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Using ROI to Support Talent Management Programs

The 2008 global financial crisis forced many organizations to rethink the way they manage and develop talent. After organizations responded to the initial crisis by making significant cost and headcount reductions, many talent management professionals scrambled to demonstrate the value of their programs to the organization. More importantly, executives recognized the urgent need to quickly innovate after cutting costs to retain market share and speed ahead of the competition.

The role of the talent management professional has gradually emerged as critical to an organization's ability to survive and thrive beyond the immediate economic crisis. However, talent management professionals continue to face growing challenges in demonstrating the monetary value of program investments and ensuring those investments are targeted to the right people, at the right time, and for the right reasons. The key is measurement.

Without measurement, talent management professionals risk failing to demonstrate value. For example, consider an OD leader of a large healthcare provider whose entire team was eliminated because leaders could not see what contribution this team's work made to the company's competitive advantage or bottom line. Or think about a training leader at a not-for-profit whose role and team were nearly eliminated because executives had no data about how that team made a difference to the organization's operational efficiency.

Moreover, as training budgets are reduced and competitive pressures continue to increase, the demand for a targeted focus on specific talent groups has become equally important. According to a 2009 ASTD report, organizations slightly reduced average expenditure per employee from $1,110 in 2007 to $1,068 in 2008, reflecting a decrease of 3.8 percent - a decrease also likely to be reflected in 2009's data. Now is the right time for talent management professionals to adopt a strategic, accountable approach to developing high-performance employees.

A strategic, accountable approach

In the past, training and development activities were assumed to work. Reporting was focused on the number of participants in attendance, number or programs offered, and reaction and satisfaction data. Today, things have changed. There is a need to develop high-performing employees so their impact is reflected in bottom-line outcomes as well as in other intangible measures. Programs must be linked to business strategy, and there are greater expectations to provide a comprehensive approach to measurement and evaluation.

Much of this change is reflected in the way top performing organizations run their talent management function. For example, ASTD has tracked the characteristics of the BEST award-winning organizations since 2003 - those that demonstrate enterprisewide success as a result of employee learning and development. Award-winning companies are identified by their previous year's financial and operational data, such as customer satisfaction, quality of products and services, cycle time, productivity, retention, revenue, and overall profitability. The 2009 BEST award winners continued to validate the same eight characteristics identified in 2003, which include clearly defined processes to link learning strategies and initiatives to increases in both individual and organizational performance. Additionally, the BEST organizations indicated that they used a balanced scorecard to assess learning's impact on individual and organizational performance metrics by gauging key performance indicators or performance objectives.

Why a scorecard?

A scorecard is an effective way to provide critical information to client groups, including senior executives. The scorecard also provides a useful way for talent management staff to track success and ensure their approach focuses on their business's key objectives.

Building the scorecard

The primary target audiences for the scorecard are the executive and talent management teams. Additionally, supervisors of program participants, as well as the participants themselves, will likely be interested in the scorecard.

Traditionally, a talent management scorecard reflects the costs and includes budget, money spent per employee, and number of participants, among other pieces of data. While this information is important to include in the overall scorecard, it is not the only data to include. The scorecard should also include learning, application, impact, and return-on-investment.

The first step is to determine which and how many programs will be evaluated at the various levels. Ideally, as many programs as possible will be measured at the ROI level. Then, data from each program must be integrated to present an overall picture at the macro level. The end result will be a scorecard that represents seven major categories, which includes indicators, each of the five evaluation levels, and intangible benefits.

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Challenges in creating a scorecard

Three main challenges must be addressed in moving to a comprehensive scorecard to measure and track success. The first challenge is to allocate appropriate resources for measurement and evaluation. The scorecard can be developed and implemented for 5 percent of the total talent management budget. However, cost savings can be realized when effective measures reveal programs that should be eliminated so budgets can be utilized more effectively.

The second challenge is to approach the task in a disciplined, methodical method. This is difficult when not required by senior management. However, the responsibility for ensuring the process is utilized appropriately rests on the talent management team.

The final challenge is the actual use of the data. While the data reveals successes, it potentially also reveals programs that are not effective. Treating the scorecard and the methodology as approaches to process improvement (not merely program elimination) alleviates the fears that some may have with this approach.

In summary, more organizations are facing greater scrutiny in their approach to talent management programs and finding it difficult to communicate the success of any program in a credible way. However, a scorecard of program success, based on outcomes rather than activities, provides evidence that developmental opportunities for high-performing employees are working within the organization.

Note: Portions of this article have been adapted from the author's work in Managing Talent Retention: An ROI Approach.

References

Alliger, George, and Scott I. Tannenbaum (1997). "A Meta-Analysis of the Relations Among Training Criteria." Personnel Psychology, 50 (2), pp. 341-358.

American Productivity & Quality Center (2000). The Corporate University Measuring the Impact of Learning, Houston, TX.

Kirkpatrick, Donald L. (1975). Techniques for Evaluating Training Programs. Alexandria, VA: ASTD

Phillips, Jack J. (1995, Summer). "Corporate Training: Does it Pay Off?" William & Mary Business Review, pp. 6-10.

Phillips, Jack J. and Phillips, Patricia P. (2010). Measuring for Success: What CEOs Really Think About Learning Investments. ASTD Press. Alexandria, VA.

Warr, Peter, Catriona Allan, and Kamal Birdi. (1999). "Predicting Three Levels of Training Outcome." Journal of Occupational and Organization Psychology, 72, pp. 351-375.

About the Author
Lisa Ann Edwards is the founder of Bloom Coaching Institute, an organization that advances coaching effectiveness through research, tools, training and consultation. Edwards’s coaching work has demonstrated as much as a 251 percent return on investment and has been shown to lift employee engagement nearly 20 percent. As head of Talent Management for Corbis, a Bill Gates' privately owned global media company, Lisa was responsible for designing and implementing effective talent development solutions such as leadership development, management development and coaching programs to ensure talent engagement, improve talent retention and serve to feed the talent pipeline. Lisa is a frequent contributing author to trade publications and has authored or contributed to the following books: Measuring the Success of Coaching: A Step-by-Step Guide to Measuring Impact and Calculating ROI (ASTD Press, 2012); Keep Looking Up (2010); Managing Talent Retention: An ROI Approach (2009) and has contributed case studies or chapters to five additional books. Lisa earned a Master of Science in Experimental Psychology from Southern Methodist University and is a certified coach from The Hudson Institute of Santa Barbara.
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