When facing unpredictable economic conditions, business leaders attempt to fully maximize existing organizational resources in an effort to maintain market expectations and ensure sustainable competitive advantage. While this is true for any economic state, it becomes more laser-like where uncertainty exists.  

Of the resources available, the most relevant, expensive, and challenging for leaders to manage are people. So why is it that training and development are so often at the top of the list for expense reduction, when really it’s when training can shine and add value? 

Too often, those involved with supporting functions—which is how training is seen—fail to grasp management’s expectations. This is either because they do not view themselves as an actual business function or are unable to make tangible connections to business objectives. In either case, this is where a training department’s role can become relevant to the organization and change business leader’s perception of its role as an unnecessary expense.  

So, how does a training department change this negative perception and become a valued and contributing business function? First, realize that every organizational function, including training and development, is an actual business activity. Second, recognize that every business activity exists out of necessity for the organization to effectively function. If not, the activity is irrelevant and should not exist. And last, acknowledge that every business activity must contribute to achieving clearly defined performance objectives. 

Accept that business leaders view training and development solely as a cost center. This is not a bad thing. A CEO/CFO views every internal business activity and function as either a cost, profit or investment center. The training department is a cost center is because it contributes indirectly to achieving business results and is not expected to make a profit or increase the organization’s financial value.  

To change the perception of training and development, take the following steps:  

·         Stop attempting to show positive financial outcomes for training initiatives.

·         Work with business leaders to discover their forecasted scenarios.

·         Align budgeted training dollars with specific performance objectives. 

Stop conducting training ROI 

In business school, managers and leaders are taught that an organization must treat its internal activities as a financial center. Many of the primary business activities are typically treated as profit centers since the goal of the business activity is to generate a greater return from allocated financial resources and is aligned with the organization’s business purpose. 

A cost center, such as training and development, is never expected to generate a positive financial result from the allocated funds. Like human resources, the training department is expected to contribute to achieving well-defined performance objectives.  

An actual return-on-investment calculation focuses on tangible capital allocations that contribute to the profit center’s long-term profitability. Contrary to what training ROI proponents claim, these rules are based upon formal accounting guidelines (such as U.S. GAAP, IFRS, ASPE, and the like) and is non-negotiable with business leaders. Line or operational expenses, unless they are included as part of a capital investment, are not measured through ROI—especially those activities treated as a cost center like training and development. The only time training should measure ROI is when there are long-term capital investments such as equipment (laptops/tablets, training rooms) or technology (LMS, e-learning software). 

Work with forecasted expectations 

This may surprise you, but every business leader prepares for various possible future outcomes. Forecasting is a core responsibility and essential activity they learn in business school. This is relevant if you want to change your business leader’s perception of training and development as a static, reactive business activity. 

Don’t confuse forecasting with budgeting. Forecasting is about outlining a variety of possible scenarios that the organization may or may not face. Typically, these scenarios full under worst, realistic, and best case outcomes. Forward thinking leaders develop business models that allow them to manipulate aspects within their control and, more importantly, external elements out of their control such a competitive factors or changing economic conditions.  

Training and development can contribute to the forecasting process closely working with business leaders to 

·         assess employee knowledge requirements to meet each scenario expectations (forecasted skills assessment)

·         develop training initiative financial requirements for each forecasted scenario

·         proactively prepard the training department for unexpected outcomes to quickly adapt and meet organizational needs. 

Align training dollars with performance objectives 

Every business activity has a monetary allocation based upon a predefined budget. This budget includes amounts required to operate the business unit and, more relevant, money for activities that contribute to performance objectives. For training and development this means money to operate while developing training initiatives that contribute to the organization’s performance objectives.  

A quick way to accomplish includes 

·         treating every training dollar as a budget allocation that is aligned with specific performance objectives

·         reviewing the training budget alongside the organization’s performance objectives—this essentially means             analyzing the performance framework in place

·         aligning with the performance needs of the core business units (business profit centers).  

The reality of these suggestions 

It is clear that some these suggestions are is easier said than done. While this is true, it is essential that you capitalize on some of these points. Why? Because training and development professionals are always challenged to sell the benefits of intangible needs (training outcomes) to those expecting tangible results (business and financial results).  

This is not to say that business leaders don’t recognize training’s relevance; however, their focus is maximizing the use of scarce resources to ensure accountability and achieving business results. This is a major reason for training and development to align with business objectives proving that training outcomes are tangible. Training leaders and staff (from design to delivery) must radically shift their thinking if they are to gain support for learning initiatives.  

Training budgets, like every other business activity, must demonstrate tangible returns, especially when an initiative is closely associated to improving a specific need for a profit center business unit. Keep in mind that a profit center’s performance is financially accountable since these leaders are paying for your training initiatives through their budgets.  

Even though business leaders focus on the organization’s financial results, they do not measure training’s performance the same way. They recognize that training is a cost of doing business and want to see its effectiveness measured—how the expense of an initiative contributes to improving performance. When training and development’s contribution connects to improving business performance, then business leaders recognize training as a valued partner to achieving business objectives.