Many internal training organizations must really start to reinvent themselves––or face the prospect of significant downsizing.
CEOs and CFOs are now demanding investments in training deliver maximum value to the organization.
Translated, this means training budgets are being put under the microscope. Training costs––their identification, measurement, and control––are an area of concern because it's difficult to monetize the return on training investments.
Yet training costs, after all, do not exist by themselves. They are always incurred––in intent at least––for the sake of a result.
What matters therefore is not the absolute cost level but the ratio between training dollars spent and their results. But––and this is a big "but"––results must be business- driven.
There are many different ways to define what is meant by business-driven results.
For the purposes of this article, we will discuss two specific ways––namely:
(1) Quantifiable measurements related to business processes and;
(2) The use of strategy maps to identify the skills needed to carry out an explicit corporate strategy
Monetizing Training Results: An Example and Its Lessons
[eventPDF]
Oral and written mastery of a subject is important. But from the perspective of the organization, the only real test of training is its impact on business performance.
Here's a concrete example. And we'll have you as the old statement goes, "walk in another's moccasins."
Let's assume you are a manufacturer of Styrofoam coffee cups used in vending machines. Lucky you!
You want to improve the quality of your coffee cups. Why? Because the costs associated with scrap, return shipments, field service calls, and customer complaints from the vending companies are devouring your profits.
Careful study reveals four major quality problems with respect to your Styrofoam coffee cups. The problems can be classified as:
- Coffee cups that are too large (this results in customers feeling cheated, that is, they are getting less coffee than expected)
- Coffee cups that are too small (this results in coffee overflowing the cup…making an unwanted mess)
- Coffee cups with cracked lips (this results in a coffee cup looking like it was chewed by a rodent)
- Coffee cups with pin holes at the bottom of the cup (this results in a leaking coffee cup)
These are the performance measurements that must be improved. Measurements define what we mean by performance. They largely dictate where efforts should be spent.
Let's further assume that, for whatever reasons, far too many of your coffee cups have one or more of the above-mentioned quality defects.
Greatly simplifying, you need to dramatically reduce the percentage of coffee cups with quality defects.
The Cost of Poor Quality
Why is this so costly to your company? Your customers––the vending machine owners––have made it clear they will stop doing business with you if your quality does not improve.
You are conscientious business person. You are spending big bucks on scrapping defective cups, inspection, re-inspection, and more.
You cannot afford to ship cups with defects. You'll be out of business because you will not be able to retain customers.
This is why you are forced to scrap defective cups. Inspection costs are skyrocketing out of fear that defective cups will be shipped to vendors.
The Need for Cost/Effective Training Automatically Suggests Itself
Six Sigma and/or statistical process control is a methodology to help prevent, eliminate, or minimize quality problems.
Again, we are greatly simplifying how to solve your quality problem. But part of the solution involves training your employee to prevent quality problems.
By preventing quality problems from occurring, inspection and re-inspection costs will plummet along with field service and other related costs.
What should be the objective of your six sigma or statistical process control training program? That's easy. Reduce or eliminate defective cups––permanently.
How would you know if the training program is a success?
A simple before-and-after analysis of the percentages of defective cups would reveal the immediate impact of the learning program on quality. (There's much more to this, but it is beyond the scope of this article)
Let's assume you are scrapping 15 percent of all cups produced. If after training, the scrap rate is reduced to one percent, the computation related to cost savings is a matter of simple arithmetic.
Similarly, other computations involving reductions in inspection costs, complaint handling, and more can be performed.
Counting for Something
These are the type of computations that CEOs and CFOs understand. Results that are measurable in terms of cost savings and/or revenue boosters.
But to find these kind of measurements, internal training organizations must become true strategic business partners with other functional groups within the organization––facilities management, call centers, manufacturing, warehousing, sales and marketing, and the like.
W. Edwards Deming in his classic book Out of the Crisis (MIT press, 1982), details hundreds of performance measurements related to accounting and financial operations, healthcare management, hotel performance, banking, and so on.
Training groups must understand what improved performance really means. The functional groups know the relevant performance metrics.
Measurement defines what is meant by performance.
The internal training organization working with relevant functional groups must design training programs and continuous learning forums to achieve specific performance improvement.
At the end of the day, that's what it means (in part) to be a strategic business partner with other groups within the organization.
Using Strategy Maps to Align Training with Corporate Objectives
Almost every internal training organization desires to link training with business objectives.
And most internal training organizations proclaim that their mission and business purpose is to equip employees with the skills required to implement explicated business strategies.
But only a handful have a framework, let alone a procedure for translating their organization's vision and strategy into a unified, coherent set of training programs.
And even fewer know or understand their organization strategy goals and tactical implementation plans.
Aligning training programs with business goals does not happen because the business and the training function desire it. There must be a mechanism, process, approach or methodology that enables it to happen.
If top management wants to create a strategy-supportive workforce, they must first communicate––in clear, simple terms––the business strategy. A strategy cannot be implemented if it is not described.
So, What Are Strategy Maps?
Strategy maps, in essence, translate the organization's stated strategy into a unified, coherent set of goals and measurements.
The question is: What are the skills employees need to accomplish those goals and measurements?
A strategy map clarifies the strategy supportive skills required to turn the strategic plan into operating reality.
Building Resource Capabilities
Competency upgrades and new skills must be acquired to carry-out the organization's new agenda. The job of training is to develop a strategy supportive workforce.
Strategy maps represent a methodology for allocating training dollars to the right results thereby increasing the productivity of internal training groups.
Without doubt, the pioneering work on using strategy maps for aligning training with strategic objectives appears in a book entitled Strategy Maps: Converting Intangible Assets into Tangible Outcomes by Robert S. Kaplan and David P. Norton (Harvard Business School Press, 2004).
The opening pages of the Strategy Maps book contains the following passage:
"Gray-Syracuse is a world-class producer of precision casting parts for highly engineered products used in aircraft engines, power generation equipment, and missiles. Senior management, after developing a balanced scorecard (BSC) and strategy map for its new strategy, had learned that the front end of the production process was a major opportunity to reduce rework and improve quality.
The entry level operators of this process, mold assembly persons, had the greatest impact on reducing rework and decreasing the lead time from product idea to customer delivery.
The company focused its limited training dollars on these few critical employees and cut the time to achieve strategic objectives in half.. "
Paul Niven––a noted expert on strategy maps and a frequent speaker at IQPC events on using strategy maps to align training with corporate goals––has an enlightening webinar on this subject.
Internal training executives, who take the time to learn how to capitalize on strategy maps, can prove to their senior-level management they are directing efforts and resources toward opportunities and results.
To conclude, strategy maps facilitate the design of specific training programs that equip employees with the required skills necessary to achieve specific objectives.