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Higher Education In India

Assessing ROIs on Management Education

- By Devendra Kumar Vyas 

"The illiterate of the 21st century will not be those who cannot read and write, but those who cannot learn, unlearn, and relearn." - Alvin Toffler

Learning never ends. For continuous development of one’s self, there has to be constant evaluation and continuous learning. College education has been a part of almost all of our CVs. However, as the years pass by, the need to keep ourselves updated becomes so much more important. There are many reasons for this.

University education, including management degrees, do not necessarily provide all the skills and knowledge that one needs in the workplace. Hence, workplaces today need to make a considerable investment in providing people with the relevant skills for their role. This is particularly relevant as one progresses in one’s career and functional or technical skills become less relevant and skills in managing people, seeing the ‘big picture’, being able to look around the corner and spot and leverage disruptions as well as build organisational capability become critical. Therefore, the need for ongoing development, both for current roles as well as for building a leadership pipeline, fuels the need for organisations to invest in learning initiatives.

Change is another driver for management education. Technology, today, has caused such a disruption that it has reduced the time lags between innovations. This keeps people on their toes as new products and processes constantly hit the market. For companies, it has become absolutely vital to not only have skilled labour but also an adaptive labour, an updated workforce. While companies can find new talent that have an updated skill set, the time required to sharpen them with experience is a difficult constraint to overcome. On the other hand, training and updating an already experienced worker is generally more feasible. And more experience an employee has, more value they create. Therefore, educating management is a more practical option than finding a replacement.

“Survival of the fittest is not the same as survival of the best. Leaving leadership development up to chance is foolish.” - Morgan McCall

Billions of dollars are spent each year on executive education. Is it important for organisations to measure returns when it comes to training? The answer to this question is an unequivocal ‘yes’. Performance initiatives and training initiatives provide tangible benefits to the company, and therefore it is important that we measure these.

The reasons for this are many. Better evaluation of the impact of learning initiatives validates these as business tools. Defining and evaluating metrics form the basis of justifying the costs, and makes it easier to strategise the future spending required on the training initiatives. It helps improve the design of training and selection of the training methods.

However, measurement of the impact of management education is not an easy task. Again there are many reasons for this. Isolating the effects of the learning and development initiatives is a key challenge. Many environmental factors such as market conditions, system changes, etc can influence post-training performance. Accurate measurement of cost of training is also difficult to ascertain.

As a business leader, the measure that resonates most in terms of looking at impact of management interventions is Return on Investment (ROI). This is for several reasons, the key being its simplicity and versatility. It not only allows for a measure of a specific training, but also allows for comparison across different types of management development interventions. Most importantly, it moves the focus and attitude towards training from expense to investment. It also allows for impact of training to be looked at in a holistic way when measuring business and individual outcomes. With the increased use of e-learning and data, the importance and relevance of ROI measurement has increased.

The correlation between the Return on Investment and Cost of Investment is easy to derive, but the causal relationship of the impact of training on the performance of the organisation is a tougher task.

How then does one demonstrate the impact a particular training had on the bottom-line performance of the company? The start can be with defining the rationale of the training. As with any project, defining the requirement holds the key. While working on ‘WHY’, both the leadership development personnel and the executives must reach a consensus on the need. Interventions should be accommodating of the many factors that affect a business. The past performances of the intended person for training and the organisation should be evaluated in parallel. Factors affecting businesses such as the market risk, operational risk, the systems and processes, performances of adjoining departments of the employee, performances of the team members of the employee, etc must also be taken into consideration.

It is also necessary to assess the specific targets and goals the business is trying to achieve. This is vital. The training has to be designed to incorporate these targets and goals. Alignment of the organisational needs with the training needs to form the basis of the cause-effect relationship. The need of the training has to be vindicated by the establishment of this relationship. Post this; identification of the Key Performance Indicators (KPI) is essential. The existing KPIs need to be revisited and updated, with additions of new ones. The training modules/courses should be designed in relation with the specific KPIs.

The KPIs and the objectives of the learning modules should be designed with very quantifiable parameters. The more detailed the quantification, the greater the accuracy of the measure of ROI of the performance. However, in practice there can be a common mistake of implementing the performance management strategies while the training is in progression or even worse, when the training has already finished. It is more suitable to inculcate the KPIs during planning of the course. This helps in determining how to measure the performance of the training and thus justify the training solutions’ implementation. By linking the training factors to a quantifiable measure such as improved sales, streamlining of operations, etc, we can come up with a monetary value whose effects can be traced to the bottom line performance. It is critical to choose the right performance measurement factors to demonstrate the impact of the training on employees and their contribution to the company.

This linking of KPIs with training is critical, and it is one of the best ways in which one can actually measure the impact of any management development interventions. In this way, when one is evaluating the business outcomes and individual performance, measurement of the impact of training becomes a part of the metrics in a very integrated way.

Businesses have a cyclic nature and it is very vital to understand that this can affect the performances of individuals in adverse ways. A method to mitigate the effects of cyclic nature is to set the benchmark for performances against similar performance records over a period of time. After the analysis of these performances, the median of these performances should be base points on which the performance post-training should be measured.

A performance tracker from the start of the training till a certain stipulated time should be maintained. While the focus should be on employee growth and development, it is also necessary that the employee productivity post-training meet the business objectives of the company. Even if a substantial increment in the productivity of the employee is still not at par with the expectations set by the company, then there is scope for re-evaluation of the training modules as well as the employee skill set. It is important to understand that training and education can only contribute to a certain extent in such situations. If the training has been successful on delivering results on previous occasions, then the need is to put the employee skills under examination; and also to look at other factors.

Almost all the trainings occur in concurrence with other functional areas. This results in improved performance of different departments. Therefore, while gauging productivity, it is important to define the contribution of the primary benefactor (the employee) and the secondary benefactor (other functions and employees).

This effectively means defining the intended outcomes as a function of direct and indirect KPIs of the employee. This distinction is very critical as with the increase in the interdependence of systems and processes, the claim to the increase in productivity and output can be shared by many. The evidence of the casual impact the employee has had on the productivity post-training determines the success or failure of the training program. The training leaders themselves need to align to the business in such an inherent manner that they can clearly calculate the impact areas and the magnitude of the impact the employee will have on the productivity, post-training. If they are able to successfully communicate that to the executives, then they are making a strong case for their training modules.

When it comes to leadership development and a leadership pipeline, the approach to measurement is slightly different - the KPIs relate to learning the skills and experience for a future role. The competencies related to the future role, therefore, need to be carefully defined. Measurement needs to relate to both development of competencies as well as business impact and readiness for promotion.

For any training programme, it is important to periodically evaluate the cost-benefit ratio. There is one critical point that has to be maintained from the start, ‘Patience’. Like with the businesses, there needs to be a long term strategy and vision for management training - for personal development and building a leadership pipeline. Like any project or any initiative, the company has to understand there will be a gestation period. Those who will be able to get through the tough initial period of any training program are sure to witness the success of it, later on.

In summary:

“In times of change, learners inherit the earth, while the learned find themselves beautifully equipped to deal with a world that no longer exists.” - Eric Hoffer

Continuing to learn is critical; both in order to deal with change and in order to further develop. For organisations, treating learning and development as a strategic business tool that can contribute to growth and profitability is also critical. Aligning learning closely with organisational goals and measuring the impact of training through measuring those organisational goals is the way forward. Measurement of outcomes of training needs to be considered and carried out as part of the key metrics of the organisation. This is what will yield the most robust results.

“Best way to respect learners: Use techniques that research has proven to work. Help people reach their goals without wasting their time.” - Cathy Moore

 

Devendra Kumar Vyas

The writer has been the Chief Executive Officer of Srei Equipment Finance Limited since its inception and has been with the group for over two decades. He is a qualified Chartered Accountant and a member of ICAI. A smart strategist and a die-hard optimist, Devendra is known for his innovative ideas that have reshaped India’s infrastructure equipment financing industry. He is in the Governing Council of Indian Construction Equipment Manufacturers’ Association (ICEMA), a CII sub-committee on construction equipment. He is also the past president of the Chairman of ASSOCHAM’s NBFC National Council. He is a thought leader in the Industry and well known for his innovative approach in managing the ecosystem’s challenges.

 

      

 

 

 


 


 

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