There is a saying that goes „dress for the job you want, not for the one you have”. For HR specialists the version is „hire for the needs the organization will have, not for the needs it has now.” There has been this huge shift of paradigm where companies no longer look for the best qualified people but for the easiest qualifiable ones.
The business world is evolving at such a rapid pace that organizations need individuals who are adaptable, can think on their feet and learn whatever they need to efficiently. As a result, talent management has become a very important component of HR activity and there is a constant challenge to design and deploy the best programs.
Talent is a rather permissive term
The term „talent” covers a very wide range so it’s difficult to give an exact definition. If one only takes a look at a middle school talent show, they will see anything from exquisite violin playing to making questionably looking fruit out of play dough. And it’s not much different with organizations.
Each is doing its best to find, hire and form the right employees but it often seems a lot like gambling – get somebody who looks promising and see if it pays off in the end or it was all a bad investment.
That’s why the people at the Centre for Talent Reporting decided to come up with a logical model that could provide a good common denominator when it came to the evaluation of a reporting on various talent management programs.
How to come up with a good reporting scheme
Getting things organized in a new field presents home challenges yet in order to have a coherent strategy for reporting on talent management, there are a few steps to follow:
- Have a common language and a common framework.
- Identify the measurements that work best in your organization.
- Put these specific measurements in reports.
- Use the centralized data in all HR endeavors that concern talent management.
Looking at the most commonly used measures, these have to do with effectiveness, efficiency and outcomes. The first one refers to quality, the second to quantity, cost and utilization, while the latter is concerned with the overall business impact.
While effectiveness is generally measured by participant satisfaction scores and efficiency is calculated fairly easily by factoring in costs and number of employees, the real headache is reporting on organizational impact.
Going back to the Kirkpatrick model
Calculating the real impact of a talent management program in organizational results has the equivalent in level four of Kirkpatrick’s model.
However, in the already classical evaluation scheme this encapsulates both the objectives that are deemed good for the individual and the organization as well as a positive return on investment. With all these huddled together, it’s no wonder that this proved to be a very difficult level to deal with and most learning practitioners stopped at level three and ended the reporting there.
The greatest challenge is to figure out which objectives or outcomes are closest linked to the learning and development program and find a way to measure those in the long run.
How to calculate impact on organizational objectives
It’s obvious that the value of any talent management program stands in how it impacts organizational outcomes. The question a relevant report should be answering is „How much did overall business performance improve as a direct result of the L&D interventions?” And since the question begins with „how much”, the answer will have to be a specific number.
If, for instance, the business objective is to get a 15% increase in sales and L&D deploys a program targeted at making the retail force more efficient thus bringing about a 5% increase in sales, that will be the percent presented as the impact of learning.
Even though it’s impossible to calculate this to a T, there are several ways in which the impact learning has on a desired objective can be honed in on. Some are as simple as getting participant or sponsor estimates on the impact while others need more sophisticated statistical techniques. A widely used method is asking about the intention to apply right after the completion of a learning intervention.
How to demonstrate the ROI of the program
Apart from the statistical measurement of how a learning program impacted business results, there is another rather important issue to be reported on – the money matter. The actual dollar impact of learning is a monetization of everything I’ve talked about at the previous level. It is the gross benefit, minus the cost of the L&D intervention. It’s that all so elusive ROI of training. Here are the basic factors in calculating it:
- The gross benefit is the monetary outcome of the learning program, before the initial costs are subtracted. If we stick to the example above, if 5% increase sales amounts to $500000, that is the gross benefit of the learning intervention.
- The total cost includes everything associated with the learning program from design, development, delivery, time employees had to deduct from their work day thus being less productive, and all other reinforcement or opportunity costs.
- The net benefit is calculated by subtracting the total cost from the gross benefit. If the total cost of the sales program were $100,000, then the net benefit would be $500,000- $100,000=$400,000.
- The Return on Investment (ROI) in business is the net income from a project divided by the capital cost of the project. When it comes to learning, it is the net benefit of the program divided by the total cost. ROI is expressed as a percentage. In the sales example above, the ROI would be $400,000/$100,000=400%.
All in all
Since businesses turn to L&D whenever a new need arises, it’s crucial that all programs come to support organizational challenges and demonstrate a positive impact and ROI. It’s equally important to establish a logical frame and have a common language when it comes to reporting on talent management.