Return on Investment and People Development

Tom Smith

About Lane4“The aim of this establishment is to create an environment where champions are inevitable”

“Like other leaders, many HR executives hold flawed and incomplete beliefs. They fall prey to second-rate evidence, logic and advice which produce suspect practices, and in the end, damages performance and people”

Pfeffer and Sutton (2006)

Hard Facts, Dangerous Half-Truths and Total Nonsense

The Value of Top Talent

LowPerformers

SuperiorPerformers

1SD

Good

Low Complexity Jobs 19%Moderately Complex Jobs 32%Highly Complex Jobs 48%Sales 48-120%

Hunter, J.E., Schmidt, F.L. and Judiesch, M.K. (1990) Individual differences in output variability as a function of job complexity. Journal of Applied Psychology, 75; 28-42

The Risk of Workforce Disengagement

13%20% 29% 27%

11%

“The Disaffected” “The Agnostics” “The True Believers”

Leaning towards disengagement

NeutralLeaning towards

engagement

The Danger of Non-EngagementPoor performers who frequently put in minimal effort – the “disaffected” – exhibit strong emotional and rational non-commitment to day-to-day work, the manager, team and organisation.

A Risk and an OpportunityThe “agnostics” exhibit only moderate commitment to their work, teams and organisations. The “agnostics” are capable of moving into either the “disaffected” or the “true believers” categories; many in fact already lean towards one of the other

Source: Corporate Leadership Council Research (2004)

The Reward of EngagementHigh performers with low retention risk – the “true believers” – exhibit very strong emotional and rational commitment to their day-to-day work, teams, managers and organisations

What strikes you about the two studies?

Barrier Mean Score

Difficult to calculate ‘true’ financial ROI 4.98

Insufficient resources available 4.77

More useful / relevant criteria 4.41

Time consuming 4.19

Don’t believe possible to calculate ‘true’ ROI level 3.78

There is no requirement 3.23

Barriers to using ‘hard data’ to measuring HR / L&D activities

Less to do with any disinterest in measuring bottom line impact, more to do with the difficulty of doing so…

Difficulty measuring

ROI

HR manage transactions

Lack of commercial

impact

Simple measures of behaviour

Indirect measure of

impact

ROI Vicious Circle

How do you currently measure the impact of what you do in HR?

Level 4:Organisational

Performance

Level 4:Organisational

Performance

Level 3;Behavioural Change

Level 3;Behavioural Change

Level 2:Learning

Level 2:Learning

Level 1:Reaction

Level 1:Reaction

Kirkpatrick’s Model of Training Evaluation

Kirkpatrick (1959)

‘’Hold HR accountable: do not accept measures of activity - things like positions filled, training hours delivered and appraisals completed on time. Require measures of accomplishment that reflect business success: sales or revenue, profits, productivity, customer retention and so on’’

Kaufman (2006)

‘’How to Fix HR’’ Harvard Business Review

Change the questions we ask….

Today’s Questions• What does the

employee survey suggest we do?

• What works at GE?• What does the business

need?• How much does it cost?• What other data do we

have?

New Questions• What do the employee

behaviours suggest we do?

• What works here?• How does what our

business needs fit into the overall system?

• What do patterns over time tell us?

• What data do we need?

Based on Nalbantian et al, 2004

ROI - Leadership Development Examples

We specialise in those industries with the key traits of professional sports – constant pressure and the need to deliver immediate and tangible results We specialise in those industries with the key traits of professional sports – constant pressure and the need to deliver immediate and tangible results • Working with Royal Mail top 90 senior managers

• 18 month programme aimed at reducing bureaucracy and managing transitions

• 25% improvement in management confidence to effect change

• “Making Sainsbury’s Great Again” Leadership programme for top 1000 business leaders

• Internal capability building of 50 accredited coaches

• Staff perceptions of the new leadership behaviours up 11% to 76%

• Development of Top 150 in CCE over 5 year period

• Aimed at improving organisational confidence• 60% reduction in voluntary attrition and

improved engagement

ROI - Leadership Development Examples

• 4x2 day workshop in High Performing Leaders Programme

• Significant improvement in 180 leadership scores (pre vs post)

• EES scores highest in participating businesses

• Development of UK Dealerships Management teams

• Aimed at improving sales and after sales service ratings

• Difference in participating vs non-participating dealerships

Discuss examples of ROI work within your organisations…..

What will you do differently next time?

Conclusions

Conclusions

• Measurement of ROI needs to change from retrospective and separate to proactive and integrated

• HR initiatives should be integrated into the business as a whole with shared accountability for the results

• Measurement of ROI should be used as a feature of feedback loop to ensure that HR initiatives continually and positively impact the organisation

www.lane4performance.com