Increasing operating income through learning analytics – 1
The context -
Is learning cost a big bearing on your operating income?
Is your learning paying? What is the “ROI”?
Given that operating margins are now known numbers across industry, these are crucial issues for Business Leadership.
Briefly, I have been in the learning domain for close to 20 years, working for large global learning organizations (coveted Learning Elite and Golden Peacock Awards several times). I am now unleashing the power of the experience and knowledge gained from all those years into issues which will make learning more relevant into the prevalent. Basically, extending my capabilities to enhance enterprise goals (through learning) without the boundaries of “this-is-your-job”. This is not the first attempt to approach ROI in learning and certainly it will not be the last. The difference is that the below account has a quantified (in an otherwise subjective world) analytics approach to it. The other point is that it also highlights the need and opportunities to overhaul the entire learning ecosystem. Key point to highlight right in the beginning is that the scope of this study was only towards new-hire performance. I will share my views on the other components effecting the “cost-to-server” in the future since this in itself is a stiff challenge to overcome culminating into significant gains. Please note the word “gains” denotes a “value-out-of-learning” approach as opposed to an unavoidable head under the P&L. Deploying the factory model is quite a challenge in training processes and I have been done it for a few years. Advent of new people joining in an organization offers great scope to impact through learning, which in turn can have a direct bearing on the operating income. Most organizations have great intent and a strong strategy to be able to measure the outcomes. The missing link in the strategy possibly is what most learning professionals are vary of… data! Especially data around new-hire performance, is rarely collected and lesser times analysed. There is increased pressure to get to know the difference between hiring and performance skills. And rightly so, since Business Leadership is almost under the obligation of knowing customer behaviour patterns and other data around prospective and current customers so pip 360 degrees disruption. There is a need to apply analytics at every stage of the business-cycle to enhance operational excellence. This made me commit to creating the end to end process and I realized that there was a need for a tool to capture and visualize data towards the learning spend. Generally identifying spend is the easy part but to be able to link the spend (as much quid-pro-quo as possible) to revenue as possible, is difficult. There needs to be a tool to capture data and articulate in a way that we will be able to co-relate learning with cost and revenue. I realized that the strategy to create great learning value and a tool which captures learning data were both equally important, each was incomplete without the other. Also, this in my assessment will have a cascading effect on all the allied training processes, for the better. So I created the – “Time of Competence” tool…….to be continued.
Increasing operating income through learning analytics – 2
The strategy and the tool -
Having set the context in the earlier part, let us now discuss the overall approach for learning cost optimization. The strategy at a high-level is fairly straight-forward – we first baseline, then identify the gaps, implement our solution, evaluate and then deploy the learnings for the cycle to go through all over again. The difference lies in intent and commitment to measure cost of learning and more, spent on the key front-ending level of employees – these could be performing any kind of roles.
The Time of Competence tool –
The reason I used this tittle was – most Training managers get this sporadic request of reducing the training time. Reduction of training time is generally in isolation of it’s’ impact on performance. So the focus is the “time of competence” metric more than just training time.
The objective of identifying the TOC is to reduce the operating costs, so while for the scope of this interaction we keep to new-hire influx, it could be tracked for any training which covers a lot of people. The training is oriented to skills (knowledge-units with defined outcomes which culminate into revenue). And the Participants get tested for those skills. Amidst a well-spread portfolio of learning services, I have also been managing new-hire training programs for several large organizations. The scale has been wide, from about hundreds of new-employees joining every month to just a handful. The determinants for the scale of the supply depended on the life-cycle of the organization. Growth, stable and maturity – all stages had its own set of needs. The employment brand was also a factor effecting new-hire performance, albeit indirect. Sometimes it was more due to high attrition in the early stages of the employee-lifecycle for that Business. After the new-joiner training when the certified employees got into production, there were varied reactions from the Supervisors of these new-joiners. Most of those reactions were based on their prior experience of the performance of these new-joiners immediately after training. Some of the Supervisors also called as the end of the “cooling-off” period and beginning of “real” learning. More often than not, if training interventions did not meet the desired performance levels then it could be time for extensive audits of almost the entire learning life-cycle. These may or maynot highlight opportunities of improvements. Performance issues could stem even from recruitment. Learning and recruitment work hand-in-hand, like Learning and the respective “Business” Teams. Training Managers then begin to start thinking of the opportunities to improve to change the feeble perception of training. It is such adversities that offer a great opportunity to take learning to the next level. There could be different scenarios – Lack of training effectiveness, lack of communication of training effectiveness or lack of correlation between training spend with revenue. Generally, the last point which holds good in most cases. To be able to directly connect learning spend with revenue earned is possibly the most complex and most challenging learning situation. There needs to be a review and possibly an over-haul of the entire learning environment to enable this rare connect. We will discuss about the implementation approach in the 3rd and the last part of this series.
Increasing operating income through learning analytics – 3
The implementation approach So how do we articulate “learning-value” (co-relate learning spend with the revenue earned by the respective interventions)
Begin with end in mind – The learning value proposition has to be compelling. The development of this value proposition begins with defining the goal. The goal could be to impact on a key revenue oriented metric – for e.g. operating income. Training cost can have a significant impact on Operating Income (OI). Choosing the Business metric is the easiest part. The challenge begins with the process of equating it with the learning outcomes/metrics. The training intervention(s) in question should be sweeping enough and enabling imbibing skills which are critical to the respective business-process, for e.g. training and application of Financial Acumen, SQL, SIEM Platform Management, Marketing Analytics, and Procure to Pay, etc.
Enabling the environment – The learning ecosystem has different parts and each play an important role in the overall impact. Identification and measuring these parts is the next step in the process. Baseline financial data is required to articulate differentiation – Training duration in days* Training cost Break-even threshold for the Participant Per diem revenue generated by the Participant *(the unit used should equate with all the components. For e.g. if the revenue is measured per hour then the training duration also needs to be accounted for in hours) Assessments need to be done for each skill separately Typically, the conventional method used to reduce training cost is to reduce training time. Reduction of training time should be in accordance with accounting for the drop/gain in performance as well. Training time reduction done in isolation will lead to higher long term learning cost.
Data mining – There needs to be measurement of all the components of the key learning program(s). The performance of the training on knowledge, feelings, behavior and application on the job need to be measured, tracked and improved. Measuring performance by batch and by individual Participant on each skill is key to decision on the way forward. The performance reports will enable Business to decide on the people to staff by skill and by proficiency. Some of the questions which the reporting needs to help answer are – What is the Participants performance on each skill? What is the performance of the Batch on each skill? How many got certified in first attempt? What was the additional training cost? Etc.
Audit of the end-to-end processes – The below key levers of training performance are to be re-visited.
Which are the skills which enable the work-processes which in turn help us deliver the solution/service to our clients? Have they been identified correctly? Content: Is the content oriented to these skills? Are the building blocks able to imbibe those skills? Engagement: Are the Participants engaged and aligned to the overall objectives of the organization? Rectification of attitudinal issues need a different approach. Delivery: Is the delivery mode of the training matching with the needs of the audience’ style of learning? Trainer’s skills also need assessment. Process: Are the different training components of the content well defined – in terms of time-lines, responsibility, integrity, etc.?
There are several organizational assets and other tools available to do the above. The erstwhile FMEA (failure management effect analysis) is also an option to identify the key opportunities to scale up effectively. At the end of this painfully extensive process, lies the possibility of articulating the highest level of successful knowledge economics. I am well aware that the implementation of this strategy and the tool is an extensive process and it will take a very long time to fructify. But given the business environment, it’s worth giving it a shot, if not mandatory. I am fine to be the enemy, as Woodrow Wilson says that it will lead to, should one try to change something. I am happy to partner along with you in fructifying the above.