Our search for a figure and the meaning
There are schools of thoughts about how to measure the ‘Return on Investment’ (ROI) in training activities, but it is not my intention to write about any of them now.
There are schools of thoughts about how to measure the ‘Return on Investment’ (ROI) in training activities, but it is not my intention to write about any of them now. I rather want to tell you the story of how two of my great (super great!) colleagues and myself were exploring the exciting possibilities to find a magic number that we could name as ‘ROI’ in some of our talent programs. It took as some time of walking in the dark, opening our eyes to new lands, getting completely lost together or losing from each other as we walked. But, believe me, we also had lot of fun and enjoyed the experience of exploring and growing together.
After we started our route, very soon we realized we were talking about several stepping stones around which we formulated our approach. This is not a easy straight pathway! These were our main initial signs that we started to recognize.
Develop vs acquire
Our main question was: “if we take into consideration all the elements of the programs and all the elements of the simply called staffing process, which of them would make more financial sense for the organization?”
On one side, there was an interesting basket called DEVELOP with 15 different type of smaller or bigger items like vendor costs, hours of coaching and mentoring, accommodation and travel costs, support organization (HR) investments and some more (of course I cannot give you all the long list of details!). Items were related not only to the program itself but also the career promotion that will happen after the program. I have not given to you the secret ingredient yet. We followed closely the promotability of the program and we were able to make a break-even point of the Promotability Indicator vs Return on Investment. In other words, we followed the end to end progress of the Talented executive since being recognized as candidate for the specific program designed to develop talents for their next career challenge until their actual promotion to a higher complexity role. Quite a journey, and it took quite some time!
A counter balance that we considered was ACQUIRE where the contemplated items are not that many but it is presented colorful in its form and rich in its shape – outsourced and/or in-sourced, assessment centers, all in perfect combination with a experienced team of (again simply called) recruiters. We followed the candidate from the initial contact with the organization until they finalize a structured sensitive onboarding phase. We also took into consideration an element of “lost performance” due to onboarding!
And guess what? After applying our ROI model calculation the results proved that investing on promotability pays off in all our talent development programs, compared to the alternative of investing in hiring and retaining those talents. The equation shows clear break even point in the scenario of promotability We are prepared to achieve significant yearly savings if we focus our talent strategy that way! Mission accomplished!
Being honest, it is not an unexpected result but we have a concrete figure that proves it now!
Engage and grow
The benefits go beyond the purely financial ones and expand heavily into the engagement of our employees. We are very proud to have high engagement scores, actually above average FTSE 100 companies. By analyzing the segmented results, we have noticed that employees in the segments which are more exposed to our Talent programs are more engaged than the average in our organization. Not such a high “aha” moment at all!
I will take an assumption that you were both engaged and disengaged in your professional life. Low engagement is a bit like a sore throat: it can be a reaction of being cold or, in professional terms, a specific situation that does not seam to be correct to us. Or it can be a signal of a more serious illness and then we need to heal it fast and prevent it from turning chronical. I am very aware of the difference in my deliverables if I am engaged. And also of the quality if I am less engaged. I can almost hear your thoughts now…
The way I see the engagement, outcomes/deliverables, career growth and quality of leaders is a continuous non-stopping cycle. Breaking the cycle or dropping a negative impact in any of the specific elements of it can provoke visible signs of worn out in the whole wheel. Very simple and no need of a broader scientific explanation at all.
Once I have asked in my previous professional life to a group of talents: “if in the case that due to clear and acceptable reasons a company would need to decrease your compensation package for a limited period of time, what would be the main reason (if any) why you would stay and still remain engaged?”. And a majority of them answered: “the possibility to develop and grow”. A Return on Investment per se.
Celebrate beyond figures
One thing I experienced in my current employer is the high quality of HR related indicators and the measuring discipline followed by focused improvement interventions. We clearly put dedicated effort into improving Talent indicators, yet we equally celebrate people development success stories and the development of our people careers. In the case of career progression, there is always certain level of healthy risk involved, both for the individual and for the organization as well. In our calculation of the ROI, we also took certain assumptions and healthy manageable risks. We took a stand that it was more important to see where we stand than having proven scientific results. It was more important that we challenged ourselves in exploring new areas and enlarge our experience back-pack. The benefits for the organization are clear: it is calculated in the value of investing in Talent programs and the savings that those programs bring every year.
A final point of team success to share with you: our approach was part of the submission for the DJSI Index and are very proud of having contributed to achieve an overall high ranking and especially in Human Capital Development.
What did I want to achieve with this article? First of all, to make you part of our success story around the never-ending topic of ROI models in HR activities. And therefore to openly share a few insights about how to calculate ROI, encouraging a more risk taking talent management culture.
I also intended to highlight the importance of proactive engagement strategies with the identified talent population. Finally I made a specific remark on the criticality of developing a holistic view of the benefits that the talent management framework can provide through the right measurement of its ROI.