by Rommin Adl
Companies are grappling with changes in their business environment like never before. Technology advances, regulatory shifts, new competition, and changes in customer preferences now compel organizations to make broad strategic shifts. As a result, senior leaders are increasingly challenged to align, motivate and develop the skills and capabilities needed for effective strategy implementation. In fact, a recent Conference Board Survey of 2,000 senior executives identified strategic alignment and speed of execution as the most pressing CEO challenges.1
Effective strategy execution starts with engaging leaders and employees to make strategy come to life. Over the last few years, senior leaders have increasingly used learning and development initiatives as a critical means of building the alignment, mindset, skills and capabilities necessary to execute their strategies. A recent study from Bersin by Deloitte revealed that overall spending on learning and development rose 12 percent in 2012, the highest growth rate in the last eight years.2 In the midst of a challenging economic environment, organizations increasingly recognize that engaging employees to implement strategy and arming them with capabilities needed to accelerate execution are mission critical.
Connecting Learning Engagements to the Bottom Line
Surprisingly, despite rising investments in this area, a McKinsey Quarterly report found that just eight percent of organizations actually measure the impact of learning and development initiatives.3 Not only are companies investing in initiatives that may be entirely ineffective, but the opportunity cost may be significant as companies miss important chances to convert on learning as a means to drive strategy implementation. Measuring its impact is truly the only way to understand if an investment in learning and development drives successful execution of the company’s strategic agenda.
Investments in effective learning engagements can yield real improvements in company performance. High performing organizations that have continually invested in their leaders have “generated nearly 60 percent improved business growth, reported a 66 percent increase in bench strength, and showed a 62 percent improvement in employee retention.”4 These organizations recognize that learning and development initiatives result in employee promotion and retention. They also increase skills, capabilities, and knowledge that lead to better organizational performance and speedier strategy execution.
Measurement can include a range of metrics: employee engagement, talent retention, customer engagement, productivity and profitability, among many others. Many organizations use Kirkpatrick’s Training Evaluation Model that targets four key areas of learning impact:
- Reaction: How well was the program received by the audience?
- Learning: How has participant knowledge increased as a result of the engagement?
- Behavior: How have participants applied the new learning?
- Results: What are the business results of the program? This includes a look at key performance indicators that the organization determined prior to the engagement.
In our experience, while senior executives often care about a combination of these factors, they are particularly concerned that employees understand their strategic priorities and they “get it.” Have they gained the critical skills needed to execute the strategy and are they taking action as a result?
Do They “Get It”? Measuring Alignment to Strategic Priorities
Often senior leaders care first and foremost that employees “get it.” Employees must know the what, why and how of where the company is going. They must understand how they play an integral part in executing the strategy. This alignment is a huge value-add to leadership, because it reduces the need to repeatedly communicate the same messages and rally people to what is “obvious” to the executive team.
Take for example a leading cloud software company who used learning to align management to its new strategy. The new CEO and his senior leadership team needed the top 450 leaders to execute it. Yet the company was already highly successful. This fact challenged leaders to create a sense of urgency to change as the market evolved; it called for a mindset shift. To engage the organization, the company used a custom business simulation at its annual leadership off-site. The immersive experience aligned leaders to the strategy, shifted mindsets and drove personal commitment to execute.
To ensure the intended alignment, a comprehensive survey was conducted to measure behaviors before and after the program. The survey demonstrated that prior to the engagement, only 55 percent of employees believed in the necessity of the new strategy. After the engagement, this number grew to 88 percent. Only 62 percent understood the evolving partner ecosystem and the vital role of various players to the company’s success; post-program, this rose to more than 90 percent. Sixty-three percent of participants recognized how various functions contribute to the company’s success, but following the engagement, this number increased to 88 percent. And finally, while 76 percent of participants were excited and confident about the company’s future success at the start of the program, 94 percent were optimistic afterwards.
In this case, the experience built alignment and a deep sense of ownership of the new strategy. It dramatically helped senior leaders move the organization in the direction they needed to go to be successful in the future. The CEO commented that the benefit of using an experiential learning approach was that it “enabled people to fish better for themselves as opposed to providing a fish that would only last a day.” The initiative not only got everyone on the same page and speaking the same language, it also allowed participants to make up their own minds to commit to the strategy and its successful execution.
How are Employees Applying the Knowledge? Measuring the Financial Impact
The behavioral impact is critical. But how can organizations effectively link learning initiatives to bottom-line results? Measuring the financial results of learning engagements is challenging, yet achievable.
A Fortune 50 telecommunications company recently faced this challenge head on. The senior leadership team recognized that executing its three-year plan would require breaking through boundaries, changing the internal culture and adopting more innovative, collaborative thinking.
The company launched a highly customized strategic initiative for all directors and above, starting with high potential vice presidents. The centerpiece was a business simulation that incorporated its strategic imperatives and key performance measures. It enabled leaders from across the business to practice successful execution of the company’s three-year plan.
Each participating high potential leader completed a Strategic Action Plan targeting key imperatives and initiatives. The value (anticipated profit improvement) of the 118 action plans was $1.8 billion, an average of $15 million per leader and $355 million per workshop. Conservatively, a mere one percent success rate on execution of these action plans would yield $17.7 million in increased profits directly attributable to the intervention.
This level of anticipated results was presented to senior leadership, who had close involvement in the customization of the program and contributed to its delivery. They were sufficiently convinced of the value of the initiative and elected to increase their investment in it. As a result, the company expanded the target audience to all vice presidents and then mid-level leaders, each of whom committed to a strategic action plan.
In this particular case, the initiative included a follow-up process to catalyze, track and measure the outcomes of the action plans. This process, which was implemented internally, entailed an initial follow-up questionnaire two to three months after the workshop and then again six to nine months later. Once an initial set of results were compiled, the follow-up process included quarterly reports on results to date. The results measurement process served two purposes: (1) To capture feedback proactively from participants on how they were applying their learning and uncover opportunities to make the program more effective for future audiences, and (2) To quantify the profit improvements directly resulting from the initiative.
The following are examples of results from similar initiatives yielding a direct impact on business performance:
- A major financial services company brought nearly 500 senior, client-facing participants together. Almost 400 cross-divisional client service opportunities were shared, ultimately bringing in more than $300 million in revenue.
- A survey following a major retailer’s learning and development initiative showed a revenue increase of approximately $5 million in one business unit that was directly attributable to the program.
Critical Missed Opportunities
Imagine that the leading telecom company cited above was among the 92 percent of companies that do not measure the impact of learning engagements, according to McKinsey’s report. What if they had not been able to gain full commitment from senior leadership for the engagement? The opportunity to create significant results from the program would have gone unnoticed. Or what if the leading software company missed the opportunity to engage employees before or after the off-site event to gauge the alignment and commitment to the three-year growth strategy? How successful would they have been not knowing if their people were on board or not?
The missed opportunities are extensive, with valuable insights lost. Without consistent follow-up and measurement, too many organizations neglect to track alignment to the strategy, share best practices in strategy execution across the business, communicate model behaviors for effective execution, and build the capabilities required to execute. In both cases above, to prove measurable results it was critical that the organizations designed a results process prior to the program.
To accelerate strategy execution for better business results, organizations can benefit by applying the following four best practices:
- The learning initiative should be highly customized and closely tied to the company’s strategic priorities. Generic initiatives may build some skills and capabilities, but if not done in a strategically relevant context, the learning will be difficult for people apply back on the job.
- Senior leaders must actively contribute. Without strong leader engagement, the intervention will not be strategically relevant and the organization will not be motivated to apply learning back on the job.
- The delivery mechanism should be highly experiential for the biggest impact. PowerPoint presentations increasingly fail to engage today’s audiences and garner their commitment. Companies are discovering the impact of innovative approaches like experiential learning and customized business simulations. When done right, these approaches deliver significantly better results than traditional lectures and case studies. In fact, recent research from BTS and The Economist Intelligence Unit revealed that the use of business simulations is expected to increase by 140 percent within five years’ time, while lecture-based approaches are expected to decline by 32 percent.
- Measure the impact. It is critical to design a follow-up and measurement process upfront and hold leaders and employees accountable for results. Celebrate, reward and recognize those who deliver measurable results.
As investments in human capital continue to rise, measuring the impact of learning engagements will be top of mind for many senior decision-makers. Yet too many organizations continue to miss a great opportunity to connect learning to the bottom line. Measurement can, indeed, be a challenge. However, with the right process, it can be done. The reward is worth the effort. Results gleaned from learning initiatives provide essential information for senior leaders. Knowing if they are making the right investments in the right places will ultimately help executives accelerate their strategic priorities.
About the Author:
Rommin Adl is an Executive Vice President at BTS.
Dave Ackley is a Senior Vice President at BTS and Managing Director.
Jessica Bower is Senior Marketing Manager at BTS.
1Linda Barrington, “CEO Challenge 2010, Top 10 Challenges”, The Conference Board, February 2010.
2 “The Corporate Learning Factbook® 2013: Benchmarks, Trends, and Analysis of the U.S. Training Market”, 2013.
3 “Putting a Value on Training”, Jenny Cermak and Monica McGurk, McKinsey Quarterly Report, 2010.
4Bersin by Deloitte, High-Impact Leadership Development for the 21st Century, 2011.