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Is L&D an Expense or an Investment in Today's Climate?
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Is L&D an Expense or an Investment in today’sclimate? The business challenge in all times • It takes an outsider 4 years to reach the same level of performance • It takes an insider 7 years to reach the same salary levels The expense is higher on an outsider, while the investment is longer on an insider… yet…
Today’s Climate • Going up • Customer expectations i. Speed of change • Economic climate - fiscal austerity ii. Business ambitions measures of developed countries are first retrenchment of spending, iii. Individual aspirations and then revenue collection. The iv. Technology & Innovation same is true of organizations. v. Business complexity • Industry climate – competitive • Workforce climate – impatient, has money to spend • Going down • Corporate climate – ambitious i. Time to learn • Social climate – networked ii. Ability to manage complexity
The Gap that Nobody Knows“Execution”, the book that hit the world in 2002, began with the discovery of theGap that Nobody knows! The gap between what the CEO wants and what theorganization achieves.“The gap nobody knows is the gap between what a company’sleaders want to achieve, and the ability of their organization toachieve it.” - Larry Bossidy, Ram Charan Strategy Ability Performance
How Competencies Contribute to BusinessBusiness Results Operations Strategy - Research & - Solutioning - Work Products Innovation • Revenue Val Proposition -Services DOMAIN Sales & Mktg EXECUTION CONTENT • Expenses - Running Costs - Processes • Costs - Work Methods - Fixed Costs - Recruitment - Competencies Results - Trg & Dev, PMS Execution of Delivery Strategic Tactical Outcomes Plans Plans
Core Processes Must Integrate for Execution Customer Strategy Operations Competencies Processes Skills People
Understanding Expense vis-à-vis Investment # Expense Investment 1 Relatively small Relatively large 2 Close to the point of benefit Earlier than the point of benefit 3 Predictable benefits/returns Unpredictable benefits/returns 4 Relatively small time period Larger time period Expense Time ( ) Benefit Investment Benefit ( X R ) Performance Result It is clear that anything that is spent on people’s future improved performance will have to be an investment in this moment. But it can be considered differently.
So What’s the Problem in Making an Investment inPeople? Is it that we do not have the confidence that people will perform to their capacity… Or Is it that we do not have the confidence that we will be able to get them to perform to their capacity…
The Difference Between Managing & Leading • When you see it as an expense, you can only manage the cost of the benefit, not its value. You work towards results, not necessarily benefits. • When you see it as an investment, you work towards a return from the investment, leading to greater performance. You work towards benefits, not only results.Manage Costs Results (Expense) Lead (Investments) Results Benefits Time
Is L&D an Expense or an Investment? For Managers it may be an Expense For Leaders it is an Investment
How to protect investments in L&D How can we be more certain of the returns from investments in L&D? Consider the factors that link L&D Investments to Performance, and how much we know of them: Returns Value Proposition Performance Rigor/Commitment Implementation Understanding of Process Skills Motivation Competencies