Can Training Really Improve Business Performance ?

Is training a “necessity” or a good-to-have “commodity”? 

The answer is difficult. In their hearts, Business and HR Heads think that the training is of the former kind but if you see the way training is planned by them training seems to be more of the latter. In the board room and in the budget books – where the resources get allocated – the training is treated as being discretionary - nice to have - but only if you can afford it.  This is evident in the way the targets are set for training.

The targets are set mostly in terms of the effort : like number of days spent in training. Less frequently they are linked to evaluations - like the number of people passing the test - or the evaluation of the usefulness of the material or of the faculty.  Only in a few exceptional cases, people set training targets in terms of  measurable business results. 

This was borne out by a recent McKinsey survey which showed that 90% executives were undertaking training because of their belief  that capacity building is their priority. 25%  executives felt that  “our training has produced measurable results”. Only 8% actually tracked business results from training.

The following is an interesting case of a social sector organization called BGCA (Boys & Girls Clubs Of America) which was compelled to measure the effect of their training expenditure because, otherwise, the donors would not fund it ! 

BGCA’s Problems

Its objective was  to impart athletic and life skills to local youth through (1) Local organizations ( 1000 ) who are self-managed – they manage their own resource development, strategic planning, programming, and fund-raising (2) Clubs (4000) where BGCA runs all these activities for them. The “business” obviously depended on availability of  local and  capable leadership and, on this crucial aspect, they were facing a problems in 2008 : on the one hand they wanted to expand the number of club locations but on the other hand a lot of their existing leaders would retire soon.

Discovering correlation   

BGCA used “50 aspects of leadership” model to map the capabilities of local leaders and plotted it against the performance of the respective club and discovered correlation between which capabilities of the leaders were correlated with which aspect of performance (KRAs like member mobilization, funds raised..). They found that it was mainly 4 (out of 50 aspects) that were primarily responsible for the local performance (1) Leader’s ability to build an effective board from the local community (2)   Find and pursue effective fund raising strategies (3) Use an investor’s mind-set toward programs and resource development (4) Lead with personal tenacity and persistence.

Strategy Formulation   

These 4 objectives – with demonstrated correlation with performance – was used to build training  programs around them - and incorporated into classroom work as well as projects chosen by each local team. By  2009, over 650 leaders from approximately 250 local organizations had been trained. Since the outcome of the training was linked to improve business outcomes,  the  impact assessment was straightforward :  BGCA compared pre-post results and they also compared post-training business results with the places where the leaders were not yet trained.  It was seen that the leaders bettered their own  “pre” scores and also were better than the control group where there was no training. 

It was thus possible to make a business forecast that - if all 1,100 organizations had matched the level of success achieved by the program participants – they would see more than 350,000 new members and more than $100 million in annual incremental revenue! They also found that the gains from training in the highest quartile were 3-5  times the average  The high performers focused on aspirational projects and set clear and quantifiable goals  and took the extra step of teaching what they’d learned to the rest of their organizations.

How can this be used by you ?  

1. Pick the right business metrics in your setting. Assess your current performance against industry benchmarks or against your own  preset goals. Decide what kinds of skills are tied to different areas of performance and which performance-enhancing skills the employees lack. This is continuous process : link between skills, performance, and training programs.
2. Make appropriate comparisons within peer groups defined by preexisting performance bands or market types. It is not so easy – because it is crucial to control for the influence of external factors (for instance, the opening of new retail competitors in local markets) and of extraordinary internal factors (such as a scheduled plant shutdown for preventative maintenance) – but it can be done.

Example 1 :  A retailer – instead of just measuring the managers’ time allocation or employee-engagement data – began using hard metrics such as category wise department wise sales, basket size, and conversion rates. Managers started giving  real-time coaching and role-modeling customer-engagement techniques.

Example 2 :  A manufacturer – decided to not measure the training given to plant supervisors of lean-manufacturing -  but began tracking downtime,  overall effectiveness of equipment.