ROI and Business Alignment - Part 1

Dear Friends

Recently completed a study and presented a paper on "ROI and Business Alignment". Below are some insights.

Sample size –In all 50 large size companies were surveyed across industries (Table 1). These included multinational companies (MNC), public sector undertaking (PSU) and private companies. For the purpose of this study, HR and training is used interchangeably.

                  Table 1: Company and Industry Profile

Industry	Companies Surveyed
Pharmaceutical	5
Chemical and paint	3
Business process outsourcing (BPO)	4
Chemical	2
Power	4
Energy	2
Banking and Finance	5
Automobile	6
Insurance	5
Oil	5
Packaging	2
Retail	3
IT	4
Total	50

THE GAP

Major gaps were identified in the companies under study. Table 2 depicts the difference in the CEO’s and HR’s thinking

Table 2: CEO Thinking vs. HR Thinking

CEO’s Thinking	HR’s Thinking
Entrepreneurial thinking (Growth, profit, revenue, market share)	Knowledge thinking (content design, training delivery)
Strategic thinking (Business alignment, predictive analysis, ROI)	Operational thinking (co-ordination, module, vendor management)
Impact data (Productivity, efficiency, customer satisfaction)	Input data (no. of hrs of training, venue, food, cost, no. of people hired, training calendar)
Balance sheet	Perception, activity

Apart from the above, gaps that exist in the companies studied are as follows: 
1. Training needs identification and business alignment: It was observed that, training is launched as per the mandate given by any department. For example, in one of the company under study, a department requested for a Critical thinking training, targeting middle management.  The training was launched and data points such as number of managers completing the training, number of hours spent, cost of the training per manager were reported. In addition, satisfaction and the acceptance of the training were recorded. The problem came when the training department was asked to report the business impact and the ROI. A guessing game took place in the absence of business alignment and needs assessment. Disappointment among participants was obvious. Employees undergoing training were seldom taken into confidence for their definite training needs.  
2 . Training and quantified objectives: Quantified objectives form a vital part of business alignment. As business alignment was absent, training objectives were not set as per the business need. In most cases, the objectives set were learning objectives. For example for a leadership training, the objectives set were- gain and develop knowledge of leadership, models of leadership, leadership pros and cons. Since the objectives set were learning objectives, it was impossible that an impact be achieved. 
3. Module & content: As business alignment was missing, the module designed was not aligned with business. Module and content was designed from learning perspective and not from application and impact perspective. So a learning level is established without any quantified measure at the application and impact level. 
4. Training and business impact: Post training a feedback form is filled by the participants. Trainer and the training team are happy that participants have given a good feedback. How the training department is going to capture the application of the training is overlooked. Neither the participants nor the training team is accountable to what happens next. For example, in one of the IT company, when participants attend an email writing training, they are not communicated how this training will impact customer satisfaction score.

So when CEOs ask for HR score card, HR professionals have input data – number of people attending the training, number of hours, cost of the training and feedback analysis. There is no data available to show the application of the concepts covered in the training and the impact achieved.

Reasons Cited for the Absence of Business Alignment and ROI

Business alignment and evaluation is missing because of the following reasons:

v  No stakeholders’ pressure - There is no pressure from the stakeholders to make HR processes transparent and HR professionals accountable.

v  Management’s mental model of HR – Management does not demand any evaluation or justification from HR, due to their mental models of HR such as

§  HR is a support department and not a core department.

§  HR can only handle recruitment, appraisal and training.

§  HR cannot contribute to the bottom-line.

§  HR cannot be a strategic partner.

§  HR is a cost center.

v  Lack of strategic thinking in HR – HR does operational role. HR does not present case studies that show profit. HR themselves feel that they are a support center.

v  Mismatch in CEO thinking and HR thinking – HR lack the perspective as to how their department can contribute to the vision of the company.

The remaining part of the paper to be continued in Part 2

What Do you feel? Do write to me on wagle.sonali@gmail.com.

With Gratitude

Dr. Sonali Wagle

www.exponentialadvisory.co.in