In the past few months, three things have become pretty clear. First, the danger of a repeat Great Depression resulting from the most recent financial meltdown is over. Second, feverish cost cutting has run its course as a viable business strategy. Third, now even senior executives are agreeing that innovation is the key to growing revenue and creating jobs.
Unfortunately, like generals, many senior managers are still fighting the last war: cost cutting. The challenge for learning executives today, however, is to recommend investments that contribute to the innovation challenge.
Keeping streamlined budgets in mind, executives first must modify their goal from cutting costs to productivity improvement. While this might appear to be a minor shift in mindset, it’s not. Cost cutting focuses exclusively on reducing inputs. Productivity, on the other hand, measures output per unit of input. Adopting this new goal means that both inputs and outputs become important parameters in making learning investments.
However, a critical element of this conversation is often missing, and that is the learning community’s agreement about what the output of learning should be. There is also no consensus on a standard of measurement for outputs. No such barrier exists for costs, however. Costs are always measured in currency. The clarity of this standard is one reason so much attention is devoted to cost cutting. The CFO measures in dollars and keeps the scorecard.
My goal is to seed a learning community conversation on measuring outputs in dollars when possible. Traditional measurements of learning do not qualify as measured outputs. Butts in seats, courses delivered and hours of instruction are all measures of activities, not outcomes.
When we return to the output measured in dollars, the innovation focus becomes clearer. Consider the following: The first priority is to identify learning interventions that have the potential to be measured in dollars. To move beyond the somewhat stuck place we currently find ourselves in, we have to innovate. For some, innovation is about “the big idea.” But focus here is not on the “aha” moment. It is on doing something — no matter how small — in a new way.
Take mentoring, for example. Mentoring is an important learning intervention that fulfills the need to transfer knowledge from soon-to-be-retiring baby boomers. However, mentoring is most often viewed as one of the “softest” learning interventions — that is, abstract, intangible and difficult to measure.
With mentoring, a new way of thinking about the intervention has to do with wages. Consider that the accounting department records wages as costs. So, then, it is appropriate to control expenditures on wages. At the same time, it is also accurate to think of wages as a measurement of value created. This does not mean abandoning the notion that wages represent a cost. The choice is not either-or. In fact, when we think about wages at the aggregate level, we can make a strong statement about their relationship to value, namely: Across the entire enterprise, the dollar value to the organization is greater than the wages paid. This statement is universally true — otherwise the organization in question would be going out of business.
So one way to measure the dollar value of mentoring is to measure the increase in wages received by mentees relative to a control group of comparable employees who did not receive the mentoring.
In sum, the shift from cost cutting to productivity lays the foundation for learning innovation. The focus on outcomes as well as inputs challenges us to measure outputs in dollars rather than in activity units. The challenge to the community is to extend the innovation to other areas of learning.Filed under: Performance Management