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?


Missing Out on L&D

I thought The following excerpt from my book (v3 coming in later this month) would be appropriate as we enter the budget season. Two decades ago when Ed Trolley and I started doing executive interviews in support of our training organization assessments we were sure to ask a rating question for learning and development. As time went on it became the net promoter score question. Over time, and many assessments, we continued to improve our data collection to provide a deeper understanding of the potential, and realized, value that the learning organization delivered.  During this time we identified what we think was an even more powerful question.

Perceived Value Score (PVS) question:

“On a scale from “extremely impacted” [10] to “would not notice”[1], how would your business be affected if all of our L&D solutions went away?”

Startups are constantly seeking “product-market fit”. Simply defined by Marc Andreessen, founder of Netscape and leading startup investor, “Product-market fit means being in a good market with a product that can satisfy that market.” The fear of loss, captured by the PVS data, was identified as a strong indicator of startup success. Sean Ellis, founder of Growth Hackers, a community collecting actionable information on how to produce high growth for organizations, sets the bar for PMF at 40%.  If forty-percent of your users aren’t rating your product/service top box then your product or organization doesn’t have it.

This gauge as to how essential learning and development is perceived by business leaders can be a compelling endorsement or call-to-action. The coronavirus shock has resulted in the provision of learning changing dramatically over the last six months. What was done face-to-face is now provided virtually or not at all. New skills such as managing at a distance were needed in short order. So now perhaps the question is less about business leaders’ability to imagine a world without L&D and more about today’s reality.

What is your learning organization’s PVS?

L&D is a Master of VR

When Ed and David released Running Training Like a Business (RTLAB) it was clear to many that the industry needed a new way of looking at not just how and what we were training employees but why.  The book aspired to take the industry discussion up a level.  Away from the micro of courses, design methodologies and technology to the macro and meta.  The book encouraged a turn inward away from the course and curricula towards the creator, the L&D organizations itself.  What the factory was designed for, pre-determined what the output was.  Transforming the organization would transform the output and the value it produced.

In 2010 when I started writing the Learning Hacks blog as a way to capture my musings on L&D I began with a blog entitled “The Spark That Started It All”, the working title for this post can still be seen in the URL for the post.  It expressed my disappointment that many of the challenges described in RTLAB, over a decade prior, remained unaddressed.  In my book Running Training Like a Startup I cite one of my favorite Ed Trolley quotes.  A quote that was validated in many of the assessments we did for clients around the world.

“Business leaders have low expectations of training. And they are being met.”

-Ed Trolley

Yesterday, Harvard Business Review released an article entitled. “Where Companies Go Wrong with Learning and Development” that put things in clear perspective. In it Steve Glaveski highlights recent studies that show:

  • 75% of 1,500 managers surveyed from across 50 organizations were dissatisfied with their company’s Learning & Development (L&D) function;
  • 70% of employees report that they don’t have mastery of the skills needed to do their jobs;
  • Only 12% of employees apply new skills learned in L&D programs to their jobs; and
  • Only 25% of respondents to a recent McKinsey survey believe that training measurably improved performance.

Glaveski nets it out this way, “Not only is the majority of training in today’s companies ineffective, but the purpose, timing, and content of training is flawed.”  I don’t disagree.

While the L&D community hold conferences dominated by sessions on how to create compelling Powerpoint title slides, the use of chatbots, and incorporating podcasting into a curriculum, the businesses they support keep moving and changing desperate for employees that can perform.  In the late 90’s I was tasked to lead a project for Microsoft.  At the time they were under intense scrutiny for monopolistic practices.  It was also a time when Fred Reicheld (who would later create the Net Promoter Score) released the “Loyalty Effect” debunking the marketer “top-box” approach to assessing satisfaction.  I won’t go into it here but when retention does not show a drop off as satisfaction goes down there are other market forces at play. High switching costs, tie-ups and lack of alternatives can be some of those drivers. The retention results don’t reflect the satisfaction of customers (it may make it worse because they feel trapped) but it does give the provider an extremely distorted view of how it is performing.

Over 20 years post the release of RTLAB the data on L&D’s customer satisfaction continue to come in.  While the L&D industry focuses on budget amounts, spend per employee and other “vanity metrics”, the HBR article clearly shows it is long overdue for the learning organizations that are delivering leadership training to take a leadership role.  For the L&D groups supporting innovation initiatives to innovate.  For the industry, as a whole, to take off the goggles and stop living in its virtual reality world.