In today’s business economy, corporate leaders are looking at every aspect of their operation. Training centers have been minimized, outsourced or eliminated. When senior management starts looking at your budget and proposes deep cuts, are you prepared to objectively defend your training’s value?
Training centers collect volumes of data each year. Activity summaries often include detailed metrics on participation, class satisfaction and test scores. Unfortunately, many training centers stop there. Measuring the true value of training is not easy. This can be especially true in a corporate environment; training is provided to employees at ‘no charge’ and viewed as a cost of doing business. One way to communicate training value is to prepare an annual report for your stakeholders.
Today’s companies deal with three types of assets: financial assets (cash and securities), physical assets (real property, buildings and equipment), and intangible assets. Documenting how training’s effect on your company’s intangible assets can be challenging. Intangible assets include:
- Human Capital, including employees, their knowledge, and competencies
- Customer Capital, to include your customer relationships, brands, and channel partners
- Social Capital, such as your corporate culture, internal networks, and management style
- Intellectual Capital, including patents, copyrights, and institutional knowledge
Training has it’s greatest impact in this realm. An important note: intangible assets are a key component of any company’s competitive advantage. Being able to show the value of your training to the overall value of the company is extremely important. Southwest Airlines actually includes training information in its overall corporate report.
In 2011, Southwest completed just over 1.3 million flights carrying nearly 128 million passengers. 45,000 employees completed in excess of 1.94 million hours of training.
Intangibles: Southwest Airlines Success
Travel + Leisure rated Southwest as the #4 Domestic Airline and achieved the US Department of Transportation’s top ranking in customer satisfaction. Southwest reported just over 45,000 employees in their system. Southwest maintains “numbers” of flights, aircraft, airports served, and personnel to other major airlines. Instead of using the classic division-of-labor approach (something that can lead to “that’s-not-my-job syndrome”, Southwest views public-facing operations as a team effort. “They are our biggest assets and are what keep customers coming back,” according to Southwest’s Communication Director Beth Harbin. Southwest employees completed in excess of 1.94 million hours of training in 2011. That’s an average of 43 hours per year, per employee. Training is more than one-way information delivery. Training is used to identify and engage future managers and leaders at all levels. Employees with aptitude are taught skills, and given expanded responsibility – including teaching others. When you review Southwest’s corporate information site (http://www.southwestonereport.com/) , information on Training performance and activity provides metrics, but also focuses on the the effect of training on intangible assets.
So What Do I Report?
Your “annual report” should mirror your fiscal year. Consisting of no more than 2-4 sheets, the report should contain summary metrics for the year. Your metrics and statistics should take up no more than two pages, and present a comparison to at least one or more previous years. Beyond that, your annual report should quantify the overall value of the training services provided and quantify the company’s return on its training investment. Some potential areas that could be summarized:
- Training initiatives that have a direct impact on business and are based on a needs assessment.
Example: An aircraft that must be turned around is late arriving; the needs assessment reveals that a number of company personnel are in the immediate area but flights are being delayed while waiting on a specific service crew to service the aircraft. By training additional personnel to support the service crew, a more rapid turnaround is possible, employee utilization is improved, and the impact on customers is minimized.
- Applications of institutional knowledge to improve business practices.
Example: While doing annual training, a line worker exposes a “trick of the trade” to the training staff. This suggestion increases his quality, accuracy and efficiency by approximately 3 units per hour. This “trick” is then relayed to all persons that perform this job task. The end result is specific, and corresponding increases have a positive financial impact that can be directly correlated to the cost of training.
- Programs that increase brand profile and build relationships.
Example: Conducting a webinar at no cost for existing customers, on innovative uses of a product or feature. Identify sales figures for participants after participation, and track increases based on participation.
- Programs that develop existing personnel.
Example: Specific employees are given the opportunity to attend an entry-level management workshop. After completion of the workshop, employee turnover in their areas of responsibility decreases. Employee attrition and replacement is a significant cost; being able to create links between training and retention represents a significant value to the company.
One of the easiest ways to help quantify the return on assessment is to assign a relative value to each class. Carefully consider three key points: pricing, cost, and value. ( TrainingForce allows independent tracking of all three elements, by the way ). Price is the amount that the attendee or his department is charged for participation in a program. Not all corporations do “charge-backs” – where the training center charges the participant’s departmental budget for the price of the training. Cost, as the term implies, is your training center’s physical cost in delivering the training opportunity. Value, unlike cost or price, can be a more arbitrary amount based on the training center’s assessment of the training opportunity’s worth to the corporate entity. Be sure the method used to determine the value of each program is easily explained.
Value-less Or Invaluable?
Demonstrating that corporate training has value is best accomplished using four steps. First, identify links between training and business strategy (the company’s mission, value and goals).
- Identify links between training and business strategy (the company’s mission, value and goals).
- Summarize new and ongoing training initiatives that relate to business strategy.
- Provide an overview of activities in support of those initiatives.
- Provide metrics and additional statistics that support the training’s value.
Establishing clear links from training activity to overall corporate strategy shows that the training center is a responsible and integral part of the company.
1. Southwest Airlines One Report, http://www.southwestonereport.com/2011/
2. Noe, Raymond A., Employee Training and Development, 5th Edition. McGraw-Hill Irwin. (c) 2010