As CHRO increasingly partner with business-unit heads to provide human-capital support that accelerates business performance, they increasingly seek real-time tangible outcomes from investments in development and training; disrupting the industry of vendors that supports them.
Recently the mid-year review meeting at a client (financial services) had the following discussion.
You’ve probably experienced similar senior management meetings; focusing on firm performance amidst a growing awareness of fundamental changes taking place in the industry, whilst the CHRO (Jane) is thinking how to defend the budget for training and wondering if they are even investing in the right skills, in the right people, and whether these investments will impact the performance of the firm fast enough so that the organization will still exist in 5 years! Sooner or later someone will ask why they don’t have enough of the right type of leaders – to which the reply ‘there is a war for talent and we can only pay in line with the market rates’ is neither productive nor accurate. Jane has already repositioned herself to be a ‘business-partner’ rather than ‘support services’; now she tries to have human capital strategic planning discussions rather than gaps and needs assessments – but as she listens quietly to the discussions in the mid-year review, she’s wondering if she could do more to help accelerate firm performance; she’s thinking about the outcomes she can control.
‘Getting what we pay for’ but not buying what we need
Spending globally on corporate executive training and development is worth an estimated US$160 billion [i] and is growing rapidly, estimated at >15% p.a. – not surprisingly as the context of business becomes increasingly dynamic, the impact of a leader’s decisions and performance can make or destroy billions of dollars of firm value in an ever decreasing timeframe.
When corporate leaders were asked to rank their top three human-capital priorities, almost two-thirds of the respondents identified leadership development as their number-one concern, however less than 10 percent report that their companies are effective at developing leaders. A separate study indicated that almost 1/3 of companies can identify specific situations where they have failed to exploit opportunities because they lack enough leaders with the right capabilities.
Insight revealed by our recent survey of CHRO and Learning & Development Officers[ii], indicates that the bulk of the spending, approximately 80%, is being spent to move executives through the talent pipeline of the firm or to broadly make management knowledge available. Less than 20% of training budgets is being spent on initiatives that demonstrably produce behavior-change, and of these only half (i.e. only about 10% of the total spending) is expected to directly impact business performance!
The focus of the vast majority of spending is to move participants across a competency framework rather than to directly address business imperatives, as such it is hardly surprising that there is little evidence of tangible impact on business performance. As one respondent commented “failure of application of learning in the businesses is the number 1 problem”. It is therefore predictable that “this investment doesn’t produce an acceptable return on investment (ROI) as the learning doesn’t lead to better organizational performance.” [iii]
The combination of the increasing need to constantly upgrade leadership capabilities, frustration with the results achieved from investment in training and the increasing desire to partner with the business-line heads, is driving CHRO to regard leadership development differently. Increasingly CHRO are focusing on impact outcomes rather than the inputs (competencies, costs, cohorts). This trend will reshape the initiatives that CHRO invest in, rebalance the portfolio of programmes and will redefine relationships with vendors. Vendors will need to talk less about their platforms and processes (classroom, clicks, coaching, consulting) and more about the behavior-changes and performance results they help to achieve.
We are not developing leaders for the future – the future is already here!
If we want to achieve greater impact from all the investment being made then we have to change how we think about development. The speed of business is continuously accelerating and the contexts of many businesses are increasingly ambiguous; the rise of unicorns and the demise of established corporations are evidence of a new era of rapid value creation and destruction. Firms need to accelerate to win – size is no indicator of future performance or sustainable competitive advantage. Firms can only accelerate if the leaders and the leadership teams are themselves accelerating; acquiring and using new skills, behaviors and mindsets. We are not developing leaders for the future – the future is already here! We need to be developing leaders to have greater impact now; ensuring results today with execution prowess whilst transforming the organization for tomorrow.
CHRO as a partner in driving business performance - through real-time leadership development
Building on the leadership team discussion at the beginning of this article; Jane (the CHRO) seized the moment to provide direct support for the performace of the business and also to refocus investments to increase impact.
We see that CHRO are increasely acting like Jane; becoming actively involved in helping to drive business performance, adjusting investments in development activities in response to the unfolding context of the business. As such behavior (active management of a portfolio of types of support, directed at achieving specific outcomes), becomes more widespread CHRO will redefine their relationships with vendors of training and development support; seeking flexibility and responsiveness.
[i] The Corporate Learning Factbook 2014, October 2014, Bersin by Deloitte
[ii] The state of leadership development 2016, June 2016, Wyatt & Netzley
[iii] Why leadership training fails and what to do about it, HBR Oct 2016, Beer, Finnstrom, Schrader
A business consultant and educator; focusing on global and regional firms operating in multiple fast changing contexts. Dr. Steve has consulted with major corporations on strategies and operations globally, Asia, Western Europe and UK. Dr. Steve is also an accomplished executive trainer and educator, with particular depth of experience in business strategy and management practice in Asia.