different. A quarter of a century later, it is time to take a fresh look at the position and the key role it plays in ensuring that learning is running at maximum efficiency and effectiveness. There are three primary roles for a founder of a startup that should be the focus for the CLO as well. These are; define and keep the vision & value proposition, attract and retain the best talent for their team, and grow the investment.

With a focus on these three critical roles, leading CLO’s will have a fighting chance in these rapidly changing times. (more to come…)

Go Ahead and Try

Experimentation is a fundamental activity for startups. Startups are leaping into a great unknown. Does anybody want to use my product? Will anybody pay for my product? How are we going to build this product? Startups are a pile of assumptions.

The goal of successful startups is to, as quickly as possible, prove or disprove assumptions and turn them into facts. They do this through experiments. In addition to the value of turning assumptions into facts, experiments are also key to effectively managing resources. They can help minimize the risk of investing too many resources into a product whose need or value has not been validated.

Experiments are simply a formal process for data collection. Why formal? Without the formality, experiments often produce less data, the wrong data, or even worse, no actionable data! When thinking about an experiment, startups must be able to clearly answer the following questions:

What we believe (our assumption).

What we will do to verify our assumption (our actions).

What we will measure (our metrics).

What our measurement results need to be if we are right (our expectations).

Nothing is perfect and innovation only comes from new experiments. With so much newness occurring every day, if L&D is not allowed to conduct some experiments of its own it will be forever behind the needs of its customers. Experiments, by definition, have an unknown outcome. Therefore, while L&D can’t know the outcome, it must know the parameters of the experiment and be able to work with the business to set the proper expectations. These expectations must be understood to get the most out of every experiment.

With a mutual understanding of the goals, structure, anticipated return and resources requirements, an experiment’s business sponsor can make a reasoned decision regarding participation in the experiment. Setting expectations is about knowing the risk and understanding that the potential reward is critical for experiments to be accepted in organizations unfamiliar with risk-taking.

For L&D, experiments can be used on any number of aspects of their organization. Content is the obvious one. I also believe that those organizations that adopt this approach in areas like process and people will see great return.

I recognize that a scientific approach can only take you so far. There are many factors that could influence the results of an experiment and there is not enough time or resources to prove everything. However, experimental results filtered through the experience and knowledge of the L&D organization can greatly increase the confidence level in any decision.

Everything Dies

Thoughts on a learning product’s lifecycle.

There is a reason that we use the term lifecycle when describing products. Products die. It happens to all companies. Startups that have launched a new product only to find that it does not deliver enough value to attract a user base generally run out of funding and are quietly forgotten. While the company may no longer exist, the product, be it an app or a web service, may remain. You can see examples of this reality every day. Look in the app store for your phone. If you see an app that has had no updates in the last 12 months, it is highly likely that the company behind it has closed. 

In December of 2017, AOL announced that it was shutting down its messaging service AIM. At that time, many still loved, AIM, a twenty-year-old remnant of the first dot-com era.  It is estimated to still have had millions of users at the time of the shutdown. So why shut down? Because there is a cost to keep the service running and as AOL stated in its announcement of the decision, “We’re more excited than ever to focus on building the next generation of iconic brands and life-changing products.” Focus. In an age of Facebook, Snapchat and Slack, there was little opportunity for AIM to deliver huge value to its users. Instead, AOL is investing those resources towards products that can.

Some products do not die, they are updated but unlike an app, where one version automagically replaces the prior, the older version remains. Software as a Service (SaaS) companies like Cornerstone, Salesforce and others release updated versions of their software all the time. The newer version is meant to replace the client’s older version. However, change is hard and many clients do not upgrade to the latest release. Upgrades can be fraught with unexpected pitfalls and the older version is familiar and therefore easier for the client to support with its internal users.

This means that SaaS companies are usually providing client support across several releases. This draws resources away from building value into future releases and instead requires investment in supporting the waning value of the past releases. Familiarity with legacy solutions is a challenge for L&D as well.   

Getting the business sponsors and managers to accept a new solution to replace an older one can take some work. L&D must be prepared to help them see the value.  L&D organizations, like all organizations, must always seek to invest their limited resources in areas that will yield the highest return. When a product either fails to deliver a predetermined value threshold, or is superseded by a higher value-adding product serving the same need, it must be retired. Like AOL, L&D must recognize that focusing resources on upgrades for a diminishing user need is a distraction and that continued support for an existing product has costs.

For L&D to adopt a true product approach it must acknowledge the dynamic nature of all solutions, continuously assess the value of its solutions, and acknowledge when a solution needs to be retired or upgraded. This requires the support of the business sponsors as well as the awareness that the “more” is not the goal. As in many activities it is not the creation but the editing that often drives significant value.

Note: I write this fully aware that in my enthusiasm I often share unedited thoughts in these posts. Unfiltered ideas are a feature not a bug for my product (I hope) – j.

Speed to Learner

Today’s business world is moving faster than ever. A years ago, some of my former colleagues at The Forum Corporation released a book titled “Strategic Speed”. In the book, authors Boswell, Davis and Frechette highlight the need to focus on people in addition to process efficiency and systems. They went on to highlight what they see as the essential people factors for driving speed; clarity, unity and agility. Startups have adopted a similar strategy to driving increases in speed.

Startups always seek to increase speed to user. How can they get more people to experience the product? What channels and messaging are resulting in new user acquisition? In order to impact this dimension, I believe the mind-set of L&D needs to change from manufacturer to marketer. One look at attendance data will show you that the most attended trainings are frequently mandated, not sold, to their audience. Assuming that learning is solving a real problem, getting users to recognize and “buy” the solution quickly is critical. Running Training Like a Business 2.0 means L&D must become marketers and packagers of a truly performance-inducing product. Like Gatorade™ for employee performance.

When I first starting exploring the idea of Speed to Learner as an important dimension of organizational speed, I explained that L&D needed to shift from manufacturer to marketer. But what does this mean? L&D needs to speak, target users, and think, like a startup. While launching a new learning offering can be nerve racking, imagine the stress entailed with launching your new company. The stakes are high for startups. While building a great product is essential to a startup, your target market must still know about it…and use it.

If you sell anything with any success, you know that people don’t buy drills, which is a product feature, they buy holes, the product’s benefits. So why is the communication and language around learning so feature based. The industry speaks of “sales training” not “close more deals, make more commissions training”. Course objectives are often written, “at the end of this course you will be able to…” when the important part is found by adding “so that…” to the end. L&D should lead with benefits. L&D should know what the benefits are for learners and clearly state them in terms that the learner can recognize. For a startup or L&D, this is where all valuable products begin, with a true need.

Consumer advertising gets a bad name because many assume that sizzle replaces the need for a high quality steak. Many startups feel the same way. You haven’t heard about those startups because they very often fail. Winning solely on the basis of a superior product may feel like the high ground but what is missed is that in an age when we are all bombarded with messages every day, cutting through that noise with the benefits of your solution is also needed.

After adopting a marketer mindset the next step to improving speed to learner is for L&D to understand the road to audience adoption. Startups understand that they can’t get everyone right away. Instead they focus on a part of their addressable market called the early adopters. In his 1991 book “Crossing Chasm”, Geoffrey Moore described an approach of looking at the way new technologies are adopted by a market that is still used today.

In the book, he divided the market, represented by a bell curve, into five parts. From the thin left edge, he began with innovators. Moving right he identified the market parts as; early adopters, early majority, late majority and laggards. Each part has its own requirements for the adoption of new technology. Innovators value new over perfect, while the early majority requires proof points, value being delivered in situations that look like theirs, in order to embrace the new technology. “Technology” is from the Greek “tekhnologia” which means the systematic treatment of an art, craft, or technique. Sounds like a learning offering, doesn’t it?

Geoffrey Moore, Crossing the Chasm

When L&D rolls out a new initiative there is often too little thought given to how it should be rolled out. What parts of the desired audience like new but untested and potentially imperfect solutions? Which parts will require proof points or endorsements? A blanket approach rarely works with anything other than compliance training where attendance can be mandated. Understanding more about your audience’s requirements for adoption can make for a much more rapid and successful roll out.

SECond Thoughts

Compilation of my thoughts on the SEC opportunity.

I have written a lot about the new legislation for Human Capital reporting.  It is refreshing to be on a topic that stirs some valuable discussion and debate.  Wish that there was more of it on issues like design,  the L&D organization optimization and such. Had we been a more challenging industry maybe learning styles would have been debunked a long time ago.

For my own learning I did a quite reprise of my thoughts on this topic.

What Is the Securities Exchange Act of 1934?

The Securities Exchange Act of 1934 (SEA) was created to govern securities transactions on the secondary market, after issue, ensuring greater financial transparency and accuracy and less fraud or manipulation. (Investopedia)

Transparency and accuracy.  Is L&D ready for this? It doesn’t matter.  Here it comes. Tail Will Wag the Dog post

How and Why Human Capital Disclosures are Evolving

A reading of the final regulation is a celebration of bureaucracy but in addition to adding “principle-based” and “materiality” to the L&D mainstream lexicon it also included some odd issues with words.

Opposed defining the term “human capital.” Well since it is not a critical term we will let that slide. WTF?

In any case I see this as huge opportunity to get our boss’ boss’ boss interested.

The Way to a CEO’s Heart

But with visibility comes accountability. Are today’s learning leaders ready for that?

The Accountable Chair

I am excited to see how various Learning leaders use this new bit of leverage. This could be a big breakthrough for L&D, repositioning the function (appropriately) as mission critical. Or not.

The 3 Ways L&D Will Bungle the SEC Opportunity

The Next Frontier

Reporting drives the elevation of L&D from the side of “tell me what you do.” The next big shift will come from the accounting side. By changing the way that companies account for human capital spend the current investment per employee can be dwarfed. By making certain investments in human capital treatable as an asset those costs can be off set by an increase in asset value. Moving learning from a income sheet item (SG&A) to a balance sheet item to be depreciated over the usable life of that asset (average tenure?) is a game changer. It paves the way for huge investments in human capital.

Lots to come on this front for sure but here are some opening thoughts.

When is Capital not Capital

Changed the Reporting. Change the Accounting

Changed The Reporting. Now Change the Accounting

The current perception of L&D is captured in a report by American Progress bemoaning the way that the training investment is currently reported.

“not on its own but lumped into selling, general, and administrative expenses, or SG&A, a measure that includes items such as company lunches and paper clips.”

Agreed.  They go on to stand up for L&D by showing the problem with this approach.

“Companies’ expenditures on worker training and skills show up not as a valuable investment similar to R&D but as an increase in general overhead, a measure that managers have shown a proclivity for cutting and whose reduction is often cheered by investors.”

They then end it with what I think was meant to be a compliment.

“This treatment of human capital ignores the findings of numerous studies:”

wait for it…

”Investments in human capital enhance productivity and are more valuable to a firm than general overhead expenses. 

L&D is a better use of a dollar than buying paper clips.  Stop all the ROI studies. We have our answer. Maybe we should start doing PSA’s that proclaim, “for the cost of just one executive expense account we can train an entire salesforce for that expansion region.” Or, “if everyone would just print out only the documents they needed we could save enough in paper supplies to onboard 1000 new hires.” L&D has a lot of work to do.  Time to get to it. 

3 Ways L&D Will Bungle the SEC Opportunity

The 3 Ways L&D Will Bungle the SEC Opportunity

This past August the SEC passed new regulations requiring reporting on Human Capital as part of a public companies standard reporting process. Since that time there has been much talk about what this means for L&D. Some have begun to suggest ways to use this new regulation as an opportunity to reshape L&D’s position in a company.  Some have even said that this is a chance to finally get that coveted “seat at the table.” I may even be included in the group of “some” people. However, if I look at it honestly.  If I look at an industry that has continued to fight the same battles for relevance and stature across the two decades I have been part of it. If I do those things I have to admit that it is likely that L&D bungles this chance. 

Remember I am one of Learning’s biggest fans.  I have repeatedly written love letters to the power of learning and lamented the lack of widespread executive support.  And bungle isn’t a complete miss. Bungle is simply an awkward failure to capture the full opportunity.  Like the quarterback who trips on the turf as he runs without a defender in sight. Apologies for the sports analogy but the Eagles are on in the background as I write this. 

The good news is that L&D won’t be in the spotlight when it trips.  This regulation comes at a time when all eyes are on Diversity & Inclusion and the environment.  So unless L&D starts measuring a meaningful reduction in carbon footprint due to online learning (not a bad idea) it will not be in the spotlight for a bit.  Unless we put ourselves there.  We all should. Most won’t.     

Bungle No.1: Misread the Moment

Human capital is a material resource for many companies and often is a focus of management, in varying ways, and an important driver of performance. – SEC regulation

You hear government regulation and what is the first thing that comes to mind? Compliance? This could easily be read as a compliance initiative.  It is and it isn’t.  By treating this as a tick the box exercise L&D misses the point. This is a coming-out party. This is L&D being introduced to the world as the new battleground on which companies will compete.  It is an endorsement of the importance and power of Human Capital strategy. And we are not talking about foosball tables and executive chefs serving free lunches. L&D is on the front lines and as such can now get the resources, attention, and investment it has longed craved. But before the supply lines start to flow, L&D has to show its value to the markets; financial and employment.  For a function that has struggled to show its value to business leaders, this is going to be a heavy lift.

Bungle No.2: Look for the “Right” Answer

“…to the extent such disclosure is material to an understanding of the registrant’s business taken as a whole…” – SEC regulation

Have you ever told a bartender to “just make me something you think I will like”? Order takers like clarity.  Tell me what you want and I will deliver it.  In the case of L&D, we have struggled long and hard to produce an impact with our solution despite what our customers ordered.  But we like taking orders.  It is safe.  You asked for it.  We delivered it.  Job well done.  Now I know that lots of you are mad at me right now.  “We have business partners’” you will scream. “We measure level four impact on all our programs, “ you will wail. Ok fine.  

Now, how about this. The SEC regulation is not “prescriptive.” The SEC provides only examples (total invested, hours per employee) not fill in the blank questions.  The regulation is principle-based.  This means it is up to the company (the L&D organization) as to what data they provide. So will your L&D organization accept the order, reporting sample metrics only because we know they are right since they were provided.  Or will your organization go to battle armed with the superpower our industry has longed for, materiality? The Supreme Court has defined materiality but now the task is on us to define it for our organization. 

– Is that new Management training program material to our overseas expansion plans?

– Is the Onboarding redesign material to achieving our growth targets.

– Is our upskilling initiative material to minimizing our labor costs?  

– Is our new product curriculum material do the upcoming roll-outs?

– Is our OSHA training digitization material to our reportable and claims costs?

We know the answer is yes to all. The question is are we going to self-inflict ourselves with a higher reporting burden.  Even if that burden comes with a new view of the role, power, and import of learning. Or will we wait until it gets ordered up? Which it will. You could argue that everything related to employee learning is material to understanding the businesses we serve. But this probably overstates the business value of some provided learning. What if you lose that argument? And what if it’s your course that is deemed immaterial?  What does that say about that course? Scared yet?

Bonus Bungle: Data Arrogance

Another bungle looming for L&D is overconfidence in their data ecosystem.  I almost left this one off entirely because honestly, I am tired of holding a mirror up to L&D’s data maturity. SEC reporting is not for the faint of heart.  These numbers don’t come with a bunch of excuses.  Do you get a long litany of caveats and qualifiers every time there is a data readout? Bad data, crazy outliers, incomplete fields.  That will not do. And it’s not just the data but also the control systems and processes that surround them.  

Had a data audit recently?  Not by an L&D service provider selling you the latest platform or reporting service but by an accounting firm. Are you familiar with COSO Internal Control-Integrated Framework? You better get familiar.  This is the standard used by many auditors.  

Principles-based reporting means the norms will be set based on demands from ESG certifiers (they will push for some standard items they can compare across companies), candidates (who will vote with their job applications), and investors who will reward companies that do this well and sue those that don’t.  Yes, I said “sue.”  If the report did not include something material, the number was misleading,  or the number was wrong, then into court you go. As Peggy Parskey, a keen observer of this space, commented in a recent conversation, “Is L&D ready to testify?”

Bungle No.3: Fear

OK, I am just going to say it.  This is scary, The door is open.  Right through there. Just step into the limelight.  This isn’t filling out the self-reported data for ATD.  This isn’t a quick 4 slide report for some executive presentation.  This could be it.  The real deal.  Finally.  A core part of the business.  A seat at the adults’ table.  This is not a Zoom meeting to hundreds,  It is an interview on CNBC.  It is right there. If you reach your hand out you can touch it. Some of your peers in Europe have it.  Don’t you want it?  It is going to be a lot of work. You could just wait and see what they want.  But the door is right there.

The Unbungling

The new reporting requirements offer L&D lots of opportunities.  It is up to L&D to capture them.  This is more than possible, this is in our wheelhouse. This is what we do.  We enable change. We should be leading HR during this critical window.  We should be facilitating discussions around what is “material”, we should be enabling process skills related to controls, we should be doubling down on data fluency, we need to frame our contribution in the most valuable light for our enhanced stakeholder audience.  If we sit back and wait for the order the perception of L&D will not change in a meaningful way and this window will close.  Will it be the end of the world? No.  Will we wish we had done more? Probably. 

On Enthusiasm

Book excerpt: Our industry’s path forward is not going to be an easy one and we will need a full tank of enthusiasm to fuel our organizations.

The following is excerpted from my open sourced ebook,

Running Training Like a Business: the startup way to delivering exponential value (working title, suggestions welcome)

I have been talking about the idea of this book for years. I was part of the team that launched Running Training Like a Business.  An industry staple and game changing approach in the nineties.  So why is it that after two decades, Learning and Development is still struggling to deliver unmistakable value?  Technology, just emerging when Running Training Like a Business came out, is now at the core of the learning organization. The tools used by learning and development practitioners for everything from course creation to measurement have improved. Yet the same problems that stirred the need for the first book continue to challenge Learning and Development organizations around the globe. Recent research by Bersin by Deloitte indicates that, while employee development has never been as important, faith of the organization in the L&D function to deliver value has also never been so low.

In those two decades, the companies that L&D organizations serve have changed. Companies of all sizes, once comfortable in their place in the market, have been disrupted. Innovation, once a source of competitive advantage, is now a business requirement. With all of these changes to the business, how has L&D evolved? Some would say not very much. The use of outsourcing, controversial at the time of the first book, is fortunately now a widely accepted solution for many functions of L&D. Thanks to the migration to digital learning, measurement data, formerly difficult to collect beyond “smile sheets”, is now readily available. But, in many ways, L&D has not changed at all. As stated recently by Bersin, “business leaders and employees often cite little or no value coming from the learning organization. An ominous comment about Learning & Development, an organization that we would argue is more important today than ever.

Enthusiasm is defined as “intense and eager enjoyment, interest or approval”. My sense, having sat with many industry professionals at all levels and comparing that to the enthusiastic energy inherent in fast growing startups, is that our industry is sorely lacking enthusiasm. While we may experience excitement, a short duration form of enthusiasm, about new tools, technologies or toys, this is the emotional equivalent of a sugar high. As the last two decades have shown us, we are running a marathon, not a sprint, and sugar is not the fuel of success.

The lack of enthusiasm is not entirely unwarranted. The importance of employee engagement in an organization’s success is widely recognized. We have all seen the studies on what increases it; mission, leadership, development, among others. Yet, when you talk to learning pros, the focus is often on the lack of funding, limited executive support or latest tool or tactic being deployed. Even the cup of sugar is half empty. And when we hear from executives, we often find they have a low expectation of training. My belief is that is because they really do not know what is possible. If we, as an industry don’t have any enthusiasm, how can we expect executives to have any enthusiasm for learning?

Successful startups have enthusiasm in abundance. Founders actually take enthusiasm to the next level, passion. Passion is that intense, driving feeling or conviction and while at points this may be divorced from reason, it sets the highest possible standard for others to follow. Sit with a startup founder for two minutes and they cannot help but tell you what they are building. They will talk fast, as if they have had too many cups of coffee. Most importantly, they will leave you excited about their mission and looking for ways that you might help them.
The passion for what they are doing is not only visible when they are talking to investors or potential customers. It comes through all the time. It is on display when they are talking with their teams, standing in line for lunch, sitting around with friends, riding the bus and even walking their dog through the park. If there are ears to listen, they feel compelled, like new parents, to share it. And this is not limited to just the founder.

Successful founders recruit people that share their passion and contribute their own enthusiasm to the mix. Enthusiasm is not solely enjoyment. It is also defined as “intense interest”. In this way, enthusiasm leads to curiosity and curiosity often leads to new, novel, more effective or more efficient solutions. Coding engineers at startups frequently spend long days at work only to go home and play around writing code for fun or to test ideas that they might be able to bring back to work. When was the last time you invited some friends over for some barbeque and some brainstorming on how redesign an assessment process or a learning program? Not because you had to, but because you wanted to.

Our industry’s path forward is not going to be an easy one and we will need a full tank of enthusiasm to fuel our organizations. We are enthusiastic about the future of learning and development and we think you should be too. We believe that unlocking the enthusiasm that our industry has for learning requires a new approach.  An approach built on the timeless principle of delivering value holds huge opportunities for the professionals that practice it and the people and organizations they support.

Enthusiastically yours, j.

Data as Author Pt. 2

Be careful about your data narratives, someone might actually believe them.

Billy Valentine, data whisperer

Numbers are nice but it is the narrative, the story, the matters. As an outside advisor for learning leaders for over two decades I know that the data may raise questions it is the narrative that raises eyebrows. Data can always be found to prop up one’s gut or one’s desired POV. Words must be carefully chosen and implications properly couched.

I have written a few times about the annual State of the Industry numbers and the narrative spun by ATD and LinkedIn Research. Spoiler alert: not a fan and not a believer. But if you want to put your learning organization’s numbers in a positive light there is no doubt you can find a stat that looks nice sitting next to the leading companies.

Data doesn’t lie. 

And we don’t have to either. But we do tell the truth in our own way.  For example:

A company has 1000 employees with the level of manager or above.  Last year L&D ran a pilot with 40 participant sin a new leadership program.  This year they ran the course multiple times putting 120 future leaders through the program.  The following data points are ALL accurate.

  • To date only 16% of the company’s leaders have received learning support.(makes the case for additional investment)
  •  We trained 3X as many leaders this year than last. (demonstrates commitment to future leaders)
  • Our leadership program has directly impacted (participant + direct reports) almost 2000 employees (assumes 10-12 direct reports per manager)

So when you write your narrative be careful.  The narrative can often say more about the author than it does about the data. Don’t overstate (tempting), know the limits of the data (it will have biases just like you), don’t over extend from data to assumption (without acknowledging it) and for heaven’s sake know the difference between causation and correlation.

The Way to a CEO’s Heart is Through Her Stock Options

L&D has been fighting for years decades to get the attention of the CEO. We have played the “it’s the right thing to do,” card. We have fought through convoluted ROI calculations. We are all adults here so let’s get honest. We know what will get the attention of our CEO. Money.

“Don’t hate the player. Hate the game”

L&D has been fighting for years decades to get the attention of the CEO. We have played the “it’s the right thing to do,” card. We have fought through convoluted ROI calculations. We are all adults here so let’s get honest. We know what will get the attention of our CEO. Money.

This is not a condemnation of CEOs. In fact, I don’t blame them. Like economists who give up the myth of the “perfectly rational actors” in systems, acceptance of reality can make us much more effective. The idealist in me would certainly prefer to support a CEO who is a true believer in the power of learning. One motivated by the strategic advantage available to companies that invest wisely in their people. But lacking that, a bigger budget and the power to put the best (team, solutions, tools) to work is a close second.

“I got my mind on my money and my money on my mind”

-Snoop Dogg

So where does your CEO get her money? The typical CEO compensation package has a significant stock or options component. This pay usually dwarfs the cash portion. With our understanding of how incentives drive performance, we can not be surprised. We can, however, be clearer on how learning aligns with those incentives. Here is the logic as I see it.

What makes a CEOs stock or stock option plan worth more? A positive movement for the company stock in the market.

What makes her company stock go up in the market? Demand for the stock.

What makes demand go up? New money or reallocated money seeking what the company stock offers.

What creates new money or reallocations? Business performance, investor values, events or “shocks” and regulatory and structural changes.

The Value of Shared Values

L&D Leaders should understand all of these dynamics on the company. This post will focus on the investor value driver. Investors’ values change. So does the demand for specific stocks. Look at all the different flavors of funds available. No matter what your investment objectives or personal beliefs there is a fund for you. The more people that share your objectives or beliefs the more money flows into those stocks and funds.

ESG funds, which fall under the larger sustainability or stakeholder umbrella, values a variety of non-financial measures such as social impact, environmental footprint and a company’s human capital strategy.

Alex Bryan, Morningstar’s director of passive strategies research for North America, told CNBC, “There’s a great realization today that ESG issues are investment issues. They’re issues that can affect the bottom line, and that may not always be something that comes to bear immediately. But it’s something that I think more people are starting to understand is aligned with shareholder value maximization,”

As the demand for stocks that share these values increases so does the stock price. And the demand is rising fast. Combined inflows (new money and reallocated money) into both active and passive ESG-focused funds reached $71.1 billion during the second quarter alone.

The recent change at the SEC regarding the reporting of human capital practices are another indicator of this trend.  Diversity & Inclusion receive the lion’s share of the media’s current attention but a rising tide lifts all boats. Research from Europe has already shown that the simple act of reporting human capital practices leads to increased investment by companies in these areas.

L&D shares the values of this new investment wave. Not only for self-serving reasons, but also because they have always been our values. Values we try and live out everyday in our roles as learning professionals. Now these same long-held values move our company’s stock price. Think that will get your CEO’s attention?