Some L&D Math and Some Questions

Disclaimer: I am a lover of data.

I had some time play with some of the data in ATD’s State of the Industry Report and it raised some questions for me. In order to better understand the ATD data, I looked at the “implied” results that are not included in the report. Because ATD includes data such as percentage of revenue and percentage of profit I can simply reverse the calculation to see what the trends are for both revenue and profit per employee. Since these are the ultimate measures of the success of learning, the trends in these should be trending positive or at least correlated to the investment in learning being made by organizations.

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The first thing that stood out was the delta between the implied revenue per employee (RPE), a common public market metric, and the profit per employee in the ATD report and the S&P 500 average. According to Yardeni, an economic advisory, the 2016 Average RPE for S&P 500 ranged from $321,000 and $1.7 million depending on industry with a profit margin of approximately 10%. The revenue discrepancy for Consolidated cohort is understandable given the smaller size for many of the reporting companies for the ATD data. The comparison to the BEST cohort is closer but still under the S&P averages.

The comparison to profit per employee was similarly off.

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I then looked for a correlation between learning and an impact on revenue and/or profit in two ways. First, I looked to see how the numbers compared year over year. I then looked for a correlation between learning and an impact on revenue and/or profit in two ways.

First, I looked to see how the numbers compared year over year. This view showed that the increased percentage of investment in learning, touted as a positive reflection on businesses opinion of learning in the ATD report might be misplaced. The ATD report states “Confirming organizations’ commitment to learning, this indicator [% of profit] grew from 8.3 percent in 2015 to 8.4 percent in 2016; the ratio has climbed steadily for four years in a row.”

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While ATD seems to draw a positive connection, in fact this may simply be a case of reported profit and revenue dropping, things that businesses care about. There appears to be no correlation. The resulting chart shows years where learning hours rose and the implied profit or revenue dropped. If there is a return to be captured from learning, the ATD numbers don’t seem to reflect it. I did a similar look lagging the revenue and profit a year, to let the impact of the learning spend sink in. Still nothing that showed a correlation much less a causation.

As I stated in the post on benchmarks, be careful.

Benchmarks and the Danger of Data

CherryPicking

We are always excited to read the annual installment of ATD’s State of the Industry.  Cited year round by our clients, and the industry as a whole, this compendium of data is seen as an important touchstone for many L&D professionals. But, while these numbers are used by so many to justify a sought after initiatives or validate current activities, benchmarks can be misleading.

The other note about benchmarks and data is that cherry picking a single data point or even source can be misleading.  While it can be comforting, it comes with a caution.  While some will point to the positivity of increased spend, others will cite the data from Bersin by Deloitte, Corporate Executive Board and others, that shows the lack of confidence in L&D, the amount of waste caused by scrap learning or the negative net promoter score for L&D.

Achieving benchmarks is not the goal for today’s learning organizations.  While directional, every company is its own group of one. Your company’s business strategy, market conditions and human capital are unlikely to be identical to any other. If you are spending lower or higher than benchmarks, and delivering no value, you are overspending. The reverse also holds true.  The true metric for learning professionals to watch is their contribution to the success of the businesses that L&D serves not spending levels.

Some additional thoughts for math lovers here.

Pull Versus Push

In order to deliver more value, Learning & Development organizations should adapt from supporting learning in a “push” environment to supporting learning in a “pull” environment.  For our book we are exploring what we can learn from successful startups.  This includes some of the new competencies required of a L&D team in order to deliver unmistakable value.  One of these new competencies is marketing.  In a world where learners are often pulling support from sources like YouTube or other resources on the web, L&D needs to ensure that its solutions have the attention of its learners too.

Historically, organizational learning was pushed to learners via compliance requirements, development plans and corporate-wide initiatives. Today’s environment requires L&D to make its solutions desirable for learners to pull.  This means more than having another table in the cafeteria or sending out another email.  For learners to want to pull L&D’s solutions they, like any consumer, must see that the value outweighs the cost. Time is money to employees, managers and executives alike.  They will decide where to spend it.

This shift requires L&D to look at all aspects of its solutions and the tools they use to ensure that they are both relevant to the business and appealing to learners. Everything from the descriptions in the LMS to the structure of the solutions themselves will need to be reconsidered. The low utilization rates for elearning catalogs, frequently available to all employees on demand, are a solid proof point that more than access is needed for learning solutions to to be “pulled” by the learners that need it.

We do not see marketing as a necessary evil.  Rather we see it as a required value creator. L&D is doing a disservice to its customers if the higher quality learning solution does not win the battle for the learner’s investment. Salespeople are known to say that you do not sell something.  Rather, you help the customer buy the right solution.  L&D has to get better at helping its learners buy smarter. Today L&D is trying to come up to speed on new technologies, data and more.  As learning professionals, we are being asked to learn a lot of new tricks.  But learning is what we do best, right?

 

 

Our Book is a Startup

Why we need your feedback and a quick 90-seconds assessment.

Please help us improve the value our product by taking 90 seconds to answer these questions about your L&D organization or the one supporting your business. In exchange you can be certain that our product, both this blog and the book, will be designed to add the value that is most important to you. We are not asking for an email or anything other than your input. We value your honest contribution and building the most valuable product possible more than building a mailing list.

Submit your responses here

Why We Are Asking

When we started this blog to explore how we might bring the best practices of leading startups in the areas of customer, product, operating principle and team into a Learning & Development organization we had an assumption.  Our assumption, based on a multitude of discussions with practitioners, industry stakeholders and business executives was that the need to innovate how we were running L&D was existent and of rapidly growing importance.

With this proof point, we began our journey looking at a range of dimensions where we could apply aspects of startups.  From leadership to a new visual business model we researched, discussed and wrote our thoughts down submitting them to the readers of this blog as well as using these “beta” concepts in discussions to further refine them. We continue to apply this product development approach to our book.  What the Lean Startup methodology calls the build, measure, learn cycle.

We believe strongly that the need to innovate across all the dimensions of L&D organizations exists. We also recognize that the priorities for our product have to be our customers’ priorities. Our customers are the L&D practitioners and business executives.  Since startups are all about data so are we.

We thank you in advance for your time and look forward to sharing the results of this build-measure-learn cycle with you in future posts.  If you are interested in a printout of the self assessment you can download the PDF Self Assessment here.

 

 

Free Has A Cost

Are free learning creation tools creating scrap learning?

A while ago Jane Hart, founder of the Centre for Learning and Performance Technologies (C4LPT), released her now annual list of top tools for workplace learning http://c4lpt.co.uk/top100tools/analysis/  This list is defined as “tools used for training, for creating e-learning, for social collaboration and performance support.” Her analysis and insights are useful for anyone interested in industry trends. Running Training Like a Business 2.0 is focused on optimizing the organizations of skilled builders, not reviewing content creation tools.  However, there was a takeaway we thought worthy of a quick note.

What jumped out at us right away was the large percentage of free or consumer tools that were included.  Over 50% of the top 25 tools fall into this category.   Demonetization of learning tools is an important trend to watch.  While this appears as a positive for budgets it offers other challenges for L&D organizations.  When things become inexpensive, it often lowers the bar to utilization.  All one has to do is look at the music industry for insight on how this trend impacts markets. Two decades ago, when a band had to spend weeks in an expensive studio in order to produce an album, the quality of the songs were carefully selected and the promotional plan to drive sales well thought out.  When a band can go into a basement and produce a similar quality product over a weekend, the bar is dramatically lowered. Perhaps there is a correlation to the amount of scrap learning in today’s corporate curricula and the inexpensive availability of the tools for production.  Just because we can does not always mean we should.

When Running Training Like A Business was released, the digitization of learning had just begun.  Companies were shipping CD-ROMS around and the online industry consisted of Lynda and scant others. The ability to digitize learning is now readily available to everyone. Learning professionals’ control over content is no longer reinforced by the barrier to production. And for learning professionals themselves, budget no longer limits the ability to develop new content.  In this new digitized and democratized learning environment what is the role for L&D? The music labels have been trying to figure that question out for over a decade with no clear solution emerging. Hopefully L&D will fare better.

On Enthusiasm

When you do a Google search for “enthusiasm+L&D”, other than a single article by Jane Bozarth discussing the use of Pintrest boards for learning, the results quickly move to case law and Agents of S.H.I.E.L.D.

Enthusiasm is defined as “intense and eager enjoyment, interest or approval”.  Our sense, having sat with many CLO’s 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, what we are running is a marathon, not a sprint, and sugar is not the fuel of success.

We know the importance of employee engagement. We have seen the studies on what drives it (mission, leadership, and development, among others). Yet when you talk to CLO’s 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 talk with executives, we find they have a low expectation of training.  We believe that is because they really don’t know what is possible.  So how can we expect them to have any enthusiasm?

Successful startups have enthusiasm in abundance.  Founders actually take enthusiasm to the next level, passion.  Passion is an 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 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.

This is not only when they are talking to investors or customers. This is all the time. This is when they are talking with their teams, standing in line for lunch, sitting around with friends, riding the bus and walking their dog through the park.  If there are ears to listen they feel compelled, like new parents, to share. And this is not just the founders.

Successful founders recruit people that share their passion and contribute their own enthusiasm.  Enthusiasm is not solely enjoyment.  It is also “intense interest”. In this way enthusiasm leads to curiosity and curiosity often leads to new, novel, more effective or more efficient solutions. Coders 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 beer and some brainstorming on how redesign a process or a 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 support our organizations. How do you talk about your work when introduced to someone new? How do you talk about your work with your  customers?  Are you jumping out of bed every morning eager and interested to enjoy another day at work? Why? Why not?

Learning To Love Data

At the time of the first book, the availability of data was limited.  Now almost twenty-years later it is everywhere. And yet we continue to see L&D organizations struggle to put it to work for them. This is not say that there have not been great strides made. The work of the ROI Institute to capture a clear and credible approach to identifying the impact and return of learning initiatives. The Center for Talent Reporting has created a proposed approach for describing the learning function that would allow for consistent comparisons and reporting. However, the gap between knowing and doing remains.

Just as having too many choices as a consumer, measurement today can cause decision paralysis and feel overwhelming.  Because of this, L&D organizations must focus on key performance indicators, ensure the measures are actionable and act on them. Startups have far more data than a typical L&D organization.  From pixel by pixel eye tracking to clicks and cookies, there is data everywhere.  So how are fast-growing startups dealing with the data tsunami?

The best startups focus on “evidence-based execution”.  Put simply, this is the use of data to improve what and how things get done. Startups make data a priority, understanding that it is critical for focus, alignment and communication. They use collections of key data points, in dashboards, not single data points, to make the data actionable.   And finally, they know that behavior doesn’t lie.  If people rate your product positively but are not using it, engaged, recommending it or coming back for more, the product is insufficient.

Dashboards are interrelated collections of key data points around key processes that drive an understanding of how to better execute. It also allows for the determination of where in a given value chain is the weakest link.  For startups, a dashboard may track the customer acquisition funnel which follow the progress of a customer from awareness to retention.  For a L&D organization this may mean a series of metrics tracking the performance of the team moving from problem identification to solution.

Focusing only on a select set of key metrics is another way startups use their resources wisely while gaining impactful information.  Honing in on key areas for optimization allows for internal and external stakeholders to understand the priorities of the organization.  These key performance indicators are not necessarily static.  As organizations change, so do their KPI’s.  Once you know you are delivering quality learning you may then turn your measurement attention to the speed of delivering a solution or other areas or focus.

Startups look at things like market share and daily active users to see progress.  As mentioned previously, having a 5-star rating means nothing if your product isn’t being used. Similarly, if the L&D organization is only supporting 50% of the learning that is occurring in the organization, how valuable is the product? What are the barriers to acquiring the other 50%? Is it speed, expertise, organizational barriers or something else? If compliance trainings are the only learning events that are being consumed by a high percentage of its L&D’s target employee base, is non-compliance training seen by the employees as a nice to have or seen as a way to truly improve performance. Behavior doesn’t lie. Trying to shield yourself with activity or satisfaction numbers without taking action on them is only a temporary refuge.

Data will continue to be more and more easily collected. This can result in L&D organizations being overwhelmed or suffering from analysis paralysis.  Focusing on KPI’s, interconnected sets of data and remaining committed to acting on that data will be essential to those organizations that want to truly deliver the next generation of value to their companies.

What are your customers (learners, managers and executives) telling you through their behavior?